(ICON)
Prudential
World
Fund, Inc.
International
Stock Series
ANNUAL
REPORT
Oct. 31, 1997
(LOGO)
<PAGE>
Prudential World Fund, Inc.
International Stock Series
Performance At A Glance.
International stock markets were very
turbulent over the past 12 months. Many
Asian markets declined sharply while some
European markets rose strongly. The
Prudential World Fund -- International Stock
Series outperformed the average
international stock fund, as measured by
Lipper Analytical Services, and
gained more than the MSCI EAFE Index (Morgan
Stanley Capital International
Europe, Australasia and Far East Index) as
well. Our strong relative
performance was the result of our emphasis on
European stocks -- particularly
in Sweden and the Netherlands -- and the
small, narrowly focused nature of our
investments in Japan.
Cumulative Total Returns1
As of 10/31/97
<TABLE>
<CAPTION>
One
Three Since
Year
Years Inception2
<S> <C> <C>
<C>
Class A 12.85%
N/A 13.19%
Class B 12.04
N/A 12.25
Class C 12.04
N/A 12.25
Class Z 13.13
28.34 98.89 (98.67)4
Lipper International
Fund Avg3 10.39
21.49 ***
</TABLE>
Average Annual Total Returns1
As of 9/30/97
<TABLE>
<CAPTION>
One
Three Since
Year
Years Inception2
<S> <C> <C>
<C>
Class A 18.22%
N/A 17.60%
Class B 18.54
N/A 18.81
Class C 22.54
N/A 22.76
Class Z 24.73
13.09% 17.22 (17.19)4
</TABLE>
Past performance is not indicative of future
results. Principal and investment
return will fluctuate so that an investor's
shares, when redeemed, may be
worth more or less than their original cost.
1 Source: Prudential Investments Fund
Management and Lipper Analytical
Services. The cumulative total returns do not
take into account sales charges.
The average annual returns do take into
account applicable sales charges. The
Fund charges a maximum front-end sales load
of 5% for Class A shares and a
declining contingent deferred sales charge
(CDSC) of 5%, 4%, 3%, 2%, 1% and 1%
for six years, for Class B shares. Class C
shares have a 1% CDSC for one year.
Class B shares will automatically convert to
Class A shares on a quarterly
basis, approximately seven years after
purchase. Class Z shares are not
subject to a sales charge or a distribution
fee.
2 Inception dates: Classes A, B and C:
9/23/96; Class Z: 11/05/92. Class Z
shares were issued on 9/20/96 in connection
with the reorganization of the
International Stock Fund, the assets and
liabilities of which were transferred
and exchanged for Class Z shares of the
Series. The Series is the "accounting"
survivor of the reorganization. Accordingly,
Class Z performance results date
from the inception of the International Stock
Fund.
3 Lipper average returns are for 406 funds
for one year, and 236 for three
years.
4 Without waiver of management fees and/or
expense subsidization, the Series'
cumulative and average annual total returns
would have been lower, as
indicated in the parentheses ( ).
***Lipper Since Inception returns are Class
A, B and C, 10.17%; Class Z,
82.80%, for all funds in each share class.
How Investments Compared.
(As of 10/31/97)
(GRAPH)
U.S. General General Money
Growth Bond Muni Debt Market
Funds Funds Funds Funds
Source: Lipper Analytical Services. Financial
markets change, so a mutual
fund's past performance should never be used
to predict future results. The
risks to each of the investments listed above
are different -- we provide 12-
month total returns for several Lipper mutual
fund categories to show you that
reaching for higher yields means tolerating
more risk. The greater the risk,
the larger the potential reward or loss. In
addition, we've included
historical 20-year average annual returns.
These returns assume the
reinvestment of dividends.
U.S. Growth Funds will fluctuate a great
deal. Investors have received higher
historical total returns from stocks than
from most other investments. Smaller
capitalization stocks offer greater potential
for long-term growth but may be
more volatile than larger capitalization
stocks.
General Bond Funds provide more income than
stock funds, which can help smooth
out their total returns year by year. But
their prices still fluctuate
(sometimes significantly) and their returns
have been historically lower than
those of stock funds.
General Municipal Debt Funds invest in bonds
issued by state governments,
state agencies and/or municipalities. This
investment provides income that
is usually exempt from federal and state
income taxes.
Money Market Funds attempt to preserve a
constant share value; they don't
fluctuate much in price but, historically,
their returns have been generally
among the lowest of the major investment
categories.
<PAGE>
Peter F. Spano, Fund Manager
Portfolio
Manager's Report
(PHOTO)
The Prudential World Fund -- International
Stock Series invests in stocks of
companies located outside the U.S. We use a
value investment style to find
stocks selling at low prices relative to
their earnings potential to attain
our long-term goal of capital appreciation.
There are special risks associated
with foreign investments, including
political, economic and social risks, and
potential illiquidity. There can be no
assurance that the Series will achieve
its investment objective.
Out Of Trouble.
We look for individual stocks that are
inexpensive based on their cash flows,
book value, dividends and expected earnings.
Often we don't find many bargains
in a country and consequently have a
portfolio that may be much different from
the benchmark EAFE Index. That's the way we
like it -- our investment
discipline helps keep us out of trouble. Over
the past 12 months, it kept us
out of Southeast Asia and heavily in Europe.
That was a good place for an
international fund to be.
Strategy Session.
We search the foreign markets for companies
that are selling below what we
consider fair value and build our portfolio
stock by stock. Our portfolio was
selling at only 1.7 times its book value on
October 31, compared with 2.3
times for the EAFE Index, and its dividend
yield was 2.8%, compared with 2.0%.
Why do some foreign stocks sell for so much
less than others? Many companies
are restructuring. We attempt to buy their
stocks before most other investors
recognize the improving situations. To be
globally competitive, companies must
sell nonproductive assets, focus on core
businesses and restructure to reduce
costs and boost earnings. Europe is in the
early stages of this process. Asian
companies are now beginning to feel the
pressure. This is a major source of
investment opportunity.
For example, our largest holding is
Electrolux, a Swedish multinational
appliance company whose well-known brand
names include Frigidaire. Electrolux
went through a major restructuring that
helped bring its share price up 45%
over the past year. Our third largest
holding, Akzo Nobel, a Netherlands-based
multinational chemical company, has also
restructured, selling its
unproductive assets.
Some companies are inexpensive because they
are in neglected markets. Orkla
Borregaard is a domestically oriented
Norwegian food and beverage company with
some sales in the rest of Scandinavia, but
not otherwise widely known. Not
many analysts followed the company. We
discovered it at an attractive price
when Norway's stock market was in the
doldrums. It gained 44% for us over the
past year. Similarly, our Argentine holdings
gained 40% over the year.
Portfolio Composition.
Sectors expressed as a percentage of
total net assets as of 10/31/97.
(PIE CHART)
<PAGE>
What Went Well.
Our financial service companies and
commercial banks performed well.
Worldwide, the need for financial services is
increasing sharply. The banks
we own are well capitalized and represent
good value. We took profits on the
National Australia Bank, the Bank of Nova
Scotia and sold all our holdings in
Lloyd's, but we added to other bank stocks in
Italy, South Korea, Spain,
Switzerland and the United Kingdom. We also
did quite well on Banca Fideuram,
an Italian company that sells mutual funds
and insurance. It is a local
company with a broad product line and an
aggressive sales force. It's
benefiting from the growth of the mutual fund
industry in Italy and is
rewarding stockholders.
The business climate in Sweden changed
dramatically over the past three years,
after the country itself had a financial
crisis. The improved national fiscal
discipline also affected individual
companies. Investors eventually
recognized the change. Our Scandinavian
holdings, in general, did very well
this year.
And Not So Well.
Our Japanese and South Korean holdings lost
ground over the past year. Korea
was the most disappointing country in our
portfolio -- amounting to only 2.3%
of total net assets on October 31 -- down by
57%. Even good companies suffer
when emerging markets are in trouble. Korea,
although the world's eleventh
largest economy, is an emerging market and
its economy needs radical change.
In the present uncertainty, investors are
wary of even strong companies.
Our relatively small holdings of Japanese
stocks (5.9% of total net assets)
were down 8%, less than the 18% decline in
the MSCI Japan Index. We own
Hitachi, Matsushita, Nissan and Sony, large
multinationals with strong balance
sheets that were early to recognize the need
for restructuring. It has been
very difficult to identify bargain stocks in
Japan. However, stock prices are
now beginning to look more reasonable. The
exports of the Japanese
multinationals that we own should be aided by
a weak yen. We expect to
find other attractive Japanese companies in
the future.
Our holdings in Australia and New Zealand
also suffered. The declines were
concentrated in the closing weeks of the
period. We retain our confidence in
the firms we own, but we are watching for
deterioration in their earnings
prospects because many companies in these
countries depend on the burgeoning
Southeast Asian market for growth.
Five Largest Holdings.
2.8% Electrolux AB
Appliances and
Household Durables
2.6% British Telecom
Telecommunications
2.5% AKZO Nobel
Chemicals
2.4% Allied -- Lyons PLC
Beverages and Tobacco
2.4% National Westminster
Commercial Banking
Expressed as a percentage of net assets as of
10/31/97.
Looking Ahead.
Foreign stocks have been bargain-priced
compared to U.S. stocks for some time.
Superior performance is long overdue, but it
often requires some event to
provoke a change in investor favor. Moreover,
instability in Asia has led
many investors to flee to the familiar.
Companies that survive the Asian
ferment are likely to be operating in a freer
business environment. They
will probably come out stronger. Those are
the companies we want to hold. It
is still too early to tell which companies
will offer the best opportunities,
so our portfolio is still weighted toward
Europe. Over the course of the
coming year, we may cut back on some European
companies if we find
opportunities in Asia.
- ---------------------------------------------
- ----------------------------------
1
<PAGE>
An interview with Portfolio Manager Peter
Spano.
Q. There is so much turmoil in Asia. How did
you remain so lightly touched by
it?
A. We were not out of Southeast Asia because
we didn't like the region. We
just couldn't find any bargains there. We are
value investors. The problems
that developed in Southeast Asia came from
overheated markets: too many bad
bank loans, too much investment money, bad
economic policies, not enough
skeptical analysis. There were few, if any,
bargain stocks for sale. So, we
weren't there. Even in Japan, where the stock
market has languished for a
while, shares were still expensive by world
standards. We didn't try to
predict the course of national economies in
Asia, we just didn't buy
overpriced companies. That is a discipline
that can help avoid problems.
Q. How do you evaluate candidates for
purchase?
A. We estimate company earnings five years
ahead. Then we compare companies on
the basis of how much their shares are
selling for compared to assets (book
value), their future earnings, cash flow and
the dividends they return to
shareholders. We are investors, not stock
traders. Countries or industries can
be overlooked or out of favor for several
years. We focus on each individual
company's long-term earnings growth and we
are patient.
Q. How can you do earnings projections for
companies around the world?
A. We have a global network of trusted
independent analysts. We receive
earnings projections from these specialists.
We are in constant dialogue with
our network to keep our earnings estimates
current. Although the Prudential
World Fund -- International Stock Series is
relatively young, our investment
professionals have been in this business for
a long time. We have extensive
contacts.
Q. If you evaluate company by company, can't
you become overly exposed to one
market?
A. Although we focus on individual stocks, we
do recognize the need to be
diversified. We don't have any minimum
requirements in different countries or
industries, but we do have maximum exposure
guidelines based on political risk
and market liquidity. We are generally in 10-
20 different countries and rarely
have more than 15% of our holdings in any one
industry.
Q. What do you think the prospects are now in
Asia?
A. Although the Asian economies will slow,
and some may even contract, stock
prices have now come down to reasonable
levels. Moreover, this crisis is
forcing much-needed market liberalizations on
many countries. We should find
some good companies selling at attractive
prices over the next year. In
particular, the stocks of domestically-
oriented Japanese companies may be
interesting, so we have been watching for
signs of growth in the Japanese
economy.
- ---------------------------------------------
- ----------------------------------
2
<PAGE>
President's Letter
December 18, 1997
(PHOTO)
It Was Another Good
Year.
Dear Shareholder:
By many measures 1997 was another good year
for investors. The economy
continued its sixth straight year of moderate
growth. Inflation remained
subdued and unemployment fell to record lows.
Thanks to this favorable
environment, the stock market posted its
third year of double-digit returns
while bond values rose as yields declined to
five-year lows.
There were periods of uncertainty, of course.
The financial markets declined
significantly three times during the year.
Yet following each episode the
markets rebounded as investors took advantage
of buying opportunities. That
is very important because it shows that
investors today are not easily swayed
by temporary setbacks -- they choose to stay
the course and are investing for
the long term.
As we begin a new year, here are a few
thoughts to help guide your investment
decisions:
- - Keep your investment expectations
realistic. Seasoned investors know that
financial markets rise and fall -- as will
the value of their holdings. Over
time, however, stocks have been shown to
produce very attractive returns. In
fact, the S&P 500 rose more than 280% from
the time of the last major market
decline (October 31, 1987) through December
31, 1996, according to Lipper
Analytical Services.
- - Don't make rash decisions. If you have an
investment plan, stick to it.
(If you don't have one, see your Prudential
Financial Professional.) While
past performance is not indicative of future
results, many investors have
profited by the long-term growth prospects of
stocks and income producing
potential of bonds.
- - Review your portfolio. Sit down with your
Prudential Securities Financial
Advisor or Pruco Securities Registered
Representative today. Your Prudential
professional can advise you on financial
strategies and explain important new
developments, such as the federal Taxpayer
Relief Act of 1997, which may
change the way you save for college, a
retirement nest egg or other long-term
financial goal.
Thank you for your continued confidence in
Prudential Mutual Funds &
Annuities. In 1998, we'll do everything we
can to keep you informed and earn
your trust.
Sincerely,
Brian M. Storms
President, Prudential Mutual Funds &
Annuities
- ---------------------------------------------
- ----------------------------------
3
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Portfolio of Investments as of October 31,
1997 INTERNATIONAL STOCK SERIES
- ---------------------------------------------
- ----------------------------------
- ---------------------------------------------
- ----------------------------------
<TABLE>
<CAPTION>
Shares Description
Value (Note 1)
<C> <S>
<C>
- ---------------------------------------------
- ---------------
LONG-TERM INVESTMENTS--93.6%
COMMON STOCKS
- ---------------------------------------------
- ---------------
Argentina--3.2%
166,000 Telecom Argentina (ADR)
(Telecommunications)
$ 4,201,875
240,000 YPF Sociedad Anonima (ADR)
(Energy Sources)
7,680,000
- ------------
11,881,875
- ---------------------------------------------
- ---------------
Australia--7.5%
2,100,000 CSR, Ltd. (Building Materials &
Components)
7,267,937
1,455,000 Mayne Nickless, Ltd.
(Multi-Industry)
6,624,504
600,000 National Australia Bank, Ltd.
(Commercial Banking)
8,174,250
2,300,000 Pioneer International Ltd.
(Building Materials &
Components)
6,057,490
- ------------
28,124,181
- ---------------------------------------------
- ---------------
Canada--4.9%
251,300 Alcan Aluminum, Ltd. (Metals-Non
Ferrous)
7,131,860
180,000 Bank of Nova Scotia (Commercial
Banking)
7,937,139
165,000 Canadian Tire Corp., Ltd., Class
A
(Mechandising)
3,365,674
- ------------
18,434,673
- ---------------------------------------------
- ---------------
France--7.4%
60,300 Bouygues (Construction and
Housing) 5,626,555
57,000 Christian Dior S.A. (Textiles &
Apparel)
6,303,567
65,000 Peugeot S.A. (Automobile
Manufacturing)
7,334,289
69,000 Societe Nationale Elf Aquitaine
(Energy Sources)
8,512,925
- ------------
27,777,336
Italy--5.7%
1,200,000 Banca Fideuram S.P.A.
(Commercial
Banking)
$ 4,563,679
275,000 Banca Popolare Di Bergamo
Credito
Vaesino S.P.A. (Commercial
Banking)
4,329,304
551,200 Benetton Group S.P.A. (ADR)
(Textiles & Apparel)
8,011,250
3,046,000 Parmalat Finanziaria S.P.A.
(Food &
Household Products)
4,220,578
- ------------
21,124,811
- ---------------------------------------------
- ---------------
Japan--5.9%
713,000 Hitachi, Ltd. (Electrical
Equipment)
5,487,353
382,000 Matsushita Electric Industrial
Co.,
Ltd. (Electrical Equipment)
6,420,168
1,080,400 Nissan Motor Co., Ltd.
(Automobile
Manufacturing)
5,762,014
54,000 Sony Corp. (Electronics)
4,488,393
- ------------
22,157,928
- ---------------------------------------------
- ---------------
South Korea--2.3%
270,000 Korea Electric Power Corp.
(Electrical Power)
3,833,160
160,953 Korea Long Term Credit Bank
(Commercial Banking)
1,294,296
98,000 Korea Zinc (Metals-Non Ferrous)
1,178,031
20,180 Pohang Iron & Steel Co., Ltd.
(Steel)
893,420
32,234 Samsung Electronics Co., Ltd.
(Electronics)
1,265,978
- ------------
8,464,885
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 4
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Portfolio of Investments as of October 31,
1997 INTERNATIONAL STOCK SERIES
- ---------------------------------------------
- ----------------------------------
- ---------------------------------------------
- ----------------------------------
<TABLE>
<CAPTION>
Shares Description
Value (Note 1)
<C> <S>
<C>
- ---------------------------------------------
- ---------------
Netherlands--11.1%
53,000 AKZO N.V. (Chemicals)
$ 9,306,693
200,000 ING Groep N.V. (Financial
Services) 8,366,697
235,000 KLM Royal Dutch Airlines
(Airlines/Military
Technology) 7,937,070
225,000 Pakhoed Holdings N.V. (Energy
Equipment & Services)
7,345,242
200,000 Stork N.V. (Machinery &
Engineering)
8,623,345
- ------------
41,579,047
- ---------------------------------------------
- ---------------
New Zealand--4.4%
3,500,000 Carter Holt Harvey, Ltd.
(Forestry
& Paper)
6,101,969
700,000 Fisher & Paykel Industries, Ltd.
(Consumer Durable Goods)
2,222,860
3,400,000 Lion Nathan Ltd. (Beverages &
Tobacco)
8,213,997
- ------------
16,538,826
- ---------------------------------------------
- ---------------
Norway--1.6%
70,000 Orkla A.S. (Multi-Industry)
5,748,403
- ---------------------------------------------
- ---------------
Spain--4.9%
240,000 Banco Bilbao Vizcaya S.A.
(Commercial Banking)
6,398,904
35,300 Banco de Andalucia S.A.
(Commercial
Banking)
5,564,771
520,000 Iberdrola, S.A. (Utilities)
6,201,508
- ------------
18,165,183
- ---------------------------------------------
- ---------------
Sweden--9.8%
125,000 Electrolux AB (Appliances)
10,325,073
179,000 Pharmacia & Upjohn (Health &
Personal Care)
5,687,650
295,000 SKF International AB (Industrial
Components)
$ 6,838,529
360,000 Svedala Industri AB (Machinery &
Engineering)
7,050,360
258,000 Volvo AB (Automobile
Manufacturing) 6,737,011
- ------------
36,638,623
- ---------------------------------------------
- ---------------
Switzerland--9.8%
3,720 Novartis AG (Drugs & Health
Care) 5,816,727
13,525 SMH-Swiss Corp. for
Microelectronics and
Watchmaking
Industries Ltd. (Electronics)
7,531,569
11,000 Sulzer Brothers, Ltd. (Machinery
&
Engineering)
8,031,373
30,000 Swiss Bank Corp. (Commercial
Banking)
8,053,476
33,000 Valora Holding AG
(Merchandising) 7,058,823
- ------------
36,491,968
- ---------------------------------------------
- ---------------
United Kingdom--15.1%
1,100,000 Allied-Lyons PLC (Beverages &
Tobacco)
8,966,164
2,900,000 British Steel PLC (Steel)
7,676,907
1,300,000 British Telecom PLC
(Telecommunications)
9,866,718
2,500,000 Coats Viyella PLC (Textiles &
Apparel)
4,649,370
615,000 National Westminster Bank PLC
(Commercial Banking)
8,830,537
1,318,000 Rank Group PLC (Leisure &
Tourism) 7,353,444
473,000 Takare PLC (Health Services)
1,133,257
1,000,000 Tesco PLC (Merchandising)
7,996,078
- ------------
56,472,475
- ------------
Total long-term investments
(cost $310,717,383)
349,600,214
- ------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 5
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Portfolio of Investments as of October 31,
1997 INTERNATIONAL STOCK SERIES
- ---------------------------------------------
- ----------------------------------
- ---------------------------------------------
- ----------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description
Value (Note 1)
<C> <S>
<C>
- ---------------------------------------------
- ---------------
SHORT-TERM INVESTMENT--5.0%
- ---------------------------------------------
- ---------------
Repurchase Agreement
$ 18,664 Joint Repurchase Agreement
Account,
5.70%, 11/3/97
(cost $18,664,000; Note 5)
$ 18,664,000
- ------------
- ---------------------------------------------
- ---------------
Total Investments--98.6%
(cost $329,381,383; Note 4)
368,264,214
Other assets in excess of
liabilities--1.4%
5,404,450
- ------------
Net Assets--100%
$373,668,664
- ------------
- ------------
</TABLE>
- ---------------
ADR--American Depository Receipt.
The industry classification of portfolio
holdings and other assets in excess of
liabilities shown as a percentage of net
assets as of October 31, 1997 was as
follows:
<TABLE>
<S>
<C>
Commercial
Banking....................................
14.8%
Machinery &
Engineering...............................
6.3
Auto
Manufacturing................................
.... 5.3
Textiles &
Apparel....................................
5.1
Merchandising................................
......... 4.9
Beverages &
Tobacco...................................
4.6
Energy
Sources......................................
.. 4.3
Telecommunications...........................
......... 3.8
Building Materials &
Components....................... 3.6
Electronics..................................
......... 3.6
Multi-
Industry.....................................
... 3.3
Electrical
Equipment..................................
3.2
Appliances...................................
......... 2.8
Chemicals....................................
......... 2.5
Steel........................................
......... 2.3
Financial
Services....................................
2.2
Metals - Non
Ferrous..................................
2.2
Airlines/Military
Technology.......................... 2.1
Energy Equipment &
Services........................... 2.0
Leisure &
Tourism.....................................
2.0
Industrial
Components.................................
1.8
Utilities....................................
......... 1.7
Drugs &
Healthcare...................................
. 1.6
Forestry &
Paper......................................
1.6
Construction &
Housing................................
1.5
Health & Personal
Care................................ 1.5
Food & Household
Products............................. 1.1
Electrical
Power......................................
1.0
Consumer Durable
Goods................................ 0.6
Health
Services.....................................
.. 0.3
Short-term
investment.................................
5.0
- -----
98.6%
Other assets in excess of
liabilities................. 1.4
- -----
100.0%
- -----
- -----
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 6
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Statement of Assets and Liabilities
INTERNATIONAL STOCK SERIES
- ---------------------------------------------
- ----------------------------------
<TABLE>
<CAPTION>
Assets
October 31, 1997
<S>
<C>
Investments, at value (cost
$329,381,383)................................
.................................
$368,264,214
Foreign currency, at value (cost
$191,067)....................................
............................
190,640
Receivable for Series shares
sold.........................................
................................
6,379,797
Dividends and interest
receivable...................................
......................................
451,061
Receivable for investments
sold.........................................
..................................
240,927
Deferred expenses and other
assets.......................................
.................................
5,437
- ----------------
Total
assets.......................................
.............................................
....... 375,532,076
- ----------------
Liabilities
Payable for Series shares
reacquired...................................
...................................
1,063,098
Management fee
payable......................................
.............................................
. 343,145
Accrued expenses and other
liabilities..................................
..................................
264,141
Distribution fee
payable......................................
............................................
101,444
Bank
overdraft....................................
.............................................
........... 91,584
- ----------------
Total
liabilities..................................
.............................................
....... 1,863,412
- ----------------
Net
Assets.......................................
.............................................
............ $373,668,664
- ----------------
- ----------------
Net assets were comprised of:
Common stock, at
par..........................................
.........................................
$ 204,892
Paid-in capital in excess of
par..........................................
.............................
323,576,342
- ----------------
323,781,234
Undistributed net investment
income.......................................
.............................
2,651,778
Accumulated net realized gain on
investments..................................
......................... 8,347,113
Net unrealized appreciation on investments
and foreign
currencies...................................
... 38,888,539
- ----------------
Net assets, October 31,
1997.........................................
.....................................
$373,668,664
- ----------------
- ----------------
Class A:
Net asset value and redemption price per
share
($36,183,515 / 1,983,836 shares of
common stock issued and
outstanding).............................
$18.24
Maximum sales charge (5% of offering
price).......................................
..................... .96
- ----------------
Maximum offering price to
public.......................................
................................
$19.20
- ----------------
- ----------------
Class B:
Net asset value, offering price and
redemption price per share
($87,154,796 / 4,807,673 shares of
common stock issued and
outstanding).............................
$18.13
- ----------------
- ----------------
Class C:
Net asset value, offering price and
redemption price per share
($12,354,284 / 681,501 shares of common
stock issued and
outstanding)...............................
$18.13
- ----------------
- ----------------
Class Z:
Net asset value, offering price and
redemption price per share
($237,976,069 / 13,016,181 shares of
common stock issued and
outstanding)...........................
$18.28
- ----------------
- ----------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 7
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Statements of Operations
INTERNATIONAL STOCK SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Year
Ended
Net Investment Income
October 31, 1997
<S>
<C>
Income
Dividends (net of foreign withholding
taxes of
$1,152,542)..................................
............ $ 7,718,449
Interest.....................................
.............................................
.............. 1,504,747
- ----------------
Total
income.......................................
.............................................
..... 9,223,196
- ----------------
Expenses
Management
fee..........................................
.............................................
... 2,932,554
Distribution fee--Class
A............................................
...................................
46,947
Distribution fee--Class
B............................................
...................................
475,842
Distribution fee--Class
C............................................
...................................
74,733
Transfer agent's fees and
expenses.....................................
.................................
504,000
Custodian's fees and
expenses.....................................
......................................
391,000
Registration
fees.........................................
.............................................
. 263,000
Reports to
shareholders.................................
.............................................
... 190,000
Audit
fee..........................................
.............................................
........ 35,000
Legal fees and
expenses.....................................
............................................
35,000
Directors' fees and
expenses.....................................
.......................................
32,000
Amortization of organization
expenses.....................................
..............................
13,384
Miscellaneous................................
.............................................
.............. 1,893
- ----------------
Total
expenses.....................................
.............................................
..... 4,995,353
- ----------------
Net investment
income.......................................
.............................................
.. 4,227,843
- ----------------
Realized and Unrealized Gain (Loss)
on Investment and Foreign Currency
Transactions
Net realized gain (loss) on:
Investment
transactions.................................
.............................................
... 8,033,280
Foreign currency
transactions.................................
..........................................
(689,417)
- ----------------
7,343,863
- ----------------
Net change in unrealized appreciation on:
Investments..................................
.............................................
.............. 13,628,134
Foreign
currencies...................................
.............................................
...... 3,675
- ----------------
13,631,809
- ----------------
Net gain on investments and foreign
currencies...................................
.......................... 20,975,672
- ----------------
Net Increase in Net Assets
Resulting from
Operations...................................
.............................................
.. $ 25,203,515
- ----------------
- ----------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 8
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Statements of Changes in Net Assets
INTERNATIONAL STOCK SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
October 1,
Year 1996 Year
Ended Through
Ended
Increase (Decrease)
October 31, October 31,
September 30,
In Net Assets
1997 1996 1996
<S>
<C> <C> <C>
Operations
Net investment income
(loss)......................................
$ 4,227,843 $ (127,030) $
2,552,778
Net realized gain on investment and
foreign currency
transactions.................................
.................. 7,343,863
814,988 4,753,897
Net change in unrealized appreciation of
investments and foreign
currencies...................................
.................. 13,631,809
496,864 7,438,658
- --------------- --------------- ---
- ----------
Net increase in net assets resulting from
operations.............. 25,203,515
1,184,822 14,745,333
- --------------- --------------- ---
- ----------
Dividends and distributions (Note 1)
Dividends from net investment income
Class
A............................................
............ (1,745)
- -- --
Class
B............................................
............ (23)
- -- --
Class
C............................................
............ (2)
- -- --
Class
Z............................................
............ (2,801,611)
- -- (1,739,771)
- --------------- --------------- ---
- ----------
(2,803,381) --
(1,739,771)
- --------------- --------------- ---
- ----------
Distributions from net realized capital
gains
Class
A............................................
............ (1,514)
- -- --
Class
B............................................
............ (24)
- -- --
Class
C............................................
............ (2)
- -- --
Class
Z............................................
............ (2,381,370)
- -- --
- --------------- --------------- ---
- ----------
(2,382,910) --
- --
- --------------- --------------- ---
- ----------
Series share transactions (net of
conversions) (Note 6)
Net proceeds from shares
sold.....................................
804,494,249 9,340,491
115,942,217
Net asset value of shares issued in
reinvestment of dividends and
distributions................................
.................. 5,185,220
- -- 1,739,771
Cost of shares
reacquired...................................
...... (646,463,274)
(8,477,063) (78,985,777)
- --------------- --------------- ---
- ----------
Net increase in net assets from Series
share transactions.........
163,216,195 863,428
38,696,211
- --------------- --------------- ---
- ----------
Total
increase.....................................
.................. 183,233,419
2,048,250 51,701,773
Net Assets
Beginning of
year.........................................
........... 190,435,245
188,386,995 136,685,222
- --------------- --------------- ---
- ----------
End of
year.........................................
................. $ 373,668,664 $
190,435,245 $188,386,995
- --------------- --------------- ---
- ----------
- --------------- --------------- ---
- ----------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 9
<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.
Subsequent to September 30, 1996 (the
Series' prior fiscal year end) the Series'
changed its fiscal year end to
October 31. 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.
Foreign security and currency transactions
may involve certain considerations
and risks not typically associated with those
of domestic origin as a result of,
among other factors, the possibility of
political and economic instability and
the level of governmental supervision and
regulation of foreign securities
markets.
Securities Transactions and Net Investment
Income: Securities transactions are
recorded on the trade date. Realized gains
and losses from investment and
currency transactions are calculated on the
identified cost basis. Dividend
income is recorded on the ex-dividend date;
interest income is recorded on the
accrual basis. Expenses are recorded on the
accrual basis which may require the
use of certain estimates by management.
- ---------------------------------------------
- -----------------------------------
10
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Notes to Financial Statements
INTERNATIONAL STOCK SERIES
- ---------------------------------------------
- -----------------------------------
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.
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 $678,080,
increase accumulated net realized gain on
investments by $689,417 and decrease
paid in capital by $11,337 for the year ended
October 31, 1997, 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.
Deferred Organization Expenses: Approximately
$64,000 of costs were incurred in
connection with the organization and initial
registration of the Series and are
being amortized ratably over the period of
benefit not to exceed 60 months from
the date of the Series' commencement of
investment operations.
- ---------------------------------------------
- ---------------
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'); 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 Fund has a distribution agreement with
Prudential Securities Incorporated
('PSI') which acts as the distributor of the
Class A, Class B, Class C and Class
Z shares of the Fund. The Fund compensates
PSI 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 PSI. The distribution fees for
Class A, Class B and Class C shares,
are accrued daily and payable monthly. No
distribution or service fees are paid
to PSI as distributor for Class Z shares of
the Fund.
Pursuant to the Class A, B and C Plans, the
Series compensates PSI 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, 1997.
PSI has advised the Series that it has
received approximately $774,000 in
front-end sales charges resulting from sales
of Class A shares during the year
ended October 31, 1997. From these fees, PSI
paid such sales charges to
affiliated broker-dealers, which in turn paid
commissions to salespersons and
incurred other distribution costs.
PSI has advised the Series that for the year
ended October 31, 1997, it received
approximately $69,000 and $11,000 in
contingent deferred sales charges imposed
upon certain redemptions by Class B and Class
C shareholders, respectively.
PSI and PIFM are indirect, wholly-owned
subsidiaries of The Prudential Insurance
Company of America.
- ---------------------------------------------
- -----------------------------------
11
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Notes to Financial Statements
INTERNATIONAL STOCK SERIES
- ---------------------------------------------
- -----------------------------------
The Fund, along with other affiliated
registered investment companies (the
'Funds'), entered into a credit agreement
(the 'Agreement') on December 31, 1996
with an unaffiliated lender. The maximum
commitment under the Agreement is
$200,000,000. The Agreement expires on
December 30, 1997. 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
Series has not borrowed any amounts pursuant
to the Agreement as of October 31,
1997. 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.
- ---------------------------------------------
- ---------------
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, 1997, the
Series incurred fees of approximately
$487,000 for the services of PMFS. As of
October 31, 1997 approximately $56,000 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 non-
affiliates.
- ---------------------------------------------
- ---------------
Note 4. Portfolio Securities
Purchases and sales of portfolio securities
of the Series, excluding short-term
investments, for the year ended October 31,
1997 were $175,262,911 and
$24,959,895, respectively.
The federal income tax basis of the Series'
investments as of October 31, 1997
was substantially the same as for financial
reporting purposes and accordingly,
net unrealized appreciation on investments
for federal income tax purposes was
$38,882,831 (gross unrealized appreciation--
$61,144,100, gross unrealized
depreciation--$22,261,269).
- ---------------------------------------------
- ---------------
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, 1997, the
Series had a 2.33% undivided interest in the
repurchase agreements in the joint
account. The undivided interest for the
Series represents $18,664,000 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., 5.70%, in the
principal amount of $236,000,000,
repurchase price $236,112,100, due 11/3/97.
The value of the collateral
including accrued interest was $241,912,917.
Credit Suisse First Boston Corp., 5.72%, in
the principal amount of
$237,440,000, repurchase price $237,553,180,
due 11/3/97. The value of the
collateral including accrued interest was
$246,134,363.
Deutsche Morgan Grenfell Inc., 5.70%, in the
principal amount of $236,000,000,
repurchase price $236,112,100, due 11/3/97.
The value of the collateral
including accrued interest was $240,720,618.
SBC Warburg Dillon Read, Inc., 5.66%, in the
principal amount of $92,714,000,
repurchase price $92,757,730, due 11/3/97.
The value of the collateral including
accrued interest was $94,588,984.
- ---------------------------------------------
- ---------------
Note 6. Capital
The Fund offers Class A, Class B, Class C and
Class Z shares. Class A shares are
sold with a front-end sales charge of up to
5%. Class B shares are sold with a
contingent deferred sales charge which
declines from 5% to zero depending on the
period of time the shares are held. Class C
shares are sold with a contingent
deferred sales charge of 1% during the first
year. 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.
Transactions in shares of common stock were
as follows:
<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
---------
- -- -------------
---------
- -- -------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
12
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Notes to Financial Statements
INTERNATIONAL STOCK SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class A Shares
Amount
- ---------------------------------- ---------
- -- -------------
<S> <C>
<C>
October 1, 1996 through
October 31, 1996:
Shares sold.......................
300 $ 5,035
---------
- -- -------------
---------
- -- -------------
September 23, 1996(a) through
September 30, 1996:
Shares sold.......................
12 $ 200
---------
- -- -------------
---------
- -- -------------
<CAPTION>
Class B
- ----------------------------------
<S> <C>
<C>
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
---------
- -- -------------
---------
- -- -------------
October 1, 1996 through
October 31, 1996:
Shares sold.......................
104 $ 1,737
---------
- -- -------------
---------
- -- -------------
September 23, 1996(a) through
September 30, 1996:
Shares sold.......................
12 $ 200
---------
- -- -------------
---------
- -- -------------
<CAPTION>
Class C
- ----------------------------------
<S> <C>
<C>
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
---------
- -- -------------
---------
- -- -------------
September 23, 1996(a) through
September 30, 1996:
Shares sold.......................
12 $ 200
---------
- -- -------------
---------
- -- -------------
</TABLE>
- ---------------
(a) Commencement of offering of Class A,
Class B and Class C
shares.
<TABLE>
<CAPTION>
Class Z Shares
Amount
- ---------------------------------- ---------
- -- -------------
<S> <C>
<C>
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
---------
- -- -------------
---------
- -- -------------
October 1, 1996 through
October 31, 1996:
Shares sold.......................
558,189 $ 9,333,719
Shares reacquired.................
(506,630) (8,477,063)
---------
- -- -------------
Net increase in shares
outstanding.....................
51,559 $ 856,656
---------
- -- -------------
---------
- -- -------------
Year ended September 30, 1996:
Shares sold.......................
7,376,874 $ 115,941,617
Shares issued in reinvestment of
dividends.......................
116,607 1,739,771
Shares reacquired.................
(5,027,997) (78,985,777)
---------
- -- -------------
Net increase in shares
outstanding.....................
2,465,484 $ 38,695,611
---------
- -- -------------
---------
- -- -------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
13
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Financial Highlights
INTERNATIONAL STOCK SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class A
Class B
---------
- ----------------------------------- -----
- ---------------------------------------
Year
October 1, September 23, Year
October 1, September 23,
Ended
1996 1996(c) Ended
1996 1996(c)
October
Through Through October
Through Through
31,
October 31, September 30, 31,
October 31, September 30,
1997(e)
1996 1996 1997(e)
1996 1996
---------
- - ----------- ------------- -----
- ----- ----------- -------------
<S> <C>
<C> <C> <C>
<C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period......................... $ 16.59
$ 16.48 $ 16.54 $ 16.57
$ 16.47 $ 16.54
---------
- - ----- ----- -----
- ----- ----- -----
Income from investment
operations:
Net investment income (loss)...... .24
(.01) -- .12
(.02) --
Net realized and unrealized gain
(loss) on investment and
foreign currency
transactions................... 1.85
.12 (.06) 1.84
.12 (.07)
---------
- - ----- ----- -----
- ----- ----- -----
Total from investment
operations.................. 2.09
.11 (.06) 1.96
.10 (.07)
---------
- - ----- ----- -----
- ----- ----- -----
Less distributions:
Dividends from net investment
income.........................
(.24) -- --
(.20) -- --
Distributions from net realized
capital gains..................
(.20) -- --
(.20) -- --
---------
- - ----- ----- -----
- ----- ----- -----
Total distributions............
(.44) -- --
(.40) -- --
---------
- - ----- ----- -----
- ----- ----- -----
Net asset value, end of period.... $ 18.24
$ 16.59 $ 16.48 $ 18.13
$ 16.57 $ 16.47
---------
- - ----- ----- -----
- ----- ----- -----
---------
- - ----- ----- -----
- ----- ----- -----
TOTAL RETURN(a)...................
12.85% .67% (.36)%
12.04% .61% (.42)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)... $ 36,184
$ 5,169(d) $ 199(d) $ 87,155
$ 1,922(d) $ 199(d)
Average net assets (000).......... $ 18,779
$ 2,793(d) $ 199(d) $ 47,584
$ 313(d) $ 199(d)
Ratios to average net assets:
Expenses, including
distribution fees...........
1.75% 2.05%(b) 2.46%(b)
2.50% 2.80%(b) 3.21%(b)
Expenses, excluding
distribution fees...........
1.50% 1.80%(b) 2.21%(b)
1.50% 1.80%(b) 2.21%(b)
Net investment income (loss)...
1.40% (1.03)%(b) .75%(b)
.65% (1.78)%(b) 0%(b)
Portfolio turnover rate...........
9% 4% 15%
9% 4% 15%
Average commission rate paid per
share.......................... $ .0281
$ .0256 $ .0222 $ .0302
$ .0256 $ .0222
</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 and
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. 14
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Financial Highlights
INTERNATIONAL STOCK SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class C
Class Z
---------
- -------------------------------- ------------
- --------------------------------
Year
October 1, September 23, Year
October 1,
Ended
1996 1996(e) Ended
1996
October
Through Through October
Through Year
31,
October 31, September 30, 31,
October 31, Ended
1997(g)
1996 1996 1997(g)
1996 September 30,
---------
- - ----------- ------------- -----
- ----- ----------- ------------
<S> <C>
<C> <C> <C>
<C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period......................... $ 16.57
$ 16.47 $ 16.54 $ 16.59
$ 16.48 $ 15.25
---------
- - ----- ----- -----
- ----- ----------- --------
Income from investment
operations:
Net investment income (loss)...... .12
(.02) -- .31
(.01) .22
Net realized and unrealized gain
(loss) on investment and
foreign currency
transactions................... 1.84
.12 (.07) 1.82
.12 1.20
---------
- - ----- ----- -----
- ----- ----------- --------
Total from investment
operations.................. 1.96
.10 (.07) 2.13
.11 1.42
---------
- - ----- ----- -----
- ----- ----------- --------
Less distributions:
Dividends from net investment
income.........................
(.20) -- --
(.24) -- (.19)
Distributions from net realized
gains..........................
(.20) -- --
(.20) -- --
---------
- - ----- ----- -----
- ----- ----------- --------
Total distributions............
(.40) -- --
(.44) -- (.19)
---------
- - ----- ----- -----
- ----- ----------- --------
Net asset value, end of period.... $ 18.13
$ 16.57 $ 16.47 $ 18.28
$ 16.59 $ 16.48
---------
- - ----- ----- -----
- ----- ----------- --------
---------
- - ----- ----- -----
- ----- ----------- --------
TOTAL RETURN(a)...................
12.04% .61% (.42)%
13.13% .67% 9.44%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)... $ 12,354
$ 200(f) $ 199(f) $237,976
$ 190,428 $188,386
Average net assets (000).......... $ 7,473
$ 202(f) $ 199(f) $219,419
$ 191,228 $161,356
Ratios to average net assets:
Expenses, including
distribution fees...........
2.50% 2.80%(b) 3.21%(b)
1.50% 1.80%(b) 1.61%(c)
Expenses, excluding
distribution fees...........
1.50% 1.80%(b) 2.21%(b)
1.50% 1.80%(b) 1.61%(c)
Net investment income (loss)...
.65% (1.78)%(b) 0%(b)
1.65% (.78)%(b) 1.58%(c)
Portfolio turnover rate...........
9% 4% 15%
9% 4% 15%
Average commission rate paid per
share.......................... $ .0281
$ .0256 $ .0222 $ .0302
$ .0256 $ .0222
<CAPTION>
November 5,
1992(d)
Through
September 30,
1995
1994 1993
--------
- -------- -------------
<S> <C>
<C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period......................... $ 14.84
$ 12.35 $ 10.00
--------
- -------- ------
Income from investment
operations:
Net investment income (loss)......
.18(c) .13(c) .16(c)
Net realized and unrealized gain
(loss) on investment and
foreign currency
transactions................... .66
2.54 2.21
--------
- -------- ------
Total from investment
operations.................. .84
2.67 2.37
--------
- -------- ------
Less distributions:
Dividends from net investment
income......................... (.10)
(.03) (.02)
Distributions from net realized
gains.......................... (.33)
(.15) --
--------
- -------- ------
Total distributions............ (.43)
(.18) (.02)
--------
- -------- ------
Net asset value, end of period.... $ 15.25
$ 14.84 $ 12.35
--------
- -------- ------
--------
- -------- ------
TOTAL RETURN(a)................... 5.95%
21.71% 23.74%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)... $136,685
$102,824 $31,708
Average net assets (000).......... $118,927
$ 68,476 $14,491
Ratios to average net assets:
Expenses, including
distribution fees...........
1.60%(c) 1.60%(c) 1.60%(c b)
Expenses, excluding
distribution fees...........
1.60%(c) 1.60%(c) 1.60%(c b)
Net investment income (loss)...
1.58%(c) 1.08%(c) 1.44%(c b)
Portfolio turnover rate........... 20%
21% 15%
Average commission rate paid per
share.......................... N/A
N/A N/A
</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) Commencement of investment operations.
(e) Commencement of offering of Class C
shares.
(f) Figures are actual and are not rounded to
the nearest thousand.
(g) Calculated based upon weighted average
shares outstanding during the year.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 15
<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 two series
constituting Prudential World Fund, Inc.) at
October 31, 1997, and the results
of its operations, the changes in its net
assets and the financial highlights
for the year 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 audit. We conducted
our audit of these financial
statements in accordance with generally
accepted auditing standards which
require that we plan and perform the audit to
obtain reasonable assurance about
whether the financial statements are free of
material misstatement. An audit
includes examining, on a test basis, evidence
supporting the amounts and
disclosures in the financial statements,
assessing the accounting principles
used and significant estimates made by
management, and evaluating the overall
financial statement presentation. We believe
that our audit, which included
confirmation of securities at October 31,
1997 by correspondence with the
custodian and brokers and the application of
alternative auditing procedures
where securities purchased had not been
received, provides a reasonable basis
for the opinion expressed above. The
accompanying statement of changes in net
assets for the period October 1, 1996 through
October 31, 1996 and the year
ended September 30, 1996 and the financial
highlights for each of the periods
prior to the year ended October 31, 1997 were
audited by other independent
accountants, whose opinion dated November 27,
1996 was unqualified.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
December 23, 1997
- ---------------------------------------------
- -----------------------------------
16
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Change of Auditors
INTERNATIONAL STOCK SERIES
- ---------------------------------------------
- -----------------------------------
Effective March 1, 1997, Deloitte & Touche
LLP was terminated as the Fund's
auditors. For the years ended September 30,
1993 through October 31, 1996,
Deloitte & Touche LLP expressed an
unqualified opinion on the Series' financial
statements. There were no disagreements
between Fund management and Deloitte &
Touche LLP prior to their termination. The
Board of Directors approved the
termination of Deloitte & Touche LLP and the
appointment of Price Waterhouse LLP
as the Fund's independent accountants.
PRUDENTIAL WORLD FUND, INC.
Federal Income Tax Information
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, 1997) 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, 1997, dividends paid from
net investment income of $.235 per share for
Class A shares, $.195 per Class B
shares, $.195 per Class C shares and $.240
per Class Z shares which are taxable
as ordinary income. In addition, the Series
paid to Class A, B, C and Z shares a
short-term capital gain distribution of $.050
which is taxable as ordinary
income and a long-term capital gain
distribution of $.154 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.
In January 1998, 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 1997.
- ---------------------------------------------
- -----------------------------------
17
<PAGE>
Getting The Most From Your Prudential Mutual
Fund.
Some mutual fund shareholders won't ever read
this -- they don't read annual
and semi-annual reports. It's quite
understandable. These annual and semi-
annual reports are prepared to comply with
Federal regulations. They are often
written in language that is difficult to
understand. So when most people run
into those particularly daunting sections of
these reports, they don't read
them.
We think that's a mistake.
At Prudential Mutual Funds, we've made some
changes to our report to make it
easier to understand and more pleasant to
read, in hopes you'll find it
profitable to spend a few minutes
familiarizing yourself with your investment.
Here's what you'll find in the report:
At A Glance
Since an investment's performance is often a
shareholder's primary concern, we
present performance information in two
different formats. You'll find it first
on the "At A Glance" page where we compare
the Fund and the comparable average
calculated by Lipper Analytical Services, a
nationally recognized mutual fund
rating agency. We report both the cumulative
total returns and the average
annual total returns. The cumulative total
return is the total amount of
income and appreciation the Fund has achieved
in various time periods. The
average annual total return is an annualized
representation of the Fund's
performance -- it generally smoothes out
returns and gives you an idea how
much the Fund has earned in an average year,
for a given time period. Under
the performance box, you'll see legends that
explain the performance
information, whether fees and sales charges
have been included in returns,
and the inception dates for the Fund's share
classes.
See the performance comparison charts at the
back of the report for more
performance information. And keep in mind
that past perfor-mance is not
indicative of future results.
Portfolio Manager's Report
The portfolio manager who invests your money
for you reports onsuccessful --
and not-so-successful -- strategies in this
section of your report. Look for
recent purchases and sales here, as well as
information about the sectors the
portfolio manager favors and any changes that
are on the drawing board.
Portfolio Of Investments
This is where the report begins to look
technical, but it's really just a
listing of each security held at the end of
the reporting period, along with
valuations and other information. Please note
that sometimes we discuss a
security in the Portfolio Manager's Report
that doesn't appear in this listing
because it was sold before the close of the
reporting period.
<PAGE>
Statement Of Assets And Liabilities
The balance sheet shows the assets (the value
of the Fund's holdings),
liabilities (how much the Fund owes) and net
assets (the Fund's equity, or
holdings after the Fund pays its debts) as of
the end of the reporting period.
It also shows how we calculate the net asset
value per share for each class of
shares. The net asset value is reduced by
payment of your dividend, capital
gain, or other distribution, but remember
that the money or new shares are
being paid or issued to you. The net asset
value fluctuates daily along with
the value of every security in the portfolio.
Statement Of Operations
This is the income statement, which details
income (mostly interest and
dividends earned) and expenses (including
what you pay us to manage your
money). You'll also see capital gains here --
both realized and unrealized.
Statement Of Changes In Net Assets
This schedule shows how income and expenses
translate into changes in net
assets. The Fund is required to pay out the
bulk of its income to shareholders
every year, and this statement shows you how
we do it -- through dividends and
distributions -- and how that affects the net
assets. This statement also
shows how money from investors flowed into
and out of the Fund.
Notes To Financial Statements
This is the kind of technical material that
can intimidate readers, but it
does contain useful information. The Notes
provide a brief history and
explanation of your Fund's objectives. In
addition, they also outline how
Prudential Mutual Funds prices securities.
The Notes also explain who manages
and distributes the Fund's shares, and more
importantly, how much they are
paid for doing so. Finally, the Notes explain
how many shares are outstanding
and the number issued and redeemed over the
period.
Financial Highlights
This information contains many elements from
prior pages, but on a per share
basis. It is designed to help you understand
how the Fund performed and to
compare this year's performance and expenses
to those of prior years.
Independent Auditor's Report
Once a year, an outside auditor looks over
our books and certifies that the
information is fairly presented and complies
with generally accepted
accounting principles.
Tax Information
This is information which we report annually
about how much of your total
return is taxable. Should you have any
questions, you may want to consult
a tax advisor.
Performance Comparison
These charts are included in the annual
report and are required by the
Securities Exchange Commission. Performance
is presented here as a
hypothetical $10,000 investment in the Fund
since its inception or for
10 years (whichever is shorter). To help you
put that return in context,
we are required to include the performance of
an unmanaged, broad based
securities index, as well. The index does not
reflect the cost of buying the
securities it contains or the cost of
managing a mutual fund. Of course, the
index holdings do not mirror those of the
fund -- the index is a broadly
based reference point commonly used by
investors to measure how well they are
doing. A definition of the selected index is
also provided. Investors
generally cannot invest directly in an index.
<PAGE>
Getting The Most From Your Prudential Mutual
Fund.
Change Your Mind. You can exchange your
shares in most Prudential Mutual Funds
for shares in most other Prudential Mutual
Funds, without charges. This may be
most helpful if your investment needs change.
Reinvest Dividends Free Of Charge.
Reinvest your dividends and/or capital gains
distributions automatically --
without charge.
Invest For Retirement.
There is no minimum investment for an IRA.
Plus, you defer taxes on your
investment earnings by investing in an IRA.
If you'd like, you can contribute up to
$2,000 a year in an IRA. And if you
are married and not covered by a retirement
plan at work, you and your spouse
may each contribute $2,000 a year to an IRA
for a total of $4,000.
Change Your Job.
You can take your pension with you. Use a
rollover IRA to manage your company-
sponsored retirement plan while retaining the
special tax-deferred advantages.
Invest In Your Children.
There's no fee to open a custodial account
for a child's education or other
needs.
Take Income.
Would you like to receive monthly or
quarterly checks in any amount from your
fund account? Just let us know. We'll take
care of it. Of course, there are
minimum amounts. And shares redeemed may be
subject to tax, and Class B and C
shares may be subject to contingent deferred
sales charges. We'll gladly
answer your questions.
Keep Informed.
We want to keep you up-to-date. Of course,
you receive account activity
statements every quarter. But you also
receive annual and semi-annual fund
reports, as well as other important updates
on events that affect your
investments, including tax information.
This material is only authorized for
distribution when preceded or accompanied
by a current prospectus. Read the prospectus
carefully before you invest or
send money.
<PAGE>
Comparing A $10,000 Investment.
Prudential World Fund, Inc. -- International
Stock Series vs.
the Morgan Stanley Capital International EAFE
Index.
[] Prudential World Fund, Inc.--International
Stock Series
- -- MSCI Index
Past performance is not indicative of future
results. Investment return and
principal value will fluctuate so an
investor's shares, when redeemed, will be
worth more or less than their original cost.
The box on top of the graph is
designed to give you an idea how much the
Series' returns can fluctuate from
year to year by measuring the best and worst
calendar years in terms of total
annual return since inception of each share
class.
This graph is furnished to you in accordance
with SEC regulations. It compares
a $10,000 investment in the Prudential World
Fund, Inc.--International Stock
Series (Class A, B, C and Z shares) with a
similar investment in the Morgan
Stanley Capital International Europe,
Australasia, and Far East (EAFE) Index
by portraying the initial account values at
the commencement of operations of
Class A, B, C and Z shares, and subsequent
account values at the end of this
reporting period (October 31), as measured on
a quarterly basis, beginning in
1996 for Class A, B, and C shares, and 1992
for Class Z shares. For purposes
of the graph, and unless otherwise indicated,
in the accompanying table it has
been assumed (a) that all recurring fees
(including management fees) were
deducted; and (b) all dividends and
distributions were reinvested. Class B
shares will automatically convert to A shares
on a quarterly basis
approximately seven years after purchase.
This conversion feature is not
reflected in these graphs. Class Z shares do
not have a sales charge or a
distribution fee. The graph and accompanying
table reflect the past subsidy
and/or waiver of expenses and/or management
fees.
*Without waivers and expense subsidies the
value of the $10,000 investment in
the Series and the Series' average annual
total return, as illustrated above,
would have been lower, as indicated in the
parentheses ( ).
The Morgan Stanley EAFE Index is a weighted
index comprised of securities
listed the stock exchanges of the Europe,
Australia, New Zealand and the Far
East. The Index is an unmanaged index and
includes the reinvestment of all
dividends, but does not reflect the payment
of transaction costs and advisory
fees associated with an investment in the
Series. The securities in the World
Index may differ substantially from the
securities in the Series'. The Index
is not the only index that may be used to
characterize performance of stock
funds and other indexes may portray different
comparative performance.
Class A Average Annual Total Returns -
Class A
With Sales Load
6.86% Since Inception
7.21% for 1 Year
Without Sales Load
11.98% Since Inception
12.85% for 1 Year
Class B Average Annual Total Returns -
Class B
With Sales Load
7.51% Since Inception
7.04% for 1 Year
Without Sales Load
11.13% Since Inception
12.04% for 1 Year
Class C Average Annual Total Returns -
Class C
With Sales Load
11.13% Since Inception
11.04% for 1 Year
Without Sales Load
11.13% Since Inception
12.04% for 1 Year
Best Year: 1993 37.5%
Worst Year: 1994 3.6%
Class Z Average Annual Total Returns -
Class Z
Without Sales Load
14.79% Since Inception (14.76%)
13.13% for 1 Year
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Directors
Edward D. Beach
Stephen C. Eyre
Delayne Dedrick Gold
Robert F. Gunia
Don G. Hoff
Robert E. LaBlanc
Mendel A. Melzer
Richard A. Redeker
Robin B. Smith
Stephen Stoneburn
Nancy H. Teeters
Officers
Richard A. Redeker, President
Thomas A. Early, Vice President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Robert C. Rosselot, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
Mercator Asset Management, L.P.
2400 East Commercial Boulevard
Fort Lauderdale, FL 33308
Distributor
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
The views expressed in this report and
information about the Fund's portfolio
holdings are for the period covered by this
report and are subject to change
thereafter.
This report is not authorized for
distribution to prospective investors unless
preceded or accompanied by a current
prospectus.
743969503 MF115E3
743969602 Cat. #42M274N
743969701
743969800
(ICON)
Prudential
World
Fund, Inc.
- --------------------------
Global Series
ANNUAL
REPORT
Oct. 31, 1997
(LOGO)
<PAGE>
Prudential World Fund, Inc. -- Global Series
Performance At A Glance.
Stock markets in the Americas and Europe
performed well over the past 12
months, but Japanese stocks sagged after an
April consumption tax increase
stalled Japan's fledgling economic recovery.
Turmoil in Southeast Asia
exacerbated the pressure, dragging the entire
Pacific Region sharply lower.
The Prudential World Fund -- Global Series
delivered a respectable 12-month
return, but trailed the average global fund
(as measured by Lipper Analytical
Services) because we held too little in the
top-performing U.S. market and too
much in companies dependent on Japanese
consumer spending.
Cumulative Total Returns1
As of 10/31/97
<TABLE>
<CAPTION>
One Five
Ten Since
Year Years
Years Inception2
<S> <C> <C>
<C> <C>
Class A 12.42%
107.56% N/A 95.80%
Class B 11.70 100.73
128.46% 416.22
Class C 11.63 N/A
N/A 35.40
Class Z 12.72 N/A
N/A 21.80
Lipper Global
2sa
Fund Average 316.50
96.26 209.33 ***
</TABLE>
Average Annual Total Returns1
As of 9/30/97
<TABLE>
<CAPTION>
One Five
Ten Since
Year Years
Years Inception2
<S> <C> <C>
<C> <C>
Class A 16.58% 16.85%
N/A 9.64%
Class B 16.83 17.14
6.24% 13.82
Class C 20.83 N/A
N/A 13.13
Class Z 23.13 N/A
N/A 19.69
</TABLE>
Past performance is not indicative of future
results. Principal and investment
return will fluctuate so that an investor's
shares, when redeemed, may be worth
more or less than their original cost.
1 Source: Prudential Investments Fund
Management and Lipper Analytical
Services. The cumulative total returns do not
take into account sales charges.
The average annual returns do take into
account applicable sales charges. The
Fund charges a maximum front-end sales load
of 5% for Class A shares and a
declining contingent deferred sales charge
(CDSC) of 5%, 4%, 3%, 2%, 1% and 1%
for six years, for Class B shares. Class C
shares have a 1% CDSC for one year.
Class B shares will automatically convert to
Class A shares on a quarterly
basis, approximately seven years after
purchase. Class Z shares are not subject
to a sales charge or a distribution fee.
2 Inception dates: Class A: 1/22/90; Class B:
5/15/84; Class C: 8/1/94; Class
Z: 3/1/96.
3 Lipper average returns are for 175 funds
for one year, 47 funds for five
years and 19 funds for 10 years.
*** Since Inception returns are: Class A,
95.69%; Class B, 508.01%; Class C,
44.92%; and Class Z, 39.52% for all funds in
each share class.
How Investments Compared.
(As of 10/31/97)
(GRAPH)
Source: Lipper Analytical Services. Financial
markets change, so a mutual
fund's past performance should never be used
to predict future results. The
risks to each of the investments listed above
are different -- we provide
12-month total returns for several Lipper
mutual fund categories to show you
that reaching for higher returns means
tolerating more risk. The greater the
risk, the larger the potential reward or
loss. In addition, we've included
historical 20-year average annual returns.
These returns assume the
reinvestment of dividends.
U.S. Growth Funds will fluctuate a great
deal. Investors have received higher
historical total returns from stocks than
from most other investments. Smaller
capitalization stocks offer greater potential
for long-term growth but may be
more volatile than larger capitalization
stocks.
General Bond Funds provide more income than
stock funds, which can help smooth
out their total returns year by year. But
their prices still fluctuate
(sometimes significantly) and their returns
have been historically lower than
those of stock funds.
General Municipal Debt Funds invest in bonds
issued by state governments, state
agencies and/or municipalities. This
investment provides income that is usually
exempt from federal and state income taxes.
Money Market Funds attempt to preserve a
constant share value; they don't
fluctuate much in price but, historically,
their returns have been generally
among the lowest of the major investment
categories.
<PAGE>
Dan Duane, Fund Manager
(PHOTO)
Portfolio
Manager's Report
The Prudential World Fund -- Global Series
invests in U.S. and foreign stocks.
We like companies whose strong earnings
growth potential is a result of
significant economic trends, particularly
those whose likely impact has not
been fully priced by local stock markets. We
look for well-managed companies
that are attractively priced and we invest in
these companies for the long
term. Because we invest globally, the Series
is subject to the special risks
associated with foreign investments,
including currency, political and social
risks and potential illiquidity. There can be
no assurance that the Series will
achieve its investment objective.
Location.
Location.
Location.
This year, where you owned stocks was more
important than which stocks you
owned. In Southeast Asia, economies became
overheated, leading to credit
problems and a currency crunch. The Japanese
economy was emerging from the
doldrums when a tax increase stopped it cold.
Europe continued its slow
progress into an expansion and the mature
U.S. economic cycle is in extended
cruising mode.
Strategy Session.
- ---------------------------------------------
- ----------------------------------
Software.
We look throughout the world for trends that
already have shown positive
results elsewhere. One trend we identified
was the need for management
information software that can handle economic
globalization.
Our third largest holding is the German
company SAP, the world's largest
corporate software firm. Our shares more than
doubled this year. SAP's products
include a large number of functional modules
that can be integrated into
complete management systems. Many companies
are replacing their software
systems instead of repairing programs whose
date calculations may fail after
the year 2000. A switch to SAP offers modules
to help manage global currency
exposure, track orders and inventories, and
many other processes. SAP may grow
rapidly for many years.
Also making broader inroads in the corporate
market is Microsoft, up almost
90% for the year. Microsoft's Windows NT is a
growing force in corporate
networking.
Financial Services.
We also own shares in Credito Italiano, a
small Italian bank that is being
restructured into a diversified financial
service company, with a focus on
asset management. We bought the stock
recently and it already has appreciated
82%. We expect a lot more from it. In Japan,
we own Nomura, the largest
domestic stock broker. We hope that
deregulation of financial services in
Japan will expand Nomura's market greatly,
but change is slow in Japan.
Portfolio Composition.
Sectors expressed as a percentage
of net assets as of 10/31/97.
(GRAPH)
<PAGE>
What Went Well.
- ---------------------------------------------
- ----
Here's To The Winners.
Over the past 12 months, we benefited by
focusing on Continental Europe. We had
a few exceptional winners:
Telecom Italia Mobile is a partially state-
owned mobile telephone company in
Italy. It is very well managed and competes
with a decrepit fixed-line system,
so it benefits from very strong demand. In
Italy, unlike the U.S., the caller
pays for calls to mobile phones, so users are
less inclined to turn off their
telephones and more likely to distribute
their numbers. In addition, Telecom
Italia Mobile customers buy smart cards that
plug into their phones and are
good for a fixed amount of service. Parents
can give cards to their children
without fear of excessive bills. This
broadens the market, and the company
profits from prepayment. This stock rose 81%
in the past 12 months and we
expect even more. It's among our 10 largest
holdings.
Hennes & Mauritz is a multinational specialty
retailer, Sweden's largest. It is
expanding rapidly in Germany, where it
competes with large, sluggish department
stores. Hennes & Mauritz builds small stores
with stylish merchandise and a
quick stock turnover. They're among our 10
largest holdings, the share price is
up 60% over 12 months, and they are still
growing.
And Not So Well.
- ---------------------------------------------
- ----
Nipponese Nightmare.
We were wrong on the direction of the
Japanese economy. We were
disproportionately focused on Japan -- as
much as 18% of total net assets,
now reduced substantially -- and
predominantly in industries selling to the
domestic market. Most investors continued to
favor the most well-known
Japanese stocks: exporters such as Toyota.
The downturn in Japan and the surprising
spread of the problems in Thailand and
Malaysia had consequences in unexpected
places. For example, we sold our
holdings of Gucci substantially below its
high because much of its business
was dependent on Japanese tourists abroad.
When Japanese tourists stayed home,
Gucci suffered.
Five Largest
Holdings.
2.4% Nokia
Telecommunications
2.2% Oracle Corp.
Software & Services
2.1% SAP AG
Software & Services
2.1% Microsoft Corp.
Software & Services
2.0% Cisco Systems
Software & Services
Expressed as a percentage of net assetsas of
10/31/97.
Looking Ahead.
- ---------------------------------------------
- ----
Worldwide, many stocks are either facing
uncertain prospects or are quite
expensive. We are increasing our cash and our
U.S. holdings and reducing our
emerging market and Japanese exposure. We are
focusing on companies that will
not face competition from Southeast Asian
products, where currency devaluations
have created formidable rivals. In the U.S.,
we added retailers and health care
to our existing focuses on technical and
leisure companies.
1
<PAGE>
Dan Duane -- What's Going On With World
Markets?
- ---------------------------------------------
- ----------------------------------
Portfolio Manager Dan Duane reviews an
uncertain year for global markets and
sees a few bright spots.
Q. What happened in Asia and what are you
doing in response?
A. We thought that Japan was going to emerge
from its prolonged economic
lethargy and we invested in companies that
would benefit from greater domestic
spending. We saw the beginnings of more
consumer-oriented government policies
and observed that Japanese consumers were
large spenders when they saw bargains
overseas. However, in April, the Japanese
government increased its consumption
tax to 5% from 3%. This destroyed consumer
confidence and stalled Japan's
economic recovery.
To make things worse, credit and currency
problems in Thailand and Malaysia
became acute, causing investors to flee the
entire region. Declining wealth and
currency values in Southeast Asia reduced the
market for Japanese export goods
and created a widespread investor flight from
emerging market countries. The
contagion even attacked the strong Hong Kong
dollar, which threatens a slowdown
in China's immense market. So, we are
reducing our holdings in Japan and are
less focused on companies that would benefit
from an economic recovery there.
We had generally avoided the most overheated
economies in Southeast Asia and
are likely to stay out until conditions
stabilize.
Q. The largest market in the world is the
U.S. How are we doing here?
A. Our U.S. holdings, which have been
concentrated on multinational technology
and entertainment companies, have done well,
but were relatively light because
U.S. stocks were expensive. Now, we have
increased our holdings because the
U.S. economy and stock market are more stable
than elsewhere. Our newer
holdings are centered on firms that have
little foreign exposure, such as
retailers and hospitals.
Q. The second best market last year was
Europe. What are its prospects?
A. Europe is in an accelerating stage of its
economic cycle and large companies
are reaping the productivity benefits of
reorganizations. We expect the kind of
well-managed companies we have been buying to
continue their growth in the year
ahead. Europe does less trade with Asia than
either the U.S. or Japan, so the
impact of an Asian slowdown should be
smaller.
Q. Investors had been enthusiastic about
Emerging Markets generally. What now?
A. We have done quite well on our Latin
American holdings, particularly with a
132% gain on the Mexican beverage company
Fomento Economico. After its rise,
the stock was no longer cheap. Moreover, all
emerging markets are likely to be
affected by the weakness in Southeast Asia.
We have taken profits in Latin
America, selling most of our holdings.
2
<PAGE>
President's Letter
December 18, 1997
- ---------------------------------------------
- ----------------------------------
(PHOTO)
It Was Another
Good Year.
Dear Shareholder:
By many measures 1997 was another good year
for investors. The economy
continued its sixth straight year of moderate
growth. Inflation remained
subdued and unemployment fell to record lows.
Thanks to this favorable
environment, the stock market posted its
third year of double-digit returns
while bond values rose as yields declined to
five-year lows.
There were periods of uncertainty, of course.
The financial markets declined
significantly three times during the year.
Yet following each episode the
markets rebounded as investors took advantage
of buying opportunities. That
is very important because it shows that
investors today are not easily swayed
by temporary setbacks -- they choose to stay
the course and are investing for
the long term.
As we begin a new year, here are a few
thoughts to help guide your investment
decisions:
- - Keep your investment expectations
realistic. Seasoned investors know that
financial markets rise and fall -- as will
the value of their holdings. Over
time, however, stocks have been shown to
produce very attractive returns. In
fact, the S&P 500 rose more than 280% from
the time of the last major market
decline (October 31, 1987) through December
31, 1996, according to Lipper
Analytical Services.
- - Don't make rash decisions. If you have an
investment plan, stick to it. (If
you don't have one, see your Prudential
Financial Professional.) While past
performance is not indicative of future
results, many investors have profited
by the long-term growth prospects of stocks
and income producing potential of
bonds.
- - Review your portfolio. Sit down with your
Prudential Securities Financial
Advisor or Pruco Securities Registered
Representative today. Your Prudential
professional can advise you on financial
strategies and explain important new
developments, such as the federal Taxpayer
Relief Act of 1997, which may change
the way you save for college, a retirement
nest egg or other long-term
financial goal.
Thank you for your continued confidence in
Prudential Mutual Funds & Annuities.
In 1998, we'll do everything we can to keep
you informed and earn your trust.
Sincerely,
Brian M. Storms
President, Prudential Mutual Funds &
Annuities
3
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Portfolio of Investments as of October 31,
1997 GLOBAL SERIES
- ---------------------------------------------
- ----------------------------------
- ---------------------------------------------
- ----------------------------------
<TABLE>
<CAPTION>
Value
Shares Description
(Note 1)
<C> <S>
<C>
- ---------------------------------------------
- ---------------
LONG-TERM INVESTMENTS--95.1%
COMMON STOCKS--94.2%
- ---------------------------------------------
- ---------------
Argentina--0.7%
485,250 Banco Frances del Rio de la Plata
SA (Banking)
$ 4,005,636
53,300 Banco Rio De La Plata SA(a) (ADR)
(Banking)
559,650
- -------------
4,565,286
- ---------------------------------------------
- ---------------
Australia--3.1%
415,000 Brambles Industries, Ltd.
(Business
& Public Services)
7,947,374
3,000,000(b) Duke Group (Precious Metals)
0
1,565,400 Publishing & Broadcasting, Ltd.
(Broadcasting & Publishing)
9,045,994
929,256 Woolworths, Ltd. (Retail)
2,987,618
- -------------
19,980,986
- ---------------------------------------------
- ---------------
Brazil--0.9%
307,900 Companhia Brasileira De
Distribuicao (ADR) (Retail)
5,696,150
- ---------------------------------------------
- ---------------
Federal Republic of Germany--4.1%
11,120 Linde AG (Machinery &
Engineering) 6,698,213
48,600 SAP AG (Computer Software &
Services)
13,919,493
10,500 Volkswagen AG (Automobiles & Auto
Parts)
6,197,040
- -------------
26,814,746
- ---------------------------------------------
- ---------------
Finland--2.4%
178,800 Nokia Corp. (Telecommunications
Equipment)
15,579,597
- ---------------------------------------------
- ---------------
France--4.7%
10,350 Carrefour SA (Retail)
5,383,173
47,500 France Telecom SA(a)
(Telecommunications)
1,791,756
21,396 Imetal SA (Misc. Materials &
Commodities)
$ 2,292,217
38,400 Legrand SA (Electrical &
Electronics)
7,126,348
63,700 Total Francaise Petroleum, Ltd.
(Energy Sources)
7,044,512
102,500 Valeo SA (Automobiles & Auto
Parts) 6,813,615
- -------------
30,451,621
- ---------------------------------------------
- ---------------
Hong Kong--2.0%
1,281,000 Hutchison Whampoa, Ltd.
(Multi-Industry)
8,865,912
1,071,000 New World Development Co., Ltd.
(Property Development)
3,768,590
- -------------
12,634,502
- ---------------------------------------------
- ---------------
Ireland--1.6%
796,200 Bank of Ireland (Finance)
10,071,642
- ---------------------------------------------
- ---------------
Italy--3.3%
3,283,500 Credito Italiano (Finance)
8,774,070
3,468,500 Telecom Italia Mobile SpA
(Telecommunications)
12,781,913
- -------------
21,555,983
- ---------------------------------------------
- ---------------
Japan--10.6%
62,900 Aoki International Co., Ltd.
(Retail)
638,472
245,000 Aoyama Trading Co., Ltd. (Retail)
6,584,158
540,000 Daibiru Corp. (Property
Investment) 5,795,823
641,000 Daito Trust Construction Co.,
Ltd.
(Property Investment)
5,706,548
1,197,000 Daiwa Securities Co., Ltd.
(Finance)
7,250,320
433,000 House Foods Corp. (Food &
Household
Products)
7,457,442
151,700 Namco Ltd. (Recreation & Other
Consumer Goods)
5,086,538
196,000 Nippon Shokubai Co. (Chemicals)
1,205,125
80 Nissen Co., Ltd. (Retail)
183
659,000 Nomura Securities Co., Ltd.
(Finance)
7,676,179
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 4
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Portfolio of Investments as of October 31,
1997 GLOBAL SERIES
- ---------------------------------------------
- ----------------------------------
- ---------------------------------------------
- ----------------------------------
<TABLE>
<CAPTION>
Value
Shares Description
(Note 1)
<C> <S>
<C>
- ---------------------------------------------
- ---------------
Japan (cont'd.)
1,488,000 Okumura Corp. (Building &
Construction)
$ 7,056,827
315,000 Seino Transportation Co.
(Trucking
& Shipping)
2,725,684
399,000 Senshukai Co. (Retail)
2,556,203
479,000 Shiseido Co., Ltd. (Consumer
Goods) 6,535,985
162,000 Xebio Co., Ltd. (Retail)
2,614,860
- -------------
68,890,347
- ---------------------------------------------
- ---------------
Mexico--4.2%
680,800 Apasco, SA (Building Materials &
Components)
4,140,823
929,500 Cifra, SA de CV (ADR) (Retail)
1,719,575
316,355 Cifra, SA de CV, Ser. A (Retail)
580,267
2,076,069 Cifra, SA de CV, Ser. B (Retail)
4,129,855
1,627,968 Fomento Economico Mexicano, SA de
CV (Beverages & Tobacco)
11,454,992
1,230,000 Kimberly-Clark de Mexico, SA de
CV
(Forest Products & Paper)
5,398,211
- -------------
27,423,723
- ---------------------------------------------
- ---------------
Netherlands--2.2%
196,700 Nutricia Verenigde Bedrijven
NV(a)
(Food & Household Products)
5,603,557
159,900 Royal Dutch Petroleum Co. (Energy
Sources)
8,429,181
- -------------
14,032,738
- ---------------------------------------------
- ---------------
Philippines--1.1%
286,800 Philippines Long Distance
Telephone
Co. (ADR) (Telecommunications)
6,954,900
- ---------------------------------------------
- ---------------
Singapore--0.4%
939,250 Sembawang Maritime, Ltd. (Energy
Equipment & Services)
2,408,486
- ---------------------------------------------
- ---------------
Spain--2.2%
378,996 Banco Central Hispanoamericano SA
(Banking)
7,065,587
267,500 Telefonica de Espana SA
(Telecommunications)
7,278,787
- -------------
14,344,374
Sweden--4.7%
522,900 Allgon AB (Electronic Components)
$ 8,359,712
246,000 Hennes & Mauritz AB (Retail)
10,045,164
182,400 Mo och Domsjo AB (Forest Products
&
Paper)
4,933,014
660,600 Skandinaviska Enskilda Banken
(Banking)
7,128,777
- -------------
30,466,667
- ---------------------------------------------
- ---------------
Switzerland--1.3%
5,500 Novartis AG (Medical Products)
8,600,000
- ---------------------------------------------
- ---------------
United Kingdom--10.4%
306,000 Barclays PLC (Banking)
7,654,422
753,400 Dixons Group PLC (Retail)
8,798,113
375,500 GKN PLC (Automobiles & Auto
Parts) 8,411,482
730,800 Hays PLC (Business & Public
Services)
8,570,926
687,000 Johnson Matthey PLC (Precious
Metals)
6,722,035
676,250 Royal & Sun Alliance Insurance
Group PLC (Insurance)
6,475,222
390,300 Siebe PLC (Machinery &
Engineering) 7,487,472
2,388,590 Vodafone Group PLC
(Telecommunications)
13,006,371
- -------------
67,126,043
- ---------------------------------------------
- ---------------
United States--34.3%
98,000 3Com Corp.(a) (Computer Software
&
Services)
4,060,875
187,700 Adaptec, Inc.(a) (Electronic
Components)
9,091,719
205,000 Adobe Systems, Inc. (Computer
Software & Services)
9,788,750
192,900 Baker Hughes, Inc. (Oil & Gas
Equipment & Services)
8,861,344
351,900 Circus Circus Enterprises,
Inc.(a)
(Leisure & Tourism)
7,829,775
159,300 Cisco Systems, Inc.(a) (Computer
Software & Services)
13,067,578
86,800 Consolidated Stores Corp.(a)
(Retail)
3,461,150
107,300 Disney (Walt) Co. (Leisure &
Tourism)
8,825,425
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 5
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Portfolio of Investments as of October 31,
1997 GLOBAL SERIES
- ---------------------------------------------
- ----------------------------------
- ---------------------------------------------
- ----------------------------------
<TABLE>
<CAPTION>
Value
Shares Description
(Note 1)
<C> <S>
<C>
- ---------------------------------------------
- ---------------
United States (cont'd.)
265,500 Electronic Arts, Inc.(a)
(Computer
Software & Services)
$ 8,993,812
103,700 Intel Corp. (Computer Software &
Services)
7,984,900
75,000 J.D. Edwards & Co.(a) (Computer
Software & Services)
2,550,000
255,482 Mattel, Inc. (Recreation & Other
Consumer Goods)
9,931,863
103,800 Microsoft Corp.(a) (Computer
Software & Services)
13,494,000
322,000 Mirage Resorts, Inc.(a) (Leisure
&
Tourism)
8,050,000
156,100 Mobil Corp. (Energy Sources)
11,366,031
76,700 Motorola, Inc. (Electronic
Components)
4,736,225
391,350 Oracle Systems Corp.(a) (Computer
Software & Services)
14,002,992
48,000 Progressive Corp. (Insurance)
5,004,000
219,000 Quorum Health Group, Inc. (Health
Services)
5,310,750
158,000 Safeway, Inc.(a) (Retail)
9,183,750
683 Siebel Systems, Inc.(a) (Computer
Software & Services)
27,587
230,500 Tenet Healthcare Corp.(a) (Health
Services)
7,044,656
82,300 Texas Instruments, Inc.
(Electronic
Components)
8,780,381
363,000 The Limited, Inc. (Retail)
8,553,188
119,900 Tiffany & Co. (Retail)
4,736,050
144,600 Time Warner, Inc. (Broadcasting &
Publishing)
8,341,613
176,600 Transocean Offshore, Inc. (Energy
Sources)
9,536,400
33,800 Wells Fargo & Co. (Finance)
9,848,475
- -------------
222,463,289
- -------------
Total common stocks
(cost US$473,996,006)
610,061,080
- -------------
PREFERRED STOCKS--0.9%
- ---------------------------------------------
- ---------------
Federal Republic of Germany--0.9%
8,300 Wella AG (Cosmetics)
(cost US$6,181,832)
5,763,922
WARRANTS(a)
- ---------------------------------------------
- ---------------
Malaysia
199,625 Renong Berhad
expiring Nov. '00 @ MYR4.10
(Multi-Industry)
(cost US$53,821)
$ 35,717
- -------------
Total long-term investments
(cost US$480,231,659)
615,860,719
- -------------
Principal
Amount
(000)
SHORT-TERM INVESTMENT--0.2%
- ---------------------------------------------
- ---------------
Repurchase Agreements
$1,440,000 Joint Repurchase Agreement
Account,
5.70%, 11/3/97
(cost US$1,440,000; Note 5)
1,440,000
- -------------
- ---------------------------------------------
- ---------------
Total Investments--95.3%
(cost US$481,671,659; Note 4)
617,300,719
Other assets in excess of
liabilities--4.7%
30,442,565
- -------------
Net Assets--100%
$ 647,743,284
- -------------
- -------------
</TABLE>
- ---------------
(a) Non-income producing security.
(b) Issue in default.
ADR--American Depository Receipt
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 6
<PAGE>
PRUDENTIAL WORLD FUND, INC.
GLOBAL SERIES
Portfolio of Investments as of October 31,
1997
- ---------------------------------------------
- ----------------------------------
The industry classification of portfolio
holdings and other assets in excess of
liabilities shown as a percentage of net
assets as of October 31, 1997 was as
follows:
<TABLE>
<S>
<C>
Computer Software &
Services.......................... 13.5%
Retail.......................................
......... 11.9
Finance......................................
......... 6.7
Telecommunications...........................
......... 6.5
Electronic
Components.................................
4.8
Energy
Sources......................................
.. 4.1
Banking......................................
......... 4.1
Leisure &
Tourism.....................................
3.8
Automobiles & Auto
Parts.............................. 3.3
Broadcasting &
Publishing.............................
2.7
Business and Public
Services.......................... 2.6
Telecommunications
Equipment.......................... 2.4
Recreation & Other Consumer
Goods..................... 2.3
Machinery &
Engineering...............................
2.2
Food & Household
Products............................. 2.0
Health
Services.....................................
.. 1.9
Property
Investment...................................
1.8
Insurance....................................
......... 1.8
Beverages &
Tobacco...................................
1.8
Forest Products &
Paper............................... 1.6
Oil & Gas
Exploration/Products........................
1.5
Multi-
industry.....................................
... 1.4
Oil & Gas Equipment &
Services........................ 1.4
Medical
Products.....................................
. 1.3
Electrical &
Electronics..............................
1.1
Building &
Construction...............................
1.1
Precious
Metals.......................................
1.0
Consumer
Goods........................................
1.0
Cosmetics....................................
......... 0.9
Building Materials &
Components....................... 0.6
Property
Development..................................
0.6
Trucking &
Shipping...................................
0.4
Energy Equipment &
Services........................... 0.4
Misc. Materials &
Commodities......................... 0.4
Chemicals....................................
......... 0.2
Short-term
investment.................................
0.2
- -----
95.3%
Other assets in excess of
liabilities................. 4.7
- -----
100.0%
- -----
- -----
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 7
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Statement of Assets and Liabilities
GLOBAL SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Assets
October 31, 1997
<S>
<C>
Investments, at value (cost
US$481,671,659)..............................
.................................
$617,300,719
Foreign currency, at value (cost
US$735,155)..................................
............................
721,794
Cash.........................................
.............................................
................ 172,508
Receivable for investments
sold.........................................
..................................
39,060,561
Receivable for Series shares
sold.........................................
................................
4,216,791
Dividends and interest
receivable...................................
......................................
983,038
Deferred expenses and other
assets.......................................
.................................
13,948
- ----------------
Total
assets.......................................
.............................................
....... 662,469,359
- ----------------
Liabilities
Payable for investments
purchased....................................
.....................................
12,605,114
Payable for Series shares
reacquired...................................
...................................
1,016,668
Management fee
payable......................................
.............................................
. 444,978
Distribution fee
payable......................................
............................................
355,016
Accrued
expenses.....................................
.............................................
........ 175,964
Withholding taxes
payable......................................
...........................................
73,046
Forward currency contracts - amount payable
to
counterparties...............................
.............. 55,289
- ----------------
Total
liabilities..................................
.............................................
....... 14,726,075
- ----------------
Net
Assets.......................................
.............................................
............ $647,743,284
- ----------------
- ----------------
Net assets were comprised of:
Common stock, at
par..........................................
.........................................
$ 385,227
Paid-in capital in excess of
par..........................................
.............................
448,620,728
- ----------------
449,005,955
Undistributed net investment
income.......................................
.............................
2,071,347
Accumulated net realized gain on
investments..................................
......................... 61,086,427
Net unrealized appreciation on investments
and foreign
currencies...................................
... 135,579,555
- ----------------
Net assets, October 31,
1997.........................................
.....................................
$647,743,284
- ----------------
- ----------------
Class A:
Net asset value and redemption price per
share
($258,080,368 / 14,940,730 shares of
common stock issued and
outstanding)...........................
$17.27
Maximum sales charge (5% of offering
price).......................................
..................... .91
- ----------------
Maximum offering price to
public.......................................
................................
$18.18
- ----------------
- ----------------
Class B:
Net asset value, offering price and
redemption price per share
($335,007,287 / 20,398,710 shares of
common stock issued and
outstanding)...........................
$16.42
- ----------------
- ----------------
Class C:
Net asset value, offering price and
redemption price per share
($10,243,929 / 624,199 shares of common
stock issued and
outstanding)...............................
$16.41
- ----------------
- ----------------
Class Z:
Net asset value, offering price and
redemption price per share
($44,411,700 / 2,559,083 shares of
common stock issued and
outstanding).............................
$17.35
- ----------------
- ----------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 8
<PAGE>
PRUDENTIAL WORLD FUND, INC.
GLOBAL SERIES
Statement of Operations
- ---------------------------------------------
- ---------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income
October 31, 1997
<S>
<C>
Income
Dividends (net of foreign withholding
taxes
of
$950,748)............................ $
8,828,942
Interest...................................
545,710
- ----------------
Total
income............................
9,374,652
- ----------------
Expenses
Management
fee.............................
5,036,520
Distribution fee--Class
A.................. 663,451
Distribution fee--Class
B.................. 3,277,315
Distribution fee--Class
C.................. 90,930
Transfer agent's fees and
expenses......... 1,370,000
Custodian's fees and
expenses.............. 550,000
Reports to
shareholders....................
240,000
Registration
fees..........................
68,000
Audit
fee..................................
35,000
Directors' fees and
expenses............... 32,000
Legal fees and
expenses.................... 25,000
Insurance
expense..........................
11,000
Miscellaneous..............................
32,411
- ----------------
Total operating
expenses................ 11,431,627
Loan interest
expense......................
225,816
- ----------------
Total
expenses..........................
11,657,443
- ----------------
Net investment
loss...........................
(2,282,791)
- ----------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions
Net realized gain on:
Investment
transactions....................
64,927,621
Foreign currency
transactions.............. 665,352
- ----------------
65,592,973
- ----------------
Net change in unrealized appreciation on:
Investments................................
17,662,192
Foreign
currencies.........................
36,468
- ----------------
17,698,660
- ----------------
Net gain on investments and foreign
currencies.................................
83,291,633
- ----------------
Net Increase in Net Assets
Resulting from
Operations..................... $
81,008,842
- ----------------
- ----------------
</TABLE>
PRUDENTIAL WORLD FUND, INC.
GLOBAL SERIES
Statement of Changes in Net Assets
- ---------------------------------------------
- ---------------
<TABLE>
<CAPTION>
Increase (Decrease) Year
Ended October 31,
in Net Assets 1997
1996
<S> <C>
<C>
Operations
Net investment loss......... $
(2,282,791) $ (1,962,492)
Net realized gain on
investment and foreign
currency transactions....
65,592,973 49,830,090
Net change in unrealized
appreciation on
investments and foreign
currencies...............
17,698,660 15,866,192
------------
- ---- -------------
Net increase in net assets
resulting from
operations...............
81,008,842 63,733,790
------------
- ---- -------------
Dividends and distributions
(Note 1)
Distributions in excess of net
investment income
Class A.....................
(672,140) --
Class B.....................
(955,146) --
Class C.....................
(22,662) --
Class Z.....................
(115,267) --
------------
- ---- -------------
(1,765,215) --
------------
- ---- -------------
Distributions from net realized
capital gains
Class A.....................
(17,584,834) (10,616,171)
Class B.....................
(24,988,935) (12,843,895)
Class C.....................
(592,898) (187,931)
Class Z.....................
(3,015,652) (30,717)
------------
- ---- -------------
(46,182,319) (23,678,714)
------------
- ---- -------------
Series share transactions (net
of share conversions) (Note
7)
Proceeds from shares sold...
1,364,574,496 639,187,000
Net asset value of shares
issued in reinvestment of
distributions............
45,634,720 22,475,256
Cost of shares reacquired...
(1,405,314,341) (586,163,045)
------------
- ---- -------------
Net increase in net assets from
Series share transactions...
4,894,875 75,499,211
------------
- ---- -------------
Total increase.................
37,956,183 115,554,287
Net Assets
Beginning of year..............
609,787,101 494,232,814
------------
- ---- -------------
End of year.................... $
647,743,284 $ 609,787,101
------------
- ---- -------------
------------
- ---- -------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 9
<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 (the 'Series') and the
International Stock Series. The Global 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 procedure 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 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
- ---------------------------------------------
- -----------------------------------
10
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Notes to Financial Statements
GLOBAL SERIES
- ---------------------------------------------
- -----------------------------------
currency transactions. Risks may arise upon
entering into these contracts from
the potential inability of the counterparties
to meet the terms of their
contracts.
Options: The Fund may either purchase or
write options in order to hedge against
adverse market movements or fluctuations in
value caused by changes in
prevailing interest rates or foreign currency
exchange rates with respect to
securities or currencies which the Fund
currently owns or intends to purchase.
When the Fund purchases an option, it pays a
premium and an amount equal to that
premium is recorded as an investment. When
the Fund writes an option, it
receives a premium and an amount equal to
that premium is recorded as a
liability. The investment or liability is
adjusted daily to reflect the current
market value of the option. If an option
expires unexercised, the Fund realizes
a gain or loss to the extent of the premium
received or paid. If an option is
exercised, the premium received or paid is an
adjustment to the proceeds from
the sale or the cost basis of the purchase in
determining whether the Fund has
realized a gain or loss. The difference
between the premium and the amount
received or paid on effecting a closing
purchase or sale transaction is also
treated as a realized gain or loss. Gain or
loss on purchased options is
included in net realized gain (loss) on
investment transactions. Gain or loss on
written options is presented separately as
net realized gain (loss) on written
option transactions.
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 (other than
distribution fees) and unrealized and
realized
gains or losses are allocated daily to each
class of shares of the Fund based
upon the relative proportion of net assets of
each class at the beginning of the
day.
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 of applying
this statement was to increase undistributed
net investment income by
$4,426,584, decrease accumulated net realized
gain on investments by $4,440,605
and increase paid-in capital in excess of par
by $14,021 due to realized and
recognized currency gains and mark to market
of passive foreign investment
companies for the year ended October 31,
1997. Net investment income, net
realized gains and net assets were not
affected by this change.
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. These differences are primarily
due to differing treatments for
foreign currency transactions.
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.
- ---------------------------------------------
- ---------------
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 has a distribution agreement with
Prudential Securities Incorporated
('PSI'), which acts as the distributor of the
Class A, Class B, Class C and
Class Z shares of the Fund. The Fund
compensates PSI 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 PSI. The distribution fees are
accrued
- ---------------------------------------------
- -----------------------------------
11
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Notes to Financial Statements
GLOBAL SERIES
- ---------------------------------------------
- -----------------------------------
daily and payable monthly. No distribution or
service fees are paid to PSI as
distributor for the Class Z shares of the
Fund.
Pursuant to the Class A Plan, the Fund
compensates PSI 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, 1997.
PSI has advised the Series that it has
received approximately $323,700 in
front-end sales charges resulting from sales
of Class A shares during the year
ended October 31, 1997. From these fees, PSI
paid such sales charges to
affiliated broker-dealers, which in turn paid
commissions to salespersons and
incurred other distribution costs.
PSI has advised the Series that during the
year ended October 31, 1997, it
received approximately $690,800 and $11,400
in contingent deferred sales charges
imposed upon certain redemptions by Class B
and C shareholders, respectively.
PSI, PIFM and PIC 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, 1997,
the Series incurred fees of approximately
$1,217,500 for the services of PMFS.
As of October 31, 1997, approximately
$106,300 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 non-
affiliates.
For the year ended October 31, 1997, PSI
and/or its foreign affiliates earned
approximately $7,900 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, 1997 were
$409,107,858 and $453,005,677,
respectively.
The United States federal income tax basis of
the Series' investments at October
31, 1997 was $487,572,777 and, accordingly,
as of October 31, 1997 net
unrealized appreciation for federal income
tax purposes was $129,727,942 (gross
unrealized appreciation--$152,266,965; gross
unrealized
depreciation--$22,539,023).
At October 31, 1997, the Fund had outstanding
forward currency contract, to sell
foreign currencies, as follows:
<TABLE>
<CAPTION>
Value at
Settlement
Foreign Currency Date
Current
Sale Contract Receivable
Value Depreciation
<S> <C>
<C> <C>
- ------------------------ ---------- --
- -------- ------------
Hong Kong Dollar,
expiring 4/27/98....... $2,195,111
$2,250,400 $ (55,289)
---------- --
- -------- ------------
---------- --
- -------- ------------
</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, 1997, the
Series had a 0.2% undivided interest in the
repurchase agreements in the joint
account. The undivided interest for the
Series represents $1,440,000 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., 5.70%, in the
principal amount of $236,000,000,
repurchase price $236,112,100, due 11/3/97.
The value of the collateral
including accrued interest was $241,912,917.
Credit Suisse First Boston Corp., 5.72%, in
the principal amount of
$237,440,000, repurchase price $237,553,180,
due 11/3/97. The value of the
collateral including accrued interest was
$246,134,363.
Deutsche Morgan Grenfell, Inc., 5.70%, in the
principal amount of $236,000,000,
repurchase price $236,112,100, due 11/3/97.
The value of the collateral
including accrued interest was $240,720,618.
- ---------------------------------------------
- -----------------------------------
12
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Notes to Financial Statements
GLOBAL SERIES
- ---------------------------------------------
- -----------------------------------
SBC Warburg Dillon Read, Inc., 5.66%, in the
principal amount of $92,714,000,
repurchase price $92,757,730, due 11/3/97.
The value of the collateral including
accrued interest was $94,588,984.
- ---------------------------------------------
- ---------------
Note 6. Borrowings
The Fund, along with other affiliated
registered investment companies, (the
'Funds'), entered into a credit agreement
(the 'Agreement') on December 31, 1996
with an unaffiliated lender. The maximum
commitment under the Agreement is
$200,000,000. The Agreement expires on
December 30, 1997. 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 Series utilized the line of credit during
the year ended October 31, 1997.
The average daily balance the Series had
outstanding during the year was
approximately $11,347,100 at a weighted
average interest rate of approximately
6.00%.
- ---------------------------------------------
- ---------------
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. Class C
shares are sold with a contingent
deferred sales charge of 1% during the first
year. 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
common stock, $.01 par value per
share, 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, 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
----------
- - ---------------
----------
- - ---------------
Year ended October 31, 1996:
Shares sold......................
26,335,607 $ 415,012,668
Shares issued in reinvestment of
distributions..................
680,446 10,109,525
Shares reacquired................
(28,068,715) (443,294,595)
----------
- - ---------------
Net decrease in shares
outstanding before
conversion.....................
(1,052,662) (18,172,402)
Shares issued upon conversion
from Class B...................
872,989 13,829,667
----------
- - ---------------
Net decrease in shares
outstanding....................
(179,673) $ (4,342,735)
----------
- - ---------------
----------
- - ---------------
<CAPTION>
Class B
- ---------------------------------
<S> <C>
<C>
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)
----------
- - ---------------
----------
- - ---------------
Year ended October 31, 1996:
Shares sold......................
10,835,882 $ 164,171,609
Shares issued in reinvestment of
distributions..................
846,398 12,154,296
Shares reacquired................
(8,151,951) (123,589,487)
----------
- - ---------------
Net increase in shares
outstanding before
conversion.....................
3,530,329 52,736,418
Shares reacquired upon conversion
into Class A...................
(906,072) (13,829,667)
----------
- - ---------------
Net increase in shares
outstanding....................
2,624,257 $ 38,906,751
----------
- - ---------------
----------
- - ---------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
13
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Notes to Financial Statements
GLOBAL SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class C Shares
Amount
- --------------------------------- ----------
- - ---------------
<S> <C>
<C>
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
----------
- - ---------------
----------
- - ---------------
Year ended October 31, 1996:
Shares sold......................
343,501 $ 5,317,184
Shares issued in reinvestment of
distributions..................
12,592 180,902
Shares reacquired................
(122,368) (1,957,739)
----------
- - ---------------
Net increase in shares
outstanding....................
233,725 $ 3,540,347
----------
- - ---------------
----------
- - ---------------
<CAPTION>
Class Z
- ---------------------------------
<S> <C>
<C>
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
----------
- - ---------------
----------
- - ---------------
March 1, 1996(a) through
October 31, 1996:
Shares sold......................
3,507,519 $ 54,685,539
Shares issued in reinvestment of
distributions..................
1,895 30,533
Shares reacquired................
(1,081,529) (17,321,224)
----------
- - ---------------
Net increase in shares
outstanding....................
2,427,885 $ 37,394,848
----------
- - ---------------
----------
- - ---------------
</TABLE>
- ---------------
(a) Commencement of offering of Class Z
shares.
- ---------------------------------------------
- -----------------------------------
14
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Financial Highlights
GLOBAL SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class A
- ---------------------------------------------
- -------------
Year Ended October 31,
- ---------------------------------------------
- -------------
1997 1996 1995(a) 1994(a)
1993(a)
- -------- -------- -------- ------
- - -------
<S>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year........................... $ 16.62
$ 15.52 $ 14.89 $ 13.17 $ 9.58
- -------- -------- -------- ------
- - -------
Income from investment operations
Net investment income
(loss).................................
(0.01) -- .01 (.04)
.02
Net realized and unrealized gain on
investment and foreign
currency
transactions.................................
.... 1.96 1.83 .81
1.76 3.57
- -------- -------- -------- ------
- - -------
Total from investment
operations..........................
1.95 1.83 .82 1.72
3.59
- -------- -------- -------- ------
- - -------
Less distributions
Distributions in excess of net investment
income............. (.05) --
- -- -- --
Distributions from net realized capital
gains................ (1.25)
(.73) (.19) -- --
- -------- -------- -------- ------
- - -------
Total
distributions................................
....... (1.30) (.73)
(.19) -- --
- -------- -------- -------- ------
- - -------
Net asset value, end of
year................................. $
17.27 $ 16.62 $ 15.52 $ 14.89
$ 13.17
- -------- -------- -------- ------
- - -------
- -------- -------- -------- ------
- - -------
TOTAL
RETURN(b):...................................
.......... 12.42% 12.33%
5.74% 13.06% 37.47%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)................................
$258,080 $234,700 $222,002
$73,815 $42,021
Average net assets
(000).....................................
$265,380 $222,948 $174,316
$58,455 $21,409
Ratios to average net assets:
Expenses, including distribution
fees..................... 1.39%
1.45% 1.51% 1.55% 1.56%
Expenses, excluding distribution
fees..................... 1.14%
1.20% 1.26% 1.30% 1.36%
Net investment income
(loss)..............................
0.01% (0.04)% .10% (0.29)%
0.20%
For Class A, B, C and Z shares:
Portfolio turnover
rate......................................
64% 52% 50% 49%
69%
Average commission rate paid per
share....................... $ 0.0264
$ 0.0366 N/A N/A N/A
</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. 15
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Financial Highlights
GLOBAL SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class B
- ---------------------------------------------
- ----------------
Year Ended October 31,
- ---------------------------------------------
- ----------------
1997 1996 1995(a) 1994(a)
1993(a)
- -------- -------- -------- -----
- --- --------
<S>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year........................... $ 15.96
$ 15.03 $ 14.53 $ 12.94 $
9.47
- -------- -------- -------- -----
- --- --------
Income from investment operations
Net investment income
(loss).................................
(0.12) (.08) (.11)
(.13) (.04)
Net realized and unrealized gain on
investment and foreign
currency
transactions.................................
.... 1.88 1.74 .80
1.72 3.51
- -------- -------- -------- -----
- --- --------
Total from investment
operations..........................
1.76 1.66 .69 1.59
3.47
- -------- -------- -------- -----
- --- --------
Less distributions
Distributions in excess of net investment
income............. (.05) --
- -- -- --
Distributions from net realized capital
gains................ (1.25)
(.73) (.19) -- --
- -------- -------- -------- -----
- --- --------
Total
distributions................................
....... (1.30) (.73)
(.19) -- --
- -------- -------- -------- -----
- --- --------
Net asset value, end of
year................................. $
16.42 $ 15.96 $ 15.03 $ 14.53
$ 12.94
- -------- -------- -------- -----
- --- --------
- -------- -------- -------- -----
- --- --------
TOTAL
RETURN(b):...................................
.......... 11.70% 11.57%
4.98% 12.29% 36.64%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)................................
$335,007 $326,978 $268,498
$410,520 $251,133
Average net assets
(000).....................................
$350,518 $294,230 $287,656
$345,771 $183,741
Ratios to average net assets:
Expenses, including distribution
fees..................... 2.07%
2.12% 2.19% 2.24% 2.24%
Expenses, excluding distribution
fees..................... 1.14%
1.20% 1.27% 1.30% 1.36%
Net investment income
(loss)..............................
(0.68)% (.67)% (.84)%
(0.97)% (0.39)%
</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. 16
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Financial Highlights
GLOBAL SERIES
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class C
- ---------------------------------------------
- ----------------
August 1,
1994(c)
Year Ended October 31,
Through
- --------------------------------------------
October 31,
1997 1996 1995(a)
1994(a)
- ---------- ------------ ------------
- ------------
<S>
<C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period......................... $ 15.96
$ 15.03 $14.53 $14.03
- ---------- ------ -----
- -----
Income from investment operations
Net investment income
(loss).................................
(0.11) (.05) (.11)
(.03)
Net realized and unrealized gain on
investment and foreign
currency
transactions.................................
.... 1.86 1.71
.80 .53
- ---------- ------ -----
- -----
Total from investment
operations..........................
1.75 1.66 .69
.50
- ---------- ------ -----
- -----
Less distributions
Distributions in excess of net investment
income............. (.05) --
- -- --
Distributions from net realized capital
gains................ (1.25)
(.73) (.19) --
- ---------- ------ -----
- -----
Total
distributions................................
....... (1.30) (.73)
(.19) --
- ---------- ------ -----
- -----
Net asset value, end of
period............................... $
16.41 $ 15.96 $15.03
$14.53
- ---------- ------ -----
- -----
- ---------- ------ -----
- -----
TOTAL
RETURN(b):...................................
.......... 11.63% 11.57%
4.98% 3.56%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000).............................. $
10,244 $ 7,693 $3,733
$1,205
Average net assets
(000).....................................
$ 9,093 $ 5,516 $2,284
$ 630
Ratios to average net assets:
Expenses, including distribution
fees..................... 2.14%
2.20% 2.25% 2.63%(e)
Expenses, excluding distribution
fees..................... 1.14%
1.20% 1.25% 1.63%(e)
Net investment income
(loss)..............................
(0.75)% (.72)% (.76)%
(1.21)%(e)
<CAPTION>
Class Z
- -----------------------------
<S>
<C> <C>
March 1,
1996(d)
Year Ended Through
October 31, October 31,
1997 1996
- ------------ ------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period......................... $ 16.65
$ 15.42
- ------ ------
Income from investment operations
Net investment income
(loss).................................
0.04 .06
Net realized and unrealized gain on
investment and foreign
currency
transactions.................................
.... 1.96 1.18
- ------ ------
Total from investment
operations..........................
2.00 1.24
- ------ ------
Less distributions
Distributions in excess of net investment
income............. (.05) --
Distributions from net realized capital
gains................ (1.25)
(.01)
- ------ ------
Total
distributions................................
....... (1.30) (.01)
- ------ ------
Net asset value, end of
period............................... $
17.35 $ 16.65
- ------ ------
- ------ ------
TOTAL
RETURN(b):...................................
.......... 12.72% 8.06%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000).............................. $
44,412 $ 40,416
Average net assets
(000).....................................
$ 46,545 $ 26,452
Ratios to average net assets:
Expenses, including distribution
fees..................... 1.14%
1.20%(e)
Expenses, excluding distribution
fees..................... 1.14%
1.20%(e)
Net investment income
(loss)..............................
0.27% .55%(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) Commencement of offering of Class Z
shares.
(e) Annualized.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 17
<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, 1997, and the results of
its operations, the changes in its
net assets and the financial highlights for
the year 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 audit. We conducted our audit
of these financial statements in accordance
with generally accepted auditing
standards which require that we plan and
perform the audit to obtain reasonable
assurance about whether the financial
statements are free of material
misstatement. An audit includes examining, on
a test basis, evidence supporting
the amounts and disclosures in the financial
statements, assessing the
accounting principles used and significant
estimates made by management, and
evaluating the overall financial statement
presentation. We believe that our
audit, which included confirmation of
securities at October 31, 1997 by
correspondence with the custodian and brokers
and the application of alternative
auditing procedure where securities purchased
had not been received, provides a
reasonable basis for the opinion expressed
above. The accompanying statement of
changes in net assets for the year ended
October 31, 1997 and the financial
highlights for each of the periods prior to
the year ended October 31, 1997 were
audited by other independent accountants,
whose opinion dated December 13, 1996
was unqualified.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
December 23, 1997
- ---------------------------------------------
- -----------------------------------
18
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Change of Auditors
GLOBAL SERIES
- ---------------------------------------------
- -----------------------------------
Effective March 1, 1997, Deloitte & Touche
LLP was terminated as the Fund's
auditors. For the years ended May 15, 1984
through October 31, 1996, Deloitte &
Touche LLP expressed an unqualified opinion
on the Series' financial statements.
There were no disagreements between Fund
management and Deloitte & Touche LLP
prior to their termination. The Board of
Directors approved the termination of
Deloitte & Touche LLP and the appointment of
Price Waterhouse LLP as the Fund's
independent accountants.
PRUDENTIAL WORLD FUND, INC.
Federal Income Tax Information
GLOBAL SERIES
- ---------------------------------------------
- -----------------------------------
We are required by the Internal Revenue Code
to advise you within 60 days of the
Series' fiscal year end (October 31, 1997) 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, 1997, dividends were paid
from currency gains of $.045 per share for
Class A, B, C and Z shares, which are
taxable as ordinary income. In addition, the
Series paid to Class A, B, C and Z
shares a short-term capital gain distribution
of $.20 which is taxable as
ordinary income and a long-term capital gain
distribution of $1.05 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.
In January 1998, 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 1997.
- ---------------------------------------------
- -----------------------------------
19
<PAGE>
Getting The Most From Your Prudential Mutual
Fund.
- ---------------------------------------------
- ----------------------------------
Change Your Mind.
You can exchange your shares in most
Prudential Mutual Funds for shares in most
other Prudential Mutual Funds, without
charges. This may be most helpful if
your investment needs change.
- ---------------------------------------------
- ----------------------------------
Reinvest Dividends Free Of Charge.
Reinvest your dividends and/or capital gains
distributions automatically --
without charge.
- ---------------------------------------------
- ----------------------------------
Invest For Retirement.
There is no minimum investment for an IRA.
Plus, you defer taxes on your
investment earnings by investing in an IRA.
If you'd like, you can contribute up to
$2,000 a year in an IRA. And if you are
married and not covered by a retirement plan
at work, you and your spouse may
each contribute $2,000 a year to an IRA for a
total of $4,000.
- ---------------------------------------------
- ----------------------------------
Change Your Job.
You can take your pension with you. Use a
rollover IRA to manage your
company-sponsored retirement plan while
retaining the special tax-deferred
advantages.
- ---------------------------------------------
- ----------------------------------
Invest In Your Children.
There's no fee to open a custodial account
for a child's education or other
needs.
- ---------------------------------------------
- ----------------------------------
Take Income.
Would you like to receive monthly or
quarterly checks in any amount from your
fund account? Just let us know. We'll take
care of it. Of course, there are
minimum amounts. And shares redeemed may be
subject to tax, and Class B and C
shares may be subject to contingent deferred
sales charges. We'll gladly answer
your questions.
- ---------------------------------------------
- ----------------------------------
Keep Informed.
We want to keep you up-to-date. Of course,
you receive account activity
statements every quarter. But you also
receive annual and semi-annual fund
reports, as well as other important updates
on events that affect your
investments, including tax information.
This material is only authorized for
distribution when preceded or accompanied
by a current prospectus. Read the prospectus
carefully before you invest or
send money.
<PAGE>
Comparing A $10,000 Investment.
- ---------------------------------------------
- ------
Prudential World Fund, Inc. -- Global Series
vs. the
Morgan Stanley Capital International World
Index.
Class A
(GRAPH)
Class B
(GRAPH)
Class C
(GRAPH)
Class Z
(GRAPH)
Past performance is not indicative of future
results. Investment return and
principal value will fluctuate so an
investor's shares, when redeemed, may be
worth more or less than their original cost.
The boxes on top of the graphs
are designed to give you an idea how much the
Series' returns can fluctuate
from year to year by measuring the best and
worst calendar years in terms of
total annual return since inception of each
share class.
These graphs are furnished to you in
accordance with SEC regulations. They
compare a $10,000 investment in the
Prudential World Fund, Inc. -- Global
Series (Class A, Class B, Class C and Class
Z) with a similar investment in the
Morgan Stanley Capital International World
Index by portraying the initial
account values at the commencement of
operations of Class A, Class C and Class
Z shares and for 10 years for Class B shares,
and subsequent account values at
the end of this reporting period (October
31), as measured on a quarterly
basis, beginning in 1990 for Class A shares,
in 1987 for Class B shares, in
1994 for Class C shares and in 1996 for Class
Z shares. For purposes of the
graphs, and unless otherwise indicated, in
the accompanying tables it has been
assumed (a) that the maximum applicable front-
end sales charge was deducted
from the initial $10,000 investment in Class
A shares; (b) the maximum
applicable contingent deferred sales charge,
if any, was deducted from the
value of the investment in Class B and Class
C shares, assuming full redemption
on October 31, 1997; (c) all recurring fees
(including management fees) were
deducted; and (d) all dividends and
distributions were reinvested. Class B
shares will automatically convert to Class A
shares, on a quarterly basis,
beginning approximately seven years after
purchase. This conversion feature is
not reflected in the graph. Class Z shares do
not have a sales charge or a
distribution fee. The graph and accompanying
tables reflect the past subsidy
and/or waiver of expenses and/or management
fees.
*Without waiver and expense subsidies the
value of the $10,000 investment in
the Series and the Series' average annual
total returns would have been lower,
as indicated in the ( ) parentheses.
The Morgan Stanley World Index is a weighted
index comprised of approximately
1,472 securities listed on the stock
exchanges of the U.S., Europe, Canada,
Australia, New Zealand and the Far East. The
World Index is an unmanaged index
and includes the reinvestment of all
dividends, but does not reflect the
payment of transaction costs and advisory
fees associated with an investment
in the Series'. The securities in the World
Index may differ substantially from
the securities in the Series'. The World
Index is not the only index that may
be used to characterize performance of stock
funds and other indexes may
portray different comparative performance.
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Directors
Edward D. Beach
Stephen C. Eyre
Delayne Dedrick Gold
Robert F. Gunia
Don G. Hoff
Robert E. LaBlanc
Mendel A. Melzer
Richard A. Redeker
Robin B. Smith
Stephen Stoneburn
Nancy H. Teeters
Officers
Richard A. Redeker, President
Thomas A. Early, Vice President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Robert C. Rosselot, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
The views expressed in this report and
information about the Fund's portfolio
holdings are for the period covered by this
report and are subject to change
thereafter.
This report is not authorized for
distribution to prospective investors unless
preceded or accompanied by a current
prospectus.
743969107 MF115E
743969206 Cat. #44014AY
743969305
743969404
