LETTER TO SHAREHOLDERS
December 19, 1994
Dear Shareholder:
International investors have enjoyed modest returns from European
investments in the past six months, as most of the region's economies
finally began to shrug off the effects of the global recession that
marked the beginning of the decade. Of course, economic growth has
been followed by generally rising rates that have marked 1994, so far.
This held back returns in the U.S., which in turn dampened stock market
activity on most of Europe's stock exchanges.
The Fund's Objective
The Prudential Europe Growth Fund seeks long-term capital growth from a
diversified portfolio of European stocks, as well as bonds. Since it
invests outside the U.S., it is subject to all the risks associated
with foreign investing, including currency, political and social risks.
The Fund may occasionally use derivatives like options and futures to
hedge currency risk, although we did not during this reporting period.
FUND PERFORMANCE
<TABLE>
<CAPTION>
Cumulative
Total Returns NAV
Since Incep.* 7/13/94 to 10/31/94
<S> <C> <C> <C>
Class A 2.0% $12.00 $11.23
Class B 1.8x 12.00 11.20
Class C 1.8 12.00 11.60
</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.
*Inception dates: 7/13/94 Class A, Class B and Class C.
The Market
Against a backdrop of expanding global economies, 1994 marks what appears
to be a lull in one of the strongest U.S. bull stock markets in many
decades. And Wall Street's woes have lead to slow equity markets in
some parts of the world. Still, there's an underlying tone of confidence
in global earnings and growth and it's reflected in returns: the S&P 500 is
up a meager
-3-
<PAGE>
3.6% through the end of October 1994, while the Morgan Stanley
Capital International index is up 9.3% in the same time.
Why are Europe's stock market returns uneven while most of the region's
economies are thriving? The U.S. Federal Reserve, with one eye on growing
gross domestic product and the other on rising commodities prices (a
historical precursor to inflation), began in February to dampen growth
by raising short-term interest rates. In Europe, investors are not so
much afraid of resurging inflation as concerned that the move to stave
it off may also crush the global economic recovery. The U.S. stock market
slumped on the news and most of Europe's exchanges followed suit. The news
was slightly less damaging in Europe, however, since valuations there remain
exceptionally low -- exactly opposite to the situation in the U.S.
What we did well...
In general, our growth investing style would not lend itself to spectacular
returns when interest rates are rising, but we made a few good moves as
we began to invest in Europe. European companies are reporting strong
and durable earnings reports, and while stock performance has been uneven,
the countries of continental Europe have outperformed eastern Europe (which
we avoided entirely during this reporting period) and the United Kingdom.
-- We are looking at a lot of discount retailers, which should benefit
as Europeans look for bargains and shun the pricey goods that were so
popular in recent years. We have placed about 15% of the Fund's assets
in these types of companies.
-- Technology firms look attractive to us because companies and
individuals are buying more computers as the economy expands and
their cash flows increase. The U.S. embraced the technological
revolution five years ago, but the industrialized and developing
countries of the Europe have a long way to go before there's a
computer in every office, much less every kitchen. And even in
the U.S. we see demand growing, since ever-falling prices are stimulating
demand beyond what was predicted even two years ago.
-- We are also buying stock in companies that supply parts and equipment
to Europe's big manufacturers. They should benefit as individuals and
businesses spend money in the growing economy, as well as from a trend
towards thrift and increased productivity. We invested in Imetal, a
French specialty steel company.
-4-
<PAGE>
...And don't forget commodities
As the global recovery stimulates a growing demand for basic materials, or
commodities, we anticipate the stocks of companies that produce raw
materials will perform well. One of our better selections was the Finnish
timber company Kymmene Oy. We don't invest directly in commodities.
Interest rates are the barometer
Looking into the next 12 months, we plan to keep our eye on both U.S. and
European interest rates. The world's stock markets probably won't start
producing healthy returns until interest rates settle in to a comfortable
new trading range. In the meantime, we'll keep looking for basic goods
producers and hope that interest rates don't rise so high that they choke
off the global recovery. If interest rates spike another percentage point
higher, you can expect us to buy more defensive stocks. But with growth
continuing at a moderate pace, we feel confident that technology stocks
will be good performers for the foreseeable future, so they are likely to
form a big part of our strategy this year.
In closing, we are optimistic, but realistic. Europe should provide fertile
ground for investors as the region's economies emerge from recession. But
the transition from a disinflationary economy to one that may be more
inflationary is bound to make the stock markets jumpy. We anticipate
strong earnings growth, and expect to find more stability once interest
rates settle in to a new trading range.
We're pleased you've chosen to explore the opportunity for long-term
gains from European stocks with us.
Sincerely,
Lawrence C. McQuade
President
Dan Duane
Portfolio Manager
-5-
<PAGE>
PORTFOLIO Q&A
(PHOTO)
Dan Duane
Talking With Dan Duane
Since the value of the U.S. dollar, compared to the currencies of
other countries, plays a role in returns, we talked with Dan about
how the markets are reacting to the weak U.S. dollar.
Q. How does the weak U.S. dollar impact returns?
A. Generally, investors believe the dollar's movements have more
impact on total returns than they actually do. It is true that when
the U.S. dollar is weak, returns from stocks denominated in the foreign
currency are improved because it takes fewer French francs, for instance,
to buy a dollar. When we value our European holdings every day, or when
they pay dividends or we take profits in them, we translate the value of
our holdings into U.S. dollars. If it now takes less foreign money to
buy a dollar, our dollar value automatically rises.
Q. What happens if the dollar starts rising?
A. We are looking for companies that will benefit from a rising dollar.
These are generally companies that have assets or revenue denominated in
dollars and costs denominated in a foreign currency. That steers us to
producers of commodities, since most enjoy revenues that are priced in
dollars (metals, oil, gold, timber). We do not invest directly in
commodities. In addition, most technology and telecommunications
company revenues are in dollars. So companies from all these sectors
are important in our portfolio for two reasons -- because the global
recovery should stimulate demand for their products and because their
stocks are a good hedge against a rising dollar.
-6-
<PAGE>
PRUDENTIAL EUROPE GROWTH FUND, INC. Portfolio of Investments
October 31, 1994 (Unaudited)
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--82.1 %
Common Stocks--74.3%
Belgium--2.9%
23,000 Barco Industries N.V. .... $ 1,792,283
(Financial services)
2,975 Bekaert S.A., N.V. ....... 2,303,851
(Industrial components) ------------
4,096,134
------------
Denmark--2.1%
40,300 Danske Traelastkomp* ..... 2,944,054
(Merchandising) ------------
Federal Republic Of Germany--6.7%
13,000 BASF AG .................. 2,751,172
(Chemicals)
4,750 Bilfinger & Berger AG .... 2,681,261
(Construction & housing)
2,400 Hornbach AG .............. 1,300,489
(Merchandising)
8,700 Preussag AG .............. 2,548,020
(Multi-industry) ------------
9,280,942
------------
Finland--2.1%
106,900 Kymmene Corp. ............ 2,920,881
(Forest products & paper) ------------
France--16.7%
20,100 Ecco S.A. ................ 2,596,193
(Business & public
services)
21,600 Imetal S.A. .............. 2,307,468
(Miscellaneous materials
& commodities)
38,600 La Farge Coppee .......... 3,061,160
(Building materials &
components)
37,300 Lapeyre S.A. ............. 2,028,552
(Building materials &
components)
1,500 Legrand S.A. ............. $ 2,010,294
(Electronics)
36,012 Naf Naf S.A. ............. 2,385,179
(Merchandising)
18,500 Rexel S.A. ............... 2,565,602
(Electronics)
19,700 Sidel S.A. ............... 3,749,830
(Machinery & engineering)
46,300 Valeo S.A. ............... 2,513,519
(Automotive) ------------
23,217,797
------------
Italy--1.5%
2,566,700 Montedison SPA* .......... 2,103,959
(Chemicals) ------------
Netherlands--1.4%
82,700 Royal Boskalis Westminster 1,878,630
N.V. ................... ------------
(Construction & housing)
Spain--8.0%
31,600 Acerinox S.A. ............ 3,498,501
(Metals-steel)
192,400 Centros Commerciale (Pryca) 3,165,950
........................
(Merchandising)
140,200 Dragados y Construcciones 2,094,216
........................
(Construction & housing)
128,300 Vallehermoso ............. 2,295,654
(Real estate) ------------
11,054,321
------------
Sweden--9.7%
116,600 Allgon AB ................ 2,627,932
(Telecommunications)
114,100 Astra B Free ............. 3,047,808
(Health & personal care)
47,600 Hennes & Mauritz B Free 2,635,668
........................
(Merchandising)
</TABLE>
-7- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL EUROPE GROWTH FUND, INC.
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
Sweden--(cont'd)
56,900 Missouri Och Domsjo AB* $ 2,596,490
........................
(Forest products & paper)
130,700 Volvo AB Free ............ 2,582,050
(Automobiles) ------------
13,489,948
------------
United Kingdom--23.2%
502,300 Allied Colloids .......... 1,108,701
(Chemicals)
149,000 British Petroleum ORD .... 1,059,725
(Energy sources)
195,000 BTR ORD .................. 977,198
(Multi-industry)
172,500 Carlton Communications PLC 2,487,570
........................
(Television &
communication equipment)
577,500 Compass Group ............ 3,068,690
(Leisure & tourism)
426,600 Guest Keen & Nettlefolds 4,247,719
ORD ....................
(Automobiles)
693,100 House of Fraser PLC ...... 2,272,102
(Merchandising)
113,000 Lloyd's Bank ............. 1,059,569
(Financial services)
310,400 Pearson ORD .............. 3,217,574
(Broadcasting &
publishing)
112,000 PowerGen PLC ............. 1,040,121
(Electrical & gas)
71,000 RTZ Corp., ORD ........... 998,331
(Gold mines)
327,400 Siebe PLC ................ 2,869,202
(Machinery & engineering)
366,300 Smith Holdings ........... 3,054,392
(Forest products & paper)
54,700 Unilever ORD ............. $ 1,017,764
(Food & household
products)
1,078,900 Vodafone Group ........... 3,735,272
(Telecommunications) ------------
32,213,930
------------
Total common stocks
(cost US$101,553,367).... 103,200,596
------------
Preferred Stock--7.8%
Federal Republic Of Germany--4.9%
1,200 Hornbach AG .............. 1,276,553
(Merchandising)
10,200 Jungheinrich AG .......... 2,427,845
(Machinery & engineering)
3,350 Krones AG ................ 3,064,792
(Machinery & engineering) ------------
6,769,190
------------
Finland--2.9%
26,800 Nokia Corp. .............. 4,039,106
(Television & ------------
electronics)
Total preferred stocks
(cost US$9,536,305)...... 10,808,296
------------
Warrants*
France
2,912 Naf Naf
Warrants expiring Feb '98 @
FF 460 ................. 11,142
(Merchandising) ------------
Total long-term investments
(cost US$111,089,672).... 114,020,034
------------
</TABLE>
-8- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL EUROPE GROWTH FUND, INC.
<TABLE>
<CAPTION>
Principal
Amount Value
(000) Description (Note 1)
<C> <S> <C>
SHORT-TERM INVESTMENTS--16.4%
U.S. Government Securities--16.4%
Federal Farm Credit Bank,
$1,700 Zero Coupon, 11/07/94...... $ 1,698,463
Federal Home Loan Bank,
635 Zero Coupon, 11/01/94...... 634,918
Federal Home Loan Mortgage
Corp.,
7,500 Zero Coupon, 11/02/94...... 7,497,996
Federal National Mortgage
Association,
13,000 Zero Coupon, 11/18/94...... 12,969,125
------------
Total short-term
investments
(cost $22,801,724)....... 22,800,502
------------
Total Investments--98.5%
(cost US$133,891,396; Note
4)....................... 136,820,536
Other assets in excess of
liabilities--1.5%........ 2,106,294
------------
Net Assets--100%........... $138,926,830
------------
------------
</TABLE>
---------------
*Non-income producing security.
-9- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL EUROPE GROWTH FUND, INC.
Statement of Assets and Liabilities
(Unaudited)
<TABLE>
<CAPTION>
Assets October 31, 1994
----------------
<S> <C>
Investments, at value (cost $133,891,396)............................................... $136,820,536
Foreign currency, at value (cost $3,193,670)............................................ 3,202,396
Cash.................................................................................... 667,660
Receivable for investments sold......................................................... 14,405,000
Receivable for foreign currency......................................................... 1,432,318
Receivable for Fund shares sold......................................................... 1,404,206
Dividends receivable.................................................................... 141,536
Deferred expenses and other assets...................................................... 231,099
----------------
Total assets...................................................................... 158,304,751
----------------
Liabilities
Payable for investments purchased....................................................... 15,034,287
Payable for foreign currency............................................................ 3,484,485
Accrued expenses........................................................................ 230,137
Payable for Fund shares reacquired...................................................... 301,305
Due to Distributors..................................................................... 114,009
Accrued organization expense............................................................ 111,583
Due to Manager.......................................................................... 102,115
----------------
Total liabilities................................................................. 19,377,921
----------------
Net Assets.............................................................................. $138,926,830
----------------
----------------
Net assets were comprised of:
Common stock, at par.................................................................. $ 11,969
Paid-in capital in excess of par...................................................... 136,796,136
----------------
136,808,105
Accumulated net investment loss....................................................... (164,921)
Accumulated net realized loss on investment and foreign currency transactions......... (639,577)
Net unrealized appreciation on investments and foreign currencies..................... 2,923,223
----------------
Net assets, October 31, 1994.......................................................... $138,926,830
----------------
----------------
Class A:
Net asset value and redemption price per share
($29,246,374 / 2,514,908 shares of common stock issued and outstanding)............. $11.63
Maximum sales charge (5.00% of offering price)........................................ .61
----------------
Maximum offering price to public...................................................... $12.24
----------------
----------------
Class B:
Net asset value, offering price and redemption price per share
($102,481,462 / 8,833,114 shares of common stock issued and outstanding)............ $11.60
----------------
----------------
Class C:
Net asset value, offering price and redemption price per share
($7,198,994 / 620,497 shares of common stock issued and outstanding)................ $11.60
----------------
----------------
</TABLE>
See Notes to Financial Statements.
-10-
<PAGE>
PRUDENTIAL EUROPE GROWTH FUND, INC.
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
July 13,
1994(D)
Through
October 31,
Net Investment Income 1994
----------
<S> <C>
Income
Dividends (net of foreign withholding
taxes of $29,665)................... $ 194,062
Interest.............................. 292,774
----------
Total income........................ 486,836
----------
Expenses
Distribution fee--Class A............. 18,928
Distribution fee--Class B............. 219,835
Distribution fee--Class C............. 17,544
Management fee........................ 234,819
Custodian's fees and expenses......... 41,000
Registration fees..................... 21,500
Reports to shareholders............... 20,000
Transfer agent's fees and expenses.... 17,000
Amortization of organization
expense............................... 15,000
Directors' fees....................... 8,500
Audit fee............................. 7,500
Legal fees............................ 6,000
Miscellaneous......................... 24,131
----------
Total operating expenses............ 651,757
----------
Net investment loss..................... (164,921)
----------
Realized and Unrealized Loss
on Investments and Foreign Currency
Transactions
Net realized loss on:
Investment transactions............... (426,596)
Foreign currency transactions......... (212,981)
----------
(639,577)
----------
Net change in unrealized
appreciation/depreciation on:
Investments........................... 2,929,140
Foreign currencies.................... (5,917)
----------
2,923,223
----------
Net gain on investments and foreign
currencies............................ 2,283,646
----------
Net Increase in Net Assets
Resulting from Operations............... $2,118,725
----------
----------
</TABLE>
PRUDENTIAL EUROPE GROWTH FUND, INC.
Statement of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
July 13,
1994(D)
Through
Increase (Decrease) in October 31,
Net Assets 1994
------------
<S> <C>
Operations
Net investment loss................ $ (164,921)
Net realized loss on investment and
foreign currency transactions.... (639,577)
Net change in unrealized
appreciation/depreciation of
investments and foreign
currencies....................... 2,923,223
------------
Net increase in net assets
resulting from operations........ 2,118,725
------------
Fund share transactions (Note 5)
Net proceeds from shares
subscribed....................... 147,494,180
Cost of shares reacquired.......... (10,786,075)
------------
Net increase in net assets from
Fund share transactions.......... 136,708,105
------------
Total increase....................... 138,826,830
Net Assets
Beginning of period.................. 100,000
------------
End of period........................ $138,926,830
------------
------------
See Notes to Financial Statements. (D)Commencement of investment operations.
</TABLE>
-11-
<PAGE>
PRUDENTIAL EUROPE GROWTH FUND, INC.
Notes to Financial Statements
(Unaudited)
Prudential Europe Growth Fund, Inc. (the ``Fund''), which was incorporated in
Maryland on March 18, 1994, is an open-end, diversified management investment
company. The Fund had no operations other than the issuance of 2,924 shares each
of Class A, Class B and Class C common stock for $100,000 on June 15, 1994 to
Prudential Mutual Fund Management, Inc. (PMF). The Fund commenced investment
operations on July 13, 1994. The investment objective of the Fund is to seek
long-term capital growth by investing primarily in equity securities of
companies domiciled in Europe.
Note 1. Accounting The following is a summary
Policies of significant accounting poli-
cies followed by the Fund in the preparation of
its financial statements.
Securities Valuation: Securities traded on an exchange (whether domestic or
foreign) are valued at the last reported sales price on the primary exchange on
which they are traded. Securities traded in the over-the-counter market
(including securities listed on exchanges for which a last sales price is not
available) are valued at the average of the last reported bid and asked prices.
Short-term securities which mature in more than 60 days are valued based upon
current market quotations. Short-term securities which mature in 60 days or less
are valued at amortized cost which approximates market value.
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian or designated
subcustodians, as the case may be under triparty repurchase agreements, take
possession of the underlying collateral securities, the value of which exceeds
the principal amount of the repurchase transaction including accrued interest.
If the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
Foreign Currency Translation: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(i) market value of investment securities, other assets and liabilities--at
the closing daily rate of exchange as reported by a major bank;
(ii) purchases and sales of investment securities, income and expenses--at
the rate of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange
rates and market values at the close of the fiscal year, the Fund does not
isolate that portion of the results of operations arising as a result of changes
in the foreign exchange rates from the fluctuations arising from changes in the
market prices of securities held at fiscal year end. Similarly, the Fund does
not isolate the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of long-term portfolio
securities sold during the fiscal year.
Net realized losses on foreign currency transactions of $212,981 represent
net foreign exchange gains or losses from sales and maturities of short-term
securities, holding of foreign currencies, currency gains or losses realized
between the trade and settlement dates on security transactions, and the
difference between the amounts of dividends and foreign taxes recorded on the
Fund's books and the U.S. dollar equivalent amounts actually received or paid.
Net currency gains and losses from valuing foreign currency denominated assets
and liabilities (other than investments) at year end exchange rates are
reflected as a component of unrealized appreciation on foreign currencies.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of domestic origin as a result of,
among other factors, the possibility of political and economic instability and
the level of governmental supervision and regulation of foreign securities
markets.
Forward Currency Contracts: 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. A forward contract is a commitment to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss arising from the difference between the settlement value of the original
and renegotiated forward contract, if any, is isolated and is included in net
realized gains from 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.
-12-
<PAGE>
<PAGE>
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses from investment and
currency transactions are calculated on the identified cost basis. Dividend
income is recorded on the ex-dividend date, and interest income is recorded on
an accrual basis.
Net investment income (other than distribution fees) and unrealized and
realized gains or losses are allocated daily to each class of shares of the Fund
based upon the relative proportion of net assets of each class at the beginning
of the day.
Equalization: The Fund follows the accounting practice known as equalization by
which a portion of the proceeds from sales and costs of reacquisitions of Fund
shares, equivalent on a per share basis to the amount of distributable net
investment income on the date of the transaction, is credited or charged to
undistributed net investment income. As a result, undistributed net investment
income per share is unaffected by sales or reacquisitions of the Fund's shares.
Dividends and Distributions: The Fund expects to pay dividends of net investment
income and distributions of net realized capital and currency gains, if any,
annually. Dividends and distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for foreign currency transactions.
Federal Income 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 tax provision is required.
Withholding taxes on foreign dividends have been provided for in accordance
with the Fund's understanding of the applicable country's tax rules and rates.
Deferred Organization Expenses: Approximately $250,000 of expenses were incurred
in connection with the organization of the Fund. These costs have been deferred
and are being amortized ratably over a period of sixty months from the date the
Fund commenced investment operations.
Note 2. Agreements The Fund has a management
agreement with PMF. Pursuant to this agreement,
PMF has responsibility for all investment advisory services and supervises the
subadviser's performance of such services. PMF has entered into a subadvisory
agreement with The Prudential Investment Corporation (``PIC''); PIC furnishes
investment advisory services in connection with the management of the Fund. PMF
pays for the cost of the subadviser's services, the compensation of officers of
the Fund, occupancy and certain clerical and bookkeeping costs of the Fund. The
Fund bears all other costs and expenses.
The management fee paid PMF is computed daily and payable monthly, at an
annual rate of .75 of 1% of the average daily net assets of the Fund.
The Fund has distribution agreements with Prudential Mutual Fund
Distributors, Inc. (``PMFD''), which acts as the distributor of the Class A
shares of the Fund, and with Prudential Securities Incorporated (``PSI''), which
acts as distributor of the Class B and Class C shares of the Fund (collectively
the ``Distributors''). The Fund compensates the Distributors for distributing
and servicing the Fund's Class A, Class B and Class C shares, pursuant to plans
of distribution, (the ``Class A, B and C Plans'') regardless of expenses
actually incurred by them. The distribution fees are accrued daily and payable
monthly.
Pursuant to the Class A, B and Class C Plans, the Fund compensates the
Distributors for distribution-related activities at an annual rate of up to .30
of 1%, 1% and 1% of the average daily net assets of Class A, B and C shares,
respectively. Such expenses under the Plans were .25 of 1%, 1% and 1% of the
average daily net assets of the Class A, B and C shares, respectively, for the
period ended October 31, 1994.
PMFD has advised the Fund that it has received approximately $796,000 in
front-end sales charges resulting from sales of Class A shares during the period
ended October 31, 1994. From these fees, PMFD paid such sales charges to PSI and
Pruco Securities Corporation, affiliated broker-dealers, which in turn paid
commissions to salespersons and incurred other distribution costs.
PSI has advised the Fund that for the period ended October 31, 1994, it
received approximately $600 in contingent deferred sales charges imposed upon
certain redemptions by Class B and C shareholders.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are (indirect)
wholly-owned subsidiaries of The Prudential Insurance Company of America
(``Prudential'').
Note 3. Other Prudential Mutual Fund Ser-
Transactions vices, Inc. (``PMFS''), a
With Affiliates wholly owned subsidiary of
PMF, serves as the Fund's transfer agent and
during the period ended October 31, 1994, the Fund incurred fees of
approximately $43,000 for the services of PMFS. As of October 31, 1994,
approximately $18,000 of such fees were due to PMFS. Transfer
-13-
<PAGE>
<PAGE>
agent fees and expenses in the Statement of Operations include certain
out-of-pocket expenses paid to non-affiliates.
Note 4. Portfolio Purchases and sales of invest-
Securities ment securities, other than
short-term investments, for the period ended
October 31, 1994 were $112,884,945 and $1,368,669, respectively.
The United States federal income tax basis of the Fund's investments is
substantially the same as for financial reporting purposes and, accordingly, as
of October 31, 1994 net unrealized appreciation for federal income tax purposes
was $2,923,223 (gross unrealized appreciation--$5,262,599; gross unrealized
depreciation--$2,339,376).
Note 5. Capital The Fund offers Class A,
Class B and Class C shares. Class A shares are
sold with a front-end sales charge of up to 5.00%. Class B shares are sold with
a contingent deferred sales charge which declines from 5% to zero depending on
the period of time the shares are held. Class C shares are sold with a
contingent deferred sales charge of 1% during the first year. Class B shares
will automatically convert to Class A shares on a quarterly basis approximately
seven years after purchase. All classes of shares have equal rights as to
earnings, assets and voting privileges except that each class bears different
distribution expenses and has exclusive voting rights with respect to its
distribution plan. There are 2 billion shares of $.001 par value common stock
authorized, divided into three classes, designated Class A, Class B and Class C,
each of which consists of 1 billion, 500 million and 500 million shares,
respectively.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
-------------------------------- --------- ------------
<S> <C> <C>
July 13(D) through
October 31, 1994:
Shares sold..................... 2,903,969 $ 32,990,570
Shares reacquired............... (389,061) (4,368,319)
--------- ------------
Net increase in shares
outstanding................... 2,514,908 $ 28,622,251
--------- ------------
--------- ------------
<CAPTION>
Class B
--------------------------------
<S> <C> <C>
July 13(D) through
October 31, 1994:
Shares sold..................... 9,369,138 $107,116,112
Shares reacquired............... (536,024) (6,133,350)
--------- ------------
Net increase in shares
outstanding................... 8,833,114 $100,982,762
--------- ------------
--------- ------------
<CAPTION>
Class C
--------------------------------
<S> <C> <C>
July 13(D) through
October 31, 1994:
Shares sold..................... 645,248 $ 7,387,498
Shares reacquired............... (24,751) (284,406)
--------- ------------
Net increase in shares
outstanding................... 620,497 $ 7,103,092
--------- ------------
--------- ------------
</TABLE>
---------------
(D)Commencement of investment operations.
-14-
<PAGE>
PRUDENTIAL EUROPE GROWTH FUND, INC.
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Class A Class B
Class C
----------- --------
-----------
July 13, July 13,
July 13,
1994(D) 1994(D)
1994(D)
through through
through
PER SHARE OPERATING October 31, October,
31 October 31,
PERFORMANCE (1): 1994 1994
1994
----------- --------
-----------
<S> <C> <C>
<C>
Net asset value, beginning of period......................................... $ 11.40 $ 11.40
$ 11.40
----------- --------
-----------
Income from investment operations
Net investment loss.......................................................... -- (.03)
(.03)
Net realized and unrealized loss on investment and foreign currency
transactions............................................................... .23 .23
.23
----------- --------
-----------
Total from investment operations........................................... .23 .20
.20
----------- --------
-----------
Net asset value, end of period............................................... $ 11.63 $ 11.60
$ 11.60
----------- --------
-----------
----------- --------
-----------
TOTAL RETURN#:............................................................... 2.02% 1.80%
1.80%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).............................................. $ 29,246 $102,481
$ 7,199
Average net assets (000)..................................................... $ 20,029 $ 58,156
$ 4,641
Ratios to average net assets:
Expenses, including distribution fees...................................... 1.61%* 2.36%*
2.36%*
Expenses, excluding distribution fees...................................... 1.36%* 1.36%*
1.36%*
Net investment loss........................................................ (.01)%*
(.69)%* (.70)%*
Portfolio turnover rate...................................................... 2%
2% 2%
</TABLE>
---------------
* Annualized.
(D) Commencement of investment operations.
(1) Based on average shares outstanding, by class.
# Total return does not consider the effects of sales loads. Total return
is calculated assuming a purchase of shares on the first day and a
sale on the last day of each period reported and includes reinvestment of
dividends and distributions. Total returns for periods of less than a
full year are not annualized.
See Notes to Financial Statements.
-15-
