PRUDENTIAL WORLD FUND INC, 497, 1999-01-28

PRUDENTIAL WORLD FUND INC
497, 1999-01-28

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FUND TYPE:
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Global stock

INVESTMENT OBJECTIVE:
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Long-term growth of
capital

[GRAPHIC OMITTED]

Prudential World
Fund, Inc.

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GLOBAL SERIES
INTERNATIONAL STOCK SERIES

PROSPECTUS: JANUARY 20, 1999

As with all mutual funds, the
Securities and Exchange
Commission has not approved
the Fund's shares, nor has
the SEC determined that this
prospectus is complete or
accurate. It is a criminal offense [LOGO] Prudential
to state otherwise. Investments

<PAGE>
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TABLE OF CONTENTS
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1 RISK/RETURN SUMMARY
Global Series:
1 Investment Objective and Principal Strategies
2 Principal Risks
3 Evaluating Performance
4 Fees and Expenses of the Series

INTERNATIONAL STOCK SERIES:
6 Investment Objective and Principal Strategies
6 Principal Risks
6 Evaluating Performance
8 Fees and Expenses of the Series

10 HOW THE FUND INVESTS
10 Global Series: Investment Objective and Policies
11 International Stock Series: Investment Objective and Policies
12 Other Investments
13 Derivative Strategies
13 Additional Strategies
14 Investment Risks

16 HOW THE FUND IS MANAGED
16 Manager
16 Investment Adviser
16 Portfolio Managers
17 Distributor
18 Year 2000 Readiness Disclosure

19 FUND DISTRIBUTIONS AND TAX ISSUES
19 Distributions
20 Tax Issues
21 If You Sell or Exchange Your Shares

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Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

23 HOW TO BUY, SELL AND EXCHANGE SHARES OF THE FUND
23 How to Buy Shares
31 How to Sell Your Shares
35 How to Exchange Your Shares

37 FINANCIAL HIGHLIGHTS
Global Series:
38 Class A Shares
39 Class B Shares
40 Class C Shares
41 Class Z Shares
International Stock Series:
42 Class A Shares
43 Class B Shares
44 Class C Shares
45 Class Z Shares

47 THE PRUDENTIAL MUTUAL FUND FAMILY

For More Information (Back Cover)

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RISK/RETURN SUMMARY
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This prospectus provides information about the PRUDENTIAL WORLD FUND, INC. (the
Fund), which consists of two separate series--the GLOBAL SERIES and the
INTERNATIONAL STOCK SERIES (each, a Series). While the two Series have some
common attributes, each one has its own portfolio managers, investment objective
and policies, performance information, financial highlights and risks.
Therefore, some sections of this prospectus deal with each Series separately,
while other sections address both Series at the same time.
A key difference between the two Series is that the Global Series makes
investments anywhere in the world--INCLUDING THE U.S.--while the International
Stock Series usually invests anywhere in the world EXCEPT THE U.S.
In sections that concern just the Global Series, "the Series" refers to the
Global Series. In sections that concern just the International Stock Series,
"the Series" refers to the International Stock Series.
This section highlights key information about each Series. Additional
information follows this summary.

GLOBAL SERIES
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
Our investment objective is LONG-TERM GROWTH OF CAPITAL, with income as a
secondary objective. This means we look for investments that we think will
increase in value over a period of years. To achieve our objective, we invest
primarily in EQUITY-RELATED SECURITIES of MEDIUM-SIZE and LARGE U.S. and FOREIGN
COMPANIES. We invest in securities similar to common stock, like preferred
stock. We use a growth investment style when deciding which securities to buy
for the Series. This means that we look for companies that we believe are
undervalued and/or which we believe will grow faster and generate better
earnings than other companies. Some of the characteristics we look for include
strong competitive advantages, effective research and product development and
strong management and finances. When a security no longer displays the
conditions for growth, it is no longer undervalued, or when the security falls
short of our expectations, we consider selling. While we make every effort to
achieve our objective, we can't guarantee success.

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1
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RISK/RETURN SUMMARY
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PRINCIPAL RISKS
Although we try to invest wisely, all investments involve risk. Since the Series
invests primarily in equity-related securities there is the risk that the value
of a particular security we own could go down. Generally, the securities of
large and medium-size companies are more stable than the securities of smaller
companies, but this is not always the case.
In addition to an individual security losing value, the value of the EQUITY
MARKETS as a whole could go down. Investing in FOREIGN SECURITIES presents
additional risks, since foreign political, economic and legal systems may be
less stable than in the U.S. and foreign stock markets could decline. The
changing value of FOREIGN CURRENCIES could also affect the value of the assets
we hold and our performance. There are special risks that may arise with the
introduction of the euro as a common currency of the European Monetary Union.
These risks include the possibility that computing, accounting and trading
systems will fail to recognize the euro, as well as the possibility that the
euro will cause markets to become more volatile.
There is also risk involved in the investment strategies we may use. Some
of our strategies require us to try to predict whether the price or value of an
underlying investment will go up or down over a certain period of time. There is
always the risk that investments will not perform as we thought they would. Like
any mutual fund, an investment in the Series could lose value, and you could
lose money.
An investment in the Series is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

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2 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

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RISK/RETURN SUMMARY
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EVALUATING PERFORMANCE
A number of factors--including risk--affect how the Global Series performs. The
following bar chart and table show the Series' performance for each full
calendar year of operation for the last 10 years. They demonstrate the risk of
investing in the Series and how returns can change. Past performance does not
mean that the Series will achieve similar results in the future.

<TABLE>
<CAPTION>
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ANNUAL RETURNS (CLASS B SHARES)(1)
- -----------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----

[BAR CHART OMITTED]

12.00% -16.51% 12.29% -5.27% 47.90% -5.49% 14.18% 18.21% 4.25% 22.47%
----- ----- ----- ---- ----- ---- ----- ----- ---- -----

BEST QUARTER: 21.47% (4th quarter of 1998) WORST QUARTER: -14.91% (3rd quarter of 1998)
- -----------------------------------------------------------------------------------------------------

1 These annual returns do not include sales charges. If sales charges were included, the annual
returns would be lower than those shown.
</TABLE>

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AVERAGE ANNUAL RETURNS (AS OF 12/31/98)(1)
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1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
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Class A shares 17.24% 9.90% N/A% 9.57% (since 1-22-90)
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Class B shares 17.47% 10.11% 9.13% 13.34% (since 5-15-84)
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Class C shares 20.17% N/A% N/A% 11.49% (since 8-1-94)
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Class Z shares 23.72% N/A% N/A% 15.00% (since 3-1-96)
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MSCI World(2) 24.80% 16.19% 11.21% n/a
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Lipper Average(3) 14.47% 11.98% 11.21% n/a

1 The Series' returns are after deduction of sales charges and expenses.

2 The Morgan Stanley Capital International (MSCI) World Index is a weighted,
unmanaged index of performance of approximately 1,500 securities listed on
stock exchanges of the U.S., Europe, Canada, Australasia, and the Far East.
These returns do not include the effect of any sales charges. These returns
would be lower if they included the effect of sales charges. MSCI World
Index returns since the inception of each class are 11.26% for Class A,
16.56% for Class B, 17.00% for Class C and 18.40% for Class Z shares.

3 The Lipper Average is based on the average return of all mutual funds in
the Global Funds category and does not include the effect of any sales
charges. Again, these returns would be lower if they included the effect of
sales charges. Lipper returns since the inception of each class are 10.44%
for Class A, 14.84% for Class B, 13.22% for Class C and 14.17% for Class Z
shares. Source: Lipper, Inc.

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3

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

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SHAREHOLDER FEES(1) (PAID DIRECTLY FROM YOUR INVESTMENT)
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CLASS A CLASS B CLASS C CLASS Z
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Maximum sales charge (load) imposed on 5% None 1% None
purchases (as a percentage of offering
price)
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Maximum deferred sales charge (load) None 5%(2) 1%(3) None
(as a percentage of the lower of
original purchase price or sale
proceeds)
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Maximum sales charge (load) None None None None
imposed on reinvested dividends
and other distributions
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Redemption fees None None None None
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Exchange fee None None None None
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ANNUAL SERIES OPERATING EXPENSES (DEDUCTED FROM SERIES ASSETS)
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CLASS A CLASS B CLASS C CLASS Z
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Management fees .75% .75% .75% .75%
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+ Distribution and service (12b-1) fees .30%(4) .93% 1.00% None
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+ Other expenses .38% .38% .38% .38%
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= TOTAL ANNUAL FUND OPERATING EXPENSES 1.43%(4) 2.06% 2.13% 1.13%

1 The maximum sales charges permitted by the National Association of
Securities Dealers, Inc. may not exceed 6.25% of total gross sales per
class. Because of 12b-1 fees, long-term shareholders may pay more than
6.25% of their investment in shares of the Fund. Your broker may charge a
separate or additional fee for purchases and sales of shares.

2 The Contingent Deferred Sales Charge (CDSC) for Class B shares decreases by
1% annually to 1% in the fifth and sixth years and 0% in the seventh year.
Class B shares convert to Class A shares approximately seven years after
purchase.

3 The CDSC for Class C shares is 1% for shares redeemed within 18 months of
purchase.

4 The Distributor of the Fund has voluntarily reduced its distributions and
service fees for Class A shares to .25% of 1% of the average daily net
assets of the Class A shares. This voluntary reduction may be terminated at
any time without notice. With this reduction, Total annual Series operating
expenses are 1.62%.

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4 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

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RISK/RETURN SUMMARY
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EXAMPLE
This example is intended to help you compare the cost of investing in the Series
with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Series for the time
periods indicated and then sell all of your shares at the end of those periods.
The example also assumes that your investment has a 5% return each year and that
the Series' operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions, your costs would be:

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1 YR 3 YRS 5 YRS 10 YRS
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Class A shares $638 $930 $1,243 $2,127
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Class B shares $709 $946 $1,208 $2,153
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Class C shares $414 $760 $1,233 $2,537
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Class Z shares $115 $359 $ 622 $1,375

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

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1 YR 3 YRS 5 YRS 10 YRS
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Class A shares $638 $930 $1,243 $2,127
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Class B shares $209 $646 $1,108 $2,153
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Class C shares $314 $760 $1,233 $2,537
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Class Z shares $115 $359 $ 622 $1,375

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5

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RISK/RETURN SUMMARY
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INTERNATIONAL STOCK SERIES
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
Our investment objective is LONG-TERM GROWTH OF CAPITAL through investment in
equity securities of foreign issuers, with income as a secondary objective. This
means we look for investments that we think will increase in value over a period
of years. To achieve our objective, we invest primarily in the common stock and
preferred stock of FOREIGN COMPANIES OF ALL SIZES. We invest in securities
similar to common stock, like preferred stock. We use a value investment style
when deciding which securities to buy for the Series. That is, we invest in
stocks that we believe are undervalued, given the company's financial and
business outlook. When a security is no longer undervalued, or we believe it
cannot maintain its current price, we consider selling. While we make every
effort to achieve our objective, we can't guarantee success.

PRINCIPAL RISKS
Since the Series invests primarily in common stock and preferred stock, there is
the risk that the value of a particular security we own could go down. In
addition to an individual stock losing value, the value of the EQUITY MARKETS of
the countries in which we invest could go down. There is also the additional
risk that foreign political, economic and legal systems may be less stable than
in the U.S. The changing value of foreign currencies could also affect the value
of the assets we hold and our performance. In addition, these are special risks
that may arise with the introduction of the euro as a common currency of the
European Monetary Union. These risks include the possibility that computing,
accounting and trading systems will fail to recognize the euro, as well as the
possibility that the euro will cause markets to become more volatile.
There is also risk involved in the investment strategies we may use. Some
of our strategies require us to try to predict whether the price or value of an
underlying investment will go up or down over a certain period of time. There is
always the risk that investments will not perform as we thought they would. Like
any mutual fund, an investment in the Series could lose value, and you could
lose money.
An investment in the Series is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

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6 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>
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RISK/RETURN SUMMARY
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EVALUATING PERFORMANCE
A number of factors--including risk--affect how the International Stock Series
performs. The following bar chart and table show the Series' performance for
each full calendar year of operation for the last 5 years. They demonstrate the
risk of investing in the Series and how returns can change. Past performance
does not mean that the Series will achieve similar results in the future.

- -----------------------------------------------
ANNUAL RETURNS (CLASS Z SHARES)(1)
- --------------------------------------------------------------------------------

1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----

[BAR CHART OMITTED]

37.56% 3.62% 9.04% 17.44% 6.52% 11.14%
----- ---- ---- ----- ---- -----

BEST QUARTER: 13.83% (4th quarter of 1993)
WORST QUARTER: -8.58% (4th quarter of 1997)
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1 These annual returns do not include sales charges. If sales charges were
included, the annual returns would be lower than those shown.

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AVERAGE ANNUAL RETURNS (AS OF 12/31/98)(1)
- ----------------------------------------------------------------------
1 YEAR 5 YEARS SINCE INCEPTION
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Class A shares 5.31% N/A% 8.07% (since 9-23-96)
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Class B shares 4.99% N/A% 8.51% (since 9-23-96)
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Class C shares 7.89% N/A% 9.21% (since 9-23-96)
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Class Z shares 11.14% 9.46% 13.78% (since 11-5-92)
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MSCI EAFE(2) 20.33% 9.50% n/a
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Lipper Average(3) 13.05% 9.69% n/a

1 The Series' returns are after deduction of sales charges and expenses.

2 The Morgan Stanley Capital International (MSCI) EAFE(R) Index is a
weighted, unmanaged index of performance that reflects stock price
movements in Europe, Australasia and the Far East. These returns do not
include the effect of any sales charges. These returns would be lower if
they included the effect of sales charges. MSCI EAFE(R) Index returns since
inception of each class are 10.37% for Class A, 10.37% for Class B, 10.37%
for Class C and 13.00% for Class Z shares.

3 The Lipper Average is based on the average return of all mutual funds in
the International Funds category and does not include the effect of any
sales charges. Again, these returns would be lower if they included the
effect of sales charges. Lipper returns since inception of each class are
9.97% for Class A, 9.97% for Class B, 9.97% for Class C and 12.36% for
Class Z shares. Source: Lipper, Inc.

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7

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RISK/RETURN SUMMARY
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- --------------------------------------------------------------
ANNUAL SERIES OPERATING EXPENSES (DEDUCTED FROM SERIES ASSETS)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS Z
- --------------------------------------------------------------------------------
Management fees 1.00% 1.00% 1.00% 1.00%
- --------------------------------------------------------------------------------
+ Distribution and service (12b-1) fees .30%(4) 1.00% 1.00% None
- --------------------------------------------------------------------------------
+ Other expenses .37% .37% .37% .37%
- --------------------------------------------------------------------------------
= TOTAL ANNUAL FUND OPERATING EXPENSES 1.67% 2.37% 2.37% 1.37%

1 The maximum sales charges permitted by the National Association of
Securities Dealers, Inc. may not exceed 6.25% of total gross sales per
class. Because of 12b-1 fees, long-term shareholders may pay more than
6.25% of their investment in shares of the Fund. Your broker may charge you
a separate or additional fee for purchases and sales of shares.

2 The Contingent Deferred Sales Charge (CDSC) for Class B shares decreases by
1% annually to 1% in the fifth and sixth years and 0% in the seventh year.
Class B shares covert to Class A shares approximately seven years after
purchase.

3 The CDSC for Class C shares is 1% for shares redeemed within 18 months of
purchase.

4 The Distributor of the Fund has voluntarily reduced its distribution and
service fees for Class A shares to .25 of 1% of the average daily net
assets of the Class A shares. This voluntary reduction may be terminated at
any time without notice. With this reduction, Total annual Series operating
expenses are __%.

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8 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

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RISK/RETURN SUMMARY
- --------------------------------------------------------------------------------

EXAMPLE
This example is intended to help you compare the cost of investing in the Series
with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Series for the time
periods indicated and then sell all of your shares at the end of those periods.
The example also assumes that your investment has a 5% return each year and that
the Series' operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:

- --------------------------------------------------------------------------------
1 YR 3 YRS 5 YRS 10 YRS
- --------------------------------------------------------------------------------
Class A shares $661 $1,000 $1,362 $2,377
- --------------------------------------------------------------------------------
Class B shares $740 $1,039 $1,365 $2,451
- --------------------------------------------------------------------------------
Class C shares $438 $ 832 $1,353 $2,779
- --------------------------------------------------------------------------------
Class Z shares $139 $ 434 $ 750 $1,646

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

- --------------------------------------------------------------------------------
1 YR 3 YRS 5 YRS 10 YRS
- --------------------------------------------------------------------------------
Class A shares $661 $1,000 $1,362 $2,377
- --------------------------------------------------------------------------------
Class B shares $240 $ 739 $1,265 $2,451
- --------------------------------------------------------------------------------
Class C shares $338 $ 832 $1,353 $2,779
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Class Z shares $139 $ 434 $ 750 $1,646

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9

<PAGE>

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HOW THE FUND INVESTS
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GLOBAL SERIES: INVESTMENT OBJECTIVE AND POLICIES
The investment objective of this Series is to seek LONG-TERM GROWTH OF CAPITAL,
with income as a secondary objective. This means we seek investments that will
increase in value over a period of years. We invest primarily in the
EQUITY-RELATED SECURITIES of U.S. AND FOREIGN COMPANIES. While we make every
effort to achieve our objective, we can't guarantee success.

While the Series may invest in companies of any size, in the past we have
invested, and we currently intend to invest, primarily in medium-size and large
companies, which means companies with a MARKET CAPITALIZATION of $1 billion or
more (market capitalization is the price per share times the number of
outstanding shares). Geographically, we intend to have investments in at least
four developed countries, including the U.S. We may invest in stock markets and
countries around the world, including countries in the Pacific Basin (like Japan
and Australia), Western Europe (like the United Kingdom and Germany) and North
America (like the U.S. and Canada).

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WE LOOK FOR GROWTH
OPPORTUNITIES
In deciding which securities to buy, we use a growth investment style. That is,
we look for companies that we believe are undervalued and/or will grow
faster--and earn better profits--than other companies. We also look for
companies with strong competitive advantages, effective research, product
development, strong management and financial strength. We consider selling a
security when the conditions for growth are no longer present or begin to
change, the price of the security reaches the level we expected, or when the
security falls short of our expectations.
- --------------------------------------------------------------------------------

From time to time, on a temporary basis, we may invest up to 65% of the
Series' total assets in just one country, and under unusual market conditions,
we may temporarily invest all of our assets in U.S. equities. For more
information, see "Investment Risks" and the Statement of Additional Information,
"Description of the Series, Their Investments and Risks." The Statement of
Additional Information--which we refer to as the SAI--contains more information
about the Series. To obtain a copy, see the back cover page of this prospectus.

Our investment objective is a fundamental policy that cannot be changed
without shareholder approval. The Board of the Fund can change investment
policies that are not fundamental.

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10 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

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HOW THE FUND INVESTS
- --------------------------------------------------------------------------------

INTERNATIONAL STOCK SERIES: INVESTMENT OBJECTIVE
AND POLICIES

The investment objective of this Series is to seek LONG-TERM GROWTH OF CAPITAL
through investment in equity securities of foreign issuers, with income as a
secondary objective. This means we seek investments--primarily the common stock
and preferred stock of FOREIGN COMPANIES--that will increase in value over a
period of years. While we make every effort to achieve our objective, we can't
guarantee success.

In deciding whether to buy a particular security, we look at a number of
factors, including the company's sales, earnings, book value, cash flow and
overall ability to grow and profit. We take a bottom-up security selection
approach, rather than allocating by country or sector. Typically, we focus on
companies that have been operating for at least three years.
Under normal conditions, we intend to invest at least 65% of our total
assets in the common stock and preferred stock of companies in at least three
foreign countries, with no more than 25% of our net assets in any one country.
We may invest anywhere in the world, including North America, Western Europe,
the United Kingdom and the Pacific Basin, but generally NOT THE U.S. However,
under unusual market conditions, on a temporary basis, we may invest up to 100%
of the Series' total assets in the stock and other equity-related securities of
U.S. companies.
Our investment objective is a fundamental policy that cannot be changed
without shareholder approval. The Board of the Fund can change investment
policies that are not fundamental. For more information, see "Investment Risks"
and the Statement of Additional Information, "Description of the Series, Their
Investments and Risks." The Statement of Additional Information--which we refer
to as the SAI--contains more information about the Series. To obtain a copy, see
the back cover page of this prospectus.

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WE'RE VALUE INVESTORS
We look primarily for securities that are undervalued. This means that the price
of a security--in our view--is lower than it really should be, given the
company's financial and business outlook. The idea is to find undervalued
securities before the rest of the market and buy them before the price goes up.
We consider selling a security after it has increased in value to the point
where we believe the price is no longer undervalued or we believe the security
cannot maintain its current price.
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11

<PAGE>

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HOW THE FUND INVESTS
- --------------------------------------------------------------------------------

OTHER INVESTMENTS
While both Series invest primarily in common stock, preferred stock, or other
equity-related securities, they may invest in other securities or use certain
investment strategies to increase returns or protect their assets if market
conditions warrant.

EQUITY-RELATED SECURITIES
These include common stock, preferred stock or securities that may be converted
to or exchanged for common stock--known as CONVERTIBLE SECURITIES--like rights
and warrants. Each Series may also invest in American Depositary Receipts
(ADRs), which are certificates--usually issued by a U.S. bank or trust
company--that represent an equity investment in a foreign company or some other
foreign issuer. ADRs are valued in U.S. dollars.

MONEY MARKET INSTRUMENTS, BONDS AND OTHER FIXED-INCOME OBLIGATIONS
Money market instruments and bonds are known as FIXED-INCOME securities because
they pay a fixed rate of interest. Typically, fixed-income securities don't
increase in value as stock may, but their fixed rate of interest usually
provides a dependable rate of return. Corporations and governments issue MONEY
MARKET INSTRUMENTS and BONDS to raise money. Each Series may buy obligations of
companies, foreign countries or the U.S. Government. Money market instruments
include the commercial paper and short-term obligations of foreign and domestic
corporations, banks and governments and their agencies.
In response to adverse market, economic or political conditions, we may
temporarily invest up to 100% of each Series' assets in money market
instruments. Investing heavily in these securities limits our ability to achieve
capital appreciation, but can help to preserve the Series' assets when global or
international markets are unstable.
Generally, each Series will purchase only "INVESTMENT-GRADE" commercial
paper and bonds. This means the commercial paper and bonds have received one of
the four highest quality ratings determined by Moody's Investors Service, Inc.
("Moody's"), or Standard & Poor's Ratings Group ("S&P"), or one of the other
nationally recognized statistical rating organizations (NRSROs). On occasion,
each Series may buy instruments that are not rated, but that are of comparable
quality to the investment-grade bonds described above. In addition, the
International Stock Series may invest up to 5% of its assets in
- --------------------------------------------------------------------------------
12 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

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HOW THE FUND INVESTS
- --------------------------------------------------------------------------------

lower-rated instruments that are more speculative, including high-yield or
"junk" bonds. For more information about bonds and bond ratings, see the SAI,
"Appendix I, Description of Security Ratings."
Each Series may also use REPURCHASE AGREEMENTS, where a party agrees to
sell a security to the Series and then repurchase it at an agreed-upon price at
a stated time. This creates a fixed return for the Series.

DERIVATIVE STRATEGIES
We may use a number of alternative investment strategies--including
DERIVATIVES--to try to improve both Series' returns or protect their assets,
although we cannot guarantee these strategies will work, that the instruments
necessary to implement these strategies will be available or that the Series
will not lose money. Derivatives--such as futures, options, foreign currency
forward contracts and options on futures--involve costs and can be volatile. The
Global Series may also use stock index futures. With derivatives, the investment
adviser tries to predict whether the underlying investment, a security, market
index, currency, interest rate or some other investment, will go up or down at
some future date. We may use derivatives to try to reduce risk or to increase
return, consistent with a Series' overall investment objective. The investment
adviser will consider other factors (such as cost) in deciding whether to employ
any particular strategy or use any particular instrument. Any derivatives we may
use may not match a Series' underlying holdings. For more information about
these strategies, see the SAI, "Description of the Series, Their Investments and
Risks--Hedging and Return Enhancement Strategies."

ADDITIONAL STRATEGIES
Each Series follows certain policies when it BORROWS MONEY (each Series can
borrow up to 20% of the value of its total assets); LENDS ITS SECURITIES to
others (each Series can lend up to 30% of the value of its total assets,
including collateral received in the transaction); and holds ILLIQUID SECURITIES
(each Series may hold up to 15% of its net assets in illiquid securities,
including restricted securities with legal or contractual restrictions, those
without a readily available market and repurchase agreements with maturities
longer than seven days). Each Series is subject to certain investment
restrictions that are fundamental policies, which means they cannot be changed
without shareholder approval. For more information about these restrictions, see
the SAI.

- --------------------------------------------------------------------------------
13
<PAGE>

- --------------------------------------------------------------------------------
HOW THE FUND INVESTS
- --------------------------------------------------------------------------------

INVESTMENT RISKS
As noted, all investments involve risk, and investing in the Fund is no
exception. This chart outlines the key risks and potential rewards of the
principal investments each Series may make. See, too, "Description of the
Series, Their Investments and Risks" in the SAI.

- --------------------------------------------------------------------------------
INVESTMENT TYPE
% OF SERIES' TOTAL ASSETS RISKS POTENTIAL REWARDS
- --------------------------------------------------------------------------------

o Foreign o Investors can
FOREIGN SECURITIES markets, economies participate in
and political systems the growth of
Global Series: may not be as stable foreign markets and
Percentage varies, up to as in the U.S. companies operating
65% in one country in those markets

o Currency
International Stock Series: risk--changing values o Opportunities
At least 65%; up to 100% of foreign for diversification
currencies

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

o Differences in
foreign laws,
accounting standards
and public information

o Year 2000
conversion may be
more of a problem for
some foreign issuers

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

o Individual o Historically,
COMMON STOCKS AND stocks could stocks have
CONVERTIBLE SECURITIES OF lose value outperformed other
U.S. COMPANIES investments over the
o The equity long term
Global Series: markets could go
Up to 65% down, resulting in a o Generally,
decline in value of a economic growth means
International Stock Series: Series' investments higher corporate
Usually 0% profits, which leads
o Companies that to an increase in
pay dividends may not stock prices, known as
do so if they don't capital appreciation
have profits or
adequate cash flow o May be a source
of dividend income
o Changes in
economic or political
conditions,
both domestic and
international,
resulting in
a decline in value of
a Series' investments
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
14 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

- --------------------------------------------------------------------------------
INVESTMENT TYPE (cont'd)
% OF SERIES' TOTAL ASSETS RISKS POTENTIAL REWARDS
- --------------------------------------------------------------------------------

o Credit risk--the o Regular interest
INVESTMENT-GRADE BONDS risk that the income
borrower can't pay
Both Series: back the money o Generally more
Up to 35% borrowed or make secure than stock
interest payments since companies
must pay their debts
o Market risk--the before paying
risk that bonds or stockholders
other debt
instruments may lose
value in the market
because interest
rates change or there
is a lack of
confidence in the
borrower
- --------------------------------------------------------------------------------
o Derivatives o A Series could
DERIVATIVES such as futures, make money and protect
options and foreign against losses if the
Both Series: currency forward investment analysis
Percentage Varies contracts may not proves correct
fully offset the
underlying positions o Derivatives that
and this could result involve leverage could
in losses to a Series generate substantial
that would not have gains at flow
otherwise occurred(*) cost

o Derivatives o One way to
used for risk manage a Series'
management may not risk/return
have the intended balance is by locking
effects and may in the value of an
result in losses or investment ahead of
missed opportunities time

o The counterparty to a
derivatives contract
could default

o Derivatives that
involve leverage
could magnify losses

o Certain types
of derivatives
involve costs to a
Series that can
reduce returns
- -------------------------------------------------------------------------------
o May be o May offer a more
ILLIQUID SECURITIES difficult to value attractive yield or
precisely potential for growth
Both Series: than more
Up to 15% of net assets o May be difficult to widely traded
sell at the time or securities
place desired
- --------------------------------------------------------------------------------

* An option is the right to buy or sell securities in exchange for a premium. A
futures contract is an agreement to buy or sell a set quantity of an
underlying product at a future date, or to make or receive a cash payment
based on the value of a securities index. A foreign currency forward contract
is an obligation to buy or sell a given currency on a future date and at a
set price.

- --------------------------------------------------------------------------------
15

<PAGE>

- --------------------------------------------------------------------------------
HOW THE FUND IS MANAGED
- --------------------------------------------------------------------------------

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

Under a management agreement with the Fund, PIFM manages the Fund's
investment operations and administers its business affairs. For the fiscal year
ended October 31, 1998, Global Series and International Stock Series paid PIFM
management fees of .75% and 1.00% of their respective average net assets.
As of November 30, 1998, PIFM served as the Manager to all 46 of the
Prudential Mutual Funds, and as Manager or administrator to 22 closed-end
investment companies, with aggregate assets of approximately $69 billion.

INVESTMENT ADVISER
The Prudential Investment Corporation (PIC), called Prudential Investments, is
the Global Series' investment adviser (the subadviser). Its address is
Prudential Plaza, 751 Broad Street, Newark, NJ 07102. Mercator Asset Management,
L.P. is the International Stock Series' investment adviser (also referred to as
a subadviser). Its address is 2400 East Commercial Blvd, Suite 810, Fort
Lauderdale, FL 33308. PIFM is responsible for all investment advisory services
and supervises the subadvisers. PIFM reimburses PIC for its reasonable costs and
expenses. Mercator is paid .75% of the average daily net assets of the
International Stock Series on assets up to $50 million; .60% on assets between
$50 million and $300 million; and .45% on assets above $300 million.

PORTFOLIO MANAGERS

GLOBAL SERIES
The Global Series is co-managed by DANIEL J. DUANE, CFA; INGRID HOLM, CFA and
MICHELLE PICKER, CFA.

Dan Duane is a Managing Director of Prudential Investments and has managed
the Global Series since 1991. He earned a B.A. from Boston College, a Ph.D. from
Yale University and an M.B.A. from New York University. He was awarded the
Chartered Financial Analyst (CFA) designation.

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16 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

- --------------------------------------------------------------------------------
HOW THE FUND IS MANAGED
- --------------------------------------------------------------------------------

Ingrid Holm is a Vice President of Prudential Investments who joined
Prudential in 1987. She has co-managed the Global Series since October 1997.
Ingrid earned a B.S. from University of Pennsylvania's Wharton School of
Business and an M.B.A. from Columbia University. She was also awarded the
Chartered Financial Analyst designation.
Michelle Picker is a Vice President of Prudential Investments who joined
Prudential in 1992. She has co-managed the Global Series since October 1997.
Michelle earned a B.A. from the University of Pennsylvania and an M.B.A. from
New York University. She was also awarded the Chartered Financial Analyst
designation.
Dan, Ingrid and Michelle are growth-oriented global equity investors. Their
primary focus is on individual stock selection.

INTERNATIONAL STOCK SERIES
Mercator Asset Management, L.P. is the subadviser for the International Stock
Series. PETER F. SPANO, CFA, is a founder of Mercator, which started in 1984. He
has managed the International Stock Series since its inception in November 1992.
Peter earned a B.B.A. from St. John's University and an M.B.A. from Baruch
College, City University of New York. He has also been awarded the Chartered
Financial Analyst designation.
Peter, along with his partners at Mercator, are value investors who seek
undervalued stocks with good prospects for earnings growth momentum. They focus
on a bottom-up stock selection, rather than a country or sector allocation.
Mercator uses a global research network to generate investment ideas.

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

- --------------------------------------------------------------------------------
17
<PAGE>

- --------------------------------------------------------------------------------
HOW THE FUND IS MANAGED
- --------------------------------------------------------------------------------

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

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18 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

- --------------------------------------------------------------------------------
FUND DISTRIBUTIONS AND TAX ISSUES
- --------------------------------------------------------------------------------

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

DISTRIBUTIONS
The Fund distributes DIVIDENDS of any net investment income to shareholders,
typically once a year. For example, if the Fund owns ACME Corp. stock and the
stock pays a dividend, the Fund will pay out a portion of this dividend to its
shareholders, assuming the Fund's income is more than its costs and expenses.
The dividends you receive from the Fund will be taxed as ordinary income,
whether or not they are reinvested in the Fund.

The Fund also distributes realized net CAPITAL GAINS to
shareholders--typically once a year. Capital gains are generated when the Fund
sells its assets for a profit. For example, if the Fund bought 100 shares of
ACME Corp. stock for a total of $1,000 and more than one year later sold the
shares for a total of $1,500, the Fund has net long-term capital gains of $500,
which it will pass on to shareholders (assuming the Fund's total gains are
greater than any losses it may have). Capital gains are taxed differently
depending on how long the Fund holds the security--if a security is held more
than one year before it is sold, LONG-TERM capital gains are taxed at the rate
of 20%, but if the security is held one year or less, SHORT-TERM capital gains
are taxed at rates up to 39.6%. Different rates apply to corporate shareholders.
For your convenience, Fund distributions of dividends and capital gains are
AUTOMATICALLY REINVESTED in the Fund without any sales charge. If you ask us to
pay the distributions in cash, we will send you a check if your account is with
the Transfer Agent. Otherwise, if your account is with a broker, you will
receive a credit to your account. Either way, the distributions may be subject
to taxes, unless your shares are held in a qualified tax-deferred plan or
account. For

- --------------------------------------------------------------------------------
19

<PAGE>

- --------------------------------------------------------------------------------
FUND DISTRIBUTIONS AND TAX ISSUES
- --------------------------------------------------------------------------------

more information about automatic reinvestment and other shareholder services,
see "Step 4: Additional Shareholder Services" in the next section.

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

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

IF YOU PURCHASE JUST BEFORE RECORD DATE
If you buy shares of the Fund just before the record date (the date that
determines who receives the distribution), that distribution will be paid to
you. As explained above, the distribution may be subject to income or capital
gains taxes. You may think you've done well, since you bought shares one day and

- --------------------------------------------------------------------------------
20 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

- --------------------------------------------------------------------------------
FUND DISTRIBUTIONS AND TAX ISSUES
- --------------------------------------------------------------------------------

soon thereafter received a distribution. That is not so because when dividends
are paid out, the value of each share of the Fund decreases by the amount of the
dividend and the market changes (if any) to reflect the payout. The distribution
you receive makes up for the decrease in share value. However, the timing of
your purchase does mean that part of your investment came back to you as taxable
income.

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

IF YOU SELL OR EXCHANGE YOUR SHARES
If you sell any shares of the Fund for a profit, you have realized a capital
gain, which is subject to tax unless you hold shares in a qualified tax-deferred
plan or account. The amount of tax you pay depends on how long you owned your
shares. If you sell shares of the Fund for a loss, you may have a capital loss,
which you may use to offset certain capital gains you have.

- ----------------------------------------
RECEIPTS } + $ CAPITAL GAIN
FROM SALE } (taxes owed)

RECEIPTS } - $ CAPITAL LOSS
FROM SALE } (offset against gain)
- ----------------------------------------

Exchanging your shares of the Fund for the shares of another Prudential
Mutual Fund is considered a sale for tax purposes. In other words, it's a
"taxable event." Therefore, if the shares you exchanged have increased in value
since you purchased them, you have capital gains, which are subject to the taxes
described above.
Any gain or loss you may have from selling or exchanging Fund shares will
not be reported on the Form 1099. Therefore, unless you hold your shares in a
qualified tax-deferred plan or account, you or your financial adviser should
keep track of the dates on which you buy and sell--or exchange--Fund shares,

- --------------------------------------------------------------------------------
21

<PAGE>

- --------------------------------------------------------------------------------
FUND DISTRIBUTIONS AND TAX ISSUES
- --------------------------------------------------------------------------------

as well as the amount of any gain or loss on each transaction. For tax advice,
please see your tax adviser.

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

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22 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

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

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

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

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

- --------------------------------------------------------------------------------
23

<PAGE>

- --------------------------------------------------------------------------------
HOW TO BUY, SELL AND
EXCHANGE SHARES OF THE FUND
- --------------------------------------------------------------------------------
o Whether you qualify for any reduction or waiver of sales charges
o The fact that Class B shares automatically convert to Class A shares
approximately seven years after purchase
o Whether you qualify to purchase Class Z shares
See "How to Sell Your Shares" for a description of the impact of CDSCs.

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

- --------------------------------------------------------------------------------
Class A Class B Class C Class Z
------- ------- ------- -------
Minimum purchase $1,000 $1,000 $2,500 None
amount(1)

Minimum amount for $100 $100 $100 None
subsequent purchases(1)

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

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

Annual distribution .30 of 1% up to 1% 1% None
and service (12b-1) (.25 of 1%
fees (shown as a currently)
percentage of average
net assets)(3)
- --------------------------------------------------------------------------------
1 The minimum investment requirements do not apply to certain retirement and
employee savings plans and custodial accounts for minors. The minimum
initial and subsequent investment for purchases made through the Automatic
Investment Plan is $50. For more information, see "Additional Shareholder
Services--Automatic Investment Plan."

2 For more information about the CDSC and how it is calculated, see
"Contingent Deferred Sales Charges (CDSC)." Class C shares bought before
November 2, 1998 have a 1% CDSC if sold within one year.

3 These distribution fees are paid from the Fund's assets on a continuous
basis. Over time, the fees will increase the cost of your investment and
may cost you more than paying other types of sales charges. The service fee
for Class A and Class C shares of Global Series and the service fee for
Class A, Class B and Class C shares of International Stock Series is .25 of
1%. The distribution fee for Class A shares of both Series is limited to
.30 of 1% (including the .25 of 1% service fee) and is .75 of 1% for Class
C shares. Class B shares of Global Series pay a distribution fee equal to
.75 of 1% of average daily net assets as of February 26, 1986, plus 1% of
assets in excess of that amount. Class B shares of International Stock
Series pay a distribution fee (in addition to the service fee) of .75 of
1%.

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24 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

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

INCREASE THE AMOUNT OF YOUR INVESTMENT. You can reduce Class A's sales charge by
increasing the amount of your investment. This table shows you how the sales
charge decreases as the amount of your investment increases.

- --------------------------------------------------------------------------------
SALES CHARGE AS % SALES CHARGE AS % DEALER
AMOUNT OF PURCHASE OF OFFERING PRICE OF AMOUNT INVESTED ALLOWANCE
------------------ ----------------- ------------------ ---------
Less than $25,000 5.00% 5.26% 4.75%
$25,000 to $49,999 4.50% 4.71% 4.25%
$50,000 to $99,999 4.00% 4.17% 3.75%
$100,000 to $249,999 3.25% 3.36% 3.00%
$250,000 to $499,999 2.50% 2.56% 2.40%
$500,000 to $999,999 2.00% 2.04% 1.90%
$1 million and above(*) None None None
- --------------------------------------------------------------------------------

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

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

- --------------------------------------------------------------------------------
25

<PAGE>

BENEFIT PLANS. Benefit Plans can avoid Class A's initial sales charge if the
Benefit Plan has existing assets of at least $1 million invested in shares of
Prudential Mutual Funds (excluding money market funds other than those acquired
under the exchange privilege) or 250 eligible employees or participants. For
these purposes, a Benefit Plan is a pension, profit-sharing or other employee
benefit plan qualified under Section 401 of the Internal Revenue Code, a
deferred compensation or annuity plan under Sections 403(b) and 457 of the
Internal Revenue Code, a "rabbi trust" or a non-qualified deferred compensation
plan sponsored by an employer that has a tax-qualified benefit plan with
Prudential. Class A shares may also be purchased without a sales charge by
participants who are repaying loans from Benefit Plans where Prudential (or its
affiliates) provides administrative or record-keeping services, sponsors the
product or provides account services.
Certain Prudential retirement programs--such as PruArray Association
Benefit Plans and PruArray Savings Programs--may also be exempt from Class A's
sales charges. For more information, see the SAI or contact your financial
adviser. In addition, waivers are available to investors in certain programs
sponsored by brokers, investment advisers and financial planners who have
agreements with Prudential Investments Advisory Group relating to
o Mutual fund "wrap" or asset allocation programs where the sponsor
places Fund trades and charges its clients a management, consulting or
other fee for its services; and
o Mutual Fund "supermarket" programs where the sponsor links its
customers' accounts to a master account in the sponsor's name and the
sponsor charges a fee for its services
OTHER TYPES OF INVESTORS. Other investors pay no sales charges, including
certain officers, employees or agents of Prudential and its affiliates,
Prudential Mutual Funds, the subadvisers of the Prudential Mutual Funds and
clients of brokers that have entered into a selected dealer agreement with the
Distributor. To qualify for a reduction or waiver of the sales charge, you must
notify the Transfer Agent or your broker at the time of purchase. For more
information about reducing or eliminating Class A's sales charge, see the SAI,
"Purchase, Redemption and Pricing of Fund Shares--Reduction and Waiver of
Initial Sales Charges--Class A Shares."

- --------------------------------------------------------------------------------
26 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

WAIVING CLASS C'S INITIAL SALES CHARGE
BENEFIT PLANS. Benefit Plans (as defined above) may purchase Class C shares
without paying an initial sales charge. Class C shares may also be purchased
without an initial sales charge by participants who are repaying loans from
Benefit Plans where Prudential (or its affiliates) provides administrative or
record-keeping services, sponsors the product or provides account services.

PRUDENTIAL RETIREMENT PLANS. The initial sales charge will be waived for
purchases of Class C shares by both qualified an nonqualified retirement and
deferred compensation plans participating in the PruArray Plan and other plans
if Prudential also provides administrative or record-keeping services.
INVESTMENT OF REDEMPTION PROCEEDS FROM OTHER INVESTMENT COMPANIES. The initial
sales charge will be waived for purchases of Class C shares if the purchase is
made with money from the redemption of shares of any unaffiliated investment
company, as long as the shares were not held in an account at Prudential
Securities Incorporated or one of its affiliates. These purchases must be made
within 60 days of the redemption. To qualify for this waiver, you must:
o purchase your shares through an account at Prudential Securities;
o purchase your shares through an ADVANTAGE Account or an Investor
Account with Pruco Securities Corporation; or
o purchase your shares through other brokers.
The waiver is not available to investors who purchase shares directly from the
Transfer Agent. If you are entitiled to the waiver, you must notify either the
Transfer Agent or your broker. The Transfer Agent may require any supporting
documents it considers appropriate.

QUALIFYING FOR CLASS Z SHARES
Class Z shares of the Fund can be purchased by any of the following:
o Any Benefit Plan (as defined above), and certain non-qualified plans,
provided the Benefit Plan--in combination with other plans sponsored
by the same employer or group of related employers--has at least $50
million in defined contribution assets
o Participants in any fee-based program or trust program sponsored by
Prudential or an affiliate which includes mutual funds as investment
options and the Fund as an available option

- --------------------------------------------------------------------------------
27
<PAGE>

o Certain participants in the MEDLEY Program (group variable annuity
contracts) sponsored by Prudential for whom Class Z shares of the
Prudential Mutual Funds are an available option
o Benefit Plans for which an affiliate of the Distributor provides
administrative or record-keeping services and as of September 20,
1996, were either Class Z shareholders of the Prudential Mutual Funds
or executed a letter of intent to purchase Class Z shares of the
Prudential Mutual Funds
o The Prudential Securities Cash Balance Pension Plan, an
employee-defined benefit plan sponsored by Prudential Securities
o Current and former Directors/Trustees of the Prudential Mutual Funds
(including the Fund)
o Employees of Prudential and/or Prudential Securities who participate
in a Prudential-sponsored employee savings plan
o Prudential with an investment of $10 million or more

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

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

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28 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

STEP 3: UNDERSTANDING THE PRICE YOU'LL PAY
The price you pay for each share of the Fund is based on the share value. The
share value of a mutual fund--known as the NET ASSET VALUE or NAV--is
determined by a simple calculation: it's the total value of the Fund (assets
minus liabilities) divided by the total number of shares outstanding. For
example, if the value of the investments held by Fund XYZ (minus its expenses)
is $1,000 and there are 100 shares of Fund XYZ owned by shareholders, the price
of one share of the fund--or the NAV--is $10 ($1,000 divided by 100). Portfolio
securities are valued based upon market quotations or, if not readily available,
at fair value as determined in good faith under procedures established by the
Fund's Board. Most national newspapers report the NAVs of most mutual funds,
which allows investors to check the price of mutual funds daily.

- -------------------------------------------------------------------------------
MUTUAL FUND SHARES
The NAV of mutual fund shares changes every day because the value of a fund's
portfolio changes constantly. For example, if Fund XYZ holds ACME Corp. stock in
its portfolio and the price of ACME stock goes up, while the value of the fund's
other holdings remains the same and expenses don't change, the NAV of Fund XYZ
will increase.
- -------------------------------------------------------------------------------
We determine the NAV of our shares once each business day at 4:15 p.m. New
York Time on days that the New York Stock Exchange is open for trading. We do
not determine NAV on days when we have not received any orders to purchase, sell
or exchange Fund shares, or when changes in the value of the Fund's portfolio do
not materially affect the NAV.

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

- --------------------------------------------------------------------------------
29

<PAGE>

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

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

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

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

RETIREMENT PLAN SERVICES. Prudential offers a wide variety of retirement plans
for individuals and institutions, including large and small businesses. For
information on IRAs, including Roth IRAs, or SEP-IRAs for a one-person business,
please contact your financial adviser. If you are interested in opening a 401(k)
or other company-sponsored retirement plan (SIMPLES, SEP plans, Keoghs,
403(b)(7) plans, pension and profit-sharing plans), your financial adviser will
help you determine which retirement plan best meets your needs. Complete
instructions about how to establish and maintain your plan and how to open
accounts for you and your employees will be included in the retirement plan kit
you receive in the mail.

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30 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

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

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

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

HOW TO SELL YOUR SHARES
You can sell your shares of the Fund for cash (in the form of a check) at any
time, subject to certain restrictions.

When you sell shares of the Fund--also known as REDEEMING your shares--the
price you will receive will be the NAV next determined after the Transfer Agent,
the Distributor or your broker receives your order to sell. If your broker holds
your shares, he must receive your order to sell by 4:15 p.m. New York Time to
process the sale on that day. Otherwise, contact:

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

Generally, we will pay you for the shares that you sell within seven days
after the Transfer Agent, the Distributor or your broker receives your sell
order. If you hold shares through a broker, payment will be credited to your
account. If you are selling shares you recently purchased with a check, we may
delay

- --------------------------------------------------------------------------------
31

<PAGE>

sending you the proceeds until your check clears, which can take up to 10 days
from the purchase date. You can avoid delay if you purchase shares by wire,
certified check or cashier's check. Your broker may charge a separate or
additional fee for purchases and sales of shares.

RESTRICTIONS ON SALES
There are certain times when you may not be able to sell shares of the Fund, or
when we may delay paying you the proceeds from a sale. This may happen during
unusual market conditions or emergencies when the Fund can't determine the value
of its assets or sell its holdings. For more information, see the SAI,
"Purchase, Redemption and Pricing of Fund Shares-Sale of Shares."
If you are selling more than $50,000 of shares, you want the check sent to
someone or some place that is not in our records or you are a business or a
trust and if you hold shares directly with the Transfer Agent, you may have to
have the signature on your sell order guaranteed by a financial institution. For
more information, see the SAI, "Purchase, Redemption and Pricing of Fund
Shares-Sale of Shares."

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

Since shares that fall into any of the categories listed above are not
subject to the CDSC, selling them first helps you to avoid--or at least
minimize--the CDSC.

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32 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

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

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

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

- --------------------------------------------------------------------------------
33

<PAGE>

WAIVER OF THE CDSC--CLASS C SHARES
PRUDENTIAL RETIREMENT PLANS. The CDSC will be waived for purchases of Class C
shares by both qualified and non-qualified retirement and deferred compensation
plans participating in the PruArray Plan and other plans if Prudential also
provides administrative or record-keeping services. The CDSC will also be waived
on redemptions from Benefit Plans sponsored by Prudential and its affiliates to
the extent that the redemption proceeds are invested in the Guaranteed
Investment Account (a group annuity insurance product sponsored by Prudential),
The Guaranteed Insulated Separate Account (a separate account offered by
Prudential), and shares of The Stable Value Fund (an unaffiliated bank
collective fund).

OTHER BENEFIT PLANS. The CDSC will be waived on redemptions from Benefit Plans
holding shares through a broker not affiliated with Prudential and for which the
broker provides administrative or record-keeping services.

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

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

90-DAY REPURCHASE PRIVILEGE
After you redeem your shares, you have a 90-day period during which you may
reinvest any of the redemption proceeds in shares of the same Fund without

- --------------------------------------------------------------------------------
34 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

paying an initial sales charge. Also, if you paid a CDSC when you redeemed your
shares, we will credit your new account with the appropriate number of shares to
reflect the amount of the CDSC you paid. In order to take advantage of this
one-time privilege, you must notify the Transfer Agent or your broker at the
time of the repurchase. See the SAI, "Purchase, Redemption and Pricing of Fund
Shares--Sale of Shares."

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

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

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

- --------------------------------------------------------------------------------
35

<PAGE>

There is no sales charge for such exchanges. However, if you exchange--and
then sell--Class B shares within approximately six years of your original
purchase or Class C shares within 18 months of your original purchase, you must
still pay the applicable CDSC. If you have exchanged Class B or Class C shares
into a money market fund, the time you hold the shares in the money market
account will not be counted in calculating the required holding periods for CDSC
liability.
Remember, as we explained in the section entitled "Fund Distributions and
Tax Issues--If You Sell or Exchange Your Shares," exchanging shares is
considered a sale for tax purposes. Therefore, if the shares you exchange are
worth more than you paid for them, you may have to pay capital gains tax. For
additional information about exchanging shares, see the SAI, "Shareholder
Investment Account--Exchange Privilege."
If you own Class B or Class C shares and qualify to purchase either Class A
shares without paying an initial sales charge or Class Z shares, we will
automatically exchange your Class B or Class C shares which are not subject to a
CDSC for Class A or Class Z shares, as appropriate. We make such exchanges on a
quarterly basis if you qualify for this exchange privilege. We have obtained a
legal opinion that this exchange is not a "taxable event" for federal income tax
purposes. This opinion is not binding on the IRS.

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

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36 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

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

- --------------------------------------------------------------------------------
37

<PAGE>

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

GLOBAL SERIES: CLASS A SHARES
The financial highlights for the two years ended October 31, 1998 were audited
by PricewaterhouseCoopers LLP, independent accountants, and the financial
highlights for the three years ended October 31, 1996 were audited by other
independent auditors whose reports were unqualified.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
CLASS A SHARES (FISCAL YEAR ENDED 10-31-98)

PER SHARE OPERATING PERFORMANCE 1998(1) 1997 1996 1995(1) 1994(1)
- -----------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $17.27 $16.62 $15.52 $14.89 $13.17
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.02) (.01) -- .01 (.04)
Net realized and unrealized gain
(loss) on investment and foreign
currency transactions .82 1.96 1.83 .81 1.76
TOTAL FROM INVESTMENT OPERATIONS .80 1.95 1.83 .82 1.72
- ----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions in excess of net
investment income (.11) (.05) -- -- --
Distributions from net realized
capital gains (1.80) (1.25) (.73) (.19) --
TOTAL DISTRIBUTIONS (1.91) (1.30) (.73) (.19) --
NET ASSET VALUE, END OF PERIOD $16.16 $17.27 $16.62 $15.52 $14.89
TOTAL RETURN(2) 5.71% 12.42% 12.33% 5.74% 13.06%
- ----------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000) $251,018 $258,080 $234,700 $222,002 $73,815
Average net assets (000) $260,774 $265,380 $222,948 $174,316 $58,455
RATIOS TO AVERAGE NET ASSETS:
Expenses, including distribution fees 1.38% 1.39% 1.45% 1.51% 1.55%
Expenses, excluding distribution fees 1.13% 1.14% 1.20% 1.26% 1.30%
Net investment income (loss) (.14)% .01% (.04)% .10% (.29)%
Portfolio turnover 61% 64% 52% 50% 49%
- ----------------------------------------------------------------------------------------------
<FN>
1 Based on average shares outstanding, by class.

2 Total return assumes reinvestment of dividends and any other distributions,
but does not include the effect of sales charges. It is calculated assuming
shares are purchased on the first day and sold on the last day of each
period reported.
</FN>
</TABLE>
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38 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

GLOBAL SERIES: CLASS B SHARES
The financial highlights for the two years ended October 31, 1998 were audited
by PricewaterhouseCoopers LLP, independent accountants, and the financial
highlights for the three years ended October 31, 1996. were audited by other
independent auditors whose reports were unqualified.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
CLASS B SHARES (FISCAL YEAR ENDED 10-31-98)

PER SHARE OPERATING PERFORMANCE 1998(1) 1997 1996 1995(1) 1994(1)
- ---------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $16.42 $15.96 $15.03 $14.53 $12.94
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.13) (.12) (.08) (.11) (.13)
Net realized and unrealized gain
(loss) on investment and foreign
currency transactions .78 1.88 1.74 .80 1.72
TOTAL FROM INVESTMENT OPERATIONS .65 1.76 1.66 .69 1.59
- ---------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions in excess of net
investment income (.01) (.05) -- -- --
Distributions from net realized
capital gains (1.80) (1.25) (.73) (.19) --
TOTAL DISTRIBUTIONS (1.81) (1.30) (.73) (.19) --
NET ASSET VALUE, END OF PERIOD $15.26 $16.42 $15.96 $15.03 $14.53
TOTAL RETURN(2) 4.95% 11.70% 11.57% 4.98% 12.29%
- ---------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000) $274,248 $335,007 $326,978 $268,498 $410,520
Average net assets (000) $312,569 $350,518 $294,230 $287,656 $345,771
RATIOS TO AVERAGE NET ASSETS:
Expenses, including distribution fees 2.06% 2.07% 2.12% 2.19% 2.24%
Expenses, excluding distribution fees 1.13% 1.14% 1.20% 1.27% 1.30%
Net investment income (loss) (.82)% (.68)% (.67)% (.84)% (.97)%
Portfolio turnover 61% 64% 52% 50% 49%
- ---------------------------------------------------------------------------------------------
<FN>

1 Based on average shares outstanding, by class.

<PAGE>

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

GLOBAL SERIES: CLASS C SHARES
The financial highlights for the two years ended October 31, 1998 were audited
by PricewaterhouseCoopers LLP, independent accountants, and the financial
highlights for the two years ended October 31, 1996 and the period from August
1, 1994 through October 31, 1994 were audited by other independent auditors
whose reports were unqualified.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
CLASS C SHARES (FISCAL YEAR ENDED 10-31-98)

PER SHARE OPERATING PERFORMANCE 1998(2) 1997 1996 1995(2) 1994(1,2)
- ------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $16.41 $15.96 $15.03 $14.53 $14.03
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.14) (0.11) (.05) (.11) (.03)
Net realized and unrealized gain
(loss) on investment and foreign
currency transactions .78 1.86 1.71 .80 .53
TOTAL FROM INVESTMENT OPERATIONS .64 1.75 1.66 .69 .50
- ------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions in excess of net
investment income(5) -- (.05) -- -- --
Distributions from net realized
capital gains (1.80) (1.25) (.73) (.19) --
TOTAL DISTRIBUTIONS (1.80) (1.30) (.73) (.19) --
NET ASSET VALUE, END OF PERIOD $(15.25) $16.41 $15.96 $15.03 $14.53
TOTAL RETURN(3) 4.90% 11.63% 11.57% 4.98% 3.56%
- ------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000) $10,698 $10,244 $7,693 $3,733 $1,205
Average net assets (000) $10,286 $9,093 $5,516 $2,284 $630
RATIOS TO AVERAGE NET ASSETS:
Expenses, including distribution fees 2.13% 2.14% 2.20% 2.25% 2.63%(4)
Expenses, excluding distribution fees 1.13% 1.14% 1.20% 1.25% 1.63%(4)
Net investment income (loss) (.90)% (0.75)% (.72)% (.76)% (1.21)%(4)
Portfolio turnover 61% 64% 52% 50% 49%
- ------------------------------------------------------------------------------------------
<FN>
1 Information shown is for the period 8-1-94 (when Class C shares were first
offered) through 10-31-94.

2 Based on average shares outstanding, by class.

3 Total return assumes reinvestment of dividends and any other distributions,
but does not include the effect of sales charges. It is calculated assuming
shares are purchased on the first day and sold on the last day of each
period reported. Total return for a period of less than a full year is not
annualized.

4 Annualized.

5 1998 distribution was $.001.

</FN>
</TABLE>
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40 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

GLOBAL SERIES: CLASS Z SHARES

The financial highlights for the two years ended October 31, 1998 were audited
by PricewaterhouseCoopers LLP, independent accountants, and the financial
highlights for the two years ended for the period from March 1, 1996 through
October 31, 1996 were audited by other independent auditors whose reports were
unqualified.

- -------------------------------------------------------------------------------------
CLASS Z SHARES (FISCAL YEAR ENDED 10-31-98)
PER SHARE OPERATING PERFORMANCE 1998(2) 1997 1996(1)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $17.35 $16.65 $15.42

INCOME FROM INVESTMENT OPERATIONS:

Net investment income (loss) .02 .04 .06
Net realized and unrealized gain (loss) on
investment and foreign currency transactions .82 1.96 1.18

TOTAL FROM INVESTMENT OPERATIONS .84 2.00 1.24
- -------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:

Distributions in excess of net investment income (.16) (.05) --
Distributions from net realized capital gains (1.80) (1.25) (.01)

TOTAL DISTRIBUTIONS (1.96) (1.30) (.01)

NET ASSET VALUE, END OF PERIOD $16.23 $17.35 $16.65
TOTAL RETURN(2) 5.97% 12.72% 8.06%
- -------------------------------------------------------------------------------------
Ratios/Supplemental Data 1998 1997 1996
- -------------------------------------------------------------------------------------

NET ASSETS, END OF PERIOD (000) $36,338 $44,412 $40,416
Average net assets (000) $41,799 $46,545 $26,452

RATIOS TO AVERAGE NET ASSETS:

Expenses, including distribution fees 1.13% 1.14% 1.20%(3)
Expenses, excluding distribution fees 1.13% 1.14% 1.20%(3)
Net investment income (loss) .12% .27% .55%(3)
Portfolio turnover 61% 64% 52%
- -------------------------------------------------------------------------------------
<FN>

1 Information shown is for the period 3-1-96 (when Class Z shares were first
offered) through 10-31-96.

2 Total return assumes reinvestment of dividends and any other distributions,
but does not include the effect of sales charges. It is calculated assuming
shares are purchased on the first day and sold on the last day of each
period reported. Total return for a period of less than a full year is not
annualized.

3 Annualized.

</FN>
</TABLE>
- --------------------------------------------------------------------------------
41

<PAGE>

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

INTERNATIONAL STOCK SERIES: CLASS A SHARES

The financial highlights for the two years ended October 31, 1998 were audited
by PricewaterhouseCoopers LLP, independent accountants, and the financial
highlights for the one month period ended October 31, 1996 and the period from
September 23, 1996 through September 30, 1996 were audited by other independent
auditors whose reports were unqualified.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
CLASS A SHARES (FISCAL YEAR ENDED 10-31-98)

PER SHARE OPERATING PERFORMANCE 1998 1997(1) 1996(2) 1996(3)
- -------------------------------------------------------------------------------------

<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $18.24 $16.59 $16.48 $16.54

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .27 .24 (.01) --
Net realized and unrealized gain
(loss) an investment and foreign
currency transactions .40 1.85 .12 (.06)

TOTAL FROM INVESTMENT OPERATIONS .67 2.09 .11 (.06)
- -------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:

Dividends from net investment income (.18) (.24) -- --

Distributions from net realized (.40) (.20) -- --
capital gains
TOTAL DISTRIBUTIONS (.58) (.44) -- --

NET ASSET VALUE, END OF PERIOD $18.33 $18.24 $16.59 $16.48

TOTAL RETURN(4) 3.85% 12.85% .67% (.36)%

- -------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA 1998 1997 1996 1996
- -------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000) $47,237 $36,184 $5,169(5) $199(5)
Average net assets (000) $44,708 $18,779 $2,793(5) $199(5)
RATIOS TO AVERAGE NET ASSETS:

Expenses, including distribution fees 1.62% 1.75% 2.05% 2.46%(6)
Expenses, excluding distribution fees 1.37% 1.50% 1.80% 2.21%(6)
Net investment income (loss) 1.28% 1.40% (1.03)% .75%(6)
Portfolio turnover 15% 9% 4% 15%
- -------------------------------------------------------------------------------------

1 Fiscal year ended 10-31. Calculated based on weighted average shares
outstanding during the year.

2 Information shown is for period 10-1-96 through 10-31-96.

3 Information shown is for the period 9-23-96 (when Class A shares were first
offered) through 9-30-96. International Stock Fund, a Mercator managed
series of The Prudential Institutional Fund and the predecessor to the
International Stock Series, had a fiscal year of September 30.
International Stock Series has a fiscal year of October 31.

4 Total return assumes reinvestment of dividends and any other distributions,
but does not include the effect of sales charges. It is calculated assuming
shares are purchased on the first day and sold on the last day of each
period reported. Total return for a period of less than a full year is not
annualized.

5 Figures are actual and are not rounded to the nearest thousand.

6 Annualized.

</TABLE>
- --------------------------------------------------------------------------------
42 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

INTERNATIONAL STOCK SERIES: CLASS B SHARES
The financial highlights for the two years ended October 31, 1998 were audited
by PricewaterhouseCoopers LLP, independent accountants, and the financial
highlights for the one month period ended October 31, 1996 and the period from
September 23, 1996 through September 30, 1996 were audited by other independent
auditors whose reports were unqualified.

- -----------------------------------------------------------------------------------------
CLASS B SHARES (FISCAL YEAR ENDED 10-31-98)

PER SHARE OPERATING PERFORMANCE 1998 1997(1) 1996(2) 1996(3)
- -----------------------------------------------------------------------------------------

<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $18.13 $16.57 $16.47 $16.54

INCOME FROM INVESTMENT OPERATIONS:

Net investment income (loss) .10 .12 (.02) --
Net realized and unrealized gain
(loss) on investment and foreign
currency transactions .43 1.84 .12 (.07)

TOTAL FROM INVESTMENT OPERATIONS .53 1.96 .10 (.07)
- -----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:

Dividends from net investment income (.08) (.20) -- --
Distributions from net realized
capital gains (.40) (.20) -- --

TOTAL DISTRIBUTIONS (.48) (.40) -- --

NET ASSET VALUE, END OF PERIOD $18.18 $18.13 $16.57 $16.47

TOTAL RETURN(2) 3.05% 12.04% .61% (.42)%
- -----------------------------------------------------------------------------------------
Ratios/Supplemental Data 1998 1997 1996 1996
- -----------------------------------------------------------------------------------------

NET ASSETS, END OF PERIOD (000) $93,896 $87,155 $1,922(5) $199(5)
Average net assets (000) $98,444 $47,584 $313(5) $199(5)

RATIOS TO AVERAGE NET ASSETS:

Expenses, including distribution fees 2.37% 2.50% 2.80% 3.21%(6)
Expenses, excluding distribution fees 1.37% 1.50% 1.80% 2.21%(6)
Net investment income (loss) .53% .65% (1.78)% 0%(6)

Portfolio turnover 15% 9% 4% 15%
- -------------------------------------------------------------------------------------

1 Fiscal year ended 10-31. Calculated based on weighted average shares
outstanding during the year.

2 Information shown is for period 10-1-96 through 10-31-96.

5 Figures are actual and are not rounded to the nearest thousand.

6 Annualized.

</TABLE>
- --------------------------------------------------------------------------------
43

<PAGE>

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

INTERNATIONAL STOCK SERIES: CLASS C SHARES
The financial highlights for the two years ended October 31, 1998 were audited
by PricewaterhouseCoopers LLP, independent accountants, and the financial
highlights for the one month period ended October 31, 1996 and the period from
September 23, 1996 through September 30, 1996 were audited by other independent
auditors whose reports were unqualified.
<TABLE>
<CAPTION>

- ---------------------------------------------------------------------------------------
CLASS C SHARES (FISCAL YEAR ENDED 10-31-98)

PER SHARE OPERATING PERFORMANCE 1998 1997(1) 1996(2) 1996(3)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $18.13 $16.57 $16.47 $16.54

INCOME FROM INVESTMENT OPERATIONS:

Net investment income (loss) .10 .12 (.02) --
Net realized and unrealized gain
(loss) an investment and foreign
currency transactions .43 1.84 .12 (.07)

TOTAL FROM INVESTMENT OPERATIONS .53 1.96 .10 (.07)
- ---------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:

Dividends from net investment income (.08) (.20) -- --
Distributions from net realized
capital gains (.40) (.20) -- --

TOTAL DISTRIBUTIONS (.48) (.40) -- --

NET ASSET VALUE, END OF PERIOD $18.18 $18.13 $16.57 $16.47

TOTAL RETURN(4) 3.05% 12.04% .61% (.42)%
- ---------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA 1998 1997 1996 1996
- ---------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000) $14,271 $12,354 $200(5) $199(5)
Average net assets (000) $14,345 $7,473 $202(5) $199(5)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including distribution fees 2.37% 2.50% 2.80%(6) 3.21%(6)
Expenses, excluding distribution fees 1.37% 1.50% 1.80%(6) 2.21%(6)
Net investment income (loss) .53% .65% (1.78)%(6) 0%(6)
Portfolio turnover 15% 9% 4%(6) 15%(6)
- ---------------------------------------------------------------------------------------

1 Fiscal year ended 10-31. Calculated based on weighted average shares
outstanding during the year.

2 Information shown is for period 10-1-96 through 10-31-96.

5 Figures are actual and are not rounded to the nearest thousand.

6 Annualized.
</TABLE>
- --------------------------------------------------------------------------------
44 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

INTERNATIONAL STOCK SERIES: CLASS Z SHARES
The financial highlights for the two years ended October 31, 1998 were audited
by PricewaterhouseCoopers LLP, independent accountants, and the financial
highlights for the month period ended October 31, 1996 and for the three years
ended September 30, 1996, were audited by other independent auditors whose
reports were unqualified.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
CLASS Z SHARES (FISCAL YEAR ENDED 10-31-98)

PER SHARE OPERATING
PERFORMANCE 1998 1997(2) 1996(3) 1996(4) 1995(4) 1994(4)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $18.28 $16.59 $16.48 $15.25 14.84 $12.35
INCOME FROM INVESTMENT
OPERATIONS:

Net investment income (loss) .30 .31 (.01) .22 .18(1) .13(1)

Net realized and
unrealized gain (loss) on
investment and foreign
currency transactions .41 1.82 .12 1.20 .66 2.54

TOTAL FROM INVESTMENT
OPERATIONS .71 2.13 .11 1.42 .84 2.67
- -----------------------------------------------------------------------------------------------

LESS DISTRIBUTIONS:
Dividends from net
investment income (.21) (.24) -- (.19) (.10) (.03)
Distributions from net
realized capital gains (.40) (.20) -- -- (.33) (.15)
TOTAL DISTRIBUTIONS (.61) (.44) -- (.19) (.43) (.18)
NET ASSET VALUE,
END OF PERIOD $18.38 $18.28 $16.59 $16.48 $15.25 $14.84
TOTAL RETURN(5) 4.08% 13.13% .67% 9.44% 5.95% 21.71%
- -----------------------------------------------------------------------------------------------
(CHART CONTINUES ON NEXT PAGE)
</TABLE>
- --------------------------------------------------------------------------------
45

<PAGE>

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
CLASS Z SHARES (FISCAL YEAR ENDED 10-31-98) (CONT'D)

RATIOS/

SUPPLEMENTAL DATA 1998 1997(2) 1996(3) 1996(4) 1995(2) 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSETS,
END OF PERIOD (000) $254,577 $237,976 $190,428 $188,386 $136,685(2) $102,824
Average net assets (000) $258,322 $219,419 $191,228 $161,356 $118,927 $68,476
- -------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:

Expenses, including
distribution fees 1.37% 1.50% 1.80%(6) 1.61%(1) 1.60%(1) 1.60%(1)
Expenses, excluding
distribution fees 1.37% 1.50% 1.80%(6) 1.61%(1) 1.60%(1) 1.60%(1)
Net investment income (loss) 1.53% 1.65% (.78)%(6) 1.58%(1) 1.58%(1) 1.08%(1)
Portfolio turnover 15% 9% 4% 15% 20% 21%
- --------------------------------------------------------------------------------------------------

1 Net of expense/recovery.

2 Fiscal year ended 10-31. Calculated based on weighted average shares
outstanding during the year.

3 Information shown is for period 10-1-96 through 10-31-96.

4 Fiscal year ended 9-30. On September 20, 1996, the manager changed from
Prudential Institutional Fund Management, Inc. to Prudential Mutual Fund
Management LLC, each company being an indirect wholly-owned subsidiary of
The Prudential Insurance Company of America. International Stock Fund, a
Mercator managed series of The Prudential Institutional Fund and the
predecessor to the International Stock Series, had a fiscal year of
September 30. International Stock Series has a fiscal year of October 31.

5 Total return assumes reinvestment of dividends and any other distributions.
It is calculated assuming shares are purchased on the first day and sold on
the last day of each period reported. Total returns for periods of less
than a full year are not annualized. Total return includes the effect of
expense subsidiaries/recoveries, as applicable.

6 Annualized.

</TABLE>

- --------------------------------------------------------------------------------
46 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

- --------------------------------------------------------------------------------
THE PRUDENTIAL MUTUAL FUND FAMILY
- --------------------------------------------------------------------------------

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

STOCK FUNDS
PRUDENTIAL DISTRESSED SECURITIES FUND, INC.
PRUDENTIAL EMERGING GROWTH FUND, INC.
PRUDENTIAL EQUITY FUND, INC.
PRUDENTIAL EQUITY INCOME FUND
PRUDENTIAL INDEX SERIES FUND
Prudential Small-Cap Index Fund
Prudential Stock Index Fund
THE PRUDENTIAL INVESTMENT PORTFOLIOS, INC.
Prudential Jennison Growth Fund
Prudential Jennison Growth & Income Fund
PRUDENTIAL MID-CAP VALUE FUND
PRUDENTIAL REAL ESTATE SECURITIES FUND
PRUDENTIAL SMALL-CAP QUANTUM FUND, INC.
PRUDENTIAL SMALL COMPANY VALUE FUND, INC.
PRUDENTIAL 20/20 FOCUS FUND
PRUDENTIAL UTILITY FUND, INC.
NICHOLAS-APPLEGATE FUND, INC.
Nicholas-Applegate Growth Equity Fund
ASSET ALLOCATION/BALANCED FUNDS
PRUDENTIAL BALANCED FUND
PRUDENTIAL DIVERSIFIED FUNDS
Conservative Growth Fund
Moderate Growth Fund
High Growth Fund
THE PRUDENTIAL INVESTMENT PORTFOLIOS, INC.
Prudential Active Balanced Fund

GLOBAL FUNDS
GLOBAL STOCK FUNDS
PRUDENTIAL DEVELOPING MARKETS FUND
Prudential Developing Markets
Equity Fund
Prudential Latin America Equity Fund
PRUDENTIAL EUROPE GROWTH FUND, INC.
PRUDENTIAL GLOBAL GENESIS FUND, INC.
PRUDENTIAL INDEX SERIES FUND
Prudential Europe Index Fund
Prudential Pacific Index Fund
PRUDENTIAL NATURAL RESOURCES
FUND, INC.
PRUDENTIAL PACIFIC GROWTH FUND, INC.
PRUDENTIAL WORLD FUND, INC.
Global Series
International Stock Series
GLOBAL UTILITY FUND, INC.

GLOBAL BOND FUNDS
PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
Limited Maturity Portfolio
PRUDENTIAL INTERMEDIATE GLOBAL INCOME FUND, INC.
PRUDENTIAL INTERNATIONAL BOND
FUND, INC.
THE GLOBAL TOTAL RETURN FUND, INC.

- --------------------------------------------------------------------------------
47

<PAGE>

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

BOND FUNDS
TAXABLE BOND FUNDS
PRUDENTIAL DIVERSIFIED BOND FUND, INC.
PRUDENTIAL GOVERNMENT INCOME
FUND, INC.
PRUDENTIAL GOVERNMENT SECURITIES TRUST
Short-Intermediate Term Series
PRUDENTIAL HIGH YIELD FUND, INC.
PRUDENTIAL HIGH YIELD TOTAL RETURN
FUND, INC.
PRUDENTIAL INDEX SERIES FUND
Prudential Bond Market Index Fund
PRUDENTIAL STRUCTURED MATURITY FUND, INC.
Income Portfolio

TAX-EXEMPT BOND FUNDS
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
California Series
California Income Series
PRUDENTIAL MUNICIPAL BOND FUND
High Income Series
Insured Series
PRUDENTIAL MUNICIPAL SERIES FUND
Florida Series
Massachusetts Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
PRUDENTIAL NATIONAL MUNICIPALS
FUND, INC.

MONEY MARKET FUNDS
TAXABLE MONEY MARKET FUNDS
CASH ACCUMULATION TRUST
Liquid Assets Fund
National Money Market Fund
PRUDENTIAL GOVERNMENT SECURITIES TRUST
Money Market Series
U.S. Treasury Money Market Series
PRUDENTIAL SPECIAL MONEY MARKET
FUND, INC.
Money Market Series
PRUDENTIAL MONEYMART ASSETS, INC.

TAX-FREE MONEY MARKET FUNDS
PRUDENTIAL TAX-FREE MONEY FUND, INC.
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
California Money Market Series
PRUDENTIAL MUNICIPAL SERIES FUND
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series

COMMAND FUNDS
COMMAND MONEY FUND
COMMAND GOVERNMENT FUND
COMMAND TAX-FREE FUND

INSTITUTIONAL MONEY MARKET FUNDS
PRUDENTIAL INSTITUTIONAL LIQUIDITY
PORTFOLIO, INC.
Institutional Money Market Series

- -------------------------------------------------------------------------------
48 Prudential World Fund, Inc. [GRAPHICTEL] (800) 225-1852

<PAGE>

FOR MORE INFORMATION

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

PRUDENTIAL MUTUAL FUND SERVICES LLC
P.O. BOX 15005
NEW BRUNSWICK, NJ 08906-5005
(800) 225-1852
(732) 417-7555
(if calling from outside the U.S.)

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

Outside Brokers Should Contact:

PRUDENTIAL INVESTMENT MANAGEMENT
SERVICES LLC
P.O. BOX 15035
NEW BRUNSWICK, NJ 08906-5035
(800) 778-8769

- ------------------------------------
Visit Prudential's Web Site At:
HTTP://WWW.PRUDENTIAL.COM

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

Additional information about the
Fund can be obtained without charge
and can be found in the following
documents:

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

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

SEMI-ANNUAL REPORT

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

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

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

Via the Internet:
http://www.sec.gov

- --------------------------------------
CUSIP Numbers:
Global Series
Class A Shares--743969-10-7
Class B Shares--743969-20-6
Class C Shares--743969-30-5
Class Z Shares--743969-40-4

International Series

Class A Shares--743969-50-3
Class B Shares--743969-60-2
Class C Shares--743969-70-1
Class Z Shares--743969-80-0

Investment Company Act File No:
811-3981

MF115A

[RECYCLE LOGO] Printed on Recycled Paper

<PAGE>
PRUDENTIAL WORLD FUND, INC.

GLOBAL SERIES

INTERNATIONAL STOCK SERIES

Statement of Additional Information
January 20, 1999

Prudential World Fund, Inc. (the Fund) is an open-end, diversified
management investment company presently consisting of two series.

GLOBAL SERIES' INVESTMENT OBJECTIVE IS TO SEEK LONG-TERM GROWTH OF CAPITAL,
WITH INCOME AS A SECONDARY OBJECTIVE. Global Series will seek to achieve its
objective through investment in a diversified portfolio of securities which will
consist of marketable securities of U.S. and non-U.S. issuers. Global Series may
invest in all types of equity-related securities and debt obligations, including
money market instruments, of foreign and domestic companies and governments,
governmental agencies and international organizations. There can be no assurance
that Global Series' investment objective will be achieved. See "Description of
the Series, their Investments and Risks."

INTERNATIONAL STOCK SERIES' INVESTMENT OBJECTIVE IS TO ACHIEVE LONG-TERM
GROWTH OF CAPITAL THROUGH INVESTMENT IN EQUITY SECURITIES OF FOREIGN ISSUERS.
INCOME IS A SECONDARY OBJECTIVE. International Stock Series will seek to achieve
its objective primarily through investment in a diversified portfolio of
securities which will consist of equity securities of foreign issuers.
International Stock Series will, under normal circumstances, invest at least 65%
of the value of its total assets in common stock and preferred stock of issuers
located in at least three foreign countries. International Stock Series may
invest up to 35% of its total assets in (i) other equity-related securities of
foreign issuers; (ii) common stock, preferred stock, and other equity-related
securities of U.S. issuers; (iii) investment grade debt securities of domestic
and foreign corporations, governments, governmental entities, and supranational
entities; and (iv) high-quality domestic money market instruments and short-term
fixed income securities. There can be no assurance that International Stock
Series' investment objective will be achieved. See "Description of the Series,
their Investments and Risks."

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

This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Fund's Prospectus, dated January 20, 1999, a copy
of which may be obtained from the Fund at the address noted above.

TABLE OF CONTENTS
<TABLE>
<CAPTION>

PAGE
----
<S> <C>
Fund History .................................................. B-2
Description of the Series, their Investments and Risks ........ B-2
Investment Restrictions ....................................... B-17
Management of the Fund ........................................ B-19
Control Persons and Principal Holders of Securities ........... B-22
Investment Advisory and Other Services ........................ B-23
Brokerage Allocation and Other Practices ...................... B-27
Capital Stock and Organization ................................ B-29
Purchase, Redemption and Pricing of Fund Shares ............... B-30
Shareholder Investment Account ................................ B-38
Net Asset Value ............................................... B-42
Taxes, Dividends and Distributions ............................ B-43
Performance Information ....................................... B-45
Financial Statements .......................................... B-48
Report of Independent Accountants .............................
Appendix I--Description of Security Ratings ................... I-1
Appendix II--General Investment Information ................... II-1
Appendix III--Historical Performance Data ..................... III-1
Appendix IV--Information Relating to Prudential ............... IV-1
</TABLE>

<PAGE>

FUND HISTORY

The Fund was organized under the laws of Maryland on September 28, 1994 as
a corporation.

DESCRIPTION OF THE SERIES, THEIR INVESTMENTS AND RISKS

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

(b) INVESTMENT STRATEGIES AND RISKS

GLOBAL SERIES: The investment objective of the Global Series is to seek
long-term growth of capital, with income as a secondary objective. Global Series
will seek to achieve this objective through investment in a diversified
portfolio of securities which consist of marketable securities of U.S. and
non-U.S. issuers. Global Series may invest in all types of equity-related
securities, including common stock, preferred stock, rights, warrants and debt
securities or preferred stock which are convertible or exchangeable for common
stock or preferred stock and master limited partnerships, bonds and other debt
obligations, including money market instruments, of foreign and domestic
companies and governments, governmental agencies and international
organizations. Global Series has no fixed policy with respect to portfolio
turnover; however, it is anticipated that Global Series' annual portfolio
turnover rate will not normally exceed 100%, though Global Series is not
restricted from investing in short-term obligations. There can be no assurance
that Global Series' investment objective will be achieved. For a further
description of the Global Series' investment objective and policies, see "How
the Fund Invests--Global Series: Investment Objective and Policies" in the
Prospectus.

INTERNATIONAL STOCK SERIES: The investment objective of International Stock
Series is to seek long-term growth of capital through investment in equity
securities of foreign issuers. Income is a secondary objective. International
Stock Series will seek to achieve this objective primarily through investment in
a diversified portfolio of securities which will consist of equity securities of
foreign issuers. International Stock Series will, under normal circumstances,
invest at least 65% of the value of its total assets in common stock and
preferred stock of issuers located in at least three foreign countries.
International Stock Series may invest up to 35% of its total assets in (i) other
equity-related securities of foreign issuers; (ii) common stock, preferred
stock, and other equity-related securities of U.S. issuers; (iii) investment
grade debt securities of domestic and foreign corporations, governments,
governmental entities, and supranational entities; and (iv) high-quality
domestic money market instruments and short-term fixed income securities.
Although International Stock Series does not purchase securities with a view to
rapid turnover, there are no limitations on the length of time that securities
must be held by International Stock Series and International Stock Series'
annual portfolio turnover rate may vary significantly from year to year. A
higher portfolio turnover rate may involve correspondingly greater transaction
costs, which would be borne directly by International Stock Series, as well as
additional realized gains and/or losses to shareholders. There can be no
assurance that International Stock Series' investment objective will be
achieved. For a further description of International Stock Series' investment
objective and policies, see "How the Fund Invests--International Stock Series:
Investment Objective and Policies" in the Prospectus.

EQUITY-RELATED SECURITIES

Each Series may invest in equity-related securities. Equity-related
securities include common stock, preferred stock, rights, warrants and debt
securities or preferred stock which are convertible into or exchangeable for
common stock or preferred stock and master limited partnerships, among others.

With respect to equity-related securities, each Series may purchase
American Depositary Receipts (ADRs). ADRs are U.S. dollar-denominated
certificates issued by a United States bank or trust company and represent the
right to receive securities of a foreign issuer deposited in a domestic bank or
foreign branch of a United States bank and traded on a United States exchange or
in an over-the-counter market. Generally, ADRs are in registered form. There are
no fees imposed on the purchase or sale of ADRs when purchased from the issuing
bank or trust company in the initial underwriting, although the issuing bank or
trust company may impose charges for the collection of dividends and the
conversion of ADRs into the underlying securities. Investment in ADRs has
certain advantages over direct investment in the underlying foreign securities
since: (i) ADRs are U.S. dollar-denominated investments that are registered
domestically, easily transferable, and for which market quotations are readily
available; and (ii) issuers whose securities are represented by ADRs are usually
subject to auditing, accounting, and financial reporting standards comparable to
those of domestic issuers.

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

Effective January 1, 1999, 11 of the 15 member states of the European Union
introduced the "euro" as a common currency. During a three year transitional
period, the euro will coexist with each member state's currency. Beginning July
1, 2002, the euro is

B-2
<PAGE>

expected to become the sole currency of the member states. During the transition
period, the Fund will treat the euro as a separate currency from that of any
member state.

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

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

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

The Fund's Manager is taking steps: (a) that it believes will reasonably
address euro-related changes to enable the Fund to process transactions
accurately and completely with minimal disruption to business activities and (b)
to obtain reasonable assurances that appropriate steps are being taken by each
of the Fund's other service providers.

U.S. GOVERNMENT SECURITIES

Securities issued or guaranteed by the U.S. Government or one of its
agencies, authorities or instrumentalities in which each Series may invest
include debt obligations of varying maturities issued by the U.S. Treasury or
issued or guaranteed by an agency or instrumentality of the U.S. Government,
including the Federal Housing Administration, Farmers' Home Administration,
Export-Import Bank of the U.S. Small Business Administration, Government
National Mortgage Association (GNMA), General Services Administration, Central
Bank for Cooperatives, Federal Farm Credit Banks, Federal Home Loan Banks,
Federal Home Loan Mortgage Corporation (FHLMC), Federal Intermediate Credit
Banks, Federal Land Banks, Federal National Mortgage Association (FNMA),
Maritime Administration, Tennessee Valley Authority, District of Columbia Armory
Board, Student Loan Marketing Association and Resolution Trust Corporation.
Direct obligations of the U.S. Treasury include a variety of securities that
differ in their interest rates, maturities and dates of issuance. Because the
U.S. Government is not obligated by law to provide support to an instrumentality
that it sponsors, a Series will invest in obligations issued by an
instrumentality of the U.S. Government only if the relevant Series' Subadviser
determines that the instrumentality's credit risk does not render its securities
unsuitable for investment by the relevant Series. For further information, see
"Mortgage-Related Securities" below.

REPURCHASE AGREEMENTS

Each Series may enter into repurchase agreements, whereby the seller of a
security agrees to repurchase that security from such Series at a mutually
agreed upon time and price. The period of maturity is usually quite short,
possibly overnight or a few days, although it may extend over a number of
months. The resale price is in excess of the purchase price, reflecting an
agreed-upon rate of return effective for the period of time such Series' money
is invested in the security.

Each Series will only enter into repurchase agreements with banks and
securities dealers which meet the creditworthiness standards established by the
Board of Directors (Qualified Institutions). The relevant Subadviser will
monitor the continued creditworthiness of Qualified Institutions, subject to the
oversight of the Manager and the Board of Directors. These agreements permit a
Series to keep all its assets earning interest while retaining "overnight"
flexibility to pursue investment of a longer-term nature.

The use of repurchase agreements involves certain risks. For example, if
the seller of securities under a repurchase agreement defaults on its obligation
to repurchase the underlying securities, as a result of its bankruptcy or
otherwise, a Series will seek to dispose of such securities, which action could
involve costs or delays. If the seller becomes insolvent and subject to
liquidation or reorganization under applicable bankruptcy or other laws, a
Series' ability to dispose of the underlying securities may be restricted.
Finally, it is possible that a Series may not be able to substantiate its
interest in the underlying securities. To minimize this risk, the securities
underlying the agreement will be held by the Custodian at all times in an amount
at least equal to the repurchase price, including accrued interest. If the
counterparty fails to repurchase the securities, a Series may suffer a loss to
the extent proceeds from the sale of the underlying collateral are less than the
repurchase price. Each Series may participate in a joint repurchase account
managed by Prudential Investments Fund Management LLC pursuant to an order of
the Commission.

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FIXED INCOME SECURITIES

In general, the ratings of Moody's Investors Service (Moody's), Standard &
Poor's Ratings Services (S&P Ratings), Duff and Phelps, Inc. (Duff & Phelps) and
other nationally recognized statistical rating organizations (NRSROs) represent
the opinions of those organizations as to the quality of debt obligations that
they rate. These ratings are relative and subjective, are not absolute standards
of quality and do not evaluate the market risk of securities. These ratings will
be among the initial criteria used for the selection of portfolio securities.
Among the factors that the rating agencies consider are the long-term ability of
the issuer to pay principal and interest and general economic trends.

Subsequent to its purchase by a Series, an issue of debt obligations may
cease to be rated or its rating may be reduced below the minimum required for
purchase by the Series. Neither event will require the sale of the debt
obligation by a Series, but such Series' Subadviser will consider the event in
its determination of whether such Series should continue to hold the obligation.
In addition, to the extent that the ratings change as a result of changes in
rating organizations or their rating systems or owing to a corporate
restructuring of Moody's, S&P Ratings, Duff & Phelps or other NRSRO, a Series
will attempt to use comparable ratings as standards for its investments in
accordance with its investment objectives and policies. The Appendix to this
Statement of Additional Information contains further information concerning the
ratings of Moody's, S&P Ratings and Duff & Phelps and their significance.

Each Series may invest, to a limited extent, in debt securities rated in
the lowest category of investment grade debt (i.e., Baa by Moody's or BBB by S&P
Ratings). These securities have speculative characteristics, and changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case with higher
grade bonds.

Non-investment grade fixed income securities are rated lower than Baa/BBB
(or the equivalent rating or, if not rated, determined by the Subadviser to be
of comparable quality to securities so rated) and are commonly referred to as
high risk or high yield securities or "junk" bonds. High yield securities are
generally riskier than higher quality securities and are subject to more credit
risk, including risk of default, and the prices of such securities are more
volatile than higher quality securities. Such securities may also have less
liquidity than higher quality securities. International Stock Series is not
authorized to invest in excess of 5% of its net assets in non-investment grade
fixed income securities. Global Series will invest only in investment grade
fixed income securities.

The markets in which medium and lower-rated securities (or unrated
securities that are equivalent to medium and lower-rated securities) are traded
are generally more limited than those in which higher-rated securities are
traded. The existence of limited markets may make it more difficult for
International Stock Series to obtain accurate market quotations for purposes of
valuing its portfolio and calculating its net asset value. Moreover, the lack of
a liquid trading market may restrict the availability of debt securities for
International Stock Series to purchase and may also have the effect of limiting
the ability of International Stock Series to sell debt securities at their fair
value either to meet redemption requests or to respond to changes in the economy
or the financial markets.

Lower-rated fixed income securities present risks based on payment
expectations. If an issuer calls the obligation for redemption, International
Stock Series may have to replace the security with a lower-yielding security,
resulting in a decreased return for investors. Also, as the principal value of
fixed income securities moves inversely with movements in interest rates, in the
event of rising interest rates, the value of the securities held by
International Stock Series may decline proportionately more than if the Series
consisted of higher-rated securities. Investments in zero coupon bonds may be
more speculative and subject to greater fluctuations in value due to changes in
interest rates than bonds that pay interest currently. If International Stock
Series experiences unexpected net redemptions, it may be forced to sell its
higher-rated bonds, resulting in a decline in the overall credit quality of the
securities held by International Stock Series and increasing the exposure of
International Stock Series to the risks of lower-rated securities.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

Each Series may purchase securities on a when-issued or delayed-delivery
basis. When-issued or delayed-delivery transactions arise when securities are
purchased or sold by a Series with payment and delivery taking place in the
future in order to secure what is considered to be an advantageous price and
yield to such Series at the time of entering into the transaction. The Custodian
will maintain, in a segregated account of the Series, cash or other liquid
assets, marked-to-market daily, having a value equal to or greater than the
Series' purchase commitments. A Series will enter into when-issued or delayed
delivery transactions for the purpose of acquiring securities and not for the
purpose of leverage. When-issued securities purchased by a Series may include
securities purchased on a "when, as and if issued" basis under which the
issuance of the securities depends on the occurrence of a subsequent event, such
as approval of a merger, corporate reorganization or debt restructuring.

Securities purchased on a when-issued or delayed delivery basis may expose
a Series to risk because the securities may experience fluctuations in value
prior to their actual delivery. A Series does not accrue income with respect to
a when-issued or

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delayed-delivery security prior to its stated delivery date. Purchasing
securities on a when-issued or delayed delivery basis may involve the additional
risk that the yield available in the market when the delivery takes place may be
higher than that obtained in the transaction itself.

FORWARD ROLLS, DOLLAR ROLLS AND REVERSE REPURCHASE AGREEMENTS

International Stock Series may commit up to 20% of the value of its net
assets to investment techniques such as dollar rolls, forward rolls and reverse
repurchase agreements. A forward roll is a transaction in which the
International Stock Series sells a security to a financial institution, such as
a bank or broker-dealer, and simultaneously agrees to repurchase the same or
similar security from the institution at a later date at an agreed-upon price.
With respect to mortgage-related securities, such transactions are often called
"dollar rolls." In dollar roll transactions, the mortgage-related securities
that are repurchased will bear the same coupon rate as those sold, but generally
will be collateralized by different pools or mortgages with different prepayment
histories than those sold. During the roll period, the International Stock
Series forgoes principal and interest paid on the securities and is compensated
by the difference between the current sales price and the forward price for the
future purchase as well as by interest earned on the cash proceeds of the
initial sale. A "covered roll" is a specific type of dollar roll for which there
is an offsetting cash position or equivalent security position which matures on
or before the forward settlement date of the dollar roll transaction.

Reverse repurchase agreements involve sales by the International Stock
Series of portfolio securities to a financial institution concurrently with
agreement by the International Stock Series to repurchase the same securities at
a later date at a fixed price. During the reverse repurchase agreement period,
the International Stock series continues to receive principal and interest
payments on these securities.

Reverse repurchase agreements, forward rolls and dollar rolls involve the
risk that the market value of the securities purchased by the International
Stock Series with the proceeds of the initial sale may decline below the price
of the securities the International Stock Series has sold but is obligated to
repurchase under the agreement. In the event the buyer of securities under a
reverse repurchase agreement, forward roll or dollar roll files for bankruptcy
or becomes insolvent, the International Stock Series' use of the proceeds from
the agreement may be restricted pending a determination by the other party, or
its trustee or receiver, whether to enforce the International Stock Series'
obligations to repurchase the securities. The staff of the SEC has taken the
position that reverse repurchase agreements, forward rolls and dollar rolls are
to be treated as borrowings for purposes of the percentage limitations discussed
in the section entitled "Borrowings" below. The International Stock Series
expects that under normal conditions most of the borrowings of the International
Stock Series will consist of such investment techniques rather than bank
borrowings.

MORTGAGE-RELATED SECURITIES

Mortgage-backed securities may be classified as private, governmental or
government related, depending on the issuer or guarantor. Private
mortgage-backed securities represent pass-through pools consisting principally
of conventional residential mortgage loans created by non-governmental issuers,
such as commercial banks, savings and loan associations and private mortgage
insurance companies. Governmental mortgage-backed securities are backed by the
full faith and credit of the United States. GNMA, the principal U.S. guarantor
of such securities, is a wholly-owned corporate instrumentality of the United
States within the Department of Housing and Urban Development. Pass-through
securities issued by FNMA are guaranteed as to timely payment of principal and
interest by FNMA, which guarantee is not backed by the full faith and credit of
the U.S. Government. FHLMC is a corporate instrumentality of the United States,
the stock of which is owned by the Federal Home Loan Banks. Participation
certificates representing interests in mortgages from FHLMC's national portfolio
are guaranteed as to the timely payment of interest and ultimate, but generally
not timely, collection of principal by FHLMC. The obligations of the FHLMC under
its guarantee are obligations solely of FHLMC and are not backed by the full
faith and credit of the U.S. Government.

Each Series expects that private and governmental entities may create
mortgage loan pools offering pass-through investments in addition to those
described above. The mortgages underlying these securities may be alternative
mortgage instruments, that is, mortgage instruments whose principal or interest
payments may vary or whose terms to maturity may be shorter than previously
customary. As new types of mortgage-backed securities are developed and offered
to investors, each Series, consistent with its investment objective and
policies, will consider making investments in those new types of securities.

Each Series may also invest in pass-through securities backed by adjustable
rate mortgages that have been issued by GNMA, FNMA and FHLMC or private issuers.
These securities bear interest at a rate that is adjusted monthly, quarterly or
annually. The prepayment experience of the mortgages underlying these securities
may vary from that for fixed rate mortgages.

The average maturity of pass-through pools of mortgage-related securities
varies with the maturities of the underlying mortgage instruments. In addition,
a pool's stated maturity may be shortened by unscheduled payments on the
underlying mortgages. Factors affecting mortgage prepayments include the level
of interest rates, general economic and social conditions,

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the location of the mortgaged property and age of the mortgage. Because
prepayment rates of individual pools vary widely, it is not possible to predict
accurately the average life of a particular pool. Common practice is to assume
that prepayments will result in an average life ranging from two to ten years
for pools of fixed rate 30-year mortgages. Pools of mortgages with other
maturities or different characteristics will have varying average life
assumptions.

Because prepayments of principal generally occur when interest rates are
declining, it is likely that a Series will have to reinvest the proceeds of
prepayments at lower interest rates than those at which the assets were
previously invested. If this occurs, a Series' yield will correspondingly
decline. Thus, mortgage-related securities may have less potential for capital
appreciation in periods of falling interest rates than other fixed-income
securities of comparable maturity, although these securities may have a
comparable risk of decline in market value in periods of rising interest rates.
To the extent that a Series purchases mortgage-related securities at a premium,
unscheduled prepayments, which are made at par, will result in a loss equal to
any unamortized premium.

Government stripped mortgage-related interest-only (IO) and principal only
(PO) securities are currently traded in an over-the-counter market maintained by
several large investment banking firms. There can be no assurance that a Series
will be able to effect a trade of IOs or POs at a time when it wishes to do so.
A Series will acquire IOs and POs only if, in the opinion of the Series'
Subadviser, a secondary market for the securities exists at the time of
acquisition, or is subsequently expected. A Series will treat IOs and POs that
are not U.S. Government securities as illiquid and will limit its investments in
these securities, together with other illiquid investments, in order not to hold
more than 5% in the case of Global Series, and 15% in the case of International
Series, of its net assets in illiquid securities. With respect to IOs and POs
that are issued by the U.S. Government, a Subadviser, subject to the supervision
of the Manager and the Board of Directors, may determine that such securities
are liquid, if they determine the securities can be disposed of promptly in the
ordinary course of business at a value reasonably close to that used in the
calculation of net asset value per share.

Investing in IOs and POs involves the risks normally associated with
investing in government and government agency mortgage-related securities. In
addition, the yields on IOs and POs are extremely sensitive to the prepayment
experience on the mortgage loans underlying the certificates collateralizing the
securities. If a decline in the level of prevailing interest rates results in a
rate of principal prepayments higher than anticipated, distributions of
principal will be accelerated, thereby reducing the yield to maturity on IOs and
increasing the yield to maturity on POs. Sufficiently high prepayment rates
could result in a Series not fully recovering its initial investment in an IO.

Mortgage-related securities may not be readily marketable. To the extent
any of these securities are not readily marketable in the judgment of a Series'
Subadviser, the investment restriction limiting such Series' investment in
illiquid instruments will apply.

COLLATERALIZED MORTGAGE OBLIGATIONS

Each Series also may invest in, among other things, parallel pay CMOs and
Planned Amortization Class CMOs (PAC Bonds). Parallel pay CMOs are structured to
provide payments of principal on each payment date to more than one class. These
simultaneous payments are taken into account in calculating the stated maturity
date or final distribution date of each class, which, as with other CMO
structures, must be retired by its stated maturity date or final distribution
date but may be retired earlier. PAC Bonds generally require payments of a
specified amount of principal on each payment date. PAC Bonds always are
parallel pay CMOs with the required principal payment on such securities having
the highest priority after interest has been paid to all classes.

In reliance on SEC rules and orders, the Series' investments in certain
qualifying CMOs, including CMOs that have elected to be treated as Real Estate
Mortgage Investment Conduits (REMICs), are not subject to the Investment Company
Act of 1940, as amended (Investment Company Act), limitation on acquiring
interests in other investment companies. In order to be able to rely on the
SEC's interpretation, the CMOs and REMICs must be unmanaged, fixed-asset issuers
that (i) invest primarily in mortgage-backed securities, (ii) do not issue
redeemable securities, (iii) operate under general exemptive orders exempting
them from all provisions of the Investment Company Act, and (iv) are not
registered or regulated under the Investment Company Act as investment
companies. To the extent that a Series selects CMOs or REMICs that do not meet
the above requirements, the Series may not invest more than 10% of its assets in
all such entities and may not acquire more than 3% of the voting securities of
any single such entity.

ASSET-BACKED SECURITIES

The value of these securities may change because of changes in the market's
perception of the creditworthiness of the servicing agent for the pool, the
originator of the pool, or the financial institution providing credit support
enhancement for the pool.

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SECURITIES LENDING

Each Series will enter into securities lending transactions only with
Qualified Institutions. A Series will comply with the following conditions
whenever it lends securities: (i) such Series must receive at least 100% cash
collateral or equivalent securities from the borrower; (ii) the value of the
loan is "marked-to-market" on a daily basis; (iii) such Series must be able to
terminate the loan at any time; (iv) such Series must receive reasonable
interest on the loan, as well as any dividends, interest or other distributions
on the loaned securities and any increase in market value; (v) the Series may
pay only reasonable custodian fees in connection with the loan; and (vi) voting
rights on the loaned securities may pass to the borrower except that, if a
material event adversely affecting the investment in the loaned securities
occurs, such Series must terminate the loan and regain the right to vote the
securities. A Series may pay reasonable finder's, administrative and custodial
fees in connection with a loan of its securities. In these transactions, there
are risks of delay in recovery and in some cases even of loss of rights in the
collateral should the borrower of the securities fail financially. Each Series
may lend up to 30% of the value of its total assets.

SEGREGATED ACCOUNTS

When the Fund is required to segregate assets in connection with certain
hedging transactions, it will maintain cash or liquid securities in a segregated
account with the Fund's Custodian. "Liquid assets" mean cash, U.S. Government
securities, equity securities (including foreign securities), debt obligations
or other liquid unencumbered assets, marked-to-market daily.

BORROWING

Each Series may borrow an amount equal to no more than 20% of the value of
its total assets to take advantage of investment opportunities, for temporary,
extraordinary, or emergency purposes or for the clearance of transactions and
may pledge up to 20% of the value of its total assets to secure such borrowings.
A Series will only borrow when there is an expectation that it will benefit
after taking into account considerations such as interest income and possible
losses upon liquidation. Borrowing by a Series creates an opportunity for
increased net income but, at the same time, creates risks, including the fact
that leverage may exaggerate rate changes in the net asset value of such Series'
shares and in the yield on the Series. Neither Series intends to borrow more
than 5% of its total assets for investment purposes, although it may borrow up
to 20% of the value of its total assets for temporary, extraordinary or
emergency purposes and for the clearance of transactions.

SECURITIES OF FOREIGN ISSUERS

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

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

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

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

LIQUIDITY PUTS

International Stock Series may purchase instruments together with the right
to resell the instruments at an agreed-upon price or yield, within a specified
period prior to the maturity date of the instruments. This instrument is
commonly known as a "put bond" or a "tender option bond."

Consistent with International Stock Series' investment objective,
International Stock Series may purchase a put so that it will be fully invested
in securities while preserving the necessary liquidity to purchase securities on
a when-issued basis, to meet

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unusually large redemptions and to purchase at a later date securities other
than those subject to the put. The Series will generally exercise the puts or
tender options on their expiration date when the exercise price is higher than
the current market price for the related fixed income security. Puts or tender
options may be exercised prior to the expiration date in order to fund
obligations to purchase other securities or to meet redemption requests. These
obligations may arise during periods in which proceeds from sales of
International Stock Series' shares and from recent sales of portfolio securities
are insufficient to meet such obligations or when the funds available are
otherwise allocated for investment. In addition, puts may be exercised prior to
the expiration date in the event the Subadvisor for the International Stock
Series revises its evaluation of the creditworthiness of the issuer of the
underlying security. In determining whether to exercise puts or tender options
prior to their expiration date and in selecting which puts or tender options to
exercise in such circumstances, International Stock Series' Subadviser
considers, among other things, the amount of cash available to International
Stock Series, the expiration dates of the available puts or tender options, any
future commitments for securities purchases, the yield, quality and maturity
dates of the underlying securities, alternative investment opportunities and the
desirability of retaining the underlying securities in International Stock
Series.

These instruments are not deemed to be "put options" for purposes of
International Stock Series' investment restrictions.

ILLIQUID SECURITIES

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

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

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

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

The staff of the SEC has taken the position that purchased over-the-counter
options and assets used as "cover" for written over-the-counter options are
illiquid securities unless the Series and the counterparty have provided for the
Series, at the Series'

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election, to unwind the over-the-counter option. The exercise of such an option
ordinarily would involve the payment by the Series of an amount designed to
reflect the counterparty's economic loss from an early termination, but does
allow the Series to treat the assets used as "cover" as "liquid."

HEDGING AND RETURN ENHANCEMENT STRATEGIES

OPTIONS ON SECURITIES AND SECURITIES INDICES

Each Series may purchase and sell put and call options on any security in
which it may invest or options on any securities index based on securities in
which the Series may invest. Each Series is also authorized to enter into
closing purchase and sale transactions in order to realize gains or minimize
losses on options sold or purchased by the Series.

A call option on equity securities gives the purchaser, in exchange for a
premium paid, the right for a specified period of time to purchase the
securities subject to the option at a specified price (the exercise price or
strike price). The writer of a call option, in return for the premium, has the
obligation, upon exercise of the option, to deliver, depending upon the terms of
the option contract, the underlying securities to the purchaser upon receipt of
the exercise price. When a Series writes a call option, the Series gives up the
potential for gain on the underlying securities in excess of the exercise price
of the option during the period that the option is open.

A put option on equity securities gives the purchaser, in return for a
premium, the right, for a specified period of time, to sell the securities
subject to the option to the writer of the put at the specified exercise price.
The writer of the put option, in return for the premium, has the obligation,
upon exercise of the option, to acquire the securities underlying the option at
the exercise price. A Series as the writer of a put option might, therefore, be
obligated to purchase underlying securities for more than their current market
price.

Each Series will write only "covered" options. A written option is covered
if, as long as a Series is obligated under the option, it (i) owns an offsetting
position in the underlying security or currency or (ii) maintains in a
segregated account cash or liquid assets in an amount equal to or greater than
its obligation under the option. Under the first circumstance, a Series' losses
are limited because it owns the underlying security or currency; under the
second circumstance, in the case of a written call option, a Series' losses are
potentially unlimited.

Options on securities indices are similar to options on equity securities,
except that the exercise of securities index options requires cash payments and
does not involve the actual purchase or sale of securities. Rather than the
right to take or make delivery of the securities at a specified price, an option
on a securities index gives the holder the right, in return for a premium paid,
to receive, upon exercise of the option, an amount of cash if the closing level
of the securities index upon which the option is based is greater than, in the
case of a call, or less than, in the case of a put, the exercise price of the
option. The writer of an index option, in return for the premium, is obligated
to pay the amount of cash due upon exercise of the option.

A Series may purchase and sell put and call options on securities indices
for hedging against a decline in the value of the securities owned by such
Series or against an increase in the market value of the type of securities in
which such Series may invest. Securities index options are designed to reflect
price fluctuations in a group of securities or segment of the securities market
rather than price fluctuations in a single security.

Each Series may also purchase and write put and call options on equity and
debt securities, on currencies and on stock indices in the over-the-counter
market (OTC options). Unlike exchange-traded options, OTC options are contracts
between a Series and its counterparty without the interposition of any clearing
organization.

A number of risk factors are associated with options transactions. There is
no assurance that a liquid secondary market on an options exchange will exist
for any particular option, at any particular time. If a Series is unable to
effect a closing purchase transaction with respect to covered options it has
written, such Series will not be able to sell the underlying securities or
dispose of assets held in a segregated account until the options expire or are
exercised. Similarly, if a Series is unable to effect a closing sale transaction
with respect to options it has purchased, it would have to exercise the options
in order to realize any profit and may incur transaction costs upon the purchase
or sale of underlying securities. The ability to terminate over-the-counter
(OTC) option positions is more limited than the ability to terminate
exchange-traded option positions because the Series would have to negotiate
directly with a counterparty. In addition, with OTC options, there is a risk
that the counterparty in such transactions will not fulfill its obligations.

A Series pays brokerage commissions or spreads in connection with its
options transactions, as well as for purchases and sales of underlying
securities. The writing of options could result in significant increases in a
Series' turnover rate. Global Series will not write put options on indices.

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The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Series writes a
call option on an index it cannot provide in advance for its potential
settlement obligations by acquiring and holding the underlying securities. The
Series can offset some of the risk of writing a call index option position by
holding a diversified portfolio of securities similar to those on which the
underlying index is based. However, a Series cannot, as a practical matter,
acquire and hold a portfolio containing exactly the same securities as underlie
the index and, as a result, bears a risk that the value of the securities held
will vary from the value of the index.

Even if a Series could assemble a securities portfolio that exactly
reproduced the composition of the underlying index, it still would not be fully
covered from a risk standpoint because of the "timing risk" inherent in writing
index options. When an index option is exercised, the amount of cash that the
holder is entitled to receive is determined by the difference between the
exercise price and the closing index level on the date when the option is
exercised. As with other kinds of options, the Series, as the call writer, will
not know that it has been assigned until the next business day at the earliest.
The time lag between exercise and notice of assignment poses no risk for the
writer of a covered call on a specific underlying security, such as a common
stock, because there the writer's obligation is to deliver the underlying
security, not to pay its value as of a fixed time in the past. So long as the
writer already owns the underlying security, it can satisfy its settlement
obligations by simply delivering it, and the risk that its value may have
declined since the exercise date is borne by the exercising holder. In contrast,
even if the writer of an index call holds securities that exactly match the
composition of the underlying index, it will not be able to satisfy its
assignment obligations by delivering those securities against payment of the
exercise price. Instead, it will be required to pay cash in an amount based on
the closing index value on the exercise date; and by the time it learns that it
has been assigned, the index may have declined, with a corresponding decline in
the value of its securities portfolio. This "timing risk" is an inherent
limitation on the ability of index call writers to cover their risk exposure by
holding securities positions.

If a Series has purchased an index option and exercises it before the
closing index value for that day is available, it runs the risk that the level
of the underlying index may subsequently change. If such a change causes the
exercised option to fall out-of-the-money, the relevant Series will be required
to pay the difference between the closing index value and the exercise price of
the option (times the applicable multiplier) to the assigned writer.

A Series will not purchase put options or call options if, after any such
purchase, the aggregate premiums paid for such options would exceed 20% of such
Series' net assets. The aggregate value of the obligations underlying put
options will not exceed 25% of the relevant Series' net assets.

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

If the Global Series has written an option on an industry or market segment
index, it will segregate or put into escrow with its Custodian, or pledge to a
broker as collateral for the option, at least ten "qualified securities," which
are securities of an issuer in such industry or market segment, with a market
value at the time the option is written of not less than 100% of the current
index value times the multiplier times the number of contracts. Such securities
will include stocks which represent at least 50% of the weighting of the
industry or market segment index and will represent at least 50% of the Global
Series' holdings in that industry or market segment. No individual security will
represent more than 25% of the amount so segregated, pledged or escrowed. If at
the close of business on any day the market value of such qualified securities
so segregated, escrowed or pledged falls below 100% of the current index value
times the multiplier times the number of contracts, the Global Series will so
segregate, escrow or pledge an amount in cash, Treasury bills or other
high-grade short-term obligations equal in value to the difference. In addition,
when the Global Series writes a call on an index which is in-the-money at the
time the call is written, the Global Series will segregate with its Custodian or
pledge to the broker as collateral cash, short-term U.S. Government securities
or other high-grade, short-term debt obligations equal in value to the amount by
which the call is in-the-money times the multiplier times the number of
contracts. Any amount segregated pursuant to the foregoing sentence may be
applied to the Global Series' obligation to segregate additional amounts in the
event that the market value of the qualified securities falls below 100% of the
current index value times the multiplier times the number of contracts. A
"qualified security" is an equity security which is listed on a national
securities exchange or listed on the National Association of Securities Dealers
Automated Quotation System against which the Global Series has not written a
stock call option and which has not been hedged by the Global Series by the sale
of stock index futures. However, if the Global Series holds a call on the same
index as the call written where the exercise price of the call held is equal to
or less than the exercise price of the call written or greater than the exercise
price of the call written if the difference is maintained by the Global Series
in cash, Treasury bills or other high-grade, short-term obligations in a
segregated account with its Custodian, it will not be subject to the
requirements described in this paragraph.

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OPTIONS TRANSACTIONS. A Series would normally purchase call options to
attempt to hedge against an increase in the market value of the type of
securities in which the Series may invest. A Series would ordinarily realize a
gain if, during the options period, the value of such securities exceeds the sum
of the exercise price, the premium paid and transaction costs; otherwise, the
Series would realize a loss on the purchase of the call option. A Series may
also write a put option, which can serve as a limited long hedge because
increases in value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the security depreciates to
a price lower than the exercise price of the put option, it can be expected that
the option will be exercised and the Series will be obligated to buy the
security at more than its market value.

A Series would normally purchase put options to hedge against a decline in
the market value of securities in its portfolio (protective puts). Gains and
losses on the purchase of protective puts would tend to be offset by
countervailing changes in the value of underlying Series' securities. A Series
would ordinarily realize a gain if, during the option period, the value of the
underlying securities decreases below the exercise price sufficiently to cover
the premium and transaction costs; otherwise, a Series would realize a loss on
the purchase of the put option. A Series may also write a call option, which can
serve as a limited short hedge because decreases in value of the hedged
investment would be offset to the extent of the premium received for writing the
option. However, if the security appreciates to a price higher than the exercise
price of the call option, it can be expected that the option will be exercised
and the Series will be obligated to sell the security at less than its market
value.

RISKS OF TRANSACTIONS IN STOCK OPTIONS. Writing of options involves the
risk that there will be no market in which to effect a closing transaction. An
option position may be closed out only on an exchange which provides a secondary
market for an option of the same series. Although a Series will generally write
only those options for which there appears to be an active secondary market,
there is no assurance that a liquid secondary market on an exchange will exist
for any particular option, or at any particular time, and for some options no
secondary market on an exchange may exist. If a Series as a covered call option
writer is unable to effect a closing purchase transaction in a secondary market,
it will not be able to sell the underlying security until the option expires or
it delivers the underlying security upon exercise.

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

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

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

Trading in index options commenced in April 1983 with the S&P 100 option
(formerly called the CBOE 100). Since that time a number of additional index
option contracts have been introduced including options on industry indices.
Although the markets for certain index option contracts have developed rapidly,
the markets for other index options are still relatively illiquid. The ability
to establish and close out positions on such options will be subject to the
development and maintenance of a liquid secondary market. It is not certain that
this market will develop in all index option contracts. A Series will not
purchase or sell any index option contract unless and until, in the relevant
Subadviser's opinion, the market for such options has developed sufficiently
that such risk in connection with such transactions is no greater than such risk
in connection with options on stocks.

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

Price movements in a Series' portfolio probably will not correlate
precisely with movements in the level of the index and, therefore, a Series
bears the risk that the price of the securities held by the Series may not
increase as much as the index. In such event, a Series would bear a loss on the
call which is not completely offset by movements in the price of the its
portfolio. It is also

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possible that the index may rise when a Series' portfolio of stocks does not
rise. If this occurred, the relevant Series would experience a loss on the call
which is not offset by an increase in the value of its portfolio and might also
experience a loss in its portfolio. However, because the value of a diversified
portfolio will, over time, tend to move in the same direction as the market,
movements in the value of the Series' portfolio in the opposite direction as the
market would be likely to occur for only a short period or to a small degree.

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

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

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

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

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

STOCK INDEX FUTURES. Global Series may purchase and sell stock index
futures which are traded on a commodities exchange or board of trade for certain
hedging and risk management purposes in accordance with regulations of the
Commodity Futures Trading Commission. A stock index futures contract is an
agreement in which one party agrees to deliver to another an amount of cash
equal to a specific dollar amount times the difference between a specific stock
index at the close of the last trading day of the contract and such index at the
time the agreement is made. No physical delivery of the underlying stocks in the
index is made.

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<PAGE>

The successful use of stock index futures contracts and options on indices
by Global Series depends upon its ability to predict the direction of the market
underlying the index and is subject to various additional risks. The correlation
between movements in the price of the stock index future and the price of the
securities being hedged is imperfect and there is a risk that the value of the
securities being hedged may increase or decrease at a greater rate than the
related futures contract, resulting in losses to Global Series. Certain futures
exchanges or boards of trade have established daily limits on the amount that
the price of a futures contract or related options may vary, either up or down,
from the previous day's settlement price. These daily limits may restrict the
Global Series' ability to purchase or sell certain futures contracts or related
options on any particular day. In addition, if Global Series purchases futures
to hedge against market advances before it can invest in common stock in an
advantageous manner and the market declines, Global Series might create a loss
on the futures contract. In addition, the ability of Global Series to close out
a futures position or an option depends on a liquid secondary market. There is
no assurance that liquid secondary markets will exist for any particular futures
contract or option at any particular time.

Global Series will engage in transactions in stock index futures contracts
as a hedge against changes resulting from market conditions in the values of
securities which are held in Global Series' portfolio or which it intends to
purchase. Global Series will engage in such transactions when they are
economically appropriate for the reduction of risks inherent in the ongoing
management of Global Series. The Global Series may not purchase or sell stock
index futures if, immediately thereafter, more than one-third of its net assets
would be hedged and, in addition, except as described above in the case of a
call written and held on the same index, will write call options on indices or
sell stock index futures only if the amount resulting from the multiplication of
the then current level of the index (or indices) upon which the option or future
contract(s) is based, the applicable multiplier(s), and the number of futures or
options contracts which would be outstanding, would not exceed one-third of the
value of Global Series' net assets. Global Series also may not purchase or sell
stock index futures for risk management purposes if, immediately thereafter, the
sum of the amount of margin deposits on Global Series' existing futures
positions and premiums paid for such options would exceed 5% of the liquidation
value of the Global Series' total assets after taking into account unrealized
profits and unrealized losses on any such contracts, provided, however, that in
the case of an option that is in-the-money, the in-the-money amount may be
excluded in computing such 5%. The above restriction does not apply to the
purchase and sale of stock index futures for bona fide hedging purposes. In
instances involving the purchase of stock index futures contracts by the Global
Series, an amount of cash, short-term U.S. Government securities or other
high-grade short-term debt obligations, equal to the market value of the futures
contracts, may be deposited in a segregated account with the Fund's Custodian
and/or in a margin account with a broker to collateralize the position and
thereby insure that the use of such futures is unleveraged.

Under regulations of the Commodity Exchange Act, investment companies
registered under the Investment Company Act of 1940, as amended (the Investment
Company Act), are exempt from the definition of "community pool operator,"
subject to compliance with certain conditions. The exemption is conditioned upon
a requirement that all commodity futures or commodity options transactions
constitute bona fide hedging transactions within the meaning of the CFTC's
regulations. The Global Series will use stock index futures and options on
futures as described herein in a manner consistent with this requirement. The
Global Series may also enter into commodity futures or commodity options
contracts for income enhancement and risk management purposes if the aggregate
initial margin and option premiums do not exceed 5% of the liquidation value of
Global Series' total assets.

FOREIGN CURRENCY FORWARD CONTRACTS, OPTIONS AND FUTURES TRANSACTIONS

A forward foreign currency exchange contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. There is no limitation on the value of
forward contracts into which a Series may enter. However, a Series' transactions
in forward contracts will be limited to hedging involving either specific
transactions or portfolio positions. Transaction hedging is the purchase or sale
of a forward contract with respect to specific receivables or payables of a
Series generally arising in connection with the purchase or sale of its
securities and accruals of interest or dividends receivable and Series expenses.
Position hedging is the sale of a foreign currency with respect to security
positions denominated or quoted in that currency. A Series may not position
hedge with respect to a particular currency for an amount greater than the
aggregate market value (determined at the time of making any sale of a forward
contract) of securities, denominated or quoted in, or currently convertible
into, such currency. A forward contract generally has no deposit requirements,
and no commissions are charged for such trades.

A Series may enter into a forward contract to hedge against risk in the
following circumstances: (i) during the time period when such Series contracts
for the purchase or sale of a security denominated in a foreign currency, or
(ii) when such Series anticipates the receipt in a foreign currency of dividends
or interest payments on a security which it holds. By entering into a forward
contract for a fixed amount of dollars for the purchase or sale of the amount of
foreign currency involved in the underlying transaction, such Series will be
able to protect itself against a possible loss resulting from an adverse change
in the relationship between the U.S. dollar and the subject foreign currency
during the period between the date on which the security is purchased or

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sold, or on which the dividend or interest payment is declared, and the date on
which such payments are made or received. Additionally, when a Series'
Subadviser believes that the currency of a particular foreign country may suffer
a substantial decline against the U.S. dollar, such Series may enter into a
forward contract, for a fixed amount of dollars, to sell the amount of foreign
currency approximating the value of some or all of the securities of a Series
denominated in such foreign currency. Further, a Series may enter into a forward
contract in one foreign currency, or basket of currencies, to hedge against the
decline or increase in value in another foreign currency. Use of a different
currency or basket of currencies magnifies the riskthat movements in the price
of the forward contract will not correlate or will correlate unfavorably with
the foreign currency being hedged.

Forward currency contracts (i) are traded in an interbank market conducted
directly between currency traders (typically commercial banks or other financial
institutions) and their customers, (ii) generally have no deposit requirements
and (iii) are typically consummated without payment of any commissions. Failure
by a Series' counterparty to make or take delivery of the underlying currency at
the maturity of the forward contract would result in the loss to such Series of
any expected benefit of the transaction.

As is the case with futures contracts, purchasers and sellers of forward
currency contracts can enter into offsetting closing transactions, similar to
closing transactions on futures, by selling or purchasing, respectively, an
instrument identical to the instrument purchased or sold. Secondary markets
generally do not exist for forward currency contracts, with the result that
closing transactions generally can be made for forward currency contracts only
by negotiating directly with the counterparty. Thus, there can be no assurance
that a Series will in fact be able to close out a forward currency contract at a
favorable price prior to maturity. In addition, in the event of insolvency of
the counterparty, a Series might be unable to close out a forward currency
contract at any time prior to maturity. In either event, such Series would
continue to be subject to market risk with respect to the position, and would
continue to be required to maintain a position in the securities or currencies
that are the subject of the hedge or to maintain cash or securities in a
segregated account.

Each Series may also purchase and sell futures contracts on foreign
currencies and groups of foreign currencies to protect against the effect of
adverse changes on foreign currencies. A Series will engage in transactions in
only those futures contracts and options thereon that are traded on a
commodities exchange or a board of trade. A "sale" of a futures contract means
the assumption of a contractural obligation to deliver the specified amount of
foreign currency at a specified price in a specified price in a specified future
month. A "purchase" of a futures contract means the assumption of a contractual
obligation to acquire the currency called for by the contract at a specified
price in a specified future month. At the time a futures contract is purchased
or sold, a Series must allocate cash or securities as a deposit payment (initial
margin). Thereafter, the futures contract is valued daily and the payment of
"variation margin" may be required in such Series' providing or receiving cash
that reflects any decline or increase in the contract's value, a process known
as "marking to market."

A Series may purchase and write put and call options on foreign currencies
traded on securities exchanges or boards of trade (foreign and domestic) and OTC
options for hedging purposes in a manner similar to that in which forward
foreign currency exchange contracts and futures contracts on foreign currencies
will be employed. Options on foreign currencies are similar to options on
securities, except that a Series has the right to take or make delivery of a
specified amount of foreign currency, rather than securities.

Generally, OTC foreign currency options used by a Series are European-style
options. This means that the option is only exercisable immediately prior to its
expiration. This is in contrast to American-style options, which are exercisable
at any time prior to the expiration date of the option.

If a Series' Subadviser anticipates purchasing a foreign security and also
anticipates a rise in the value of such foreign currency (thereby increasing the
cost of such security), such Series may purchase call options or write put
options on the foreign currency. A Series could also enter into a long forward
contract or a long futures contract on such currency, or purchase a call option,
or write a put option, on a currency futures contract. The use of such
instruments could offset, at least partially, the effects of the adverse
movements of the exchange rates.

FOREIGN CURRENCY STRATEGIES--SPECIAL CONSIDERATIONS

A Series may use options on foreign currencies, futures on foreign
currencies, options on futures on foreign currencies and forward currency
contracts, to hedge against movements in the values of the foreign currencies in
which such Series' securities are denominated. Such currency hedges can protect
against price movements in a security that a Series owns or intends to acquire
that are attributable to changes in the value of the currency in which it is
denominated. Such hedges do not, however, protect against price movements in the
securities that are attributable to other causes.

A Series might seek to hedge against changes in the value of a particular
currency when no futures contract, forward contract or option involving that
currency is available or one of such contracts is more expensive than certain
other contracts. In

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<PAGE>

such cases, a Series may hedge against price movements in
that currency by entering into a contract on another currency or basket of
currencies, the values of which such Series' Subadviser believes will have a
positive correlation to the value of the currency being hedged. The risk that
movements in the price of the contract will not correlate perfectly with
movements in the price of the currency being hedged is magnified when this
strategy is used.

The value of futures contracts, options on futures contracts, forward
contracts and options on foreign currencies depends on the value of the
underlying currency relative to the U.S. dollar. Because foreign currency
transactions occurring in the interbank market might involve substantially
larger amounts than those involved in the use of futures contracts, forward
contracts or options, a Series could be disadvantaged by dealing in the odd-lot
market (generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.

There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirements that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information generally is representative of very large transactions in the
interbank market and thus might not reflect odd-lot transactions where rates
might be less favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the futures contracts or options until they
reopen.

Settlement of futures contracts, forward contracts and options involving
foreign currencies might be required to take place within the country issuing
the underlying currency. Thus, a Series might be required to accept or make
delivery of the underlying foreign currency in accordance with any U.S. or
foreign regulations regarding the maintenance of foreign banking arrangements by
U.S. residents and might be required to pay any fees, taxes and charges
associated with such delivery assessed in the issuing country.

COVERED FORWARD CURRENCY CONTRACTS, FUTURES CONTRACTS AND OPTIONS

Transactions using forward currency contracts, futures contracts and
options (other than options that the Series has purchased) expose a Series to an
obligation to another party. A Series will not enter into any such transactions
unless it owns either (1) an offsetting ("covered") position in securities,
currencies, or other options, forward currency contracts or futures contracts,
or (2) liquid assets with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. The Series will comply with
SEC guidelines regarding cover for these instruments and, if the guidelines so
require,set aside cash or liquid assets in a segregated account with its
Custodian in the prescribed amount.

Assets used as cover or held in a segregated account cannot be sold while
the position in the corresponding forward currency contract, futures contract or
option is open, unless they are replaced with similar assets. As a result, the
commitment of a large portion of the Series' assets to cover segregated accounts
could impede portfolio management or the Series' ability to meet redemption
requests or other current obligations.

LIMITATIONS ON PURCHASE AND SALE OF OPTIONS ON FOREIGN CURRENCIES AND FUTURES
CONTRACTS ON FOREIGN CURRENCIES

Global Series will not (a) write puts having aggregate exercise prices
greater than 25% of total net assets; or (b) purchase (i) put options on
currencies or futures contracts on foreign currencies or (ii) call options on
foreign currencies if, after any such purchase, the aggregate premiums paid for
such options would exceed 10% of Global Series' total net assets.

RISKS OF TRANSACTIONS IN OPTIONS ON FOREIGN CURRENCIES

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

Reasons for the absence of a liquid secondary market on an exchange include
the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing

B-15
<PAGE>

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

RISKS OF OPTIONS ON FOREIGN CURRENCIES

Options on foreign currencies involve the currencies of two nations and,
therefore, developments in either or both countries can affect the values of
such options. These risks include government actions affecting currency
valuation and the movements of currencies from one country to another. The
quality of currency underlying option contracts represent odd lots in a market
dominated by transactions between banks; this can mean extra transaction costs
upon exercise. Options markets may be closed while round-the-clock interbank
currency markets are open, which can create price and rate discrepancies.

RISKS OF TRANSACTIONS IN FUTURES CONTRACTS

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

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

Under regulations of the Commodity Exchange Act, investment companies
registered under the Investment Company Act are exempt from the definition of
"commodity pool operator," subject to compliance with certain conditions. The
exemption is conditioned upon a requirement that all of the Series' futures or
options transactions constitute bona fide hedging transactions within the
meaning of the Commodity Futures Trading Commission's (CFTC's) regulations. The
Series will use currency futures and options on futures in a manner consistent
with this requirement. The Series may also enter into futures or related options
contracts for income enhancement and risk management purposes if the aggregate
initial margin and option premiums do not exceed 5% of the liquidation value of
the relevant Series' total assets.

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

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

OPTIONS ON FUTURES CONTRACTS

An option on a futures contract gives the purchaser the right, but not the
obligation, to assume a position in a futures contract (a long position if the
option is a call and a short position if the option is a put) at a specified
exercise price at any time

B-16
<PAGE>

during the option exercise period. The writer of the option is required upon
exercise to assume an offsetting futures position (a short position if the
option is a call and a long position if the option is a put). Upon exercise of
the option, the assumption of offsetting futures positions by the writer and
holder of the option will be accompanied by delivery of the accumulated cash
balance in the writer's futures margin account which represents the amount by
which the market price of the futures contract, at exercise, exceeds, in the
case of a call, or is less than, in the case of a put, the exercise price of the
option on the futures contract. Currently options can be purchased or written
with respect to futures contracts on the Australian Dollar, British Pound,
Canadian Dollar, Japanese Yen, Swiss Franc, Deutsche Mark and Eurodollar.

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

OTHER INVESTMENT TECHNIQUES

Each Series may take advantage of opportunities in the area of options and
futures contracts and any other derivative instruments that are not presently
contemplated for use by it or that are not currently available but that may be
developed, to the extent such opportunities are both consistent with its
investment objective and legally permissible for it.

INVESTMENT RESTRICTIONS

The investment restrictions listed below have been adopted by the indicated
Series as fundamental policies, except as otherwise indicated. Under the
Investment Company Act, a fundamental policy of a Series may not be changed
without the vote of a majority of the outstanding voting securities of such
Series. As defined in the Investment Company Act, a "majority of a Fund's
outstanding voting securities" means the lesser of (i) 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares are
present in person or represented by proxy or (ii) more than 50% of the
outstanding shares. For purposes of the following limitations: (i) all
percentage limitations apply immediately after a purchase or initial investment;
and (ii) any subsequent change in any applicable percentage resulting from
market fluctuations does not require elimination of any asset from a Series.

GLOBAL SERIES MAY NOT:

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

2. Make short sales of securities or maintain a short position.

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

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

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

6. Buy or sell commodities or commodity contracts or real estate or invest
in real estate, although it may purchase or sell securities which are secured by
real estate and securities of companies which invest or deal in real estate (for
the purposes of this restriction, stock options, options on debt securities,
options on stock indices, stock indices futures, options on stock index futures,
futures contracts on currencies, options on such contracts and forward foreign
exchange contracts are not deemed to be a commodity or commodity contract).

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

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

B-17
<PAGE>

9. Invest in securities of other registered investment companies, except by
purchases in the open market involving only customary brokerage commissions and
as a result of which not more than 10% of its total assets (determined at the
time of investment) would be invested in such securities, or except as part of a
merger, consolidation or other acquisition.

10. Invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in the common stocks of companies
which invest in or sponsor such programs.

11. Make loans, except through (i) repurchase agreements and (ii) loans of
portfolio securities (limited to 30% of Global Series' total assets).

12. Purchase warrants if as a result the Fund would then have more than 5%
of its total assets (taken at current value) invested in warrants.

For purposes of Restriction No. 4, the Global Series will not invest 25% or
more of its total assets in a single industry.

INTERNATIONAL STOCK SERIES MAY NOT:

1. Purchase any security if, as a result, with respect to 75% of
International Stock Series' total assets, more than 5% of the value of its total
assets (determined at the time of investment) would then be invested in the
securities of any one issuer.

2. Purchase a security if more than 10% of the outstanding voting
securities of any one issuer would be held by International Stock Series.

3. Purchase a security if, as a result, 25% or more of the value of its
total assets (determined at the time of investment) would be invested in
securities of one or more issuers having their principal business activities in
the same industry. This restriction does not apply to obligations issued or
guaranteed by the United States Government, its agencies or instrumentalities.

4. Purchase or sell real estate or interests therein (including limited
partnership interests), although International Stock Series may purchase
securities of issuers which engage in real estate operations and securities
which are secured by real estate or interests therein.

5. Purchase or sell commodities or commodity futures contracts, except that
International Stock Series may purchase and sell financial futures contracts and
options thereon and that forward contracts are not deemed to be commodities or
commodity futures contracts.

6. Purchase oil, gas or other mineral leases, rights or royalty contracts
or exploration or development programs, except that International Stock Series
may invest in the securities of companies which operate, invest in or sponsor
such programs.

7. Issue senior securities, borrow money or pledge its assets, except that
International Stock Series may borrow from banks or through forward rolls,
dollar rolls or reverse repurchase agreements up to 20% of the value of its
total assets to take advantage of investment opportunities, for temporary,
extraordinary or emergency purposes, or for the clearance of transactions and
may pledge up to 20% of the value of its total assets to secure such borrowings.
For purposes of this restriction, the purchase or sale of securities on a
"when-issued" or delayed-delivery basis; the purchase and sale of options,
financial futures contracts and options thereon; the entry into repurchase
agreements and collateral and margin arrangements with respect to any of the
foregoing, will not be deemed to be a pledge of assets nor the issuance of
senior securities.

8. Make loans except by the purchase of fixed income securities in which
International Stock Series may invest consistently with its investment objective
and policies or by use of reverse repurchase and repurchase agreements, forward
rolls, dollar rolls and securities lending arrangements.

9. Make short sales of securities.

10. Purchase securities on margin, except for such short-term loans as are
necessary for the clearance of purchases of portfolio securities. (For the
purpose of this restriction, the deposit or payment by International Stock
Series of initial or maintenance margin in connection with financial futures
contracts is not considered the purchase of a security on margin.)

11. Act as underwriter except to the extent that, in connection with the
disposition of portfolio securities, the Series may be deemed to be an
underwriter under certain federal securities laws. International Stock Series
has no limit with respect to investments in restricted securities.

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

B-18
<PAGE>

MANAGEMENT OF THE FUND

(A) DIRECTORS

The Fund has Directors who, in addition to overseeing the actions of the
Fund's Manager, Subadvisers and Distributor, decide upon matters of general
policy.

The Directors also review the actions of the Fund's officers who conduct
and supervise the daily business operations of the Fund.

(B) MANAGEMENT INFORMATION--DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>

POSITION WITH PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE(1) FUND DURING PAST FIVE YEARS
- --------------------- ------------- ----------------------

<S> <C> <C>
Edward D. Beach (73) Director President and Director of BMC Fund, Inc., a closed-end
investment company; previously Vice Chairman of Broyhill
Furniture Industries, Inc.; Certified Public Accountant;
Secretary and Treasurer of Broyhill Family Foundation,
Inc.; Member of the Board of Trustees of Mars
Hill College; and Director of The High Yield Income Fund,
Inc.

Stephen C. Eyre (75) Director Executive Director (May 1985 through December 1997) of
The John A. Hartford Foundation, Inc. (charitable foundation);
Director of Faircom, Inc.; and Trustee Emeritus of Pace
University.

Delayne Dedrick Gold (59) Director Marketing and Management Consultant; Director of The High
Yield Income Fund, Inc.

* Robert F. Gunia (51) Vice Presi- Vice President, Prudential Investments since September 1997;
dent and Executive Vice President and Treasurer (since December 1996),
Director Prudential Investments Fund Management LLC (PIFM); Senior Vice
President (since March 1987)of Prudential Securities Incorporated
(Prudential Securities); formerly Chief Administrative Officer (July
1990-September 1996), Director (January 1989-September 1996)
and Executive Vice President, Treasurer and Chief Financial Officer
(June 1987-September 1996) of Prudential Mutual Fund
Management, Inc. (PMF), Vice President and Director (since May
1989) of The Asia Pacific Fund, Inc.; Director of The High Yield
Income Fund, Inc.

Don G. Hoff (62) Director Chairman and Chief Executive Officer (since 1980) of Intertec, Inc.
(investments); Chairman and Chief Executive Officer of The Lamour
Corporation, Inc.; Director of Innovative Capital Management, Inc.
and The Greater China Fund, Inc.; and Chairman and Director of The
Asia Pacific Fund, Inc.

Robert E. LaBlanc (63) Director President (since 1981) of Robert E. LaBlanc Associates, Inc.
(telecommunications); formerly General Partner at Salomon Brothers
and Vice-Chairman of Continental Telecom; Director of Storage
Technology Corporation, Titan Corporation, Salient 3
Communications, Inc. and Tribune Company; and Trustee of
Manhattan College.

B-19

<PAGE>

POSITION WITH PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE(1) FUND DURING PAST FIVE YEARS
------------- ----------------------

<S> <C> <C>
* Mendel A. Melzer (37) Director Chief Investment Officer (since October 1996) of Prudential Mutual
Funds; formerly Chief Financial Officer (November 1995-October
1996) of Prudential Investments; Senior Vice President and Chief
Financial Officer (April 1993-November 1995) of Prudential Preferred
Financial Services; Managing Director (April 1991-April 1993) of
Prudential Investment Advisors and Senior Vice President (July
1989-April 1991) of Prudential Capital Corporation; Chairman and
Director of Prudential Series Fund, Inc.; and Director of The High
Yield Income Fund, Inc.

Robin B. Smith (58) Director Chairman (since August 1996) and Chief Executive Officer (since
January 1988), formerly President (September 1981-August 1996)
and Chief Operating Officer (September 1981-December 1988) of
Publishers Clearing House; Director of BellSouth Corporation, Texaco
Inc., Springs Industries Inc. and Kmart Corporation.

Stephen Stoneburn (54) Director President and Chief Executive Officer (since June 1996) of Quadrant
Media Corp. (a publishing company); formerly, President (June
1995-June 1996) of Argus Integrated Media, Inc.; formerly Senior
Vice President and Managing Director, (January 1993-1995) Cowles
Business Media; and Senior Vice President (January 1991-1992)
of Gralla Publications (a division of United Newspapers, U.K.); and
Senior Vice President of Fairchild Publications, Inc.

* Brian M. Storms (44) President President (since October 1998) of Prudential Investments; formerly
and Director President (September 1996-October 1998) of Prudential Mutual
Funds, Annuities and Investment Management Services, Managing
Director (July 1991-September 1996) of Fidelity Investment
Institutional Services Company, Inc., President (October 1989-
September 1991) of J.K. Schofield and Senior Vice President
(September 1982-October 1989) of INVEST Financial Corporation;
President and Director or Trustee of funds within the Prudential
Mutual Funds.

Nancy H. Teeters (67) Director Economist; formerly Vice President and Chief Economist (March 1986-
June 1990) of International Business Machines Corporation; Director
(since July 1991) of Inland Steel Corporation; Director of The High
Yield Income Fund, Inc.

Grace C. Torres (39) Treasurer First Vice President (sinceDecember 1996) of PIFM; First Vice
and Principal President (since March 1994) of Prudential Securities; formerly First
Financial and Vice President (March 1994-September 1996), Prudential Mutual
Accounting Fund Management, Inc. and Vice President (July 1989-March 1994)
Officer of Bankers Trust Corporation.

Robert C. Rosselot (38) Secretary Assistant General Counsel (since September 1997) of PIFM.
Formerly, partner with the firm of Howard & Howard, Bloomfield
Hills, Michigan (since December 1995) and, prior thereto, Corporate
Counsel, Federated Investors (1990-1995).

</TABLE>

B-20

<PAGE>

POSITION WITH PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE(1) FUND DURING PAST FIVE YEARS
- ----------------------- ------------- ----------------------
Stephen M. Ungerman (44) Assistant Vice President and Tax Director (since
Treasurer March 1996) Prudential Investments;
formerly First Vice President,
Prudential Mutual Fund Management,
Inc. (February 1993-September 1996)
- ----------

(1) Unless otherwise noted, the address for each of the above persons is c/o
Prudential Mutual Fund Management LLC, Gateway Center Three, 100 Mulberry
Street, 9th Floor, Newark, New Jersey 07102-4077.

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

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

The Fund pays each of its Directors who is not an "affiliated" person of
PIFM annual compensation of $7,000, in addition to certain out-of-pocket
expenses. The amount of annual compensation paid to each Director may change as
a result of the introduction of additional funds upon which the Director will be
asked to serve.

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

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

Pursuant to the terms of the Management Agreement with the Fund, the
Manager pays all compensation of officers and employees of the Fund as well as
the fees and expenses of all Directors of the Fund who are affiliated persons of
the Manager.

B-21
<PAGE>

The following table sets forth the aggregate compensation paid by the Fund
for the fiscal year ended October 31, 1998 to the Directors who are not
affiliated with the Manager and the aggregate compensation paid to such
Directors for service on the Fund's board and that of all other investment
companies managed by Prudential Investments Fund Management LLC (Fund Complex)
for the calendar year ended December 31, 1998. Below are listed the Directors
who have served the Fund during its most recent fiscal year.

<TABLE>
<CAPTION>
COMPENSATION TABLE

TOTAL 1998
PENSION OR COMPENSATION
RETIREMENT FROM FUND
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL AND FUND
COMPENSATION AS PART OF FUND BENEFITS UPON COMPLEX PAID
NAME AND POSITION FROM FUND EXPENSES RETIREMENT TO DIRECTORS(2)
----------------- ------------ ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Edward D. Beach--Director ................... $7,500 None N/A $135,000 (44/71)*
Stephen C. Eyre--Former Director ............ 7,500 None N/A 45,000*(14,17)*
Delayne D. Gold--Director ................... 7,500 None N/A 135,000*(44/71)*
Robert F. Gunia (1)--Director ............... -- None N/A --
Don G. Hoff--Director ....................... 7,500 None N/A 45,000*(14/17)*
Robert F. LaBlanc--Director ................. 7,500 None N/A 45,000*(14,17)*
Mendel A. Melzer (1)--Director .............. -- None N/A --
Richard A. Redeker (1)--Former Director ..... -- None N/A --
Robin B. Smith--Director .................... 7,500 None N/A 90,000*(32/41)*
Stephen Stoneburn--Director ................. 7,500 None N/A 45,000*(14,17)*
Brian M. Storms ............................. -- None N/A --
Nancy H. Teeters--Director .................. 7,500 None N/A 90,000*(26,47)*
</TABLE>
- ----------

Effective January 1997, the annual compensation paid to Directors was reduced to
$7,000 in addition to certain out-of-pocket expenses.

* Indicates number of funds/portfolios in Fund Complex (including the Fund) to
which aggregate compensation relates.

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

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

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

Directors of the Fund are eligible to purchase Class Z shares of each
Series, which are sold without either an initial sales charge or CDSC to a
limited group of investors.

As of December 21, 1998, the Directors and officers of the Fund, as a
group, owned less than 1% of the outstanding common stock of the Fund.

As of December 21, 1998, the beneficial owners, directly or indirectly, of
more than 5% of the outstanding common stock of Global Series were: Daniel J.
Duane IRA held 12,189 Class Z shares (or approximately 6.93% of the outstanding
Class Z shares); Mr. Edward Michael Caulfield and Mrs. Helen B. Caulfield JT Ten
held 12,823 Class Z shares (or approximately 7.29% of the outstanding Class Z
shares); and Ms. Daniel J. Duane and Ms. Deborah L. Duane TEN COM held 47,781
Class Z shares (or approximately 27.16% of the outstanding Class Z shares) and
the beneficial owners, directly or indirectly, of more than 5% of the
outstanding common stock of International Stock Series were: GFL Enterprises,
1911 Rohlwing Rd, Rollings MDWS, Illinois held 28,132 Class Z shares (or
approximately 5.45% of the outstanding Class Z shares)].

B-22

<PAGE>

INVESTMENT ADVISORY AND OTHER SERVICES

(A) INVESTMENT ADVISORS

The manager of each Series is Prudential Investments Fund Management LLC
(PIFM or the Manager), Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102-4077. PIFM serves as manager to substantially all of the other
investment companies that, together with the Series, comprise the "Prudential
Mutual Funds." See "How the Fund is Managed--Manager" in the Prospectus. As of
November 30, 1998 PIFM managed and/or administered open-end and closed-end
management investment companies with assets of approximately $70.5 billion and,
according to the Investment Company Institute, as of November 30, 1998, the
Prudential Mutual Funds were the 18th largest family of mutual funds in the
United States.

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

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

For its services, PIFM receives, pursuant to the Management Agreement, a
fee at an annual rate of .75% of Global Series' average daily net assets and 1%
of International Stock Series' average daily net assets. The fee is computed
daily and payable monthly. The Management Agreement also provides that, in the
event the expenses of a Series (including the fees of PIFM, but excluding
interest, taxes, brokerage commissions, distribution fees and litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of a Series' business) for any fiscal year exceed the lowest
applicable annual expense limitation established and enforced pursuant to the
statutes or regulations of any jurisdiction in which a Series' shares are
qualified for offer and sale, the compensation due to PIFM will be reduced by
the amount of such excess. Reductions in excess of the total compensation
payable to PIFM will be paid by PIFM to the Fund. Currently, each Series
believes that there are no such expense limitations.

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

(a) the salaries and expenses of all of its and a Series' personnel
except the fees and expenses of Directors who are not affiliated persons of
PIFM or the Series' investment adviser;

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

(c) with respect to the Global Series, the costs and expenses payable
to The Prudential Investment Corporation, doing business as Prudential
Investments (PI or Subadviser) pursuant to the subadvisory agreement
between PIFM and PI (the Subadvisory Agreement);

(d) with respect to International Stock Series, the fees payable to
Mercator Asset Management, L.P. (Mercator) pursuant to the subadvisory
agreement between PIFM and Mercator; and

(e) with respect to International Stock Series, the costs and expenses
payable to PI pursuant to a subadvisory agreement between PIFM and PI.

Under the terms of the Management Agreements, each Series is responsible
for the payment of the following expenses: (a) the fees payable to the Manager,
(b) the fees and expenses of Directors who are not affiliated persons of the
Manager or such Series' investment adviser, (c) the fees and certain expenses of
the Custodian and Transfer and Dividend Disbursing Agent, including the cost of
providing records to the Manager in connection with its obligation of
maintaining required records of each Series and of pricing such Series' shares,
(d) the charges and expenses of legal counsel and independent accountants for
such Series, (e) brokerage commissions and any issue or transfer taxes
chargeable to such Series in connection with its securities transactions, (f)
all taxes and corporate fees payable by such Series to governmental agencies,
(g) the fees of any trade associations of which such Series may be a member, (h)
the cost of stock certificates representing shares of such Series, (i) the cost
of fidelity and liability insurance, (j) the fees and expenses involved in
registering and maintaining registration of such Series and of

B-23

<PAGE>

its shares with the Securities and Exchange Commission, registering such Series
and qualifying its shares under state securities laws, including the preparation
and printing of the Fund's registration statements and prospectuses for such
purposes, (k) allocable communications expenses with respect to investor
services and all expenses of shareholders' and Directors' meetings and of
preparing, printing and mailing reports, proxy statements and prospectuses to
shareholders in the amount necessary for distribution to the shareholders, (l)
litigation and indemnification expenses and other extraordinary expenses not
incurred in the ordinary course of such Series' business and (m) distribution
fees.

The Management Agreements provide that PIFM will not be liable for any
error of judgment or for any loss suffered by a Series in connection with the
matters to which the Management Agreement relates, except a loss resulting from
willful misfeasance, bad faith, gross negligence or reckless disregard of duty.
The Management Agreements provide that it will terminate automatically if
assigned, and that it may be terminated without penalty by either party upon not
more than 60 days' nor less than 30 days' written notice. The Management
Agreements will continue in effect for a period of more than two years from the
date of execution only so long as such continuance is specifically approved at
least annually in conformity with the Investment Company Act. For the fiscal
years ended October 31, 1998, 1997 and 1996, PIFM received management fees of
$4,690,703, $5,036,520, and $4,118,594, respectively, from Global Series. For
the fiscal years ended October 31, 1998, and 1997, and for the period from
October 1, 1996 through October 31, 1996, PIFM received management fees of
$4,158,188, $2,932,554 and $162,415, respectively, from the newer International
Stock Series.

With respect to Global Series, PIFM has entered into a Subadvisory
Agreement (the Subadvisory Agreement) with PI (the Subadviser), a wholly-owned
subsidiary of The Prudential Insurance Company of America (Prudential). The
Subadvisory Agreement provides that PI will furnish investment advisory services
in connection with the management of the Global Series. In connection therewith,
PI is obligated to keep certain books and records of the Global Series. PIFM
continues to have responsibility for all investment advisory services pursuant
to the Management Agreement and supervises PI's performance of such services. PI
is reimbursed by PIFM for the reasonable costs and expenses incurred by PI in
furnishing those services. Investment advisory services are provided to the
Global Series by a unit at PI, known as Prudential Mutual Fund Investment
Management.

With respect to International Stock Series, PIFM has entered into a
Subadvisory Agreement (the Subadvisory Agreement) with Mercator. The Subadvisory
Agreement with Mercator provides that PIFM will compensate Mercator for its
services at an annual rate of .75% of International Stock Series' average daily
net assets up to and including $50 million, .60% of International Stock Series'
average daily net assets in excess of $50 million up to and including $300
million and .45% of International Stock Series' average daily net assets in
excess of $300 million. For the fiscal years ended October 31, 1998, and 1997,
and for the period from October 1, 1996 through October 31, 1996, Mercator
received fees of $2,396,184, $1,834,533 and $103,819, respectively, from PIFM.
Dedicated to global and international common stock investing, Mercator was
initially founded in 1984 by senior professionals formerly associated with
Templeton Investment Counsel as Mercator Asset Management, Inc. (Mercator,
Inc.). On November 30, 1995, Mercator, a limited partnership organized under the
laws of the State of Delaware, assumed the investment advisory business of
Mercator, Inc. As of September 30, 1998, Mercator had approximately $3 billion
in assets under management. The Subadvisory Agreement provides that Mercator
will furnish investment advisory services in connection with the management of
the International Stock Series. In connection therewith, Mercator is obligated
to keep certain books and records of the International Stock Series. PIFM
continues to have responsibility for all investment advisory services pursuant
to the Management Agreement and supervises Mercator's performance of such
services.

Portfolio manager Peter Spano and the Mercator Asset Management team are
equity specialists with approximately 100 years of combined international
investing experience. They primarily use a value investing style in managing the
International Stock Series. Using a value investing style, International Stock
Series' managers search outside the U.S. for long-term growth from stocks deemed
to be underpriced. Mercator's team accesses a substantial network of top equity
analysts around the world who are experts in their local markets. The team
screens more than 5,500 stocks outside the U.S., selecting approximately 50
significantly undervalued stocks with strong prospects for earnings growth.

With respect to International Stock Series, and pursuant to a subadvisory
agreement with PIFM, PI provides investment advisory services to such Series
with respect to (i) the management of short-term assets, including cash, money
market instruments and repurchase agreements and (ii) the lending of portfolio
securities in connection with the management of the International Stock Series.
For these services, PIFM will reimburse PI for reasonable costs and expenses
incurred by PI determined in a manner acceptable to PIFM.

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

B-24
<PAGE>

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

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

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

Each Series' Class A Plan provides that (i) up to .25 of 1% of the average
daily net assets of the Class A shares of such Series may be used to pay for
personal service and the maintenance of shareholder accounts (service fee) and
(ii) total distribution fees (including the service fee of .25 of 1%) may not
exceed .30 of 1% of the average daily net assets of the Class A shares of such
Series. The Global Series' Class B Plan provides that (i) up to .25 of 1% of the
average daily net assets of the Class B shares of such Series may be paid as a
service fee and (ii) .50 of 1% (not including the service fee) per annum of such
Series' average daily net assets up to the level of average daily net assets as
of February 26, 1986, plus .75 of 1% of the average daily net assets of the
Class B shares of such Series in excess of such level may be used as
compensation for distribution-related expenses with respect to the Class B
shares of such Series. The International Stock Series' Class B Plan provides
that (i) up to .25 of 1% of the average daily net assets of the Class B shares
of such Series may be paid as a service fee and (ii) .75 of 1% (not including
the service fee) per annum of such Series' average daily net assets may be used
as compensation for distribution-related expenses with respect to the Class B
shares (asset-based sales charge). Each Series' Class C Plan provides that (i)
up to .25 of 1% of the average daily net assets of the Class C shares of such
Series may be paid as a service fee and (ii) .75 of 1% (not including the
service fee) per annum of such Series' average daily net assets may be used as
compensation for distribution-related expenses with respect to the Class C
shares (asset-based sales charge).

The Class A, Class B and Class C Plans continue in effect from year to
year, provided that each such continuance is approved at least annually by a
vote of the Board of Directors, including a majority vote of the Rule 12b-1
Directors, cast in person at a meeting called for the purpose of voting on such
continuance. The Plans may each be terminated at any time, without penalty, by
the vote of a majority of the Rule 12b-1 Directors or by the vote of the holders
of a majority of the outstanding shares of the applicable class of the Series to
which such Plan relates. The Plans may not be amended to increase materially the
amounts to be spent for the services described therein without approval by the
shareholders of the applicable class (by both Class A and Class B shareholders,
voting separately, in the case of material amendments to the Class A Plan), and
all material amendments are required to be approved by the Board of Directors in
the manner described above. Each Plan will automatically terminate in the event
of its assignment. A Series will not be contractually obligated to pay expenses
incurred under any Plan if it is terminated or not continued.

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

Pursuant to the Distribution Agreement, the Fund has agreed to indemnify
the Distributor to the extent permitted by applicable law against certain
liabilities under the Securities Act of 1933, as amended.

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

GLOBAL SERIES

CLASS A PLAN. For the fiscal year ended October 31, 1998, Prudential
Securities received payments of $377,259 and PIMS received payments of
$274,685 under the Class A Plan. These amounts were expended on commission
credits to Prudential Securities and Pruco Securities Corporation, an affiliated
broker-dealer (Prusec), for payments of commissions and account servicing fees
to financial advisers and other persons who sell Class A shares. For the fiscal
year ended October 31, 1998, Prudential Securities and PIMS also received
approximately $157,400 and $80,300 in initial sales charges.

CLASS B PLAN. For the fiscal year ended October 31, 1998, Prudential
Securities received $1,745,480 and PIMS received payments of $1,152,342 from the
Series under the Class B Plan and spent approximately $893,100 and $499,300,
respectively, in

B-25

<PAGE>

distributing the Class B shares of the Series. It is estimated that of the
latter amounts approximately $3,400 (.4%) and $0 (0%), respectively, was spent
on printing and mailing of prospectuses to other than current shareholders;
$292,700 (32.8%) and $123,300 (24.7%), respectively, on compensation to Prusec
for commissions to its representatives and other expenses, including an
allocation on account of overhead and other branch office distribution-related
expenses incurred by it for distribution of Class B shares; and $597,000 (66.8%)
and $376,000 (75.3%), respectively, on the aggregate of (i) payments of
commissions and account servicing fees to its financial advisers $377,500
(42.3%) and $247,000 (49.6%), respectively, and (ii) an allocation on account of
overhead and other branch office distribution expenses $219,500 (84.5%) and
$128,600 (25.7%), respectively. The term "overhead and other branch office
distribution related expenses" represents (a) the expenses of operating Prusec's
and Prudential Securities' branch offices in connection with the sale of Series
shares, including lease costs, the salaries and employee benefits of operations
and sales support personnel, utility costs, communications costs and the costs
of stationery and supplies, (b) the costs of client sales seminars, (c) expenses
of mutual fund sales coordinators to promote the sale of Series shares and (d)
other incidental expenses relating to branch promotion of Series sales.

The Distributor also receives the proceeds of contingent deferred sales
charges paid by holders of Class B shares upon certain redemptions of Class B
shares. For the fiscal year ended October 31, 1998, Prudential Securities and
PIMS received approximately $437,600 and $237,700, respectively, in
contingent deferred sales charges.

CLASS C PLAN. For the fiscal year ended October 31, 1998, Prudential
Securities received $58,736 and PIMS received payments of $44,122 from the
Series under the Class C Plan and spent approximately $52,100 and $42,400,
respectively, in distributing the Class C shares of the Series. It is
estimated that of the latter amounts approximately $900 (1.8%) and
$0 (0%), respectively, was spent on printing and mailing of
prospectuses to other than current shareholders; $2,200 (4.3%) and $900
(2.0%), respectively, on compensation to Prusec for commissions to its
representatives and other expenses, including an allocation on account of
overhead and other branch office distribution-related expenses incurred by it
for distribution of Class C shares; and $49,000 (93.9%) and $41,500 (88.0%),
respectively, on the aggregate of (i) payments of commissions and account
servicing fees to its financial advisers $45,900 (88.0%) and $37,600
(88.7%), respectively, and (ii) an allocation on account of overhead and other
branch office distribution expenses $3,100 (5.9%) and $3,900 (9.3%),
respectively.

The Distributor also receives the proceeds of contingent deferred sales
charges paid by investors upon certain redemptions of Class C shares. For the
fiscal year ended October 31, 1998, Prudential Securities and PIMS received
contingent deferred sales charges of approximately $3,700 and $1,900,
respectively.

INTERNATIONAL STOCK SERIES

CLASS A PLAN. For the fiscal year ended October 31, 1998, Prudential
Securities received payments of $60,302 and PIMS received payments of $51,469
under the Class A. Plan. These amounts were expended on commission credits to
Prudential Securities and Pruco Securities Corporation, an affiliated
broker-dealer (Prusec), for payments of commissions and account servicing fees
to financial advisers and other persons who sell Class A shares. For the fiscal
year ended October 31, 1998, Prudential Securities and PIMS also received
approximately $126,476 and $76,524, respectively, in initial sales charges.

CLASS B PLAN. For the fiscal year ended October 31, 1998, Prudential
Securities received payments of $558,688 and PIMS received payments of $425,750
from the Series under the Class B Plan and spent approximately $623,100 and
$342,200, respectively, in distributing the Class B shares of the Series. It is
estimated that of the latter amounts approximately $19,100 (3.1%) and $0 (0%),
respectively, was spent on printing and mailing of prospectuses to other than
current shareholders; $77,100 (12.4%) and $62,500 (18.3%), respectively, on
compensation to Prusec for commissions to its representatives and other
expenses, including an allocation on account of overhead and other branch office
distribution-related expenses incurred by it for distribution of Class B shares;
and $526,900 (84.5%) and $279,700 (81.7%), respectively, on the aggregate of (i)
payments of commissions and account servicing fees to its financial advisers
$229,500 (36.8%) and $134,400 (39.2%), respectively, and (ii) an allocation on
account of overhead and other branch office distribution-related expenses
$297,400 (47.7%) and $145,300 (42.5%), respectively. The term "overhead and
other branch office distribution-related expenses" represents (a) the expenses
of operating Prusec's and Prudential Securities' branch offices in connection
with the sale of Series shares, including lease costs, the salaries and employee
benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies, (b) the costs of
client sales seminars, (c) expenses of mutual fund sales coordinators to promote
the sale of Series shares and (d) other incidental expenses relating to branch
promotion of Series sales.

B-26

<PAGE>

The Distributor also receives the proceeds of contingent deferred sales
charges paid by holders of Class B shares upon certain redemptions of Class B
shares. For the fiscal year ended October 31, 1998, Prudential Securities
received approximately $143,900 in contingent deferred sales charges and PIMS
received approximately $124,100 in contingent deferred sales charges.

CLASS C PLAN. For the fiscal year ended October 31, 1998, Prudential
Securities received payments of $81,282 and PIMS received payments of
$62,164 from the Series under the Class C Plan and spent approximately
$45,600 and $31,900, respectively, in distributing the Class C shares of
the Series. It is estimated that of the latter amounts approximately $4,742
(10.3%) and $0 (0%), respectively, was spent on printing and mailing
of prospectuses to other than current shareholders; $100 (0.2%) and
$300 (0.9%), respectively, on compensation to Prusec for commissions to
its representatives and other expenses, including an allocation on account of
overhead and other branch office distribution-related expenses incurred by it
for distribution of Class C shares; and $40,800 (58.6%) and $31,600 (99.1%),
respectively, on the aggregate of (i) payments of commissions and account
servicing fees to its financial advisers $26,700 (89.5%) and $22,300
(69.9%), respectively, and (ii) an allocation on account of overhead and other
branch office distribution expenses $14,100 (30.9%) and $9,300 (29.2%),
respectively.

The Distributor also receives the proceeds of contingent deferred sales
charges paid by investors upon certain redemptions of Class C shares. For the
fiscal year ended October 31, 1998, Prudential Securities received contingent
deferred sales charges of approximately $6,200 and PIMS received contingent
deferred sales charges of approximately $1,700.

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

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

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

Prudential Mutual Fund Services LLC (PMFS), Raritan Plaza One, Edison, New
Jersey 08837, serves as the transfer and dividend disbursing agent of the Fund.
PMFS is a wholly-owned subsidiary of PIFM. PMFS provides customary transfer
agency services to the Fund, including the handling of shareholder
communications, the processing of shareholder transactions, the maintenance of
shareholder account records, the payment of dividends and distributions and
related functions. For these services, PMFS receives an annual fee per
shareholder account, a new account set-up fee for each manually established
account and a monthly inactive zero balance account fee per shareholder account.
PMFS is also reimbursed for its out-of-pocket expenses, including but not
limited to postage, stationery, printing, allocable communication expenses and
other costs. For the fiscal year ended October 31, 1998, the Fund incurred fees
of approximately $2,013,000 for the services of PMFS.

PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New
York 10036, serves as the Fund's independent accountants and in that capacity
audits the Fund's annual financial statements.

BROKERAGE ALLOCATION AND OTHER PRACTICES

The Manager is responsible for decisions to buy and sell securities,
options and futures contracts for the Series, the selection of brokers, dealers
and futures commission merchants to effect the transactions and the negotiation
of brokerage commissions, if any. Purchases and sales of securities, options or
futures on a national securities exchange or board of trade are effected through
brokers or futures commission merchants who charge a negotiated commission for
their services; on foreign securities exchanges, commissions may be fixed.
Orders may be directed to any broker or futures commission merchant including,
to the extent and in the manner permitted by applicable law, Prudential
Securities and its affiliates. The term "Manager" as used in this section
includes the Subadvisers.

B-27

<PAGE>

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

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

In placing orders for portfolio securities of the Series, the Manager is
required to give primary consideration to obtaining the most favorable price and
efficient execution. This means that the Manager will seek to execute each
transaction at a price and commission, if any, which provide the most favorable
total cost or proceeds reasonably attainable in the circumstances. While the
Manager generally seeks reasonably competitive spreads or commissions, the
Series will not necessarily be paying the lowest spread or commission available.
Within the framework of this policy, the Manager will consider research and
investment services provided by brokers, dealers or futures commission merchants
who effect or are parties to portfolio transactions of the Series, the Manager
or its clients. Such research and investment services are those which brokerage
houses customarily provide to institutional investors and include statistical
and economic data and research reports on particular companies and industries.
Such services are used by the Manager in connection with all of its investment
activities, and some of such services obtained in connection with the execution
of transactions for the Series may be used in managing other investment
accounts. Conversely, brokers, dealers or futures commission merchants
furnishing such services may be selected for the execution of transactions of
such other accounts, whose aggregate assets are far larger than those of the
Series, and the services furnished by such brokers, dealers or futures
commission merchants may be used by the Manager in providing investment
management for the Series. Commission rates are established pursuant to
negotiations with the broker, dealer or futures commission merchant based on the
quality and quantity of execution services provided by the broker, dealer or
futures commission merchant in the light of generally prevailing rates. The
Manager is authorized to pay higher commissions on brokerage transactions for
the Series to brokers, dealers or futures commission merchants other than
Prudential Securities in order to secure research and investment services
described above, subject to review by the Fund's Board of Directors from time to
time as to the extent and continuation of this practice. The allocation of
orders among brokers, dealers and futures commission merchants and the
commission rates paid are reviewed periodically by the Fund's Board of
Directors.

Subject to the above considerations, Prudential Securities may act as a
broker or futures commission merchant for the Fund. In order for Prudential
Securities (or any affiliate) to effect any portfolio transactions for the
Series, the commissions, fees or other remuneration received by Prudential
Securities (or any affiliate) must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers or futures
commission merchants in connection with comparable transactions involving
similar securities or futures being purchased or sold on a securities exchange
or board of trade during a comparable period of time. This standard would allow
Prudential Securities (or any affiliate) to receive no more than the
remuneration which would be expected to be received by an unaffiliated broker in
a commensurate arm's-length transaction. Furthermore, the Board of Directors of
the Fund, including a majority of the noninterested directors, has adopted
procedures which are reasonably designed to provide that any commissions, fees
or other remuneration paid to Prudential Securities (or any affiliate) are
consistent with the foregoing standard. In accordance with Section 11(a) of the
Securities Exchange Act of 1934, Prudential Securities may not retain
compensation for effecting transactions on a national securities exchange for
the Series unless the Series has expressly authorized the retention of such
compensation. Prudential Securities must furnish to each Series at least
annually a statement setting forth the total amount of all compensation retained
by Prudential Securities from transactions effected for such Series during the
applicable period. Brokerage transactions with Prudential Securities (or any
affiliate) are also subject to such fiduciary standards as may be imposed upon
Prudential Securities (or such affiliate) by applicable law.

B-28

<PAGE>

The table presented below shows certain information regarding the
payment of commissions by Global Series, including the amount of such
commissions paid to Prudential Securities, for the three year period ended
October 31, 1998.

<TABLE>
<CAPTION>
FISCAL YEARS ENDED OCTOBER 31,
--------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Total brokerage commissions paid by the Fund ............................... $1,836,706 $2,048,227 $1,544,620
Total brokerage commissions paid to Prudential Securities .................. $ 18,700 $ 7,900 $ 40,100
Percentage of total brokerage commissions paid to Prudential Securities .... 1.0% .4% 2.6%
Percentage of total dollar amount of transactions involving
commissions that were effected through Prudential Securities ............. 1.4% .3% 2.0%
</TABLE>
Of the total brokerage commissions, none were paid to firms which provided
research, statistical or other services to PIFM during the fiscal year ended
October 31, 1998.

The table presented below shows certain information regarding the payment
of commissions by International Stock Series, including the amount of such
commissions paid to Prudential Securities, for the following periods:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
OCTOBER 31, OCTOBER 1, 1996
------------------------- THROUGH
1998 1997 OCTOBER 31, 1996
--------- -------- ----------------
<S> <C> <C> <C>

Total brokerage commissions paid by the Fund ............................... $342,294 $583,271 $45,000
Total brokerage commissions paid to Prudential Securities .................. $ 0 $ 0 $ 0
Percentage of total brokerage commissions paid to
Prudential Securities .................................................... 0% 0% 0%
Percentage of total dollar amount of transactions involving
commissions that were effected through Prudential
Securities ............................................................... 0% 0% 0%
</TABLE>
Of the total brokerage commissions, none were paid to firms which provided
research, statistical or other services to PIFM during the fiscal year ended
October 31, 1998.

CAPITAL STOCK AND ORGANIZATION

THE FUND IS AUTHORIZED TO ISSUE 1 BILLION SHARES OF COMMON STOCK, $.01 PER
SHARE WHICH ARE CURRENTLY DIVIDED INTO TWO PORTFOLIOS OR SERIES, GLOBAL SERIES
AND INTERNATIONAL STOCK SERIES, EACH OF WHICH CONSISTS OF 500 MILLION AUTHORIZED
SHARES. THE SHARES OF EACH SERIES ARE DIVIDED INTO FOUR CLASSES, DESIGNATED
CLASS A, CLASS B, CLASS C AND CLASS Z SHARES. Each class of shares represents an
interest in the same assets of each Series and is identical in all respects
except that (i) each class is subject to different sales charges and
distribution and/or service fees (except for Class Z shares, which are not
subject to any sales charges and distribution and/or service fees), which may
affect performance, (ii) each class has exclusive voting rights on any matter
submitted to shareholders that relates solely to its arrangement and has
separate voting rights on any matter submitted to shareholders in which the
interests of one class differ from the interests of any other class, (iii) each
class has a different exchange privilege, (iv) only Class B shares have a
conversion feature and (v) Class Z shares are offered exclusively for sale to a
limited group of investors. See "How the Fund is Managed--Distributor." In
accordance with the Fund's Articles of Incorporation, the Directors may
authorize the creation of additional series and classes within such series, with
such preferences, privileges, limitations and voting and dividend rights as the
Trustees may determine. Currently, the Fund is offering four classes, designated
Class A, Class B, Class C and Class Z shares.

The Articles of Incorporation further provide that no Director, officer,
employee or agent of the Fund is liable to the Fund or to a shareholder, nor is
any Director, officer, employee or agent liable to any third persons in
connection with the affairs of the Fund, except as such liability may arise from
his or her own bad faith, willful misfeasance, gross negligence or reckless
disregard of his or her duties. It also provides that all third parties shall
look solely to the Fund property for satisfaction of claims arising in
connection with the affairs of the Fund. With the exceptions stated, the
Articles of Incorporation permit the Directors to provide for the
indemnification of Directors, officers, employees or agents of the Fund against
all liability in connection with the affairs of the Fund.

The Fund shall continue without limitation of time subject to the
provisions in the Articles of Incorporation concerning termination by action of
the shareholders or by the Directors by written notice to the shareholders.

Pursuant to the Articles of Incorporation, the Directors may authorize the
creation of additional series of shares (the proceeds of which would be invested
in separate, independently managed portfolios with distinct investment
objectives and policies and share

B-29

<PAGE>

purchase, redemption and net asset value procedures) with such preferences,
privileges, limitations and voting and dividend rights as the Directors may
determine. All consideration received by the Fund for shares of any additional
series, and all assets in which such consideration is invested, would belong to
that series (subject only to the rights of creditors of that series) and would
be subject to the liabilities related thereto. Pursuant to the Investment
Company Act, shareholders of any additional series of shares would normally have
to approve the adoption of any advisory contract relating to such series and of
any changes in the investment policies related thereto. The Directors have no
intention of authorizing additional series at the present time.

The Directors have the power to alter the number and the terms of office of
the Directors and they may at any time lengthen their own terms or make their
terms of unlimited duration and appoint their own successors, provided that
always at least a majority of the Directors have been elected by the
shareholders of the Fund. The voting rights of shareholders are not cumulative,
so that holders of more than 50 percent of the shares voting can, if they
choose, elect all Directors being selected, while the holders of the remaining
shares would be unable to elect any Directors.

PURCHASE, REDEMPTION AND PRICING OF FUND SHARES

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

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

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

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

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

ISSUANCE OF FUND SHARES FOR SECURITIES

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

B-30

<PAGE>

SPECIMEN PRICE MAKE-UP

Under the current distribution arrangements between the Fund and the
Distributor, Class A shares are sold at a maximum sales charge of 5%, Class C*
shares are sold at a maximum sales charge of 1% and Class B* and Class Z shares
are sold at net asset value. Using each Series' net asset value at October 31,
1998, the maximum offering price of the Series' shares is as follows:

INTERNATIONAL
GLOBAL SERIES STOCK SERIES
------------- ------------
<S> <C> <C>
CLASS A
Net asset value and redemption price per Class A share ..... $16.16 $18.33
Maximum sales charge (5% of offering price) ................ .85 .96
------ ------
Offering price to public ................................... $17.01 $19.29
====== ======
CLASS B
Net asset value, offering price and redemption price
per Class B share* ......................................... $15.26 $18.18
====== ======
CLASS C
Net asset value and redemption price per Class C share* .... $15.25 $18.18
Maximum sales charge (1% of offering price) ................ .15 .18
------ ------
Offering price to public ................................... $15.40 $18.36
====== ======
CLASS Z
Net asset value, offering price and redemption price
per Class Z share .......................................... $16.23 $18.38
====== ======
</TABLE>
- ----------

* Class B and Class C shares are subject to a contingent deferred sales charge
on certain redemptions. See "How to Buy, Sell and Exchange Shares of the
Fund--How to Sell Your Shares--Contingent Deferred Sales Charges" in the
Prospectus.

SELECTING A PURCHASE ALTERNATIVE

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

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

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

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

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

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

Class A shares may be purchased at NAV, through the Distributor or the
Transfer Agent, by the following persons: (a) officers of the Prudential Mutual
Funds (including the Fund), (b) employees of Prudential Securities, PIFM and
their subsidiaries and members of the families of such persons who maintain an
"employee related" account at Prudential Securities or the Transfer Agent, (c)
employees of subadvisers of the Prudential Mutual Funds provided that purchases
at NAV are permitted by such person's employer, (d) Prudential, employees and
special agents of Prudential and its subsidiaries and all persons who have
retired directly from active service with Prudential or one of its subsidiaries,
(e) registered representatives and employees of Dealers who have entered into a
selected dealer agreement with the Distributor provided that purchases at NAV
are permitted by

B-31

<PAGE>

such person's employer, (f) investors who have a business relationship with a
financial adviser who joined Prudential Securities from another investment firm,
provided that (i) the purchase is made within 180 days of the commencement of
the financial adviser's employment at Prudential Securities, or within one year
in the case of Benefit Plans, (ii) the purchase is made with proceeds of a
redemption of shares of any open-end non-money market fund sponsored by the
financial adviser's previous employer (other than a fund which imposes a
distribution or service fee of .25 of 1% or less) and (iii) the financial
adviser served as the client's broker on the previous purchase, and (g)
investors in Individual Retirement Accounts, provided the purchase is made with
the proceeds of a tax-free rollover of assets from a Benefit Plan for which
Prudential Investments serves as the recordkeeper or administrator.

For an investor to obtain any reduction or waiver of the initial sales
charges, at the time of the sale either the Transfer Agent must be notified
directly by the investor or the Distributor must be notified by the Dealer
facilitating the transaction that the sale qualifies for the reduced or waived
sales charge. The reduction or waiver will be granted subject to confirmation of
your entitlement. No initial sales charges are imposed upon Class A shares
acquired upon the reinvestment of dividends and distributions.

COMBINED PURCHASE AND CUMULATIVE PURCHASE PRIVILEGE. If an investor or
eligible group of related investors purchases Class A shares of a Series
concurrently with Class A shares of other Prudential Mutual Funds, the purchases
may be combined to take advantage of the reduced sales charges applicable to
larger purchases. See the table of break points under "How to Buy, Sell and
Exchange Shares of the Fund--Reducing or Waiving Class A's Initial Sales Charge"
in the Prospectus.

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

(a) an individual;

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

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

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

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

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

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

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

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

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

B-32

<PAGE>

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

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

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

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

CLASS B AND CLASS C SHARES

The offering price of Class B shares is the NAV next determined following
receipt of an order by the Transfer Agent, your Dealer or the Distributor. Class
C shares are sold at a maximum sales charge of 1%. Redemptions of Class B and
Class C shares may be subject to a CDSC. See "Contingent Deferred Sales
Charges."

The Distributor will pay, from its own resources, sales commissions of up
to 4% of the purchase price of Class B shares to Dealers, financial advisers and
other persons who sell Class B shares at the time of sale. This facilitates the
ability of the Fund to sell the Class B shares without an initial sales charge
being deducted at the time of purchase. The Distributor anticipates that it will
recoup its advancement of sales commissions from the combination of the CDSC and
the distribution fee. See "How the Fund is Managed--Distributor." In connection
with the sale of Class C shares, the Distributor will pay, from its own
resources, dealers, financial advisers and other persons which distribute Class
C shares a sales commission of up to 1% of the purchase price at the time of the
sale.

CLASS Z SHARES

Class Z shares of each Series may be purchased by certain savings,
retirement and deferred compensation plans, qualified or non-qualified under the
Internal Revenue Code of 1986, as amended (the Internal Revenue Code), provided
that (i) the plan purchases shares of the Series pursuant to an investment
management agreement with The Prudential Insurance Company of America or its
affiliates, (ii) the Series is an available investment option under the
agreement and (iii) the plan will participate in the PruArray and SmartPath
Programs (benefit plan recordkeeping services) sponsored by Prudential Mutual
Fund Services LLC. These plans include pension, profit-sharing, stock-bonus or
other employee benefit plans under Section 401 of the Internal Revenue Code and
deferred compensation and annuity plans under Sections 457 or 403(b)(7) of the
Internal Revenue Code.

SALE OF SHARES

You can redeem your shares at any time for cash at the NAV next determined
after the redemption request is received in proper form (in accordance with
procedures established by the Transfer Agent in connection with investors'
accounts) by the

B-33

<PAGE>

Transfer Agent. See "How the Fund Values its Shares." In certain cases, however,
redemption proceeds will be reduced by the amount of any applicable CDSC, as
described below. See "Contingent Deferred Sales Charges" below. If you are
redeeming your shares through a Dealer, your Dealer must receive your sell order
before the Fund computes its NAV for that day (i.e., 4:15 P.M., New York time)
in order to receive that day's NAV. Your Dealer will be responsible for
furnishing all necessary documentation to the Distributor and may charge you for
its services in connection with redeeming shares of the Fund.

If you hold shares of a Series through Prudential Securities, you must
redeem your shares through Prudential Securities. Please contact your Prudential
Securities financial adviser.

If you hold shares in non-certificate form, a written request for
redemption signed by you exactly as the account is registered is required. If
you hold certificates, the certificates, signed in the name(s) shown on the face
of the certificates, must be received by the Transfer Agent, the Distributor or
your Dealer in order for the redemption request to be processed. If redemption
is requested by a corporation, partnership, trust or fiduciary, written evidence
of authority acceptable to the Transfer Agent must be submitted before such
request will be accepted. All correspondence and documents concerning
redemptions should be sent to the Fund in care of its Transfer Agent, Prudential
Mutual Fund Services LLC, Attention: Redemption Services, P.O. Box 15010, New
Brunswick, New Jersey 08906-5010, the Distributor or to your Dealer.

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

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

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

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

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

90-DAY REPURCHASE PRIVILEGE. If you redeem your shares and have not
previously exercised the repurchase privilege, you may reinvest any portion or
all of the proceeds of such redemption in shares of the Series at the NAV next
determined after the order is received, which must be within 90 days after the
date of redemption. Any CDSC paid in connection with such redemption

B-34

<PAGE>

will be credited (in shares) to your account. (If less than a full repurchase is
made, the credit will be on a pro rata basis.) You must notify the Transfer
Agent either directly or through The Distributor of your Dealer, at the time the
repurchase privilege is exercised to adjust your account for the CDSC you
previously paid. Thereafter, any redemptions will be subject to the CDSC
applicable at the time of the redemption. See "Contingent Deferred Sales
Charges" below. Exercise of the repurchase privilege will generally not affect
federal tax treatment of any gain realized upon redemption. However, if the
redemption was made within a 30 day period of the repurchase and if the
redemption resulted in a loss, some or all of the loss, depending on the amount
reinvested, may not be allowed for federal income tax purposes.

CONTINGENT DEFERRED SALES CHARGES

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

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

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

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

In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible rate.
It will be assumed that the redemption is made first of amounts representing
shares acquired pursuant to the reinvestment of dividends and distributions;
then of amounts representing the increase in NAV above the total amount of
payments for the purchase of Series shares made during the preceding six years
(five years for Class B shares purchased prior to January 22, 1990); then of
amounts representing the cost of shares held beyond the applicable CDSC period;
and finally, of amounts representing the cost of shares held for the longest
period of time within the applicable CDSC period.

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

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

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

B-35

<PAGE>

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

Systematic Withdrawal Plan. The CDSC will be waived (or reduced) on
certain redemptions from a Systematic Withdrawal Plan. On an annual basis, up to
12% of the total dollar amount subject to the CDSC may be redeemed without
charge. The Transfer Agent will calculate the total amount available for this
waiver annually on the anniversary date of your purchase, or for shares
purchased prior to March 1, 1997, on March 1 of the current year. The CDSC will
be waived (or reduced) on redemptions until this threshold 12% is reached.

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

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

CATEGORY OF WAIVER REQUIRED DOCUMENTATION

Death A copy of the shareholder's death
certificate or, in the case of a
trust, a copy of the grantor's death
certificate, plus a copy of the trust
agreement identifying the grantor.

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

Distribution from an IRA or 403(b) A copy of the distribution form from
Custodial Account the custodial firm indicating (i) the
date of birth of the shareholder
and (ii) that the shareholder is over
age 59-1/2 and is taking a normal
distribution--signed by the
shareholder.

Distribution from Retirement Plan A letter signed by the plan
administrator/trustee indicating the
reason for the distribution.

Excess Contributions A letter from the shareholder
(for an IRA) or the plan
administrator/trustee on company
letterhead indicating the amount of
the excess and whether or not taxes
have been paid.

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

QUANTITY DISCOUNT--CLASS B SHARES PURCHASED PRIOR TO AUGUST 1, 1994

The CDSC is reduced on redemptions of Class B shares of Global Series
purchased prior to August 1, 1994 if, immediately after a purchase of such
shares, the aggregate cost of all Class B shares of Global Series owned by you
in a single account exceeded $500,000. For example, if you purchased $100,000 of
Class B shares of Global Series in one year and an additional $450,000 of Class
B shares in the following year with the result that the aggregate cost of your
Class B shares of Global Series following the second purchase was $550,000, the
quantity discount would be available for the second purchase of $450,000 but

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<PAGE>

not for the first purchase of $100,000. The quantity discount will be imposed at
the following rates depending on whether the aggregate value exceeded $500,000
or $1 million:

CONTINGENT DEFERRED SALES CHARGE
AS A PERCENTAGE OF DOLLARS INVESTED
OR REDEMPTION PROCEEDS
YEAR SINCE PURCHASE ------------------------------------------
PAYMENT MADE $500,001 TO $1 MILLION OVER $1 MILLION
- ------------------- ---------------------- ---------------
First ............................. 3.0% 2.0%
Second ............................ 2.0% 1.0%
Third ............................. 1.0% 0%
Fourth and thereafter ............. 0% 0%

You must notify the Series' Transfer Agent either directly or through
Prudential Securities or Prusec, at the time of redemption, that you are
entitled to the reduced CDSC. The reduced CDSC will be granted subject to
confirmation of your holdings.

WAIVER OF CONTINGENT DEFERRED SALES CHARGES--CLASS C SHARES

PruArray or SmartPath Plan. The CDSC will be waived on redemptions from
qualified and non-qualified retirement and deferred compensation plans that
participate in the PruArray and SmartPath programs.

CONVERSION FEATURE--CLASS B SHARES

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

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

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

Since annual distribution-related fees are lower for Class A shares than
Class B shares, the per share NAV of the Class A shares may be higher than that
of the Class B shares at the time of conversion. Thus, although the aggregate
dollar value will be the same, you may receive fewer Class A shares than Class B
shares converted.

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

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

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<PAGE>

SHAREHOLDER INVESTMENT ACCOUNT

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

AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR DISTRIBUTIONS

For the convenience of investors, all dividends and distributions are
automatically reinvested in full and fractional shares of the Series at the net
asset value per share at the close of business on the record date. An investor
may direct the Transfer Agent in writing not less than five full business days
prior to the record date to have subsequent dividends and/or distributions sent
in cash rather than reinvested. In the case of recently purchased shares for
which registration instructions have not been received on the record date, cash
payment will be made directly to the dealer. Any shareholder who receives a cash
payment representing a dividend or distribution may reinvest such distribution
at NAV by returning the check or the proceeds to the Transfer Agent within 30
days after the payment date. Such investment will be made at the NAV per share
next determined after receipt of the check or proceeds by the Transfer Agent.
Such shareholder will receive credit for any CDSC paid in connection with the
amount of proceeds being reinvested.

EXCHANGE PRIVILEGE

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

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

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

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

Prudential California Municipal Fund
(California Money Market Series)

Prudential Government Securities Trust
(Money Market Series)
(U.S. Treasury Money Market Series)

Prudential Municipal Series Fund
(Connecticut Money Market Series)
(Massachusetts Money Market Series)
(New Jersey Money Market Series)
(New York Money Market Series)

Prudential Money Mart Assets (Class A Shares)

Prudential Tax-Free Money Fund

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

B-38
<PAGE>

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

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

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

In order to exchange shares by telephone, you must authorize telephone
exchanges on your initial application form or by written notice to the Transfer
Agent and hold shares in non-certificate form. Thereafter, you may call the Fund
at (800) 225-1852 to execute a telephone exchange of shares, on weekdays, except
holidays, between the hours of 8:00 A.M. and 6:00 P.M., New York time. For your
protection and to prevent fraudulent exchanges, your telephone call will be
recorded and you will be asked to provide your personal identification number. A
written confirmation of the exchange transaction will be sent to you. Neither
the Fund nor its agents will be liable for any loss, liability or cost which
results from acting upon instructions reasonably believed to be genuine under
the foregoing procedures. All exchanges will be made on the basis of the
relative NAV of the two funds next determined after the request is received in
good order. The Exchange Privilege is available only in states where the
exchange may legally be made.

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

If you hold certificates, the certificates, signed in the name(s) shown on
the face of the certificates, must be returned in order for the shares to be
exchanged. See "Sale of Shares" above.

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

In periods of severe market or economic conditions the telephone exchange
of shares may be difficult to implement and you should make exchanges by mail by
writing to Prudential Mutual Fund Services LLC, at the address noted above.

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

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

B-39

<PAGE>

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

Additional details about the exchange privilege and prospectuses for each
of the Prudential Mutual Funds are available from the Series' Transfer Agent,
the Distributor or your Dealer. The exchange privilege may be modified,
terminated or suspended on 60 days' notice, and any fund, including a Series, or
the Distributor, has the right to reject any exchange application relating to
such fund's shares.

DOLLAR COST AVERAGING

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

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

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

PERIOD OF
MONTHLY INVESTMENTS: $100,000 $150,000 $200,000 $250,000
- -------------------- -------- -------- -------- --------
25 Years ........................ $ 105 $ 158 $ 210 $ 263
20 Years ........................ 170 255 340 424
15 Years ........................ 289 433 578 722
10 Years ........................ 547 820 1,093 1,366
5 Years ......................... 1,361 2,041 2,721 3,402

See "Automatic Savings Accumulation Plan."

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

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

AUTOMATIC SAVINGS ACCUMULATION PLAN (ASAP)

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

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

SYSTEMATIC WITHDRAWAL PLAN

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

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

B-40

<PAGE>

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

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

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

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

TAX-DEFERRED RETIREMENT PLANS

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

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

TAX-DEFERRED RETIREMENT ACCOUNTS

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

TAX-DEFERRED COMPOUNDING(1)

CONTRIBUTIONS PERSONAL
MADE OVER: SAVINGS IRA
----------- -------- --------
10 years $ 26,165 $ 31,291
15 years 44,676 58,649
20 years 68,109 98,846
25 years 97,780 157,909
30 years 135,346 244,692

(1) The chart is for illustrative purposes only and does not represent the
performance of a Series or any specific investment. It shows taxable versus
tax-deferred compounding for the periods and on the terms indicated. Earnings in
a traditional IRA account will be subject to tax when withdrawn from the
account. Distributions from a Roth IRA which meet the conditions required under
the Internal Revenue Code will not be subject to tax upon withdrawal from the
account.

MUTUAL FUND PROGRAMS

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

The mutual funds in the program may be purchased individually or as a part
of the program. Since the allocation of portfolios included in the program may
not be appropriate for all investors, investors should consult their Prudential
Securities Financial

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<PAGE>

Adviser or Prudential/Pruco Securities Representative concerning the appropriate
blend of portfolios for them. If investors elect to purchase the individual
mutual funds that constitute the program in an investment ratio different from
that offered by the program, the standard minimum investment requirements for
the individual mutual funds will apply.

NET ASSET VALUE

Each Series' net asset value per share or NAV is determined by subtracting
its liabilities from the value of its assets and dividing the remainder by the
number of outstanding shares. NAV is calculated separately for each class. The
Directors have fixed the specific time of day for the computation of each
Series' net asset value to be as of 4:15 P.M., New York time.

Under the Investment Company Act, the Directors are responsible for
determining in good faith fair value of securities of each Series. In accordance
with procedures adopted by the Directors, the value of investments listed on a
securities exchange and NASDAQ National Market System securities (other than
options on stock and stock indices) are valued at the last sale price of such
exchange system on the day of valuation or, if there was no sale on such day,
the mean between the last bid and asked prices on such day, or at the bid price
on such day in the absence of an asked price. Corporate bonds (other than
convertible debt securities and U.S. Government securities that are actively
traded in the over-the-counter market, including listed securities for which the
primary market is believed by the Manager in consultation with the Subadviser to
be over-the-counter, are valued on the basis of valuations provided by an
independent pricing agent or principal market maker which uses information with
respect to transactions in bonds, quotations from bond dealers, agency ratings,
market transactions in comparable securities and various relationships between
securities in determining value. Convertible debt securities that are actively
traded in the over-the-counter market, including listed securities for which the
primary market is believed by the Manager in consultation with the Subadviser to
be over-the-counter, are valued at the mean between the last reported bid and
asked prices provided by principal market makers. Options on stock and stock
indices traded on an exchange are valued at the mean between the most recently
quoted bid and asked prices on the respective exchange and futures contracts and
options thereon are valued at their last sale prices as of the close of trading
on the applicable commodities exchange 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. Quotations of foreign securities in a foreign currency are
converted to U.S. dollar equivalents at the current rate obtained from a
recognized bank or dealer, and forward currency exchange contracts are valued at
the current cost of covering or offsetting such contracts. Should an
extraordinary event, which is likely to affect the value of the security, occur
after the close of an exchange on which a portfolio security is traded, such
security will be valued at fair value considering factors determined in good
faith by the investment adviser under procedures established by and under the
general supervision of the fund's Board of Directors.

Securities or other assets for which reliable market quotations are not
readily available or for which the pricing agent or principal market maker does
not provide a valuation or methodology or provides a valuation or methodology
that, in the judgment of the Manager or Subadviser (or Valuation Committee or
Board of Trustees) does not represent fair value, are valued by the Valuation
Committee or Board of Directors in consultation with the Manager or Subadviser
including its portfolio manager, traders, and its research and credit analysts,
on the basis of the following factors; cost of the security, transactions in
comparable securities, relationships among various securities and such other
factors as may be determined by the Manager, Subadviser, Board of Directors or
Valuation Committee to materially affect the value of the security. Short-term
debt securities are valued at cost, with interest accrued or discount amortized
to the date of maturity, if their original maturity was 60 days or less, unless
this is determined by the Directors not to represent fair value. Short-term
securities with remaining maturities of more than 60 days, for which market
quotations are readily available, are valued at their current market quotations
as supplied by an independent pricing agent or principal market maker. Each
Series will compute its NAV at 4:15 P.M., New York time, on each day the New
York Stock Exchange is open for trading except on days on which no orders to
purchase, sell or redeem Series shares have been received or days on which
changes in the value of the Series' portfolio securities do not affect NAV. In
the event the New York Stock Exchange closes early on any business day, the NAV
of the Series' shares shall be determined at the time between such closing and
4:15 P.M., New York Time. The New York Stock Exchange is closed on the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.

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

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<PAGE>

TAXES, DIVIDENDS AND DISTRIBUTIONS

Each Series has elected to qualify and intends to remain qualified as a
regulated investment company under the Internal Revenue Code for each taxable
year. Accordingly, a Series must, among other things, (a) derive at least 90% of
its gross income from dividends, interest, proceeds from loans of securities and
gains from the sale or other disposition of securities or foreign currencies, or
other income (including, but not limited to, gains from options, futures or
forward contracts) derived with respect to its business of investing in such
securities or currencies; and (b) diversify its holdings so that, at the end of
each fiscal quarter, (i) at least 50% of the value of its assets is represented
by cash, U.S. Government securities, securities of other regulated investment
companies and other securities, with such other securities limited in respect of
any one issuer to an amount not greater than 5% of such Series' assets, and not
greater than 10% of the outstanding voting securities of such issuer, and (ii)
not more than 25% of the value of its assets is invested in the securities of
any one issuer (other than U.S. Government securities or the securities of other
regulated investment companies). These requirements may limit a Series' ability
to invest in other types of assets.

As a regulated investment company, a Series will not be subject to federal
income tax on its net investment income and capital gains, if any, that it
distributes to its shareholders, provided (among other things) that at least 90%
of the Series' net investment income (including net short-term capital gains)
other than long-term capital gains earned in the taxable year is distributed.
Each Series intends to distribute annually to its shareholders all of its
taxable net investment income, which includes dividends, interest and any net
short-term capital gains in excess of net long-term capital losses. The Board of
Directors of the Fund will determine once a year whether to distribute any net
long-term capital gains in excess of any net short-term capital losses. In
determining the amount of capital gains to be distributed, any capital loss
carryovers from prior years will be offset against capital gains. A 4%
nondeductible excise tax will be imposed on a Series to the extent such Series
does not meet certain distribution requirements by the end of each calendar
year.

Gains or losses attributable to foreign currency contracts, or to
fluctuations in exchange rates between the time a Series accrues income,
expenses or other liabilities denominated in a foreign currency and the time
such Series actually collects such income or pays such liabilities, are treated
as ordinary income or ordinary loss for federal income tax purposes. Similarly,
gains or losses on the disposition of debt securities held by a Series, if any,
denominated in a foreign currency, to the extent attributable to fluctuations in
exchange rates between the acquisition and disposition dates are also treated as
ordinary income or loss.

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

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

Forward currency contracts, options and futures contracts entered into by a
Series may create "straddles" for federal income tax purposes, which may result
in the deferral of losses on positions held by the Series to the extent of any
unrecognized gain on offsetting positions held by the Series and a limitation on
the deductibility of interest or other charges incurred to purchase or carry
such positions.

A "passive foreign investment company" ("PFIC") is a foreign corporation
that, in general, meets either of the following tests: (a) at least 75% of its
gross income is passive or (b) an average of at least 50% of its assets produce,
or are held for the production of, passive income. If a Series acquires and
holds stock in a PFIC beyond the end of the year of its acquisition, such Series
will be subject to federal income tax on a portion of any "excess distribution"
received on the stock or of any gain from

B-43

<PAGE>

disposition of the stock (collectively "PFIC income"), plus interest thereon,
even if such Series distributes the PFIC income as a taxable dividend to its
shareholders. If a Series elects to treat any PFIC in which it invests as a
"qualified electing fund," then in lieu of the foregoing tax and interest
obligation, such Series will be required to include in income each year its pro
rata share of the qualified electing fund's annual ordinary earnings and net
capital gain, even if they are not distributed to such Series; those amounts
would be subject to the distribution requirements applicable to such Series
described above. Because the election to treat a PFIC as a qualifying electing
Fund cannot be made without the provision of certain information by the PFIC, a
Series may not be able to make such an election. For taxable years of each
Series beginning after December 31, 1997, if a Series does not or cannot elect
to treat such a PFIC as a "qualified electing fund," such Series can make a
"mark-to-market" election, i.e., treat the shares of the PFIC as sold on the
last day of such Series' taxable year, and thus avoid the special tax and
interest charge. The gains a Series recognizes from the mark-to-market election
would be included as ordinary income in the net investment income such Series
must distribute to shareholders, notwithstanding that such Series would receive
no cash in respect of such gains. Any loss from the mark-to-market election may
be recognized to the extent of previously reported mark-to-market gains.

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

Any dividends or capital gains distributions received by a shareholder will
have the effect of reducing the net asset value of the Series' shares by the
exact amount of the dividend or capital gains distribution. If the net asset
value of the shares should be reduced below a shareholder's cost as a result of
a dividend or capital gains distribution, such dividend or capital gains
distribution, although constituting a return of capital, will be taxable as
described above. Prior to purchasing shares of the Series, therefore, the
investor should carefully consider the impact of dividends or capital gains
distributions which are expected to be or have been announced.

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

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

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

Distributions of net investment income made to a nonresident alien
individual, a nonresident alien fiduciary of a foreign estate or trust, foreign
corporation or foreign partnership (foreign shareholder) will be subject to U.S.
withholding tax at a rate of 30% (or lower treaty rate), unless the dividends
are effectively connected with the U.S. trade or business of the shareholder and
the shareholder complies with certain filing requirements. Gains realized upon
the sale or redemption of shares of the Series by a foreign shareholder and
distributions of net long-term capital gains to a foreign shareholder will
generally not be subject to U.S. income tax unless the gain is effectively
connected with a trade or business carried on by the shareholder within the
United States or, in the case of a shareholder who is a nonresident alien
individual, the shareholder is present in the United States for more than 182
days during the taxable year and certain other conditions are met. In the case
of a foreign shareholder who is a nonresident alien individual, the Series may
be required to withhold U.S. federal income tax at the rate of 31% of
distributions of net long-term capital gains unless IRS Form W-8 is provided. If
distributions are effectively connected with a U.S. trade or business carried on
by a foreign shareholder, distributions of net investment income and net
long-term capital gains will be subject to U.S. income tax at the graduated
rates applicable to U.S. citizens or domestic corporations. Transfers by gift of
shares of the Series by a foreign shareholder who is a nonresident alien
individual will not be subject to U.S. federal gift tax, but the value of the
shares of the Series held by such a shareholder at his death will be includable
in his gross estate for U.S. federal estate tax purposes. The tax consequences
to a foreign shareholder entitled to claim the benefits of an applicable tax
treaty may be different from those described herein. Foreign shareholders are
advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in the Series.

Income received by the Series from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. It is

B-44

<PAGE>

impossible to determine the effective rate of foreign tax in advance since the
amount of the Series' assets to be invested in various countries is not known.

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

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

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

Distributions may be subject to additional state and local taxes.

PERFORMANCE INFORMATION

AVERAGE ANNUAL TOTAL RETURN. A Series may from time to time advertise its
average annual total return. Average annual total return is determined
separately for Class A, Class B, Class C and Class Z shares.

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

P(1+T)(superior n) = ERV

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

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

GLOBAL SERIES: The average annual total return for Class A shares for the
one year, five year and and since inception (January 22, 1990) periods ended
October 31, 1998 was 0.42%, 8.68% and 8.01%, respectively. The average annual
total return with respect to the Class B shares of Global Series for the one,
five and ten year periods ended on October 31, 1998 was 0.05%, 8.90% and 7.78%,
respectively. The average annual total return for Class C shares for the one
year and since-inception (August 1, 1994) periods ended October 31, 1998 was
3.90% and 8.61%, respectively. The average annual total return for Class Z
shares

B-45

<PAGE>

of Global Series for the one year and since-inception (March 1, 1996)
periods ended October 31, 1998 was 5.97% and 10.04%, respectively.

INTERNATIONAL STOCK SERIES: Class A, Class B and Class C shares were first
offered in September 1996. The average annual total return for Class A, Class B
and Class C shares for the one year period ended October 31, 1998 was (1.34)%,
(1.95)% and 2.05%, respectively. The average annual total return for Class A,
Class B and Class C shares for the since-inception (September 22, 1996) period
ended October 31, 1998 was 5.39%, 5.84% and 7.17%, respectively. The average
annual total return for Class Z shares for the one year, five year and
since-inception (November 5, 1992) periods ended October 31, 1998 was 4.08%,
9.81% and 12.93%, respectively.

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

a-b
YIELD = 2 [(----- + 1)(superior 6)-1]
cd

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

Yield fluctuates and an annualized yield quotation is not a representation
by the Series as to what an investment in the Series will actually yield for any
given period. Yields for a Series will vary based on a number of factors
including changes in net asset value, market conditions, the level of interest
rates and the level of such Series income and expenses.

AGGREGATE TOTAL RETURN. A Series may also advertise its aggregate total
return. Aggregate total return is determined separately for Class A, Class B,
Class C and Class Z shares.

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

ERV - P
-------
P

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

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

GLOBAL SERIES: The aggregate total return with respect to the Class A
shares of Global Series for the one year, five year and since-inception (January
22, 1990) periods ended October 31, 1998 was 5.71%, 59.60% and 106.98%,
respectively. The aggregate total return with respect to the Class B shares of
Global Series for the one, five and ten year periods ended on October 31, 1998
was 4.95%, 54.17% and 11.57%, respectively. The aggregate total return for Class
C shares for the one year and since-inception (August 1, 1994) periods ended
October 31, 1998 was 4.90% and 42.03%, respectively. The aggregate total return
for Class Z shares of Global Series for the one year and since-inception (March
1, 1996) periods ended October 31, 1998 was 5.97% and 29.07%, respectively.

INTERNATIONAL STOCK SERIES: The aggregate total return with respect to the
Class A shares of International Stock Series for the one year and
since-inception (September 23, 1996) periods ended October 31, 1998 was 3.85%
and 17.55%, respectively. The aggregate total return with respect to the Class
B shares of the International Stock Series for the one year and since-inception
(September 23, 1996) periods ended on October 31, 1998 was 3.05% and 15.67%,
respectively. The aggregate total return with respect to the Class C shares of
the Series for the one year and since-inception (September 23, 1996) periods
ended on October 31, 1998 was 3.05% and 15.67%, respectively. The aggregate
total return for Class Z shares for the one year, five year and since-inception
(November 5, 1992) periods ended October 31, 1998 was 4.08%, 59.66% and 106.78%,
respectively.

B-46

<PAGE>

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

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

PERFORMANCE
COMPARISON OF DIFFERENT
TYPES OF INVESTMENTS
OVER THE LONG TERM
(12/31/25 - 12/31/98)

Common Stocks.................. 11.2%
Long-Term Govt. Bonds.......... 5.3%
Inflation...................... 3.1%

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

- ----------

(1) Source: Ibbotson Associates. Used with permission. All rights reserved.
Common stock returns are based on the Standard and Poor's 500 Stock Index, a
market-weighted, unmanaged index of 500 common stocks in a variety of industry
sectors. It is a commonly used indicator of broad stock price movements. This
chart is for illustrative purposes only and is not intended to represent the
performance of any particular investment or fund. Investors cannot invest
directly in an index. Past performance is not a guarantee of future results.

B-47

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Portfolio of Investments as of October 31, 1998 GLOBAL SERIES
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--90.2%
COMMON STOCKS--89.1%
- ------------------------------------------------------------
Australia--1.9%
328,300 AMP Ltd.(a) $ 3,902,209
307,600 Brambles Industries, Ltd. 6,740,656
1,565,400 FXF Trust(a) 185,743
-------------
10,828,608
- ------------------------------------------------------------
Federal Republic of Germany--2.4%
82,916 Mannesmann AG 8,170,793
13,128 SAP AG 5,515,966
-------------
13,686,759
- ------------------------------------------------------------
Finland--2.6%
163,900 Nokia Oyj, Ser. A 14,942,961
- ------------------------------------------------------------
France--9.9%
79,200 Elf Aquitaine SA 9,179,092
64,313 Etablissements Economiques du
Casino Guichard-Perrachon SA 6,410,434
40,300 Legrand SA 10,285,652
28,800 Pinault-Printemps-Redoute SA 4,827,686
45,500 Suez Lyonnaise des Eaux 8,160,148
239,000 Thomson CSF 8,314,167
107,600 Valeo SA 9,328,695
-------------
56,505,874
- ------------------------------------------------------------
Ireland--2.1%
668,800 Bank of Ireland 12,231,306
- ------------------------------------------------------------
Italy--4.7%
1,134,000 Telecom Italia SpA 8,208,858
3,447,700 Unicredito Italiano SpA 18,533,757
-------------
26,742,615
Japan--4.4%
123,000 Honda Motor Co., Ltd. $ 3,702,271
868 Nippon Telegraph & Telephone Corp. 6,807,843
900,000 Olympus Optical Co., Ltd 9,287,926
105,000 Takefuji Corp. 5,607,585
-------------
25,405,625
- ------------------------------------------------------------
Netherlands--2.8%
175,000 ING Groep N.V. 8,477,574
196,700 Koninklijke Numico N.V. 7,747,414
-------------
16,224,988
- ------------------------------------------------------------
Spain--4.1%
806,399 Banco Central Hispanoamericano SA 8,917,932
326,735 Telefonica de Espana SA 14,778,711
-------------
23,696,643
- ------------------------------------------------------------
Sweden--4.4%
140,000 Drott AB, Ser. B(a) 1,078,029
133,300 Hennes & Mauritz AB, Ser. B 9,409,009
1,648,000 Nordbanken Holding AB 9,898,152
140,000 Skanska AB, Ser. B 4,617,556
-------------
25,002,746
- ------------------------------------------------------------
Switzerland--2.5%
5,800 Novartis AG 10,472,878
13,592 Union Bank of Switzerland AG 3,736,719
-------------
14,209,597
- ------------------------------------------------------------
United Kingdom--11.9%
711,034 Bank of Scotland(a) 7,724,853
163,307 Coca Cola Beverages PLC(a) 344,453
591,200 GKN PLC 7,184,990
248,300 Glaxo Wellcome PLC 7,714,536
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-48

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Portfolio of Investments as of October 31, 1998 GLOBAL SERIES
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
United Kingdom (cont'd.)
767,300 Hays PLC $ 11,303,242
541,000 Johnson Matthey PLC 3,033,872
710,050 Royal & Sun Alliance Insurance
Group PLC 6,501,767
1,639,200 Siebe PLC 6,722,846
1,301,490 Vodafone Group PLC 17,429,541
-------------
67,960,100
- ------------------------------------------------------------
United States--35.4%
372,200 Belo (A.H.) Corp. 6,769,388
114,050 Cisco Systems, Inc.(a) 7,185,150
148,200 Citigroup, Inc. 6,974,663
142,200 Computer Sciences Corp.(a) 7,501,050
47,000 Consolidated Stores Corp.(a) 772,563
239,700 Disney (Walt) Co. 6,456,919
208,800 Electronic Arts, Inc.(a) 8,586,900
357,500 Healthsouth Corp.(a) 4,334,688
181,900 MCI WorldCom, Inc.(a) 10,049,975
133,100 Microsoft Corp.(a) 14,091,962
63,900 Mobil Corp. 4,836,431
139,800 Office Depot, Inc.(a) 3,495,000
31,400 Pfizer, Inc. 3,369,613
271,800 PMC-Sierra, Inc.(a) 12,197,025
331,800 Safeway Inc.(a) 15,864,187
136,600 SCI Systems Inc.(a) 5,395,700
93,400 Solectron Corp.(a) 5,347,150
325,000 Tenet Healthcare Corp.(a) 9,079,687
153,000 Texas Instruments, Inc. 9,782,437
381,100 The Limited, Inc. 9,765,687
151,800 Time Warner, Inc. 14,088,937
185,400 Transocean Offshore, Inc. 6,848,213
283,700 USA Networks, Inc.(a) $ 6,383,250
47,800 Warner-Lambert Co. 3,746,325
213,200 Waste Management, Inc. 9,620,650
26,700 Wells Fargo & Co. 9,879,000
-------------
202,422,550
Total common stocks
(cost US$368,708,418) 509,860,372
-------------
PREFERRED STOCKS--1.1%
- ------------------------------------------------------------
Federal Republic of Germany--1.1%
8,700 Wella AG
(cost US$6,471,737) $ 6,258,993
-------------
Total long-term investments
(cost US$375,180,155) 516,119,365
-------------
Principal
Amount
(000)
SHORT-TERM INVESTMENT--4.3%
- ------------------------------------------------------------
Repurchase Agreements
Joint Repurchase Agreement Account,
$24,856 5.40%, 11/02/98
(cost US$24,856,000; Note 5) 24,856,000
- ------------------------------------------------------------
Total Investments--94.5%
(cost US$400,036,155; Note 4) 540,975,365
Other assets in excess of
liabilities--5.5% 31,326,962
-------------
Net Assets--100% $ 572,302,327
-------------
-------------
</TABLE>
- ---------------
(a) Non-income producing security.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-49

<PAGE>
PRUDENTIAL WORLD FUND, INC.
GLOBAL SERIES
Portfolio of Investments as of October 31, 1998
- ------------------------------------------------------------
The industry classification of portfolio holdings and other assets in excess of
liabilities shown as a percentage of net assets as of October 31, 1998 was as
follows:
<TABLE>
<S> <C>
Banking............................................... 11.9%
Telecommunications.................................... 10.0
Retail................................................ 8.8
Computer Software & Services.......................... 7.5
Electronic Components................................. 5.7
Electrical & Electronics.............................. 4.9
Finance............................................... 4.2
Broadcasting & Publishing............................. 3.7
Automobiles & Auto Parts.............................. 3.6
Business and Public Services.......................... 3.2
Telecommunications Equipment.......................... 2.6
Machinery & Engineering............................... 2.6
Drugs & Medical Supplies.............................. 2.6
Health Services....................................... 2.3
Building & Construction............................... 2.2
Medical Products...................................... 1.8
Insurance............................................. 1.8
Waste Management...................................... 1.7
Oil & Gas Exploration/Production...................... 1.6
Food & Household Products............................. 1.4
Oil Services.......................................... 1.2
Media & Communications................................ 1.1
Leisure & Tourism..................................... 1.1
Cosmetics............................................. 1.1
Energy Sources........................................ 0.8
Precious Metals....................................... 0.5
Real Estate........................................... 0.2
Food & Beverage....................................... 0.1
Repurchase Agreement.................................. 4.3
-----
94.5%
Other assets in excess of liabilities................. 5.5
-----
100.0%
-----
-----
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-50

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Statement of Assets and Liabilities GLOBAL SERIES
- --------------------------------------------------------------------------------
<TABLE>
Assets October 31, 1998
<S> <C>
Investments, at value (cost US$400,036,155)............................................................... $540,975,365
Foreign currency, at value (cost US$42,386,438)........................................................... 43,682,014
Cash...................................................................................................... 195,820
Dividends and interest receivable......................................................................... 1,114,440
Receivable for investments sold........................................................................... 792,174
Receivable for Series shares sold......................................................................... 433,279
Deferred expenses and other assets........................................................................ 13,609
----------------
Total assets........................................................................................... 587,206,701
----------------
Liabilities
Payable for investments purchased......................................................................... 6,319,322
Forward currency contracts - amount payable to counterparties............................................. 3,885,506
Payable for Series shares reacquired...................................................................... 3,529,797
Accrued expenses and other liabilities.................................................................... 516,920
Management fee payable.................................................................................... 337,902
Distribution fee payable.................................................................................. 254,843
Withholding taxes payable................................................................................. 60,084
----------------
Total liabilities...................................................................................... 14,904,374
----------------
Net Assets................................................................................................ $572,302,327
----------------
----------------
Net assets were comprised of:
Common stock, at par................................................................................... $ 364,439
Paid-in capital in excess of par....................................................................... 407,982,867
----------------
408,347,306
Accumulated net investment loss........................................................................ (9,033,099)
Accumulated net realized gain on investments........................................................... 34,590,440
Net unrealized appreciation on investments and foreign currencies...................................... 138,397,680
----------------
Net assets, October 31, 1998.............................................................................. $572,302,327
----------------
----------------
Class A:
Net asset value and redemption price per share
($251,017,652 (divided by) 15,533,137 shares of common stock issued and outstanding)................ $16.16
Maximum sales charge (5% of offering price)............................................................ .85
----------------
Maximum offering price to public....................................................................... $17.01
----------------
----------------
Class B:
Net asset value, offering price and redemption price per share
($274,248,295 (divided by) 17,969,960 shares of common stock issued and outstanding)................ $15.26
----------------
----------------
Class C:
Net asset value, offering price and redemption price per share
($10,698,337 (divided by) 701,696 shares of common stock issued and outstanding).................... $15.25
----------------
----------------
Class Z:
Net asset value, offering price and redemption price per share
($36,338,043 (divided by) 2,239,062 shares of common stock issued and outstanding).................. $16.23
----------------
----------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-51

<PAGE>
PRUDENTIAL WORLD FUND, INC.
GLOBAL SERIES
Statement of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
October 31,
Net Investment Income 1998
<S> <C>
Income
Dividends (net of foreign withholding taxes
of $755,271)............................. $ 6,956,214
Interest.................................... 841,537
-----------
Total income............................. 7,797,751
-----------
Expenses
Management fee.............................. 4,690,703
Distribution fee--Class A................... 651,935
Distribution fee--Class B................... 2,897,822
Distribution fee--Class C................... 102,858
Transfer agent's fees and expenses.......... 1,600,000
Custodian's fees and expenses............... 500,000
Reports to shareholders..................... 130,000
Registration fees........................... 62,000
Audit fee................................... 35,000
Directors' fees............................. 30,000
Legal fees and expenses..................... 20,000
Insurance expense........................... 9,000
Miscellaneous............................... 13,255
-----------
Total operating expenses................. 10,742,573
Loan interest expense....................... 2,624
-----------
Total expenses........................... 10,745,197
-----------
Net investment loss............................ (2,947,446)
-----------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions
Net realized gain (loss) on:
Investment transactions..................... 33,532,588
Foreign currency transactions............... 1,073,851
-----------
34,606,439
-----------
Net change in unrealized appreciation
(depreciation) on:
Investments................................. 5,310,151
Foreign currencies.......................... (2,492,026)
-----------
2,818,125
-----------
Net gain on investments and foreign
currencies.................................. 37,424,564
-----------
Net Increase in Net Assets
Resulting from Operations...................... $34,477,118
-----------
-----------
</TABLE>

PRUDENTIAL WORLD FUND, INC.
GLOBAL SERIES
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended October 31,
in Net Assets 1998 1997
<S> <C> <C>
Operations
Net investment loss.......... $ (2,947,446) $ (2,282,791)
Net realized gain on
investment and foreign
currency transactions..... 34,606,439 65,592,973
Net change in unrealized
appreciation on
investments and foreign
currencies................ 2,818,125 17,698,660
-------------- --------------
Net increase in net assets
resulting from
operations................ 34,477,118 81,008,842
-------------- --------------
Dividends and distributions
(Note 1)
Distributions in excess of
net investment income
Class A................... (1,600,133) (672,140)
Class B................... (202,372) (955,146)
Class C................... (786) (22,662)
Class Z................... (393,824) (115,267)
-------------- --------------
(2,197,115) (1,765,215)
-------------- --------------
Distributions from net
realized capital gains
Class A................... (26,120,391) (17,584,834)
Class B................... (35,471,585) (24,988,935)
Class C................... (1,046,952) (592,898)
Class Z................... (4,423,383) (3,015,652)
-------------- --------------
(67,062,311) (46,182,319)
-------------- --------------
Series share transactions (net
of share conversions) (Note
7)
Proceeds from shares sold.... 423,854,618 1,364,574,496
Net asset value of shares
issued in reinvestment of
distributions............. 66,072,062 45,634,720
Cost of shares reacquired.... (530,585,329) (1,405,314,341)
-------------- --------------
Net increase (decrease) in net
assets from Series share
transactions................. (40,658,649) 4,894,875
-------------- --------------
Total increase (decrease)....... (75,440,957) 37,956,183
Net Assets
Beginning of year............... 647,743,284 609,787,101
-------------- --------------
End of year(a).................. $ 572,302,327 $ 647,743,284
-------------- --------------
-------------- --------------
- ---------------
(a) Includes undistributed net
investment income (loss)
of.......................... $ (9,033,099) $ 2,071,347
-------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-52

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Notes to Financial Statements GLOBAL SERIES
- --------------------------------------------------------------------------------
Prudential World Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as an open-end, diversified management investment company
and currently consists of two series: the Global Series and the International
Stock Series. The Global Series (the "Series") commenced investment operations
in May, 1984. The investment objective of the Series is to seek long-term
capital growth, with income as a secondary objective, by investing in a
diversified portfolio of securities consisting of marketable securities of U.S.
and non-U.S. issuers.
- ------------------------------------------------------------
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 traded on an exchange (whether domestic or
foreign) are valued at the last reported sales price on the primary exchange on
which they are traded. Securities traded in the over-the-counter market
(including securities listed on exchanges for which a last sales price is not
available) are valued at the average of the last reported bid and asked prices.
Any security for which a reliable market quotation is unavailable is valued at
fair value considering factors determined in good faith by the investment
adviser under procedures established by and under the general supervision of the
Fund's Board of Directors.

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

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

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

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

Forward Currency Contracts: A forward currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. The Fund enters into forward currency contracts in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign portfolio
holdings or on specific receivables and payables denominated in a foreign
currency. The contracts are valued daily at current exchange rates and any
unrealized gain or loss is included in net unrealized appreciation or
depreciation on investments. Gain or loss is realized on the settlement date of
the contract equal to the difference between the settlement value of the
original and renegotiated forward contracts. This gain or loss, if any, is
included in net realized gain (loss) on foreign currency transactions. Risks may
arise upon entering into these contracts
- --------------------------------------------------------------------------------
B-53

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Notes to Financial Statements GLOBAL SERIES
- --------------------------------------------------------------------------------
from the potential inability of the counterparties to meet the terms of their
contracts.

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, and interest income is recorded on
an accrual basis. Expenses are recorded on the accrual basis which may require
the use of certain estimates by management.

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.

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

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

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

Reclassification of Capital Accounts: The Fund accounts and reports for
distributions to shareholders in accordance with the American Institute of
Certified Public Accountants Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. The effect for the
Series of applying this statement was to increase accumulated net investment
loss and increase accumulated net realized gain on investment by $5,959,885 for
realized foreign currency losses and mark to market of passive foreign
investment companies during the year ended October 31, 1998. Net investment
income, net realized gains and net assets were not affected by this change.

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 subadviser's performance of such
services. PIFM has entered into a subadvisory agreement with The Prudential
Investment Corporation ('PIC'); PIC furnishes investment advisory services in
connection with the management of the Series. 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 .75 of 1% of the average daily net assets of the Series.

The Fund had a distribution agreement with Prudential Securities Incorporated
('PSI'), which acted as the distributor of the Class A, B, C and Z shares of the
Fund through May 31, 1998. Prudential Investment Management Services LLC
('PIMS') became the distributor of the Fund effective June 1, 1998 and is
serving the Fund under the same terms and conditions as under the arrangement
with PSI. The Fund compensated PSI and 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
them. The distribution fees are accrued daily and payable monthly. No
distribution or service fees are paid to PIMS as distributor for the Class Z
shares of the Fund.

Pursuant to the Class A Plan, the Series compensates PIMS with respect to Class
A shares, for distribution-related activities at an annual rate of up to .30 of
1% of the average daily net assets of the Class A shares. Pursuant to the Class
B and C Plans, the Series compensates PSI for distribution-related activities at
the annual rate of .75 of 1% of the average daily net assets of Class B shares
up to the level of average daily net assets as of February 26, 1986, plus 1% of
the average daily net assets in excess of such level of the Class B shares and
1% of average daily net assets of Class C shares. Payments made pursuant to the
Plans were .25 of 1%, .93 of 1% and 1% of the average daily net assets of Class
A, B and C shares, respectively, for the year ended October 31, 1998.

PSI and PIMS have advised the Series that they received approximately $237,700
in front-end sales charges resulting from sales of Class A shares during the
year ended October 31, 1998. From these fees, PSI and PIMS paid such sales
charges to affiliated broker-dealers, which in turn paid commissions to
salespersons and incurred other distribution costs.
- --------------------------------------------------------------------------------
B-54

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Notes to Financial Statements GLOBAL SERIES
- --------------------------------------------------------------------------------
PSI and PIMS have advised the Series that during the year ended October 31,
1998, they received approximately $675,300 and $5,600 in contingent deferred
sales charges imposed upon certain redemptions by Class B and C shareholders,
respectively.

PSI, PIFM, PIC amd PIMS are indirect, wholly owned subsidiaries of The
Prudential Insurance Company of America.
- ------------------------------------------------------------
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 and during the year ended October 31, 1998,
the Series incurred fees of approximately $1,278,800 for the services of PMFS.
As of October 31, 1998, approximately $102,700 of such fees were due to PMFS.
Transfer agent fees and expenses in the Statement of Operations include certain
out-of-pocket expenses paid to nonaffiliates.

For the year ended October 31, 1998, PSI and/or its foreign affiliates earned
approximately $18,700 in brokerage commissions from portfolio transactions
executed on behalf of the Series.
- ------------------------------------------------------------
Note 4. Portfolio Securities

Purchases and sales of investment securities, other than short-term investments,
for the year ended October 31, 1998 were $357,898,413 and $495,054,333,
respectively.

The United States federal income tax basis of the Series' investments at October
31, 1998 was $414,281,115 and, accordingly, net unrealized appreciation for
federal income tax purposes was $126,694,250 (gross unrealized
appreciation--$143,619,397; gross unrealized depreciation--$16,925,147).

At October 31, 1998, the Fund had outstanding forward currency contracts, to
sell foreign currencies, as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current
Sale Contracts Receivable Value Depreciation
- ---------------------- --------------- ---------- -------------
<S> <C> <C> <C>
Japanese Yen,
expiring 12/23/98.... $ 4,000,000 $4,539,308 $ (539,308)
Japanese Yen,
expiring 12/24/98.... 4,000,000 4,539,022 (539,022)
Japanese Yen,
expiring 2/16/99..... 2,650,000 3,279,201 (629,201)
<CAPTION>
Japanese Yen,
expiring 2/17/99..... $ 2,400,000 $2,963,949 $ (563,949)
Japanese Yen,
expiring 3/17/99..... 3,922,000 4,451,090 (529,090)
Japanese Yen,
expiring 3/17/99..... 1,178,000 1,337,536 (159,536)
Japanese Yen,
expiring 4/1/99...... 6,106,870 7,032,270 (925,400)
-------------
$(3,885,506)
-------------
-------------
</TABLE>
- ------------------------------------------------------------
Note 5. Joint Repurchase Agreement Account

The Fund, along with other affiliated registered investment companies, transfers
uninvested cash balances into a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements collateralized
by U.S. Treasury or federal agency obligations. As of October 31, 1998, the
Series had a 2.6% undivided interest in the repurchase agreements in the joint
account. The undivided interest for the Series represents $24,856,000 in
principal amount. As of such date, each repurchase agreement in the joint
account and the value of the collateral therefor were as follows:

Bear, Stearns & Co., Inc., 5.40%, in the principal amount of $260,000,000,
repurchase price $260,117,000, due 11/2/98. The value of the collateral
including accrued interest was $265,935,719.

Salomon Smith Barney, Inc., 5.40%, in the principal amount of $260,000,000,
repurchase price $260,117,000, due 11/2/98. The value of the collateral
including accrued interest was $265,365,298.

Deutsche Morgan Grenfell, Inc., 5.41%, in the principal amount of $260,000,000,
repurchase price $260,117,217, due 11/2/98. The value of the collateral
including accrued interest was $265,200,735.

SBC Warburg Dillion Read, Inc., 5.38%, in the principal amount of $160,825,000,
repurchase price $160,897,103, due 11/2/98. The value of the collateral
including accrued interest was $164,045,205.
- ------------------------------------------------------------
Note 6. Borrowings

The Fund, along with other affiliated registered investment companies (the
'Funds'), has a credit agreement (the 'Agreement') with an unaffiliated lender.
The maximum commitment under the Agreement is
- --------------------------------------------------------------------------------
B-55

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Notes to Financial Statements GLOBAL SERIES
- --------------------------------------------------------------------------------
$200,000,000. Interest on any such borrowings outstanding will be at market
rates. The purpose of the Agreement is to serve as an alternative source of
funding for capital share redemptions. The Funds pay a commitment fee at an
annual rate of .055 of 1% on the unused portion of the credit facility. The
commitment fee is accrued and paid quarterly on a pro rata basis by the Funds.
The Agreement expired on December 30, 1997 and has been extended through
December 29, 1998 under the same terms.

The Series utilized the line of credit during the year ended October 31, 1998.
The average daily balance the Series had outstanding during the year was
approximately $42,436 at a weighted average interest rate of approximately
6.18%.
- ------------------------------------------------------------
Note 7. Capital

The Fund offers Class A, Class B, Class C and Class Z shares. Class A shares are
sold with a front-end sales charge of up to 5%. Class B shares are sold with a
contingent deferred sales charge which declines from 5% to zero depending on the
period of time the shares are held. Prior to November 2, 1998, Class C shares
are sold with a contingent deferred sales charge of 1% during the first year.
Effective November 2, 1998, Class C shares are sold with a front-end sales
charge of 1% and a contingent deferred sales charge of 1% during the first 18
months. Class B shares will 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 qualify 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.

There are 500 million authorized shares of $.01 par value common stock, divided
equally into four classes, designated Class A, Class B, Class C and Class Z
common stock.

Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- --------------------------------- ----------- ---------------
<S> <C> <C>
Year ended October 31, 1998:
Shares sold...................... 10,859,321 $ 181,121,938
Shares issued in reinvestment of
distributions.................. 1,785,945 26,321,425
Shares reacquired................ (13,130,954) (219,688,490)
----------- ---------------
Net decrease in shares
outstanding before
conversion..................... (485,688) (12,245,127)
Shares issued upon conversion
from Class B................... 1,078,095 18,014,302
----------- ---------------
Net increase in shares
outstanding.................... 592,407 $ 5,769,175
----------- ---------------
----------- ---------------

Year ended October 31, 1997:
Shares sold...................... 56,776,730 $ 973,808,525
Shares issued in reinvestment of
distributions.................. 1,094,293 17,300,775
Shares reacquired................ (58,304,729) (1,006,429,177)
----------- ---------------
Net decrease in shares
outstanding before
conversion..................... (433,706) (15,319,877)
Shares issued upon conversion
from Class B................... 1,249,160 21,616,884
----------- ---------------
Net increase in shares
outstanding.................... 815,454 $ 6,297,007
----------- ---------------
----------- ---------------
<CAPTION>
Class B
- ---------------------------------
Year ended October 31, 1998:
Shares sold...................... 9,903,606 $ 155,002,590
Shares issued in reinvestment of
distributions.................. 2,422,180 33,924,667
Shares reacquired................ (13,616,672) (212,628,656)
----------- ---------------
Net decrease in shares
outstanding before
conversion..................... (1,290,886) (23,701,399)
Shares reacquired upon conversion
into Class A................... (1,137,864) (18,014,302)
----------- ---------------
Net decrease in shares
outstanding.................... (2,428,750) $ (41,715,701)
----------- ---------------
----------- ---------------
Year ended October 31, 1997:
Shares sold...................... 18,853,519 $ 309,413,543
Shares issued in reinvestment of
distributions.................. 1,627,339 24,605,095
Shares reacquired................ (19,260,790) (317,569,948)
----------- ---------------
Net increase in shares
outstanding before
conversion..................... 1,220,068 16,448,690
Shares reacquired upon conversion
into Class A................... (1,309,346) (21,616,884)
----------- ---------------
Net decrease in shares
outstanding.................... (89,278) $ (5,168,194)
----------- ---------------
----------- ---------------
<CAPTION>
Class C
- ---------------------------------
Year ended October 31, 1998:
Shares sold...................... 2,738,671 $ 42,979,629
Shares issued in reinvestment of
distributions.................. 73,474 1,028,570
Shares reacquired................ (2,734,648) (43,156,490)
----------- ---------------
Net increase in shares
outstanding.................... 77,497 $ 851,709
----------- ---------------
----------- ---------------
Year ended October 31, 1997:
Shares sold...................... 1,634,289 $ 28,057,761
Shares issued in reinvestment of
distributions.................. 39,547 597,939
Shares reacquired................ (1,531,715) (26,428,611)
----------- ---------------
Net increase in shares
outstanding.................... 142,121 $ 2,227,089
----------- ---------------
----------- ---------------
</TABLE>
- --------------------------------------------------------------------------------
B-56

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Notes to Financial Statements GLOBAL SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class Z Shares Amount
- --------------------------------- ----------- ---------------
<S> <C> <C>
Year ended October 31, 1998:
Shares sold...................... 2,663,009 $ 44,750,461
Shares issued in reinvestment of
distributions.................. 324,879 4,797,400
Shares reacquired................ (3,307,909) (55,111,693)
----------- ---------------
Net decrease in shares
outstanding.................... (320,021) $ (5,563,832)
----------- ---------------
----------- ---------------
Year ended October 31, 1997:
Shares sold...................... 3,048,281 $ 53,294,667
Shares issued in reinvestment of
distributions.................. 197,534 3,130,911
Shares reacquired................ (3,114,617) (54,886,605)
----------- ---------------
Net increase in shares
outstanding.................... 131,198 $ 1,538,973
----------- ---------------
----------- ---------------
</TABLE>
- ------------------------------------------------------------
Note 8. Dividends

On December 11, 1998, the Board of Directors of the Series declared the
following long-term capital gain distribution of $.60 per share for all classes
and ordinary income dividends of $.14, $.02, $.01 and $.18 per share for Class
A, B, C and Z respectively, payable on December 15, 1998 to shareholders of
record on December 14, 1998.
- --------------------------------------------------------------------------------
B-57

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Financial Highlights GLOBAL SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------
Year Ended October 31,
-----------------------------------------------------------
1998(a) 1997 1996 1995(a) 1994(a)
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year............ $ 17.27 $ 16.62 $ 15.52 $ 14.89 $ 13.17
-------- -------- -------- -------- -------
Income from investment operations
Net investment income (loss).................. (.02) (.01) -- .01 (.04)
Net realized and unrealized gain on investment
and foreign currency transactions.......... .82 1.96 1.83 .81 1.76
-------- -------- -------- -------- -------
Total from investment operations........... .80 1.95 1.83 .82 1.72
-------- -------- -------- -------- -------
Less distributions
Distributions in excess of net investment
income..................................... (.11) (.05) -- -- --
Distributions from net realized capital
gains...................................... (1.80) (1.25) (.73) (.19) --
-------- -------- -------- -------- -------
Total distributions........................ (1.91) (1.30) (.73) (.19) --
-------- -------- -------- -------- -------
Net asset value, end of year.................. $ 16.16 $ 17.27 $ 16.62 $ 15.52 $ 14.89
-------- -------- -------- -------- -------
-------- -------- -------- -------- -------
TOTAL RETURN(b):.............................. 5.71% 12.42% 12.33% 5.74% 13.06%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)................. $251,018 $258,080 $234,700 $222,002 $73,815
Average net assets (000)...................... $260,774 $265,380 $222,948 $174,316 $58,455
Ratios to average net assets:
Expenses, including distribution fees...... 1.38% 1.39% 1.45% 1.51% 1.55%
Expenses, excluding distribution fees...... 1.13% 1.14% 1.20% 1.26% 1.30%
Net investment income (loss)............... (.14)% .01% (.04)% .10% (.29)%
For Class A, B, C and Z shares:
Portfolio turnover rate....................... 61% 64% 52% 50% 49%
</TABLE>
- ---------------
(a) Based on average shares outstanding.
(b) Total return does not consider the effects 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 year reported and includes reinvestment of dividends and
distributions.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-58

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Financial Highlights GLOBAL SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
------------------------------------------------------------
Year Ended October 31,
------------------------------------------------------------
1998(a) 1997 1996 1995(a) 1994(a)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year............ $ 16.42 $ 15.96 $ 15.03 $ 14.53 $ 12.94
-------- -------- -------- -------- --------
Income from investment operations
Net investment income (loss).................. (.13) (.12) (.08) (.11) (.13)
Net realized and unrealized gain on investment
and foreign currency transactions.......... .78 1.88 1.74 .80 1.72
-------- -------- -------- -------- --------
Total from investment operations........... .65 1.76 1.66 .69 1.59
-------- -------- -------- -------- --------
Less distributions
Distributions in excess of net investment
income..................................... (.01) (.05) -- -- --
Distributions from net realized capital
gains...................................... (1.80) (1.25) (.73) (.19) --
-------- -------- -------- -------- --------
Total distributions........................ (1.81) (1.30) (.73) (.19) --
-------- -------- -------- -------- --------
Net asset value, end of year.................. $ 15.26 $ 16.42 $ 15.96 $ 15.03 $ 14.53
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL RETURN(b):.............................. 4.95% 11.70% 11.57% 4.98% 12.29%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)................. $274,248 $335,007 $326,978 $268,498 $410,520
Average net assets (000)...................... $312,569 $350,518 $294,230 $287,656 $345,771
Ratios to average net assets:
Expenses, including distribution fees...... 2.06% 2.07% 2.12% 2.19% 2.24%
Expenses, excluding distribution fees...... 1.13% 1.14% 1.20% 1.27% 1.30%
Net investment loss........................ (.82)% (.68)% (.67)% (.84)% (.97)%
</TABLE>
- ---------------
(a) Based on average shares outstanding.
(b) Total return does not consider the effects 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 year reported and includes reinvestment of dividends and
distributions.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-59

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Financial Highlights GLOBAL SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
-----------------------------------------------------------
August 1,
1994(c)
Year Ended October 31, Through
------------------------------------------- October 31,
1998(a) 1997 1996 1995(a) 1994(a)
------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 16.41 $ 15.96 $ 15.03 $14.53 $ 14.03
------- ------- ------- ------- -----
Income from investment operations
Net investment income (loss).................. (.14) (.11) (.05) (.11 ) (.03)
Net realized and unrealized gain on investment
and foreign currency transactions.......... .78 1.86 1.71 .80 .53
------- ------- ------- ------- -----
Total from investment operations........... .64 1.75 1.66 .69 .50
------- ------- ------- ------- -----
Less distributions
Distributions in excess of net investment
income..................................... (d) (.05) -- -- --
Distributions from net realized capital
gains...................................... (1.80) (1.25) (.73) (.19 ) --
------- ------- ------- ------- -----
Total distributions........................ (1.80) (1.30) (.73) (.19 ) --
------- ------- ------- ------- -----
Net asset value, end of period................ $ 15.25 $ 16.41 $ 15.96 $15.03 $ 14.53
------- ------- ------- ------- -----
------- ------- ------- ------- -----
TOTAL RETURN(b):.............................. 4.90% 11.63% 11.57% 4.98 % 3.56%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $10,698 $10,244 $ 7,693 $3,733 $ 1,205
Average net assets (000)...................... $10,286 $ 9,093 $ 5,516 $2,284 $ 630
Ratios to average net assets:
Expenses, including distribution fees...... 2.13% 2.14% 2.20% 2.25 % 2.63%(e)
Expenses, excluding distribution fees...... 1.13% 1.14% 1.20% 1.25 % 1.63%(e)
Net investment loss........................ (.90)% (.75)% (.72)% (.76 )% (1.21)%(e)
</TABLE>
- ---------------
(a) Based on average shares outstanding.
(b) Total return does not consider the effects 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 returns for periods of less than a full year are not
annualized.
(c) Commencement of offering of Class C shares.
(d) Distribution in excess of net investment income was $.001.
(e) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-60

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Financial Highlights GLOBAL SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class Z
------------------------------------------
March 1,
1996(c)
Year Ended October 31, Through
-------------------------- October 31,
1998(a) 1997 1996
---------- ----------- -----------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 17.35 $ 16.65 $ 15.42
---------- ----------- -----------
Income from investment operations
Net investment income (loss).................. .02 .04 .06
Net realized and unrealized gain on investment
and foreign currency transactions.......... .82 1.96 1.18
---------- ----------- -----------
Total from investment operations........... .84 2.00 1.24
---------- ----------- -----------
Less distributions
Distributions in excess of net investment
income..................................... (.16) (.05) --
Distributions from net realized capital
gains...................................... (1.80) (1.25) (.01)
---------- ----------- -----------
Total distributions........................ (1.96) (1.30) (.01)
---------- ----------- -----------
Net asset value, end of period................ $ 16.23 $ 17.35 $ 16.65
---------- ----------- -----------
---------- ----------- -----------
TOTAL RETURN(b):.............................. 5.97% 12.72% 8.06%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $ 36,338 $44,412 $40,416
Average net assets (000)...................... $ 41,799 $46,545 $26,452
Ratios to average net assets:
Expenses, including distribution fees...... 1.13% 1.14% 1.20%(d)
Expenses, excluding distribution fees...... 1.13% 1.14% 1.20%(d)
Net investment income...................... .12% .27% .55%(d)
</TABLE>
- ---------------
(a) Based on average shares outstanding.
(b) Total return does not consider the effects 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 returns for periods of less than a full year are not
annualized.
(c) Commencement of offering of Class Z shares.
(d) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-61

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Report of Independent Accountants GLOBAL SERIES
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors
Prudential World Fund, Inc., Global Series

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Prudential World Fund, Inc., Global
Series (the "Fund", one of the portfolios constituting Prudential World Fund,
Inc.) at October 31, 1998, the results of its operations for the year then
ended, and the changes in its net assets and the financial highlights for each
of the two years in the period then ended, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above. The accompanying financial highlights for each of the three periods in
the period ended October 31, 1996 were audited by other independent accountants,
whose opinion dated December 13, 1996 was unqualified.

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
December 18, 1998

PRUDENTIAL WORLD FUND, INC.
Federal Income Tax Information (Unaudited) GLOBAL SERIES
- --------------------------------------------------------------------------------
We are required by the Internal Revenue Code to advise you within 60 days of the
Series' fiscal year end (October 31, 1998) as to the federal tax status of
dividends paid by the Series during such fiscal year. Accordingly, we are
advising you that in the fiscal year ended October 31, 1998, dividends were paid
of $.16, $.06, $.051 and $.21 per share (representing net investment income and
short-term capital gains) for Class A, B, C and Z shares respectively, which are
taxable as ordinary income. In addition, the Series paid to Class A, B, C and Z
shares a long-term capital gain distribution of $1.75 which is taxable as such.

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

The Series has elected to give the benefit of foreign tax credits to its
shareholders. Accordingly, shareholders who must report their gross income
dividends and distributions in a federal income tax return will be entitled to a
foreign tax credit, or an itemized deduction in computing their U.S. income tax
liability. It is generally more advantageous to claim rather than take a
deduction. For the fiscal year ended October 31, 1998 the Series intends on
passing through 31% of ordinary income distributions as a foreign tax credit.

In January 1999, you will be advised on IRS Form 1099 DIV or substitute 1099 DIV
as to the federal tax status of the dividends and distributions received by you
in calendar year 1998.
- --------------------------------------------------------------------------------
B-62
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Portfolio of Investments as of October 31, 1998 INTERNATIONAL STOCK SERIES
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--87.6%
COMMON STOCKS
- ------------------------------------------------------------
Argentina--2.7%
166,000 Telecom Argentina (ADR) $ 5,353,500
201,800 YPF Sociedad Anonima (ADR) 5,839,588
------------
11,193,088
- ------------------------------------------------------------
Australia--6.5%
2,500,000 CSR, Ltd. 5,714,175
1,695,000 Mayne Nickless, Ltd. 7,811,933
580,000 National Australia Bank, Ltd. 7,678,852
2,600,000 Pioneer International, Ltd. 5,390,684
------------
26,595,644
- ------------------------------------------------------------
Canada--3.4%
230,000 Alcan Aluminum, Ltd. 5,779,831
390,000 Bank of Nova Scotia 8,143,969
------------
13,923,800
- ------------------------------------------------------------
France--9.6%
68,200 Bouygues 13,780,137
65,000 Christian Dior SA 6,877,253
69,000 Elf Aquitaine SA 7,996,936
65,000 Peugeot SA 10,860,670
------------
39,514,996
- ------------------------------------------------------------
Italy--7.3%
428,000 Banca Popolare Di Bergamo Credito
Vaesino S.P.A. 8,758,705
536,700 Banca Popolare Di Brescia 12,655,235
5,082,000 Benetton Group S.P.A. 8,521,741
------------
29,935,681
- ------------------------------------------------------------
Japan--4.5%
700,000 Hitachi, Ltd. 3,569,831
530,000 Matsushita Electric Industrial Co.,
Ltd. 7,798,676
109,500 Sony Corp. 6,968,524
------------
18,337,031
Netherlands--8.2%
212,000 AKZO N.V. $ 8,247,790
200,000 ING Groep N.V. 9,688,655
245,000 KLM N.V. 7,404,748
173,225 Koninklijke Pakhoed Holdings N.V. 4,270,055
164,050 Stork N.V. 4,096,635
------------
33,707,883
- ------------------------------------------------------------
New Zealand--2.4%
3,500,000 Carter Holt Harvey, Ltd. 2,854,274
700,000 Fisher & Paykel Industries, Ltd. 2,075,836
1,778,000 Lion Nathan, Ltd. 4,660,622
------------
9,590,732
- ------------------------------------------------------------
Norway--1.1%
343,500 Saga Petroleum 4,346,031
- ------------------------------------------------------------
South Korea--1.4%
270,000 Korea Electric Power Corp. 4,808,640
20,180 Pohang Iron & Steel Co., Ltd. 887,033
------------
5,695,673
- ------------------------------------------------------------
Spain--6.9%
720,000 Banco Bilbao Vizcaya SA 9,729,038
141,200 Banco de Andalucia SA 6,728,113
732,600 Iberdrola SA 11,853,104
------------
28,310,255
- ------------------------------------------------------------
Sweden--7.3%
660,000 Electrolux AB 9,952,515
225,200 Pharmacia & Upjohn 11,531,674
330,000 SKF AB 3,790,426
290,000 Svedala Industri AB 4,577,772
------------
29,852,387
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-63

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Portfolio of Investments as of October 31, 1998 INTERNATIONAL STOCK SERIES
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Switzerland--10.4%
5,500 Novartis AG $ 9,931,177
15,025 The Swatch Group AG 8,305,835
11,560 Sulzer Brothers, Ltd. 6,672,686
32,307 UBS AG 8,881,855
33,000 Valora Holding AG 8,901,428
------------
42,692,981
- ------------------------------------------------------------
United Kingdom--15.9%
1,100,000 Allied Domecq PLC 10,127,693
2,353,000 British Steel PLC 4,037,392
1,300,000 British Telecom PLC 16,800,252
1,334,000 Coats Viyella PLC 692,266
615,000 National Westminster Bank PLC 10,387,748
1,140,000 Rank Group PLC 4,694,562
765,000 Rio Tinto PLC 9,290,819
3,300,000 Tesco PLC 9,308,270
------------
65,339,002
------------
Total common stocks
(cost $314,020,029) 359,035,184
------------
- ------------------------------------------------------------
Rights
2,712,000 Mayne Nickless, Ltd.
expiring November 1998
(cost $0) 0
------------
Total long-term investments
(cost $314,020,029) 359,035,184
------------
SHORT-TERM INVESTMENT--13.0%
Principal Amount
(000)
- ------------------------------------------------------------
Repurchase Agreement
Joint Repurchase Agreement Account,
$ 53,504 5.40%, 11/02/98
(cost $53,504,000; Note 5) 53,504,000
------------
- ------------------------------------------------------------
Total Investments--100.6%
(cost $367,524,029; Note 5) 412,539,184
Liabilities in excess of
other assets--(0.6%) (2,558,453)
------------
Net Assets--100% $409,980,731
------------
------------
</TABLE>
- ---------------
ADR--American Depository Receipt.

PRUDENTIAL WORLD FUND, INC.
INTERNATIONAL STOCK SERIES
- -------------------------------------------------------

The industry classification of portfolio holdings and other assets in excess of
liabilities shown as a percentage of net assets as of October 31, 1998 was as
follows:
<TABLE>
<S> <C>
Commercial Banking.................................. 17.9%
Telecommunications.................................. 5.4
Merchandising....................................... 4.4
Textiles & Apparel.................................. 3.9
Electronics......................................... 3.7
Machinery & Engineering............................. 3.7
Beverages & Tobacco................................. 3.6
Steel............................................... 3.5
Energy Sources...................................... 3.4
Construction & Housing.............................. 3.4
Utilities........................................... 2.9
Electrical Equipment................................ 2.8
Health & Personal Care.............................. 2.8
Building Materials & Components..................... 2.7
Auto Manufacturing.................................. 2.6
Appliances.......................................... 2.4
Drugs & Healthcare.................................. 2.4
Financial Services.................................. 2.4
Chemicals........................................... 2.0
Multi-Industry...................................... 1.9
Airlines/Military Technology........................ 1.8
Metals - Nonferrous................................. 1.4
Electrical Power.................................... 1.2
Leisure & Tourism................................... 1.1
Oil & Gas........................................... 1.1
Energy Equipment & Services......................... 1.0
Industrial Components............................... .9
Forestry & Paper.................................... .7
Consumer Durable Goods.............................. .6
Short-term investment............................... 13.0
-----
100.6%
Liabilities in excess of other assets............... (.6)
-----
100.0%
-----
-----
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-64

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Statement of Assets and Liabilities INTERNATIONAL STOCK SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets October 31, 1998
<S> <C>
Investments excluding repurchase agreement at value (cost $314,020,029)................................... $359,035,184
Repurchase agreement, at value (cost $53,504,000)......................................................... 53,504,000
Cash...................................................................................................... 91,450
Foreign currency, at value (cost $643,923)................................................................ 645,078
Receivable for Series shares sold......................................................................... 1,928,292
Dividends and interest receivable......................................................................... 781,473
Deferred expenses and other assets........................................................................ 6,609
----------------
Total assets........................................................................................... 415,992,086
----------------
Liabilities
Payable for Series shares reacquired...................................................................... 5,308,976
Management fee payable.................................................................................... 326,039
Accrued expenses and other liabilities.................................................................... 280,189
Distribution fee payable.................................................................................. 96,151
----------------
Total liabilities...................................................................................... 6,011,355
----------------
Net Assets................................................................................................ $409,980,731
----------------
----------------
Net assets were comprised of:
Common stock, at par................................................................................... $ 223,771
Paid-in capital in excess of par....................................................................... 360,493,979
----------------
360,717,750
Undistributed net investment income.................................................................... 3,884,785
Accumulated net realized gain on investments........................................................... 319,694
Net unrealized appreciation on investments and foreign currencies...................................... 45,058,502
----------------
Net assets, October 31, 1998.............................................................................. $409,980,731
----------------
----------------
Class A:
Net asset value and redemption price per share
($47,237,244 (divided by) 2,577,403 shares of common stock issued and outstanding).................. $18.33
Maximum sales charge (5% of offering price)............................................................ .96
----------------
Maximum offering price to public....................................................................... $19.29
----------------
----------------
Class B:
Net asset value, offering price and redemption price per share
($93,895,911 (divided by) 5,165,966 shares of common stock issued and outstanding).................. $18.18
----------------
----------------
Class C:
Net asset value, offering price and redemption price per share
($14,270,753 (divided by) 785,127 shares of common stock issued and outstanding).................... $18.18
----------------
----------------
Class Z:
Net asset value, offering price and redemption price per share
($254,576,823 (divided by) 13,848,604 shares of common stock issued and outstanding)................ $18.38
----------------
----------------

</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-65

<PAGE>
PRUDENTIAL WORLD FUND, INC.
INTERNATIONAL STOCK SERIES
Statements of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income October 31, 1998
<S> <C>
Income
Dividends (net of foreign withholding
taxes of $1,352,001)................. $ 10,037,621
Interest................................ 2,015,005
----------------
Total income......................... 12,052,626
----------------
Expenses
Management fee.......................... 4,158,188
Distribution fee--Class A............... 111,771
Distribution fee--Class B............... 984,438
Distribution fee--Class C............... 143,446
Transfer agent's fees and expenses...... 826,000
Custodian's fees and expenses........... 440,000
Reports to shareholders................. 95,000
Registration fees....................... 67,000
Audit fee............................... 35,000
Legal fees and expenses................. 33,000
Directors' fees......................... 30,000
Miscellaneous........................... 25,148
----------------
Total expenses....................... 6,948,991
----------------
Net investment income...................... 5,103,635
----------------
Realized and Unrealized Gain (Loss)
on Investment and Foreign Currency
Transactions
Net realized gain (loss) on:
Investment transactions................. 69,985
Foreign currency transactions........... (406,127)
----------------
(336,142)
----------------
Net change in unrealized appreciation on:
Investments............................. 6,168,381
Foreign currencies...................... 1,582
----------------
6,169,963
----------------
Net gain on investments and foreign
currencies.............................. 5,833,821
----------------
Net Increase in Net Assets
Resulting from Operations.................. $ 10,937,456
----------------
----------------
</TABLE>

PRUDENTIAL WORLD FUND, INC.
INTERNATIONAL STOCK SERIES
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended October 31,
in Net Assets 1998 1997
<S> <C> <C>
Operations
Net investment income........ $ 5,103,635 $ 4,227,843
Net realized gain (loss) on
investment and foreign
currency transactions..... (336,142) 7,343,863
Net change in unrealized
appreciation of
investments and foreign
currencies................ 6,169,963 13,631,809
------------- -------------
Net increase in net assets
resulting from
operations................ 10,937,456 25,203,515
------------- -------------
Dividends and distributions
(Note 1)
Dividends from net investment
income
Class A................... (355,991) (1,745)
Class B................... (388,835) (23)
Class C................... (55,588) (2)
Class Z................... (2,669,202) (2,801,611)
------------- -------------
(3,469,616) (2,803,381)
------------- -------------
Distributions from net
realized capital gains
Class A................... (791,091) (1,514)
Class B................... (1,944,176) (24)
Class C................... (277,943) (2)
Class Z................... (5,084,194) (2,381,370)
------------- -------------
(8,097,404) (2,382,910)
------------- -------------
Series share transactions (net
of conversions) (Note 6)
Net proceeds from shares
sold...................... 672,760,380 804,494,249
Net asset value of shares
issued in reinvestment of
dividends and
distributions............. 11,451,509 5,185,220
Cost of shares reacquired.... (647,270,258) (646,463,274)
------------- -------------
Net increase in net assets
from Series share
transactions.............. 36,941,631 163,216,195
------------- -------------
Total increase.................. 36,312,067 183,233,419
Net Assets
Beginning of year............... 373,668,664 190,435,245
------------- -------------
End of year(a).................. $ 409,980,731 $ 373,668,664
------------- -------------
------------- -------------
- ---------------
(a) Includes undistributed net
investment income of............ $ 3,884,785 $ 2,651,778
------------- -------------
------------- -------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-66

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Notes to Financial Statements INTERNATIONAL STOCK SERIES
- --------------------------------------------------------------------------------
Prudential World Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as an open-end, diversified management investment company
and currently consists of two series: the International Stock Series and the
Global Series. The International Stock Series (the 'Series') commenced
investment operations in November 1992. The investment objective of the Series
is to achieve long-term growth of capital through investment in equity
securities of foreign issuers. Income is a secondary objective. The Series seeks
to achieve its objective primarily through investment in a diversified portfolio
of securities which consist of equity securities of foreign issuers.
- ------------------------------------------------------------
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 traded on an exchange (whether domestic or
foreign) are valued at the last reported sales price on the primary exchange on
which they are traded. Securities traded in the over-the-counter market
(including securities listed on exchanges for which a last sales price is not
available) are valued at the average of the last reported bid and asked prices.
Any security for which a reliable market quotation is unavailable is valued at
fair value considering factors determined in good faith by the investment
adviser under procedures established by and under the general supervision of the
Fund's Board of Directors.

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

Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains or losses from holdings of foreign currencies, currency
gains or losses realized between the trade and settlement dates on security
transactions, and the difference between the amounts of dividends, interest and
foreign taxes recorded on the 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 year-end exchange rates are reflected as a component of net
unrealized appreciation on investments and foreign currencies.

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.

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Notes to Financial Statements INTERNATIONAL STOCK SERIES
- --------------------------------------------------------------------------------
Taxes: For federal income tax purposes, each series in the Fund is treated as a
separate taxpaying entity. It is the intent of the Series to continue to meet
the requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its net 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.

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.

Reclassification of Capital Accounts: The Series accounts for and reports
distributions to shareholders in accordance with the American Institute of
Certified Public Accountants' Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gains, and
Return of Capital Distributions by Investment Companies. The effect of applying
this statement was to decrease undistributed net investment income by $401,012,
increase accumulated net realized gain on investments by $406,127 and decrease
paid in capital by $5,115 for the year ended October 31, 1998, due to realized
and recognized currency losses during the year and certain expenses not being
deductible for tax purposes. Net investment income, net realized gains and net
assets were not affected by this change.
- ------------------------------------------------------------
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 subadviser's performance of such
services. PIFM has entered into a subadvisory agreement with Mercator Asset
Management, L.P. ("Mercator"), a limited partnership where The Prudential Asset
Management Company, Inc. ("PAMCI") is a limited partner. Mercator furnishes
investment advisory services in connection with the management of the Series.
PIFM pays for the cost of the subadviser's services, the compensation of
officers and employees 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% of the average daily net assets of the Series. PIFM pays Mercator at
an annual rate of .75 of 1% of the Series average daily net assets up to and
including $50 million, .60 of 1% of the Series' average daily net assets in
excess of $50 million up to and including $300 million and .45 of 1% of the
Series' average daily net assets in excess of $300 million. The subadvisory fee
amounted to $2,396,200 for the year ended October 31, 1998.

The Fund had a distribution agreement with Prudential Securities Incorporated
("PSI") which acted as the distributor of the Class A, Class B, Class C and
Class Z shares of the Fund through May 31, 1998. Prudential Investment
Management Services LLC ("PIMS") became the distributor of the Fund effective
June 1, 1998 and is serving the Fund under the same terms and conditions as
under the arrangement with PSI. The Fund compensated PSI and 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 them. 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 Series 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 year ended October
31, 1998.

PSI and PIMS have advised the Series that they received approximately $203,000
in front-end sales charges resulting from sales of Class A shares during the
year ended October 31, 1998. From these fees, PSI and PIMS paid such sales
charges to affiliated broker-dealers, which in turn paid commissions to
salespersons and incurred other distribution costs.

PSI and PIMS have advised the Series that for the year ended October 31, 1998,
they received approximately $268,000 and $7,900 in contingent deferred sales
charges imposed upon certain redemptions by Class B and Class C shareholders,
respectively.

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

The Fund, along with other affiliated registered investment companies (the
"Funds"), entered into a credit agreement (the "Agreement") with an unaffiliated
lender. The maximum commitment under the Agreement is $200,000,000. Interest on
any such borrowings outstanding will be at
- --------------------------------------------------------------------------------
B-68

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Notes to Financial Statements INTERNATIONAL STOCK SERIES
- --------------------------------------------------------------------------------
market rates. The purpose of the Agreement is to serve as an alternative source
of funding for capital share redemptions. The Series did not borrow any amounts
pursuant to the Agreement during the year ended October 31, 1998. The Funds pay
a commitment fee at an annual rate of .055 of 1% on the unused portion of the
credit facility. The commitment fee is accrued and paid quarterly on a pro rata
basis by the Funds. The Agreement expired on December 30, 1997 and has been
extended through December 29, 1998 under the same terms.
- ------------------------------------------------------------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the year ended October 31, 1998, the
Series incurred fees of approximately $734,000 for the services of PMFS. As of
October 31, 1998 approximately $66,000 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 year ended October 31, 1998 were $58,848,701 and
$55,115,189, respectively.

The federal income tax basis of the Series' investments as of October 31, 1998
was substantially the same as for financial reporting purposes and accordingly,
net unrealized appreciation on investments for federal income tax purposes was
$45,015,155 (gross unrealized appreciation--$83,987,094, gross unrealized
depreciation--$38,971,939).
- ------------------------------------------------------------
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 October 31, 1998, the
Series had a 5.7% undivided interest in the repurchase agreements in the joint
account. The undivided interest for the Series represents $53,504,000 in the
principal amount. As of such date, each repurchase agreement in the joint
account and the collateral therefor were as follows:

Bear, Stearns & Co., Inc., 5.40%, in the principal amount of $260,000,000,
repurchase price $260,117,000, due 11/2/98. The value of the collateral
including accrued interest was $265,935,719.

Salomon Smith Barney Inc., 5.40%, in the principal amount of $260,000,000,
repurchase price $260,117,000, due 11/2/98. The value of the collateral
including accrued interest was $265,365,298.

Deutsche Morgan Grenfell Inc., 5.41%, in the principal amount of $260,000,000,
repurchase price $260,117,217, due 11/2/98. The value of the collateral
including accrued interest was $265,200,735.

SBC Warburg Dillon Read, Inc., 5.38%, in the principal amount of $160,825,000,
repurchase price $160,897,103, due 11/2/98. The value of the collateral
including accrued interest was $164,045,205.
- ------------------------------------------------------------
Note 6. Capital
The Fund offers Class A, Class B, Class C and Class Z shares. Class A shares are
sold with a front-end sales charge of up to 5%. Class B shares are sold with a
contingent deferred sales charge which declines from 5% to zero depending on the
period of time the shares are held. Prior to November 2, 1998, Class C shares
are sold with a contingent deferred sales charge of 1% during the first year.
Effective November 2, 1998, Class C shares are sold with a front-end sales
charge of 1% and a contingent deferred sales charge of 1% during the first 18
months. Class B shares automatically convert to Class A shares on a quarterly
basis approximately seven years after purchase. A special exchange privilege is
also available for shareholders who qualified to purchase Class A shares at net
asset value. Class Z shares are not subject to any sales or redemption charge
and are offered exclusively for sale to a limited group of investors.

There are 500 million authorized shares of $.01 par value common stock, divided
equally into four classes, designated Class A, Class B, Class C and Class Z
common stock.

As of October 30, 1998, 2,634 of the outstanding shares were owned by the
Prudential.

Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ---------------------------------- ----------- -------------
<S> <C> <C>
Year ended October 31, 1998:
Shares sold....................... 3,579,531 $ 68,487,089
Shares issued in reinvestment of
dividends and distributions..... 64,964 1,127,781
Shares reacquired................. (3,130,800) (59,424,795)
----------- -------------
Net increase in shares outstanding
before conversion............... 513,695 10,190,075
Shares issued upon conversion from
Class B......................... 79,872 1,517,622
----------- -------------
Net increase in shares
outstanding..................... 593,567 $ 11,707,697
----------- -------------
----------- -------------
</TABLE>
- --------------------------------------------------------------------------------
B-69

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Notes to Financial Statements INTERNATIONAL STOCK SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Amount
- ---------------------------------- ----------- -------------
<S> <C> <C>
Year ended October 31, 1997:
Shares sold....................... 10,202,989 $ 196,064,399
Shares issued in reinvestment of
dividends and distributions..... 203 3,367
Shares reacquired................. (8,307,335) (161,996,245)
----------- -------------
Net increase in shares outstanding
before conversion............... 1,895,857 34,071,521
Shares issued upon conversion from
Class B......................... 87,667 1,665,704
----------- -------------
Net increase in shares
outstanding..................... 1,983,524 $ 35,737,225
----------- -------------
----------- -------------
<CAPTION>
Class B
- ----------------------------------
<S> <C> <C>
Year ended October 31, 1998:
Shares sold....................... 2,837,939 $ 54,447,404
Shares issued in reinvestment of
dividends and distributions..... 130,869 2,267,954
Shares reacquired................. (2,530,182) (47,519,258)
----------- -------------
Net increase in shares outstanding
before conversion............... 438,626 9,196,100
Shares reacquired upon conversion
into Class A.................... (80,332) (1,517,622)
----------- -------------
Net increase in shares
outstanding..................... 358,294 $ 7,678,478
----------- -------------
----------- -------------
Year ended October 31, 1997:
Shares sold....................... 13,896,760 $ 263,039,826
Shares issued in reinvestment of
dividends and distributions..... 3 44
Shares reacquired................. (9,001,122) (174,661,409)
----------- -------------
Net increase in shares outstanding
before conversion............... 4,895,641 88,378,461
Shares reacquired upon conversion
into Class A.................... (88,084) (1,665,704)
----------- -------------
Net increase in shares
outstanding..................... 4,807,557 $ 86,712,757
----------- -------------
----------- -------------
<CAPTION>
Class C Shares Amount
- ---------------------------------- ----------- -------------
<S> <C> <C>
Year ended October 31, 1998:
Shares sold....................... 878,403 $ 16,772,243
Shares issued in reinvestment of
dividends and distributions..... 18,693 323,948
Shares reacquired................. (793,470) (15,123,933)
----------- -------------
Net increase in shares
outstanding..................... 103,626 $ 1,972,258
----------- -------------
----------- -------------
Year ended October 31, 1997:
Shares sold....................... 3,133,108 $ 59,754,209
Shares reacquired................. (2,451,619) (47,614,464)
----------- -------------
Net increase in shares
outstanding..................... 681,489 $ 12,139,745
----------- -------------
----------- -------------
<CAPTION>
Class Z
- ----------------------------------
<S> <C> <C>
Year ended October 31, 1998:
Shares sold....................... 27,696,101 $ 533,053,644
Shares issued in reinvestment of
dividends and distributions..... 445,125 7,731,826
Shares reacquired................. (27,308,803) (525,202,272)
----------- -------------
Net increase in shares
outstanding..................... 832,423 $ 15,583,198
----------- -------------
----------- -------------
Year ended October 31, 1997:
Shares sold....................... 15,399,799 $ 285,635,815
Shares issued in reinvestment of
dividends and distributions..... 312,157 5,181,809
Shares reacquired................. (14,177,275) (262,191,156)
----------- -------------
Net increase in shares
outstanding..................... 1,534,681 $ 28,626,468
----------- -------------
----------- -------------
</TABLE>
- ------------------------------------------------------------
Note 7. Dividends
On December 11, 1998, the Board of Directors of the Series declared the
following ordinary income dividends per Class A, B, C and Z shares of $.15,
$.01, $.01 and $.20 respectively, payable on December 15, 1998 to shareholders
of record on December 14, 1998.
- --------------------------------------------------------------------------------
B-70

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Financial Highlights INTERNATIONAL STOCK SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------
October 1, September 23,
1996 1996(c)
Year Ended October 31, Through Through
------------------------- October 31, September 30,
1998 1997(e) 1996 1996
---------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...... $ 18.24 $ 16.59 $ 16.48 $ 16.54
---------- ---------- ----- -----
Income from investment operations:
Net investment income (loss).............. .27 .24 (.01) --
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions........................... .40 1.85 .12 (.06)
---------- ---------- ----- -----
Total from investment operations....... .67 2.09 .11 (.06)
---------- ---------- ----- -----
Less distributions:
Dividends from net investment income...... (.18) (.24) -- --
Distributions from net realized capital
gains.................................. (.40) (.20) -- --
---------- ---------- ----- -----
Total distributions.................... (.58) (.44) -- --
---------- ---------- ----- -----
Net asset value, end of period............ $ 18.33 $ 18.24 $ 16.59 $ 16.48
---------- ---------- ----- -----
---------- ---------- ----- -----
TOTAL RETURN(a)........................... 3.85% 12.85% .67% (.36)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........... $ 47,237 $ 36,184 $ 5,169(d) $ 199(d)
Average net assets (000).................. $ 44,708 $ 18,779 $ 2,793(d) $ 199(d)
Ratios to average net assets:
Expenses, including distribution
fees................................ 1.62% 1.75% 2.05%(b) 2.46%(b)
Expenses, excluding distribution
fees................................ 1.37% 1.50% 1.80%(b) 2.21%(b)
Net investment income (loss)........... 1.28% 1.40% (1.03)%(b) .75%(b)
Portfolio turnover rate................... 15% 9% 4% 15%
</TABLE>
- ---------------
(a) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each period reported and includes reinvestment
of dividends and distributions. Total return for periods of less than a full
year are not annualized.
(b) Annualized.
(c) Commencement of offering of Class A shares.
(d) Figures are actual and are not rounded to the nearest thousand.
(e) Calculated based upon weighted average shares outstanding during the year.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-71

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Financial Highlights INTERNATIONAL STOCK SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
-----------------------------------------------------------
October 1, September 23,
1996 1996(c)
Year Ended October 31, Through Through
------------------------- October 31, September 30,
1998 1997(e) 1996 1996
---------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...... $ 18.13 $ 16.57 $ 16.47 $ 16.54
---------- ---------- ----- -----
Income from investment operations:
Net investment income (loss).............. .10 .12 (.02) --
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions........................... .43 1.84 .12 (.07)
---------- ---------- ----- -----
Total from investment operations....... .53 1.96 .10 (.07)
---------- ---------- ----- -----
Less distributions:
Dividends from net investment income...... (.08) (.20) -- --
Distributions from net realized capital
gains.................................. (.40) (.20) -- --
---------- ---------- ----- -----
Total distributions.................... (.48) (.40) -- --
---------- ---------- ----- -----
Net asset value, end of period............ $ 18.18 $ 18.13 $ 16.57 $ 16.47
---------- ---------- ----- -----
---------- ---------- ----- -----
TOTAL RETURN(a)........................... 3.05% 12.04% .61% (.42)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........... $ 93,896 $ 87,155 $ 1,922(d) $ 199(d)
Average net assets (000).................. $ 98,444 $ 47,584 $ 313(d) $ 199(d)
Ratios to average net assets:
Expenses, including distribution
fees................................ 2.37% 2.50% 2.80%(b) 3.21%(b)
Expenses, excluding distribution
fees................................ 1.37% 1.50% 1.80%(b) 2.21%(b)
Net investment income (loss)........... .53% .65% (1.78)%(b) 0%(b)
Portfolio turnover rate................... 15% 9% 4% 15%
</TABLE>
- ---------------
(a) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each period reported and includes reinvestment
of dividends and distributions. Total return for periods of less than a full
year are not annualized.
(b) Annualized.
(c) Commencement of offering of Class B shares.
(d) Figures are actual and are not rounded to the nearest thousand.
(e) Calculated based upon weighted average shares outstanding during the year.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-72

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Financial Highlights INTERNATIONAL STOCK SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
-----------------------------------------------------------
October 1, September 23,
1996 1996(c)
Year Ended October 31, Through Through
------------------------- October 31, September 30,
1998 1997(e) 1996 1996
---------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...... $ 18.13 $ 16.57 $ 16.47 $ 16.54
---------- ---------- ----- -----
Income from investment operations:
Net investment income (loss).............. .10 .12 (.02) --
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions........................... .43 1.84 .12 (.07)
---------- ---------- ----- -----
Total from investment operations....... .53 1.96 .10 (.07)
---------- ---------- ----- -----
Less distributions:
Dividends from net investment income...... (.08) (.20) -- --
Distributions from net realized gains..... (.40) (.20) -- --
---------- ---------- ----- -----
Total distributions.................... (.48) (.40) -- --
---------- ---------- ----- -----
Net asset value, end of period............ $ 18.18 $ 18.13 $ 16.57 $ 16.47
---------- ---------- ----- -----
---------- ---------- ----- -----
TOTAL RETURN(a)........................... 3.05% 12.04% .61% (.42)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........... $ 14,271 $ 12,354 $ 200(d) $ 199(d)
Average net assets (000).................. $ 14,345 $ 7,473 $ 202(d) $ 199(d)
Ratios to average net assets:
Expenses, including distribution
fees................................ 2.37% 2.50% 2.80%(b) 3.21%(b)
Expenses, excluding distribution
fees................................ 1.37% 1.50% 1.80%(b) 2.21%(b)
Net investment income (loss)........... .53% .65% (1.78)%(b) 0%(b)
Portfolio turnover rate................... 15% 9% 4% 15%
</TABLE>
- ---------------
(a) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each period reported and includes reinvestment
of dividends and distributions. Total return for periods of less than a full
year are not annualized. Total return includes the effect of expense
subsidies/recoveries, as applicable.
(b) Annualized.
(c) Commencement of offering of Class C shares.
(d) Figures are actual and are not rounded to the nearest thousand.
(e) Calculated based upon weighted average shares outstanding during the year.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-73

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Financial Highlights INTERNATIONAL STOCK SERIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class Z
--------------------------------------------------------------------------------------
October 1,
1996
Year Ended October 31, Through Year Ended September 30,
------------------------- October 31, ----------------------------------------
1998 1997(d) 1996 1996 1995 1994
---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $ 18.28 $ 16.59 $ 16.48 $ 15.25 $ 14.84 $ 12.35
---------- ---------- ----------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss)............ .30 .31 (.01) .22 .18(c) .13(c)
Net realized and unrealized gain (loss)
on investment and foreign currency
transactions......................... .41 1.82 .12 1.20 .66 2.54
---------- ---------- ----------- ---------- ---------- ----------
Total from investment operations..... .71 2.13 .11 1.42 .84 2.67
---------- ---------- ----------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income.... (.21) (.24) -- (.19) (.10) (.03)
Distributions from net realized gains... (.40) (.20) -- -- (.33) (.15)
---------- ---------- ----------- ---------- ---------- ----------
Total distributions.................. (.61) (.44) -- (.19) (.43) (.18)
---------- ---------- ----------- ---------- ---------- ----------
Net asset value, end of period.......... $ 18.38 $ 18.28 $ 16.59 $ 16.48 $ 15.25 $ 14.84
---------- ---------- ----------- ---------- ---------- ----------
---------- ---------- ----------- ---------- ---------- ----------
TOTAL RETURN(a)......................... 4.08% 13.13% .67% 9.44% 5.95% 21.71%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)......... $254,577 $237,976 $ 190,428 $188,386 $136,685 $102,824
Average net assets (000)................ $258,322 $219,419 $ 191,228 $161,356 $118,927 $ 68,476
Ratios to average net assets:
Expenses, including distribution
fees.............................. 1.37% 1.50% 1.80%(b) 1.61%(c) 1.60%(c) 1.60%(c)
Expenses, excluding distribution
fees.............................. 1.37% 1.50% 1.80%(b) 1.61%(c) 1.60%(c) 1.60%(c)
Net investment income (loss)......... 1.53% 1.65% (.78)%(b) 1.58%(c) 1.58%(c) 1.08%(c)
Portfolio turnover rate................. 15% 9% 4% 15% 20% 21%
</TABLE>
- ---------------
(a) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each period reported and includes reinvestment
of dividends and distributions. Total return for periods of less than a full
year are not annualized. Total return includes the effect of expense
subsidies/recoveries, as applicable.
(b) Annualized.
(c) Net of expense subsidy/recovery.
(d) Calculated based upon weighted average shares outstanding during the year.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. B-74

<PAGE>
PRUDENTIAL WORLD FUND, INC.
Report of Independent Accountants INTERNATIONAL STOCK SERIES
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
Prudential World Fund, Inc., International Stock Series

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Prudential World Fund, Inc.,
International Stock Series (the 'Fund', one of the portfolios constituting
Prudential World Fund, Inc.) at October 31, 1998, results of its operations for
the year then ended, and the changes in its net assets and the financial
highlights for each of the two years in the period then ended, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as 'financial statements') are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1998 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above. The accompanying financial highlights for the three periods in
the period ended October 31, 1996 were audited by other independent accountants,
whose opinion dated November 27, 1996 was unqualified.

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
December 18, 1998
- --------------------------------------------------------------------------------
B-75
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Federal Income Tax Information (Unaudited) INTERNATIONAL STOCK SERIES
- --------------------------------------------------------------------------------
We are required by the Internal Revenue Code to advise you within 60 days of the
Series' fiscal year end (October 31, 1998) as to the federal tax status of
dividends paid by the Series during such fiscal year. Accordingly, we are
advising you that in the fiscal year ended October 31, 1998, dividends of $.43
per share for Class A shares, $.33 per Class B shares, $.33 per Class C shares
and $.46 per Class Z shares (representing net investment income and short-term
capital gains) which are taxable as ordinary income. In addition, the Series
paid to Class A, B, C and Z shares a long-term capital gain distribution of $.15
which is taxable as such.

The Fund has elected to give the benefit of foreign tax credits to its
shareholders. Accordingly, shareholders who must report their gross income
dividends and distributions in a federal income tax return will be entitled to a
foreign tax credit, or an itemized deduction in computing their U.S. income tax
liability. It is generally more advantageous to claim a credit rather than take
a deduction. For the fiscal year ended October 31, 1998 the Fund intends on
passing through 10.3% of ordinary income distributions as a foreign tax credit.

In January 1999, you will be advised on IRS Form 1099 DIV or substitute 1099 DID
as to the federal tax status of the dividends and distributions received by you
in calendar year 1998.
- --------------------------------------------------------------------------------

B-76

<PAGE>

APPENDIX I--DESCRIPTION OF SECURITY RATINGS

Description of S&P Corporate Bond Ratings:

AAA - Bonds rated AAA have the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.

AA - Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.

A - Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.

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

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

Description of Moody's Corporate Bond Ratings:

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

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

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

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

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

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

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

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

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

Moody's applies the numerical modifiers 1, 2 and 3 in the Aa and A rating
categories. The modifier 1 indicates that the security ranks in the higher end
of its generic rating category; the modifier 2 indicates a mid-range ranking;
and the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.

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<PAGE>

Description of Duff & Phelps Bond Ratings:

AAA - Bonds rated AAA by Duff & Phelps are considered to be of the highest
credit quality. The risk factors are negligible, being only slightly more than
for risk-free U.S. Treasury debt.

AA+, AA, AA- - Bonds rated AA+, AA or AA- are considered to be of high
credit quality. Protection factors are strong. Risk is modest but may vary
slightly from time to time because of economic conditions.

A+, A, A- - Bonds rated A+, A or A- have protection factors which are
average but adequate; however, risk factors are more variable and greater in
periods of economic stress.

BBB+, BBB, BBB- - Bonds rated BBB+, BBB or BBB- have below average
protection factors but are still considered sufficient for prudent investment.
These bonds demonstrate considerable variability in risk during economic cycles.

BB+, BB, BB- - Bonds rated BB+, BB, or BB- are below investment grade but
are still deemed likely to meet obligations when due. Present or prospective
financial protection factors fluctuate according to industry conditions or
company fortunes. Overall quality may move up or down frequently within this
category.

B+, B, B- - Bonds rated B+, B, or B- are below investment grade and possess
the risk that obligations will not be met when due. Financial protection factors
will fluctuate widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the rating within
this category or into a higher or lower rating grade.

CCC - Bonds rated CCC are well below investment grade securities.
Considerable uncertainty exists as to timely payment of principal, interest or
preferred dividends. Protection factors are narrow and risk can be substantial
with unfavorable economic/industry conditions, and/or with unfavorable company
developments.

DD - Bonds rated DD are defaulted debt obligations. The issuer failed to
meet scheduled principal and/or interest payments.

Description of S&P Commercial Paper Ratings:

Commercial paper rated A-1 by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted A-1+.
Capacity for timely payment on commercial paper rated A-2 is strong, but the
relative degree of safety is not as high as for issues designated A-1.

Description of Moody's Commercial Paper Ratings:

The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics of
issuers rated Prime-1 but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternative liquidity is maintained.

Description of Duff & Phelps Commercial Paper Rating:

Duff & Phelps commercial paper ratings are divided into three categories,
ranging from "1" for the highest quality obligations to "3" for the lowest. No
ratings are issued for companies whose paper is not deemed investment grade.
Issues assigned the Duff 1 rating are considered top grade. This category is
further divided into three gradations as follows: Duff 1 plus -- highest
certainty of timely payment, short-term liquidity, including internal operating
factors and/or ready access to alternative sources of funds, is clearly
outstanding and safety is just below risk-free U.S. Treasury short-term
obligations; Duff 1 -- very high certainty of timely payment, liquidity factors
are excellent and supported by strong fundamental protection factors, risk
factors are minor; Duff 1 minus-high certainty of timely payment, liquidity
factors are strong and supported by good fundamental protection factors, risk
factors are very small. Issues rated Duff 2 represent a good certainty of timely
payment; liquidity factors and company fundamentals are sound; although ongoing
internal funds needs may enlarge total financing requirements, access to capital
markets is good; risk factors are small. Duff 3 represents a satisfactory grade;
satisfactory liquidity and other protection factors qualify issue as to
investment grade; risk factors are larger and subject to more variation;
nevertheless timely payment is expected.

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<PAGE>

APPENDIX II--GENERAL INVESTMENT INFORMATION

The following terms are used in mutual fund investing.

Asset Allocation

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

Diversification

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

Duration

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

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

Market Timing

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

Power of Compounding

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

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<PAGE>

APPENDIX III--HISTORICAL PERFORMANCE DATA

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

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

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

INSERT CHART A

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

Source: Ibbotson Associates. Used with permission. This chart is for
illustrative purposes only and is not indicative of the past, present, or future
performance of any asset class or any Prudential Mutual Fund.

Generally, stock returns are due to capital appreciation and the reinvestment of
distributions. Bond returns are attributable mainly to reinvestment of interest.
Also, stock prices are usually more volatile than bond prices over the
long-term.

Small stock returns for 1926-1980 are those of stocks comprising the 5th
quintile of the New York Stock Exchange. Thereafter, returns are those of the
Dimensional Fund Advisors (DFA) Small Company Fund. Common stock returns are
based on the S&P Composite Index, a market-weighted, unmanaged index of 500
stocks (currently) in a variety of industries. It is often used as a broad
measure of stock market performance.

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

Impact of Inflation. The "real" rate of investment return is that which exceeds
the rate of inflation, the percentage change in the value of consumer goods and
the general cost of living. A common goal of long-term investors is to outpace
the erosive impact of inflation on investment returns.

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<PAGE>

Set forth below is historical performance data relating to various sectors
of the fixed-income securities markets. The chart shows the historical total
returns of U.S. Treasury bonds, U.S. mortgage securities, U.S. corporate bonds,
U.S. high yield bonds and world government bonds on an annual basis from 1988
through 1998. The total returns of the indices include accrued interest, plus
the price changes (gains or losses) of the underlying securities during the
period mentioned. The data is provided to illustrate the varying historical
total returns and investors should not consider this performance data as an
indication of the future performance of either Series or of any sector in which
a Series invests.

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

Historical Total Returns of Different Bond Market Sector

[Insert Chart B]

(1) Lehman Brothers Treasury Bond Index is an unmanaged index made up of over
150 public issues of the U.S. Treasury having maturities of at least one
year.

(2) Lehman Brothers Mortgage-Backed Securities Index is an unmanaged index that
includes over 600 15- and 30-year fixed-rate mortgage-backed securities of
the Government National Mortgage Association (GNMA), Federal National
Mortgage Association (FNMA), and the Federal Home Loan Mortgage Corporation
(FHLMC).

(3) Lehman Brothers Corporate Bond Index includes over 3,000 public fixed-rate,
nonconvertible investment-grade bonds. All bonds are U.S.
dollar-denominated issues and include debt issued or guaranteed by foreign
sovereign governments, municipalities, governmental agencies or
international agencies. All bonds in the index have maturities of at least
one year.

(4) Lehman Brothers High Yield Bond Index is an unmanaged index comprising over
750 public, fixed-rate, nonconvertible bonds that are rated Ba1 or lower by
Moody's Investors Service (or rated BB+ or lower by Standard & Poor's or
Fitch Investors Service). All bonds in the index have maturities of at
least one year. Source: Lipper, Inc.

(5) Salomon Smith Barney World Government Index (Non U.S.) includes over 800
bonds issued by various foreign governments or agencies, excluding those in
the U.S., but including those in Japan, Germany, France, the U.K., Canada,
Italy, Australia, Belgium, Denmark, the Netherlands, Spain, Sweden, and
Austria. All bonds in the index have maturities of at least one year.

III-2
<PAGE>

This chart illustrates the performance of major world stock markets for the
period from December 31, 1985 through December 31, 1998. It does not represent
the performance of any Prudential Mutual Fund.

[Insert Chart C]

Source: Morgan Stanley Capital International (MSCI) based on data retrieved from
Lipper Analytical New Application (LANA) as of 9/30/97. Morgan Stanley country
indices are unmanaged indices which include those stocks making up the largest
two-thirds of each country's total stock market capitalization. This chart is
for illustrative purposes only and is not indicative of the past, present or
future performance of any specific investment. Investors cannot invest directly
in stock indices.

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

[Insert Chart D]

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

Insert Chart E

Source: Morgan Stanley Capital International, December 31, 1998. Used with
permission. This chart represents the capitalization of major world stock
markets as measured by the Morgan Stanley Capital International (MSCI) World
Index. The total market capitalization is based on the value of approximately
1577 companies in 22 countries (representing approximately 60% of the aggregate
market value of the stock exchanges). This chart is for illustrative purposes
only and does not represent the allocation of any Prudential Mutual Fund.

III-3
<PAGE>

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

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

(INSERT CHART F)

- ----------
Source: Ibbotson Associates. Used with permission. All rights reserved. The
chart illustrates the historical yield of the long-term U.S. Treasury Bond from
1926-1998. Yields represent that of an annually renewed one-bond portfolio with
a remaining maturity of approximately 20 years. This chart is for illustrative
purposes and should not be construed to represent the yields of any Prudential
Mutual Fund.

III-4

<PAGE>

APPENDIX IV--INFORMATION RELATING TO PRUDENTIAL

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

Information about Prudential

The Manager and PIC(1) are subsidiaries of Prudential, which is one of the
largest diversified financial services institutions in the world and, based on
total assets, the largest insurance company in North America as of December 31,
1996. Principal products and services include life and health insurance, other
healthcare products, property and casualty insurance, securities brokerage,
asset management, investment advisory services and real estate brokerage.
Prudential (together with its subsidiaries) employs almost 79,000 persons
worldwide, and maintains a sales force of approximately 10,100 agents and nearly
6,500 financial advisors. Prudential is a major issuer of annuities, including
variable annuities. Prudential seeks to develop innovative products and services
to meet consumer needs in each of its business areas. Prudential uses the rock
of Gibraltar as its symbol. The Prudential rock is a recognized brand name
throughout the world.

Insurance. Prudential has been engaged in the insurance business since
1875. It insures or provides financial services to nearly 40 million people
worldwide. Long one of the largest issuers of individual life insurance, the
Prudential has 25 million life insurance policies and group certificates in
force today with a face value of almost $1 trillion. Prudential has the largest
capital base ($12.1 billion) of any life insurance company in the United States.
Prudential provides auto insurance for more than 1.5 million cars and insures
more than 1.2 million homes.

Money Management. Prudential is one of the largest pension fund managers in
the country, providing pension services to 1 in 3 Fortune 500 firms. It manages
$36 billion of individual retirement plan assets, such as 401(k) plans. As of
December 31, 1996, Prudential had more than $370 billion in assets under
management. Prudential Investments, a business group of Prudential (of which
Prudential Mutual Funds is a key part) manages over $211 billion in assets of
institutions and individuals. In Pensions & Investments, May 12, 1997,
Prudential was ranked third in terms of total assets under management.

Real Estate. The Prudential Real Estate Affiliates, the fourth largest real
estate brokerage network in the United States, has more than 37,000 brokers and
agents and more than 1,100 offices in the United States.(2)

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

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

Information about the Prudential Mutual Funds

As of August 31, 1998, Prudential Investments Fund Management LLC isthe
eighteenth largest mutual fund company in the country, with over 2.5 million
shareholders invested in more than 50 mutual fund portfolios and variable
annuities with more than 3.7 million shareholder accounts.

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

- ----------
(1) Prudential Investments, a business group of PIC, serves as the Subadviser
to substantially all of the Prudential Mutual Funds. Wellington Management
Company serves as the subadviser to Global Utility Fund, Inc.
Nicholas-Applegate Capital Management as subadviser to Nicholas-Applegate
Fund, Inc., Jennison Associates Capital Corp. LLC as one of the subadvisers
to Prudential Investment Portfolio, Inc. and Mercator Asset Management,
L.P. as subadviser to International Stock Series, a portfolio of Prudential
World Fund, Inc. There are multiple subadvisers for The Target Portfolio
Trust.

(2) As of December 31, 1996.

IV-1
<PAGE>

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

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

High Yield Funds. Investing in high yield bonds is a complex and research
intensive pursuit. A separate team of high yield bond analysts monitor the
approximately 200 issues held in the Prudential High Yield Fund (currently the
largest fund of its kind in the country) along with 100 or so other high yield
bonds, which may be considered for purchase.(3) Non-investment grade bonds, also
known as junk bonds or high yield bonds, are subject to a greater risk of loss
of principal and interest including default risk than higher-rated bonds.
Prudential high yield portfolio managers and analysts meet face-to-face with
almost every bond issuer in the High Yield Fund's portfolio annually, and have
additional telephone contact throughout the year.

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

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

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

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

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

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

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

- ----------
(3) As of December 31, 1995. The number of bonds and the size of the Fund are
subject to change.

(4) Trading data represents average daily transactions for portfolios of the
Prudential Mutual Funds for which PIC serves as the subadviser, portfolios
of the Prudential Series Fund and institutional and non-US accounts managed
by Prudential Mutual Fund Investment Management LLC, a division of PIC, for
the year ended December 31, 1995.

(5) Based on 669 funds in Lipper Analytical Services categories of Short U.S.
Treasury, Short U.S. Government, Intermediate U.S. Treasury, Intermediate
U.S. Government, Short Investment Grade Debt, Intermediate Investment Grade
Debt, General U.S. Treasury, General U.S. Government and Mortgage funds.

(6) As of December 31, 1994.

IV-2
<PAGE>

Based on complex-wide data, on an average day, over 7,250 shareholders
telephoned Prudential Mutual Fund Services, Inc., the Transfer Agent of the
Prudential Mutual Funds, on the Prudential Mutual Funds' toll-free number. On an
annual basis, that represents approximately 1.8 million telephone calls
answered.

Information about Prudential Securities

Prudential Securities is the fifth largest retail brokerage firm in the
United States with approximately 6,000 financial advisors. It offers to its
clients a wide range of products, including Prudential Mutual Funds and
annuities. As of December 31, 1997, assets held by Prudential Securities for its
clients approximated $235 billion.

During 1997, approximately 29,000 new customer accounts were opened each
month at Prudential Securities.(7)

Prudential Securities has a two-year Financial Advisor training program
plus advanced education programs, including Prudential Securities "university,"
which provides advanced education in a wide array of investment areas.
Prudential Securities is the only Wall Street firm to have its own in-house
Certified Financial Planner (CFP) program. In the December 1995 issue of
Registered Rep, an industry publication, Prudential Securities Financial Advisor
training programs received a grade of A- (compared to an industry average of
B+).

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

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

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

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

- ----------

(7) As of December 31, 1997.

(8) In 1995, Institutional Investor magazine surveyed more than 700
institutional money managers, chief investment officers and research
directors, asking them to evaluate analysts in approximately 80 industry
sectors. Scores were produced by taking the number of votes awarded to an
individual analyst and weighting them based on the size of the voting
institution. In total, the magazine sent its survey to more than 2,000
institutions, including a group of European and Asian institutions. This
survey is conducted annually.

IV-3