<PAGE>
SEMIANNUAL REPORT JUNE 30, 2000
Prudential
International Bond Fund, Inc.
Fund Type Global debt
Objective Total return, made up of current income and capital appreciation
(GRAPHIC)
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.
(LOGO)
<PAGE>
Build on the Rock
www.prudential.com (800) 225-1852
Investment Goals and Style
The Prudential International Bond Fund seeks total return made up of current
income and capital appreciation. The Fund invests primarily in intermediate-
and long-term investment-grade debt securities of issuers outside the United
States. However, up to 35% of total investments can be in U.S. securities. The
Fund may invest in debt securities of developed and developing countries. It
may also invest up to 15% of 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's investment objective will be achieved.
Currency Concentration
Expressed as a percentage of total investments as of 6/30/00
41.4% Euro
36.3 United States
6.2 Asia
4.7 United Kingdom
3.0 Australia
2.9 Sweden
2.8 New Zealand
2.7 Other Europe
Ten Largest Issuers
Expressed as a percentage of net assets as of 6/30/00
22.9% Germany Government Bonds
7.1 Austria Government Bond
6.9 United States Treasury Bonds
6.8 Corporacion Andina de Formento
6.1 Japanese Government Bonds
3.6 Republic of Italy
2.9 New South Wales Treasury Corp.
2.9 Swedish Government Bond
2.9 United Kingdom Treasury Bond
2.8 Kingdom of Spain
<PAGE>
Performance at a Glance
Cumulative Total Returns1 As of 6/30/00
Six One Five Ten Since
Months Year Years Years Inception2
Class A -0.41% -0.82% 31.09% 111.12% 153.66%
Class B -0.84 -1.53 N/A N/A 18.10
Class C -0.84 -1.53 N/A N/A 18.10
Class Z -0.28 -0.70 N/A N/A 8.53
Lipper Global Income
Fund Avg.3 0.69 1.73 26.67 81.18 ***
Average Annual Total Returns1 As of 6/30/00
One Five Ten Since
Year Years Years Inception2
Class A -4.79% 4.71% 7.32% 7.13%
Class B -6.53 N/A N/A 3.61
Class C -3.52 N/A N/A 3.57
Class Z -0.70 N/A N/A 2.52
Distributions and Yields As of 6/30/00
Total Distributions 30-Day
Paid for Six Months SEC Yield
Class A $0.21 4.35%
Class B $0.20 4.04
Class C $0.20 4.00
Class Z $0.22 4.79
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.
1 Source: Prudential Investments Fund Management LLC and Lipper Inc. The
cumulative total returns do not take into account sales charges. The average
annual total returns do take into account applicable sales charges. The Fund
charges a maximum front-end sales charge of 4% for Class A shares. Class B
shares are subject to a declining contingent deferred sales charge (CDSC) of
5%, 4%, 3%, 2%, 1%, and 1% for six years. Class B shares will automatically
convert to Class A shares, on a quarterly basis, approximately seven years
after purchase. Class C shares are subject to a front-end sales charge of 1%
and a CDSC of 1% for 18 months. Class Z shares are not subject to a sales
charge or distribution and service (12b-1) fees.
2 Inception dates: Class A, 7/31/87; Class B and Class C, 1/15/96; and Class
Z, 3/17/97.
3 Lipper average returns are for all funds in each share class for the
six-months, one-, five-, and ten-year periods in the Global Income Fund
category. The Lipper average is unmanaged. Funds in the Global Income category
invest primarily in U.S. dollar debt securities of issuers located in at least
three countries, one of which may be the United States.
*** Lipper Since Inception returns are 134.42% for Class A, 16.68% for Class B
and Class C, and 9.70% for Class Z, based on all funds in each share class.
1
<PAGE>
(LOGO) August 14, 2000
Dear Shareholder,
The first half of the year has been a challenging period in the global
fixed-income markets. During the six-month reporting period ended June 30,
2000, Prudential International Bond Fund's Class A shares fell 0.41%-falling
4.39% for those subject to the initial Class A sales charge. This compares to
a 0.69% return for the Lipper Global Income Funds Average.
These lackluster results are indicative of the overall fixed-income
environment. In the United States and Europe, returns continued to be adversely
affected by rising interest rates. Both the U.S. Federal Reserve Board (the
"Fed") and the European Central Bank raised rates on several occasions in an
attempt to slow the pace of economic growth. This led to declining bond prices
in most sectors of the fixed-income market.
Toward the end of the period, there were signs that economic growth in the
United States was moderating. This prompted the Fed to hold rates steady at the
end of June, after raising them six consecutive times during the last year. A
rally throughout much of the bond market ensued.
In closing, I would like to add that it is important to maintain a portfolio
that is diversified across asset classes, particularly during volatile market
times. To this end, your investment in the Prudential International Bond Fund,
which provides an element of exposure to the fixed-income markets, occupies an
important place within your portfolio.
We appreciate your confidence and look forward to serving your investment needs
in the future.
Sincerely,
John R. Strangfeld, President
Prudential International Bond Fund, Inc.
2
<PAGE>
Prudential International Bond Fund, Inc.
Semiannual Report June 30, 2000
Investment Adviser's Report
Rising interest rates take their toll
In our last report covering the end of 1999, we explained that interest rates
were on the rise in virtually every market in which the Fund invests. Economies
in both the United States and abroad were growing more strongly than
anticipated. As a result, central banks had to increase short-term rates in an
attempt to slow growth and ward off inflation.
In some ways, with respect to the global bond markets, this year has been a
mirror image of 1999. Year to date, the Fed has raised its federal funds rate
(the rate U.S. banks charge each other for overnight loans) three times, as it
did in 1999. These actions have led to falling prices in many sectors, since
bond prices move in the opposite direction of interest rates. Overseas, the
European Central Bank (ECB) has raised rates 125 basis points (a basis point is
one one-hundredth of a percent).
A glimmer of hope did emerge toward the end of the period when the Fed decided
to leave rates unchanged at the end of June. This decision was based on
encouraging unemployment figures and signs indicating that U.S. economic growth
may be moderating. The Fed's decision not to raise rates boosted bond prices
both in the United States and overseas-particularly in the emerging markets.
A falling euro hurt the Fund
The Fund's returns relative to its benchmark were hurt during the reporting
period, due to its exposure to the euro currency. We believed that the euro was
very attractively priced, and with the positive growth outlook for the European
region, we felt that a substantial rebound could occur. Unfortunately, we were
only half correct. Growth in Europe was, indeed, stronger than anticipated.
However, growth rates in the United States were even stronger, and investors
favored the dollar over the euro. As a result, the euro fell sharply during
much of the period.
3
<PAGE>
Semiannual Report June 30, 2000
www.prudential.com (800) 225-1852
Moving to lower the Fund's volatility
In recent months, we have made two noteworthy adjustments in an effort to lower
the Fund's volatility. First, we have altered the Fund's currency policy to be
more dynamic and to be even more responsive to market changes. Second, we have
reallocated a large portion of the Fund's emerging markets holdings to
shorter-duration securities-typically issues maturing in five years or less.
(Duration measures how much a portfolio's bonds will fluctuate in price in
response to a change in interest rates. Like a portfolio's average maturity,
duration is expressed in years.) We believe this stance will allow us to
continue to pick up incremental yield versus other bond markets, and will lower
the Fund's susceptibility to interest rate fluctuations.
Anticipating a changing policy in Japan
Overall, during the past year the Japanese bond market has generated
surprisingly strong results. The combination of a long-awaited economic
rebound, corporate restructuring, and government intervention has caused
investors to embrace Japanese bonds. However, with fears of disinflation
(prices falling as opposed to rising) a thing of the past, we anticipate that
to stimulate growth, the Bank of Japan will soon move away from the zero
interest rate policy it has employed. If it does, the subsequent rise in
interest rates would serve to lower the prices of Japanese bonds.
Looking ahead
We are reasonably optimistic about the prospects for the global debt markets.
With regard to the U.S. economy, we foresee three possible scenarios. First,
economic growth could reaccelerate, necessitating further interest rate hikes
by the Fed. Second, the economy could fall into a recession. Third, we could
experience a "soft landing," whereby growth falls to a more moderate and
acceptable level. While many experts believe a soft landing is the most likely
scenario, a resurgence of economic growth cannot be ruled out. If this occurs,
it would be detrimental to bond prices, as a further round of rate hikes has
not been priced into the market. Rising rates could also have a negative ripple
effect in many emerging market bonds.
4
<PAGE>
With economic growth still expanding in Europe, the ECB could also engineer
further rate increases this year. However, additional rate hikes have already
been factored into the European fixed-income markets, and inflation throughout
much of Europe is very modest compared to the United States. As such, European
bond yields are more attractive on a relative basis than U.S. bond yields. We
also believe there is greater potential for price appreciation in the European
debt markets. Therefore, we have increased the Fund's weighting in European
bonds.
Prudential International Bond Fund Management Team
5
<PAGE>
Prudential International Bond Fund, Inc.
Semiannual Report June 30, 2000
Financial
Statements
<PAGE>
Prudential International Bond Fund, Inc.
Portfolio of Investments as of June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount US$
(000) Description Value (Note 1)
---------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 86.1%
-------------------------------------------------------------------------------------
<C> <S> <C>
Australia 2.9%
A$ 2,960 New South Wales Treasury Corp.,
6.50%, 5/1/06 $ 1,762,962
-------------------------------------------------------------------------------------
Eurobonds 40.8%
Austria Government Bonds,
EURO 132 5.50%, 1/15/10 125,403
4,139 6.25%, 7/15/27 4,172,591
370 Callahan Nordrhein Westfalen,
14.00%, 7/15/10 355,144
420 Flextronics Itn'l Ltd,
9.75%, 7/1/10 406,659
German Government Bonds,
4,250 8.00%, 7/22/02 4,302,419
3,161 4.25%, 2/18/05 2,925,746
3,170 6.50%, 10/14/05 3,218,216
2,834 5.25%, 7/4/10 2,715,455
843 4.75%, 7/4/28 718,034
490 Netia Holdings,
13.75%, 6/15/10 479,368
Republic of Italy,
550 4.75%, 4/15/03 520,983
1,775 4.75%, 7/1/05 1,659,914
140 Esat Telecom Group PLC,
11.875%, 11/1/09 167,110
1,142 Government of France,
5.50%, 4/25/29 1,078,356
1,827 Kingdom of Spain,
4.95%, 7/30/05 1,716,424
170 Level 3 Communications Inc. (United States),
10.75%, 3/15/08 154,414
--------------
24,716,236
-------------------------------------------------------------------------------------
Greece 0.6%
GRD 131,000 Republic of Greece
6.50%, 10/22/19 381,174
</TABLE>
See Notes to Financial Statements 7
<PAGE>
Prudential International Bond Fund, Inc.
Portfolio of Investments as of June 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Amount US$
(000) Description Value (Note 1)
---------------------------------------------------------------------------------------
<C> <S> <C>
Japan 6.1%
Japanese Government Bonds,
Y 250,000 1.80%, 6/21/10 $ 2,391,762
135,000 2.30%, 5/20/30 1,299,598
--------------
3,691,360
-------------------------------------------------------------------------------------
New Zealand 2.7%
NZ$ 3,500 Federal National Mortgage Assocation,
7.25%, 6/20/02 1,629,705
-------------------------------------------------------------------------------------
Russia 0.2%
RUB 4,500 European Bank of Reconstruction Development,
Zero Coupon, 5/28/02 93,783
-------------------------------------------------------------------------------------
Sweden 2.9%
SEK 15,000 Swedish Government Bond,
6.00%, 2/9/05 1,756,412
-------------------------------------------------------------------------------------
United Kingdom 4.6%
BP 702 Deutsche Telecom I,
7.125%, 6/15/05 1,068,421
1,172 United Kingdom Treasury Bond,
5.00%, 6/7/04 1,728,848
--------------
2,797,269
-------------------------------------------------------------------------------------
United States 25.3%
Corporate Bonds 6.9%
US$ 500 Grupo Iusacell S.A. de .C.V. ,
14.25%, 12/1/06 522,500
160 Hanvit Bank (Korea),
12.75%, 3/1/10 158,800
500 Industrial Bank of Korea,
8.375%, 9/30/02 500,000
</TABLE>
8 See Notes to Financial Statements
<PAGE>
Prudential International Bond Fund, Inc.
Portfolio of Investments as of June 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Amount US$
(000) Description Value (Note 1)
---------------------------------------------------------------------------------------
<C> <S> <C>
US$ 980 Korea Development Bank,
6.625%, 11/21/03 $ 941,290
Korea Electric Power Corp.,
219 7.00%, 10/1/02 212,831
1,000 6.375%, 12/1/03 949,500
360 6.375%, 12/1/03 341,863
300 Philippine Long Distance Telephone Co.
(Philippines),
10.50%, 4/15/09 267,000
300 Sakura Capital Funding (Cayman),
7.70%, 9/29/49 291,000
--------------
4,184,784
-------------------------------------------------------------------------------------
Foreign Government Bonds 1.4%
900 Province of Ontario,
6.00%, 2/21/06 852,300
-------------------------------------------------------------------------------------
Sovereign Bonds 7.4%
400 Kingdom of Jordan,
6.00%, 12/23/23 264,527
900 Ministry of Finance (Russia),
10.00%, 6/26/07 696,375
500 Oman Sultante (India),
7.125%, 3/20/02 482,500
400 Republic of Argentina, FRN,
7.375%, 3/31/05, Ser. L 364,520
750 Republic of Bulgaria,
2.75%, 7/28/12 551,250
500 Republic of Colombia,
7.25%, 2/23/04 414,500
846 Republic of Croatia, FRN,
7.0325%, 7/31/06 798,197
400 Republic of Lithuania,
7.125%, 7/22/02 389,000
600 Republic of Panama,
8.25%, 4/22/08 543,000
--------------
4,503,869
</TABLE>
See Notes to Financial Statements 9
<PAGE>
Prudential International Bond Fund, Inc.
Portfolio of Investments as of June 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Amount US$
(000) Description Value (Note 1)
---------------------------------------------------------------------------------------
<C> <S> <C>
Supranational Bonds 1.0%
US$ 300 Chonhung Bank,
11.0725%, 1/7/05 $ 300,000
400 Embotelladora Andina SA,
7.875%, 10/1/97 309,684
--------------
609,684
-------------------------------------------------------------------------------------
U.S. Government Obligations 8.6%
United States Treasury Bonds,
2,005 6.25%, 2/15/07 2,006,564
1,255 8.875%, 8/15/17 1,599,736
570 6.625%, 2/15/27 605,180
1,000 United States Treasury Notes,
6.00%, 8/15/09 992,030
--------------
5,203,510
--------------
15,354,147
--------------
Total long-term investments (cost US$52,841,665) 52,183,048
--------------
SHORT-TERM INVESTMENTS 12.4%
-------------------------------------------------------------------------------------
Hungary 1.9%
Hungarian Government Bonds,
HUF 225,000 15.50%, 7/24/00 832,627
80,000 15.00%, 7/24/01 307,250
--------------
1,139,877
-------------------------------------------------------------------------------------
United States 10.5%
U.S. Government Obligations 0.1%
US$ 50 United States Treasury Bills,
Zero Coupon, 10/12/00 49,194
-------------------------------------------------------------------------------------
Sovereign Bonds 0.3%
US$ 185 Republic of Brazil, FRN,
7.00%, 1/1/01 184,500
</TABLE>
10 See Notes to Financial Statements
<PAGE>
Prudential International Bond Fund, Inc.
Portfolio of Investments as of June 30, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Amount US$
(000) Description Value (Note 1)
---------------------------------------------------------------------------------------
<C> <S> <C>
Supranational Bonds 6.7%
US$ 4,100 Corporacion Andina de Formento,
7.375%, 7/21/00 $ 4,094,875
--------------
4,328,569
-------------------------------------------------------------------------------------
Repurchase Agreement 3.4%
2,030 Joint Repurchase Agreement Account,
6.56%, 7/3/00 (Note 5) 2,030,000
--------------
Total short-term Investments
(cost US$7,687,588) 7,498,446
--------------
Total Investments 98.5%
(cost $60,529,253; Note 4) 59,681,494
Other assets in excess of liabilities 1.5% 919,475
--------------
Net Assets 100% $ 60,600,969
--------------
--------------
</TABLE>
------------------------------
Portfolio securities are classified according to the security's currency
denomination.
FRN--Floating Rate Note.
See Notes to Financial Statements 11
<PAGE>
Prudential International Bond Fund, Inc.
Statement of Assets and Liabilities (Unaudited)
<TABLE>
<CAPTION>
June 30, 2000
<S> <C>
---------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $60,529,253) $59,681,494
Foreign currency, at value (cost $402,290) 409,978
Cash 6,959
Receivable for investments sold 2,266,922
Interest receivable 1,588,942
Forward currency contracts-net amount receivable from
counterparties 690,831
Receivable for Fund shares sold 15,201
Other assets 2,582
-------------
Total assets 64,662,909
-------------
LIABILITIES
Payable for investments purchased 2,825,050
Forward currency contracts-net amount payable to counterparties 607,530
Accrued expenses and other liabilities 365,883
Dividend payable 106,770
Payable for Fund shares reacquired 98,138
Management fee payable 37,354
Distribution fee payable 12,621
Due from broker-variation margin 8,594
-------------
Total liabilities 4,061,940
-------------
NET ASSETS $60,600,969
-------------
-------------
Net assets were comprised of:
Common stock, at par $ 98,886
Paid-in capital in excess of par 69,360,977
-------------
69,459,863
Accumulated net investment loss (5,031,719)
Accumulated net realized loss on investments and foreign
currency transactions (3,051,359)
Net unrealized depreciation on investments and foreign
currencies (775,816)
-------------
Net assets, June 30, 2000 $60,600,969
-------------
-------------
</TABLE>
12 See Notes to Financial Statements
<PAGE>
Prudential International Bond Fund, Inc.
Statement of Assets and Liabilities (Unaudited) Cont'd.
<TABLE>
<CAPTION>
June 30, 2000
<S> <C>
---------------------------------------------------------------------------------------
Class A:
Net asset value and redemption price per share
($55,380,460 / 9,038,798 shares of common stock issued
and outstanding) $6.13
Maximum sales charge (4% of offering price) .26
-------------
Maximum offering price to public $6.39
-------------
-------------
Class B:
Net asset value, offering price and redemption price per
share ($1,824,797 / 296,921 shares of common stock issued
and outstanding) $6.15
-------------
-------------
Class C:
Net asset value and redemption price per share
($166,473 / 27,090 shares of common stock issued and
outstanding) $6.15
Sales charge (1% of offering price) .06
-------------
Offering price to public $6.21
-------------
-------------
Class Z:
Net asset value, offering price and redemption price per
share ($3,229,239 / 525,803 shares of common stock issued
and outstanding) $6.14
-------------
-------------
</TABLE>
See Notes to Financial Statements 13
<PAGE>
Prudential International Bond Fund, Inc.
Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 2000
<S> <C>
---------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest and discount earned (net of foreign withholding
taxes of $2,957) $ 2,435,976
-------------
Expenses
Management fee 238,076
Distribution fee--Class A 73,060
Distribution fee--Class B 6,683
Distribution fee--Class C 730
Transfer agent's fees and expenses 99,000
Custodian's fees and expenses 99,000
Reports to shareholders 59,000
Legal fees and expenses 23,000
Audit fees and expenses 18,000
Registration fees 12,000
Directors' fees and expenses 5,000
Miscellaneous 3,352
-------------
Total expenses 636,901
-------------
Net investment income 1,799,075
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS
Net realized loss on:
Investment transactions (1,183,078)
Foreign currency transactions (4,653,211)
-------------
(5,836,289)
-------------
Net change in unrealized appreciation (depreciation) on:
Investments 3,811,663
Foreign currencies 12,909
Financial futures contracts (31,813)
-------------
3,792,759
-------------
Net loss on investments and foreign currencies (2,110,815)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (244,455)
-------------
-------------
</TABLE>
14 See Notes to Financial Statements
<PAGE>
Prudential International Bond Fund, Inc.
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
June 30, 2000 December 31, 1999
<S> <C> <C>
-----------------------------------------------------------------------------------
INCREASE (DECREASE) IN
NET ASSETS
Operations
Net investment income $ 1,799,075 $ 4,440,549
Net realized loss on investment and foreign
currency transactions (5,836,289) (3,500,819)
Net change in unrealized appreciation
(depreciation) on investments and
foreign currencies 3,792,759 (4,500,538)
------------- -----------------
Net decrease in net assets resulting from
operations (244,455) (3,560,808)
------------- -----------------
Dividends and distributions (Note 1)
Dividends from net investment income
Class A (2,007,608) (2,402,993)
Class B (55,437) (43,976)
Class C (6,127) (6,974)
Class Z (108,411) (97,964)
------------- -----------------
(2,177,583) (2,551,907)
------------- -----------------
Distributions from net realized currency
gains
Class A -- (946,356)
Class B -- (18,501)
Class C -- (3,103)
Class Z -- (31,869)
------------- -----------------
-- (999,829)
------------- -----------------
Tax return of capital distributions
Class A -- (2,195,215)
Class B -- (47,298)
Class C -- (7,507)
Class Z -- (83,223)
------------- -----------------
-- (2,333,243)
------------- -----------------
</TABLE>
See Notes to Financial Statements 15
<PAGE>
Prudential International Bond Fund, Inc.
Statement of Changes in Net Assets (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
June 30, 2000 December 31, 1999
-----------------------------------------------------------------------------------
<S> <C> <C>
Fund share transactions (net of share
conversions) (Note 6)
Net proceeds from shares sold $ 2,542,947 $ 6,001,617
Net asset value of shares issued in
reinvestment of dividends and
distributions 788,311 2,006,537
Cost of shares reacquired (8,742,747) (17,864,198)
------------- -----------------
Decrease in net assets from Fund share
transactions (5,411,489) (9,856,044)
------------- -----------------
Total decrease (7,833,527) (19,301,831)
NET ASSETS
Beginning of period 68,434,496 87,736,327
------------- -----------------
End of period $ 60,600,969 $ 68,434,496
------------- -----------------
------------- -----------------
</TABLE>
16 See Notes to Financial Statements
<PAGE>
Prudential International Bond Fund, Inc.
Notes to Financial Statements (Unaudited)
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 it'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 on the
basis of valuations provided by an independent pricing agent or principal market
maker. Any security for which the primary market is on an exchange or NASDAQ
National Market System securities are valued at the last sale price on such
exchange on the day of valuation or, if there was no sale on such day, at the
mean between the last bid and asked prices on such day or at the bid price on
such day in the absence of an asked price. 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
17
<PAGE>
Prudential International Bond Fund, Inc.
Notes to Financial Statements (Unaudited) Cont'd.
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.
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.
18
<PAGE>
Prudential International Bond Fund, Inc.
Notes to Financial Statements (Unaudited) Cont'd.
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.
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.
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
19
<PAGE>
Prudential International Bond Fund, Inc.
Notes to Financial Statements (Unaudited) Cont'd.
Financial Statement Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies. The effect of applying this statement was
to increase distributions in excess of net investment income and decrease
accumulated net realized loss on investments by $4,653,211. This was primarily
the result of net foreign currency losses for the six months ended June 30,
2000. Net investment income, net realized gains and net assets were not affected
by this change.
Note 2. Agreements
The Fund has a management agreement with Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PIFM has entered into a Subadvisory Agreement with The Prudential
Investment Corporation ('PIC'), a wholly owned subsidiary of Prudential. The
Subadvisory Agreement provides that the subadviser will furnish investment
advisory services in connection with the management of the Fund. In connection
therewith, the Subadviser is obligated to keep certain books and records of the
Fund. PIFM continues to have responsibility for all investment advisory services
pursuant to the Management Agreement and supervises the Subadviser's performance
of such services. The Subadviser is reimbursed by PIFM for the reasonable costs
and expenses incurred by the Subadviser in furnishing those services. Effective
January 1, 2000, PIC is paid by PIFM at an annual rate of .375 of 1% of the
Fund's average daily net assets up to $1 billion and .333 of 1% of the Fund's
average daily net assets in excess of $1 billion. PIFM pays for the services of
PIC, the cost of 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 has a distribution agreement with Prudential Investment
Management Services LLC ('PIMS'). The Fund compensates PIMS 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 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 of the Class Z
shares of the Fund.
Pursuant to the Class A, B and C Plans, the Fund compensates PIMS for
distribution-related activities at an annual rate of up to .30 of 1%, 1% and 1%
of the average daily net assets of the Class A, B and C shares respectively.
Such expenses under the Plans were .25 of 1%, .75 of 1% and .75 of 1% of the
average daily net
20
<PAGE>
Prudential International Bond Fund, Inc.
Notes to Financial Statements (Unaudited) Cont'd.
assets of the Class A, B and C shares, respectively, for the six months ended
June 30, 2000.
PIMS has advised the Fund that it has received approximately $1,700 in
front-end sales charges resulting from sales of Class A during the six months
ended June 30, 2000. From these fees, PIMS 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.
PIMS has advised the Series that for the six months ended June 30, 2000,
it has received approximately $3,100 and $700 in contingent deferred sales
charges imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
PIFM, PIC, PIMS and PRICOA 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 syndicated credit agreement ('SCA') with an
unaffiliated lender. The maximum commitment under the SCA is $1 billion.
Interest on any such borrowings will be at market rates. The purpose of the
agreement is to serve as an alternative source of funding for capital share
redemptions. The Funds pay a commitment fee of .080 of 1% of the unused portion
of the credit facility. The commitment fee is accrued and paid quarterly on a
pro rata basis by the Funds. The expiration date of the SCA is March 9, 2001.
Prior to March 9, 2000, the commitment fee was .065 of 1% of the unused portion
of the credit facility. The Fund did not borrow any amounts pursuant to the SCA
during the six months ended June 30, 2000.
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, 2000
the Fund incurred fees of approximately $85,000 for the services of PMFS. As of
June 30, 2000 approximately $14,100 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, 2000 aggregated $37,258,735 and $43,183,163,
respectively.
21
<PAGE>
Prudential International Bond Fund, Inc.
Notes to Financial Statements (Unaudited) Cont'd.
At June 30, 2000, the Fund had outstanding forward currency contracts to
purchase and sell foreign currencies, as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Purchase Contracts Payable Value (Depreciation)
----------------------------------- ---------------- ----------- --------------
<S> <C> <C> <C>
Australian Dollar, expiring 7/26/00 $ 1,620,993 $ 1,584,733 $ (36,260)
Canadian Dollar, expiring 7/17/00 816,652 810,084 (6,568)
Danish Krone, expiring 7/18/00 488,547 494,497 5,950
Euro Currency, expiring 7/17/00 37,799,965 38,309,165 509,200
Pound Sterling, expiring 7/20/00 275,486 276,373 887
Japanese Yen, expiring 7/19/00 5,363,521 5,417,254 53,733
Norwegian Krone, expiring 7/13/00 626,137 642,091 15,954
---------------- ----------- --------------
$ 46,991,301 $47,534,197 $ 542,896
---------------- ----------- --------------
---------------- ----------- --------------
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
----------------------------------- ---------------- ----------- --------------
<S> <C> <C> <C>
Australian Dollar, expiring 7/26/00 $ 3,073,000 $ 3,072,923 $ 77
Danish Krone, expiring 7/18/00 497,502 494,497 3,005
Euro Currency, expiring 7/17/00 55,788,851 56,343,568 (554,717)
Pound Sterling, expiring 7/20/00 1,259,875 1,269,860 (9,985)
Japanese Yen, expiring 7/19/00 3,639,535 3,636,327 3,208
New Zealand Dollar, expiring
7/26/00 1,724,311 1,684,813 39,498
Swedish Krona, expiring 7/19/00 2,113,937 2,054,618 59,319
---------------- ----------- --------------
$ 68,097,011 $68,556,606 $ (459,595)
---------------- ----------- --------------
---------------- ----------- --------------
</TABLE>
The United States federal income tax basis of the Fund's investments at
June 30, 2000 was $60,730,330 and, accordingly, net unrealized depreciation for
United States federal income tax purposes was $1,048,836 (gross unrealized
appreciation--$680,717; gross unrealized depreciation--$1,729,553).
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, 2000, the Fund
had a .4% undivided interest in the joint account. The undivided interest for
the Fund represented
22
<PAGE>
Prudential International Bond Fund, Inc.
Notes to Financial Statements (Unaudited) Cont'd.
$2,030,000 in the principal amount. As of such date, each repurchase agreement
in the joint account and the collateral therefor were as follows:
ABN AMRO Inc., 6.60%, in the principal amount of $100,000,000, repurchase
price $100,055,000, due 7/3/00. The value of the collateral including accrued
interest was $102,000,279.
Bear, Stearns & Co. Inc., 6.55%, in the principal amount of $125,000,000,
repurchase price $125,068,229, due 7/3/00. The value of the collateral including
accrued interest was $128,815,250.
Credit Suisse First Boston Corp., 6.65%, in the principal amount of
$125,000,000, repurchase price $125,069,271, due 7/3/00. The value of the
collateral including accrued interest was $129,282,882.
UBS Warburg, 6.30%, in the principal amount of $58,110,000, repurchase
price $58,140,508, due 7/3/00. The value of the collateral including accrued
interest was $59,275,285.
UBS Warburg, 6.55%, in the principal amount of $100,000,000, repurchase
price $100,054,583, due 7/3/00. The value of the collateral including accrued
interest was $102,000,550.
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 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 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 June
30, 2000 Prudential owned 145 Class A shares.
23
<PAGE>
Prudential International Bond Fund, Inc.
Notes to Financial Statements (Unaudited) Cont'd.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
---------------------------------------------------------- ---------- ------------
<S> <C> <C>
Six months ended June 30, 2000:
Shares sold 116,145 $ 707,678
Shares issued in reinvestment of dividends and
distributions 104,207 642,803
Shares reacquired (1,148,506) (7,119,874)
---------- ------------
Net decrease in shares outstanding before conversion (928,154) (5,769,393)
Shares issued upon conversion from Class B 5,911 36,736
---------- ------------
Net decrease in shares outstanding (922,243) $ (5,732,657)
---------- ------------
---------- ------------
Year ended December 31, 1998:
Shares sold 302,079 $ 1,995,054
Shares issued in reinvestment of dividends and
distributions 254,193 1,701,726
Shares reacquired (2,303,857) (15,461,489)
---------- ------------
Net decrease in shares outstanding before conversion (1,747,585) (11,764,709)
Shares issued upon conversion from Class B 201 1,323
---------- ------------
Net decrease in shares outstanding (1,747,384) $(11,763,386)
---------- ------------
---------- ------------
<CAPTION>
Class B
----------------------------------------------------------
<S> <C> <C>
Six months ended June 30, 2000:
Shares sold 57,912 $ 360,692
Shares issued in reinvestment of dividends and
distributions 7,758 47,931
Shares reacquired (39,466) (245,640)
---------- ------------
Net increase in shares outstanding before conversion 26,204 162,983
Shares reacquired upon conversion into Class A (5,892) (36,736)
---------- ------------
Net increase in shares outstanding 20,312 $ 126,247
---------- ------------
---------- ------------
Year ended December 31, 1999:
Shares sold 200,931 $ 1,360,681
Shares issued in reinvestment of dividends and
distributions 14,238 94,984
Shares reacquired (107,807) (721,299)
---------- ------------
Net increase in shares outstanding before conversion 107,362 734,366
Shares reacquired upon conversion into Class A (201) (1,323)
---------- ------------
Net increase in shares outstanding 107,161 $ 733,043
---------- ------------
---------- ------------
</TABLE>
24
<PAGE>
Prudential International Bond Fund, Inc.
Notes to Financial Statements (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C Shares Amount
---------------------------------------------------------- ---------- ------------
Six months ended June 30, 2000:
<S> <C> <C>
Shares sold 1,674 $ 10,585
Shares issued in reinvestment of
dividends and distributions 807 4,997
Shares reacquired (14,225) (88,173)
---------- ------------
Net decrease in shares outstanding (11,744) $ (72,591)
---------- ------------
---------- ------------
Year ended December 31, 1999:
Shares sold 6,775 $ 45,628
Shares issued in reinvestment of
dividends and distributions 2,269 15,192
Shares reacquired (6,039) (40,929)
---------- ------------
Net increase in shares outstanding 3,005 $ 19,891
---------- ------------
---------- ------------
<CAPTION>
Class Z
----------------------------------------------------------
<S> <C> <C>
Six months ended June 30, 2000:
Shares sold 235,479 $ 1,463,992
Shares issued in reinvestment of
dividends and distributions 14,991 92,580
Shares reacquired (207,699) (1,289,060)
---------- ------------
Net increase in shares outstanding 42,771 $ 267,512
---------- ------------
---------- ------------
Year ended December 31, 1999:
Shares sold 386,570 $ 2,600,254
Shares issued in reinvestment of
dividends and distributions 29,107 194,635
Shares reacquired (245,883) (1,640,481)
---------- ------------
Net increase in shares outstanding 169,794 $ 1,154,408
---------- ------------
---------- ------------
</TABLE>
25
<PAGE>
Prudential International Bond Fund, Inc.
Financial Highlights (Unaudited)
<TABLE>
<CAPTION>
Class A(c)
<S> <C>
----------------
<CAPTION>
Six Months Ended
June 30, 2000(c)
---------------------------------------------------------------------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 6.36
--------
Income from investment operations:
Net investment income .17
Net realized and unrealized gain (loss) on investments and
foreign currencies (.19)
--------
Total from investment operations (.02)
--------
Less distributions:
Dividends from net investment income (.21)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Tax return of capital distributions --
--------
Total dividends and distributions (.21)
--------
Redemption fee retained by Fund --
--------
Net asset value, end of period $ 6.13
--------
--------
Per share market price, end of period N/A
--------
--------
TOTAL INVESTMENT RETURN BASED ON(a):
Market price N/A
Net asset value (.41)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 55,380
Average net assets (000) $ 58,769
Ratios to average net assets:
Expenses, including distribution fees 2.00(d)
Expenses, excluding distribution fees 1.75(d)
Net investment income 5.70(d)
For Class A, B, C and Z shares:
Portfolio turnover rate 63%
</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 return 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 period.
(d) Annualized.
26 See Notes to Financial Statements
<PAGE>
Prudential International Bond Fund, Inc.
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class A(b)
---------------------------------------------------------------------------------------------------------
Year Ended December 31,
---------------------------------------------------------------------------------------------------------
1999(c) 1998(c) 1997(c) 1996 1995
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 7.17 $ 7.08 $ 7.63 $ 7.68 $ 6.76
-------- ---------------- ---------------- ---------------- ----------------
.39 .43 .49 .56 .48
(.68) .12 (.22) .28 1.13
-------- ---------------- ---------------- ---------------- ----------------
(.29) .55 .27 .84 1.61
-------- ---------------- ---------------- ---------------- ----------------
(.22) (.25) (.58) (.67) (.48)
-- (.17) (.24) (.40) (.21)
(.09) (.04) -- -- --
(.21) -- -- -- --
-------- ---------------- ---------------- ---------------- ----------------
(.52) (.46) (.82) (1.07) (.69)
-------- ---------------- ---------------- ---------------- ----------------
-- -- -- .18 --
-------- ---------------- ---------------- ---------------- ----------------
$ 6.36 $ 7.17 $ 7.08 $ 7.63 $ 7.68
-------- ---------------- ---------------- ---------------- ----------------
-------- ---------------- ---------------- ---------------- ----------------
N/A N/A N/A N/A $ 7.375
-------- ---------------- ---------------- ---------------- ----------------
-------- ---------------- ---------------- ---------------- ----------------
N/A N/A N/A N/A 44.39%
(4.27)% 8.00% 3.62% 14.02% 25.14%
$ 63,343 $ 84,008 $ 96,365 $125,637 $350,339
$ 72,413 $ 89,970 $110,910 $180,588 $342,741
1.86% 1.63% 1.64% 1.48% 1.05%
1.61% 1.48% 1.49% 1.34% 1.05%
5.77% 6.08% 6.54% 6.45% 6.37%
110% 46% 53% 38% 203%
</TABLE>
See Notes to Financial Statements 27
<PAGE>
Prudential International Bond Fund, Inc.
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
----------------
Six Months Ended
June 30, 2000(d)
---------------------------------------------------------------------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 6.38
-------
Income from investment operations:
Net investment income .16
Net realized and unrealized gain (loss) on investments and
foreign currencies (.19)
-------
Total from investment operations (.03)
-------
Less distributions:
Dividends from net investment income (.20)
Distributions in excess of net investment income --
Distributions from net realized gains --
Tax return of capital distributions --
-------
Total dividends and distributions (.20)
-------
Redemption fee retained by Fund --
-------
Net asset value, end of period $ 6.15
-------
TOTAL INVESTMENT RETURN(a) (.84)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $1,825
Average net assets (000) $1,792
Ratios to average net assets:
Expenses, including distribution fees 2.50%(b)
Expenses, excluding distribution fees 1.75%(b)
Net investment income 5.19%(b)
</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 returns for
periods of less than one full year are not annualized.
(b) Annualized.
(c) Commencement of offering of Class B shares.
(d) Calculated based upon weighted average shares outstanding during the period.
28 See Notes to Financial Statements
<PAGE>
Prudential International Bond Fund, Inc.
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------------------------------
January 15, 1996(c)
Year Ended December 31, Through
--------------------------------------------------------- December 31,
1999(d) 1998(d) 1997(d) 1996
---------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 7.19 $ 7.10 $ 7.64 $ 7.72
------- ------- ------- -------
.35 .37 .44 .52
(.68) .11 (.20) .25
------- ------- ------- -------
(.33) .48 .24 .77
------- ------- ------- ---
(.18) (.21) (.54) (.63)
-- -- -- --
(.09) (.14) (.24) (.40)
(.21) (.04) -- --
------- ------- ------- -------
(.48) (.39) (.78) (1.03)
------- ------- ------- -------
-- -- -- .18
------- ------- ------- ---
$ 6.38 $ 7.19 $ 7.10 $ 7.64
------- ------- ------- -------
(4.76)% 7.32% 3.25% 12.86%
$1,764 $1,218 $ 531 $ 75
$1,560 $ 785 $ 335 $ 23
2.36% 2.23% 2.24% 2.09%(b)
1.61% 1.48% 1.49% 1.34%(b)
5.29% 5.51% 6.00% 5.85%(b)
</TABLE>
See Notes to Financial Statements 29
<PAGE>
Prudential International Bond Fund, Inc.
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
----------------
Six Months Ended
June 30, 2000(d)
---------------------------------------------------------------------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 6.38
-------
Income from investment operations:
Net investment income .15
Net realized and unrealized gain (loss) on investments and
foreign currencies (.18)
-------
Total from investment operations (.03)
-------
Less distributions:
Dividends from net investment income (.20)
Distributions in excess of net investment income --
Distributions from net realized gains --
Tax return of capital distributions
-------
Total dividends and distributions (.20)
-------
Redemption fee retained by Fund --
-------
Net asset value, end of period $ 6.15
-------
-------
TOTAL INVESTMENT RETURN(a) (.84)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 167
Average net assets (000) $1,956
Ratios to average net assets:
Expenses, including distribution fees 2.50%(b)
Expenses, excluding distribution fees 1.75%(b)
Net investment income 5.19%(b)
</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 C shares.
(d) Calculated based upon weighted average shares outstanding during the period.
30 See Notes to Financial Statements
<PAGE>
Prudential International Bond Fund, Inc.
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class C
---------------------------------------------------------------------------------
January 15, 1996(c)
Year Ended December 31, Through
--------------------------------------------------------- December 31,
1999(d) 1998(d) 1997(d) 1996
---------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 7.19 $ 7.10 $ 7.64 $ 7.72
------- ------- ------- -------
.35 .37 .44 .52
(.68) .11 (.20) .25
------- ------- ------- -------
(.33) .48 .24 .77
------- ------- ------- -------
(.18) (.21) (.54) (.63)
-- (.14) (.24) (.40)
(.09) (.04) -- --
(.21)
------- ------- ------- -------
(.48) (.39) (.78) (1.03)
------- ------- ------- -------
-- -- -- .18
------- ------- ------- -------
$ 6.38 $ 7.19 $ 7.10 $ 7.64
------- ------- ------- -------
------- ------- ------- -------
(4.76)% 7.32% 3.25% 12.86%
$ 248 $1,218 $ 531 $ 75
$ 248 $ 785 $ 335 $ 23
2.36% 2.23% 2.24% 2.09%(b)
1.61% 1.48% 1.49% 1.34%(b)
5.29% 5.51% 6.00% 5.85%(b)
</TABLE>
See Notes to Financial Statements 31
<PAGE>
Prudential International Bond Fund, Inc.
Financial Highlights (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Class Z
-------------------------------------------------------------
March 17,
Six Months Year Ended 1997(a)
Ended December 31, Through
June 30, ----------------------- December 31,
2000(d) 1999(d) 1998(d) 1997(d)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period $ 6.38 $ 7.19 $ 7.10 $ 7.57
---------- --------- --------- ------------
Income from investment
operations:
Net investment income .19 .40 .44 .38
Net realized and unrealized gain
(loss) on investments and
foreign currencies (.21) (.68) .10 (.02)
---------- --------- --------- ------------
Total from investment
operations (.02) (.28) .54 .36
---------- --------- --------- ------------
Less distributions:
Dividends from net investment
income (.22) (.23) (.25) (.59)
Distributions in excess of net
investment income -- -- (.16) (.24)
Distributions from net realized
gains -- (.09) (.04) --
---------- --------- --------- ------------
Tax return of capital
distributions -- (.21) -- --
Total dividends and
distributions (.22) (.53) (.45) (.83)
---------- --------- --------- ------------
Net asset value, end of period $ 6.14 $ 6.38 $ 7.19 $ 7.10
---------- --------- --------- ------------
---------- --------- --------- ------------
TOTAL INVESTMENT RETURN(a) (.28)% (4.14)% 8.16% 4.97%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $3,229 $ 3,080 $ 2,253 $ 628
Average net assets (000) $3,079 $ 2,720 $ 1,487 $ 121
Ratios to average net assets:
Expenses, including
distribution fees 1.75%(b) 1.61% 1.48% 1.49%(b)
Expenses, excluding
distribution fees 1.75%(b) 1.61% 1.48% 1.49%(b)
Net investment income 5.97%(b) 6.04% 6.29% 6.82%(b)
</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 returns for
periods of less than one full year are not annualized.
(b) Annualized.
(c) Commencement of offering of Class Z shares.
(d) Calculated based upon weighted average shares outstanding during the period.
32 See Notes to Financial Statements
<PAGE>
Prudential International Bond Fund, Inc.
Getting the Most from Your Prudential Mutual Fund
Some mutual fund shareholders won't ever read this-they don't read annual and
semiannual reports. It's quite understandable. These annual and semiannual
reports are prepared to comply with federal regulations, and are often written
in language that is difficult to understand. So when most people run into those
particularly daunting sections of these reports, they don't read them.
We think that's a mistake
At Prudential Mutual Funds, we've made some changes to our report to make it
easier to understand and more pleasant to read. We hope you'll find it
profitable to spend a few minutes familiarizing yourself with your investment.
Here's what you'll find in the report:
Performance at a Glance
Since an investment's performance is often a shareholder's primary concern, we
present performance information in two different formats. You'll find it first
on the "Performance at a Glance" page where we compare the Fund and the
comparable average calculated by Lipper, Inc., a nationally recognized mutual
fund rating agency. We report both the cumulative total returns and the average
annual total returns. The cumulative total return is the total amount of income
and appreciation the Fund has achieved in various time periods. The average
annual total return is an annualized representation of the Fund's performance.
It gives you an idea of how much the Fund has earned in an average year for a
given time period. Under the performance box, you'll see legends that explain
the performance information, whether fees and sales charges have been included
in returns, and the inception dates for the Fund's share classes.
See the performance comparison charts at the back of the report for more
performance information. Please keep in mind that past performance is not
indicative of future results.
<PAGE>
Prudential International Bond Fund, Inc.
www.prudential.com (800) 225-1852
Getting the Most from Your Prudential Mutual Fund
Investment Adviser's Report
The portfolio manager, who invests your money for you, reports on
successful-and not-so-successful-strategies in this section of your report.
Look for recent purchases and sales here, as well as information about the
sectors the portfolio manager favors, and any changes that are on the drawing
board.
Portfolio of Investments
This is where the report begins to appear technical, but it's really just a
listing of each security held at the end of the reporting period, along with
valuations and other information. Please note that sometimes we discuss a
security in the "Investment Adviser's Report" section that doesn't appear in
this listing because it was sold before the close of the reporting period.
Statement of Assets and Liabilities
The balance sheet shows the assets (the value of the Fund's holdings),
liabilities (how much the Fund owes), and net assets (the Fund's equity, or
holdings after the Fund pays its debts) as of the end of the reporting period.
It also shows how we calculate the net asset value per share for each class of
shares. The net asset value is reduced by payment of your dividend, capital
gain, or other distribution, but remember that the money or new shares are
being paid or issued to you. The net asset value fluctuates daily, along with
the value of every security in the portfolio.
Statement of Operations
This is the income statement, which details income (mostly interest and
dividends earned) and expenses (including what you pay us to manage your
money). You'll also see capital gains here-both realized and unrealized.
<PAGE>
Statement of Changes in Net Assets
This schedule shows how income and expenses translate into changes in net
assets. The Fund is required to pay out the bulk of its income to shareholders
every year, and this statement shows you how we do it (through dividends and
distributions) and how that affects the net assets. This statement also shows
how money from investors flowed into and out of the Fund.
Notes to Financial Statements
This is the kind of technical material that can intimidate readers, but it does
contain useful information. The Notes provide a brief history and explanation
of your Fund's objectives. In addition, they outline how Prudential Mutual
Funds prices securities. The Notes also explain who manages and distributes the
Fund's shares and, more importantly, how much they are paid for doing so.
Finally, the Notes explain how many shares are outstanding and the number
issued and redeemed over the period.
Financial Highlights
This information contains many elements from prior pages, but on a per-share
basis. It is designed to help you understand how the Fund performed, and to
compare this year's performance and expenses to those of prior years.
Independent accountant's Report
Once a year, an outside auditor looks over our books and certifies that the
financial statements are fairly presented and comply with generally accepted
accounting principles.
Tax Information
This is information that we report annually about how much of your total return
is taxable. Should you have any questions, you may want to consult a tax
adviser.
<PAGE>
Prudential International Bond Fund, Inc.
www.prudential.com (800) 225-1852
Getting the Most from Your Prudential Mutual Fund
Performance Comparison
These charts are included in the annual report and are required by the
Securities Exchange Commission. Performance is presented here as a hypothetical
$10,000 investment in the Fund since its inception or for 10 years (whichever
is shorter). To help you put that return in context, we are required to include
the performance of an unmanaged, broad-based securities index as well. The
index does not reflect the cost of buying the securities it contains or the
cost of managing a mutual fund. Of course, the index holdings do not mirror
those of the Fund-the index is a broad-based reference point commonly used by
investors to measure how well they are doing. A definition of the selected
index is also provided. Investors cannot invest directly in an index.
<PAGE>
For More Information
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Directors
Delayne Dedrick Gold
Robert F. Gunia
Douglas H. McCorkindale
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
Robin B. Smith
John R. Strangfeld
Louis A. Weil, III
Clay T. Whitehead
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
David R. Odenath, Jr., Vice President
Grace C. Torres, Treasurer
Marguerite E.H. Morrison, Secretary
William V. Healey, 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
194 Wood Avenue South
Iselin, NJ 08830
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
Fund Symbols NASDAQ CUSIP
Class A GGPAX 74436Q101
Class B PDBBX 74436Q200
Class C PIBCX 74436Q309
Class Z PIBZX 74436Q408
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, 2000, were not audited
and, accordingly, no opinion is expressed on them.
<PAGE>
(LOGO)
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
MF170E2 74436Q101 74436Q200 74436Q309 74436Q408
(LOGO) Printed on Recycled Paper
