<PAGE>
Prudential Europe Growth Fund, Inc.
PERFORMANCE AT A GLANCE.
In the last six months, European stocks climbed 8.5%,
performing better than any
other region in the world according to Morgan Stanley
Capital International
European Index (MSCI). This happened in spite of sluggish
European economic
growth, as strong exports, widespread restructuring, lower
interest rates and
strong corporate profits powered stocks to new highs. As a
result, the
Prudential Europe Growth Fund produced handsome returns. In
fact, it finished
ahead of the average European stock fund as measured by
Lipper, because of solid
gains in our manufacturing and industrial holdings.
- ------------------------------------------------------------
- --------------------
CUMULATIVE TOTAL RETURNS(1)
As of 10/31/96
- ------------------------------------------------------------
- --------------------
Six One
Since
Months Year
Inception(2)
Class A 9.9% 14.9%
31.9%
Class B 9.5 14.1
29.6
Class C 9.5 14.1
29.6
Class Z 9.3 N/A
11.6
Lipper European Fund Avg(3) 6.9 17.0
34.2
- ------------------------------------------------------------
- --------------------
- ------------------------------------------------------------
- --------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
As of 9/30/96
- ------------------------------------------------------------
- --------------------
One
Since
Year
Inception(2)
Class A 4.5%
9.4%
Class B 4.2
9.8
Class C 8.3
11.1
- ------------------------------------------------------------
- --------------------
Past performance is not indicative of future results.
Principal and investment
return will fluctuate so that an investor's shares, when
redeemed, may be worth
more or less than their original cost.
(1) Source: Prudential Mutual Fund Management and Lipper
Analytical Services.
The cumulative total returns do not take into account sales
charges. The average
annual returns do take into account applicable sales
charges. The Fund charges a
maximum front-end sales load of 5% for Class A shares and a
declining contingent
deferred sales charge (CDSC) of 5%, 4%, 3%, 2%, 1% and 1%
for six years, for
Class B shares. Class C shares have a 1% CDSC for one year.
Class B shares will
automatically convert to Class A shares on a quarterly
basis, approximately
seven years after purchase. Class Z shares have been in
existence for less than
one year and average annual total returns are not available.
Class Z shares are
not subject to any sales charge and are offered to a limited
group of investors.
(2) Inception dates: 7/13/94 Class A, Class B and Class C;
4/15/96 Class Z.
(3) Lipper average returns are for 68 funds for six months
and 43 funds for one
year and 32 funds since inception of the shares on 07/13/94.
- ------------------------------------------------------------
- --------------------
HOW INVESTMENTS COMPARED.
(As of 10/31/96)
- ------------------------------------------------------------
- --------------------
[GRAPH]
- ------------------------------------------------------------
- --------------------
U.S. General General
U.S.
Growth Bond Muni Debt
Taxable
Funds Funds Funds
Money Funds
- ------------------------------------------------------------
- --------------------
SOURCE: LIPPER ANALYTICAL SERVICES. Financial markets
change, so a mutual
fund's past performance should never be used to predict
future results. The
risks to each of the investments listed above are
different -- we provide
12-month total returns for several Lipper mutual fund
categories to show
you that reaching for higher yields means tolerating
more risk. The greater
the risk, the larger the potential reward or loss. In
addition, we've
included historical 20-year average annual returns.
These returns assume
the reinvestment of dividends.
U.S. GROWTH FUNDS will fluctuate a great deal. Investors
have received
higher historical total returns from stocks than from
most other
investments. Smaller capitalization stocks offer greater
potential for
long-term growth but may be more volatile than larger
capitalization
stocks.
GENERAL BOND FUNDS provide more income than stock funds,
which can help
smooth out their total returns year by year. But their
prices still
fluctuate (sometimes significantly) and their returns
have been
historically lower than those of stock funds.
GENERAL MUNICIPAL DEBT FUNDS invest in bonds issued by
state governments,
state agencies and/or municipalities. This investment
provides income that
is usually exempt from federal and state income taxes.
MONEY MARKET FUNDS attempt to preserve a constant share
value; they don't
fluctuate much in price but, historically, their returns
have been
generally among the lowest of the major investment
categories.
<PAGE>
DANIEL J. DUANE, FUND MANAGER
[PHOTO]
DANIEL J. DUANE
PORTFOLIO
MANAGER'S REPORT
The Prudential Europe Growth Fund invests primarily in
stocks of companies in
Europe. The Fund is subject to all the risks associated with
foreign investing,
including currency, political and social risks, and
illiquidity. There can be no
assurance that the Fund will achieve its investment
objective, which is
long-term growth of capital.
OUR INVESTING
STYLE.
AS GROWTH INVESTORS, WE TRY TO PROFIT FROM CHANGE BY
INVESTING IN COMPANIES WE
THINK WILL BENEFIT FROM SIGNIFICANT ECONOMIC TRENDS. WE LIKE
ATTRACTIVELY PRICED
STOCKS THAT WE THINK WILL PRODUCE STRONG EARNINGS GROWTH.
WE'RE PATIENT, SO WE
TEND TO HOLD STOCKS FOR THE LONG TERM.
STRATEGY SESSION.
- ------------------------------------------------------------
- --------------------
During the past six months, we've profited from dramatic
changes in the way
European companies do business. In almost every industry,
businesses continued
to cut costs and sold unprofitable operations -- much as
U.S. companies started
doing in the 1980s -- to compete more efficiently with other
developed
countries.
- ------------------------------------------------------------
- --------------------
PORTFOLIO BREAKDOWN
EXPRESSED AS A PERCENTAGE OF
TOTAL INVESTMENTS AS OF 10/31/96
- ------------------------------------------------------------
- --------------------
[GRAPH]
Cash 4%
U.S. 5%
United Kingdom 28%
Germany 8%
Sweden 10%
France 23%
Other Continental Europe 14%
Netherlands 8%
- ------------------------------------------------------------
- --------------------
Similarly, we saw a new drive for efficiency among European
governments. Many
were thus hesitant to increase spending and that helped
stall Europe's economic
recovery in 1995. Unfortunately, as the economy weakened,
stock prices fell and
hurt our 12-month performance.
The good news is that European governments cut interest
rates to spur economic
growth. Lower interest rates lead to increased capital
spending and a lower cost
of doing business, which together can foster long-term
growth. Here's what we
did in the past six months:
- - We favored multinational companies that export a lot of
their goods and
depend less on European-generated revenues. Among the global
companies, we were
particularly drawn to cyclical stocks -- those that tend to
do well when an
economy is growing -- to benefit from economic expansion
outside Europe.
(Falling interest rates helped companies export -- they
reduced the value of
many European currencies, making European goods less
expensive to foreigners.)
- - We also invested in European telecommunications and
technology companies. We
figured that demand for their products and services would
continue to rise as
more and more companies restructure and seek greater
competitive efficiencies.
- - We selectively bought European retailers to take
advantage of a continuing
trend in Europe towards specialty retailers. In addition, we
bought luxury
retailers with strong international revenues, which are
benefitting from aging
- -- and wealthier -- populations around the world.
<PAGE>
WHAT WENT WELL.
- ------------------------------------------------------------
- --------------------
MULTINATIONALS
PAID OFF.
While economic growth remained sluggish in Europe, it was
healthier elsewhere in
the world, especially in the U.S. This boosted profits for
European
multinational companies with overseas sales. As a result,
some of our strongest
performers were from multinationals that exported consumer
goods and capital
equipment. For example, Siebe, a British supplier of
industrial equipment,
benefited from strong revenues in the U.S. Its stock
returned a healthy 21%
over the period.
THE CHANGING FACE
OF RETAILING.
Our Fund delivered good returns from its retail holdings. We
took advantage of a
trend in the European retailing sector away from department
stores and toward
specialty stores -- a shift that happened decades ago in
the U.S. The success
of Sweden's Hennes & Moritz, our fourth largest holding, is
a sign of the
growing clout of European discount specialty retailers,
which use sophisticated
marketing and inventory controls to undersell department
stores. Hennes &
Moritz's stock surged 88% in the past six months.
AND NOT SO WELL.
WE JUMPED THE GUN
ON RECOVERY.
Our timing was off when we tried to get a head start on an
economic recovery
that didn't happen. We bought some cyclical stocks too soon,
which perform best
early in a recovery. For example, we invested in Acerinox,
Spain's lowest cost
producer of stainless steel -- a company whose revenues are
highly dependent on
demand for basic materials. With the European economy in
limbo, demand just
wasn't there. Despite setbacks like this, we are confident
that the expansion
will eventually come, because we are already starting to see
a pickup in
economic activity. When it reaches sustainable levels, we'll
keep our eyes open
for investments like Acerinox.
FIVE LARGEST
STOCK HOLDINGS.
4.4% Rexel SA
Electronics
3.5% Compass Group PLC
Leisure & Tourism
3.3% Carrefour
Retailing
2.9% Hennes & Mauritz AB
Retailing
2.5% Banco Popular
Espanol SA
Banking
Expressed as a percentage of total net assets as of
10/31/96.
LOOKING AHEAD.
- ------------------------------------------------------------
- --------------------
In spite of slack economic demand at home, European stocks
have appreciated
strongly since the start of the year. We think stocks can
rise even more if
economic growth is sustainable. While we haven't seen much
increase in consumer
spending, lower interest rates throughout Europe favor
stronger economic growth.
In fact, our economists are predicting European economic
growth of 2% in 1997,
double their estimate for 1996. Once we see convincing
evidence of a sustainable
recovery, we will likely begin to shift into stocks that do
best in the early
stages of the business cycle -- basic materials, industrial
and consumer
cyclical.
- ------------------------------------------------------------
- --------------------
1
<PAGE>
PRESIDENT'S LETTER
DECEMBER 2, 1996
- ------------------------------------------------------------
- --------------------
[PHOTO] DEAR SHAREHOLDER:
For many investors, 1996 may well be the
second year of
back-to-back, double-digit stock market
returns. In late
November, the Dow Jones Industrial
Average passed 6500 --
only weeks after breaking the 6000 mark
in mid-October.
America's economic expansion is entering
its sixth year and
there seems little evidence of an end to
the continued
modest growth and low inflation we've
enjoyed for the last
several years.
This is good news. For most investors
it's meant an increase
in their share values for college funds,
retirement nest
eggs or other long-term financial goals.
However, as you
read your year-end account statements and
make plans for
1997, it's important to remember that
there never is a
"sure thing" when it comes to investment
returns. Stock and
bond markets go down just as they go up.
(Did you notice the
brief period of decline this past
summer?) No one likes to
see the value of their investments fall
but such periods
remind us we must keep our expectations
realistic.
Regardless of the market's direction, a
wise investor plans
for tomorrow's needs today. Your
Financial Advisor or
Registered Representative can help you:
- Review your portfolio and suggest
strategies for 1997,
such as diversifying across
different types of
investments. Financial markets
seldom move in lockstep.
By investing in a mix of stock and
bond funds (foreign
& domestic) and money market funds
you may be in a
better position to achieve your long-
term goals and to
weather periods of uncertainty.
- See why annuities have become
popular retirement
planning tools. The choices are
broader than ever. Our
new DISCOVERY SELECTSM Variable
Annuity offers you many
of the keys to successful retirement
planning,
including a personalized asset
allocation program and a
choice of 21 variable- or fixed-rate
investment options
offering a broad array of investment
objectives and
styles.
- Explain new retirement savings
developments. For
example, Congress has expanded the
contribution limit
on spousal IRAs. And don't forget,
it's not too late
for you to make a contribution to
your IRA or open one
for 1996. The IRS deadline is April
15, 1997, but it's
best to act sooner.
Why not contact your Financial Advisor or
Registered
Representative today? If you are
interested in DISCOVERY
SELECTSM call for a prospectus, which
contains more complete
information. Read it carefully before you
invest.
Sincerely,
/s/ Richard A. Redeker
Richard A. Redeker
President
P.S. Your 1997 Prudential IRA
contribution may qualify you
for a waiver of the annual custodial fee.
Ask your financial
representative for details.
- ------------------------------------------------------------
- --------------------
2
<PAGE>
PORTFOLIO OF INVESTMENTS AS OF OCTOBER 31, 1996 (UNAUDITED)
- ------------------------------------------------------------
- --------------------
- ------------------------------------------------------------
- --------------------
SHARES DESCRIPTION
VALUE (NOTE 1)
- ------------------------------------------------------------
- --------------------
LONG-TERM INVESTMENTS--88.3%
COMMON STOCK--88.3%
- ------------------------------------------------------------
- --------------------
BELGIUM--3.4%
15,216 Barco Industries NV (Electrical &
electronics) $ 2,497,150
4,775 Bekaert SA (Building materials & components)
3,857,105
- -------------
6,354,255
- ------------------------------------------------------------
- --------------------
FEDERAL REPUBLIC OF GERMANY--7.2%
91,000 Hoechst AG* (Chemicals)
3,415,799
5,520 Linde AG (Machinery & engineering)
3,410,889
23,600 SAP AG (Data processing & reproduction)
3,188,769
66,300 Siemens AG (Electrical & electronics)
3,419,440
- -------------
13,434,897
- ------------------------------------------------------------
- --------------------
FINLAND--1.5%
59,400 Nokia Corp. (Telecommunications equipment)
2,739,071
- ------------------------------------------------------------
- --------------------
FRANCE--20.9%
11,100 Carrefour (Retail)
6,148,306
15,800 Hermes International (Textiles & apparel
manufacturing)
4,004,100
18,721 Imetal SA (Miscellaneous materials &
commodities) 2,913,134
22,400 Legrand SA (Electrical & electronics)
3,879,224
27,400 Rexel SA (Electrical & electronics)
8,104,689
21,100 Salomon SA (Recreation & other consumer
growth) 1,886,779
18,100 Seb SA (Appliances & household durables)
3,657,565
36,280 Sidel SA (Machinery & engineering)
2,416,140
19,000 Unibail (Financial services)
1,888,185
66,000 Valeo SA (Automobiles & auto parts)
3,953,415
- -------------
38,851,537
PRUDENTIAL
EUROPE GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
- ------------------------------------------------------------
- --------------------
SHARES DESCRIPTION
VALUE (NOTE 1)
- ------------------------------------------------------------
- --------------------
ITALY--3.5%
213,400 Bulgari SpA* (Retail)
$ 3,696,054
1,417,100 Telecom Italia Mobile SpA*
(Telecommunications) 2,925,676
- -------------
6,621,730
- ------------------------------------------------------------
- --------------------
NETHERLANDS--7.2%
46,900 Hagemeyer (Wholesale & international trading)
3,515,571
10,750 Heineken NV (Beverages & tobacco)
2,025,580
51,700 IHC Caland NV (Oil services)
2,878,414
16,200 Nutricia Verenigde Bedrijven NV
(Food & household products)
2,266,756
16,000 Royal Dutch Petroleum Co. (Energy sources)
2,635,730
- -------------
13,322,051
- ------------------------------------------------------------
- --------------------
SPAIN--4.5%
24,500 Banco Popular Espanol SA (Banking)
4,675,655
159,300 Centros Commerciales Pryca SA (Retail)
3,652,145
- -------------
8,327,800
- ------------------------------------------------------------
- --------------------
SWEDEN--9.3%
100,400 Allgon AB (Telecommunications)
2,036,726
84,600 Astra AB (Health & personal care)
3,856,642
41,400 Hennes & Mauritz AB (Retail)
5,353,620
139,800 Mo och Domsjo AB (Forest products & paper)
3,845,063
266,300 Skandinaviska Enskilda Banken (Banking)
2,225,623
- -------------
17,317,674
- ------------------------------------------------------------
- --------------------
UNITED KINGDOM--26.0%
432,300 Bank of Ireland (Banking)
3,552,474
317,800 British Sky Broadcasting Group PLC
(Broadcasting
& publishing)
2,983,898
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements
3
<PAGE>
PORTFOLIO OF INVESTMENTS AS OF OCTOBER 31, 1996 (UNAUDITED)
- ------------------------------------------------------------
- --------------------
- ------------------------------------------------------------
- --------------------
SHARES DESCRIPTION
VALUE (NOTE 1)
- ------------------------------------------------------------
- --------------------
UNITED KINGDOM--CONT'D
264,700 Carpetright PLC (Retail)
$ 2,692,082
651,500 Compass Group PLC (Leisure & tourism)
6,477,537
315,900 Dixons Group PLC (Retail)
2,829,836
577,300 Electrocomponents PLC (Electronic components
&
instruments)
3,884,466
241,400 EMAP PLC (Broadcasting & publishing)
2,816,506
164,048 GKN PLC (Automobiles & auto parts)
3,083,239
300,000 Hays PLC (Business & public services)
2,514,101
205,800 Reed International PLC (Broadcasting &
publishing) 3,831,119
242,300 Siebe PLC (Machinery & engineering)
3,800,885
275,300 Standard Chartered PLC (Banking)
2,970,120
912,900 Vodafone Group PLC (Telecommunications)
3,528,102
299,300 Whitebread PLC (Beverages & tobacco)
3,506,659
- -------------
48,471,024
- ------------------------------------------------------------
- --------------------
UNITED STATES--4.8%
70,000 Baan Company NV (Data processing &
reproduction) 2,590,000
40,900 Gucci Group NV* (Retail)
2,822,100
67,500 SGS Thompson Microelectronics NV* (Electronic
components & instruments)
3,535,312
- -------------
8,947,412
- -------------
Total common stocks (cost US$124,264,909)
164,387,451
- ------------------------------------------------------------
- --------------------
PRUDENTIAL EUROPE GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
- ------------------------------------------------------------
- --------------------
PRINCIPAL
AMOUNT
(000) DESCRIPTION
VALUE (NOTE 1)
- ------------------------------------------------------------
- --------------------
SHORT-TERM INVESTMENTS--4.4%
- ------------------------------------------------------------
- --------------------
U.S. GOVERNMENT SECURITIES--4.4%
$ 8,125 Federal Home Loan Mortgage Corporation,
Zero Coupon, 11/1/96 (cost US$8,125,000)
$ 8,125,000
- ------------------------------------------------------------
- --------------------
TOTAL INVESTMENTS--92.7%
(cost US$132,389,909; Note 4)
172,512,451
Other assets in excess of liabilities-7.3%
13,596,328
- -------------
Net Assets-100.0%
$ 186,108,779
- -------------
- -------------
- -------------------------
* Non-income producing security
- ------------------------------------------------------------
- --------------------
4 See Notes to
Financial Statements
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
PRUDENTIAL EUROPE GROWTH FUND, INC.
- ------------------------------------------------------------
- -------------------------------------------------------
- ------------------------------------------------------------
- -------------------------------------------------------
OCTOBER 31,
1996
- -------------
<S>
<C>
ASSETS
Investments, at value (cost $132,389,909). . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . $ 172,512,451
Foreign currency, at value (cost $9,814,052) . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 9,787,797
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 1,930,249
Receivable for investments sold. . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 4,320,286
Dividends receivable . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 343,434
Deferred expenses and other assets . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 136,303
Receivable for Fund shares sold. . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 40,151
- -------------
Total assets. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 189,070,671
- -------------
LIABILITIES
Payable for investments purchased. . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 2,036,098
Accrued expenses . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 365,097
Payable for Fund shares reacquired . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 316,125
Distribution fee payable . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 126,473
Management fee payable . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 118,099
- -------------
Total liabilities . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 2,961,892
- -------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . $ 186,108,779
- -------------
- -------------
Net assets were comprised of:
Common stock, at par. . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . $ 12,550
Paid-in capital in excess of par. . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 138,819,621
- -------------
138,832,171
Undistributed net investment income . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 259,383
Accumulated net realized gain on investments and foreign
currency transactions. . . . . . . . . . 6,917,285
Net unrealized appreciation on investments and foreign
currencies . . . . . . . . . . . . . . . . 40,099,940
- -------------
Net Assets, October 31, 1996. . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . $ 186,108,779
- -------------
- -------------
Class A :
Net asset value and redemption price per share
( $35,223,249 / 2,341,905 shares of common stock issued
and outstanding). . . . . . . . . . . . $15.04
Maximum sales charge ( 5% of offering price ) . . . . . .
. . . . . . . . . . . . . . . . . . . . .79
- ------
Maximum offering price to public. . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . $15.83
- ------
- ------
Class B :
Net asset value and redemption price per share
( $132,698,987 / 8,985,503 shares of common stock
issued and outstanding) . . . . . . . . . . . $14.77
- ------
- ------
Class C :
Net asset value and redemption price per share
( $7,918,776 / 536,077 shares of common stock issued
and outstanding) . . . . . . . . . . . . . $14.77
- ------
- ------
Class Z :
Net asset value and redemption price per share
( $10,267,767 / 681,338 shares of common stock issued
and outstanding). . . . . . . . . . . . . $15.07
- ------
- ------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements
5
<PAGE>
PRUDENTIAL EUROPE GROWTH FUND, INC.
STATEMENT OF OPERATIONS (UNAUDITED)
- ------------------------------------------------------------
- --------------------
- ------------------------------------------------------------
- --------------------
SIX MONTHS
ENDED
OCTOBER 31,
NET INVESTMENT INCOME
1996
- -------------
Income
Dividends (net of foreign withholding taxes
of $206,083) . . . . . . . . . . . . . . . . . . . . .
. . $ 1,827,352
Interest. . . . . . . . . . . . . . . . . . . . . . . . .
. . 180,062
- -------------
Total income . . . . . . . . . . . . . . . . . . . . .
. . 2,007,414
- -------------
Expenses
Management fee. . . . . . . . . . . . . . . . . . . . . .
. . 672,090
Distribution fee--Class A . . . . . . . . . . . . . . . .
. . 47,404
Distribution fee--Class B . . . . . . . . . . . . . . . .
. . 642,859
Distribution fee--Class C . . . . . . . . . . . . . . . .
. . 38,709
Transfer agent's fees and expenses. . . . . . . . . . . .
. . 144,000
Custodian's fees and expenses . . . . . . . . . . . . . .
. . 76,000
Registration fees . . . . . . . . . . . . . . . . . . . .
. . 35,000
Reports to shareholders . . . . . . . . . . . . . . . . .
. . 35,000
Amortization of organization expenses . . . . . . . . . .
. . 25,000
Directors' fees and expenses. . . . . . . . . . . . . . .
. . 21,600
Audit fee and expenses. . . . . . . . . . . . . . . . . .
. . 12,500
Legal fees and expenses . . . . . . . . . . . . . . . . .
. . 7,500
Miscellaneous . . . . . . . . . . . . . . . . . . . . . .
. . 4,343
- -------------
Total operating expenses . . . . . . . . . . . . . . .
. . 1,762,005
- -------------
Net investment income. . . . . . . . . . . . . . . . . . . .
. . 245,409
- -------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on:
Investment transactions. . . . . . . . . . . . . . . .
. . 8,171,883
Foreign currency transactions. . . . . . . . . . . . .
. . 13,974
- -------------
8,185,857
- -------------
Net change in unrealized appreciation /depreciation on:. . .
. .
Investments. . . . . . . . . . . . . . . . . . . . . .
. . 8,805,632
Foreign currencies . . . . . . . . . . . . . . . . . .
. . 16,623
- -------------
8,822,255
- -------------
Net gain on investments and foreign currencies . . . . . . .
. . 17,008,112
- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . .
. . $ 17,253,521
- -------------
- -------------
PRUDENTIAL EUROPE GROWTH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
- ------------------------------------------------------------
- --------------------
- ------------------------------------------------------------
- --------------------
SIX
MONTHS YEAR
ENDED ENDED
OCTOBER
31, APRIL 31,
1996
1996
---------
- ---- -------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income (loss). . . . . . . . . . $
245,409 $ (217,884)
Net realized gain on investment and
foreign currency transactions. . . . . . . .
8,185,857 3,252,406
Net change in unrealized
appreciation/depreciation of investments
and foreign currencies . . . . . . . . . . .
8,822,255 21,905,018
---------
- ---- -------------
Net increase in net assets resulting
from operations . . . . . . . . . . . . . . . .
17,253,521 24,939,540
---------
- ---- -------------
Fund share transactions (net of share
conversions) (Note 5)
Net proceeds from shares sold . . . . . . . . .
229,499,017 213,839,301
Cost of shares reacquired . . . . . . . . . . .
(242,041,902) (212,685,204)
---------
- ---- -------------
Net increase (decrease) in net assets
from Fund share transactions . . . . . . . .
(12,542,885) 1,154,097
---------
- ---- -------------
Total increase . . . . . . . . . . . . . . . . . .
4,710,636 26,093,637
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . .
181,398,143 155,304,506
---------
- ---- -------------
End of period. . . . . . . . . . . . . . . . . . . $
186,108,779 $ 181,398,143
---------
- ---- -------------
---------
- ---- -------------
- ------------------------------------------------------------
- --------------------
6 See Notes to
Financial Statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) PRUDENTIAL
EUROPE GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
- ------------------------------------------------------------
- --------------------
Prudential Europe Growth Fund, Inc. (the "Fund"), is
registered under the
Investment Company Act as a diversified, open-end management
investment company.
The investment objective of the Fund is to seek long-term
capital growth by
investing primarily in equity securities of companies
domiciled in Europe. The
Fund was incorporated in Maryland on March 18, 1994 and
commenced investment
operations on July 13, 1994.
- ------------------------------------------------------------
- --------------------
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 gain on foreign currency transactions of
$13,974 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
- ------------------------------------------------------------
- --------------------
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) PRUDENTIAL
EUROPE GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
- ------------------------------------------------------------
- --------------------
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. 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
of the Fund based
upon the relative proportion of net assets of each class at
the beginning of the
day.
EQUALIZATION: Effective May 1, 1996 the Fund discontinued
the accounting
practice known as equalization. Equalization is a practice
whereby 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.
RECLASSIFICATION OF CAPITAL ACCOUNTS: The Fund accounts and
reports for
distributions to shareholders in accordance with the
American Institute of
Certified Public Accountant'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 increase undistributed net
investment income by
$13,974 and decrease accumulated net realized gain on
investments and foreign
currency transactions by $13,974 for the six months ended
October 31, 1996. Net
realized losses and net assets were not affected by this
change.
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 Prudential Mutual
Fund Management LLC
("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 a distribution agreement with Prudential
Securities Incorporated
("PSI") which acts as the distributor of the Class A, B, C,
and Z shares of the
Fund. The Fund compensates PSI for distributing and
servicing the Fund's Class
A, Class B and Class C shares, pursuant to plans of
distribution, (the "Class A,
B and C Plans") regardless of expenses actually incurred by
them. The
distribution fees are accrued daily and payable monthly. No
distribution or
service fees are paid to PSI as distributor of the Class Z
shares of the Fund.
Pursuant to the Class A, B and C Plans, the Fund compen-
- ------------------------------------------------------------
- --------------------
8
<PAGE>
sates PSI with respect to Class A, B and C shares, 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
Class A, Class B and Class C Plans were .25 of 1%, 1% and
1%, respectively of
the average daily net assets of the Class A, Class B and
Class C shares for the
six months ended October 31, 1996. No distribution or
service fees are paid to
PSI as distributor for the Class Z shares of the Fund.
PSI has advised the Fund that it has received approximately
$31,000 in front-end
sales charges resulting from sales of Class A shares during
the six months ended
October 31, 1996. From these fees PSI paid such sales
charges to Pruco
Securities Corporation, an affiliated broker-dealer, which
in turn paid
commissions to sales persons and incurred other distribution
costs.
PSI has advised the Fund that for the six months ended
October 31, 1996 it
received approximately $242,500 and $1,300 in contingent
deferred sales charges
imposed upon certain redemptions by Class B and Class C
shareholders,
respectively.
PSI, PMF and PIC are indirect, wholly-owned subsidiaries of
The Prudential
Insurance Company of America.
- ------------------------------------------------------------
- --------------------
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 six
months ended October
31, 1996, the Fund incurred fees of approximately $143,300
for the services of
PMFS. As of October 31, 1996, approximately $23,000 of such
fees were due to
PMFS. Transfer agent's 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 six months ended October 31, 1996 were $11,232,210
and $23,985,577,
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, 1996 net unrealized appreciation for federal
income tax purposes
was $40,122,542 (gross unrealized appreciation--$40,521,308;
gross unrealized
depreciation-- $398,766). For federal income tax purposes,
the Fund had a
capital loss carryforward as of October 31, 1996 of
approximately $1,254,600 of
which $426,600 expires in 2003 and $828,000 expires in 2004.
Accordingly, no
capital gains distribution is expected to be paid to
shareholders until net
gains have been realized in excess of such carryforward.
- ------------------------------------------------------------
- --------------------
NOTE 5. CAPITAL
The Fund offers Class A, Class B, Class C and Class Z
shares. Class A shares are
sold with a front-end sales charge of up to 5.00%. 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 privilege is
also available for
shareholders who qualified to purchase Class A shares at net
asset value.
Effective April 15, 1996 the Fund commenced offering Class Z
shares. Class Z
shares are not subject to any sales or redemption charge and
are offered
exclusively for sale to the participants of the Prudential
Securities 401(k)
Plan, a defined contribution plan sponsored by Prudential
Securities. 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
four classes,
designated Class A, Class B, Class C and Class Z Shares,
each consisting of 500
million authorized shares.
- ------------------------------------------------------------
- --------------------
NOTE 6. DISTRIBUTIONS
On December 10, 1996 the Board of Directors of the Fund
declared a short-term
capital gain distribution of $0.09 per share and a long-term
capital gain
distribution of $0.47 per share for Class A, B, C, and Z
shares respectively,
payable on December 19, 1996 to shareholders of record on
December 16, 1996.
- ------------------------------------------------------------
- --------------------
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) PRUDENTIAL
EUROPE GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
- ------------------------------------------------------------
- --------------------
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Shares
Amount
-----------
- - ------------
<S> <C>
<C>
CLASS A
Six months ended October 31, 1996:
Shares sold. . . . . . . . . . . . . . . . . 11,311,594
$ 160,462,827
Shares reacquired. . . . . . . . . . . . . .
(12,564,306) (178,696,637)
-----------
- -------------
Net decrease in shares
outstanding before conversion . . . . . .
(1,257,712) (18,233,810)
Shares issued upon conversion
from Class B. . . . . . . . . . . . . . . 107,570
1,536,828
-----------
- -------------
Net decrease in shares
outstanding . . . . . . . . . . . . . . .
(1,150,142) $ (16,696,982)
-----------
- -------------
-----------
- -------------
Year ended April 30, 1996:
Shares sold. . . . . . . . . . . . . . . . . 11,353,245
$ 146,536,469
Shares reacquired. . . . . . . . . . . . . .
(11,576,243) (149,929,575)
-----------
- -------------
Net increase in shares
outstanding before conversion . . . . . .
(222,998) (3,393,106)
Shares issued upon conversion
from Class B. . . . . . . . . . . . . . . 149,628
1,908,762
-----------
- -------------
Net decrease in shares
outstanding . . . . . . . . . . . . . . .
(73,370) $ (1,484,344)
-----------
- -------------
-----------
- -------------
CLASS B
Six months ended October 31, 1996:
Shares sold. . . . . . . . . . . . . . . . . 2,875,546
$ 40,651,420
Shares reacquired. . . . . . . . . . . . . .
(3,110,576) (43,891,553)
-----------
- -------------
Net decrease in shares
outstanding before conversion . . . . . .
(235,030) (3,240,133)
Shares issued upon conversion
from Class A. . . . . . . . . . . . . . .
(109,286) (1,536,828)
-----------
- -------------
Net decrease in shares
outstanding . . . . . . . . . . . . . . .
(344,316) $ (4,776,961)
-----------
- -------------
-----------
- -------------
Year ended April 30, 1996:
Shares sold. . . . . . . . . . . . . . . . . 4,965,336
$ 63,469,612
Shares reacquired. . . . . . . . . . . . . .
(4,561,206) (58,326,887)
-----------
- -------------
Net increase in shares
outstanding before conversion . . . . . . 404,130
5,142,725
Shares issued upon conversion
from Class A. . . . . . . . . . . . . . .
(151,150) (1,908,762)
-----------
- -------------
Net increase in shares
outstanding . . . . . . . . . . . . . . . . 252,980
$ 3,233,963
-----------
- -------------
-----------
- -------------
CLASS C
Six months ended October 31, 1996:
Shares sold. . . . . . . . . . . . . . . . . 1,344,194
$ 18,884,770
Shares reacquired. . . . . . . . . . . . . .
(1,381,853) (19,453,712)
-----------
- -------------
Net decrease in shares
outstanding . . . . . . . . . . . . . . .
(37,659) $ (568,942)
-----------
- -------------
-----------
- -------------
Year ended April 30, 1996:
Shares sold. . . . . . . . . . . . . . . . . 295,865
$ 3,833,020
Shares reacquired. . . . . . . . . . . . . .
(343,363) (4,428,742)
-----------
- -------------
Net decrease in shares
outstanding . . . . . . . . . . . . . . .
(47,498) $ (595,722)
-----------
- -------------
-----------
- -------------
CLASS Z
Six months ended October 31, 1996:
Shares sold. . . . . . . . . . . . . . . . . 681,323
$ 9,500,000
Shares reacquired. . . . . . . . . . . . . . --
- --
-----------
- -------------
Net increase in shares
outstanding . . . . . . . . . . . . . . . 681,323
$ 9,500,000
-----------
- -------------
-----------
- -------------
April 15, 1996(a)
through April 30, 1996:
Shares sold. . . . . . . . . . . . . . . . . 15
$ 200
Shares reacquired. . . . . . . . . . . . . . --
- --
-----------
- -------------
Net increase on shares
outstanding . . . . . . . . . . . . . . . 15
$ 200
----------
- - -------------
----------
- - -------------
</TABLE>
- --------------------
(a) Commencement of investment operations.
- ------------------------------------------------------------
- --------------------
10
<PAGE>
FINANCIAL HIGHLIGHTS (UNAUDITED) PRUDENTIAL
EUROPE GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------------
- ------------------------ ----------------------------------
- ---------
SIX MONTHS
YEAR JULY 13,1994(b) SIX MONTHS YEAR JULY
13, 1994(b)
ENDED
ENDED THROUGH ENDED ENDED
THROUGH
OCTOBER 31,
APRIL 30, APRIL 30, OCTOBER 31, APRIL 30,
APRIL 30,
1996
1996 (c) 1995 (c) 1996 1996 (c)
1995 (c)
------------ ---
- ------ --------------- ----------- --------- ------
- ---------
<S> <C> <C>
<C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of period . . $ 13.69 $
11.77 $ 11.40 $ 13.49 $ 11.69 $
11.40
------- --
- ----- ------- -------- -------- ---
- -----
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (loss) . . . . . . .08
.06 .01 .01 (.04)
(.06)
Net realized and unrealized
gain on investment and
foreign currency transactions. . . . . 1.27
1.86 .36 1.27 1.84
.35
------- --
- ----- ------- -------- -------- ---
- -----
Total from investment operations . . 1.35
1.92 .37 1.28 1.80
.29
------- --
- ----- ------- -------- -------- ---
- -----
Net asset value, end of period . . . . . $ 15.04 $
13.69 $ 11.77 $ 14.77 $ 13.49 $
11.69
------- --
- ----- ------- -------- -------- ---
- -----
------- --
- ----- ------- -------- -------- ---
- -----
TOTAL RETURN(d): . . . . . . . . . . . . 9.86%
16.31% 3.25% 9.49% 15.40%
2.54%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000). . . . . $35,223
$47,789 $41,963 $132,699 $125,868
$106,081
Average net assets (000) . . . . . . . . $37,618
$47,183 $29,598 $127,523 $122,255 $
85,623
Ratios to average net assets:
Expenses, including distribution fees. 1.63%(a)
1.53% 1.84%(a) 2.38%(a) 2.28%
2.59%(a)
Expenses, excluding distribution fees. 1.38%(a)
1.28% 1.59%(a) 1.38%(a) 1.28%
1.59%(a)
Net investment income (loss) . . . . . .97%(a)
.44% .06%(a) .10%(a) (.33)%
(.71)%(a)
FOR CLASS A, B, C AND Z SHARES:
Portfolio turnover rate . . . . . . . . 7%
65% 25%
Average Commission Rate per share. . . . $ .0450 $
.0233 N/A
</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
<PAGE>
FINANCIAL HIGHLIGHTS (UNAUDITED) PRUDENTIAL
EUROPE GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
CLASS C CLASS Z
--------------------
- ------------------------ ------------------------------
SIX MONTHS
YEAR JULY 13,1994(b) SIX MONTHS APRIL 15, 1996(b)
ENDED
ENDED THROUGH ENDED THROUGH
OCTOBER 31,
APRIL 30, APRIL 30, OCTOBER 31, APRIL 30,
1996
1996 (c) 1995 (c) 1996 1996 (c)
------------ ---
- ------ --------------- ----------- ----------------
<S> <C> <C>
<C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of period . . $13.49
$11.69 $11.40 $ 13.68 $13.40
------ -
- ----- ------ ------- ------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (loss) . . . . . . .01
(.04) (.06) (.01) .28
Net realized and unrealized
gain on investment and
foreign currency transactions. . . . . 1.27
1.84 .35 1.38 --
------ -
- ----- ------ ------- ------
Total from investment operations . . . . 1.28
1.80 .29 1.37 .28
------ -
- ----- ------ ------- ------
Net asset value, end of period . . . . . $14.77
$13.49 $11.69 $ 15.07 $13.68
------ -
- ----- ------ ------- ------
------ -
- ----- ------ ------- ------
TOTAL RETURN(d): . . . . . . . . . . . . 9.49%
15.40% 2.54% 10.16% 2.09%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000). . . . . $7,919
$7,741 $7,260 $10,268 $ 204(e)
Average net assets (000) . . . . . . . . $7,679
$7,768 $6,094 $ 4,943 $ 203(e)
Ratios to average net assets:
Expenses, including distribution fees. 2.38%(a)
2.28% 2.59%(a) 1.38%(a) 1.28%(a)
Expenses, excluding distribution fees. 1.38%(a)
1.28% 1.59%(a) 1.38%(a) 1.28%(a)
Net investment income (loss) . . . . . .12%(a)
(.30)% (.71)%(a) (.25)%(a) .54%(a)
</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.
(e) Figures are actual and not rounded to the nearest
thousand.
- ------------------------------------------------------------
- --------------------
12 See Notes to
Financial Statements
<PAGE>
PRUDENTIAL MUTUAL FUNDS
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NJ 07102-4077
(800) 225-1852
HTTP://WWW.PRUDENTIAL.COM
DIRECTORS
Edward D. Beach
Stephen C. Eyre
Delayne D. Gold
Robert F. Gunia
Don G. Hoff
Robert E. LaBlanc
Mendel A. Melzer
Richard A. Redeker
Robin B. Smith
Stephen Stoneburn
Nancy H. Teeters
OFFICERS
Richard A. Redeker, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Ellyn C. Vogin, Assistant Secretary
MANAGER
Prudential Mutual Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
INVESTMENT ADVISER
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
DISTRIBUTOR
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
TRANSFER AGENT
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
LEGAL COUNSEL
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, NY 10022
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 October 31, 1996
were not audited
and, accordingly, no opinion is expressed on them.
This report is not authorized for distribution to
prospective investors unless
preceded or accompanied by a current prospectus.
<PAGE>
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BULK RATE
U.S. POSTAGE
PAID
PRUDENTIAL MUTUAL FUNDS
Permit 6807
GATEWAY CENTER THREE
New York, NY
100 MULBERRY STREET
NEWARK, NJ 07102-4077
(800) 225-1852
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74431N103 MF160E2 PRUDENTIAL
74431N202 Cat#42M171V EUROPE GROWTH
74431N301 FUND, INC.
74431N400
SEMI
ANNUAL
REPORT
Oct. 31, 1996
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