(ICON)
Prudential
Europe Growth
Fund, Inc.
ANNUAL
REPORT
April 30, 1998
(LOGO)
<PAGE>
Prudential Europe Growth Fund, Inc.
Performance At A Glance.
European stocks had the highest returns of any
region in the world over the 12
months ended April 30, 1998. The Prudential
Europe Growth Fund beat the
average competing fund by more than five
percentage points over the year, led
by our technology and financial stocks. The high
return reflects growing
European interest in stock ownership, as well as
excellent prospects for
earnings growth.
Cumulative Total Returns1 As of
4/30/98
<TABLE>
<CAPTION>
One Three
Since
Year Years
Inception2
<S> <C> <C>
<C>
Class A 44.93% 97.58%
103.99%
Class B 43.35 92.56
97.46
Class C 43.55 92.83
97.73
Class Z 44.95 N/A
74.11
Lipper European
Region Fd Avg3 39.23 89.47
***
</TABLE>
Average Annual Total Returns1
As of 3/31/98
<TABLE>
<CAPTION>
One Three
Since
Year Years
Inception2
<S> <C> <C>
<C>
Class A 32.51% 24.32%
18.51%
Class B 32.94 24.75
18.80
Class C 37.14 25.45
19.18
Class Z 39.36 N/A
30.62
</TABLE>
Past performance is not indicative of future
results. Principal and investment
return will fluctuate so that an investorOs
shares, when redeemed, may be worth
more or less than their original cost.
1Source: Prudential Investments 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 are not subject to a
sales charge or a distribution fee.
2Inception dates: Classes A, B, and C, 7/13/94;
Class Z, 4/15/96.
3Lipper returns are for all funds in each share
class for the 1- and 3-year
periods.
***Lipper Since Inception returns are 106.42% for
Classes A, B, and C, and
64.09% for Class Z and are for all funds in each
share class.
How Investments Compared.
(As of 4/30/98)
(GRAPH)
Source: Lipper Analytical Services. Financial
markets change, so a mutual
fund's past performance should never be used to
predict future results. The
risks to each of the investments listed above are
different -- we provide
12-month total returns for several Lipper mutual
fund categories to show you
that reaching for higher returns means tolerating
more risk. The greater the
risk, the larger the potential reward or loss. In
addition, we've included
historical 20-year average annual returns. These
returns assume the
reinvestment of dividends.
U.S. Growth Funds will fluctuate a great deal.
Investors have received higher
historical total returns from stocks than from
most other investments. Smaller
capitalization stocks offer greater potential for
long-term growth but may be
more volatile than larger capitalization stocks.
General Bond Funds provide more income than stock
funds, which can help smooth
out their total returns year by year. But their
prices still fluctuate
(sometimes significantly) and their returns have
been historically lower than
those of stock funds.
General Municipal Debt Funds invest in bonds
issued by state governments, state
agencies and/or municipalities. This investment
provides income that is usually
exempt from federal and state income taxes.
U.S. Taxable Money Funds attempt to preserve a
constant share value; they
don't fluctuate much in price but, historically,
their returns have been
generally among the lowest of the major investment
categories.
<PAGE>
Steve Auth, Bill Higgins, and Jean-Yves Chereau
Fund Managers
(PHOTO)
Portfolio
Managers' Report
The Prudential Europe Growth Fund invests
primarily in stocks of companies in
Europe, selecting a diversified portfolio for long-
term growth of capital.
Steve Auth, head of Prudential's global equity
group, designs overall strategy
and assigns country allocations. Bill Higgins
focuses on the Fund's core
holdings, while Jean-Yves Chereau, head of
Prudential's Europe-based team,
focuses on a tactical portfolio that we trade more
actively. The Fund is
subject to all of the risks associated with
foreign investing, including
currency, political and social risks, and
potential illiquidity. There can be
no assurance that the Fund will achieve its
investment objective.
Not Too Fast.
Are European stocks too expensive after their
sharp first quarter climb? We
don't expect them to maintain that pace, and
investors may pause to digest
their gains, but we believe the underlying
business fundamentals are strong
enough to support further movement. We're
focusing on growth companies where
we think there is more room for positive than
negative earnings surprises.
Strategy Session.
- --------------------------------------------------
- -----------------------------
More Countries. We added Swiss stocks, bringing
them to eight percent of our
portfolio, to broaden our country diversification.
Switzerland is not
participating in the European monetary union, so
this move also tempers our
exposure to the unified monetary policy. Our
purchases included additional
financial firms (Credit Suisse and Julius Baer
Holdings) and a major
pharmaceutical firm (Roche). We believe this
diversification helps stabilize
our portfolio's return.
Portfolio Composition.
Sectors expressed as a percentage
of net assets as of 4/30/98.
(GRAPH)
We continue to emphasize the southern countries,
Spain and Italy. Because they
formerly had high interest rates and weak fiscal
discipline, these countries
are gaining most from the monetary union's low
interest rates and improved
business climate.
More Industries. We are still enthusiastic about
the information technology
and financial sectors. The markets for technology
and software are expanding,
as companies search for productivity gains and
ways of managing the new
European currency (the Euro). The financial
sector is at the beginning of a
growth wave like that in the U.S. in 1990. We
also like pharmaceuticals
because their relatively stable growth is
attractive to investors. In
addition to our recent Roche purchase, we own
Smithkline Beecham (U.K.), Astra
(Sweden), and Ares-Serono (Switzerland).
We bought Volkswagen and Porsche, which are
increasing their efficiency while
introducing cutting edge designs. They are
winning market share in a very
competitive market. The new Volkswagen, based on
the classic Beetle design,
is a head-turner.
<PAGE>
What Went Well.
- -------------------------------------------------
Three of our 10 largest holdings at April 30 were
banks, and all were major
contributors to our return for the year: Credito
Italiano, Banco Central
Hispanoamericano, and Bank of Ireland. The
European economy is shifting into
high gear, industries are restructuring, and banks
are benefiting from both the
increased financial activity and greater
productivity in their own operations.
Banks in Italy and Spain are particularly
profiting from their new mutual fund
businesses.
We have had excellent returns on retailers:
Telepizza dominates the market for
home delivery of pizza in Spain. Hennes & Moritz
is a multinational specialty
retailer, Sweden's largest. It is expanding
rapidly in Germany.
The drive to improve productivity has created
great markets for software and
telecommunications companies. Our largest holding
was SAP, the world leader
in enterprise management software. We took some
profits in Baan, a smaller
Netherlands-based software firm. The U.K. mobile
phone services company
Vodafone, the Finnish manufacturer of mobile
phones Nokia, and Telefonica De
Espana all contributed substantially to our
return. To improve productivity,
firms also are outsourcing their noncore
functions, such as lunchroom catering.
Compass is an international catering and
restaurant company that also owns
branded businesses, such as Burger King.
And Not So Well.
- -------------------------------------------------
The economic slowdown and financial turmoil in
Asia affected several of our
holdings. It hit manufacturers of luxury goods
hard, driving down the stock
prices of Gucci and Hermes. We sold our holdings
in both companies. We also
sold our holdings in Standard Chartered, a U.K.-
based international bank with
a strong Asian presence. Two of our U.K. holdings
suffered reverses we believe
to be temporary: regulators were concerned about
British Sky Broadcasting's
proposed digital television alliance and
investors' lack of enthusiasm for
U.K. retailers hurt Dixons Group -- an appliance
and electronics retailer. We
expect both to benefit from the introduction of
digital broadcast television
in the U.K.
Five Largest Holdings.
3.2% SAP
Computer Products & Services
2.8% Banco Central
HispanoamericanoBanking
2.8% Compass Group PLC
Food Services
2.8% Credito Italiano SpA
Banking
2.6% Vodafone Group PLC
Telecommunications
Expressed as a percentage of net assetsas of
4/30/98.
Looking Ahead.
- -------------------------------------------------
The strength of European stock markets reflects,
in part, investors' greater
demand for stocks. The change in European savings
and investment habits
parallels earlier developments in the U.S. Middle
and working-class families,
who formerly kept their savings in bank accounts
(or out of financial assets
altogether), have been investing in mutual funds.
In Europe, banks are
managing mutual funds, so they are promoting this
change. There is still
considerable room for this trend to continue:
European households average only
25% of their financial assets in stocks, compared
to 38% in the U.S.
1
<PAGE>
Portfolio Managers Steve Auth, William Higgins,
and
Jean-Yves Chereau Discuss European Prospects.
- --------------------------------------------------
- -----------------------------
Can Things Stay This Good?
Q. How will European monetary union affect stock
prices?
A. Steve Auth: European stocks are likely to rise
further, despite their first
quarter climb to historically high prices, because
their earnings prospects are
excellent for the next several years. Monetary
union has contributed to this
in several ways: First, it increased fiscal and
monetary discipline,
particularly in Southern Europe -- where inflation
and interest rates had been
high and productivity low. This alone has given a
huge boost to economic
growth in Spain and Italy. They are becoming
better markets for exports from
slower-growing economies, such as those of France
and Germany. Second, the
removal of regulatory and currency barriers will
reduce costs. Third,
competition will increase, so the most productive
and customer-focused
companies will have larger markets and greater
economies of scale. Fourth,
pressure for greater productivity has forced
European labor to be more
competitive. This is beginning to bring down
unemployment levels and boost
consumer confidence. Consumers spend more,
reinforcing the economic growth.
Q. What do we mean by restructuring in Europe?
A. Jean-Yves Chereau: Companies are focusing more
narrowly on their core
businesses and selling businesses and investments
that are not essential to
that core. They are reorganizing their production
processes to reduce costs.
Labor laws and practices are becoming more
flexible, including greater use of
temporary workers. In general, corporate
strategies are clearer and more
closely tied to financial targets. Performance-
based incentive plans are
spreading and there is greater sensitivity to
shareholders' interests.
Q. What industries benefit most from these trends?
A. Bill Higgins: Of course, merger and acquisition
activity and the increased
pace of investment are good for the financial
sector. We own banks throughout
Europe that have done very well. The other major
beneficiary is the
information technology sector. The more
competitive business environment has
added pressure to become more productive.
Companies that make software and
give technological advice are in great demand. The
urgency is increased by the
time limits for fixing or replacing software that
may not be able to handle
calendar dates in the year 2000 and for modifying
business software to handle
the new European currency. Europeans' greater
tendency to think
internationally probably contributed to SAP's
development of software for
worldwide enterprise management. It is our
largest holding now.
(PHOTO)
2
<PAGE>
President's Letter
June 9, 1998
- --------------------------------------------------
- -----------------------------
(PHOTO)
See You On the Net!
Dear Shareholder:
We are proud to be part of the worldwide web and
we invite you to visit our two
web sites, if you have not already done so. Yes,
we currently offer two
sites -- each with its own distinctive identity.
http://www.prudential.com
The Prudential web site features information on
personal investing, retirement
planning, commercial and residential real estate
opportunities, as well as
insurance products for life, health, home and
property.
You can look up performance data on your
Prudential mutual funds, learn about
proven investment strategies, or take one of our
many interactive quizzes that
will help guide you in determining long-term goals
- -- like how much to save for
your child's college education or for your
retirement.
http://www.prusec.com
The Prudential Securities Virtual Branch Office is
a full-service brokerage web
site specifically designed to provide investors
with the information they need
to make informed financial decisions. It was rated
the No. 1 full-service
brokerage web site of its type by Financial Net
News (February 1998), a
subsidiary of Institutional Investor magazine, and
was also rated among the top
corporate web sites by Fortune magazine (Winter
1998).
What investors can find here are -- daily market
commentaries, stock quotes,
economic forecasts, product news, and current
market research, in addition to
interactive investing programs. Investors, through
their Prudential Securities
Financial Advisors, may also enroll in Prudential
Online" and have access to
their personal account information which includes
balances, security values,
transactions and account activities. They can also
easily E-mail their
Financial Advisor.
Both sites also contain professional opportunities
for people who are searching
for employment or considering a change of career
paths.
We plan to make further enhancements to our web
pages as the year progresses.
So please, the next time you are "web browsing" or
"surfing the net," pay us a
visit. Let us know what you think and what you'd
like to see added in the
future.
Sincerely,
Brian M. Storms
President, Prudential Mutual Funds & Annuities
3
<PAGE>
Portfolio of Investments as
of April 30, 1998 PRUDENTIAL
EUROPE GROWTH FUND, INC.
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Shares Description Value
(Note 1)
----------------------------------------------
- -------------
LONG-TERM INVESTMENTS--96.2%
COMMON STOCKS--92.9%
----------------------------------------------
- -------------
<C> <S>
<C>
Belgium--2.9%
8,963 Barco Industries NV (Electrical &
electronics)
$ 2,371,201
8,500 Kredietbank NV (Banking)
4,789,988
- ------------
7,161,189
- --------------------------------------------------
- ----------
Denmark--0.2%
28,793 Holm, (Jacob) & Sons AS(a)
(Textiles & apparel
manufacturing)
403,803
- --------------------------------------------------
- ----------
Federal Republic of Germany--6.8%
9,867 Deutsche Pfandbrief Hypothekenbank
AG (Banking)
761,326
6,020 Linde AG (Machinery & engineering)
4,155,309
16,600 SAP AG (Computer products &
services)
7,860,724
5,848 Schwarz Pharma AG (Medical
products)
471,750
2,889 SGL Carbon AG (Chemicals)
304,351
3,984 Volkswagen AG (Automobiles & auto
parts)
3,171,664
- ------------
16,725,124
- --------------------------------------------------
- ----------
Finland--2.4%
86,800 Nokia Corp. (Telecommunication
equipment)
5,812,658
- --------------------------------------------------
- ----------
France--11.4%
3,500 Carrefour SA (Retail)
2,003,573
8,959 Ciments Francais (Building
products)
521,045
4,297 Compagnie Francaise d'Etudes et de
Construction Technip
(Construction)
545,515
35,127 Dollfus-Mieg & Cie SA(a) (Textiles
& apparel manufacturing)
1,040,151
365 Galeries Lafayette (Retail)
320,239
2,268 GFI Industries SA (Manufacturing)
565,304
1,145 Le Carbone-Lorraine (Electrical &
electronics)
$ 468,997
18,600 Legrand SA (Electrical &
electronics)
4,914,257
961 L'Europeenne d'Extincteurs
(Manufacturing)
80,323
8,100 Rexel SA (Electrical & electronics)
3,250,499
14,850 Seb SA (Appliances & household
durables)
2,319,541
29,685 Sidel SA (Machinery & engineering)
2,269,043
33,391 Societe Generale d'Entreprises
SA(a) (Construction)
1,301,128
19,900 Total SA (Oil production &
services)
2,364,324
57,100 Valeo SA (Automobiles & auto parts)
5,673,945
4,558 Vallourec SA (Manufacturing)
384,756
- ------------
28,022,640
- --------------------------------------------------
- ----------
Ireland--0.5%
46,613 Adare Printing Group PLC (Printing)
680,306
97,514 Anglo Irish Bank Corp. PLC
(Banking)
260,007
29,272 DCC PLC (Diversified operations)
267,011
- ------------
1,207,324
- --------------------------------------------------
- ----------
Italy--7.1%
24,215 Autogrill SpA (Restaurants)
167,495
21,257 Banca Popolare di Bergamo Credito
Varesino SpA (Banking)
515,867
118,622 Banca Popolare di Milano (Banking)
1,091,576
61,319 Bulgari SpA(a) (Retail)
374,101
1,300,000 Credito Italiano SpA (Banking)
6,830,631
703,000 Istituto Nazionale delle
Assicurazioni (Insurance)
2,100,821
17,911 Mediolanum SpA (Financial services)
536,762
160,941 Pirelli SpA (Manufacturing)
531,362
927,900 Telecom Italia Mobile SpA(a)
(Telecommunication services)
5,289,204
- ------------
17,437,819
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments as
of April 30, 1998 PRUDENTIAL
EUROPE GROWTH FUND, INC.
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Shares Description Value
(Note 1)
----------------------------------------------
- -------------
<C> <S>
<C>
Netherlands--5.2%
12,490 DOCdata NV(a) (Manufacturing)
$ 378,174
17,064 Getronics NV (Computer products &
services)
754,738
45,300 Hagemeyer NV (Wholesale &
international trading)
2,162,735
11,750 Heineken NV (Beverages)
2,724,069
15,932 Internatio-Muller NV (Diversified
operations)
551,755
5,939 Koninklijke BAM Groep NV
(Construction)
499,505
66,375 Koninklijke Numico NV (Food
products & services)
2,216,594
41,600 Royal Dutch Petroleum Co. (Oil
production & services)
2,294,807
27,589 Royal Volker Wessels Stevin NV
(Construction)
918,605
9,670 Twentsche Kabel Holding NV
(Diversified operations)
369,814
- ------------
12,870,796
- --------------------------------------------------
- ----------
Norway--2.9%
143,572 Agresso Group ASA(a) (Computer
products & services)
615,857
50,431 ASK ASA(a) (Computer products &
services)
513,773
32,030 Det Sondenfjelds-Norske
Dampskibsselskab(a) (Oil
production & services)
790,014
12,078 Seateam Technology ASA(a) (Oil
production & services)
291,426
58,279 Tandberg Television ASA(a)
(Telecommunication equipment)
769,499
126,975 Tomra System ASA (Waste management)
4,084,975
- ------------
7,065,544
- --------------------------------------------------
- ----------
Portugal--0.2%
9,995 Portugal Telecom SA
(Telecommunication services)
537,075
Spain--8.1%
206,196 Banco Central Hispanoamericano
(Banking)
$ 6,858,661
6,857 Banco Pastor SA (Banking)
782,321
12,228 Bodegas y Bebidas SA (Beverages)
568,791
4,951 Grupo Acciona SA (Construction)
1,113,811
3,888 Miquel y Costas & Miquel SA
(Forest products & paper)
202,279
33,525 Tele Pizza SA (Restaurants)
4,816,860
134,181 Telefonica de Espana
(Telecommunication services)
5,598,855
- ------------
19,941,578
- --------------------------------------------------
- ----------
Sweden--3.6%
112,800 Astra AB (Healthcare)
2,243,289
28,400 Enator AB (Computer products &
services)
814,192
104,200 Hennes & Mauritz AB (Retail)
5,422,856
10,921 NetCom Systems AB(a)
(Telecommunication services)
370,914
- ------------
8,851,251
- --------------------------------------------------
- ----------
Switzerland--8.3%
970 Ares-Serono Group (Medical
products)
1,390,055
11,300 Credit Suisse Group (Financial
services)
2,485,503
364 Gurit-Heberlein AG (Chemicals)
1,298,007
1,300 Julius Baer Holding AG (Banking)
3,587,283
1,441 Kardex AG (Electrical &
electronics)
456,225
5,866 Mikron Holding AG(a)
(Machinery & engineering)
1,466,207
1,150 Nestle SA (Food products &
services)
2,230,554
280 Phonak Holding AG (Medical
products)
246,351
2,133 PubliGroupe SA (Media)
554,469
250 Roche Holding AG (Medical products)
2,533,660
575 Sarna Kunststoff Holding AG
(Building products)
977,304
328 SIG Schweizerische
Industrie-Gesellschaft Holding
AG (Machinery & engineering)
272,841
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 5
<PAGE>
Portfolio of Investments as
of April 30, 1998 PRUDENTIAL
EUROPE GROWTH FUND, INC.
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Shares Description Value
(Note 1)
----------------------------------------------
- -------------
Switzerland (cont'd.)
<C> <S>
<C>
2,000 Valora Holding AG(a) (Restaurants)
$ 522,562
3,800 Zurich Versicherungs-Gesellschaft
(Insurance)
2,315,004
- ------------
20,336,025
- --------------------------------------------------
- ----------
United Kingdom--31.0%
719,157 Aggregate Industries PLC (Building
products)
889,533
76,214 Alliance Unichem PLC (Medical
products)
522,306
72,436 Arriva PLC (Diversified operations)
510,944
280,200 Bank of Ireland (Banking)
5,718,606
203,408 Baird, (William) PLC (Textiles &
apparel manufacturing)
890,791
159,500 Barclays PLC (Banking)
4,598,923
68,488 Blacks Leisure Group PLC (Retail)
400,672
83,878 British-Borneo Petroleum Syndicate
PLC (Oil production & services)
487,202
246,100 British Sky Broadcasting Group PLC
(Media)
1,789,399
88,329 Cadcentre Group PLC (Computer
products & services)
375,010
145,930 Capita Group PLC (Computer products
& services)
1,231,806
396,400 Compass Group PLC (Food products &
services)
6,857,730
161,730 Datrontech Group PLC (Electronic
components & instruments)
324,398
95,451 David Brown Group PLC
(Manufacturing)
358,979
219,076 Dialog Corp. PLC(a) (Media)
649,979
218,900 Dixons Group PLC (Retail)
2,089,240
558,900 Electrocomponents PLC (Electronic
components & instruments)
5,432,381
151,325 Finelist Group PLC (Automobiles &
auto parts)
1,011,759
169,105 FirstGroup PLC (Transportation)
1,099,826
146,280 FKI PLC (Manufacturing)
503,684
179,148 GKN PLC (Automobiles & auto parts)
5,174,425
351,800 Hays PLC (Business & public
services)
5,980,303
122,686 Headlam Group PLC (Wholesale &
international trading)
771,575
163,629 Hewden Stuart PLC (Construction)
$ 503,251
43,464 Inspec Group PLC (Chemicals)
212,502
76,482 Jarvis PLC (Construction)
848,216
234,915 Jarvis Hotels PLC (Hotels)
624,330
65,428 Johnson Matthey PLC (Electronic
components & instruments)
662,739
148,668 Johnston Press PLC (Media)
546,697
51,052 Lex Service PLC (Retail)
516,267
76,885 London Clubs International PLC
(Casinos)
264,737
83,957 Low & Bonar PLC (Manufacturing)
468,716
165,655 Mayflower Corp. (The) PLC
(Automobiles & auto parts)
670,080
55,000 Misys PLC (Computer products &
services)
2,643,059
791,416 Mowlem, (John) & Company PLC
(Construction)
1,481,594
96,160 Newsquest PLC(a) (Media)
483,802
179,319 Partco Group PLC (Automobiles &
auto parts)
893,201
109,500 Siebe PLC (Machinery & engineering)
2,477,923
171,103 Skillsgroup PLC (Computer products
& services)
780,776
156,400 SmithKline Beecham PLC (Medical
products)
1,863,943
584,200 Vodafone Group PLC
(Telecommunication services)
6,396,012
138,045 Westminster Health Care Holdings
PLC (Healthcare)
913,739
288,900 Whitbread PLC (Beverages)
4,988,319
31,824 WWP Group PLC (Media)
201,871
- ------------
76,111,245
- --------------------------------------------------
- ----------
United States--2.3%
114,750 Baan Company NV(a) (Computer
products & services)
5,092,031
18,460 Dr. Solomon's Group PLC (ADR)(a)
(Computer products & services)
549,185
- ------------
5,641,216
Total commom stocks
(cost $140,257,468)
228,125,287
- ------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 6
<PAGE>
Portfolio of Investments as
of April 30, 1998 PRUDENTIAL
EUROPE GROWTH FUND, INC.
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Shares Description Value
(Note 1)
<C> <S>
<C>
----------------------------------------------
- -------------
PREFERRED STOCKS--3.3%
- --------------------------------------------------
- ----------
Federal Republic Of Germany--3.1%
2,368 Fresenius AG (Medical products)
$ 567,924
7,275 Henkel KGaA (Chemicals)
567,409
148 Hugo Boss AG (Textiles & apparel
manufacturing)
275,181
2,501 KSB AG (Manufacturing)
835,989
889 Porsche AG (Automobiles & auto
parts)
2,223,738
3,275 Wella AG (Cosmetics & toiletries)
2,983,078
- ------------
7,453,319
- --------------------------------------------------
- ----------
Netherlands--0.2%
11,400 Ballast Nedam NV (Construction)
538,625
- ------------
Total preferred stocks
(cost $6,038,433)
7,991,944
- ------------
Total long-term investments
(cost $146,295,901)
236,117,231
- ------------
Principal
Amount
(000)
SHORT-TERM INVESTMENTS--2.9%
- --------------------------------------------------
- ----------
Repurchase Agreement--2.9%
$7,146 Bear Stearns & Co. Inc.,
5.51%, dated 4/30/98, due 5/1/98
in the amount of $7,147,094
(cost $7,146,000; the value of
the collateral including accrued
interest is $7,395,492)
7,146,000
- ------------
- --------------------------------------------------
- ----------
Total Investments--99.1%
(cost $153,441,901; Note 4)
243,263,231
Other assets in excess of
liabilities--0.9%
2,313,096
- ------------
Net Assets--100%
$245,576,327
- ------------
- ------------
</TABLE>
- ---------------
(a) Non-income producing security.
ADR--American Depository Receipt.
The industry classification of portfolio holdings
and other assets in excess of
liabilities shown as a percentage of net assets as
of April 30, 1998 was as
follows:
Banking...........................................
.... 14.6%
Computer Products &
Services.......................... 8.7
Telecommunication
Services............................ 8.2
Automobiles & Auto
Parts.............................. 7.7
Electrical &
Electronics.............................. 4.7
Retail............................................
.... 4.6
Food Products &
Services.............................. 4.6
Machinery &
Engineering............................... 4.3
Construction......................................
.... 3.5
Beverages.........................................
.... 3.3
Medical
Products......................................
3.1
Telecommunication
Equipment........................... 2.7
Electronic Components &
Instruments................... 2.6
Oil Production &
Services............................. 2.5
Business & Public
Services............................ 2.4
Restaurants.......................................
.... 2.3
Insurance.........................................
.... 1.8
Waste
Management......................................
1.7
Media.............................................
.... 1.7
Manufacturing.....................................
.... 1.6
Cosmetics &
Toiletries................................ 1.2
Financial
Services....................................
1.2
Wholesale & International
Trading..................... 1.2
Building
Products.....................................
1.0
Miscellaneous.....................................
.... 5.0
Other assets in excess of liabilities
(including Joint Repurchase
Agreement).............. 3.8
- -----
100.0%
- -----
- -----
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 7
<PAGE>
Statement of Assets and Liabilities
PRUDENTIAL EUROPE GROWTH FUND, INC.
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Assets
April 30, 1998
<S>
<C>
Investments, at value (cost
$153,441,901).....................................
.............................. $ 243,263,231
Foreign currency, at value (cost
$1,807,415).......................................
......................... 1,799,620
Cash..............................................
..................................................
........ 142,548
Receivable for foreign currency
sold..............................................
.......................... 4,573,790
Receivable for investments
sold..............................................
............................... 1,222,722
Receivable for Fund shares
sold..............................................
............................... 3,071,227
Dividends and interest
receivable........................................
...................................
599,382
Other
assets............................................
..................................................
.. 675
- --------------
Total
assets............................................
.................................................
254,673,195
- --------------
Liabilities
Payable for foreign currency
purchased.........................................
............................. 5,708,164
Payable for Fund shares
reacquired........................................
..................................
2,153,749
Payable for investments
purchased.........................................
..................................
698,754
Accrued
expenses..........................................
..................................................
228,781
Distribution fee
payable...........................................
.........................................
159,878
Management fee
payable...........................................
...........................................
147,542
- --------------
Total
liabilities.......................................
.................................................
9,096,868
- --------------
Net
Assets............................................
..................................................
.... $ 245,576,327
- --------------
- --------------
Net assets were comprised of:
Common stock, at
par...............................................
...................................... $
12,605
Paid-in capital in excess of
par...............................................
.......................... 135,216,092
- --------------
135,228,697
Distributions in excess of net investment
income............................................
............. (2,136,884 )
Accumulated net realized gain on investments
and foreign currency
transactions...........................
22,662,552
Net unrealized appreciation on investments and
foreign
currencies........................................
89,821,962
- --------------
Net Assets, April 30,
1998..............................................
.................................... $
245,576,327
- --------------
- --------------
Class A:
Net asset value and redemption price per share
($55,507,359 / 2,787,849 shares of common
stock issued and
outstanding)...............................
$19.91
Maximum sales charge (5% of offering
price)............................................
.................. 1.05
- --------------
Maximum offering price to
public............................................
............................. $20.96
- --------------
- --------------
Class B:
Net asset value, offering price and redemption
price per share
($175,857,043 / 9,088,546 shares of common
stock issued and
outstanding)..............................
$19.35
- --------------
- --------------
Class C:
Net asset value, offering price and redemption
price per share
($11,121,710 / 573,859 shares of common
stock issued and
outstanding).................................
$19.38
- --------------
- --------------
Class Z:
Net asset value, offering price and redemption
price per share
($3,090,215 / 155,070 shares of common stock
issued and
outstanding)..................................
$19.93
- --------------
- --------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 8
<PAGE>
PRUDENTIAL EUROPE GROWTH FUND, INC.
Statement of Operations
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income
April 30, 1998
<S>
<C>
Income
Dividends (net of foreign withholding
taxes of $311,014)..................... $
2,780,854
Interest..................................
268,941
--
- ------------
Total income...........................
3,049,795
--
- ------------
Expenses
Management fee............................
1,582,883
Distribution fee--Class A.................
107,213
Distribution fee--Class B.................
1,474,915
Distribution fee--Class C.................
85,261
Transfer agent's fees and expenses........
297,000
Custodian's fees and expenses.............
250,000
Reports to shareholders...................
104,000
Registration fees.........................
47,000
Audit fees and expenses...................
35,000
Directors' fees and expenses..............
28,000
Amortization of organization expenses.....
26,678
Legal fees and expenses...................
15,000
Miscellaneous.............................
10,993
--
- ------------
Total operating expenses...............
4,063,943
--
- ------------
Net investment loss..........................
(1,014,148)
--
- ------------
Realized and Unrealized Gain (Loss) on
Investment and Foreign Currency Transactions
Net realized gain (loss) on:
Investment transactions...................
36,949,864
Foreign currency transactions.............
(967,463)
--
- ------------
35,982,401
--
- ------------
Net change in unrealized appreciation on:
Investment transactions...................
43,514,496
Foreign currency transactions.............
149,579
--
- ------------
43,664,075
--
- ------------
Net gain on investments and foreign
currencies................................
79,646,476
--
- ------------
Net Increase in Net Assets
Resulting from Operations.................... $
78,632,328
--
- ------------
--
- ------------
</TABLE>
<TABLE>
PRUDENTIAL EUROPE GROWTH FUND, INC.
Statement of Changes in Net Assets
<CAPTION>
Increase (Decrease) Year Ended
April 30,
in Net Assets 1998
1997
<S> <C>
<C>
Operations
Net investment loss.......... $ (1,014,148)
$ (149,582)
Net realized gain on
investment and foreign
currency transactions..... 35,982,401
15,600,006
Net change in unrealized
appreciation of
investments and foreign
currencies................ 43,664,075
14,880,202
-------------
- -------------
Net increase in net assets
resulting from
operations................ 78,632,328
30,330,626
-------------
- -------------
Dividends and distributions (Note 1):
Dividends in excess of net
investment income
Class A................... (321,821)
- --
Class B................... (81,896)
- --
Class C................... (4,853)
- --
Class Z................... (139,871)
- --
-------------
- -------------
(548,441)
- --
-------------
- -------------
Distributions from net
realized gains
Class A................... (4,137,694)
(1,314,232)
Class B................... (14,741,276)
(4,996,228)
Class C................... (873,579)
(297,634)
Class Z................... (1,346,354)
(382,973)
-------------
- -------------
(21,098,903)
(6,991,067)
-------------
- -------------
Fund share transactions (net of
share conversions) (Note 5):
Net proceeds from shares
sold...................... 432,031,984
563,381,129
Net asset value of shares
issued in reinvestment of
distributions............. 20,131,598
6,574,997
Cost of shares reacquired.... (461,615,189)
(576,650,878)
-------------
- -------------
Net decrease in net assets
from Fund share
transactions.............. (9,451,607)
(6,694,752)
-------------
- -------------
Total increase.................. 47,533,377
16,644,807
Net Assets
Beginning of year............... 198,042,950
181,398,143
-------------
- -------------
End of year..................... $ 245,576,327
$ 198,042,950
-------------
- -------------
-------------
- -------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 9
<PAGE>
Notes to Financial Statements
PRUDENTIAL EUROPE GROWTH FUND, INC.
- --------------------------------------------------
- ------------------------------
Prudential Europe Growth Fund, Inc. (the 'Fund')
is registered under the
Investment Company Act of 1940 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.
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
portfolio securities sold during
the fiscal period. Accordingly, such realized
foreign currency gains (losses)
related to portfolio securities are included in
the net realized gains on
investment transactions.
Net realized loss on foreign currency transactions
of $967,463 represents net
foreign exchange gains or losses from the sale 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. 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.
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.
- --------------------------------------------------
- ------------------------------
10
<PAGE>
Notes to Financial Statements
PRUDENTIAL EUROPE GROWTH FUND, INC.
- --------------------------------------------------
- ------------------------------
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
$177,000 of expenses were incurred
in connection with the organization of the Fund.
These costs have been deferred
and have been fully amortized as of the fiscal
year ended April 30, 1998.
Reclassification of Capital Accounts: The Fund
accounts and reports for
distributions to shareholders in accordance with
the American Institute of
Certified Public Accountants, Statement of
Position 93-2: Determination,
Disclosure, and Financial Statement Presentation
of Income, Capital Gain and
Return of Capital Distributions by Investment
Companies. The effect of applying
this statement was to decrease undistributed net
investment income and increase
accumulated net realized gain on investments and
foreign currency transactions
by $703,073 for the year ended April 30, 1998 due
to realized and recognized
currency losses during the period. Net investment
income, net realized gains and
net assets were not affected by this change.
- --------------------------------------------------
- ----------
Note 2. Agreements
The Fund has a management agreement with
Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has
responsibility for all
investment advisory services and supervises the
subadviser's performance of such
services. PIFM has entered into a subadvisory
agreement with The Prudential
Investment Corporation ('PIC'); PIC, through an
agreement with PRICOA Asset
Management Ltd. ('PRICOA'), furnishes investment
advisory services in connection
with the management of the Fund. PIFM pays for the
cost of the subadviser's
services, 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 PIFM 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.
Effective July 1, 1998, Prudential Investment
Management Services LLC will
become the distributor of the Fund and will serve
the Fund under the same terms
and conditions as under the arrangement with PSI.
Pursuant to the Class A, B and C Plans, the Fund
compensates 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
year ended April 30, 1998.
PSI has advised the Fund that it has received
approximately $81,800 in front-end
sales charges resulting from sales of Class A
shares during the year ended April
30, 1998. From these fees PSI paid such sales
charges to Pruco Securities
Corporation, an affiliated broker-dealer, which in
turn paid commissions to
sales persons and incurred other distribution
costs.
PSI has advised the Fund that for the year ended
April 1998 it received
approximately $335,600 and $6,500 in contingent
deferred sales charges imposed
upon certain redemptions by Class B and Class C
shareholders, respectively.
PSI, PIFM and PIC are indirect, wholly owned
subsidiaries of The Prudential
Insurance Company of America.
The Fund, along with other affiliated registered
investment companies (the
'Funds'), has a credit agreement (the 'Agreement')
with an unaffiliated lender.
The maximum commitment under the Agreement is
$200,000,000. Interest on any such
borrowings outstanding will be at market rates.
The purpose of the Agreement is
to serve as an alternative source of funding for
capital share redemptions. The
Fund has not borrowed any amounts pursuant to the
Agreement as of April 30,
1998. The Funds pay a commitment fee at an annual
rate of .055 of 1% on the
unused portion of the credit facility. The
commitment fee is accrued and paid
quarterly on a pro rata basis by the Funds. The
Agreement expired on December
30, 1997 and has been extended through December
29, 1998 under the same terms.
- --------------------------------------------------
- ----------
Note 3. Other Transactions With Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a
wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent. During the
year ended
- --------------------------------------------------
- ------------------------------
11
<PAGE>
Notes to Financial Statements
PRUDENTIAL EUROPE GROWTH FUND, INC.
- --------------------------------------------------
- ------------------------------
April 30, 1998, the Fund incurred fees of
approximately $243,300 for the
services of PMFS. As of April 30, 1998,
approximately $21,900 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
nonaffiliates.
- --------------------------------------------------
- ----------
Note 4. Portfolio Securities
Purchases and sales of investment securities,
other than short-term investments,
for the year ended April 30, 1998 were $99,882,501
and $132,624,827,
respectively.
The cost basis of investments for federal income
tax purposes at April 30, 1998
was $158,343,416 and, accordingly, net unrealized
appreciation for federal
income tax purposes was $84,919,815 (gross
unrealized appreciation--$85,954,761;
gross unrealized depreciation--$1,034,946).
The Fund will elect, for United States Federal
income tax purposes, to treat net
currency losses of approximately $393,168 incurred
in the six month period ended
April 30, 1998 as having been incurred in the
following fiscal year.
- --------------------------------------------------
- ----------
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
employee benefit plans qualified
under Section 401, 457 and 403(b)(7) of the
Internal Revenue Code, and
nonqualified plans for which the Fund is an
available option. 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.
Transactions in shares of common shares were as
follows:
<TABLE>
<CAPTION>
Class A Shares
Amount
- ----------------------------------- -----------
- -------------
<S> <C>
<C>
Year ended April 30, 1998:
Shares sold........................ 14,645,188
$ 246,604,700
Shares issued in reinvestment of
dividends and distributions...... 265,957
4,114,350
Shares reacquired.................. (14,809,778)
(249,777,100)
-----------
- -------------
Net increase in shares outstanding
before conversion................ 101,367
941,950
Shares issued upon conversion from
Class B.......................... 176,364
3,035,236
-----------
- -------------
Net increase in shares
outstanding...................... 277,731
$ 3,977,186
-----------
- -------------
-----------
- -------------
Year ended April 30, 1997:
Shares sold........................ 23,351,661
$ 344,533,412
Shares issued in reinvestment of
distributions.................... 80,872
1,196,902
Shares reacquired.................. (24,625,496)
(363,626,484)
-----------
- -------------
Net decrease in shares outstanding
before conversion................ (1,192,963)
(17,896,170)
Shares issued upon conversion from
Class B.......................... 211,034
3,125,390
-----------
- -------------
Net decrease in shares
outstanding...................... (981,929)
$ (14,770,780)
-----------
- -------------
-----------
- -------------
<CAPTION>
Class B
- -----------------------------------
<S> <C>
<C>
Year ended April 30, 1998:
Shares sold........................ 6,961,562
$ 115,370,566
Shares issued in reinvestment of
dividends and distributions...... 909,680
13,708,874
Shares reacquired.................. (7,814,335)
(128,395,833)
-----------
- -------------
Net increase in shares outstanding
before conversion................ 56,907
683,607
Shares issued upon conversion from
Class A.......................... (181,159)
(3,035,236)
-----------
- -------------
Net decrease in shares
outstanding...................... (124,252)
$ (2,351,629)
-----------
- -------------
-----------
- -------------
Year ended April 30, 1997:
Shares sold........................ 9,531,575
$ 140,295,556
Shares issued in reinvestment of
distributions.................... 324,391
4,710,146
Shares reacquired.................. (9,758,102)
(143,749,550)
-----------
- -------------
Net increase in shares outstanding
before conversion................ 97,864
1,256,152
Shares issued upon conversion
from Class A..................... (214,885)
(3,125,390)
-----------
- -------------
Net decrease in shares
outstanding...................... (117,021)
$ (1,869,238)
-----------
- -------------
-----------
- -------------
</TABLE>
- --------------------------------------------------
- ------------------------------
12
<PAGE>
Notes to Financial Statements
PRUDENTIAL EUROPE GROWTH FUND, INC.
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class C Shares
Amount
- ----------------------------------- -----------
- -------------
<S> <C>
<C>
Year ended April 30, 1998:
Shares sold........................ 3,938,227
$ 64,864,170
Shares issued in reinvestment of
dividends and distributions...... 54,970
829,494
Shares reacquired.................. (3,949,010)
(64,988,945)
-----------
- -------------
Net increase in shares
outstanding...................... 44,187
$ 704,719
-----------
- -------------
-----------
- -------------
Year ended April 30, 1997:
Shares sold........................ 4,507,770
$ 66,198,312
Shares issued in reinvestment of
distributions.................... 19,502
283,176
Shares reacquired.................. (4,571,336)
(67,391,048)
-----------
- -------------
Net decrease in shares
outstanding...................... (44,064)
$ (909,560)
-----------
- -------------
-----------
- -------------
<CAPTION>
Class Z
- -----------------------------------
<S> <C>
<C>
Year ended April 30, 1998:
Shares sold........................ 282,034
$ 5,192,548
Shares issued in reinvestment of
dividends and distributions...... 95,720
1,478,880
Shares reacquired.................. (992,837)
(18,453,311)
-----------
- -------------
Net decrease in shares
outstanding...................... (615,083)
$ (11,781,883)
-----------
- -------------
-----------
- -------------
Year ended April 30, 1997:
Shares sold........................ 862,103
$ 12,353,849
Shares issued in reinvestment of
distributions.................... 25,963
384,773
Shares reacquired.................. (117,928)
(1,883,796)
-----------
- -------------
Net increase in shares
outstanding...................... 770,138
$ 10,854,826
-----------
- -------------
-----------
- -------------
</TABLE>
- --------------------------------------------------
- ------------------------------
13
<PAGE>
Financial Highlights
PRUDENTIAL EUROPE GROWTH FUND, INC.
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class A Class B
-------
- ---------------------------------------------
- ---------------------
July 13, 1994(b)
Years Ended April 30, Through
Years Ended April 30,
-------
- ------------------------ April 30,
- ---------------------
1998(c)
1997 1996(c) 1995(c)
1998(c) 1997
-------
- ------- ------- ---------------- -----
- --- --------
<S> <C>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $ 15.46
$ 13.69 $ 11.77 $ 11.40 $
15.12 $ 13.49
-------
- ------- ------- ------ -----
- --- --------
Income from investment operations
Net investment income (loss)............ .01
.09 .06 .01 (.11)
(.04)
Net realized and unrealized gain on
investment and foreign currency
transactions......................... 6.38
2.24 1.86 .36 6.15
2.23
-------
- ------- ------- ------ -----
- --- --------
Total from investment operations..... 6.39
2.33 1.92 .37 6.04
2.19
-------
- ------- ------- ------ -----
- --- --------
Less Distributions
Distributions in excess of net
investment income....................
(.14) -- -- --
(.01) --
Distributions paid to shareholders from
net realized gains on investment and
foreign currency transactions........
(1.80) (.56) -- --
(1.80) (.56)
-------
- ------- ------- ------ -----
- --- --------
Total distributions..................
(1.94) (.56) -- --
(1.81) (.56)
-------
- ------- ------- ------ -----
- --- --------
Net asset value, end of period.......... $ 19.91
$ 15.46 $ 13.69 $ 11.77 $
19.35 $ 15.12
-------
- ------- ------- ------ -----
- --- --------
-------
- ------- ------- ------ -----
- --- --------
TOTAL RETURN(d):........................
44.93% 17.20% 16.31% 3.25%
43.35% 16.41%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)......... $55,507
$38,807 $47,789 $ 41,963
$175,857 $139,277
Average net assets (000)................ $42,885
$37,834 $47,183 $ 29,598
$147,492 $133,135
Ratios to average net assets:
Expenses, including distribution
fees..............................
1.39% 1.36% 1.53% 1.84%(a)
2.14% 2.11%
Expenses, excluding distribution
fees..............................
1.14% 1.11% 1.28% 1.59%(a)
1.14% 1.11%
Net investment income (loss).........
.08% .57% .44% .06%(a)
(.69)% (.27)%
For Class A, B, C and Z shares:
Portfolio turnover rate.................
50% 31% 65% 25%
<CAPTION>
<S> <C>
<C>
July 13, 1994(b)
Through
April 30,
1996(c)
1995(c)
--------
- ----------------
<S> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $ 11.69
$ 11.40
--------
- -------
Income from investment operations
Net investment income (loss)............
(.04) (.06)
Net realized and unrealized gain on
investment and foreign currency
transactions......................... 1.84
.35
--------
- -------
Total from investment operations..... 1.80
.29
--------
- -------
Less Distributions
Distributions in excess of net
investment income.................... --
- --
Distributions paid to shareholders from
net realized gains on investment and
foreign currency transactions........ --
- --
--------
- -------
Total distributions.................. --
- --
--------
- -------
Net asset value, end of period.......... $ 13.49
$ 11.69
--------
- -------
--------
- -------
TOTAL RETURN(d):........................
15.40% 2.54%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)......... $125,868
$106,081
Average net assets (000)................ $122,255
$ 85,623
Ratios to average net assets:
Expenses, including distribution
fees..............................
2.28% 2.59%(a)
Expenses, excluding distribution
fees..............................
1.28% 1.59%(a)
Net investment income (loss).........
(.33)% (.71)%(a)
For Class A, B, C and Z shares:
Portfolio turnover rate.................
</TABLE>
- ---------------
(a) Annualized.
(b) Commencement of class 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. 14
<PAGE>
Financial Highlights
PRUDENTIAL EUROPE GROWTH FUND, INC.
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class C Class Z
-------
- -------------------------------------------- -
- ------------------
July 13, 1994(b) Years Ended April
Years Ended April 30, Through
30,
-------
- ----------------------- April 30, -
- ------------------
1998(c)
1997 1996(c) 1995(c) 1998(c)
1997
-------
- ------ ------- ---------------- ------
- - -------
<S> <C>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $ 15.12
13.49 $11.69 $11.40 $ 15.51
$ 13.68
-------
- ------ ------- ----- ------
- - -------
Income from investment operations
Net investment income (loss)............
(.11) (.04) (.04 ) (.06)
.04 .02
Net realized and unrealized gain on
investment and foreign currency
transactions......................... 6.18
2.23 1.84 .35 6.37
2.37
-------
- ------ ------- ----- ------
- - -------
Total from investment operations..... 6.07
2.19 1.80 .29 6.41
2.39
-------
- ------ ------- ----- ------
- - -------
Less Distributions
Distributions in excess of net
investment income....................
(.01) -- -- --
(.19) --
Distributions paid to shareholders from
net realized gains on investment and
foreign currency transactions........
(1.80) (.56) -- --
(1.80) (.56)
-------
- ------ ------- ----- ------
- - -------
Total distributions..................
(1.81) (.56) -- --
(1.99) (.56)
-------
- ------ ------- ----- ------
- - -------
Net asset value, end of period.......... $ 19.38
$15.12 $13.49 $11.69 $
19.93 $ 15.51
-------
- ------ ------- ----- ------
- - -------
-------
- ------ ------- ----- ------
- - -------
TOTAL RETURN(d):........................
43.55% 16.41% 15.40 % 2.54%
44.95% 17.66%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)......... $11,122
$8,010 $7,741 $7,260 $
3,090 $11,949
Average net assets (000)................ $ 8,526
$8,002 $7,768 $6,094
$12,148 $ 7,958
Ratios to average net assets:
Expenses, including distribution
fees..............................
2.14% 2.11% 2.28 % 2.59%(a)
1.14% 1.11%
Expenses, excluding distribution
fees..............................
1.14% 1.11% 1.28 % 1.59%(a)
1.14% 1.11%
Net investment income (loss).........
(.66)% (.25)% (.30 )% (.71)%(a)
.26% .22%
<CAPTION>
April
15, 1996(b)
Through
April 30,
1996(c)
--------
- ---------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $
13.40
-
- ----
Income from investment operations
Net investment income (loss)............
.28
Net realized and unrealized gain on
investment and foreign currency
transactions......................... --
-
- ----
Total from investment operations.....
.28
-
- ----
Less Distributions
Distributions in excess of net
investment income.................... --
Distributions paid to shareholders from
net realized gains on investment and
foreign currency transactions........ --
-
- ----
Total distributions.................. --
-
- ----
Net asset value, end of period.......... $
13.68
-
- ----
-
- ----
TOTAL RETURN(d):........................
2.09%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)......... $
204(e)
Average net assets (000)................ $
203(e)
Ratios to average net assets:
Expenses, including distribution
fees..............................
1.28%(a)
Expenses, excluding distribution
fees..............................
1.28%(a)
Net investment income (loss).........
.54%(a)
</TABLE>
- ---------------
(a) Annualized.
(b) Commencement of class 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.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 15
<PAGE>
Report of Independant Accountants
PRUDENTIAL EUROPE GROWTH FUND, INC.
- --------------------------------------------------
- ------------------------------
The Shareholders and Board of Directors of
Prudential Europe Growth Fund, Inc.
In our opinion, the accompanying statement of
assets and liabilities, including
the portfolio of investments, and the related
statements of operations and of
changes in net assets and the financial highlights
present fairly, in all
material respects, the financial position of
Prudential Europe Growth Fund, Inc.
(the 'Fund') at April 30, 1998, the results of its
operations for the year then
ended and the changes in its net assets and the
financial highlights for each of
the two years in the period then ended, in
conformity with generally accepted
accounting principles. These financial statements
and financial highlights
(hereafter referred to as 'financial statements')
are the responsibility of the
Fund's management; our responsibility is to
express an opinion on these
financial statements based on our audits. We
conducted our audits of these
financial statements in accordance with generally
accepted auditing standards
which require that we plan and perform the audit
to obtain reasonable assurance
about whether the financial statements are free of
material misstatement. An
audit includes examining, on a test basis,
evidence supporting the amounts and
disclosures in the financial statements, assessing
the accounting principles
used and significant estimates made by management,
and evaluating the overall
financial statement presentation. We believe that
our audits, which included
confirmation of securities at April 30, 1998 by
correspondence with the
custodian and brokers and the application of
alternative auditing procedures
where confirmations from brokers were not
received, provide a reasonable basis
for our opinion expressed above. The accompanying
financial highlights for the
year ended April 30, 1996 and the period ended
April 30, 1995 were audited by
other independent accountants, whose opinion dated
June 13, 1996 was
unqualified.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
June 18, 1998
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 16
<PAGE>
Federal Income Tax Information
(Unaudited) PRUDENTIAL
EUROPE GROWTH FUND, INC.
- --------------------------------------------------
- ------------------------------
We are required by the Internal Revenue Code to
advise you within 60 days of the
Fund's fiscal year end (April 30, 1998) as to the
federal income tax status of
dividends paid by the Fund during such fiscal
year. Accordingly, we are advising
you that during its fiscal year ended April 30,
1998, the Fund paid an ordinary
distribution for Class A shares totaling $0.14 per
share, which is taxable as
ordinary income. The Fund paid an ordinary
distribution for Class B and Class C
shares totaling $0.01 per share, which is taxable
as ordinary income. The Fund
paid an ordinary distribution for Class Z shares
totaling $0.187 per share,
which is taxable as ordinary income. The Fund paid
distributions for Class A,
Class B, Class C and Class Z shares totaling $1.80
per share, comprised of
long-term capital gains, of which $0.66 was
taxable at the 28% rate gain and
$1.14 was taxable at the 20% rate gain. We wish to
advise you that the corporate
dividends received deduction for the Fund is zero.
For the purpose of preparing your annual federal
income tax return, however, you
should report the amounts as reflected on the
appropriate Form 1099-DIV or
substitute 1099-DIV.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 17
<PAGE>
Comparing A $10,000 Investment.
- --------------------------------------------------
- ---
Prudential Europe Growth Fund, Inc. vs.
the Morgan Stanley Capital International Europe
Index.
- --Prudential Europe Growth
Fund, Inc.
- --Morgan Stanley Capital
International World Index
Class A
(GRAPH)
Class B
(GRAPH)
Class C
(GRAPH)
Class Z
(GRAPH)
Past performance is not indicative of future
results and an investor's shares,
when redeemed, may be worth more or less than
their original value.
These graphs are furnished in accordance with SEC
regulations. They compare a
$10,000 investment in the Prudential Europe Growth
Fund (Class A, B, C and Z)
with a similar investment in the Morgan Stanley
Capital International Europe
Index (MSCI Index) by portraying the initial
account values at the commencement
of operations of each class, and subsequent
account values at the end of this
reporting period (April 30, 1998), as measured on
a quarterly basis, beginning
in 1994 for Class A, B, and C shares and 1996 for
Class Z shares. For purposes
of the graphs, and unless otherwise indicated, in
the accompanying tables it
has been assumed a) that the maximum applicable
front-end sales charge was
deducted from the initial $10,000 investment in
Class A shares; b) the maximum
applicable contingent deferred sales charge was
deducted from the value of the
investment in Class B and Class C shares, assuming
full redemption on April 30,
1998; c) all recurring fees (including management
fees) were deducted; and d)
all dividends and distributions were reinvested.
Class Z shares do not have a
sales charge. Class B shares will automatically
convert to Class A shares, on
a quarterly basis, beginning approximately seven
years after purchase. This
conversion feature is not reflected in the graph.
The MSCI Index is a weighted
index comprised of approximately 584 companies
listed on the stock exchanges of
13 European countries. The MSCI Index is an
unmanaged index and includes the
reinvestment of all dividends, but does not
reflect the payment of transaction
costs and advisory fees associated with an
investment in the Fund. The
securities held by the MSCI Index may differ
substantially from the securities
held in the Fund's portfolio. The MSCI Index is
not the only benchmark which
may be used to characterize performance of
European equity funds and other
indexes may portray different comparative
performance.
<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 Dedrick Gold
Robert F. Gunia
Don G. Hoff
Robert E. LaBlanc
Mendel A. Melzer, CFA
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
Robert C. Rosselot, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
PRICOA Asset Management Ltd.
Cutlers Court, 115 Houndsditch 4th Floor
London EC3A 7BU England
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 LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
The views expressed in this report and information
about the Fund's portfolio
holdings are for the period covered by this report
and are subject to change
thereafter.
This report is not authorized for distribution to
prospective investors unless
preceded or accompanied by a current prospectus.
74431N103 74431N301 MF160E
74431N202 74431N400 Cat. #42M081W
