(ICON)
Prudential
International
Bond Fund,
Inc.
SEMI
ANNUAL
REPORT
June 30, 1998
(LOGO)
<PAGE>
Prudential International Bond Fund, Inc.
Performance At A Glance.
Rapidly deteriorating economic conditions in Asia
during the past six months
increased investor appetite for better quality
debt securities such as
government bonds of the U.S., the U.K. and
Germany. Your Prudential
International Bond Fund surpassed the return on
the average comparable fund
because we emphasized these "safe haven"
investments and maintained a below
average exposure to riskier emerging markets
bonds.
<TABLE>
Cumulative Total Returns1
As of 6/30/98
<CAPTION>
Six One Five
Ten Since
Months Year
Years Years Inception2
<S> <C> <C> <C>
<C> <C>
Class A 3.89% 6.01%
53.22% 135.59% 155.28%
Class B 3.41 5.33
N/A N/A 20.51
Class C 3.41 5.33
N/A N/A 20.51
Class Z 3.81 6.16
N/A N/A 8.97
Lipper Global
Income Fund Avg.3 2.09 4.67
33.62 108.50 ***
</TABLE>
<TABLE>
Average Annual Total Returns1
As of 6/30/98
<CAPTION>
One Five
Ten Since
Year
Years Years Inception2
<S> <C> <C>
<C> <C>
Class A 1.77%
8.02% 8.50% 8.50%
Class B 0.33
N/A N/A 6.79
Class C 4.33
N/A N/A 7.89
Class Z 6.16
N/A N/A 6.91
</TABLE>
<TABLE>
<CAPTION>
Distributions & Yields
As of 6/30/98
Total Distributions
30-Day
Paid for Six Mos.
SEC Yield
<S> <C>
<C>
Class A $0.24
3.98%
Class B $0.22
3.54
Class C $0.22
3.54
Class Z $0.25
4.30
</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. Past
performance numbers, with
the exception of six-month and one-year returns,
do not fully reflect the
higher operating expenses incurred since the Fund
commenced operations as an
open-end mutual fund on January 15, 1996. If these
expenses had been applied
since the Fund's inception, past performance
returns would have been lower.
Prior to January 15, 1996, the Fund operated as a
closed-end fund with shares
being traded on the New York Stock Exchange.
1Source: Prudential Investments Fund Management
and Lipper Analytical Services.
The cumulative total returns do not take into
account sales charges. The
average annual total returns do take into account
applicable sales charges.
The Fund charges a maximum front-end sales load of
4% for Class A shares and a
declining contingent deferred sales charge (CDSC)
of 5%, 4%, 3%, 2%, 1% and 1%
for six years for Class B shares. Class B shares
will automatically convert to
Class A shares, on a quarterly basis,
approximately seven years after purchase.
Class C shares have a 1% CDSC for one year. Class
Z shares are not subject to a
sales charge or distribution fee.
2Inception dates: Class A, 7/31/87; Class B and
Class C, 1/15/96; and Class Z,
3/17/97.
3Lipper average returns are for all funds in each
share class for the six-
month, one-, five-, and ten-year periods.
***Lipper Since Inception returns are 131.33% for
Class A; 14.61% for Class B
and Class C; and 7.81% for Class Z based on all
funds in each share class.
How Investments Compared.
(As of 6/30/98)
(GRAPH)
U.S. General General U.S.
Growth Bond Muni Debt Taxable
Funds Funds Funds Money Funds
Source: Lipper Analytical Services. Financial
markets change, so a mutual
fund's past performance should never be used to
predict future results. The
risks to each of the investments listed above are
different -- we provide 12-
month total returns for several Lipper mutual fund
categories to show you that
reaching for higher 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>
Gabriel Irwin and Simon Wells, Fund Managers
(PHOTOS)
Portfolio
Managers'Report
Your Fund seeks total return, which is current
income plus any capital
appreciation. The Fund invests primarily in
intermediate-term, investment
grade debt securities of issuers outside the U.S.
(However, up to 35% of total
assets can be held in U.S. securities.) The Fund
may also invest up to 15% of
its total assets in bonds rated below investment
grade with a minimum rating
of "B" by Standard & Poor's or Moody's or of
comparable quality in our view.
Lower rated securities carry a greater risk of
loss of principal and interest
than higher rated securities. There are special
risks associated with foreign
investing, including social, political and
currency risks as well as potential
illiquidity. There can be no assurance that the
Fund will achieve its
investment objective.
U.S. Dollar Soars.
The U.S. dollar soared briefly to an eight-year
high against the Japanese yen
in June as investors worried about the slumping
Japanese economy and its
ailing banking system. The Fund's exposure to the
U.S. dollar as of June 30,
1998 stood at 62%.
Strategy Session.
Bondholders Eye Asian Crisis.
Global bond investors continued to focus on
economic developments in Asia over
the past six months. Despite soaring corporate
bankruptcies, tumbling local
currencies and banks burdened by bad loans, some
investors initially
anticipated an early resolution to the Asian
economic crisis. Indeed market
sentiment was so upbeat that investors eagerly
purchased $4.0 billion of bonds
sold in early April by the financially strapped
Republic of South Korea.
As the spring continued, however, market sentiment
shifted. The Japanese
economy sank into recession, casting doubt on
regional prospects for recovery.
Some investors feared a domino effect that could
spread into Latin America.
Under this scenario, a slumping Japanese yen might
cause devaluations in the
Hong Kong dollar and Chinese yuan that would then
pressure the Brazilian
currency. While this did not happen, investors
still shifted assets away from
Asia and other emerging market debt securities.
Russian financial markets also
sold off as investors feared that country's
currency might be devalued.
Shortly after the reporting period, the Russian
government announced it would
allow the ruble to fall this year and presented a
plan to restructure
repayment of short-term, ruble-denominated
government debt securities.
Across the ocean, the U.S. economy raced through
the first three months of
1998 at a 5.4% annualized pace then slowed to a
more sustainable rate of
growth in the spring, while core European
economies grew at a moderate pace.
Because economic conditions in the U.S. and
western Europe compared favorably
with chaotic events in Asia, demand soared for
U.S. Treasuries and bonds of
European countries such as Germany and France. As
a result, the 30-year
Treasury bond yield, which moves in the opposite
direction of its price, fell
in June to its lowest level since regular sales of
the securities began in
1977.
<PAGE>
What Went Well.
A Proven Track Record.
We disagreed with the bullish outlook for Asian
bonds that was prevalent in
fixed-income markets earlier in the year. However,
the cloud hovering over
Asia has a silver lining because it has helped
quell global inflationary
pressures as imports from countries such as Japan
sell at bargain basement
prices. Taken together, the Asian crisis and its
deflationary impact on world
economies led us to stick with better quality
bonds such as those of Germany,
the U.K., the U.S., Sweden and Denmark. This
proved to be a wise choice since
bonds from countries with a proven track record of
timely interest and
principal payments posted some of the best returns
for the six-month period.
Bonds of the U.K. and U.S. also rallied as their
respective currencies
strengthened, while Moody's Investors Service's
upgrade of Sweden's sovereign
debt rating to AA2 from AA3 boosted that country's
bonds. German bonds
comprised our largest European position,
accounting for 13% of the Fund's
total investments as of June 30, 1998. That was
followed by Denmark (7%) and
the U.K. (5%). We took profits on some of our U.K.
bonds because sterling will
likely weaken as the British economy slips into
recession.
Euro Wannabes.
Our very modest emerging markets exposure included
bonds of Hungary, Poland
and Greece. Prices on these bonds rose (and yields
fell) more in line with
debt securities of countries that will participate
in the single European
currency or Euro that is slated to begin in
January 1999. Hungary, Poland and
Greece are expected to join in the next three to
five years.
And Not So Well.
Russian Bear Stumbles.
Russian ruble-denominated bonds accounted for less
than half of one percent of
the Fund's total investments as of June 30. While
our dollar-denominated
Russian sovereign bonds (2.04% of total
investments) were not directly
affected by the devaluation of the ruble, the
Russian fixed-income market in
general came under pressure as a result of the
government's actions.
Portfolio Composition.
Sectors expressed as a percentage of
total investments as of 6/30/98.
(GRAPH)
Five Largest Issuers.
11.5% German Gov't Bonds
11.2% U.S. Treasury
Obligations
7.3% Danish Gov't Bonds
4.9% New South Wales
Treasury Corp.
4.6% Corporacion Andina
de Formento
Expressed as a percentage of net assets as of
6/30/98.
Looking Ahead.
We believe that economic turmoil in Asia will
continue to infect other sectors
of the emerging markets. As a precautionary
measure, the Fund will likely
maintain a below average exposure to emerging
markets bonds, focusing on
eastern European countries that provide
incremental yield over that of better
quality bonds.
- --------------------------------------------------
- -----------------------------
1
<PAGE>
President's Letter
August 4, 1998
(PHOTO)
Managing
Expectations.
Dear Shareholder:
For nearly eight years we've enjoyed above-
average, double-digit returns from
stocks--a bull market of unprecedented duration.
As a result, many of us have
grown accustomed to seeing the Dow Jones
Industrial Average, the S&P 500 and
other market indexes set new records. That's why
the fluctuations normally
seen in financial markets may take investors by
surprise.
Although the media has given ample coverage to the
factors that have caused
concern in 1998, we'd like to remind you that
there is also good news to
report: the US economy is healthy and continues to
grow. Inflation remains
subdued and employment is strong.
Even with a sound economy, it isn't easy to
maintain your investment
discipline when the market is fluctuating. Here
are some thoughts that may
help:
- - Manage Your Expectations. Experienced mutual
fund investors understand that
financial markets rise and fall. Over time,
however, stocks and bonds have
produced attractive returns that have kept ahead
of inflation.
- - Don't Invest Emotionally. If you have long-term
(several years or longer)
investment goals, it may be counter-productive
to sell an investment in
reaction to short-term market fluctuation. Over
the course of several
years, it's not unusual for stocks and bonds to
experience several periods
of market uncertainty.
- - Diversification Lessens Risk. Market sectors
seldom move in tandem. A well-
diversified portfolio that includes stock, bond,
and money market mutual funds
can lessen the effects of market volatility over
time.
- - We're On Your Side. Your Prudential professional
can help you understand
what's happening in the markets. He or she can
assist you in making informed
decisions based upon a thorough knowledge of
your financial needs and long-
term goals. Call your Prudential professional
today.
Thank you for your continued confidence in
Prudential mutual funds. We'll do
everything we can to keep you informed and to earn
your trust.
Sincerely,
Brian M. Storms
President, Prudential Mutual Funds & Annuities
- --------------------------------------------------
- -----------------------------
2
<PAGE>
Portfolio of Investments
as of June 30, 1998 (Unaudited) PRUDENTIAL
INTERNATIONAL BOND FUND, INC.
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Principal
Amount
US$
(000) Description
Value (Note 1)
<C> <S>
<C>
- --------------------------------------------------
- ----------
LONG-TERM INVESTMENTS--85.4%
- --------------------------------------------------
- ----------
Australia--5.9%
A$ 1,500 Federal National Mortgage
Association,
6.375%, 8/15/07
$ 957,806
7,000 New South Wales Treasury
Corporation,
6.50%, 5/1/06
4,515,668
- -----------
5,473,474
- --------------------------------------------------
- ----------
Canada--6.0%
C$ 3,500 British Columbia Provincial
Bond,
6.00%, 6/9/08
2,460,658
1,500 Ontario Hydro,
7.75%, 11/3/05
1,159,309
2,600 Province of Quebec,
6.50%, 10/1/07
1,871,313
- -----------
5,491,280
- --------------------------------------------------
- ----------
Denmark--7.3%
Danish Government Bonds,
DKr 21,000 7.00%, 12/15/04
3,416,903
19,250 8.00%, 3/15/06
3,342,369
- -----------
6,759,272
- --------------------------------------------------
- ----------
Germany--13.1%
German Government Bonds,
DM 5,300 7.375%, 1/3/05
3,377,084
7,000 6.00%, 1/5/06
4,185,403
4,500 6.25%, 1/4/24
2,805,111
3,000 Republic of Colombia,
7.25%, 12/21/00
1,707,459
- -----------
12,075,057
Greece--2.0%
Hellenic Republic,
GRD 175,000 9.20%, 3/21/02
$ 568,659
370,000 12.70%, 12/31/03
1,236,938
- -----------
1,805,597
- --------------------------------------------------
- ----------
Hungary--1.4%
Hungarian Government Bonds,
HUF 140,000 16.50%, 7/24/99
639,257
150,000 16.00%, 4/12/00
676,732
- -----------
1,315,989
- --------------------------------------------------
- ----------
Netherlands--4.1%
Dutch Government Bonds,
NLG 4,400 7.00%, 6/15/05
2,456,321
2,000 7.50%, 1/15/23
1,271,987
- -----------
3,728,308
- --------------------------------------------------
- ----------
New Zealand--3.9%
NZ$ 3,500 Federal National Mortgage
Associtation,
7.25%, 6/20/02
1,802,538
1,800 International Bank of
Reconstruction Development,
7.25%, 5/27/03
935,648
1,600 New Zealand Government Bond,
8.00%, 4/15/04
880,196
- -----------
3,618,382
- --------------------------------------------------
- ----------
Russia--0.4%
European Bank of Reconstruction
Development,
RUB 2,300 31.00%, 5/5/00
73,789
2,700 Zero Coupon, 5/28/02
272,858
- -----------
346,647
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments
as of June 30, 1998 (Unaudited) PRUDENTIAL
INTERNATIONAL BOND FUND, INC.
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Principal
Amount
US$
(000) Description
Value (Note 1)
<C> <S>
<C>
- --------------------------------------------------
- ----------
Spain--4.4%
Pts 500,000 Spanish Government Bond,
8.20%, 2/28/09
$ 4,082,131
- --------------------------------------------------
- ----------
Sweden--2.2%
SEK 15,000 Swedish Government Bond,
6.00%, 2/9/05
2,001,188
- --------------------------------------------------
- ----------
United Kingdom--4.8%
BP 650 Powergen PLC,
8.875%, 3/26/03
1,154,384
200 Republic of Argentina,
11.50%, 8/14/01
343,194
4,500 United Kingdom Treasury Strip,
Zero Coupon, 12/7/15
2,908,830
- -----------
4,406,408
- --------------------------------------------------
- ----------
United States--29.9%
Corporate Bonds--3.3%
US$ 650 Banco Ganadero Colombian Bond
(Colombia),
9.75%, 8/26/99
666,250
1,900 Financiera Energetica Nacional
(Colombia),
9.00%, 11/8/99
1,909,500
500 Romanian Commercial Bank,
9.125%, 3/10/00
481,250
- -----------
3,057,000
- --------------------------------------------------
- ----------
Sovereign Bonds--10.9%
2,500 Ministry of Finance (Russia),
10.00%, 6/26/07
1,900,000
750 Muncipality of Rio De Janeiro
(Brazil),
10.375%, 7/12/99
750,000
$500 Oman Sultante (India),
7.125%, 3/20/02
$ 510,000
950 Republic of Argentina, FRN,
6.625%, 3/31/05, Ser. L
838,375
1,400 Republic of Brazil, IDU, FRN,
6.875%, 1/1/01
1,330,000
924 Republic of Croatia, FRN,
6.50%, 7/31/06
822,759
400 Republic of Lithuania,
7.125%, 7/22/02
387,000
1,500 Republic of Poland, FRN,
6.6875%, 10/27/24
1,473,750
2,000 United Mexican States, FRN,
9.75%, 2/6/01
2,080,000
- -----------
10,091,884
- --------------------------------------------------
- ----------
Supranational Bonds--4.6%
4,100 Corporacion Andina de Fomento,
7.375%, 7/21/00
4,200,450
- --------------------------------------------------
- ----------
U.S. Government Obligations--11.1%
United States Treasury Bond,
2,550 6.625%, 2/15/27
2,876,655
United States Treasury Notes,
2,700 6.125%, 9/30/00
2,733,318
2,500 7.875%, 11/15/04
2,807,800
1,700 6.25%, 2/15/07
1,780,223
- -----------
10,197,996
- -----------
27,547,330
- -----------
Total long-term investments
(cost US$81,054,994)
78,651,063
- -----------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments
as of June 30, 1998 (Unaudited) PRUDENTIAL
INTERNATIONAL BOND FUND, INC.
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Principal
Amount
US$
(000) Description
Value (Note 1)
<C> <S>
<C>
- --------------------------------------------------
- ----------
SHORT-TERM INVESTMENTS--14.3%
- --------------------------------------------------
- ----------
Germany--1.9%
Time Deposit,
DM 1,600 3.50%, 07/2/98
$ 884,980
1,600 3.25%, 07/6/98
884,980
- -----------
1,769,960
- --------------------------------------------------
- ----------
Mexico--1.6%
MP 4,500 Mexican Cetes,
20.541%(a), 9/17/98
446,070
1,000 Petroleas Mexicano (Mexico),
FRN,
6.6875%, 3/8/99
985,000
- -----------
1,431,070
- --------------------------------------------------
- ----------
Poland--1.4%
Polish Treasury Bills,
PLZ 1,300 20.45%(a), 8/12/98
364,041
2,000 20.15%(a), 2/17/99
500,416
700 20.35%(a), 3/3/99
173,325
1,100 20.095%(a), 4/28/99
263,181
- -----------
1,300,963
- --------------------------------------------------
- ----------
United States--9.4%
Repurchase Agreement
US$ 8,686 Joint Repurchase Agreement
Account,
5.72%, 7/1/98 (Note 5)
8,686,000
- -----------
Total short-term investments
(cost US$12,299,025)
13,187,993
- -----------
- --------------------------------------------------
- ----------
Total Investments--99.7%
(cost $93,354,019; Note 4)
91,839,056
Other assets in excess of
liabilities--0.3%
276,555
- -----------
Net Assets--100%
$92,115,611
- -----------
- -----------
</TABLE>
- ---------------
Portfolio securities are classified according to
the security's currency
denomination.
(a) Percentages quoted represent yield-to-maturity
as of purchase date.
FRN--Floating Rate Note.
IDU--Interest Due and Unpaid.
NCD--Negotiable Certificates of Deposit.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 5
<PAGE>
Statement of Assets and Liabilities
(Unaudited) PRUDENTIAL
INTERNATIONAL BOND FUND, INC.
- --------------------------------------------------
- ------------------------------
<TABLE>
Assets
June 30, 1998
<S>
<C>
Investments, at value (cost
$93,354,019)......................................
.............................. $91,839,056
Foreign currency, at value (cost
$149,673).........................................
......................... 143,442
Interest
receivable........................................
.................................................
1,725,007
Forward currency contracts-amount receivable from
counterparties....................................
........ 92,829
Receivable for investments
sold..............................................
............................... 68,027
Receivable for Fund shares
sold..............................................
............................... 35,198
Other
assets............................................
..................................................
.. 2,660
- -------------
Total
assets............................................
.................................................
93,906,219
- -------------
Liabilities
Payable for investments
purchased.........................................
..................................
884,980
Accrued expenses and other
liabilities.......................................
............................... 316,185
Payable for Fund shares
reacquired........................................
..................................
253,340
Dividends
payable...........................................
................................................
140,046
Forward currency contracts-amount payable to
counterparties....................................
............. 126,695
Management fee
payable...........................................
...........................................
57,620
Distribution fee
payable...........................................
.........................................
11,742
- -------------
Total
liabilities.......................................
.................................................
1,790,608
- -------------
Net
Assets............................................
..................................................
.... $92,115,611
- -------------
- -------------
Net assets were comprised of:
Common stock, at
par...............................................
...................................... $
129,451
Paid-in capital in excess of
par...............................................
.......................... 93,898,424
- -------------
94,027,875
Distributions in excess of net investment
income............................................
............. (817,203)
Accumulated net realized gain on
investments.......................................
...................... 512,312
Net unrealized depreciation on investments and
foreign
currencies........................................
(1,607,373)
- -------------
Net assets, June 30,
1998..............................................
.....................................
$92,115,611
- -------------
- -------------
Class A:
Net asset value and redemption price per share
($89,794,298 / 12,619,535 shares of common
stock issued and
outstanding)..............................
$7.12
Maximum sales charge (4% of offering
price)............................................
.................. .30
- -------------
Maximum offering price to
public............................................
............................. $7.42
- -------------
- -------------
Class B:
Net asset value, offering price and redemption
price per share
($682,701 / 95,783 shares of common stock
issued and
outstanding).....................................
$7.13
- -------------
- -------------
Class C:
Net asset value, offering price and redemption
price per share
($122,972 / 17,254 shares of common stock
issued and
outstanding).....................................
$7.13
- -------------
- -------------
Class Z:
Net asset value, offering price and redemption
price per share
($1,515,640 / 212,488 shares of common stock
issued and
outstanding)..................................
$7.13
- -------------
- -------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 6
<PAGE>
PRUDENTIAL INTERNATIONAL BOND FUND, INC.
Statement of Operations (Unaudited)
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income
June 30, 1998
<S>
<C>
Income
Interest and discount earned (net of foreign
withholding taxes of $1,096)..............
$ 3,669,896
- -------------
Expenses
Management fee...............................
357,549
Distribution fee--Class A....................
70,279
Distribution fee--Class B....................
2,274
Distribution fee--Class C....................
345
Transfer agent's fees and expenses...........
128,000
Custodian's fees and expenses................
93,000
Reports to shareholders......................
87,000
Registration fees............................
32,000
Audit fees and expenses......................
18,000
Directors' fees..............................
13,000
Legal fees and expenses......................
11,000
Miscellaneous................................
3,911
- -------------
Total expenses............................
816,358
- -------------
Net investment income...........................
2,853,538
- -------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency Transactions
Net realized gain on:
Investment transactions......................
768,665
Foreign currency transactions................
612,129
- -------------
1,380,794
- -------------
Net change in unrealized appreciation
(depreciation) on:
Investments..................................
165,477
Foreign currencies...........................
(671,205)
- -------------
(505,728)
- -------------
Net gain on investments and foreign
currencies...................................
875,066
- -------------
Net Increase in Net Assets
Resulting from Operations.......................
$ 3,728,604
- -------------
- -------------
</TABLE>
PRUDENTIAL INTERNATIONAL BOND FUND, INC.
Statement of Changes in Net Assets (Unaudited)
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Six Months
Ended
Year Ended
Increase June 30,
December 31,
in Net Assets 1998
1997
<S> <C>
<C>
Operations
Net investment income.......... $ 2,853,538
$ 7,280,941
Net realized gain on investment
and foreign currency
transactions................ 1,380,794
5,430,440
Net change in unrealized
depreciation on investments
and foreign currencies...... (505,728)
(8,593,067)
--------------
- -------------
Net increase in net assets
resulting from operations... 3,728,604
4,118,314
--------------
- -------------
Dividends and distributions (Note
1)
Dividends from net investment
income
Class A..................... (2,403,956)
(8,710,279)
Class B..................... (14,033)
(31,668)
Class C..................... (2,143)
(1,906)
Class Z..................... (24,598)
(8,615)
--------------
- -------------
(2,444,730)
(8,752,468)
--------------
- -------------
Distributions in excess of net
investment income
Class A..................... (803,574)
(3,222,672)
Class B..................... (4,691)
(10,128)
Class C..................... (717)
(757)
Class Z..................... (8,221)
(10,368)
--------------
- -------------
(817,203)
(3,243,925)
--------------
- -------------
Fund share transactions (Note 6)
Net proceeds from shares
sold........................ 2,748,550
3,218,583
Net asset value of shares
issued in reinvestment of
dividends and
distributions............... 828,493
2,720,812
Cost of shares reacquired...... (9,527,834)
(26,185,590)
--------------
- -------------
Net decrease in net assets from
Fund share transactions..... (5,950,791)
(20,246,195)
--------------
- -------------
Total decrease.................... (5,484,120)
(28,124,274)
Net Assets
Beginning of period............... 97,599,731
125,724,005
--------------
- -------------
End of period(a).................. $ 92,115,611
$ 97,599,731
--------------
- -------------
--------------
- -------------
- ---------------
(a) Includes undistributed
(distribution in excess of)
net investment income of:..... $ (817,203)
$ 147,690
--------------
- -------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 7
<PAGE>
Notes to Financial Statements
(Unaudited) PRUDENTIAL
INTERNATIONAL BOND FUND, INC.
- --------------------------------------------------
- ------------------------------
Prudential International Bond Fund, Inc., (the
'Fund'), is an open-end,
nondiversified, management investment company
whose investment objective is to
seek total return, the components of which are
current income and capital
appreciation. The Fund invests primarily in debt
securities of issuers located
in at least three countries, excluding the United
States (except in periods of
weakness). The Fund invests in foreign debt
securities issued by foreign
corporate issuers as well as securities issued or
guaranteed by foreign
governments, semi-governmental entities,
governmental agencies, supernational
entities and other governmental entities. The
bonds are primarily of investment
grade, i.e., bonds rated within the four highest
quality grades as determined by
Moody's Investor's Service or Standard & Poor's
Rating's Group, or in unrated
securities of equivalent quality. In addition, the
Fund is permitted to invest
up to 15% of the Fund's total assets in bonds
rated below investment grade with
a minimum rating of B, or in unrated securities of
equivalent quality. The
ability of issuers of debt securities held by the
Fund to meet their obligations
may be affected by economic and political
developments in a specific country or
region.
- --------------------------------------------------
- ----------
Note 1. Accounting Policies
The following is a summary of significant
accounting policies followed by the
Fund in the preparation of its financial
statements.
Securities Valuation: In valuing the Fund's
assets, quotations of foreign
securities in a foreign currency are converted to
U.S. dollar equivalents at the
then current currency value. Portfolio securities
that are actively traded in
the over-the-counter market, including listed
securities for which the primary
market is believed to be over-the-counter, are
valued at the mean between the
most recently quoted bid and asked prices provided
by principal market makers.
Any security for which the primary market is on an
exchange is valued at the
last sale price on such exchange on the day of
valuation or, if there was no
sale on such day, the last bid price quoted on
such day. Forward currency
contracts are valued at the current cost of
covering or offsetting the contract
on the day of valuation. Securities and assets for
which market quotations are
not readily available are valued at fair value as
determined in good faith by or
under the direction of the Board of Directors of
the Fund.
Short-term securities which mature in more than 60
days are valued at current
market quotations. Short-term securities which
mature in 60 days or less are
valued at amortized cost.
In connection with transactions in repurchase
agreements with U.S. financial
institutions, it is the Fund's policy that its
custodian or designated
subcustodians, as the case may be under triparty
repurchase agreements, takes
possession of the underlying collateral
securities, the value of which exceeds
the principal amount of the repurchase transaction
including accrued interest.
To the extent that any repurchase transaction
exceeds one business day, the
value of the collateral is marked-to-market on a
daily basis to ensure the
adequacy of the collateral. 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.
Foreign Currency Translation: The books and
records of the Fund are maintained
in United States dollars. Foreign currency amounts
are translated into United
States dollars on the following basis:
(i) market value of investment securities, other
assets and liabilities--at the
current rates of exchange.
(ii) purchases and sales of investment securities,
income and expenses--at the
rates 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 period, the
Fund does not isolate that
portion of the results of operations arising as a
result of changes in the
foreign exchange rates from the fluctuations
arising from changes in the market
prices of the securities held at period-end.
Similarly, the Fund does not
isolate the effect of changes in foreign exchange
rates from the fluctuations
arising from changes in the market prices of long-
term debt securities sold
during the period. Accordingly, such realized
foreign currency gains and losses
are included in the reported net realized gains on
investment transactions.
Net realized gains or losses on foreign currency
transactions represent net
foreign exchange gains from sales and maturities
of short-term securities and
forward currency contracts, disposition of foreign
currencies, currency gains or
losses realized between the trade and settlement
dates on securities
transactions, and the difference between the
amounts of interest, discount, and
foreign taxes recorded on the Fund's books and the
U.S. dollar equivalent
amounts actually received or paid. Net currency
gains (losses) from valuing
foreign currency denominated assets (excluding
investments) and liabilities at
period-end exchange rates are reflected as a
component of net unrealized
appreciation or depreciation on investments and
foreign currencies.
- --------------------------------------------------
- ------------------------------
8
<PAGE>
Notes to Financial Statements
(Unaudited) PRUDENTIAL
INTERNATIONAL BOND FUND, INC.
- --------------------------------------------------
- ------------------------------
Foreign security and currency transactions may
involve certain considerations
and risks not typically associated with those of
U.S. companies as a result of,
among other factors, the possibility of political
or economic instability and
the level of governmental supervision and
regulation of foreign securities
markets.
Forward Currency Contracts: A forward currency
contract is a commitment to
purchase or sell a foreign currency at a future
date at a negotiated forward
rate. The Fund enters into forward currency
contracts in order to hedge its
exposure to changes in foreign currency exchange
rates on its foreign portfolio
holdings or on specific receivables and payables
denominated in a foreign
currency. The contracts are valued daily at
current exchange rates and any
unrealized gain or loss is included in net
unrealized appreciation or
depreciation on investments and foreign
currencies. Gain or loss is realized on
the settlement date of the contract equal to the
difference between the
settlement value of the original and renegotiated
forward contracts. This gain
or loss, if any, is included in net realized gain
(loss) on foreign currency
transactions. Risks may arise upon entering into
these contracts from the
potential inability of the counterparties to meet
the terms of their contracts.
Security Transactions and Net Investment Income:
Security transactions are
recorded on the trade date. Realized and
unrealized gains and losses from
security and currency transactions are calculated
on the identified cost basis.
Interest income, which is comprised of three
elements: stated coupon, original
issue discount and market discount, 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 (other than distribution
fees) and unrealized and realized
gains or losses are allocated daily to each class
of shares based upon the
relative proportion of net assets of each class at
the beginning of the day.
Dividends and Distributions: The Fund declares
daily and pays dividends from
book basis net investment income monthly and makes
distributions at least
annually of any net capital gains. Dividends and
distributions are recorded on
the ex-dividend date.
Income distributions and capital gain
distributions are determined in accordance
with income tax regulations which may differ from
generally accepted accounting
principles. These differences are primarily due to
differing treatments for
foreign currency transactions.
Reclassification of Capital Accounts: The Fund
accounts for and reports
distributions to shareholders in accordance with
the American Institute of
Certified Public Accountants' Statement of
Position 93-2: Determination,
Disclosure, and Financial Statement Presentation
of Income, Capital Gain, and
Return of Capital Distributions by Investment
Companies. The effect of applying
this statement was to decrease undistributed net
investment income and increase
accumulated net realized loss on investments by
$556,498 for foreign currency
gains realized and recognized during the six
months ended June 30, 1998. Net
investment income, net realized gains and net
assets were not affected by this
change.
Taxes: It is the Fund's policy to continue to meet
the requirements of the
Internal Revenue Code applicable to regulated
investment companies and to
distribute all of its taxable income to
shareholders. Therefore, no federal
income or excise tax provision is required.
Withholding taxes on foreign interest have been
provided for in accordance with
the Fund's understanding of the applicable
country's tax rules and rates.
- --------------------------------------------------
- ----------
Note 2. Agreements
The Fund has a management agreement with
Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement PIFM has
responsibility for all
investment advisory services and supervises the
subadviser's performance of such
services. PIFM has entered into a subadvisory
agreement with The Prudential
Investment Corporation ('PIC'); PIC, through an
agreement with PRICOA Asset
Management Ltd. ('PRICOA'), furnishes investment
advisory services in connection
with the management of the Fund. PIFM pays for the
cost of the subadviser's
services, compensation of officers of the Fund,
occupancy and certain clerical
and bookkeeping costs of the Fund. The Fund bears
all other costs and expenses.
The management fee paid PIFM is computed daily and
payable monthly at an annual
rate of .75 of 1% of the Fund's average daily net
assets up to $1 billion and
.70 of 1% of such assets in excess of $1 billion.
The Fund had a distribution agreement with
Prudential Securities Incorporated
('PSI'), which acted as distributor of the Class
A, Class B, Class C and Class Z
shares of the Fund. The Fund compensated PSI for
distributing and servicing the
Fund's Class A, Class B and Class C shares,
pursuant to a plan of distribution,
(the 'Class A, B and C Plan') regardless of
expenses actually incurred by them.
The distribution fees were accrued daily and
payable monthly. No distribution or
service fees were paid to PSI as distributor of
the Class Z shares of the Fund.
Effective July 1, 1998, Prudential Investment
Management Services LLC ('PIMS')
- --------------------------------------------------
- ------------------------------
9
<PAGE>
Notes to Financial Statements
(Unaudited) PRUDENTIAL
INTERNATIONAL BOND FUND, INC.
- --------------------------------------------------
- ------------------------------
became the distributor of the Fund and will serve
the Fund under the same terms
and conditions as under the arrangement with PSI.
Pursuant to the Class A, B and C Plans, the Fund
compensated PSI for
distribution-related activities at an annual rate
of up to .30 of 1%, 1% and 1%
of the average daily net assets of the Class A, B
and C shares respectively.
Such expenses under the Plans were .15 of 1%, .75
of 1% and .75 of 1% of the
average daily net assets of the Class A, B and C
shares, respectively, for the
six months ended June 30, 1998.
PSI has advised the Fund that it has received
approximately $23,400 in front-end
sales charges resulting from sales of Class A
shares during the six months ended
June 30, 1998. From these fees, PSI paid such
sales charges to Pruco Securities
Corporation, an affiliated broker-dealer, which in
turn paid commissions to
sales-persons and incurred other distribution
costs.
PSI has advised the Series that for the six months
ended June 30, 1998, it
received approximately $100 in contingent deferred
sales charges imposed upon
certain redemptions by Class B shareholders.
PSI, PIFM, PIC, PRICOA and PIMS are indirect,
wholly owned subsidiaries of The
Prudential Insurance Company of America.
The Fund, along with other affiliated registered
investment companies (the
'Funds'), has a credit agreement (the 'Agreement')
with an unaffiliated lender.
The maximum commitment under the Agreement is
$200,000,000. Interest on any such
borrowings outstanding will be at market rates.
The purpose of the Agreement is
to serve as an alternative source of funding for
capital share redemptions. The
Fund did not borrow any amounts pursuant to the
Agreement during the six months
ended June 30, 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 expires on
December 29, 1998.
- --------------------------------------------------
- ----------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a
wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the
six months ended June 30, 1998
the Fund incurred fees of approximately $96,000
for the services of PMFS. As of
June 30, 1998 approximately $16,000 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 investment securities,
other than short-term investments,
for the six months ended June 30, 1998 aggregated
$19,904,579 and $26,862,516,
respectively.
At June 30, 1998, the Fund had outstanding forward
currency contracts to sell
and purchase foreign currencies, as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current
Purchase Contracts Payable Value
Appreciation
- ------------------- --------------- -----------
- ---------------
<S> <C> <C>
<C>
New Zealand Dollar,
expiring
7/28/98.......... $ 861,711 $ 872,004
$ 10,293
--------------- -----------
- ---------------
--------------- -----------
- ---------------
</TABLE>
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current
Appreciation
Sale Contracts Receivable Value
(Depreciation)
- ------------------- --------------- -----------
- ---------------
<S> <C> <C>
<C>
Australian Dollars,
expiring
7/28/98.......... $ 8,637,080 $ 8,746,499
$(109,419)
French Francs,
expiring
7/28/98.......... 4,892,846 4,874,393
18,453
Japanese Yen,
expiring
7/28/98.......... 861,712 878,987
(17,275)
Swiss Francs,
expiring
7/28/98.......... 6,878,423 6,814,341
64,082
--------------- -----------
- ---------------
$21,270,061 $21,314,220
$ (44,159)
--------------- -----------
- ---------------
--------------- -----------
- ---------------
</TABLE>
The United States federal income tax basis of the
Fund's investments at June 30,
1998 was $93,354,019 and, accordingly, net
unrealized depreciation for United
States federal income tax purposes was $1,514,963
(gross unrealized
appreciation--$1,818,486; gross unrealized
depreciation--$3,333,449).
For federal income tax purposes, the Fund had a
capital loss carryforward as of
December 31, 1997 of approximately $949,500 which
will expire in 2002.
Accordingly, no capital gains distribution is
expected to be paid to
shareholders until net capital gains have been
realized in excess of such
amount.
- --------------------------------------------------
- ------------------------------
10
<PAGE>
Notes to Financial Statements
(Unaudited) PRUDENTIAL
INTERNATIONAL BOND FUND, INC.
- --------------------------------------------------
- ------------------------------
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 June 30, 1998, the Fund
had a 0.70% undivided interest in the joint
account. The undivided interest for
the Fund represented $8,686,000 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., 5.85%, in the principal
amount of $345,000,000,
repurchase price $345,056,063, due 7/1/98. The
value of the collateral including
accrued interest was $353,215,323.
Goldman Sachs & Co., Inc., 5.20%, in the principal
amount of $206,264,000,
repurchase price $206,293,794, due 7/1/98. The
value of the collateral including
accrued interest was $210,389,609.
Salomon Smith Barney Inc., 5.70%, in the principal
amount of $345,000,000,
repurchase price $345,054,625, due 7/1/98. The
value of the collateral including
accrued interest was $352,383,850.
SBC Warburg Dillon Read, Inc., 5.93%, in the
principal amount of $345,000,000,
repurchase price $345,056,829, due 7/1/98. The
value of the collateral including
accrued interest was $352,174,874.
- --------------------------------------------------
- ----------
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 4%.
Class B shares are sold with a
contingent deferred sales charge which declines
from 5% to zero depending on the
period of time the shares are held. Class C shares
are sold with a contingent
deferred sales charge of 1% during the first year.
Class B shares automatically
convert to Class A shares on a quarterly basis
approximately seven years after
purchase. A special exchange privilege is also
available for shareholders who
qualified to purchase Class A shares at net asset
value. Class Z shares are not
subject to any sales or redemption charge and are
offered exclusively for sale
to a limited group of investors.
There are 2 billion shares of common stock, $.01
par value per share, authorized
divided into four classes, designated Class A,
Class B, Class C and Class Z
common stock, consisting of 500 million shares of
each class. As of December 31,
1997 Prudential owned 11,470 Class A shares.
Transactions in shares of common stock were as
follows:
<TABLE>
<CAPTION>
Class A Shares
Amount
- --------------------------------- -----------
- -------------
<S> <C>
<C>
Six months ended June 30, 1998:
Shares sold...................... 208,963
$ 1,493,060
Shares issued in reinvestment of
dividends and distributions.... 109,017
782,566
Shares reacquired................ (1,301,884)
(9,330,132)
-----------
- -------------
Net decrease in shares
outstanding before
conversion..................... (983,904)
(7,054,506)
Shares issued upon conversion
from Class B................... 1,972
14,202
-----------
- -------------
Net decrease in shares
outstanding.................... (981,932)
$ (7,040,304)
-----------
- -------------
-----------
- -------------
Year ended December 31, 1997:
Shares sold...................... 269,214
$ 1,994,094
Shares issued in reinvestment of
dividends and distributions.... 365,841
2,666,579
Shares reacquired................ (3,501,590)
(26,103,706)
-----------
- -------------
Net decrease in shares
outstanding.................... (2,866,535)
$ (21,443,033)
-----------
- -------------
-----------
- -------------
<CAPTION>
Class B
- ---------------------------------
Six months ended June 30, 1998:
Shares sold...................... 38,383
$ 275,501
Shares issued in reinvestment of
dividends and distributions.... 2,000
14,374
Shares reacquired................ (17,458)
(125,310)
-----------
- -------------
Net increase in shares
outstanding before
conversion..................... 22,925
164,565
Shares reacquired upon conversion
into Class A................... (1,975)
(14,202)
-----------
- -------------
Net increase in shares
outstanding.................... 20,950
$ 150,363
-----------
- -------------
-----------
- -------------
Year ended December 31, 1997:
Shares sold...................... 62,322
$ 465,398
Shares issued in reinvestment of
dividends and distributions.... 4,402
31,994
Shares reacquired................ (1,673)
(12,403)
-----------
- -------------
Net increase in shares
outstanding.................... 65,051
$ 484,989
-----------
- -------------
-----------
- -------------
<CAPTION>
Class C
- ---------------------------------
Six months ended June 30, 1998:
Shares sold...................... 6,543
$ 46,914
Shares issued in reinvestment of
dividends and distributions.... 210
1,514
Shares reacquired................ (223)
(1,600)
-----------
- -------------
Net increase in shares
outstanding.................... 6,530
$ 46,828
-----------
- -------------
-----------
- -------------
</TABLE>
- --------------------------------------------------
- ------------------------------
11
<PAGE>
Notes to Financial Statements
(Unaudited) PRUDENTIAL
INTERNATIONAL BOND FUND, INC.
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class C Shares
Amount
- --------------------------------- -----------
- -------------
<S> <C>
<C>
Year ended December 31, 1997:
Shares sold...................... 14,124
$ 102,477
Shares issued in reinvestment of
dividends and distributions.... 149
1,087
Shares reacquired................ (5,201)
(38,465)
-----------
- -------------
Net increase in shares
outstanding.................... 9,072
$ 65,099
-----------
- -------------
-----------
- -------------
<CAPTION>
Class Z
- ---------------------------------
Six months ended June 30, 1998:
Shares sold...................... 129,764
$ 933,075
Shares issued in reinvestment of
dividends and distributions.... 4,174
30,039
Shares reacquired................ (9,837)
(70,792)
-----------
- -------------
Net increase in shares
outstanding.................... 124,101
$ 892,322
-----------
- -------------
-----------
- -------------
March 17, 1997(a) through
December 31, 1997:
Shares sold...................... 89,636
$ 656,614
Shares issued in reinvestment of
dividends and distributions.... 2,944
21,152
Shares reacquired................ (4,193)
(31,016)
-----------
- -------------
Net increase in shares
outstanding.................... 88,387
$ 646,750
-----------
- -------------
-----------
- -------------
</TABLE>
- ---------------
(a) Commencement of offering of Class Z shares.
- --------------------------------------------------
- ------------------------------
12
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL
INTERNATIONAL BOND FUND, INC.
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class A(b)
- --------------------------------------------------
- -------------------------
Six Months
Ended Year Ended December
31,
June 30, ------------------------------------
- ------------------------
1998 1997(c) 1996 1995
1994 1993
- ---------- -------- -------- --------
- -------- --------
<S>
<C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..........
$ 7.08 $ 7.63 $ 7.68 $ 6.76
$ 7.84 $ 7.38
- ---------- -------- -------- --------
- -------- --------
Income from investment operations:
Net investment income.........................
.21 .49 .56 .48
.45 .55
Net realized and unrealized gain (loss) on
investments and foreign currencies.........
.07 (.22) .28 1.13
(.97) .74
- ---------- -------- -------- --------
- -------- --------
Total from investment operations...........
.28 .27 .84 1.61
(.52) 1.29
- ---------- -------- -------- --------
- -------- --------
Less distributions:
Dividends from net investment income..........
(.18) (.58) (.67) (.48)
(.23) (.23)
Distributions in excess of net investment
income.....................................
(.06) (.24) (.40) (.21)
- -- --
Distributions from net realized capital
gains......................................
- -- -- -- --
(.10) (.54)
Distributions in excess of net capital
gains......................................
- -- -- -- --
- -- (.06)
Tax return of capital distributions...........
- -- -- -- --
(.23) --
- ---------- -------- -------- --------
- -------- --------
Total dividends and distributions..........
(.24) (.82) (1.07) (.69)
(.56) (.83)
- ---------- -------- -------- --------
- -------- --------
Redemption fee retained by Fund...............
- -- -- .18 --
- -- --
- ---------- -------- -------- --------
- -------- --------
Net asset value, end of period................
$ 7.12 $ 7.08 $ 7.63 $ 7.68
$ 6.76 $ 7.84
- ---------- -------- -------- --------
- -------- --------
- ---------- -------- -------- --------
- -------- --------
Per share market price, end of period.........
N/A N/A N/A $ 7.375 $
5.625 $ 7.00
- -------- -------- --------
- -------- -------- --------
TOTAL INVESTMENT RETURN BASED ON(a):
Market price...............................
N/A N/A N/A 44.39%
(12.04)% 11.57%
Net asset value............................
3.89% 3.62% 14.02% 25.14%
(5.62)% 18.38%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...............
$ 89,794 $ 96,365 $125,637 $350,339
$308,703 $357,783
Average net assets (000)......................
$ 94,482 $110,910 $180,588 $342,741
$331,421 $361,374
Ratios to average net assets:
Expenses, including distribution fees......
1.71%(d) 1.64% 1.48% 1.05%
1.11% 1.07%
Expenses, excluding distribution fees......
1.56%(d) 1.49% 1.34% 1.05%
1.11% 1.07%
Net investment income......................
5.99%(d) 6.54% 6.45% 6.37%
6.21% 6.93%
Portfolio turnover rate.......................
23% 53% 38% 203%
526% 441%
</TABLE>
- ---------------
(a) Total investment return based on net asset
value is calculated assuming a
purchase of common stock at the current net
asset value on the first day and
a sale at the current net asset value on the
last day of each period
reported. Total investment return does not
consider the effect of sales
load. Prior to January 15, 1996 the Fund
operated as a closed-end investment
company and total investment return was
calculated based on market value
assuming a purchase of common stock at the
current market value on the first
day and a sale at the current market value on
the last day of each period
reported. Dividends and distributions are
assumed for purposes of this
calculation to be reinvested at prices
obtained under the dividend
reinvestment plan. This calculation does not
reflect brokerage commissions.
Total investment returns for periods of less
than one full year are not
annualized.
(b) Prior to January 15, 1996 the Fund operated as
a closed-end, non-diversified
management investment company.
(c) Calculated based upon weighted average shares
outstanding during the year.
(d) Annualized.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 13
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL
INTERNATIONAL BOND FUND, INC.
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class B Class C
- ----------------------------------------------
- -----------------------------
January 15,
Six Months Year 1996(c)
Six Months Year
Ended Ended Through
Ended Ended
June 30, December 31, December 31,
June 30, December 31,
1998 1997(d) 1996
1998 1997(d)
- ----- ------------ ------------ ---
- --------- ------------
<S>
<C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..........
$ 7.10 $ 7.64 $ 7.72
$ 7.10 $ 7.64
- ----- ------------ ------------ ---
- --------- ------------
Income from investment operations:
Net investment income.........................
.19 .44 .52
.20 .40
Net realized and unrealized gain (loss) on
investments and foreign currencies.........
.06 (.20) .25
.05 (.16)
- ----- ------------ ------------ ---
- --------- ------------
Total from investment operations...........
.25 .24 .77
.25 .24
- ----- ------------ ------------ ---
- --------- ------------
Less distributions:
Dividends from net investment income..........
(.16) (.54) (.63)
(.16) (.54)
Distributions in excess of net investment
income.....................................
(.06) (.24) (.40)
(.06) (.24)
- ----- ------------ ------------ ---
- --------- ------------
Total dividends and distributions..........
(.22) (.78) (1.03)
(.22) (.78)
- ----- ------------ ------------ ---
- --------- ------------
Redemption fee retained by Fund(d)............
- -- -- .18
- -- --
- ----- ------------ ------------ ---
- --------- ------------
Net asset value, end of period................
$ 7.13 $ 7.10 $ 7.64
$ 7.13 $ 7.10
- ----- ------------ ------------ ---
- --------- ------------
- ----- ------------ ------------ ---
- --------- ------------
TOTAL INVESTMENT RETURN(a)....................
3.41% 3.25% 12.86%
3.41% 3.25%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...............
$683 $531 $75
$123 $76
Average net assets (000)......................
$611 $335 $23
$93 $26
Ratios to average net assets:
Expenses, including distribution fees......
2.31%(b) 2.24% 2.56%(b)
2.31%(b) 2.24%
Expenses, excluding distribution fees......
1.56%(b) 1.49% 1.34%(b)
1.56%(b) 1.49%
Net investment income......................
5.41%(b) 6.00% 5.85%(b)
5.44%(b) 5.96%
Portfolio turnover rate.......................
23% 53% 38%
33% 53%
<CAPTION>
Class Z
- -----------------------------
January 15, March 17,
1996(c) Six Months 1997(c)
Through Ended Through
December 31, June 30, December 31,
1996 1998 1997(d)
--
- ---------- ------------ ------------
<S>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..........
$ 7.72 $ 7.10 $ 7.57
--
- ---------- ------------ ------------
Income from investment operations:
Net investment income.........................
.52 .23 .38
Net realized and unrealized gain (loss) on
investments and foreign currencies.........
.25 .05 (.02)
--
- ---------- ------------ ------------
Total from investment operations...........
.77 .28 .36
--
- ---------- ------------ ------------
Less distributions:
Dividends from net investment income..........
(.63) (.19) (.59)
Distributions in excess of net investment
income.....................................
(.40) (.06) (.24)
--
- ---------- ------------ ------------
Total dividends and distributions..........
(1.03) (.25) (.83)
--
- ---------- ------------ ------------
Redemption fee retained by Fund(d)............
.18 -- --
--
- ---------- ------------ ------------
Net asset value, end of period................
$ 7.64 $ 7.13 $ 7.10
--
- ---------- ------------ ------------
--
- ---------- ------------ ------------
TOTAL INVESTMENT RETURN(a)....................
12.86% 3.81% 4.97%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...............
$13 $1,516 $628
Average net assets (000)......................
$8 $950 $121
Ratios to average net assets:
Expenses, including distribution fees......
2.09%(b) 1.56%(b) 1.49%(b)
Expenses, excluding distribution fees......
1.34%(b) 1.56%(b) 1.49%(b)
Net investment income......................
5.85%(b) 6.22%(b) 6.22%(b)
Portfolio turnover rate.......................
38% 23% 53%
</TABLE>
- ---------------
(a) Total investment return is based on a purchase
of common stock at the
current net asset value on the first day and a
sale at the current net asset
value on the last day of each period reported.
Total investment return does
not consider the effect of sales load. Total
investment returns for periods
of less than one full year are not annualized.
(b) Annualized.
(c) Commencement of offering of Class B, Class C
and Class Z shares.
(d) Calculated based upon weighted average shares
outstanding during the period.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 14
<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 Dedrick Gold
Robert F. Gunia
Douglas H. McCorkindale
Mendel A. Melzer, CFA
Thomas T. Mooney
Stephen P. Munn
Richard A. Redeker
Robin B. Smith
Louis A. Weil, III
Clay T. Whitehead
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Marguerite E.H. Morrison, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential 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
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
The views expressed in this report and information
about the Fund's portfolio
holdings are for the period covered by this report
and are subject to change
thereafter.
The accompanying financial statements as of June
30, 1998 were not audited
and, accordingly, no opinion is expressed on them.
This report is not authorized for distribution to
prospective investors unless
preceded or accompanied by a current prospectus.
<PAGE>
(LOGO)
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
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