(ICON)
Prudential
World
Fund, Inc.
- ---------------------------
International
Stock Series
ANNUAL
REPORT
Oct. 31, 1998
(LOGO)
<PAGE>
Performance At A Glance.
The Prudential World Fund -- International Stock Series
performed in line with
its peers over the 12 months ended October 31, 1998. Its
strategy of focusing
on companies whose earnings prospects are underappreciated
by most investors
helped the Series in rising markets. However, in the summer
months, many
investors reacted strongly to the possibility of a global
recession: stocks
that already had been out of favor fell further than most
other stocks in the
rapidly dropping markets. Overall, we had a modest gain in a
difficult year.
Cumulative Total Returns1 As of 10/31/98
<TABLE>
<CAPTION>
One Five
Since
Year Years
Inception2
<S> <C> <C>
<C>
Class A 3.85% N/A
17.55%
Class B 3.05 N/A
15.67
Class C 3.05 N/A
15.67
Class Z 4.08 59.66%
106.78
Lipper International Fund Avg.3 4.07 41.60
***
</TABLE>
Average Annual Total Returns1 As of
9/30/98
<TABLE>
<CAPTION>
One Five
Since
Year Years
Inception2
<S> <C> <C>
<C>
Class A -15.93% N/A
2.08%
Class B -17.18 N/A
2.47
Class C -13.18 N/A
3.91
Class Z -11.33 9.32%
11.80
</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,
Inc. The
cumulative total returns do not take into account sales
charges. The average
annual total returns do take into account applicable sales
charges. The Series
charges a maximum front-end sales load of 5% for Class A
shares. Class B shares
are subject to a declining contingent deferred sales charge
(CDSC) of 5%, 4%,
3%, 2%, 1% and 1% for six years. Class B shares will
automatically convert to
Class A shares, on a quarterly basis, approximately seven
years after purchase.
Class C shares are subject to a front-end sales charge of 1%
and a CDSC of 1%
for 18 months. Class C shares bought before November 2, 1998
have a 1% CDSC if
sold within one year. Class Z shares are not subject to a
sales charge or
distribution fee. 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 ( ).
2 Inception dates: Class A, B, and C, 9/23/96; Class Z,
11/5/92.
3 Lipper average returns are for all funds in each share
class for the one-
and five-year periods in the International Fund category.
***Lipper Since Inception returns are 14.46% for Class A, B,
and C, and 91.53%
for Class Z based on all funds in each share class.
How Investments Compared.
(As of 10/31/98)
(GRAPH)
Source: Lipper, Inc. 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.
U.S. Taxable Money 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
The Prudential World Fund -- International Stock Series
invests primarily in
equity securities of companies located outside the United
States. Mercator uses
a value investment style to identify stocks selling at low
prices compared with
their earnings potential to attain our primary goal of long-
term growth of
capital. 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.
Value And Patience.
We are value investors and buy stocks that we believe to be
undervalued and
hold them (unless there is an unexpected deterioration)
until their strengths
are recognized and the stock price moves up significantly.
Value managers have
to be very patient. When investors panic, as they did last
summer, they
sometimes abandon the stocks of companies whose sources of
earnings growth are
not obvious. We project the earnings of companies five years
ahead and buy
when they are bargains.
Strategy Session.
- ------------------------------------------------------------
- -------------------
Our basic strategy does not change: we search the foreign
markets for companies
that are selling below what we consider fair value and build
our portfolio
stock by stock. In a favorable market, we may see a stock
rise to our price
target quickly. In today's unfavorable climate for value
stocks, many stocks we
had bought inexpensively remained bargain-priced, so our
portfolio turnover was
unusually low -- less than 15% for the year. Because of the
uncertain markets,
we allowed our average cash balance to rise higher than
usual. We believe
analysts still haven't fully appreciated the impact of Asian
events on Europe.
We bought Rio Tinto, a U.K.-based company with global metals
mining operations.
The Asian economic depression and potential slowdown in
Europe and North
America have sharply reduced investor interest in the stocks
of companies whose
business is closely tied to the economic cycle. A time-
honored value strategy
is to buy economically sensitive stocks when they are cheap
and take our gains
when they are expensive. In this economic cycle, inventories
appear low, yet
most commodity industries have refrained from building
capacity. These
companies should do well when demand recovers, but we have
to be patient until
then. A similar theme underlies our purchase of Saga
Petroleum, a Norway-based
oil production company. The lowest oil prices in 12 years
have led its price to
fall to very low levels.
We added Sony and Matsushita Electric to our small holdings
in Japan. These
are global companies that were inexpensive because of the
poor state of
Japan's economy and stock market.
Portfolio Composition.
Sectors expressed as a percentage
of net assets as of 10/31/98.
(GRAPH)
<PAGE>
What Went Well.
- -------------------------------------------------
Although we build our portfolio from the bottom up,
sometimes we see a theme
recur. A year ago, we were reporting gains on Banca
Fideuram, an Italian bank
that had strong earnings on mutual funds and insurance
sales. The stock rose
beyond our estimate of fair value, so we took our profits
and reinvested the
proceeds in an undervalued bank with a similar story: Banca
Popolare Di
Brescia. It has excellent management and rapid growth of
financial services
products as it does a very good job of gathering assets
through mutual fund
sales. We took a small part of our profits as the stock
price rose sharply, but
held most of our shares because we think they do not yet
reflect the full
earnings growth potential of this bank.
Bouygues, on the other hand, is a French conglomerate that
we thought was
undervalued and would benefit from a restructuring. We
bought it at a large
discount to our estimate of the value of the underlying
assets. As our
reporting period came to a close, and afterward, purchasers
of large blocks of
shares appeared as potential catalysts to the restructuring.
We benefited from
a rise in the stock, but are holding it as the share price
rises toward a
realistic value of Bouygues' components.
British Telecom was our largest holding on October 31.
Recently, the
telecommunications industry has been a major source of
global economic growth,
and it is relatively buffered from the economic cycle.
British Telecom had been
less than efficient, but it reorganized and now can be a
strong competitor.
And Not So Well.
- -------------------------------------------------
Our value strategy leads us to hold many cyclical stocks --
those whose
prospects vary with the pace of economic growth. As Asian
economies contracted,
threatening global growth, many of our economically
sensitive stocks suffered.
In particular, some of our Australian companies -- such as
CSR Limited and
Pioneer International -- and Alcan Aluminum in Canada did
poorly as resource
and metals businesses were hurt. Our Peugeot shares suffered
from the economic
slowdown as concerns of a softening in consumer spending
mounted.
The threat of a slowdown also hurt Stork, a capital
equipment manufacturer in
the Netherlands. The stock fell substantially through the
spring and summer,
but has rebounded somewhat since then.
Parmalat, the Italian food company, changed its corporate
strategy, going into
more mature markets and making a large number of
acquisitions. We no longer
had confidence in our earnings projections and sold our
shares at a small
profit.
Five Largest
Holdings.
4.1% British Telecom PLC
Telecommunications
3.4% Bouygues
Construction & Housing
3.1% Banca Popolare Di Brescia
Commercial Banking
2.9% Iberdrola SA
Electrical & Gas Utilities
2.8% Pharmacia & Upjohn
Health & Personal Care
Expressed as a percentage of net assets as of 10/31/98.
Looking Ahead.
- -------------------------------------------------
Mercator expects choppy times to continue for a while. The
earnings
expectations of most securities analysts are too high to fit
economists'
expectations of world economic growth, so we think there
will be more earnings
forecasts adjusted downward. Value stocks may be under
pressure a little
longer. The companies we own, however, are strong enough to
weather a slowdown,
and they currently are very inexpensive when compared with
our estimates of
their long-term earnings.
The best stock values may soon be in Asia, but Asian
economies are so unstable
that we don't feel confident of earnings projections. There
are signs that
some Asian countries are stabilizing. Over the coming year,
we should get a
clearer view.
1
<PAGE>
Cautious Optimism.
- ------------------------------------------------------------
- -------------------
Portfolio Manager Peter Spano is in for the long term.
Q. All of your 10 largest holdings are in Europe. Shouldn't
you be more
diversified internationally?
A. Let's start with how we build our portfolio. Using our
global network of
independent analysts, we project earnings of companies
five years ahead. We
compare these estimates with the current share price.
Then we build our
portfolio stock by stock with the least expensive shares.
We ensure
diversification with guidelines for maximum exposure in
any one country or
industry, but don't have any minimum requirements. If a
country or industry
offers no value opportunities, we won't buy there.
Nonetheless, we generally
are in 10 to 20 different countries (we were in 14 on
October 31) and rarely
have more than 15% of our assets in any one industry. On
October 31, about
two-thirds of our assets were in European countries. Our
largest country
investment was 16% in the United Kingdom, but the U.K.
makes up 22% of the
world's non-U.S. developed markets (as measured by Morgan
Stanley Capital
International's EAFE Index). Our second-largest focus was
11% in
Switzerland, compared with its eight percent of the EAFE
Index.
We think the global economic situation still is uncertain
over the next
year. European countries have the most secure growth
outside the United
States, so we own perhaps more in Europe than we usually
would. Even there,
however, we expect competition from low-cost Asian
producers will change the
near-term playing field. Some European companies will not
be able to control
their destiny the way they have in the past. We have to
watch the situation
on a company-by-company basis.
Q. You had very little invested in Japan, which is a large
part of the world's
economy. Why?
A. The key is earnings visibility. We have to have
confidence in our long-term
earnings projections for a company. The companies we own
in Japan --
Hitachi, Matsushita Electric, and Sony -- have worldwide
businesses and we
do not expect them to require dramatic restructuring to
meet global
productivity standards. Japanese industry must undergo a
structural
transformation, after which the companies may be much
stronger. We are not
yet in a position to see how that process will play out.
Companies that
depend on the Japanese domestic market will have
uncertain futures until
consumers feel more confident in the economy.
Q. Are we heading for a global recession?
A. We don't think so, but it is a possibility that we must
consider as global
growth clearly is slowing. We are cautious investors and
there is more of a
real threat to the global economy than there has been in
a very long time.
That said, most economists are not predicting a recession
in the United
States or Europe. We believe the most likely outcome is
lower growth
followed by a recovery and we will be buying firms that
will be
well-positioned for the future. It is a time for cautious
optimism.
2
<PAGE>
President's Letter
December 18, 1998
- ------------------------------------------------------------
- -------------------
(PHOTO)
Dear Shareholder:
As 1998 draws to a close, the news from the financial
markets is decidedly
mixed. After a series of sharp sell-offs in late summer,
some stock prices
began to rebound in early fall, helped by three interest
rate cuts by the
Federal Reserve.
There was other good news. U.S. Treasuries and Western
European bonds
appreciated during the year as investors fled troubled Asian
markets and other
emerging markets. The U.S. economy remained strong with
steady growth and low
inflation.
The periods of uncertainty we experienced in 1998 illustrate
why it is
important to manage your expectations and diversify your
portfolio.
Keep A Good Perspective.
Experienced mutual fund investors understand that financial
markets will always
rise and fall -- that's what markets do. Although past
performance may not be
indicative of future results, stocks and bonds have, over
time, consistently
produced attractive returns that have kept ahead of
inflation. In fact,
investors who remained focused on the long term and did not
sell during
summer's volatility were rewarded. Stock prices, as measured
by the Standard &
Poor's 500 Index, recovered strongly in November regaining
lost ground and even
setting a new record high.
Diversify. Diversify. Diversify.
Because asset classes seldom move in lockstep, owning a mix
of stock, bond,
and money market mutual funds can help lessen the effects of
a market downturn
over time. In fact, a well-diversified portfolio may retain
or perhaps even
gain value during times of uncertainty.
We're Here To Help.
How diversified is your portfolio? Your Prudential
professional will be glad to
review your current allocations. He or she will recommend
adjustments based
upon your goals, market conditions, risk tolerance, and
potential investment
opportunities.
Thank you for your confidence in Prudential mutual funds.
We'll continue to do
our part in keeping you informed.
Sincerely,
Brian M. Storms
President
3
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Portfolio of Investments as of October 31, 1998
INTERNATIONAL STOCK SERIES
- ------------------------------------------------------------
- -------------------
- ------------------------------------------------------------
- -------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--87.6%
COMMON STOCKS
- ------------------------------------------------------------
Argentina--2.7%
166,000 Telecom Argentina (ADR) $
5,353,500
201,800 YPF Sociedad Anonima (ADR)
5,839,588
---------
- ---
11,193,088
- ------------------------------------------------------------
Australia--6.5%
2,500,000 CSR, Ltd.
5,714,175
1,695,000 Mayne Nickless, Ltd.
7,811,933
580,000 National Australia Bank, Ltd.
7,678,852
2,600,000 Pioneer International, Ltd.
5,390,684
---------
- ---
26,595,644
- ------------------------------------------------------------
Canada--3.4%
230,000 Alcan Aluminum, Ltd.
5,779,831
390,000 Bank of Nova Scotia
8,143,969
---------
- ---
13,923,800
- ------------------------------------------------------------
France--9.6%
68,200 Bouygues
13,780,137
65,000 Christian Dior SA
6,877,253
69,000 Elf Aquitaine SA
7,996,936
65,000 Peugeot SA
10,860,670
---------
- ---
39,514,996
- ------------------------------------------------------------
Italy--7.3%
428,000 Banca Popolare Di Bergamo Credito
Vaesino S.P.A.
8,758,705
536,700 Banca Popolare Di Brescia
12,655,235
5,082,000 Benetton Group S.P.A.
8,521,741
---------
- ---
29,935,681
- ------------------------------------------------------------
Japan--4.5%
700,000 Hitachi, Ltd.
3,569,831
530,000 Matsushita Electric Industrial Co.,
Ltd.
7,798,676
109,500 Sony Corp.
6,968,524
---------
- ---
18,337,031
Netherlands--8.2%
212,000 AKZO N.V. $
8,247,790
200,000 ING Groep N.V.
9,688,655
245,000 KLM N.V.
7,404,748
173,225 Koninklijke Pakhoed Holdings N.V.
4,270,055
164,050 Stork N.V.
4,096,635
---------
- ---
33,707,883
- ------------------------------------------------------------
New Zealand--2.4%
3,500,000 Carter Holt Harvey, Ltd.
2,854,274
700,000 Fisher & Paykel Industries, Ltd.
2,075,836
1,778,000 Lion Nathan, Ltd.
4,660,622
---------
- ---
9,590,732
- ------------------------------------------------------------
Norway--1.1%
343,500 Saga Petroleum
4,346,031
- ------------------------------------------------------------
South Korea--1.4%
270,000 Korea Electric Power Corp.
4,808,640
20,180 Pohang Iron & Steel Co., Ltd.
887,033
---------
- ---
5,695,673
- ------------------------------------------------------------
Spain--6.9%
720,000 Banco Bilbao Vizcaya SA
9,729,038
141,200 Banco de Andalucia SA
6,728,113
732,600 Iberdrola SA
11,853,104
---------
- ---
28,310,255
- ------------------------------------------------------------
Sweden--7.3%
660,000 Electrolux AB
9,952,515
225,200 Pharmacia & Upjohn
11,531,674
330,000 SKF AB
3,790,426
290,000 Svedala Industri AB
4,577,772
---------
- ---
29,852,387
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 4
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Portfolio of Investments as of October 31, 1998
INTERNATIONAL STOCK SERIES
- ------------------------------------------------------------
- -------------------
- ------------------------------------------------------------
- -------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Switzerland--10.4%
5,500 Novartis AG $
9,931,177
15,025 The Swatch Group AG
8,305,835
11,560 Sulzer Brothers, Ltd.
6,672,686
32,307 UBS AG
8,881,855
33,000 Valora Holding AG
8,901,428
---------
- ---
42,692,981
- ------------------------------------------------------------
United Kingdom--15.9%
1,100,000 Allied Domecq PLC
10,127,693
2,353,000 British Steel PLC
4,037,392
1,300,000 British Telecom PLC
16,800,252
1,334,000 Coats Viyella PLC
692,266
615,000 National Westminster Bank PLC
10,387,748
1,140,000 Rank Group PLC
4,694,562
765,000 Rio Tinto PLC
9,290,819
3,300,000 Tesco PLC
9,308,270
---------
- ---
65,339,002
---------
- ---
Total common stocks
(cost $314,020,029)
359,035,184
---------
- ---
- ------------------------------------------------------------
Rights
2,712,000 Mayne Nickless, Ltd.
expiring November 1998
(cost $0)
0
---------
- ---
Total long-term investments
(cost $314,020,029)
359,035,184
---------
- ---
SHORT-TERM INVESTMENT--13.0%
Principal Amount
(000)
- ------------------------------------------------------------
Repurchase Agreement
Joint Repurchase Agreement Account,
$ 53,504 5.40%, 11/02/98
(cost $53,504,000; Note 5)
53,504,000
---------
- ---
- ------------------------------------------------------------
Total Investments--100.6%
(cost $367,524,029; Note 5)
412,539,184
Liabilities in excess of
other assets--(0.6%)
(2,558,453)
---------
- ---
Net Assets--100%
$409,980,731
---------
- ---
---------
- ---
</TABLE>
- ---------------
ADR--American Depository Receipt.
The industry classification of portfolio holdings and other
assets in excess of
liabilities shown as a percentage of net assets as of
October 31, 1998 was as
follows:
<TABLE>
<S> <C>
Commercial Banking..................................
17.9%
Telecommunications.................................. 5.4
Merchandising....................................... 4.4
Textiles & Apparel.................................. 3.9
Electronics......................................... 3.7
Machinery & Engineering............................. 3.7
Beverages & Tobacco................................. 3.6
Steel............................................... 3.5
Energy Sources...................................... 3.4
Construction & Housing.............................. 3.4
Utilities........................................... 2.9
Electrical Equipment................................ 2.8
Health & Personal Care.............................. 2.8
Building Materials & Components..................... 2.7
Auto Manufacturing.................................. 2.6
Appliances.......................................... 2.4
Drugs & Healthcare.................................. 2.4
Financial Services.................................. 2.4
Chemicals........................................... 2.0
Multi-Industry...................................... 1.9
Airlines/Military Technology........................ 1.8
Metals - Nonferrous................................. 1.4
Electrical Power.................................... 1.2
Leisure & Tourism................................... 1.1
Oil & Gas........................................... 1.1
Energy Equipment & Services......................... 1.0
Industrial Components............................... .9
Forestry & Paper.................................... .7
Consumer Durable Goods.............................. .6
Short-term investment............................... 13.0
-----
100.6%
Liabilities in excess of other assets...............
(.6)
-----
100.0%
-----
-----
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 5
<PAGE>
PRUDENTIAL
WORLD FUND, INC.
Statement of Assets and Liabilities
INTERNATIONAL STOCK SERIES
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Assets
October 31, 1998
<S>
<C>
Investments excluding repurchase agreement at value (cost
$314,020,029)...................................
$359,035,184
Repurchase agreement, at value (cost
$53,504,000)................................................
......... 53,504,000
Cash........................................................
..............................................
91,450
Foreign currency, at value (cost
$643,923)...................................................
............. 645,078
Receivable for Series shares
sold........................................................
................. 1,928,292
Dividends and interest
receivable..................................................
....................... 781,473
Deferred expenses and other
assets......................................................
.................. 6,609
- ----------------
Total
assets......................................................
..................................... 415,992,086
- ----------------
Liabilities
Payable for Series shares
reacquired..................................................
.................... 5,308,976
Management fee
payable.....................................................
............................... 326,039
Accrued expenses and other
liabilities.................................................
................... 280,189
Distribution fee
payable.....................................................
............................. 96,151
- ----------------
Total
liabilities.................................................
..................................... 6,011,355
- ----------------
Net
Assets......................................................
..........................................
$409,980,731
- ----------------
- ----------------
Net assets were comprised of:
Common stock, at
par.........................................................
.......................... $ 223,771
Paid-in capital in excess of
par.........................................................
.............. 360,493,979
- ----------------
360,717,750
Undistributed net investment
income......................................................
.............. 3,884,785
Accumulated net realized gain on
investments.................................................
.......... 319,694
Net unrealized appreciation on investments and foreign
currencies......................................
45,058,502
- ----------------
Net assets, October 31,
1998........................................................
...................... $409,980,731
- ----------------
- ----------------
Class A:
Net asset value and redemption price per share
($47,237,244 / 2,577,403 shares of common stock issued
and outstanding).............................
$18.33
Maximum sales charge (5% of offering
price)......................................................
...... .96
- ----------------
Maximum offering price to
public......................................................
................. $19.29
- ----------------
- ----------------
Class B:
Net asset value, offering price and redemption price per
share
($93,895,911 / 5,165,966 shares of common stock issued
and outstanding).............................
$18.18
- ----------------
- ----------------
Class C:
Net asset value, offering price and redemption price per
share
($14,270,753 / 785,127 shares of common stock issued
and outstanding)...............................
$18.18
- ----------------
- ----------------
Class Z:
Net asset value, offering price and redemption price per
share
($254,576,823 / 13,848,604 shares of common stock
issued and outstanding)...........................
$18.38
- ----------------
- ----------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 6
<PAGE>
PRUDENTIAL WORLD FUND, INC.
INTERNATIONAL STOCK SERIES
Statements of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income October 31,
1998
<S> <C>
Income
Dividends (net of foreign withholding
taxes of $1,352,001)................. $ 10,037,621
Interest................................ 2,015,005
--------------
- --
Total income......................... 12,052,626
--------------
- --
Expenses
Management fee.......................... 4,158,188
Distribution fee--Class A............... 111,771
Distribution fee--Class B............... 984,438
Distribution fee--Class C............... 143,446
Transfer agent's fees and expenses...... 826,000
Custodian's fees and expenses........... 440,000
Reports to shareholders................. 95,000
Registration fees....................... 67,000
Audit fee............................... 35,000
Legal fees and expenses................. 33,000
Directors' fees......................... 30,000
Miscellaneous........................... 25,148
--------------
- --
Total expenses....................... 6,948,991
--------------
- --
Net investment income...................... 5,103,635
--------------
- --
Realized and Unrealized Gain (Loss)
on Investment and Foreign Currency
Transactions
Net realized gain (loss) on:
Investment transactions................. 69,985
Foreign currency transactions...........
(406,127)
--------------
- --
(336,142)
--------------
- --
Net change in unrealized appreciation on:
Investments............................. 6,168,381
Foreign currencies...................... 1,582
--------------
- --
6,169,963
--------------
- --
Net gain on investments and foreign
currencies.............................. 5,833,821
--------------
- --
Net Increase in Net Assets
Resulting from Operations.................. $ 10,937,456
--------------
- --
--------------
- --
</TABLE>
PRUDENTIAL WORLD FUND, INC.
INTERNATIONAL STOCK SERIES
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended October 31,
in Net Assets 1998 1997
<S> <C> <C>
Operations
Net investment income........ $ 5,103,635 $
4,227,843
Net realized gain (loss) on
investment and foreign
currency transactions..... (336,142)
7,343,863
Net change in unrealized
appreciation of
investments and foreign
currencies................ 6,169,963
13,631,809
------------- ---------
- ----
Net increase in net assets
resulting from
operations................ 10,937,456
25,203,515
------------- ---------
- ----
Dividends and distributions
(Note 1)
Dividends from net investment
income
Class A................... (355,991)
(1,745)
Class B................... (388,835)
(23)
Class C................... (55,588)
(2)
Class Z................... (2,669,202)
(2,801,611)
------------- ---------
- ----
(3,469,616)
(2,803,381)
------------- ---------
- ----
Distributions from net
realized capital gains
Class A................... (791,091)
(1,514)
Class B................... (1,944,176)
(24)
Class C................... (277,943)
(2)
Class Z................... (5,084,194)
(2,381,370)
------------- ---------
- ----
(8,097,404)
(2,382,910)
------------- ---------
- ----
Series share transactions (net
of conversions) (Note 6)
Net proceeds from shares
sold...................... 672,760,380
804,494,249
Net asset value of shares
issued in reinvestment of
dividends and
distributions............. 11,451,509
5,185,220
Cost of shares reacquired.... (647,270,258)
(646,463,274)
------------- ---------
- ----
Net increase in net assets
from Series share
transactions.............. 36,941,631
163,216,195
------------- ---------
- ----
Total increase.................. 36,312,067
183,233,419
Net Assets
Beginning of year............... 373,668,664
190,435,245
------------- ---------
- ----
End of year(a).................. $ 409,980,731 $
373,668,664
------------- ---------
- ----
------------- ---------
- ----
- ---------------
(a) Includes undistributed net
investment income of............ $ 3,884,785 $
2,651,778
------------- ---------
- ----
------------- ---------
- ----
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 7
<PAGE>
PRUDENTIAL
WORLD FUND, INC.
Notes to Financial Statements INTERNATIONAL
STOCK SERIES
- ------------------------------------------------------------
- --------------------
Prudential World Fund, Inc. (the 'Fund') is registered under
the Investment
Company Act of 1940, as an open-end, diversified management
investment company
and currently consists of two series: the International
Stock Series and the
Global Series. The International Stock Series (the 'Series')
commenced
investment operations in November 1992. The investment
objective of the Series
is to achieve long-term growth of capital through investment
in equity
securities of foreign issuers. Income is a secondary
objective. The Series seeks
to achieve its objective primarily through investment in a
diversified portfolio
of securities which consist of equity securities of foreign
issuers.
- ------------------------------------------------------------
Note 1. Accounting Policies
The following is a summary of significant accounting
policies followed by the
Fund and the Series in the preparation of its financial
statements.
Securities Valuation: Securities traded on an exchange
(whether domestic or
foreign) are valued at the last reported sales price on the
primary exchange on
which they are traded. Securities traded in the over-the-
counter market
(including securities listed on exchanges for which a last
sales price is not
available) are valued at the average of the last reported
bid and asked prices.
Any security for which a reliable market quotation is
unavailable is valued at
fair value considering factors determined in good faith by
the investment
adviser under procedures established by and under the
general supervision of the
Fund's Board of Directors.
Short-term securities which mature in more than 60 days are
valued at current
market quotations. Short-term securities which mature in 60
days or less are
valued at amortized cost.
In connection with transactions in repurchase agreements
with U.S. financial
institutions, it is the Series' policy that its custodian or
designated
subcustodians, as the case may be under triparty repurchase
agreements, take
possession of the underlying securities, the value of which
exceeds the
principal amount of the repurchase transaction including
accrued interest. If
the seller defaults and the value of the collateral declines
or if bankruptcy
proceedings are commenced with respect to the seller of the
security,
realization of the collateral by the Fund may be delayed or
limited.
All securities are valued as of 4:15 p.m., New York time.
Foreign Currency Translation: The books and records of the
Fund are maintained
in U.S. dollars. Foreign currency amounts are translated
into U.S. dollars on
the following basis:
(i) market value of investment securities, other assets and
liabilities - at the
closing daily rates of exchange.
(ii) purchases and sales of investment securities, income
and expenses - at the
rate of exchange prevailing on the respective dates of such
transactions.
Although the net assets of the Fund are presented at the
foreign exchange rates
and market values at the close of the fiscal year, the Fund
does not isolate
that portion of the results of operations arising as a
result of changes in the
foreign exchange rates from the fluctuations arising from
changes in the market
prices of securities held at the end of the year. Similarly,
the Fund does not
isolate the effect of changes in foreign exchange rates from
the fluctuations
arising from changes in the market prices of long-term
portfolio securities sold
during the year. Accordingly, these realized foreign
currency gains (losses) are
included in the reported net realized gains (losses) on
investment transactions.
Net realized gains (losses) on foreign currency transactions
represent net
foreign exchange gains or losses from holdings of foreign
currencies, currency
gains or losses realized between the trade and settlement
dates on security
transactions, and the difference between the amounts of
dividends, interest and
foreign taxes recorded on the Fund's books and the U.S.
dollar equivalent
amounts actually received or paid. Net unrealized currency
gains or losses from
valuing foreign currency denominated assets and liabilities
(other than
investments) at year-end exchange rates are reflected as a
component of net
unrealized appreciation on investments and foreign
currencies.
Foreign security and currency transactions may involve
certain considerations
and risks not typically associated with those of domestic
origin as a result of,
among other factors, the possibility of political and
economic instability and
the level of governmental supervision and regulation of
foreign securities
markets.
Securities Transactions and Net Investment Income:
Securities transactions are
recorded on the trade date. Realized gains and losses from
investment and
currency transactions are calculated on the identified cost
basis. Dividend
income is recorded on the ex-dividend date; interest income
is recorded on the
accrual basis. Expenses are recorded on the accrual basis
which may require the
use of certain estimates by management.
Net investment income (loss), other than distribution fees,
and unrealized and
realized gains or losses are allocated daily to each class
of shares based upon
the relative proportion of net assets of each class at the
beginning of the day.
- ------------------------------------------------------------
- --------------------
8
<PAGE>
PRUDENTIAL
WORLD FUND, INC.
Notes to Financial Statements
INTERNATIONAL STOCK SERIES
- ------------------------------------------------------------
- --------------------
Taxes: For federal income tax purposes, each series in the
Fund is treated as a
separate taxpaying entity. It is the intent of the Series to
continue to meet
the requirements of the Internal Revenue Code applicable to
regulated investment
companies and to distribute all of its net income to
shareholders. Therefore, no
federal income tax provision is required.
Withholding taxes on foreign dividends have been provided
for in accordance with
the Fund's understanding of the applicable country's tax
rules and rates.
Dividends and Distributions: The Fund expects to pay
dividends of net investment
income and distributions of net realized capital and
currency gains, if any,
annually. Dividends and distributions are recorded on the ex-
dividend date.
Income distributions and capital gain distributions are
determined in accordance
with income tax regulations which may differ from generally
accepted accounting
principles.
Reclassification of Capital Accounts: The Series accounts
for and reports
distributions to shareholders in accordance with the
American Institute of
Certified Public Accountants' Statement of Position 93-2:
Determination,
Disclosure, and Financial Statement Presentation of Income,
Capital Gains, and
Return of Capital Distributions by Investment Companies. The
effect of applying
this statement was to decrease undistributed net investment
income by $401,012,
increase accumulated net realized gain on investments by
$406,127 and decrease
paid in capital by $5,115 for the year ended October 31,
1998, due to realized
and recognized currency losses during the year and certain
expenses not being
deductible for tax purposes. Net investment income, net
realized gains and net
assets were not affected by this change.
- ------------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement with Prudential
Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has
responsibility for all
investment advisory services and supervises the subadviser's
performance of such
services. PIFM has entered into a subadvisory agreement with
Mercator Asset
Management, L.P. ('Mercator'), a limited partnership where
The Prudential Asset
Management Company, Inc. ('PAMCI') is a limited partner.
Mercator furnishes
investment advisory services in connection with the
management of the Series.
PIFM pays for the cost of the subadviser's services, the
compensation of
officers and employees of the Fund, occupancy and certain
clerical and
bookkeeping costs of the Fund. The Fund bears all other
costs and expenses.
The management fee paid PIFM is computed daily and payable
monthly at an annual
rate of 1% of the average daily net assets of the Series.
PIFM pays Mercator at
an annual rate of .75 of 1% of the Series average daily net
assets up to and
including $50 million, .60 of 1% of the Series' average
daily net assets in
excess of $50 million up to and including $300 million and
.45 of 1% of the
Series' average daily net assets in excess of $300 million.
The subadvisory fee
amounted to $2,396,200 for the year ended October 31, 1998.
The Fund had a distribution agreement with Prudential
Securities Incorporated
('PSI') which acted as the distributor of the Class A, Class
B, Class C and
Class Z shares of the Fund through May 31, 1998. Prudential
Investment
Management Services LLC ('PIMS') became the distributor of
the Fund effective
June 1, 1998 and is serving the Fund under the same terms
and conditions as
under the arrangement with PSI. The Fund compensated PSI and
PIMS for
distributing and servicing the Fund's Class A, Class B and
Class C shares,
pursuant to plans of distribution, (the 'Class A, B and C
Plans'), regardless of
expenses actually incurred by them. The distribution fees
are accrued daily and
payable monthly. No distribution or service fees are paid to
PIMS as distributor
for Class Z shares of the Fund.
Pursuant to the Class A, B and C Plans, the Series
compensates PIMS for
distribution-related activities at an annual rate of up to
.30 of 1%, 1% and 1%
of the average daily net assets of the Class A, B, and C
shares, respectively.
Such expenses under the Plans were .25 of 1%, 1% and 1% of
the average daily net
assets of the Class A, B and C shares respectively, for the
year ended October
31, 1998.
PSI and PIMS have advised the Series that they received
approximately $203,000
in front-end sales charges resulting from sales of Class A
shares during the
year ended October 31, 1998. From these fees, PSI and PIMS
paid such sales
charges to affiliated broker-dealers, which in turn paid
commissions to
salespersons and incurred other distribution costs.
PSI and PIMS have advised the Series that for the year ended
October 31, 1998,
they received approximately $268,000 and $7,900 in
contingent deferred sales
charges imposed upon certain redemptions by Class B and
Class C shareholders,
respectively.
PSI, PIMS, PIFM and PAMCI are indirect, wholly owned
subsidiaries of The
Prudential Insurance Company of America.
The Fund, along with other affiliated registered investment
companies (the
'Funds'), entered into a credit agreement (the 'Agreement')
with an unaffiliated
lender. The maximum commitment under the Agreement is
$200,000,000. Interest on
any such borrowings outstanding will be at
- ------------------------------------------------------------
- --------------------
9
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Notes to Financial Statements
INTERNATIONAL STOCK SERIES
- ------------------------------------------------------------
- --------------------
market rates. The purpose of the Agreement is to serve as an
alternative source
of funding for capital share redemptions. The Series did not
borrow any amounts
pursuant to the Agreement during the year ended October 31,
1998. The Funds pay
a commitment fee at an annual rate of .055 of 1% on the
unused portion of the
credit facility. The commitment fee is accrued and paid
quarterly on a pro rata
basis by the Funds. The Agreement expired on December 30,
1997 and has been
extended through December 29, 1998 under the same terms.
- ------------------------------------------------------------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned
subsidiary of PIFM,
serves as the Fund's transfer agent. During the year ended
October 31, 1998, the
Series incurred fees of approximately $734,000 for the
services of PMFS. As of
October 31, 1998 approximately $66,000 of such fees were due
to PMFS. Transfer
agent fees and expenses in the Statement of Operations
include certain
out-of-pocket expenses paid to nonaffiliates.
- ------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of portfolio securities of the Series,
excluding short-term
investments, for the year ended October 31, 1998 were
$58,848,701 and
$55,115,189, respectively.
The federal income tax basis of the Series' investments as
of October 31, 1998
was substantially the same as for financial reporting
purposes and accordingly,
net unrealized appreciation on investments for federal
income tax purposes was
$45,015,155 (gross unrealized appreciation--$83,987,094,
gross unrealized
depreciation--$38,971,939).
- ------------------------------------------------------------
Note 5. Joint Repurchase Agreement Account
The Fund, along with other affiliated registered investment
companies, transfers
uninvested cash balances into a single joint account, the
daily aggregate
balance of which is invested in one or more repurchase
agreements collateralized
by U.S. Treasury or federal agency obligations. As of
October 31, 1998, the
Series had a 5.7% undivided interest in the repurchase
agreements in the joint
account. The undivided interest for the Series represents
$53,504,000 in the
principal amount. As of such date, each repurchase agreement
in the joint
account and the collateral therefor were as follows:
Bear, Stearns & Co., Inc., 5.40%, in the principal amount of
$260,000,000,
repurchase price $260,117,000, due 11/2/98. The value of the
collateral
including accrued interest was $265,935,719.
Salomon Smith Barney Inc., 5.40%, in the principal amount of
$260,000,000,
repurchase price $260,117,000, due 11/2/98. The value of the
collateral
including accrued interest was $265,365,298.
Deutsche Morgan Grenfell Inc., 5.41%, in the principal
amount of $260,000,000,
repurchase price $260,117,217, due 11/2/98. The value of the
collateral
including accrued interest was $265,200,735.
SBC Warburg Dillon Read, Inc., 5.38%, in the principal
amount of $160,825,000,
repurchase price $160,897,103, due 11/2/98. The value of the
collateral
including accrued interest was $164,045,205.
- ------------------------------------------------------------
Note 6. Capital
The Fund offers Class A, Class B, Class C and Class Z
shares. Class A shares are
sold with a front-end sales charge of up to 5%. Class B
shares are sold with a
contingent deferred sales charge which declines from 5% to
zero depending on the
period of time the shares are held. Prior to November 2,
1998, Class C shares
are sold with a contingent deferred sales charge of 1%
during the first year.
Effective November 2, 1998, Class C shares are sold with a
front-end sales
charge of 1% and a contingent deferred sales charge of 1%
during the first 18
months. Class B shares automatically convert to Class A
shares on a quarterly
basis approximately seven years after purchase. A special
exchange privilege is
also available for shareholders who qualified to purchase
Class A shares at net
asset value. Class Z shares are not subject to any sales or
redemption charge
and are offered exclusively for sale to a limited group of
investors.
There are 500 million authorized shares of $.01 par value
common stock, divided
equally into four classes, designated Class A, Class B,
Class C and Class Z
common stock.
As of October 30, 1998, 2,634 of the outstanding shares were
owned by the
Prudential.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ---------------------------------- ----------- ---------
- ----
<S> <C> <C>
Year ended October 31, 1998:
Shares sold....................... 3,579,531 $
68,487,089
Shares issued in reinvestment of
dividends and distributions..... 64,964
1,127,781
Shares reacquired................. (3,130,800)
(59,424,795)
----------- ---------
- ----
Net increase in shares outstanding
before conversion............... 513,695
10,190,075
Shares issued upon conversion from
Class B......................... 79,872
1,517,622
----------- ---------
- ----
Net increase in shares
outstanding..................... 593,567 $
11,707,697
----------- ---------
- ----
----------- ---------
- ----
</TABLE>
- ------------------------------------------------------------
- --------------------
10
<PAGE>
PRUDENTIAL
WORLD FUND, INC.
Notes to Financial Statements
INTERNATIONAL STOCK SERIES
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class A Shares Amount
- ---------------------------------- ----------- ---------
- ----
<S> <C> <C>
Year ended October 31, 1997:
Shares sold....................... 10,202,989 $
196,064,399
Shares issued in reinvestment of
dividends and distributions..... 203
3,367
Shares reacquired................. (8,307,335)
(161,996,245)
----------- ---------
- ----
Net increase in shares outstanding
before conversion............... 1,895,857
34,071,521
Shares issued upon conversion from
Class B......................... 87,667
1,665,704
----------- ---------
- ----
Net increase in shares
outstanding..................... 1,983,524 $
35,737,225
----------- ---------
- ----
----------- ---------
- ----
<CAPTION>
Class B
- ----------------------------------
<S> <C> <C>
Year ended October 31, 1998:
Shares sold....................... 2,837,939 $
54,447,404
Shares issued in reinvestment of
dividends and distributions..... 130,869
2,267,954
Shares reacquired................. (2,530,182)
(47,519,258)
----------- ---------
- ----
Net increase in shares outstanding
before conversion............... 438,626
9,196,100
Shares reacquired upon conversion
into Class A.................... (80,332)
(1,517,622)
----------- ---------
- ----
Net increase in shares
outstanding..................... 358,294 $
7,678,478
----------- ---------
- ----
----------- ---------
- ----
Year ended October 31, 1997:
Shares sold....................... 13,896,760 $
263,039,826
Shares issued in reinvestment of
dividends and distributions..... 3
44
Shares reacquired................. (9,001,122)
(174,661,409)
----------- ---------
- ----
Net increase in shares outstanding
before conversion............... 4,895,641
88,378,461
Shares reacquired upon conversion
into Class A.................... (88,084)
(1,665,704)
----------- ---------
- ----
Net increase in shares
outstanding..................... 4,807,557 $
86,712,757
----------- ---------
- ----
----------- ---------
- ----
<CAPTION>
Class C Shares Amount
- ---------------------------------- ----------- ---------
- ----
<S> <C> <C>
Year ended October 31, 1998:
Shares sold....................... 878,403 $
16,772,243
Shares issued in reinvestment of
dividends and distributions..... 18,693
323,948
Shares reacquired................. (793,470)
(15,123,933)
----------- ---------
- ----
Net increase in shares
outstanding..................... 103,626 $
1,972,258
----------- ---------
- ----
----------- ---------
- ----
Year ended October 31, 1997:
Shares sold....................... 3,133,108 $
59,754,209
Shares reacquired................. (2,451,619)
(47,614,464)
----------- ---------
- ----
Net increase in shares
outstanding..................... 681,489 $
12,139,745
----------- ---------
- ----
----------- ---------
- ----
<CAPTION>
Class Z
- ----------------------------------
<S> <C> <C>
Year ended October 31, 1998:
Shares sold....................... 27,696,101 $
533,053,644
Shares issued in reinvestment of
dividends and distributions..... 445,125
7,731,826
Shares reacquired................. (27,308,803)
(525,202,272)
----------- ---------
- ----
Net increase in shares
outstanding..................... 832,423 $
15,583,198
----------- ---------
- ----
----------- ---------
- ----
Year ended October 31, 1997:
Shares sold....................... 15,399,799 $
285,635,815
Shares issued in reinvestment of
dividends and distributions..... 312,157
5,181,809
Shares reacquired................. (14,177,275)
(262,191,156)
----------- ---------
- ----
Net increase in shares
outstanding..................... 1,534,681 $
28,626,468
----------- ---------
- ----
----------- ---------
- ----
</TABLE>
- ------------------------------------------------------------
Note 7. Dividends
On December 11, 1998, the Board of Directors of the Series
declared the
following ordinary income dividends per Class A, B, C and Z
shares of $.15,
$.01, $.01 and $.20 respectively, payable on December 15,
1998 to shareholders
of record on December 14, 1998.
- ------------------------------------------------------------
- --------------------
11
<PAGE>
PRUDENTIAL
WORLD FUND, INC.
Financial Highlights INTERNATIONAL
STOCK SERIES
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class A
-------------
- ----------------------------------------------
October 1, September 23,
1996 1996(c)
Year Ended
October 31, Through Through
-------------
- ------------ October 31, September 30,
1998
1997(e) 1996 1996
----------
- ---------- ----------- -------------
<S> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...... $ 18.24
$ 16.59 $ 16.48 $ 16.54
----------
- ---------- ----- -----
Income from investment operations:
Net investment income (loss).............. .27
.24 (.01) --
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions........................... .40
1.85 .12 (.06)
----------
- ---------- ----- -----
Total from investment operations....... .67
2.09 .11 (.06)
----------
- ---------- ----- -----
Less distributions:
Dividends from net investment income...... (.18)
(.24) -- --
Distributions from net realized capital
gains.................................. (.40)
(.20) -- --
----------
- ---------- ----- -----
Total distributions.................... (.58)
(.44) -- --
----------
- ---------- ----- -----
Net asset value, end of period............ $ 18.33
$ 18.24 $ 16.59 $ 16.48
----------
- ---------- ----- -----
----------
- ---------- ----- -----
TOTAL RETURN(a)........................... 3.85%
12.85% .67% (.36)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........... $ 47,237
$ 36,184 $ 5,169(d) $ 199(d)
Average net assets (000).................. $ 44,708
$ 18,779 $ 2,793(d) $ 199(d)
Ratios to average net assets:
Expenses, including distribution
fees................................ 1.62%
1.75% 2.05%(b) 2.46%(b)
Expenses, excluding distribution
fees................................ 1.37%
1.50% 1.80%(b) 2.21%(b)
Net investment income (loss)........... 1.28%
1.40% (1.03)%(b) .75%(b)
Portfolio turnover rate................... 15%
9% 4% 15%
</TABLE>
- ---------------
(a) Total return is calculated assuming a purchase of shares
on the first day
and a sale on the last day of each period reported and
includes reinvestment
of dividends and distributions. Total return for periods
of less than a full
year are not annualized.
(b) Annualized.
(c) Commencement of offering of Class A shares.
(d) Figures are actual and are not rounded to the nearest
thousand.
(e) Calculated based upon weighted average shares
outstanding during the year.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 12
<PAGE>
PRUDENTIAL
WORLD FUND, INC.
Financial Highlights
INTERNATIONAL STOCK SERIES
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class B
-------------
- ----------------------------------------------
October 1, September 23,
1996 1996(c)
Year Ended
October 31, Through Through
-------------
- ------------ October 31, September 30,
1998
1997(e) 1996 1996
----------
- ---------- ----------- -------------
<S> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...... $ 18.13
$ 16.57 $ 16.47 $ 16.54
----------
- ---------- ----- -----
Income from investment operations:
Net investment income (loss).............. .10
.12 (.02) --
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions........................... .43
1.84 .12 (.07)
----------
- ---------- ----- -----
Total from investment operations....... .53
1.96 .10 (.07)
----------
- ---------- ----- -----
Less distributions:
Dividends from net investment income...... (.08)
(.20) -- --
Distributions from net realized capital
gains.................................. (.40)
(.20) -- --
----------
- ---------- ----- -----
Total distributions.................... (.48)
(.40) -- --
----------
- ---------- ----- -----
Net asset value, end of period............ $ 18.18
$ 18.13 $ 16.57 $ 16.47
----------
- ---------- ----- -----
----------
- ---------- ----- -----
TOTAL RETURN(a)........................... 3.05%
12.04% .61% (.42)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........... $ 93,896
$ 87,155 $ 1,922(d) $ 199(d)
Average net assets (000).................. $ 98,444
$ 47,584 $ 313(d) $ 199(d)
Ratios to average net assets:
Expenses, including distribution
fees................................ 2.37%
2.50% 2.80%(b) 3.21%(b)
Expenses, excluding distribution
fees................................ 1.37%
1.50% 1.80%(b) 2.21%(b)
Net investment income (loss)........... .53%
.65% (1.78)%(b) 0%(b)
Portfolio turnover rate................... 15%
9% 4% 15%
</TABLE>
- ---------------
(a) Total return is calculated assuming a purchase of shares
on the first day
and a sale on the last day of each period reported and
includes reinvestment
of dividends and distributions. Total return for periods
of less than a full
year are not annualized.
(b) Annualized.
(c) Commencement of offering of Class B shares.
(d) Figures are actual and are not rounded to the nearest
thousand.
(e) Calculated based upon weighted average shares
outstanding during the year.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 13
<PAGE>
PRUDENTIAL
WORLD FUND, INC.
Financial Highlights
INTERNATIONAL STOCK SERIES
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class C
-------------
- ----------------------------------------------
October 1, September 23,
1996 1996(c)
Year Ended
October 31, Through Through
-------------
- ------------ October 31, September 30,
1998
1997(e) 1996 1996
----------
- ---------- ----------- -------------
<S> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...... $ 18.13
$ 16.57 $ 16.47 $ 16.54
----------
- ---------- ----- -----
Income from investment operations:
Net investment income (loss).............. .10
.12 (.02) --
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions........................... .43
1.84 .12 (.07)
----------
- ---------- ----- -----
Total from investment operations....... .53
1.96 .10 (.07)
----------
- ---------- ----- -----
Less distributions:
Dividends from net investment income...... (.08)
(.20) -- --
Distributions from net realized gains..... (.40)
(.20) -- --
----------
- ---------- ----- -----
Total distributions.................... (.48)
(.40) -- --
----------
- ---------- ----- -----
Net asset value, end of period............ $ 18.18
$ 18.13 $ 16.57 $ 16.47
----------
- ---------- ----- -----
----------
- ---------- ----- -----
TOTAL RETURN(a)........................... 3.05%
12.04% .61% (.42)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........... $ 14,271
$ 12,354 $ 200(d) $ 199(d)
Average net assets (000).................. $ 14,345
$ 7,473 $ 202(d) $ 199(d)
Ratios to average net assets:
Expenses, including distribution
fees................................ 2.37%
2.50% 2.80%(b) 3.21%(b)
Expenses, excluding distribution
fees................................ 1.37%
1.50% 1.80%(b) 2.21%(b)
Net investment income (loss)........... .53%
.65% (1.78)%(b) 0%(b)
Portfolio turnover rate................... 15%
9% 4% 15%
</TABLE>
- ---------------
(a) Total return is calculated assuming a purchase of shares
on the first day
and a sale on the last day of each period reported and
includes reinvestment
of dividends and distributions. Total return for periods
of less than a full
year are not annualized. Total return includes the
effect of expense
subsidies/recoveries, as applicable.
(b) Annualized.
(c) Commencement of offering of Class C shares.
(d) Figures are actual and are not rounded to the nearest
thousand.
(e) Calculated based upon weighted average shares
outstanding during the year.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 14
<PAGE>
PRUDENTIAL
WORLD FUND, INC.
Financial Highlights
INTERNATIONAL STOCK SERIES
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class Z
---------------
- ------------------------------------------------------------
- -----------
October 1,
1996
Year Ended
October 31, Through Year Ended
September 30,
---------------
- ---------- October 31, -----------------------------
- -----------
1998
1997(d) 1996 1996 1995
1994
----------
- ---------- ----------- ---------- ----------
- ----------
<S> <C>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $ 18.28
$ 16.59 $ 16.48 $ 15.25 $ 14.84
$ 12.35
----------
- ---------- ----------- ---------- ----------
- ----------
Income from investment operations:
Net investment income (loss)............ .30
.31 (.01) .22 .18(c)
.13(c)
Net realized and unrealized gain (loss)
on investment and foreign currency
transactions......................... .41
1.82 .12 1.20 .66
2.54
----------
- ---------- ----------- ---------- ----------
- ----------
Total from investment operations..... .71
2.13 .11 1.42 .84
2.67
----------
- ---------- ----------- ---------- ----------
- ----------
Less distributions:
Dividends from net investment income.... (.21)
(.24) -- (.19) (.10)
(.03)
Distributions from net realized gains... (.40)
(.20) -- -- (.33)
(.15)
----------
- ---------- ----------- ---------- ----------
- ----------
Total distributions.................. (.61)
(.44) -- (.19) (.43)
(.18)
----------
- ---------- ----------- ---------- ----------
- ----------
Net asset value, end of period.......... $ 18.38
$ 18.28 $ 16.59 $ 16.48 $ 15.25
$ 14.84
----------
- ---------- ----------- ---------- ----------
- ----------
----------
- ---------- ----------- ---------- ----------
- ----------
TOTAL RETURN(a)......................... 4.08%
13.13% .67% 9.44% 5.95%
21.71%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)......... $254,577
$237,976 $ 190,428 $188,386 $136,685
$102,824
Average net assets (000)................ $258,322
$219,419 $ 191,228 $161,356 $118,927
$ 68,476
Ratios to average net assets:
Expenses, including distribution
fees.............................. 1.37%
1.50% 1.80%(b) 1.61%(c) 1.60%(c)
1.60%(c)
Expenses, excluding distribution
fees.............................. 1.37%
1.50% 1.80%(b) 1.61%(c) 1.60%(c)
1.60%(c)
Net investment income (loss)......... 1.53%
1.65% (.78)%(b) 1.58%(c) 1.58%(c)
1.08%(c)
Portfolio turnover rate................. 15%
9% 4% 15% 20%
21%
</TABLE>
- ---------------
(a) Total return is calculated assuming a purchase of shares
on the first day
and a sale on the last day of each period reported and
includes reinvestment
of dividends and distributions. Total return for periods
of less than a full
year are not annualized. Total return includes the
effect of expense
subsidies/recoveries, as applicable.
(b) Annualized.
(c) Net of expense subsidy/recovery.
(d) Calculated based upon weighted average shares
outstanding during the year.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 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 constituting
Prudential World Fund, Inc.) at October 31, 1998, results of
its operations for
the year then ended, and the changes in its net assets and
the financial
highlights for each of the two years in the period then
ended, in conformity
with generally accepted accounting principles. These
financial statements and
financial highlights (hereafter referred to as 'financial
statements') are the
responsibility of the Fund's management; our responsibility
is to express an
opinion on these financial statements based on our audits.
We conducted our
audits of these financial statements in accordance with
generally accepted
auditing standards which require that we plan and perform
the audit to obtain
reasonable assurance about whether the financial statements
are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting
the amounts and disclosures in the financial statements,
assessing the
accounting principles used and significant estimates made by
management, and
evaluating the overall financial statement presentation. We
believe that our
audits, which included confirmation of securities at October
31, 1998 by
correspondence with the custodian, provide a reasonable
basis for the opinion
expressed above. The accompanying financial highlights for
the three periods in
the period ended October 31, 1996 were audited by other
independent accountants,
whose opinion dated November 27, 1996 was unqualified.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
December 18, 1998
- ------------------------------------------------------------
- --------------------
16
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Federal Income Tax Information (Unaudited)
INTERNATIONAL STOCK SERIES
- ------------------------------------------------------------
- --------------------
We are required by the Internal Revenue Code to advise you
within 60 days of the
Series' fiscal year end (October 31, 1998) as to the federal
tax status of
dividends paid by the Series during such fiscal year.
Accordingly, we are
advising you that in the fiscal year ended October 31, 1998,
dividends of $.43
per share for Class A shares, $.33 per Class B shares, $.33
per Class C shares
and $.46 per Class Z shares (representing net investment
income and short-term
capital gains) which are taxable as ordinary income. In
addition, the Series
paid to Class A, B, C and Z shares a long-term capital gain
distribution of $.15
which is taxable as such.
We wish to advise you that the corporate dividends received
deduction for the
Series is zero. Only funds that invest in U.S. equity
securities are entitled to
pass-through a corporate dividends received deduction.
The Fund has elected to give the benefit of foreign tax
credits to its
shareholders. Accordingly, shareholders who must report
their gross income
dividends and distributions in a federal income tax return
will be entitled to a
foreign tax credit, or an itemized deduction in computing
their U.S. income tax
liability. It is generally more advantageous to claim a
credit rather than take
a deduction. For the fiscal year ended October 31, 1998 the
Fund intends on
passing through 10.3% of ordinary income distributions as a
foreign tax credit.
In January 1999, you will be advised on IRS Form 1099 DIV or
substitute 1099 DID
as to the federal tax status of the dividends and
distributions received by you
in calendar year 1998.
- ------------------------------------------------------------
- --------------------
17
<PAGE>
Comparing A $10,000 Investment.
- -------------------------------
Prudential World Fund, Inc. -- International Stock Series
vs.
the Morgan Stanley Capital International EAFE Index.
Past performance is not indicative of future results.
Principal and investment
return will fluctuate so an investor's shares, when
redeemed, may be worth more
or less than their original cost.
These graphs are furnished to you in accordance with SEC
regulations. They
compare 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, Australia, and
Far East (EAFE)
Index (the 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 each fiscal year (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 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 charges
were deducted from the
value of the investment in Class B and Class C shares,
assuming full redemption
on October 31, 1998; (c) beginning November 2, 1998, Class C
shares are subject
to a front-end sales charge of 1% and a CDSC of 1% for 18
months. This change
is not reflected in the charts to the right; (d) all
recurring fees (including
management fees) were deducted; and (e) all dividends and
distributions were
reinvested. Class B shares will automatically convert to
Class A shares, on a
quarterly basis, approximately seven years after purchase.
This conversion
feature is not reflected in the graphs. Class Z shares are
not subject to a
sales charge or distribution fee. Without waiver of
management fees and/or
expense subsidization, the Series' average annual total
returns would have been
lower, as indicated in parentheses ( ).
The Morgan Stanley Capital International EAFE Index is a
weighted index
comprised of securities listed on the stock exchanges of
Europe, Australia,
New Zealand, and the Far East. The Index is unmanaged 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 Index may differ substantially from the
securities in the
Series. The Index is not the only one that may be used to
characterize
performance of equity funds, and other indexes may portray
different
comparative performance. Investors cannot invest directly in
an index.
Class A
(GRAPH)
Class B
(GRAPH)
Class C
(GRAPH)
Class Z
(GRAPH)
<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
Delayne D. Gold
Robert F. Gunia
Don G. Hoff
Robert E. LaBlanc
Mendel A. Melzer, CFA
Robin B. Smith
Stephen Stoneburn
Brian M. Storms
Nancy H. Teeters
Officers
Brian M. Storms, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Robert C. Rosselot, 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 Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
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
743969701
743969800
(ICON)
Prudential
World
Fund, Inc.
- ---------------------------
International
Stock Series
ANNUAL
REPORT
Oct. 31, 1998
(LOGO)
<PAGE>
Performance At A Glance.
The Prudential World Fund -- International Stock Series
performed in line with
its peers over the 12 months ended October 31, 1998. Its
strategy of focusing
on companies whose earnings prospects are underappreciated
by most investors
helped the Series in rising markets. However, in the summer
months, many
investors reacted strongly to the possibility of a global
recession: stocks
that already had been out of favor fell further than most
other stocks in the
rapidly dropping markets. Overall, we had a modest gain in a
difficult year.
Cumulative Total Returns1 As of 10/31/98
<TABLE>
<CAPTION>
One Five
Since
Year Years
Inception2
<S> <C> <C>
<C>
Class A 3.85% N/A
17.55%
Class B 3.05 N/A
15.67
Class C 3.05 N/A
15.67
Class Z 4.08 59.66%
106.78
Lipper International Fund Avg.3 4.07 41.60
***
</TABLE>
Average Annual Total Returns1 As of
9/30/98
<TABLE>
<CAPTION>
One Five
Since
Year Years
Inception2
<S> <C> <C>
<C>
Class A -15.93% N/A
2.08%
Class B -17.18 N/A
2.47
Class C -13.18 N/A
3.91
Class Z -11.33 9.32%
11.80
</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,
Inc. The
cumulative total returns do not take into account sales
charges. The average
annual total returns do take into account applicable sales
charges. The Series
charges a maximum front-end sales load of 5% for Class A
shares. Class B shares
are subject to a declining contingent deferred sales charge
(CDSC) of 5%, 4%,
3%, 2%, 1% and 1% for six years. Class B shares will
automatically convert to
Class A shares, on a quarterly basis, approximately seven
years after purchase.
Class C shares are subject to a front-end sales charge of 1%
and a CDSC of 1%
for 18 months. Class C shares bought before November 2, 1998
have a 1% CDSC if
sold within one year. Class Z shares are not subject to a
sales charge or
distribution fee. 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 ( ).
2 Inception dates: Class A, B, and C, 9/23/96; Class Z,
11/5/92.
3 Lipper average returns are for all funds in each share
class for the one-
and five-year periods in the International Fund category.
***Lipper Since Inception returns are 14.46% for Class A, B,
and C, and 91.53%
for Class Z based on all funds in each share class.
How Investments Compared.
(As of 10/31/98)
(GRAPH)
Source: Lipper, Inc. 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.
U.S. Taxable Money 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
The Prudential World Fund -- International Stock Series
invests primarily in
equity securities of companies located outside the United
States. Mercator uses
a value investment style to identify stocks selling at low
prices compared with
their earnings potential to attain our primary goal of long-
term growth of
capital. 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.
Value And Patience.
We are value investors and buy stocks that we believe to be
undervalued and
hold them (unless there is an unexpected deterioration)
until their strengths
are recognized and the stock price moves up significantly.
Value managers have
to be very patient. When investors panic, as they did last
summer, they
sometimes abandon the stocks of companies whose sources of
earnings growth are
not obvious. We project the earnings of companies five years
ahead and buy
when they are bargains.
Strategy Session.
- ------------------------------------------------------------
- -------------------
Our basic strategy does not change: we search the foreign
markets for companies
that are selling below what we consider fair value and build
our portfolio
stock by stock. In a favorable market, we may see a stock
rise to our price
target quickly. In today's unfavorable climate for value
stocks, many stocks we
had bought inexpensively remained bargain-priced, so our
portfolio turnover was
unusually low -- less than 15% for the year. Because of the
uncertain markets,
we allowed our average cash balance to rise higher than
usual. We believe
analysts still haven't fully appreciated the impact of Asian
events on Europe.
We bought Rio Tinto, a U.K.-based company with global metals
mining operations.
The Asian economic depression and potential slowdown in
Europe and North
America have sharply reduced investor interest in the stocks
of companies whose
business is closely tied to the economic cycle. A time-
honored value strategy
is to buy economically sensitive stocks when they are cheap
and take our gains
when they are expensive. In this economic cycle, inventories
appear low, yet
most commodity industries have refrained from building
capacity. These
companies should do well when demand recovers, but we have
to be patient until
then. A similar theme underlies our purchase of Saga
Petroleum, a Norway-based
oil production company. The lowest oil prices in 12 years
have led its price to
fall to very low levels.
We added Sony and Matsushita Electric to our small holdings
in Japan. These
are global companies that were inexpensive because of the
poor state of
Japan's economy and stock market.
Portfolio Composition.
Sectors expressed as a percentage
of net assets as of 10/31/98.
(GRAPH)
<PAGE>
What Went Well.
- -------------------------------------------------
Although we build our portfolio from the bottom up,
sometimes we see a theme
recur. A year ago, we were reporting gains on Banca
Fideuram, an Italian bank
that had strong earnings on mutual funds and insurance
sales. The stock rose
beyond our estimate of fair value, so we took our profits
and reinvested the
proceeds in an undervalued bank with a similar story: Banca
Popolare Di
Brescia. It has excellent management and rapid growth of
financial services
products as it does a very good job of gathering assets
through mutual fund
sales. We took a small part of our profits as the stock
price rose sharply, but
held most of our shares because we think they do not yet
reflect the full
earnings growth potential of this bank.
Bouygues, on the other hand, is a French conglomerate that
we thought was
undervalued and would benefit from a restructuring. We
bought it at a large
discount to our estimate of the value of the underlying
assets. As our
reporting period came to a close, and afterward, purchasers
of large blocks of
shares appeared as potential catalysts to the restructuring.
We benefited from
a rise in the stock, but are holding it as the share price
rises toward a
realistic value of Bouygues' components.
British Telecom was our largest holding on October 31.
Recently, the
telecommunications industry has been a major source of
global economic growth,
and it is relatively buffered from the economic cycle.
British Telecom had been
less than efficient, but it reorganized and now can be a
strong competitor.
And Not So Well.
- -------------------------------------------------
Our value strategy leads us to hold many cyclical stocks --
those whose
prospects vary with the pace of economic growth. As Asian
economies contracted,
threatening global growth, many of our economically
sensitive stocks suffered.
In particular, some of our Australian companies -- such as
CSR Limited and
Pioneer International -- and Alcan Aluminum in Canada did
poorly as resource
and metals businesses were hurt. Our Peugeot shares suffered
from the economic
slowdown as concerns of a softening in consumer spending
mounted.
The threat of a slowdown also hurt Stork, a capital
equipment manufacturer in
the Netherlands. The stock fell substantially through the
spring and summer,
but has rebounded somewhat since then.
Parmalat, the Italian food company, changed its corporate
strategy, going into
more mature markets and making a large number of
acquisitions. We no longer
had confidence in our earnings projections and sold our
shares at a small
profit.
Five Largest
Holdings.
4.1% British Telecom PLC
Telecommunications
3.4% Bouygues
Construction & Housing
3.1% Banca Popolare Di Brescia
Commercial Banking
2.9% Iberdrola SA
Electrical & Gas Utilities
2.8% Pharmacia & Upjohn
Health & Personal Care
Expressed as a percentage of net assets as of 10/31/98.
Looking Ahead.
- -------------------------------------------------
Mercator expects choppy times to continue for a while. The
earnings
expectations of most securities analysts are too high to fit
economists'
expectations of world economic growth, so we think there
will be more earnings
forecasts adjusted downward. Value stocks may be under
pressure a little
longer. The companies we own, however, are strong enough to
weather a slowdown,
and they currently are very inexpensive when compared with
our estimates of
their long-term earnings.
The best stock values may soon be in Asia, but Asian
economies are so unstable
that we don't feel confident of earnings projections. There
are signs that
some Asian countries are stabilizing. Over the coming year,
we should get a
clearer view.
1
<PAGE>
Cautious Optimism.
- ------------------------------------------------------------
- -------------------
Portfolio Manager Peter Spano is in for the long term.
Q. All of your 10 largest holdings are in Europe. Shouldn't
you be more
diversified internationally?
A. Let's start with how we build our portfolio. Using our
global network of
independent analysts, we project earnings of companies
five years ahead. We
compare these estimates with the current share price.
Then we build our
portfolio stock by stock with the least expensive shares.
We ensure
diversification with guidelines for maximum exposure in
any one country or
industry, but don't have any minimum requirements. If a
country or industry
offers no value opportunities, we won't buy there.
Nonetheless, we generally
are in 10 to 20 different countries (we were in 14 on
October 31) and rarely
have more than 15% of our assets in any one industry. On
October 31, about
two-thirds of our assets were in European countries. Our
largest country
investment was 16% in the United Kingdom, but the U.K.
makes up 22% of the
world's non-U.S. developed markets (as measured by Morgan
Stanley Capital
International's EAFE Index). Our second-largest focus was
11% in
Switzerland, compared with its eight percent of the EAFE
Index.
We think the global economic situation still is uncertain
over the next
year. European countries have the most secure growth
outside the United
States, so we own perhaps more in Europe than we usually
would. Even there,
however, we expect competition from low-cost Asian
producers will change the
near-term playing field. Some European companies will not
be able to control
their destiny the way they have in the past. We have to
watch the situation
on a company-by-company basis.
Q. You had very little invested in Japan, which is a large
part of the world's
economy. Why?
A. The key is earnings visibility. We have to have
confidence in our long-term
earnings projections for a company. The companies we own
in Japan --
Hitachi, Matsushita Electric, and Sony -- have worldwide
businesses and we
do not expect them to require dramatic restructuring to
meet global
productivity standards. Japanese industry must undergo a
structural
transformation, after which the companies may be much
stronger. We are not
yet in a position to see how that process will play out.
Companies that
depend on the Japanese domestic market will have
uncertain futures until
consumers feel more confident in the economy.
Q. Are we heading for a global recession?
A. We don't think so, but it is a possibility that we must
consider as global
growth clearly is slowing. We are cautious investors and
there is more of a
real threat to the global economy than there has been in
a very long time.
That said, most economists are not predicting a recession
in the United
States or Europe. We believe the most likely outcome is
lower growth
followed by a recovery and we will be buying firms that
will be
well-positioned for the future. It is a time for cautious
optimism.
2
<PAGE>
President's Letter
December 18, 1998
- ------------------------------------------------------------
- -------------------
(PHOTO)
Dear Shareholder:
As 1998 draws to a close, the news from the financial
markets is decidedly
mixed. After a series of sharp sell-offs in late summer,
some stock prices
began to rebound in early fall, helped by three interest
rate cuts by the
Federal Reserve.
There was other good news. U.S. Treasuries and Western
European bonds
appreciated during the year as investors fled troubled Asian
markets and other
emerging markets. The U.S. economy remained strong with
steady growth and low
inflation.
The periods of uncertainty we experienced in 1998 illustrate
why it is
important to manage your expectations and diversify your
portfolio.
Keep A Good Perspective.
Experienced mutual fund investors understand that financial
markets will always
rise and fall -- that's what markets do. Although past
performance may not be
indicative of future results, stocks and bonds have, over
time, consistently
produced attractive returns that have kept ahead of
inflation. In fact,
investors who remained focused on the long term and did not
sell during
summer's volatility were rewarded. Stock prices, as measured
by the Standard &
Poor's 500 Index, recovered strongly in November regaining
lost ground and even
setting a new record high.
Diversify. Diversify. Diversify.
Because asset classes seldom move in lockstep, owning a mix
of stock, bond,
and money market mutual funds can help lessen the effects of
a market downturn
over time. In fact, a well-diversified portfolio may retain
or perhaps even
gain value during times of uncertainty.
We're Here To Help.
How diversified is your portfolio? Your Prudential
professional will be glad to
review your current allocations. He or she will recommend
adjustments based
upon your goals, market conditions, risk tolerance, and
potential investment
opportunities.
Thank you for your confidence in Prudential mutual funds.
We'll continue to do
our part in keeping you informed.
Sincerely,
Brian M. Storms
President
3
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Portfolio of Investments as of October 31, 1998
INTERNATIONAL STOCK SERIES
- ------------------------------------------------------------
- -------------------
- ------------------------------------------------------------
- -------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--87.6%
COMMON STOCKS
- ------------------------------------------------------------
Argentina--2.7%
166,000 Telecom Argentina (ADR) $
5,353,500
201,800 YPF Sociedad Anonima (ADR)
5,839,588
---------
- ---
11,193,088
- ------------------------------------------------------------
Australia--6.5%
2,500,000 CSR, Ltd.
5,714,175
1,695,000 Mayne Nickless, Ltd.
7,811,933
580,000 National Australia Bank, Ltd.
7,678,852
2,600,000 Pioneer International, Ltd.
5,390,684
---------
- ---
26,595,644
- ------------------------------------------------------------
Canada--3.4%
230,000 Alcan Aluminum, Ltd.
5,779,831
390,000 Bank of Nova Scotia
8,143,969
---------
- ---
13,923,800
- ------------------------------------------------------------
France--9.6%
68,200 Bouygues
13,780,137
65,000 Christian Dior SA
6,877,253
69,000 Elf Aquitaine SA
7,996,936
65,000 Peugeot SA
10,860,670
---------
- ---
39,514,996
- ------------------------------------------------------------
Italy--7.3%
428,000 Banca Popolare Di Bergamo Credito
Vaesino S.P.A.
8,758,705
536,700 Banca Popolare Di Brescia
12,655,235
5,082,000 Benetton Group S.P.A.
8,521,741
---------
- ---
29,935,681
- ------------------------------------------------------------
Japan--4.5%
700,000 Hitachi, Ltd.
3,569,831
530,000 Matsushita Electric Industrial Co.,
Ltd.
7,798,676
109,500 Sony Corp.
6,968,524
---------
- ---
18,337,031
Netherlands--8.2%
212,000 AKZO N.V. $
8,247,790
200,000 ING Groep N.V.
9,688,655
245,000 KLM N.V.
7,404,748
173,225 Koninklijke Pakhoed Holdings N.V.
4,270,055
164,050 Stork N.V.
4,096,635
---------
- ---
33,707,883
- ------------------------------------------------------------
New Zealand--2.4%
3,500,000 Carter Holt Harvey, Ltd.
2,854,274
700,000 Fisher & Paykel Industries, Ltd.
2,075,836
1,778,000 Lion Nathan, Ltd.
4,660,622
---------
- ---
9,590,732
- ------------------------------------------------------------
Norway--1.1%
343,500 Saga Petroleum
4,346,031
- ------------------------------------------------------------
South Korea--1.4%
270,000 Korea Electric Power Corp.
4,808,640
20,180 Pohang Iron & Steel Co., Ltd.
887,033
---------
- ---
5,695,673
- ------------------------------------------------------------
Spain--6.9%
720,000 Banco Bilbao Vizcaya SA
9,729,038
141,200 Banco de Andalucia SA
6,728,113
732,600 Iberdrola SA
11,853,104
---------
- ---
28,310,255
- ------------------------------------------------------------
Sweden--7.3%
660,000 Electrolux AB
9,952,515
225,200 Pharmacia & Upjohn
11,531,674
330,000 SKF AB
3,790,426
290,000 Svedala Industri AB
4,577,772
---------
- ---
29,852,387
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 4
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Portfolio of Investments as of October 31, 1998
INTERNATIONAL STOCK SERIES
- ------------------------------------------------------------
- -------------------
- ------------------------------------------------------------
- -------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Switzerland--10.4%
5,500 Novartis AG $
9,931,177
15,025 The Swatch Group AG
8,305,835
11,560 Sulzer Brothers, Ltd.
6,672,686
32,307 UBS AG
8,881,855
33,000 Valora Holding AG
8,901,428
---------
- ---
42,692,981
- ------------------------------------------------------------
United Kingdom--15.9%
1,100,000 Allied Domecq PLC
10,127,693
2,353,000 British Steel PLC
4,037,392
1,300,000 British Telecom PLC
16,800,252
1,334,000 Coats Viyella PLC
692,266
615,000 National Westminster Bank PLC
10,387,748
1,140,000 Rank Group PLC
4,694,562
765,000 Rio Tinto PLC
9,290,819
3,300,000 Tesco PLC
9,308,270
---------
- ---
65,339,002
---------
- ---
Total common stocks
(cost $314,020,029)
359,035,184
---------
- ---
- ------------------------------------------------------------
Rights
2,712,000 Mayne Nickless, Ltd.
expiring November 1998
(cost $0)
0
---------
- ---
Total long-term investments
(cost $314,020,029)
359,035,184
---------
- ---
SHORT-TERM INVESTMENT--13.0%
Principal Amount
(000)
- ------------------------------------------------------------
Repurchase Agreement
Joint Repurchase Agreement Account,
$ 53,504 5.40%, 11/02/98
(cost $53,504,000; Note 5)
53,504,000
---------
- ---
- ------------------------------------------------------------
Total Investments--100.6%
(cost $367,524,029; Note 5)
412,539,184
Liabilities in excess of
other assets--(0.6%)
(2,558,453)
---------
- ---
Net Assets--100%
$409,980,731
---------
- ---
---------
- ---
</TABLE>
- ---------------
ADR--American Depository Receipt.
The industry classification of portfolio holdings and other
assets in excess of
liabilities shown as a percentage of net assets as of
October 31, 1998 was as
follows:
<TABLE>
<S> <C>
Commercial Banking..................................
17.9%
Telecommunications.................................. 5.4
Merchandising....................................... 4.4
Textiles & Apparel.................................. 3.9
Electronics......................................... 3.7
Machinery & Engineering............................. 3.7
Beverages & Tobacco................................. 3.6
Steel............................................... 3.5
Energy Sources...................................... 3.4
Construction & Housing.............................. 3.4
Utilities........................................... 2.9
Electrical Equipment................................ 2.8
Health & Personal Care.............................. 2.8
Building Materials & Components..................... 2.7
Auto Manufacturing.................................. 2.6
Appliances.......................................... 2.4
Drugs & Healthcare.................................. 2.4
Financial Services.................................. 2.4
Chemicals........................................... 2.0
Multi-Industry...................................... 1.9
Airlines/Military Technology........................ 1.8
Metals - Nonferrous................................. 1.4
Electrical Power.................................... 1.2
Leisure & Tourism................................... 1.1
Oil & Gas........................................... 1.1
Energy Equipment & Services......................... 1.0
Industrial Components............................... .9
Forestry & Paper.................................... .7
Consumer Durable Goods.............................. .6
Short-term investment............................... 13.0
-----
100.6%
Liabilities in excess of other assets...............
(.6)
-----
100.0%
-----
-----
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 5
<PAGE>
PRUDENTIAL
WORLD FUND, INC.
Statement of Assets and Liabilities
INTERNATIONAL STOCK SERIES
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Assets
October 31, 1998
<S>
<C>
Investments excluding repurchase agreement at value (cost
$314,020,029)...................................
$359,035,184
Repurchase agreement, at value (cost
$53,504,000)................................................
......... 53,504,000
Cash........................................................
..............................................
91,450
Foreign currency, at value (cost
$643,923)...................................................
............. 645,078
Receivable for Series shares
sold........................................................
................. 1,928,292
Dividends and interest
receivable..................................................
....................... 781,473
Deferred expenses and other
assets......................................................
.................. 6,609
- ----------------
Total
assets......................................................
..................................... 415,992,086
- ----------------
Liabilities
Payable for Series shares
reacquired..................................................
.................... 5,308,976
Management fee
payable.....................................................
............................... 326,039
Accrued expenses and other
liabilities.................................................
................... 280,189
Distribution fee
payable.....................................................
............................. 96,151
- ----------------
Total
liabilities.................................................
..................................... 6,011,355
- ----------------
Net
Assets......................................................
..........................................
$409,980,731
- ----------------
- ----------------
Net assets were comprised of:
Common stock, at
par.........................................................
.......................... $ 223,771
Paid-in capital in excess of
par.........................................................
.............. 360,493,979
- ----------------
360,717,750
Undistributed net investment
income......................................................
.............. 3,884,785
Accumulated net realized gain on
investments.................................................
.......... 319,694
Net unrealized appreciation on investments and foreign
currencies......................................
45,058,502
- ----------------
Net assets, October 31,
1998........................................................
...................... $409,980,731
- ----------------
- ----------------
Class A:
Net asset value and redemption price per share
($47,237,244 / 2,577,403 shares of common stock issued
and outstanding).............................
$18.33
Maximum sales charge (5% of offering
price)......................................................
...... .96
- ----------------
Maximum offering price to
public......................................................
................. $19.29
- ----------------
- ----------------
Class B:
Net asset value, offering price and redemption price per
share
($93,895,911 / 5,165,966 shares of common stock issued
and outstanding).............................
$18.18
- ----------------
- ----------------
Class C:
Net asset value, offering price and redemption price per
share
($14,270,753 / 785,127 shares of common stock issued
and outstanding)...............................
$18.18
- ----------------
- ----------------
Class Z:
Net asset value, offering price and redemption price per
share
($254,576,823 / 13,848,604 shares of common stock
issued and outstanding)...........................
$18.38
- ----------------
- ----------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 6
<PAGE>
PRUDENTIAL WORLD FUND, INC.
INTERNATIONAL STOCK SERIES
Statements of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income October 31,
1998
<S> <C>
Income
Dividends (net of foreign withholding
taxes of $1,352,001)................. $ 10,037,621
Interest................................ 2,015,005
--------------
- --
Total income......................... 12,052,626
--------------
- --
Expenses
Management fee.......................... 4,158,188
Distribution fee--Class A............... 111,771
Distribution fee--Class B............... 984,438
Distribution fee--Class C............... 143,446
Transfer agent's fees and expenses...... 826,000
Custodian's fees and expenses........... 440,000
Reports to shareholders................. 95,000
Registration fees....................... 67,000
Audit fee............................... 35,000
Legal fees and expenses................. 33,000
Directors' fees......................... 30,000
Miscellaneous........................... 25,148
--------------
- --
Total expenses....................... 6,948,991
--------------
- --
Net investment income...................... 5,103,635
--------------
- --
Realized and Unrealized Gain (Loss)
on Investment and Foreign Currency
Transactions
Net realized gain (loss) on:
Investment transactions................. 69,985
Foreign currency transactions...........
(406,127)
--------------
- --
(336,142)
--------------
- --
Net change in unrealized appreciation on:
Investments............................. 6,168,381
Foreign currencies...................... 1,582
--------------
- --
6,169,963
--------------
- --
Net gain on investments and foreign
currencies.............................. 5,833,821
--------------
- --
Net Increase in Net Assets
Resulting from Operations.................. $ 10,937,456
--------------
- --
--------------
- --
</TABLE>
PRUDENTIAL WORLD FUND, INC.
INTERNATIONAL STOCK SERIES
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended October 31,
in Net Assets 1998 1997
<S> <C> <C>
Operations
Net investment income........ $ 5,103,635 $
4,227,843
Net realized gain (loss) on
investment and foreign
currency transactions..... (336,142)
7,343,863
Net change in unrealized
appreciation of
investments and foreign
currencies................ 6,169,963
13,631,809
------------- ---------
- ----
Net increase in net assets
resulting from
operations................ 10,937,456
25,203,515
------------- ---------
- ----
Dividends and distributions
(Note 1)
Dividends from net investment
income
Class A................... (355,991)
(1,745)
Class B................... (388,835)
(23)
Class C................... (55,588)
(2)
Class Z................... (2,669,202)
(2,801,611)
------------- ---------
- ----
(3,469,616)
(2,803,381)
------------- ---------
- ----
Distributions from net
realized capital gains
Class A................... (791,091)
(1,514)
Class B................... (1,944,176)
(24)
Class C................... (277,943)
(2)
Class Z................... (5,084,194)
(2,381,370)
------------- ---------
- ----
(8,097,404)
(2,382,910)
------------- ---------
- ----
Series share transactions (net
of conversions) (Note 6)
Net proceeds from shares
sold...................... 672,760,380
804,494,249
Net asset value of shares
issued in reinvestment of
dividends and
distributions............. 11,451,509
5,185,220
Cost of shares reacquired.... (647,270,258)
(646,463,274)
------------- ---------
- ----
Net increase in net assets
from Series share
transactions.............. 36,941,631
163,216,195
------------- ---------
- ----
Total increase.................. 36,312,067
183,233,419
Net Assets
Beginning of year............... 373,668,664
190,435,245
------------- ---------
- ----
End of year(a).................. $ 409,980,731 $
373,668,664
------------- ---------
- ----
------------- ---------
- ----
- ---------------
(a) Includes undistributed net
investment income of............ $ 3,884,785 $
2,651,778
------------- ---------
- ----
------------- ---------
- ----
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 7
<PAGE>
PRUDENTIAL
WORLD FUND, INC.
Notes to Financial Statements INTERNATIONAL
STOCK SERIES
- ------------------------------------------------------------
- --------------------
Prudential World Fund, Inc. (the 'Fund') is registered under
the Investment
Company Act of 1940, as an open-end, diversified management
investment company
and currently consists of two series: the International
Stock Series and the
Global Series. The International Stock Series (the 'Series')
commenced
investment operations in November 1992. The investment
objective of the Series
is to achieve long-term growth of capital through investment
in equity
securities of foreign issuers. Income is a secondary
objective. The Series seeks
to achieve its objective primarily through investment in a
diversified portfolio
of securities which consist of equity securities of foreign
issuers.
- ------------------------------------------------------------
Note 1. Accounting Policies
The following is a summary of significant accounting
policies followed by the
Fund and the Series in the preparation of its financial
statements.
Securities Valuation: Securities traded on an exchange
(whether domestic or
foreign) are valued at the last reported sales price on the
primary exchange on
which they are traded. Securities traded in the over-the-
counter market
(including securities listed on exchanges for which a last
sales price is not
available) are valued at the average of the last reported
bid and asked prices.
Any security for which a reliable market quotation is
unavailable is valued at
fair value considering factors determined in good faith by
the investment
adviser under procedures established by and under the
general supervision of the
Fund's Board of Directors.
Short-term securities which mature in more than 60 days are
valued at current
market quotations. Short-term securities which mature in 60
days or less are
valued at amortized cost.
In connection with transactions in repurchase agreements
with U.S. financial
institutions, it is the Series' policy that its custodian or
designated
subcustodians, as the case may be under triparty repurchase
agreements, take
possession of the underlying securities, the value of which
exceeds the
principal amount of the repurchase transaction including
accrued interest. If
the seller defaults and the value of the collateral declines
or if bankruptcy
proceedings are commenced with respect to the seller of the
security,
realization of the collateral by the Fund may be delayed or
limited.
All securities are valued as of 4:15 p.m., New York time.
Foreign Currency Translation: The books and records of the
Fund are maintained
in U.S. dollars. Foreign currency amounts are translated
into U.S. dollars on
the following basis:
(i) market value of investment securities, other assets and
liabilities - at the
closing daily rates of exchange.
(ii) purchases and sales of investment securities, income
and expenses - at the
rate of exchange prevailing on the respective dates of such
transactions.
Although the net assets of the Fund are presented at the
foreign exchange rates
and market values at the close of the fiscal year, the Fund
does not isolate
that portion of the results of operations arising as a
result of changes in the
foreign exchange rates from the fluctuations arising from
changes in the market
prices of securities held at the end of the year. Similarly,
the Fund does not
isolate the effect of changes in foreign exchange rates from
the fluctuations
arising from changes in the market prices of long-term
portfolio securities sold
during the year. Accordingly, these realized foreign
currency gains (losses) are
included in the reported net realized gains (losses) on
investment transactions.
Net realized gains (losses) on foreign currency transactions
represent net
foreign exchange gains or losses from holdings of foreign
currencies, currency
gains or losses realized between the trade and settlement
dates on security
transactions, and the difference between the amounts of
dividends, interest and
foreign taxes recorded on the Fund's books and the U.S.
dollar equivalent
amounts actually received or paid. Net unrealized currency
gains or losses from
valuing foreign currency denominated assets and liabilities
(other than
investments) at year-end exchange rates are reflected as a
component of net
unrealized appreciation on investments and foreign
currencies.
Foreign security and currency transactions may involve
certain considerations
and risks not typically associated with those of domestic
origin as a result of,
among other factors, the possibility of political and
economic instability and
the level of governmental supervision and regulation of
foreign securities
markets.
Securities Transactions and Net Investment Income:
Securities transactions are
recorded on the trade date. Realized gains and losses from
investment and
currency transactions are calculated on the identified cost
basis. Dividend
income is recorded on the ex-dividend date; interest income
is recorded on the
accrual basis. Expenses are recorded on the accrual basis
which may require the
use of certain estimates by management.
Net investment income (loss), other than distribution fees,
and unrealized and
realized gains or losses are allocated daily to each class
of shares based upon
the relative proportion of net assets of each class at the
beginning of the day.
- ------------------------------------------------------------
- --------------------
8
<PAGE>
PRUDENTIAL
WORLD FUND, INC.
Notes to Financial Statements
INTERNATIONAL STOCK SERIES
- ------------------------------------------------------------
- --------------------
Taxes: For federal income tax purposes, each series in the
Fund is treated as a
separate taxpaying entity. It is the intent of the Series to
continue to meet
the requirements of the Internal Revenue Code applicable to
regulated investment
companies and to distribute all of its net income to
shareholders. Therefore, no
federal income tax provision is required.
Withholding taxes on foreign dividends have been provided
for in accordance with
the Fund's understanding of the applicable country's tax
rules and rates.
Dividends and Distributions: The Fund expects to pay
dividends of net investment
income and distributions of net realized capital and
currency gains, if any,
annually. Dividends and distributions are recorded on the ex-
dividend date.
Income distributions and capital gain distributions are
determined in accordance
with income tax regulations which may differ from generally
accepted accounting
principles.
Reclassification of Capital Accounts: The Series accounts
for and reports
distributions to shareholders in accordance with the
American Institute of
Certified Public Accountants' Statement of Position 93-2:
Determination,
Disclosure, and Financial Statement Presentation of Income,
Capital Gains, and
Return of Capital Distributions by Investment Companies. The
effect of applying
this statement was to decrease undistributed net investment
income by $401,012,
increase accumulated net realized gain on investments by
$406,127 and decrease
paid in capital by $5,115 for the year ended October 31,
1998, due to realized
and recognized currency losses during the year and certain
expenses not being
deductible for tax purposes. Net investment income, net
realized gains and net
assets were not affected by this change.
- ------------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement with Prudential
Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has
responsibility for all
investment advisory services and supervises the subadviser's
performance of such
services. PIFM has entered into a subadvisory agreement with
Mercator Asset
Management, L.P. ('Mercator'), a limited partnership where
The Prudential Asset
Management Company, Inc. ('PAMCI') is a limited partner.
Mercator furnishes
investment advisory services in connection with the
management of the Series.
PIFM pays for the cost of the subadviser's services, the
compensation of
officers and employees of the Fund, occupancy and certain
clerical and
bookkeeping costs of the Fund. The Fund bears all other
costs and expenses.
The management fee paid PIFM is computed daily and payable
monthly at an annual
rate of 1% of the average daily net assets of the Series.
PIFM pays Mercator at
an annual rate of .75 of 1% of the Series average daily net
assets up to and
including $50 million, .60 of 1% of the Series' average
daily net assets in
excess of $50 million up to and including $300 million and
.45 of 1% of the
Series' average daily net assets in excess of $300 million.
The subadvisory fee
amounted to $2,396,200 for the year ended October 31, 1998.
The Fund had a distribution agreement with Prudential
Securities Incorporated
('PSI') which acted as the distributor of the Class A, Class
B, Class C and
Class Z shares of the Fund through May 31, 1998. Prudential
Investment
Management Services LLC ('PIMS') became the distributor of
the Fund effective
June 1, 1998 and is serving the Fund under the same terms
and conditions as
under the arrangement with PSI. The Fund compensated PSI and
PIMS for
distributing and servicing the Fund's Class A, Class B and
Class C shares,
pursuant to plans of distribution, (the 'Class A, B and C
Plans'), regardless of
expenses actually incurred by them. The distribution fees
are accrued daily and
payable monthly. No distribution or service fees are paid to
PIMS as distributor
for Class Z shares of the Fund.
Pursuant to the Class A, B and C Plans, the Series
compensates PIMS for
distribution-related activities at an annual rate of up to
.30 of 1%, 1% and 1%
of the average daily net assets of the Class A, B, and C
shares, respectively.
Such expenses under the Plans were .25 of 1%, 1% and 1% of
the average daily net
assets of the Class A, B and C shares respectively, for the
year ended October
31, 1998.
PSI and PIMS have advised the Series that they received
approximately $203,000
in front-end sales charges resulting from sales of Class A
shares during the
year ended October 31, 1998. From these fees, PSI and PIMS
paid such sales
charges to affiliated broker-dealers, which in turn paid
commissions to
salespersons and incurred other distribution costs.
PSI and PIMS have advised the Series that for the year ended
October 31, 1998,
they received approximately $268,000 and $7,900 in
contingent deferred sales
charges imposed upon certain redemptions by Class B and
Class C shareholders,
respectively.
PSI, PIMS, PIFM and PAMCI are indirect, wholly owned
subsidiaries of The
Prudential Insurance Company of America.
The Fund, along with other affiliated registered investment
companies (the
'Funds'), entered into a credit agreement (the 'Agreement')
with an unaffiliated
lender. The maximum commitment under the Agreement is
$200,000,000. Interest on
any such borrowings outstanding will be at
- ------------------------------------------------------------
- --------------------
9
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Notes to Financial Statements
INTERNATIONAL STOCK SERIES
- ------------------------------------------------------------
- --------------------
market rates. The purpose of the Agreement is to serve as an
alternative source
of funding for capital share redemptions. The Series did not
borrow any amounts
pursuant to the Agreement during the year ended October 31,
1998. The Funds pay
a commitment fee at an annual rate of .055 of 1% on the
unused portion of the
credit facility. The commitment fee is accrued and paid
quarterly on a pro rata
basis by the Funds. The Agreement expired on December 30,
1997 and has been
extended through December 29, 1998 under the same terms.
- ------------------------------------------------------------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned
subsidiary of PIFM,
serves as the Fund's transfer agent. During the year ended
October 31, 1998, the
Series incurred fees of approximately $734,000 for the
services of PMFS. As of
October 31, 1998 approximately $66,000 of such fees were due
to PMFS. Transfer
agent fees and expenses in the Statement of Operations
include certain
out-of-pocket expenses paid to nonaffiliates.
- ------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of portfolio securities of the Series,
excluding short-term
investments, for the year ended October 31, 1998 were
$58,848,701 and
$55,115,189, respectively.
The federal income tax basis of the Series' investments as
of October 31, 1998
was substantially the same as for financial reporting
purposes and accordingly,
net unrealized appreciation on investments for federal
income tax purposes was
$45,015,155 (gross unrealized appreciation--$83,987,094,
gross unrealized
depreciation--$38,971,939).
- ------------------------------------------------------------
Note 5. Joint Repurchase Agreement Account
The Fund, along with other affiliated registered investment
companies, transfers
uninvested cash balances into a single joint account, the
daily aggregate
balance of which is invested in one or more repurchase
agreements collateralized
by U.S. Treasury or federal agency obligations. As of
October 31, 1998, the
Series had a 5.7% undivided interest in the repurchase
agreements in the joint
account. The undivided interest for the Series represents
$53,504,000 in the
principal amount. As of such date, each repurchase agreement
in the joint
account and the collateral therefor were as follows:
Bear, Stearns & Co., Inc., 5.40%, in the principal amount of
$260,000,000,
repurchase price $260,117,000, due 11/2/98. The value of the
collateral
including accrued interest was $265,935,719.
Salomon Smith Barney Inc., 5.40%, in the principal amount of
$260,000,000,
repurchase price $260,117,000, due 11/2/98. The value of the
collateral
including accrued interest was $265,365,298.
Deutsche Morgan Grenfell Inc., 5.41%, in the principal
amount of $260,000,000,
repurchase price $260,117,217, due 11/2/98. The value of the
collateral
including accrued interest was $265,200,735.
SBC Warburg Dillon Read, Inc., 5.38%, in the principal
amount of $160,825,000,
repurchase price $160,897,103, due 11/2/98. The value of the
collateral
including accrued interest was $164,045,205.
- ------------------------------------------------------------
Note 6. Capital
The Fund offers Class A, Class B, Class C and Class Z
shares. Class A shares are
sold with a front-end sales charge of up to 5%. Class B
shares are sold with a
contingent deferred sales charge which declines from 5% to
zero depending on the
period of time the shares are held. Prior to November 2,
1998, Class C shares
are sold with a contingent deferred sales charge of 1%
during the first year.
Effective November 2, 1998, Class C shares are sold with a
front-end sales
charge of 1% and a contingent deferred sales charge of 1%
during the first 18
months. Class B shares automatically convert to Class A
shares on a quarterly
basis approximately seven years after purchase. A special
exchange privilege is
also available for shareholders who qualified to purchase
Class A shares at net
asset value. Class Z shares are not subject to any sales or
redemption charge
and are offered exclusively for sale to a limited group of
investors.
There are 500 million authorized shares of $.01 par value
common stock, divided
equally into four classes, designated Class A, Class B,
Class C and Class Z
common stock.
As of October 30, 1998, 2,634 of the outstanding shares were
owned by the
Prudential.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ---------------------------------- ----------- ---------
- ----
<S> <C> <C>
Year ended October 31, 1998:
Shares sold....................... 3,579,531 $
68,487,089
Shares issued in reinvestment of
dividends and distributions..... 64,964
1,127,781
Shares reacquired................. (3,130,800)
(59,424,795)
----------- ---------
- ----
Net increase in shares outstanding
before conversion............... 513,695
10,190,075
Shares issued upon conversion from
Class B......................... 79,872
1,517,622
----------- ---------
- ----
Net increase in shares
outstanding..................... 593,567 $
11,707,697
----------- ---------
- ----
----------- ---------
- ----
</TABLE>
- ------------------------------------------------------------
- --------------------
10
<PAGE>
PRUDENTIAL
WORLD FUND, INC.
Notes to Financial Statements
INTERNATIONAL STOCK SERIES
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class A Shares Amount
- ---------------------------------- ----------- ---------
- ----
<S> <C> <C>
Year ended October 31, 1997:
Shares sold....................... 10,202,989 $
196,064,399
Shares issued in reinvestment of
dividends and distributions..... 203
3,367
Shares reacquired................. (8,307,335)
(161,996,245)
----------- ---------
- ----
Net increase in shares outstanding
before conversion............... 1,895,857
34,071,521
Shares issued upon conversion from
Class B......................... 87,667
1,665,704
----------- ---------
- ----
Net increase in shares
outstanding..................... 1,983,524 $
35,737,225
----------- ---------
- ----
----------- ---------
- ----
<CAPTION>
Class B
- ----------------------------------
<S> <C> <C>
Year ended October 31, 1998:
Shares sold....................... 2,837,939 $
54,447,404
Shares issued in reinvestment of
dividends and distributions..... 130,869
2,267,954
Shares reacquired................. (2,530,182)
(47,519,258)
----------- ---------
- ----
Net increase in shares outstanding
before conversion............... 438,626
9,196,100
Shares reacquired upon conversion
into Class A.................... (80,332)
(1,517,622)
----------- ---------
- ----
Net increase in shares
outstanding..................... 358,294 $
7,678,478
----------- ---------
- ----
----------- ---------
- ----
Year ended October 31, 1997:
Shares sold....................... 13,896,760 $
263,039,826
Shares issued in reinvestment of
dividends and distributions..... 3
44
Shares reacquired................. (9,001,122)
(174,661,409)
----------- ---------
- ----
Net increase in shares outstanding
before conversion............... 4,895,641
88,378,461
Shares reacquired upon conversion
into Class A.................... (88,084)
(1,665,704)
----------- ---------
- ----
Net increase in shares
outstanding..................... 4,807,557 $
86,712,757
----------- ---------
- ----
----------- ---------
- ----
<CAPTION>
Class C Shares Amount
- ---------------------------------- ----------- ---------
- ----
<S> <C> <C>
Year ended October 31, 1998:
Shares sold....................... 878,403 $
16,772,243
Shares issued in reinvestment of
dividends and distributions..... 18,693
323,948
Shares reacquired................. (793,470)
(15,123,933)
----------- ---------
- ----
Net increase in shares
outstanding..................... 103,626 $
1,972,258
----------- ---------
- ----
----------- ---------
- ----
Year ended October 31, 1997:
Shares sold....................... 3,133,108 $
59,754,209
Shares reacquired................. (2,451,619)
(47,614,464)
----------- ---------
- ----
Net increase in shares
outstanding..................... 681,489 $
12,139,745
----------- ---------
- ----
----------- ---------
- ----
<CAPTION>
Class Z
- ----------------------------------
<S> <C> <C>
Year ended October 31, 1998:
Shares sold....................... 27,696,101 $
533,053,644
Shares issued in reinvestment of
dividends and distributions..... 445,125
7,731,826
Shares reacquired................. (27,308,803)
(525,202,272)
----------- ---------
- ----
Net increase in shares
outstanding..................... 832,423 $
15,583,198
----------- ---------
- ----
----------- ---------
- ----
Year ended October 31, 1997:
Shares sold....................... 15,399,799 $
285,635,815
Shares issued in reinvestment of
dividends and distributions..... 312,157
5,181,809
Shares reacquired................. (14,177,275)
(262,191,156)
----------- ---------
- ----
Net increase in shares
outstanding..................... 1,534,681 $
28,626,468
----------- ---------
- ----
----------- ---------
- ----
</TABLE>
- ------------------------------------------------------------
Note 7. Dividends
On December 11, 1998, the Board of Directors of the Series
declared the
following ordinary income dividends per Class A, B, C and Z
shares of $.15,
$.01, $.01 and $.20 respectively, payable on December 15,
1998 to shareholders
of record on December 14, 1998.
- ------------------------------------------------------------
- --------------------
11
<PAGE>
PRUDENTIAL
WORLD FUND, INC.
Financial Highlights INTERNATIONAL
STOCK SERIES
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class A
-------------
- ----------------------------------------------
October 1, September 23,
1996 1996(c)
Year Ended
October 31, Through Through
-------------
- ------------ October 31, September 30,
1998
1997(e) 1996 1996
----------
- ---------- ----------- -------------
<S> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...... $ 18.24
$ 16.59 $ 16.48 $ 16.54
----------
- ---------- ----- -----
Income from investment operations:
Net investment income (loss).............. .27
.24 (.01) --
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions........................... .40
1.85 .12 (.06)
----------
- ---------- ----- -----
Total from investment operations....... .67
2.09 .11 (.06)
----------
- ---------- ----- -----
Less distributions:
Dividends from net investment income...... (.18)
(.24) -- --
Distributions from net realized capital
gains.................................. (.40)
(.20) -- --
----------
- ---------- ----- -----
Total distributions.................... (.58)
(.44) -- --
----------
- ---------- ----- -----
Net asset value, end of period............ $ 18.33
$ 18.24 $ 16.59 $ 16.48
----------
- ---------- ----- -----
----------
- ---------- ----- -----
TOTAL RETURN(a)........................... 3.85%
12.85% .67% (.36)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........... $ 47,237
$ 36,184 $ 5,169(d) $ 199(d)
Average net assets (000).................. $ 44,708
$ 18,779 $ 2,793(d) $ 199(d)
Ratios to average net assets:
Expenses, including distribution
fees................................ 1.62%
1.75% 2.05%(b) 2.46%(b)
Expenses, excluding distribution
fees................................ 1.37%
1.50% 1.80%(b) 2.21%(b)
Net investment income (loss)........... 1.28%
1.40% (1.03)%(b) .75%(b)
Portfolio turnover rate................... 15%
9% 4% 15%
</TABLE>
- ---------------
(a) Total return is calculated assuming a purchase of shares
on the first day
and a sale on the last day of each period reported and
includes reinvestment
of dividends and distributions. Total return for periods
of less than a full
year are not annualized.
(b) Annualized.
(c) Commencement of offering of Class A shares.
(d) Figures are actual and are not rounded to the nearest
thousand.
(e) Calculated based upon weighted average shares
outstanding during the year.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 12
<PAGE>
PRUDENTIAL
WORLD FUND, INC.
Financial Highlights
INTERNATIONAL STOCK SERIES
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class B
-------------
- ----------------------------------------------
October 1, September 23,
1996 1996(c)
Year Ended
October 31, Through Through
-------------
- ------------ October 31, September 30,
1998
1997(e) 1996 1996
----------
- ---------- ----------- -------------
<S> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...... $ 18.13
$ 16.57 $ 16.47 $ 16.54
----------
- ---------- ----- -----
Income from investment operations:
Net investment income (loss).............. .10
.12 (.02) --
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions........................... .43
1.84 .12 (.07)
----------
- ---------- ----- -----
Total from investment operations....... .53
1.96 .10 (.07)
----------
- ---------- ----- -----
Less distributions:
Dividends from net investment income...... (.08)
(.20) -- --
Distributions from net realized capital
gains.................................. (.40)
(.20) -- --
----------
- ---------- ----- -----
Total distributions.................... (.48)
(.40) -- --
----------
- ---------- ----- -----
Net asset value, end of period............ $ 18.18
$ 18.13 $ 16.57 $ 16.47
----------
- ---------- ----- -----
----------
- ---------- ----- -----
TOTAL RETURN(a)........................... 3.05%
12.04% .61% (.42)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........... $ 93,896
$ 87,155 $ 1,922(d) $ 199(d)
Average net assets (000).................. $ 98,444
$ 47,584 $ 313(d) $ 199(d)
Ratios to average net assets:
Expenses, including distribution
fees................................ 2.37%
2.50% 2.80%(b) 3.21%(b)
Expenses, excluding distribution
fees................................ 1.37%
1.50% 1.80%(b) 2.21%(b)
Net investment income (loss)........... .53%
.65% (1.78)%(b) 0%(b)
Portfolio turnover rate................... 15%
9% 4% 15%
</TABLE>
- ---------------
(a) Total return is calculated assuming a purchase of shares
on the first day
and a sale on the last day of each period reported and
includes reinvestment
of dividends and distributions. Total return for periods
of less than a full
year are not annualized.
(b) Annualized.
(c) Commencement of offering of Class B shares.
(d) Figures are actual and are not rounded to the nearest
thousand.
(e) Calculated based upon weighted average shares
outstanding during the year.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 13
<PAGE>
PRUDENTIAL
WORLD FUND, INC.
Financial Highlights
INTERNATIONAL STOCK SERIES
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class C
-------------
- ----------------------------------------------
October 1, September 23,
1996 1996(c)
Year Ended
October 31, Through Through
-------------
- ------------ October 31, September 30,
1998
1997(e) 1996 1996
----------
- ---------- ----------- -------------
<S> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...... $ 18.13
$ 16.57 $ 16.47 $ 16.54
----------
- ---------- ----- -----
Income from investment operations:
Net investment income (loss).............. .10
.12 (.02) --
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions........................... .43
1.84 .12 (.07)
----------
- ---------- ----- -----
Total from investment operations....... .53
1.96 .10 (.07)
----------
- ---------- ----- -----
Less distributions:
Dividends from net investment income...... (.08)
(.20) -- --
Distributions from net realized gains..... (.40)
(.20) -- --
----------
- ---------- ----- -----
Total distributions.................... (.48)
(.40) -- --
----------
- ---------- ----- -----
Net asset value, end of period............ $ 18.18
$ 18.13 $ 16.57 $ 16.47
----------
- ---------- ----- -----
----------
- ---------- ----- -----
TOTAL RETURN(a)........................... 3.05%
12.04% .61% (.42)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........... $ 14,271
$ 12,354 $ 200(d) $ 199(d)
Average net assets (000).................. $ 14,345
$ 7,473 $ 202(d) $ 199(d)
Ratios to average net assets:
Expenses, including distribution
fees................................ 2.37%
2.50% 2.80%(b) 3.21%(b)
Expenses, excluding distribution
fees................................ 1.37%
1.50% 1.80%(b) 2.21%(b)
Net investment income (loss)........... .53%
.65% (1.78)%(b) 0%(b)
Portfolio turnover rate................... 15%
9% 4% 15%
</TABLE>
- ---------------
(a) Total return is calculated assuming a purchase of shares
on the first day
and a sale on the last day of each period reported and
includes reinvestment
of dividends and distributions. Total return for periods
of less than a full
year are not annualized. Total return includes the
effect of expense
subsidies/recoveries, as applicable.
(b) Annualized.
(c) Commencement of offering of Class C shares.
(d) Figures are actual and are not rounded to the nearest
thousand.
(e) Calculated based upon weighted average shares
outstanding during the year.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 14
<PAGE>
PRUDENTIAL
WORLD FUND, INC.
Financial Highlights
INTERNATIONAL STOCK SERIES
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class Z
---------------
- ------------------------------------------------------------
- -----------
October 1,
1996
Year Ended
October 31, Through Year Ended
September 30,
---------------
- ---------- October 31, -----------------------------
- -----------
1998
1997(d) 1996 1996 1995
1994
----------
- ---------- ----------- ---------- ----------
- ----------
<S> <C>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $ 18.28
$ 16.59 $ 16.48 $ 15.25 $ 14.84
$ 12.35
----------
- ---------- ----------- ---------- ----------
- ----------
Income from investment operations:
Net investment income (loss)............ .30
.31 (.01) .22 .18(c)
.13(c)
Net realized and unrealized gain (loss)
on investment and foreign currency
transactions......................... .41
1.82 .12 1.20 .66
2.54
----------
- ---------- ----------- ---------- ----------
- ----------
Total from investment operations..... .71
2.13 .11 1.42 .84
2.67
----------
- ---------- ----------- ---------- ----------
- ----------
Less distributions:
Dividends from net investment income.... (.21)
(.24) -- (.19) (.10)
(.03)
Distributions from net realized gains... (.40)
(.20) -- -- (.33)
(.15)
----------
- ---------- ----------- ---------- ----------
- ----------
Total distributions.................. (.61)
(.44) -- (.19) (.43)
(.18)
----------
- ---------- ----------- ---------- ----------
- ----------
Net asset value, end of period.......... $ 18.38
$ 18.28 $ 16.59 $ 16.48 $ 15.25
$ 14.84
----------
- ---------- ----------- ---------- ----------
- ----------
----------
- ---------- ----------- ---------- ----------
- ----------
TOTAL RETURN(a)......................... 4.08%
13.13% .67% 9.44% 5.95%
21.71%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)......... $254,577
$237,976 $ 190,428 $188,386 $136,685
$102,824
Average net assets (000)................ $258,322
$219,419 $ 191,228 $161,356 $118,927
$ 68,476
Ratios to average net assets:
Expenses, including distribution
fees.............................. 1.37%
1.50% 1.80%(b) 1.61%(c) 1.60%(c)
1.60%(c)
Expenses, excluding distribution
fees.............................. 1.37%
1.50% 1.80%(b) 1.61%(c) 1.60%(c)
1.60%(c)
Net investment income (loss)......... 1.53%
1.65% (.78)%(b) 1.58%(c) 1.58%(c)
1.08%(c)
Portfolio turnover rate................. 15%
9% 4% 15% 20%
21%
</TABLE>
- ---------------
(a) Total return is calculated assuming a purchase of shares
on the first day
and a sale on the last day of each period reported and
includes reinvestment
of dividends and distributions. Total return for periods
of less than a full
year are not annualized. Total return includes the
effect of expense
subsidies/recoveries, as applicable.
(b) Annualized.
(c) Net of expense subsidy/recovery.
(d) Calculated based upon weighted average shares
outstanding during the year.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 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 constituting
Prudential World Fund, Inc.) at October 31, 1998, results of
its operations for
the year then ended, and the changes in its net assets and
the financial
highlights for each of the two years in the period then
ended, in conformity
with generally accepted accounting principles. These
financial statements and
financial highlights (hereafter referred to as 'financial
statements') are the
responsibility of the Fund's management; our responsibility
is to express an
opinion on these financial statements based on our audits.
We conducted our
audits of these financial statements in accordance with
generally accepted
auditing standards which require that we plan and perform
the audit to obtain
reasonable assurance about whether the financial statements
are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting
the amounts and disclosures in the financial statements,
assessing the
accounting principles used and significant estimates made by
management, and
evaluating the overall financial statement presentation. We
believe that our
audits, which included confirmation of securities at October
31, 1998 by
correspondence with the custodian, provide a reasonable
basis for the opinion
expressed above. The accompanying financial highlights for
the three periods in
the period ended October 31, 1996 were audited by other
independent accountants,
whose opinion dated November 27, 1996 was unqualified.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
December 18, 1998
- ------------------------------------------------------------
- --------------------
16
<PAGE>
PRUDENTIAL WORLD FUND, INC.
Federal Income Tax Information (Unaudited)
INTERNATIONAL STOCK SERIES
- ------------------------------------------------------------
- --------------------
We are required by the Internal Revenue Code to advise you
within 60 days of the
Series' fiscal year end (October 31, 1998) as to the federal
tax status of
dividends paid by the Series during such fiscal year.
Accordingly, we are
advising you that in the fiscal year ended October 31, 1998,
dividends of $.43
per share for Class A shares, $.33 per Class B shares, $.33
per Class C shares
and $.46 per Class Z shares (representing net investment
income and short-term
capital gains) which are taxable as ordinary income. In
addition, the Series
paid to Class A, B, C and Z shares a long-term capital gain
distribution of $.15
which is taxable as such.
We wish to advise you that the corporate dividends received
deduction for the
Series is zero. Only funds that invest in U.S. equity
securities are entitled to
pass-through a corporate dividends received deduction.
The Fund has elected to give the benefit of foreign tax
credits to its
shareholders. Accordingly, shareholders who must report
their gross income
dividends and distributions in a federal income tax return
will be entitled to a
foreign tax credit, or an itemized deduction in computing
their U.S. income tax
liability. It is generally more advantageous to claim a
credit rather than take
a deduction. For the fiscal year ended October 31, 1998 the
Fund intends on
passing through 10.3% of ordinary income distributions as a
foreign tax credit.
In January 1999, you will be advised on IRS Form 1099 DIV or
substitute 1099 DID
as to the federal tax status of the dividends and
distributions received by you
in calendar year 1998.
- ------------------------------------------------------------
- --------------------
17
<PAGE>
Comparing A $10,000 Investment.
- -------------------------------
Prudential World Fund, Inc. -- International Stock Series
vs.
the Morgan Stanley Capital International EAFE Index.
Past performance is not indicative of future results.
Principal and investment
return will fluctuate so an investor's shares, when
redeemed, may be worth more
or less than their original cost.
These graphs are furnished to you in accordance with SEC
regulations. They
compare 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, Australia, and
Far East (EAFE)
Index (the 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 each fiscal year (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 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 charges
were deducted from the
value of the investment in Class B and Class C shares,
assuming full redemption
on October 31, 1998; (c) beginning November 2, 1998, Class C
shares are subject
to a front-end sales charge of 1% and a CDSC of 1% for 18
months. This change
is not reflected in the charts to the right; (d) all
recurring fees (including
management fees) were deducted; and (e) all dividends and
distributions were
reinvested. Class B shares will automatically convert to
Class A shares, on a
quarterly basis, approximately seven years after purchase.
This conversion
feature is not reflected in the graphs. Class Z shares are
not subject to a
sales charge or distribution fee. Without waiver of
management fees and/or
expense subsidization, the Series' average annual total
returns would have been
lower, as indicated in parentheses ( ).
The Morgan Stanley Capital International EAFE Index is a
weighted index
comprised of securities listed on the stock exchanges of
Europe, Australia,
New Zealand, and the Far East. The Index is unmanaged 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 Index may differ substantially from the
securities in the
Series. The Index is not the only one that may be used to
characterize
performance of equity funds, and other indexes may portray
different
comparative performance. Investors cannot invest directly in
an index.
Class A
(GRAPH)
Class B
(GRAPH)
Class C
(GRAPH)
Class Z
(GRAPH)
<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
Delayne D. Gold
Robert F. Gunia
Don G. Hoff
Robert E. LaBlanc
Mendel A. Melzer, CFA
Robin B. Smith
Stephen Stoneburn
Brian M. Storms
Nancy H. Teeters
Officers
Brian M. Storms, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Robert C. Rosselot, 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 Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
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
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