The Prospectus and Statement of Additional Information dated June 30, 1995, as
supplemented, are incorporated herein by reference in their entirety from
Post-Effective Amendment No.2 to Registrant's Registration Statement (File Nos.
33-53151 and 811-7167) filed via EDGAR on June 30, 1995.
<PAGE>
[LOGO]
(Class Z Shares)
- --------------------------------------------------------------------------------
PROSPECTUS DATED APRIL 15, 1996
- --------------------------------------------------------------------------------
Prudential Europe Growth Fund, Inc. (the Fund) is an open-end, diversified
management investment company whose investment objective is long-term growth of
capital. The Fund seeks to achieve this objective by investing primarily in
equity securities (common stock, securities convertible into common stock and
preferred stock) of companies domiciled in Europe. Under normal circumstances,
the Fund intends to invest at least 65% of its total assets in such securities.
The Fund may also invest in equity securities of other companies and in
non-convertible debt securities and may engage in various derivative
transactions such as options on stocks, stock indices, foreign currencies,
futures contracts on foreign currencies and foreign currency exchange contracts
and the purchase and sale of futures contracts on foreign currencies and groups
of currencies and on financial or stock indices to hedge its portfolio and to
attempt to enhance returns. There can be no assurance that the Fund's investment
objective will be achieved. See 'How the Fund Invests -- Investment Objective
and Policies.' The Fund's address is One Seaport Plaza, New York, New York
10292, and its telephone number is (800) 225-1852.
The Fund is not intended to constitute a complete investment program. Because of
its investment objective and policies, including its European orientation, the
Fund is subject to greater investment risks than certain other mutual funds. See
'How the Fund Invests -- Risk Factors and Special Considerations of Investing in
Foreign Securities.'
- --------------------------------------------------------------------------------
Class Z shares are offered exclusively for sale to the PSI Cash Balance Pension
Plan, an employee benefit plan sponsored by Prudential Securities Incorporated
(the PSI Pension Plan or the Plan). Only Class Z shares are offered through this
Prospectus. The Fund also offers Class A, Class B and Class C shares through the
attached Prospectus dated June 30, 1995 (the Retail Class Prospectus) which is a
part hereof.
- --------------------------------------------------------------------------------
This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. Additional information about
the Fund has been filed with the Securities and Exchange Commission in a
Statement of Additional Information, dated June 30, 1995, which information is
incorporated herein by reference (is legally considered a part of this
Prospectus) and is available without charge upon request to the Fund, at the
address or telephone number noted above.
- --------------------------------------------------------------------------------
Investors are advised to read this Prospectus and retain it for future
reference.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
- --------------------------------------------------------------------------------
FUND EXPENSES
<TABLE>
<CAPTION>
CLASS Z SHARES
--------------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)....... None
Maximum Sales Load or Deferred Sales Load
Imposed on Reinvested Dividends............ None
Deferred Sales Load (as a percentage of
original purchase price or redemption
proceeds,
whichever is lower)....................... None
Redemption Fees............................. None
Exchange Fee................................ None
<CAPTION>
CLASS Z SHARES
--------------
<S> <C>
ANNUAL FUND OPERATING EXPENSES*
(as a percentage of average net assets)
Management Fees............................. .75%
12b-1 Fees.................................. None
Other Expenses.............................. .84
-----
Total Fund Operating Expenses............... 1.59%
-----
-----
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
- -------------------------------------------------- ----------- ---------------
<S> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming:
(1) 5% annual return and (2) redemption at the
end of each time period:
Class Z..................................... $ 16 $ 50
</TABLE>
The above example is based on expenses expected to have been incurred if
Class Z shares had been in existence during the entire fiscal year ended
April 30, 1995. The example should not be considered a representation of
past or future expenses. Actual expenses may be greater or less than those
shown.
The purpose of this table is to assist investors in understanding the
various costs and expenses that an investor in Class Z shares of the Fund
will bear, whether directly or indirectly. For more complete descriptions
of the various costs and expenses, see 'How the Fund is Managed' in the
Retail Class Prospectus. 'Other Expenses' includes operating expenses of
the Fund, such as Directors' and professional fees, registration fees,
reports to shareholders, transfer agency and custodian fees and franchise
taxes.
------------------------
*Estimated based on expenses expected to have been incurred if Class Z
shares had been in existence during the entire fiscal year ended April
30, 1995.
2
<PAGE>
THE FOLLOWING INFORMATION SUPPLEMENTS 'HOW THE FUND IS MANAGED--DISTRIBUTOR' IN
THE RETAIL CLASS PROSPECTUS:
Prudential Securities serves as the Distributor of Class Z shares and
incurs the expenses of distributing the Fund's Class Z shares under a
Distribution Agreement with the Fund, none of which are reimbursed by or
paid for by the Fund.
THE FOLLOWING INFORMATION SUPPLEMENTS 'HOW THE FUND VALUES ITS SHARES' IN THE
RETAIL CLASS PROSPECTUS:
The NAV of Class Z shares will generally be higher than the NAV of the
Class A, Class B or Class C shares because Class Z shares are not subject to
any distribution and/or service fee. It is expected, however, that the NAV
of the four classes will tend to converge immediately after the recording of
dividends, which will differ by approximately the amount of the
distribution-related expense accrual differential among the classes.
THE FOLLOWING INFORMATION SUPPLEMENTS 'TAXES, DIVIDENDS AND
DISTRIBUTIONS--TAXATION OF SHAREHOLDERS' IN THE RETAIL CLASS PROSPECTUS:
As a qualified plan, the PSI Pension Plan generally pays no federal
income tax. Individual participants in the Plan should consult the Plan
documents and their own tax advisers for information on the tax consequences
associated with participating in the PSI Pension Plan.
The per share dividends on Class Z shares will generally be higher than
the per share dividends on Class A, Class B or Class C shares because Class
Z shares are not subject to any distribution or service fee.
THE FOLLOWING INFORMATION REPLACES THE INFORMATION UNDER 'SHAREHOLDER GUIDE--HOW
TO BUY SHARES OF THE FUND' AND 'SHAREHOLDER GUIDE--HOW TO SELL YOUR SHARES' IN
THE RETAIL CLASS PROSPECTUS:
Class Z shares of the Fund are offered exclusively for sale to the PSI
Pension Plan. Such shares may be purchased or redeemed only by the Plan on
behalf of individual plan participants at NAV without any sales or
redemption charge. Class Z shares are not subject to any minimum investment
requirements. The PSI Pension Plan purchases and redeems shares pursuant to
the investment choices of the PSI Pension Committee. All purchases through
the Plan will be for Class Z shares.
The average net asset value per share at which shares of the Fund are
purchased or redeemed by the Plan might be more or less than the net asset
value per share prevailing at the time it made its investment choice.
THE FOLLOWING INFORMATION SUPPLEMENTS 'SHAREHOLDER GUIDE--HOW TO EXCHANGE YOUR
SHARES' IN THE RETAIL CLASS PROSPECTUS:
The PSI Pension Plan may only exchange its Class Z shares for Class Z
shares of those Prudential Mutual Funds which permit investment by the Plan.
THE INFORMATION ABOVE ALSO SUPPLEMENTS THE INFORMATION UNDER 'FUND HIGHLIGHTS'
IN THE RETAIL CLASS PROSPECTUS AS APPROPRIATE.
3
<PAGE>
PRUDENTIAL EUROPE GROWTH FUND, INC.
Supplement dated April 15, 1996
to Prospectus dated June 30, 1995
THE FOLLOWING INFORMATION SUPPLEMENTS 'FINANCIAL HIGHLIGHTS' IN THE PROSPECTUS:
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED) (CLASS A, CLASS B AND
CLASS C SHARES)
The following financial highlights for Class A, Class B and Class C shares
are unaudited. This information should be read in conjunction with the financial
statements and the notes thereto, which appear in the Statement of Additional
Information. The financial highlights contain selected data for a Class A, Class
B and Class C share of common stock, respectively, outstanding, total return,
ratios to average net assets and other supplemental data for the period
indicated. The information has been determined based on data contained in the
financial statements. No Class Z shares were outstanding during the indicated
period.
<TABLE>
<CAPTION>
SIX MONTHS ENDED OCTOBER 31,
1995
--------------------------------
PER SHARE OPERATING PERFORMANCE:(C) CLASS A CLASS B CLASS C
------- -------- -------
<S> <C> <C> <C>
Net asset value, beginning of period.... $ 11.77 $ 11.69 $ 11.69
------- -------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income................... .05 -- .01
Net realized and unrealized gain (loss)
on investments........................ 1.27 1.26 1.25
------- -------- -------
Total from investment
operations.................... 1.32 1.26 1.26
------- -------- -------
Net asset value, end of period.......... $ 13.09 $ 12.95 $ 12.95
------- -------- -------
------- -------- -------
TOTAL RETURN(B)......................... 11.22% 10.78% 10.78%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)......... $48,836 $129,430 $ 8,093
Average net assets (000)................ $46,260 $120,614 $ 7,876
Ratios to average net assets(a):
Expenses, including distribution
fees............................... 1.67% 2.44% 2.41%
Expenses, excluding distribution
fees............................... 1.42% 1.44% 1.41%
Net investment income................. .81% (.01)% (.07)%
Portfolio turnover rate................. 19% 19% 19%
- ------------------
(a) Annualized.
(b) Total return does not consider the effects of sales loads. Total return
is calculated assuming a purchase of shares on the first day and a sale
on the last day of each period reported and includes reinvestment of
dividends and distributions. Total returns for periods of less than a
full year are not annualized.
(c) Based on average shares outstanding, by class.
</TABLE>
<PAGE>
THE FOLLOWING INFORMATION SUPPLEMENTS 'GENERAL INFORMATION--DESCRIPTION OF
COMMON STOCK' IN THE PROSPECTUS:
The Fund is authorized to offer 2 billion shares of common stock, $.001 par
value per share, divided into four classes of shares, designated Class A, Class
B, Class C and Class Z shares, each consisting of 500 million authorized shares.
Each class represents an interest in the same assets of the Fund and is
identical in all respects except that (i) each class is subject to different
sales charges and distribution and/or service fees (except for Class Z shares
which are not subject to any distribution and/or service fee), (ii) each class
has exclusive voting rights on any matter submitted to shareholders that relates
solely to its arrangement and has separate voting rights on any matter submitted
to shareholders in which the interests of one class differ from the interests of
any other class, (iii) each class has a different exchange privilege, (iv) only
Class B shares have a conversion feature and (v) Class Z shares are not subject
to any sales or redemption charge and are offered exclusively for sale to the
PSI Cash Balance Pension Plan. Since Class B and Class C shares generally bear
higher distribution expenses than Class A shares, the liquidation proceeds to
shareholders of those classes are likely to be lower than to Class A
shareholders and to Class Z shareholders, whose shares are not subject to any
distribution and/or service fee. In accordance with the Fund's Articles of
Incorporation, the Board of Directors may authorize the creation of additional
series and classes within such series, with such preferences, privileges,
limitations and voting and dividend rights as the Directors may determine.
Currently, the Fund is offering four classes, designated Class A, Class B, Class
C and Class Z shares.
MF160A-1
2
<PAGE>
PRUDENTIAL EUROPE GROWTH FUND, INC.
Supplement dated April 15, 1996 to
Statement of Additional Information dated June 30, 1995
THE FOLLOWING INFORMATION SUPPLEMENTS 'DISTRIBUTOR' IN THE STATEMENT OF
ADDITIONAL INFORMATION:
Prudential Securities serves as the Distributor of Class Z shares and
incurs the expenses of distributing the Fund's Class Z shares under a
Distribution Agreement with the Fund, none of which are reimbursed by or
paid for by the Fund.
THE FOLLOWING INFORMATION SUPPLEMENTS 'PURCHASE AND REDEMPTION OF FUND SHARES'
IN THE STATEMENT OF ADDITIONAL INFORMATION:
Shares of the Fund may be purchased at a price equal to the next
determined net asset value per share plus a sales charge which, at the
election of the investor, may be imposed either (i) at the time of purchase
(Class A shares) or (ii) on a deferred basis (Class B or Class C shares).
Class Z shares of the Fund are not subject to any sales or redemption
charge and are offered exclusively for sale to the PSI Cash Balance Pension
Plan, a defined contribution plan sponsored by Prudential Securities (the
PSI Pension Plan). See 'Shareholder Guide--How to Buy Shares of the Fund'
in the Prospectus.
Each class represents an interest in the same assets of the Fund and
is identical in all respects except that (i) each class is subject to
different sales charges and distribution and/or service fees (except for
Class Z shares, which are not subject to any sales or redemption charge or
to any distribution and/or service fee), (ii) each class has exclusive
voting rights with respect to any matter submitted to shareholders that
relates solely to its arrangement and has separate voting rights on any
matter submitted to shareholders in which the interests of one class differ
from the interests of any other class, (iii) each class has a different
exchange privilege, (iv) only Class B shares have a conversion feature and
(v) Class Z shares are offered exclusively for sale to the PSI Pension
Plan. See 'Distributor' and 'Shareholder Investment Account--Exchange
Privilege.'
SPECIMEN PRICE MAKE-UP
Under the current distribution arrangement between the Fund and the
Distributor, Class A shares are sold with a maximum sales charge of 5% and Class
B*, Class C* and Class Z** shares are sold at net asset value. Using the Fund's
net asset value at October 31, 1995, the maximum offering price of the Fund's
shares is as follows:
<TABLE>
<S> <C>
CLASS A
Net asset value and redemption price per Class A
share........................................ $11.77
Maximum sales charge (4% of offering price)..... .62
------
Offering price to public........................ 12.39
------
------
CLASS B
Net asset value, offering price and redemption
price per Class B share*..................... $11.69
------
------
CLASS C
Net asset value, offering price and redemption
price per Class C share*..................... $11.69
------
------
CLASS Z
Net asset value, offering price and redemption
price per Class Z share**.................... $11.77
------
------
</TABLE>
--------------------------
* Class B and Class C shares are subject to a contingent deferred sales
charge on certain redemptions. See 'Shareholder Guide--How to Sell
Your Shares--Contingent Deferred Sales Charges' in the Prospectus.
** Class Z shares were not offered prior to April 15, 1996.
<PAGE>
THE FOLLOWING INFORMATION SUPPLEMENTS 'SHAREHOLDER INVESTMENT ACCOUNT--EXCHANGE
PRIVILEGE' IN THE STATEMENT OF ADDITIONAL INFORMATION:
CLASS Z. Class Z shares may be exchanged for Class Z shares of the
funds listed below which participate in the PSI Pension Plan. No fee or
sales load will be imposed upon the exchange.
Prudential Equity Income Fund
Prudential Pacific Growth Fund, Inc.
THE FOLLOWING INFORMATION SUPPLEMENTS 'PERFORMANCE INFORMATION' IN THE STATEMENT
OF ADDITIONAL INFORMATION:
AVERAGE ANNUAL TOTAL RETURN. The Fund may from time to time advertise
its average annual total return. Average annual total return is determined
separately for Class A, Class B, Class C and Class Z shares. See 'How the
Fund Calculates Performance' in the Prospectus.
The average annual total return for Class A shares for the one year
and since inception (July 13, 1994) periods ended October 31, 1995 was
12.5%, and 8.9%, respectively. The average annual total return for the
Class B shares of the Fund for the one year and since inception (July 13,
1994) periods ended on October 31, 1995 was 12.3% and 9.4%, respectively.
The average annual total return for Class C shares for the one year and
since inception (July 13, 1994) periods ended October 31, 1995 was 16.3%
and 12.6%, respectively. During these periods, no Class Z shares were
outstanding.
AGGREGATE TOTAL RETURN. The Fund may also advertise its aggregate
total return. Aggregate total return is determined separately for Class A,
Class B, Class C and Class Z shares. See 'How the Fund Calculates
Performance' in the Prospectus.
The aggregate total return for Class A shares for the one year and
since inception (July 13, 1994) periods ended October 31, 1995 was 12.6%
and 14.8%, respectively. The aggregate total return with respect to the
Class B shares of the Fund for the one year and since inception (July 13,
1994) periods ended on October 31, 1995 was 11.6%, and 13.6%, respectively.
The aggregate total return for Class C shares for the one year and since
inception (July 13, 1994) periods ended October 31, 1995 was 11.6% and
13.6%, respectively. During these periods, no Class Z shares were
outstanding.
THE FOLLOWING INFORMATION SUPPLEMENTS 'DIRECTORS AND OFFICERS' IN THE STATEMENT
OF ADDITIONAL INFORMATION:
As of February 9, 1996, the directors and officers of the Fund, as a
group, owned less than 1% of the outstanding common stock of the Fund.
As of February 9, 1996 The Prudential Insurance Company of America,
Attn: Ms. Dawne Erwin, P.O. Box 1084, Newark, NJ 07101-1084, owned
1,142,300 Class A shares (approximately 32% of the outstanding Class A
shares).
As of February 9, 1996, Prudential Securities was the record holder
for other beneficial owners of 1,709,204 Class A shares (or approximately
48% of the outstanding Class A shares), 7,764,006 Class B shares (or
approximately 81% of the outstanding Class B shares) and 521,246 Class C
shares (or approximately 89% of the outstanding Class C shares) of the
Fund. In the event of any meetings of shareholders, Prudential Securities
will forward, or cause the forwarding of, proxy materials to the beneficial
owners for which it is the record holder.
The following financial statements are unaudited and are based upon
the results of operations for the interim period ended October 31, 1995.
Included therein are all adjustments, if any, which are, in the opinion of
management, necessary to a fair statement of the results for the interim
period presented.
2
<PAGE>
Portfolio of Investments as of
October 31, 1995 (Unaudited) PRUDENTIAL EUROPE GROWTH FUND, INC.
- ---------------------------------------------------------------------
Shares Description Value (Note 1)
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--91.0%
COMMON STOCKS--88.7%
- ------------------------------------------------------------
Belgium--3.7%
32,800 Barco Industries N.V. (Electronics) $ 3,691,409
4,375 Bekaert S.A., N.V. (Industrial
components) 3,217,054
-------------
6,908,463
- ------------------------------------------------------------
Denmark--1.3%
35,800 Danske Traelastkomp (Retailing) 2,554,688
- ------------------------------------------------------------
Federal Republic Of Germany--5.2%
25,100 SAP AG (Electronics) 3,976,802
34,000 Hornbach AG (Retailing) 1,713,576
6,620 Linde AG (Machinery & engineering) 4,064,809
-------------
9,755,187
- ------------------------------------------------------------
Finland--3.1%
100,400 Nokia Corp.* (Television &
electronics) 5,744,057
- ------------------------------------------------------------
France--16.6%
5,400 Carrefour* (Retailing) 3,177,056
30,900 Imetal S.A. (Miscellaneous materials
& commodities) 3,646,092
60,750 La Farge Coppee (Building materials
& components) 4,033,407
19,000 Legrand S.A. (Electronics) 3,183,857
26,400 Rexel S.A. (Electronics) 4,272,457
27,851 Sidel S.A. (Machinery & engineering) 9,687,801
66,200 Valeo S.A. (Automotive) 2,995,715
-------------
30,996,385
- ------------------------------------------------------------
Italy--3.3%
244,000 Bulgari* (Retailing) $ 2,123,828
2,378,300 Telecom Italia Mobile*
(Telecommunications) 3,998,253
-------------
6,122,081
- ------------------------------------------------------------
Netherlands--4.6%
41,600 Hagemeyer (Wholesaling) 2,070,320
15,550 Heineken NV (Food & beverages) 2,756,830
82,000 Randstad Holdings (Business
Services) 3,696,711
-------------
8,523,861
- ------------------------------------------------------------
Spain--7.6%
24,676 Acerinox S.A. (Regd) (Metals-steel) 2,598,668
20,700 Banco Popular Esp. (Regd) (Banking) 3,289,434
274,800 Centros Commerciales (Pryca)
(Retailing) 5,855,487
183,100 Dragados y Construcciones
(Construction & housing) 2,400,940
-------------
14,144,529
- ------------------------------------------------------------
Sweden--8.9%
152,500 Allgon AB Free (Telecommunications) 2,311,062
162,900 Astra B Free (Health & personal
care) 5,895,329
36,100 Autoliv AB Free (Automotive) 2,073,996
43,600 Hennes & Mauritz B Free (Retailing) 2,853,330
67,600 Missouri Och Domsjo AB* (Forest
products & paper) 3,445,396
-------------
16,579,113
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as of
October 31, 1995 (Unaudited) PRUDENTIAL EUROPE GROWTH FUND, INC.
- ---------------------------------------------------------------------
Shares Description Value (Note 1)
- ------------------------------------------------------------
United Kingdom--30.9%
257,400 Barclays Bank (Banking) $ 3,022,555
72,400 Britannic Assurance (Insurance) 808,375
197,700 British Land Co. (Real estate) 1,134,965
31,800 British Land PLC, Res.* (Real
estate) 182,559
192,200 British Petroleum (Energy sources) 1,413,434
469,100 BTR (Multi-industry) 2,492,723
817,700 Bunzl (Paper, Packaging & Printing) 2,612,249
177,100 Commercial Union PLC (Insurance) 1,716,913
577,500 Compass Group (Leisure & tourism) 3,927,261
511,700 Electrocomponents PLC (Electronics) 2,621,982
213,900 EMAP Publishing PLC (Graphics &
publishing) 1,762,454
490,400 Filtronic Comtek PLC* (Electronics) 3,683,947
437,400 Grand Metropolitan (Food &
beverages) 3,029,857
271,800 Guest Keen & Nettlefolds
(Automotive) 3,468,904
246,000 Legal & General Group (Insurance) 2,659,150
489,500 London Clubs International (Leisure
& tourism) 3,181,733
201,700 Matthew Clark PLC (Food & beverages) 2,031,957
240,600 Pearson* (Broadcasting & publishing) 2,391,499
358,000 Siebe PLC (Machinery & engineering) 4,260,483
146,700 Smith Holdings (Forest products &
paper) 1,336,355
268,600 SmithKline Beecham (Pharmaceuticals
& cosmetics) 2,805,744
132,000 Unilever (Food & household products) 2,565,636
1,078,900 Vodafone Group PLC
(Telecommunications) 4,461,924
-------------
57,572,659
- ------------------------------------------------------------
United States--3.5%
127,300 Gucci Group* NV (Retailing) $ 3,819,000
59,000 SGS Thompson Microelectronics NV*
(Television & electronics) 2,669,750
-------------
6,488,750
-------------
Total common stocks
(cost US$136,540,012) 165,389,773
-------------
PREFERRED STOCKS--2.3%
- ------------------------------------------------------------
Federal Republic Of Germany--2.3%
1,600 Hornbach AG (Retailing) 1,607,098
14,500 Jungheinrich AG (Machinery &
engineering) 2,665,839
-------------
Total preferred stocks
(cost US$5,077,240) 4,272,937
-------------
Total long-term investments
(cost US$141,617,252) 169,662,710
-------------
Principal
Amount
(000)
SHORT-TERM INVESTMENTS--2.6%
- ------------------------------------------------------------
U.S. Government Securities--2.6%
$4,835 Federal Home Loan Mortgage
Corporation,
Zero Coupon, 11/1/95
(cost US$4,834,214) 4,834,214
-------------
- ------------------------------------------------------------
Total Investments--93.6%
(cost US$146,451,466; Note 4) 174,496,924
Other assets in excess of
liabilities--6.4% 11,862,446
-------------
Net Assets--100% $ 186,359,370
-------------
-------------
- ---------------
*Non-income producing security.
- --------------------------------------------------------------------------------
4 See Notes to Financial Statements.
<PAGE>
Statement of Assets and Liabilities
(Unaudited) PRUDENTIAL EUROPE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets October 31, 1995
Investments, at value (cost $146,451,466).................................................................... $174,496,924
Foreign currency, at value (cost $11,377,530)................................................................ 11,713,654
Receivable for investments sold.............................................................................. 7,380,000
Receivable for foreign currency.............................................................................. 2,048,595
Dividends and interest receivable............................................................................ 462,605
Receivable for Fund shares sold.............................................................................. 147,632
Deferred expenses............................................................................................ 174,864
------------
Total assets.............................................................................................. 196,424,274
------------
Liabilities
Payable for investments purchased............................................................................ 5,977,276
Bank overdraft............................................................................................... 2,543,478
Payable for foreign currency................................................................................. 999,725
Payable for Fund shares reacquired........................................................................... 202,882
Due to Distributors.......................................................................................... 126,218
Due to Manager............................................................................................... 118,389
Accrued expenses............................................................................................. 96,936
------------
Total liabilities......................................................................................... 10,064,904
------------
Net Assets................................................................................................... $186,359,370
------------
------------
Net assets were comprised of:
Common stock, at par...................................................................................... $ 14,351
Paid-in capital in excess of par.......................................................................... 164,275,962
------------
164,290,313
Undistributed net investment income....................................................................... 100,981
Accumulated net realized loss on investment and foreign currency transactions............................. (6,413,614)
Net unrealized appreciation on investments and foreign currencies......................................... 28,381,690
------------
Net assets, October 31, 1995.............................................................................. $186,359,370
------------
------------
Class A:
Net asset value and redemption price per share
($48,836,155 / 3,730,620 shares of common stock issued and outstanding)................................ $13.09
Maximum sales charge (5.00% of offering price)............................................................ .69
------
Maximum offering price to public.......................................................................... $13.78
------
------
Class B:
Net asset value, offering price and redemption price per share
($129,429,897 / 9,995,668 shares of common stock issued and outstanding)............................... $12.95
------
------
Class C:
Net asset value, offering price and redemption price per share
($8,093,318 / 624,902 shares of common stock issued and outstanding)................................... $12.95
------
------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5
<PAGE>
PRUDENTIAL EUROPE GROWTH FUND, INC.
Statement of Operations (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
October 31,
Net Investment Income 1995
-----------
<S> <C>
Income
Dividends (net of foreign withholding taxes
of $241,767)............................. $ 1,993,822
Interest.................................... 153,415
-----------
Total income............................. 2,147,237
-----------
Expenses
Distribution fee--Class A................... 58,141
Distribution fee--Class B................... 606,363
Distribution fee--Class C................... 39,597
Management fee.............................. 660,620
Transfer agent's fees and expenses.......... 237,000
Custodian's fees and expenses............... 180,000
Registration fees........................... 60,000
Reports to shareholders..................... 30,000
Amortization of organization expense........ 25,000
Directors' fees and expenses................ 21,600
Audit fee and expenses...................... 10,000
Legal fees and expenses..................... 7,500
Miscellaneous............................... 27,894
-----------
Total operating expenses................. 1,963,715
-----------
Net investment income.......................... 183,522
-----------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions
Net realized loss on:
Investment transactions..................... (1,898,496)
Foreign currency transactions............... (82,541)
-----------
(1,981,037)
-----------
Net change in unrealized
appreciation/depreciation on:
Investments................................. 18,698,354
Foreign currencies.......................... 310,669
-----------
19,009,023
-----------
Net gain on investments and foreign
currencies.................................. 17,027,986
-----------
Net Increase in Net Assets
Resulting from Operations...................... $17,211,508
-----------
-----------
</TABLE>
PRUDENTIAL EUROPE GROWTH FUND, INC.
Statement of Changes in Net Assets (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months July 13, 1994D
Ended Through
Increase (Decrease) October 31, April 30,
in Net Assets 1995 1995
------------ ------------------
<S> <C> <C>
Operations
Net investment gain (loss).... $ 183,522 $ (507,198)
Net realized loss on
investment and foreign
currency transactions...... (1,981,037) (4,674,403)
Net change in unrealized
appreciation/depreciation
of investments and foreign
currencies................. 19,009,023 9,372,667
------------ ------------
Net increase in net assets
resulting from
operations................. 17,211,508 4,191,066
------------ ------------
Fund share transactions (net of
share conversions) (Note 5)
Net proceeds from shares
sold....................... 93,319,680 189,831,561
Cost of shares reacquired..... (79,476,324) (38,818,121)
------------ ------------
Net increase in net assets
from Fund share
transactions............... 13,843,356 151,013,440
------------ ------------
Total increase................... 31,054,864 155,204,506
Net Assets
Beginning of period.............. 155,304,506 100,000
------------ ------------
End of period.................... $186,359,370 $155,304,506
------------ ------------
------------ ------------
</TABLE>
- ---------------
DCommencement of investment operations.
- --------------------------------------------------------------------------------
6 See Notes to Financial Statements.
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL EUROPE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
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 Policies
The following is a summary of significant accounting policies 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.
Securities 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 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 period. Accordingly, realized foreign currency gains (losses)
are included in the reported net realized gains on investment transactions.
Net realized losses on foreign currency transactions of $82,541 represents net
foreign exchange gains or losses from 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 net unrealized appreciation on
investments and foreign currencies.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of domestic origin as a result of,
among other factors, the possibility of political and economic instability and
the level of governmental supervision and regulation of foreign securities
markets.
Securities Transactions and 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.
- --------------------------------------------------------------------------------
7
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL EUROPE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
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.
Reclassification of Capital Accounts: The Fund accounts and reports for
distributions to shareholders in accordance with the A.I.C.P.A.'s Statement of
Position 93-2: Determination, Disclosure, and Financial Statement Presentation
of Income, Capital Gain, and Return of Capital Distributions by Investment
Companies. The effect caused by applying this statement was to decrease
accumulated net investment income by $82,541, and decrease accumulated net
realized loss on investments and foreign currency transactions by $82,541 for
the six months ended October 31, 1995.
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, 1995.
PMFD has advised the Fund that it has received approximately $61,200 in
front-end sales charges resulting from sales of Class A shares during the six
months ended October 31, 1995. 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 six months ended October 31, 1995, it
received approximately $209,100 and $4,100 in contingent deferred sales charges
imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
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'').
- --------------------------------------------------------------------------------
8
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL EUROPE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
Note 3. Other Transactions With Affiliates
Prudential Mutual Fund Services, Inc. (``PMFS''), a wholly owned subsidiary of
PMF, serves as the Fund's transfer agent. During the period ended October 31,
1995, the Fund incurred fees of approximately $117,400 for the services of PMFS.
As of October 31, 1995, approximately $20,600 of such fees were due to PMFS.
Transfer agent fees and expenses in the Statement of Operations include certain
out-of-pocket expenses paid to non-affiliates.
- ------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the period ended October 31, 1995 were $34,517,227 and $30,213,006,
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, 1995 net unrealized appreciation for federal income tax purposes
was $28,381,690 (gross unrealized appreciation--$31,883,386; gross unrealized
depreciation--$3,501,696). For federal income tax purposes, the Fund had a
capital loss carryforward as of April 30, 1995 of approximately $426,600 all of
which expires in 2003. Accordingly, no capital gains distribution is expected to
be paid to shareholders until net gains have been realized in excess of such
carryforward.
The Fund will elect to treat net capital losses of approximately $4,088,500
incurred in the six month period ended April 30, 1995 as having been incurred in
the current fiscal year.
- ------------------------------------------------------------
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. A special exchange priviledge is also available for
shareholders who qualified to purchase Class A shares at net asset value. 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 and divided into three classes,
designated Class A, Class B and Class C. Of the authorized shares, 1 billion
shares consist of Class A common stock and 500 million shares consist of, each,
Class B and Class C common stock.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------------ ---------- ------------
<S> <C> <C>
Six months ended October 31, 1995:
Shares sold......................... 4,663,341 $ 59,529,487
Shares reacquired................... (4,563,772) (58,366,315)
---------- ------------
Net increase in shares outstanding
before conversion................. 99,569 1,163,172
Shares issued upon conversion from
Class B & C....................... 65,634 831,154
---------- ------------
Net increase in shares
outstanding....................... 165,203 $ 1,994,326
---------- ------------
---------- ------------
July 13, 1994D through
April 30, 1995:
Shares sold......................... 4,562,903 $ 51,186,584
Shares reacquired................... (1,479,247) (16,487,105)
---------- ------------
Net increase in shares
outstanding before conversion..... 3,083,656 34,699,479
Shares issued upon conversion
from Class B...................... 481,761 5,270,536
---------- ------------
Net increase in shares
outstanding....................... 3,565,417 $ 39,970,015
---------- ------------
---------- ------------
Class B
- ------------------------------------
Six months ended October 31, 1995:
Shares sold......................... 2,457,799 $ 31,352,562
Shares reacquired................... (1,475,650) (18,771,604)
---------- ------------
Net increase in shares outstanding
before conversion................. 982,149 12,580,958
Shares reaquired upon conversion
into Class A...................... (63,320) (793,833)
---------- ------------
Net increase in shares
outstanding....................... 918,829 $ 11,787,125
---------- ------------
---------- ------------
July 13, 1994D through
April 30, 1995:
Shares sold......................... 11,500,827 $130,710,033
Shares reacquired................... (1,939,571) (21,509,277)
---------- ------------
Net increase in shares
outstanding before conversion..... 9,561,256 109,200,756
Shares reacquired upon conversion
into Class A...................... (484,417) (5,270,536)
---------- ------------
Net increase in shares
outstanding....................... 9,076,839 $103,930,220
---------- ------------
---------- ------------
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL EUROPE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Shares Amount
- ------------------------------------ ---------- ------------
<S> <C> <C>
Six months ended October 31, 1995:
Shares sold......................... 186,910 $ 2,437,631
Shares reacquired................... (180,410) (2,338,405)
---------- ------------
Net increase in shares outstanding
before conversion................. 6,500 99,226
Shares reaquired upon conversion
into Class A...................... (2,832) (37,321)
---------- ------------
Net increase in shares
outstanding....................... 3,668 $ 61,905
---------- ------------
---------- ------------
July 13, 1994D through
April 30, 1995:
Shares sold......................... 694,581 $ 7,934,944
Shares reacquired................... (73,347) (821,739)
---------- ------------
Net increase in shares
outstanding....................... 621,234 $ 7,113,205
---------- ------------
---------- ------------
</TABLE>
- ---------------
DCommencement of investment operations.
- --------------------------------------------------------------------------------
10
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL EUROPE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class B Class C
--------------------------- ------------------------ -----------
July 13, July 13,
Six Months 1994(b) Six Months 1994(b) Six Months
Ended through Ended through Ended
October 31, April 30, October 31, April October 31,
1995 1995 1995 30, 1995 1995
<S> <C> <C> <C> <C> <C>
----------- ----------- ----------- -------- -----------
PER SHARE OPERATING PERFORMANCE(c):
Net asset value, beginning of period.......... $ 11.77 $ 11.40 $ 11.69 $ 11.40 $ 11.69
----------- ----------- ----------- -------- -----------
Income from investment operations
Net investment gain (loss).................... .05 .01 -- (.06) .01
Net realized and unrealized gain on investment
and foreign currency transactions 1.27 .36 1.26 .35 1.25
----------- ----------- ----------- -------- -----------
Total from investment operations........... 1.32 .37 1.26 .29 1.26
----------- ----------- ----------- -------- -----------
Net asset value, end of period................ $ 13.09 $ 11.77 $ 12.95 $ 11.69 $ 12.95
----------- ----------- ----------- -------- -----------
----------- ----------- ----------- -------- -----------
TOTAL RETURN(d):.............................. 11.22% 3.25% 10.78% 2.54% 10.78%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $ 48,836 $ 41,963 $ 129,430 $106,081 $ 8,093
Average net assets (000)...................... $ 46,260 $ 29,598 $ 120,614 $ 85,623 $ 7,876
Ratios to average net assets(a):
Expenses, including distribution fees...... 1.67% 1.84% 2.44% 2.59% 2.41%
Expenses, excluding distribution fees...... 1.42% 1.59% 1.44% 1.59% 1.41%
Net investment income (loss)............... .81% .06% (.01)% (.71)% (.07)%
Portfolio turnover rate....................... 19% 25% 19% 25% 19%
<CAPTION>
Class C
-----------
July 13,
1994(b)
through
April 30,
1995
-----------
<S> <C>
PER SHARE OPERATING PERFORMANCE(c):
Net asset value, beginning of period.......... $ 11.40
-----------
Income from investment operations
Net investment gain (loss).................... (.06)
Net realized and unrealized gain on investment
and foreign currency transactions .35
-----------
Total from investment operations........... .29
-----------
Net asset value, end of period................ $ 11.69
-----------
-----------
TOTAL RETURN(d):.............................. 2.54%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $ 7,260
Average net assets (000)...................... $ 6,094
Ratios to average net assets(a):
Expenses, including distribution fees...... 2.59%
Expenses, excluding distribution fees...... 1.59%
Net investment income (loss)............... (.71)%
Portfolio turnover rate....................... 25%
</TABLE>
- ---------------
(a) Annualized
(b) Commencement of investment operations.
(c) Based on average shares outstanding, by class.
(d) 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. 11
MF160B-1
