(ICON)
Prudential
Europe
Growth
Fund, Inc.
SEMI
ANNUAL
REPORT
Oct. 31, 1998
(LOGO)
<PAGE>
Prudential Europe Growth Fund, Inc.
Performance At A Glance.
After very rapid gains early in the year, European stock
markets
reacted to a Russian financial crisis by tumbling 31%
between July
20 and October 5, which included the second-worst month in
30 years
(August). Through this volatile market, the Prudential
Europe Growth
Fund performed no worse than average in down movements and
better
in the upswings. Overall, despite our negative return for
the six-month
reporting period, we outperformed the Lipper Europe Average,
in part
because we owned relatively little in companies exposed to
emerging
market problems.
<TABLE>
Cumulative Total Returns1 As of 10/31/98
<CAPTION>
Six One Three Since
Months Year Years Inception2
<S> <C> <C> <C> <C>
Class A -6.98% 23.33% 65.25% 89.75%
Class B -7.13 22.66 61.43 83.37
Class C -7.17 22.63 61.58 83.55
Class Z -6.78 23.87 N/A 62.31
Lipper European
Region Fund Avg.3 -9.05 15.45 61.45 ***
</TABLE>
<TABLE>
Average Annual Total Returns1 As of 9/30/98
<CAPTION>
One Three Since
Year Years Inception2
<S> <C> <C> <C>
Class A 2.11% 12.80% 13.03%
Class B 1.90 13.10 13.35
Class C 5.89 13.92 13.54
Class Z 7.98 N/A 18.23
</TABLE>
Past performance is not indicative of future results.
Principal
and investment return will fluctuate so that an investor's
shares,
when redeemed, may be worth more or less than their original
cost.
1 Source: Prudential Investments Fund Management and Lipper,
Inc.
The cumulative total returns do not take into account sales
charges.
The average annual total returns do take into account
applicable
sales charges. The Fund charges a maximum front-end sales
load of
5% for Class A shares. Class B shares are subject to a
declining
contingent deferred sales charge (CDSC) of 5%, 4%, 3%, 2%,
1% and
1% for six years. Class B shares will automatically convert
to
Class A shares, on a quarterly basis, approximately seven
years
after purchase. Class C shares are subject to a front-end
sales
charge of 1% and a CDSC of 1% for 18 months. Class C shares
bought
before November 2, 1998, have a 1% CDSC if sold within one
year.
Class Z shares are not subject to a sales charge or
distribution fee.
2 Inception dates: Class A, B, and C, 7/13/94; Class Z,
4/15/96.
3 Lipper average returns are for all funds in each share
class for
the one- and three-year periods in the European Region Fund
category.
***Lipper Since Inception returns are 95.17% for Class A, B,
and C,
and 50.43% for Class Z based on all funds in each share
class.
How Investments Compared.
(As of 10/31/98)
(GRAPH)
Source: Lipper, Inc. 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
Portfolio
Managers' Report
The Prudential Europe Growth Fund invests primarily in
equity securities
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. 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.
Extraordinary Volatility.
In the first quarter of 1998 the MSCI Europe Index climbed
more
than 20%, while the third quarter was the third worst in 30
years.
The early climb was an overreaction to favorable earnings
trends.
The fall was an overreaction to fears of losses in
emerging markets. In fact, the European economies are
continuing
to grow. The companies most affected were banks exposed to
Russia
and utilities investing in Latin America. Among our
holdings,
long-term growth stories predominate.
Strategy Session.
We expect the economic environment to be relatively
soft in 1999, so we've focused on companies with strong-
pricing-power
and the ability to increase their earnings. We will continue
to avoid
companies that are significantly exposed
to emerging markets or to a slowing economy.
Our out-sourcing theme includes both food services, such as
Compass
Group, and business services, such as Hays. As European
companies
work harder to cut costs, they are increasingly turning to
out-sourcing
specialists.
European retailers are increasing in size and passing the
cost savings
on to consumers. Hennes & Mauritz, our fourth largest
holding and among
our best-performing, is a good example. They are a Sweden-
based clothing
store and expanding rapidly through Europe. Carrefour is a
French
example. Not only do better stores gain market share, they
increase
the size of the market because consumers spend more when
they get good
value.
Wireless telecommunications are gaining popularity in Europe
faster
than analysts had predicted -- wireless is above 20% of the
telecommunications market in some countries. Although it has
deeply penetrated the Scandinavian and Italian markets, the
major markets of France, Germany, and the United States lag,
offering opportunities for explosive growth. Nokia (a global
equipment company) and Vodafone (a regional service
provider)
are among our largest and the best-performing of our
holdings; we
also own Telecom Italia Mobile.
Portfolio Composition.
Sectors expressed as a percentage of
net assets as of 10/31/98.
(PIE CHART)
<PAGE>
What Went Well.
Many of our companies that had substantial earnings growth
from European
sources, and that were relatively isolated from emerging
markets, had
high six-month stock returns despite the poor markets. Our
telecommunications firms, Nokia and Vodafone, for example,
posted
gains of 34% and 26% (in U.S. dollars). Food and food
service
companies -- including Heineken, Compass Group, and
Telepizza -- had
good returns. Hennes & Mauritz, whose growth is in European
consumer
markets, returned 34% over the half year.
Other substantially positive contributions to our return
came
from KBC Bankverzekerin, one of the largest financial
services firms
in Belgium; SGE, a French construction firm; Roche Holding,
a Swiss
drug company; and British Sky Broadcasting, which dominates
U.K
pay-per-view television.What Could Have Gone Better.The
Asian economic
slowdown, the dollar weakening against European currencies,
and other
factors may slow European growth, but are unlikely to
reverse it.
Nonetheless, European stock prices fell as though recession
were imminent.
In an uncertain environment, the stocks of smaller companies
tend to
be disproportionately punished, and we held several stocks
in this
sector that were particularly hard hit. On average, they
reduced our
return substantially. Although we expect some of the highest
growth
rates in our portfolio to come from our small-company
holdings, we
are reducing our commitment in the sector because we expect
a softer
economy next year. Moreover, as European investors think
more on a
continental basis, markets may favor more familiar and
liquid stocks.
Baan, a Dutch enterprise resources software and services
company,
made strong contributions to our return in previous periods.
However,
the company's growth weakened, its stock fell sharply, and
we sold
our holding.
Five Largest
Holdings.
3.0% Compass Group PLC
Food Products & Services
3.0% Nokia Corp.
TelecommunicationEquipment
3.0% Vodafone Group PLC
Telecommunications
Services
2.8% Hennes & Mauritz AB
Retail
2.6% Banco Central
Hispanoamericano
Banking
Expressed as a percentage of net assetsas of 10/31/98.
Looking Ahead.
The Euro -- the unified European currency -- is going to be
among
the major world currencies. Product prices and company share
prices
will be more easily compared across borders. Stock portfolio
managers
in each country will restructure their portfolios to reflect
a
Europe-wide perspective. We expect to see higher share
turnover
and a premium paid for familiarity and liquidity as
inexperienced
European portfolio managers begin to broaden their
perspectives.
Of course, we have been managing our holdings on a Europe-
wide
basis all along. We will continue to favor outsourcing,
financial,
information technology, and telecommunication firms, which
maintain
their pricing power in a disinflationary age.
1
<PAGE>
Portfolio Managers Steve Auth, William Higgins, and
Jean-Yves Chereau discuss European prospects.
Fear And Opportunity?
Q. It comes as a shock to see a negative European return
after
the euphoria earlier in the year. What happened?
Steve Auth: Many financial institutions, particularly German
and
Swiss banks, held Russian debt and even more had lent to
companies
that were investing in Russia. The reporting requirements in
Europe
are not as strict as in the U.S., so the full
extent of these exposures was something of a mystery. When
Russia
defaulted on debt, investors reacted as if worst-case
scenarios
would be realized. Exposure to Latin America was another
factor
because emerging market economies also were in
question. In many cases, stock prices came down to levels
that
might have been appropriate if we were heading into a global
recession. But we're not. Since October -- especially after
the wave of interest rate reductions in the U.S. and Europe
- -- it
has become clearer that our economies are going to continue
to grow, although the rate of growth will slow and
projections
of corporate earnings are likely to come down.
Q. What impact is introduction of the Euro in the new year
likely to have?
Bill Higgins: I think the overall impact will be positive.
Both
industry and the financial markets will become more
efficient, to
the benefit of the European consumer. However, the Euro is
likely
to increase competition among manufacturers and
retailers. Companies that formerly were happy to dominate a
national market now will either reach out across Europe or
find others reaching into their territory. The single
currency
makes cross-border transactions easier and also makes
pricing
differences transparent. Prices for similar items had been
quite
different across Europe. We expect that to change with the
single
currency. Competition may foster convergence on labor and
taxation
standards.
Q. With all the Euro-inspired gains we've had, is most of
the good
news already in European stock prices?
Jean-Yves Chereau: We don't think so. Since the summer
correction,
European prices have stayed much below their former highs,
which
is not true for United States' stocks. We think European
earnings
growth is likely to remain strong in the years
ahead. Companies here still have a lot more restructuring
to do to improve their efficiency, and their economies are
just beginning to feel the positive impact of the financial
and policy reforms that were required as part of the
introduction of the
Euro. So our outlook for the longer term remains bullish.
2
<PAGE>
President's Letter December 18,
1998
(PHOTO)
Dear Shareholder:
As 1998 draws to a close, the news from the financial
markets is
decidedly mixed. After a series of sharp sell-offs in late
summer,
some stock prices began to rebound in early fall, helped by
three
interest rate cuts by the Federal Reserve.
There was other good news. U.S. Treasuries and Western
European
bonds appreciated during the year as investors fled troubled
Asian markets and other emerging markets. The U.S. economy
remained strong with steady growth and low inflation.
The periods of uncertainty we experienced in 1998 illustrate
why it is important to manage your expectations and
diversify
your portfolio.
Keep A Good Perspective.
Experienced mutual fund investors understand that financial
markets will always rise and fall -- that's what markets do.
Although past performance may not be indicative of future
results,
stocks and bonds have, over time, consistently produced
attractive returns that have kept ahead of inflation. In
fact,
investors who remained focused on the long term and did not
sell
during summer's volatility were rewarded. Stock prices, as
measured
by the Standard & Poor's 500 Index, recovered
strongly in November regaining lost ground and even setting
a new
record high.
Diversify. Diversify. Diversify.
Because asset classes seldom move in lockstep, owning a mix
of
stock, bond, and money market mutual funds can help lessen
the
effects of a market downturn over time. In fact, a well-
diversified
portfolio may retain or perhaps even gain value during
times of uncertainty.
We're Here To Help.
How diversified is your portfolio? Your Prudential
professional will
be glad to review your current allocations. He or she will
recommend
adjustments based upon your goals, market conditions, risk
tolerance,
and potential investment opportunities.
Thank you for your confidence in Prudential mutual funds.
We'll
continue to do our part in keeping you informed.
Sincerely,
Brian M. Storms
President
3
<PAGE>
Portfolio of Investments as of
October 31, 1998
(Unaudited) PRUDENTIAL EUROPE
GROWTH FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
--------------------------------------------------------
- ----
LONG-TERM INVESTMENTS--90.1%
COMMON STOCKS--87.8%
--------------------------------------------------------
- ----
Belgium--3.2%
8,963 Barco Industries NV
(Electrical & electronics) $
2,393,186
85,000 KBC Bancassurance Holding NV
(Banking)
5,941,718
---------
- ---
8,334,904
- ------------------------------------------------------------
Denmark--0.2%
17,227 GN Store Nord
(Telecommunication equipment)
569,821
- ------------------------------------------------------------
Federal Republic of Germany--5.2%
27,562 Deutsche Pfandbrief &
Hypothekenbank
AG (Banking)
2,183,030
12,290 Kamps AG(a)
(Food products & services)
558,788
1,165 MobilCom AG
(Telecommunication services)
339,579
14,250 SAP AG
(Computer products & services)
5,987,938
43,655 Volkswagen AG
(Automobiles & auto parts)
3,286,101
43,759 Winkler & Duennebier AG(a)
(Machinery & engineering)
1,389,007
---------
- ---
13,744,443
- ------------------------------------------------------------
Finland--3.0%
86,800 Nokia Corp.
(Telecommunication equipment)
7,919,946
- ------------------------------------------------------------
France--11.4%
4,147 Carrefour SA (Retail)
2,756,694
63,147 Dollfus-Mieg & Cie SA(a)
(Textiles & apparel
manufacturing)
830,881
5,628 Havas Advertising SA (Media)
957,612
20,121 Legrand SA (Electrical &
electronics)
5,135,425
36,116 Rexel SA (Electrical & electronics)
3,319,964
29,685 Sidel SA (Machinery & engineering) $
2,193,736
99,080 Societe Generale d'Entreprises SA
(Construction)
4,768,270
14,467 Sodexho Alliance SA
(Food products & services)
2,813,607
19,900 Total SA (Oil production &
services)
2,299,189
57,100 Valeo SA (Automobiles & auto parts)
4,950,451
---------
- ---
30,025,829
- ------------------------------------------------------------
Ireland--1.1%
341,662 Anglo Irish Bank Corp. PLC
(Banking)
827,683
30,624 Bank of Ireland (Banking)
566,772
40,119 CRH PLC (Building products)
588,568
146,147 DCC PLC (Diversified operations)
912,598
41,382 Fyffes PLC (Food products &
services)
73,474
---------
- ---
2,969,095
- ------------------------------------------------------------
Italy--7.9%
530,338 Autogrill SpA (Restaurants)
4,045,087
963,000 Istituto Nazionale delle
Assicurazioni (Insurance)
2,657,325
936,605 Olivetti SpA (Office furnishings)
2,292,554
987,386 Telecom Italia Mobile SpA
(Telecommunication services)
5,741,910
1,126,961 Unicredito Italiano SpA (Banking)
6,061,110
---------
- ---
20,797,986
- ------------------------------------------------------------
Netherlands--5.8%
39,650 Benckiser NV
(Household products)
2,250,998
40,157 DOCdata NV(a) (Manufacturing)
678,122
32,548 Getronics NV
(Computer products & services)
1,352,265
54,458 Hagemeyer NV
(Wholesale & international
trading)
1,716,623
83,027 Heineken NV (Beverages)
4,428,721
12,737 Koninklijke Frans Maas Groep NV
(Transportation services)
415,151
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments as of
October 31, 1998
(Unaudited) PRUDENTIAL EUROPE
GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
--------------------------------------------------------
- ---
Netherlands (cont'd.)
25,392 Nutreco Holdings NV
(Food products & services) $
864,384
6,606 Prolion Holdings NV(a)
(Machinery & engineering)
623,286
41,600 Royal Dutch Petroleum Co.
(Oil production & services)
2,011,573
46,982 Royal Volker Wessels Stevin NV
(Construction)
931,899
---------
- ---
15,273,022
- ------------------------------------------------------------
Norway--2.0%
168,705 Agresso Group ASA(a)
(Computer products & services)
619,510
84,178 ASK ASA(a)
(Computer products & services)
520,915
50,405 Tandberg Television ASA(a)
(Telecommunication equipment)
466,165
126,975 Tomra System ASA
(Waste management)
3,574,749
---------
- ---
5,181,339
- ------------------------------------------------------------
Spain--7.7%
18,220 Azucarera Ebro Agricolas, SA(a)
(Food products & services)
398,452
618,588 Banco Central Hispanoamericano
(Banking)
6,840,911
19,757 Centros Comerciales Continente, SA
(Retail)
590,136
134,181 Telefonica de Espana SA
(Telecommunication services)
6,069,183
703,533 Tele Pizza SA(a) (Restaurants)
5,753,927
35,799 Union Electrica Fenosa SA
(Electrical & electronics)
581,754
---------
- ---
20,234,363
- ------------------------------------------------------------
Sweden--4.2%
112,800 Astra AB (Healthcare)
1,776,618
53,361 Enator AB
(Computer products & services)
1,289,824
104,200 Hennes & Mauritz AB (Retail)
7,368,502
14,876 NetCom AB(a)
(Telecommunication services) $
560,406
---------
- ---
10,995,350
- ------------------------------------------------------------
Switzerland--7.7%
1,583 Ares-Serono Group (Medical
products)
2,385,102
1,423 Julius Baer Holding AG (Banking)
4,370,199
2,000 Kardex AG (Electrical &
electronics)
532,820
9,055 Mikron Holding AG
(Machinery & engineering)
1,889,669
1,332 Nestle SA (Food products &
services)
2,838,866
369 Phonak Holding AG (Medical
products)
409,606
2,244 PubliGroupe SA (Media)
597,824
290 Roche Holding AG (Medical products)
3,390,809
417 Sarna Kunststoff Holding AG
(Building products)
583,238
3,002 Valora Holding AG (Restaurants)
809,760
4,344 Zurich Versicherungs-Gesellschaft
AG
(Insurance)
2,645,684
---------
- ---
20,453,577
- ------------------------------------------------------------
United Kingdom--28.2%
190,000 Allied Irish Banks PLC (Banking)
2,728,955
90,428 Arriva PLC (Diversified operations)
555,552
232,643 Baird, (William) PLC
(Textiles & apparel
manufacturing)
467,333
296,251 Bank of Ireland (Banking)
5,417,972
204,630 Barclays PLC (Banking)
4,370,946
151,234 British-Borneo Oil & Gas PLC
(Oil production & services)
568,357
425,608 British Sky Broadcasting Group PLC
(Media)
3,469,718
17,683 Bodycote International PLC
(Manufacturing)
253,091
129,471 Cadcentre Group PLC
(Computer products & services)
509,326
152,391 Capita Group PLC
(Computer products & services)
1,533,166
792,800 Compass Group PLC
(Food products & services)
7,962,883
163,904 Datrontech Group PLC
(Electronic components &
instruments)
76,825
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 5
<PAGE>
Portfolio of Investments as of
October 31, 1998
(Unaudited) PRUDENTIAL EUROPE
GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
--------------------------------------------------------
- ---
United Kingdom (cont'd.)
263,478 Dixons Group PLC (Retail) $
2,813,977
607,274 Electrocomponents PLC
(Electronic components &
instruments)
4,005,312
187,659 Finelist Group PLC
(Automobiles & auto parts)
376,969
385,683 GKN PLC (Automobiles & auto parts)
4,646,404
111,806 Games Workshop Group PLC (Retail)
1,029,398
22,861 Geest PLC (Food products &
services)
179,866
351,800 Hays PLC (Business & public
services)
5,164,062
184,695 Headlam Group PLC
(Wholesale & international
trading)
587,441
112,519 Jarvis PLC (Construction)
1,186,648
93,565 Johnson Matthey PLC
(Electronic components &
instruments)
527,836
167,917 Low & Bonar PLC (Manufacturing)
584,673
153,172 Matalan PLC(a) (Retail)
717,948
389,000 Mayflower Corp. (The) PLC
(Automobiles & auto parts)
856,310
391,300 Misys PLC
(Computer products & services)
2,757,702
292,805 Mowlem, (John) & Company PLC
(Construction)
448,492
102,735 Securicor PLC
(Business & public services)
756,705
571,200 Siebe PLC (Machinery & engineering)
2,342,662
293,327 Skillsgroup PLC
(Computer products & services)
964,873
626,282 SkyePharma PLC(a) (Medical
products)
608,070
232,100 SmithKline Beecham PLC
(Medical products)
2,882,933
584,200 Vodafone Group PLC
(Telecommunication services)
7,813,827
207,396 Westminster Health Care Holdings
PLC (Healthcare)
899,198
314,916 Whitbread PLC (Beverages)
4,254,257
55,834 WWP Group PLC (Media)
275,725
---------
- ---
74,595,412
United States--0.2%
32,341 Saville System PLC (ADR)(a)
(Computer products & services) $
545,754
---------
- ---
Total commom stocks
(cost $166,415,497)
231,640,841
---------
- ---
PREFERRED STOCKS--2.3%
- ------------------------------------------------------------
Federal Republic of Germany--2.3%
13,025 Fielmann AG (Retail)
586,694
665 Hugo Boss AG
(Textiles & apparel
manufacturing)
1,037,335
1,025 Porsche AG (Automobiles & auto
parts)
1,815,804
3,627 Wella AG (Cosmetrics & toiletries)
2,609,589
---------
- ---
Total preferred stocks
(cost $6,409,423)
6,049,422
---------
- ---
Total long-term investments
(cost $172,824,920)
237,690,263
---------
- ---
Principal
Amount
(000)
SHORT-TERM INVESTMENTS--4.5%
- ------------------------------------------------------------
Repurchase Agreement--4.5%
$11,999 Bear Stearns & Co. Inc.,
5.38%, dated 10/30/98, due
11/2/98 in the amount of
$12,004,380 (cost $11,999,000;
the value of the collateral
including accrued interest
$12,213,822)
11,999,000
---------
- ---
- ------------------------------------------------------------
Total Investments--94.6%
(cost $184,823,920; Note 4)
249,689,263
Other assets in excess of
liabilities--5.4%
14,247,851
---------
- ---
Net Assets--100%
$263,937,114
---------
- ---
---------
- ---
</TABLE>
- ---------------
(a) Non-income producing security.
ADR--American Depository Receipt.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 6
<PAGE>
Portfolio of Investments as of
October 31, 1998
(Unaudited) PRUDENTIAL EUROPE
GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
The industry classification of portfolio holdings and other
assets in excess of
liabilities shown as a percentage of net assets as of
October 31, 1998 was as
follows:
Banking...............................................
14.9%
Telecommunication Services............................
7.8
Automobiles & Auto Parts..............................
6.0
Retail................................................
6.0
Food Products & Services..............................
5.9
Computer Products & Services..........................
5.5
Electrical & Electronics..............................
4.5
Restaurants...........................................
4.0
Medical Products......................................
3.7
Telecommunication Equipment...........................
3.4
Beverages.............................................
3.3
Machinery & Engineering...............................
3.2
Construction..........................................
2.8
Business & Public Services............................
2.8
Insurance.............................................
2.0
Media.................................................
2.0
Oil Production & Services.............................
1.8
Electronic Components & Instruments...................
1.7
Waste Management......................................
1.4
Cosmetics & Toiletries................................
1.0
Healthcare............................................
1.0
Miscellaneous.........................................
5.4
Other assets in excess of liabilities
(including Joint Repurchase Agreement)..............
9.9
----
- -
100.0%
----
- -
----
- -
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 7
<PAGE>
Statement of Assets and Liabilities
(Unaudited) PRUDENTIAL EUROPE
GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Assets
October 31, 1998
<S>
<C>
Investments, at value (cost
$184,823,920)...............................................
.................. $249,689,263
Foreign currency, at value (cost
$14,706,313)................................................
............. 14,863,971
Receivable for foreign currency
sold........................................................
.............. 1,981,413
Receivable for Fund shares
sold........................................................
................... 456,454
Dividends and interest
receivable..................................................
....................... 365,150
Other
assets......................................................
........................................ 87
- ----------------
Total
assets......................................................
..................................... 267,356,338
- ----------------
Liabilities
Bank
overdraft...................................................
.........................................
422,885
Payable for foreign currency
purchased...................................................
................. 1,262,315
Forward currency contracts-amounts payable from
counterparties............................................
915,067
Payable for Fund shares
reacquired..................................................
...................... 413,029
Distribution fee
payable.....................................................
............................. 163,398
Management fee
payable.....................................................
............................... 154,901
Accrued
expenses....................................................
...................................... 87,629
- ----------------
Total
liabilities.................................................
..................................... 3,419,224
- ----------------
Net
Assets......................................................
..........................................
$263,937,114
- ----------------
- ----------------
Net assets were comprised of:
Common stock, at
par.........................................................
.......................... $ 14,567
Paid-in capital in excess of
par.........................................................
.............. 175,984,537
- ----------------
175,999,104
Accumulated net investment
loss........................................................
................ (2,073,749)
Accumulated net realized gain on investments and foreign
currency transactions.........................
25,886,845
Net unrealized appreciation on investments and foreign
currencies......................................
64,124,914
- ----------------
Net Assets, October 31,
1998........................................................
...................... $263,937,114
- ----------------
- ----------------
Class A:
Net asset value and redemption price per share
($62,760,652 / 3,389,030 shares of common stock issued
and outstanding).............................
$18.52
Maximum sales charge (5% of offering
price)......................................................
...... .97
- ----------------
Maximum offering price to
public......................................................
................. $19.49
- ----------------
- ----------------
Class B:
Net asset value, offering price and redemption price per
share
($180,090,272 / 10,020,009 shares of common stock
issued and outstanding)...........................
$17.97
- ----------------
- ----------------
Class C:
Net asset value, offering price and redemption price per
share
($12,676,541 / 704,660 shares of common stock issued
and outstanding)...............................
$17.99
- ----------------
- ----------------
Class Z:
Net asset value, offering price and redemption price per
share
($8,409,649 / 452,834 shares of common stock issued
and outstanding)................................
$18.57
- ----------------
- ----------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 8
<PAGE>
PRUDENTIAL EUROPE GROWTH FUND, INC.
Statement of Operations (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Loss October 31,
1998
<S> <C>
Income
Dividends (net of foreign withholding
taxes of $256,229)................... $ 2,027,861
Interest................................ 380,926
--------------
- --
Total income......................... 2,408,787
--------------
- --
Expenses
Management fee.......................... 1,013,930
Distribution fee--Class A............... 79,070
Distribution fee--Class B............... 939,660
Distribution fee--Class C............... 61,682
Transfer agent's fees and expenses...... 161,000
Custodian's fees and expenses........... 156,000
Reports to shareholders................. 50,000
Registration fees....................... 24,000
Audit fees and expenses................. 18,000
Directors' fees and expenses............ 14,000
Legal fees and expenses................. 8,000
Miscellaneous........................... 2,097
--------------
- --
Total operating expenses............. 2,527,439
--------------
- --
Net investment loss........................
(118,652)
--------------
- --
Realized and Unrealized Gain (Loss) on
Investment and Foreign Currency
Transactions
Net realized gain on:
Investment transactions................. 3,224,293
Foreign currency transactions........... 181,787
--------------
- --
3,406,080
--------------
- --
Net change in unrealized depreciation of:
Investment transactions.................
(24,955,988)
Foreign currency transactions...........
(741,060)
--------------
- --
(25,697,048)
--------------
- --
Net loss on investments and foreign
currencies..............................
(22,290,968)
--------------
- --
Net Decrease in Net Assets
Resulting from Operations..................
$(22,409,620)
--------------
- --
--------------
- --
</TABLE>
PRUDENTIAL EUROPE GROWTH FUND, INC.
Statement of Changes in Net Assets (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year
Ended
Increase October 31, April
30,
in Net Assets 1998 1998
<S> <C> <C>
Operations
Net investment loss.......... $ (118,652) $
(1,014,148)
Net realized gain on
investment and foreign
currency transactions..... 3,406,080
35,982,401
Net change in unrealized
appreciation/depreciation
of investments and foreign
currencies................ (25,697,048)
43,664,075
------------- ---------
- ----
Net increase/decrease in net
assets resulting from
operations................ (22,409,620)
78,632,328
------------- ---------
- ----
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)
Class B................... --
(14,741,276)
Class C................... --
(873,579)
Class Z................... --
(1,346,354)
------------- ---------
- ----
--
(21,098,903)
------------- ---------
- ----
Fund share transactions (net of
share conversions) (Note 5):
Net proceeds from shares
sold...................... 158,851,871
432,031,984
Net asset value of shares
issued in reinvestment of
distributions............. --
20,131,598
Cost of shares reacquired.... (118,081,464)
(461,615,189)
------------- ---------
- ----
Net increase/decrease in net
assets from Fund share
transactions.............. 40,770,407
(9,451,607)
------------- ---------
- ----
Total increase.................. 18,360,787
47,533,377
Net Assets
Beginning of period............. 245,576,327
198,042,950
------------- ---------
- ----
End of period................... $ 263,937,114 $
245,576,327
------------- ---------
- ----
------------- ---------
- ----
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 9
<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 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 period, the Fund does
not isolate that
portion of the results of operations arising as a result of
changes in the
foreign exchange rates from the fluctuations arising from
changes in the market
prices of securities held at period end. Similarly, the Fund
does not isolate
the effect of changes in foreign exchange rates from the
fluctuations arising
from changes in the market prices of portfolio securities
sold during the
period. Accordingly, such realized foreign currency gains
(losses) related to
portfolio securities are included in the net realized gains
on investment
transactions.
Net realized gain on foreign currency transactions of
$181,787 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 period
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 (Unaudited) 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.
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 increase undistributed net investment
income and decrease
accumulated net realized gain on investments and foreign
currency transactions
by $181,787 for the six months ended October 31, 1998 due to
realized and
recognized currency gains 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 had a distribution agreement with Prudential
Securities Incorporated
('PSI'), which acted as the distributor of the Class A, B, C
and Class Z shares
of the Fund through May 31, 1998. Prudential Investment
Management Services LLC
('PIMS') became the distributor of the Fund effective June
1, 1998 and is
serving the Fund under the same terms and conditions as
under the arrangement
with PSI. The Fund compensated PSI and PIMS 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 PIMS as distributor
of the Class Z
shares of the Fund.
Pursuant to the Class A, B and C Plans, the Fund compensates
PSI and PIMS for
distribution-related activities at an annual rate of up to
.30 of 1%, 1% and 1%,
of the average daily net assets of the Class A, B and C
shares, respectively.
Such expenses under the Plans were .25 of 1%, 1% and 1% of
the average daily net
assets of the Class A, B and C shares, respectively, for the
six months ended
October 31, 1998.
PSI and PIMS have advised the Fund that they received
approximately $226,100 in
front-end sales charges resulting from sales of Class A
shares during the six
months ended October 31, 1998. From these fees, PSI paid
such sales charges to
affiliated broker-dealers, which in turn paid commissions to
salespersons and
incurred other distribution costs.
PSI and PIMS have advised the Fund that for the six months
ended October 31,
1998, they received approximately $121,200 and $2,800 in
contingent deferred
sales charges imposed upon certain redemptions by Class B
and Class C
shareholders, respectively.
PIFM, PIC, PIMS and PSI 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 October 31,
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 six months
ended October 31,
1998, the Fund incurred fees of approximately $159,200 for
the services of PMFS.
As of October 31, 1998, approximately $28,200 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.
- ------------------------------------------------------------
- --------------------
11
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL
EUROPE GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than
short-term investments,
for the six months ended October 31, 1998 were $92,608,273
and $67,571,934,
respectively.
The cost basis of investments for federal income tax
purposes at October 31,
1998 was $184,913,243 and, accordingly, net unrealized
appreciation for federal
income tax purposes was $64,776,020 (gross unrealized
appreciation--$75,379,026;
gross unrealized depreciation--$10,603,006).
At October 31, 1998, the Fund had outstanding forward
currency contracts, to
sell foreign currencies, as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date
Current
Sale Contracts Receivable
Value Depreciation
<S> <C> <C>
<C>
- ----------------------------- --------------- -------
- ---- -------------
German Deutschemarks,
expiring 12/3/98 - 2/19/99.. $39,500,000
$40,415,067 $ (915,067)
- -------------
- -------------
</TABLE>
- ------------------------------------------------------------
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%. 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. Prior to Novmber 2,
1998, Class C shares
were sold with a contingent deferred sales charge of 1%
during the first year.
Effective November 2, 1998, Class C shares are sold with a
front-end sales
charge of 1% and a contingent deferred sales charge of 1%
during the first 18
months. Class B shares 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 qualify 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>
Six months ended October 31, 1998:
Shares sold........................ 3,533,714 $
68,497,210
Shares issued in reinvestment of
dividends and distributions...... --
- --
Shares reacquired.................. (3,021,975)
(57,942,948)
----------- ---------
- ----
Net increase in shares outstanding
before conversion................ 511,739
10,554,262
Shares issued upon conversion from
Class B.......................... 89,442
1,744,336
----------- ---------
- ----
Net increase in shares
outstanding...................... 601,181 $
12,298,598
----------- ---------
- ----
----------- ---------
- ----
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
----------- ---------
- ----
----------- ---------
- ----
<CAPTION>
Class B
- -----------------------------------
<S> <C> <C>
Six months ended October 31, 1998:
Shares sold........................ 2,961,124 $
57,339,292
Shares issued in reinvestment of
dividends and distributions...... --
- --
Shares reacquired.................. (1,937,540)
(35,809,224)
----------- ---------
- ----
Net increase in shares outstanding
before conversion................ 1,023,584
21,530,068
Shares issued upon conversion from
Class A.......................... (92,121)
(1,744,336)
----------- ---------
- ----
Net increase in shares
outstanding...................... 931,463 $
19,785,732
----------- ---------
- ----
----------- ---------
- ----
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)
----------- ---------
- ----
----------- ---------
- ----
</TABLE>
- ------------------------------------------------------------
- --------------------
12
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL
EUROPE GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class C Shares Amount
- ----------------------------------- ----------- ---------
- ----
<S> <C> <C>
Six months ended October 31, 1998:
Shares sold........................ 760,835 $
14,492,730
Shares issued in reinvestment of
dividends and distributions...... --
- --
Shares reacquired.................. (630,034)
(11,945,819)
----------- ---------
- ----
Net increase in shares
outstanding...................... 130,801 $
2,546,911
----------- ---------
- ----
----------- ---------
- ----
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
----------- ---------
- ----
----------- ---------
- ----
<CAPTION>
Class Z
- -----------------------------------
<S> <C> <C>
Six months ended October 31, 1998:
Shares sold........................ 931,049 $
18,522,639
Shares issued in reinvestment of
dividends and distributions...... --
- --
Shares reacquired.................. (633,285)
(12,383,473)
----------- ---------
- ----
Net increase in shares
outstanding...................... 297,764 $
6,139,166
----------- ---------
- ----
----------- ---------
- ----
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)
----------- ---------
- ----
----------- ---------
- ----
</TABLE>
- ------------------------------------------------------------
Note 6. Dividends
On December 11, 1998 the Board of Directors of the Fund
declared the following
dividends per share, payable on December 15, 1998 to
shareholders of record on
December 14, 1998:
<TABLE>
<CAPTION>
Class B
Class A and C
Class Z
-------- -------- ---
- -----
<S> <C> <C> <C>
Ordinary Income.................. $ .24 $ .10 $
.28
Short-Term Capital Gains......... $ .15 $ .15 $
.15
Long-Term Capital Gains.......... $ 1.03 $ 1.03 $
1.03
</TABLE>
- ------------------------------------------------------------
- --------------------
13
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL
EUROPE GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class A
- -----------------------------------------------
Six Months
Ended Years Ended April 30,
October 31, -------------------------------
1998(c) 1998(c) 1997 1996(c)
- ----------- ------- ------- -------
<S>
<C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period......................... $ 19.91 $ 15.46
$ 13.69 $ 11.77
- ----------- ------- ------- -------
Income from investment operations
Net investment
income........................................ .04
.01 .09 .06
Net realized and unrealized gain (loss) on investment and
foreign currency
transactions............................. (1.43)
6.38 2.24 1.86
- ----------- ------- ------- -------
Total from investment
operations.......................... (1.39)
6.39 2.33 1.92
- ----------- ------- ------- -------
Less Distributions
Distributions in excess of net investment
income............. -- (.14) --
- --
Distributions paid to shareholders from net realized gains
on
investment and foreign currency
transactions.............. -- (1.80)
(.56) --
- ----------- ------- ------- -------
Total
distributions....................................... -
- - (1.94) (.56) --
- ----------- ------- ------- -------
Net asset value, end of
period............................... $ 18.52 $
19.91 $ 15.46 $ 13.69
- ----------- ------- ------- -------
- ----------- ------- ------- -------
TOTAL
RETURN(d):.............................................
(6.98)% 44.93% 17.20% 16.31%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000).............................. $62,761
$55,507 $38,807 $47,789
Average net assets
(000)..................................... $62,740
$42,885 $37,834 $47,183
Ratios to average net assets:
Expenses, including distribution
fees..................... 1.32%(a) 1.39%
1.36% 1.53%
Expenses, excluding distribution
fees..................... 1.07%(a) 1.14%
1.11% 1.28%
Net investment
income..................................... .44%(a)
.08% .57% .44%
For Class A, B, C and Z shares:
Portfolio turnover
rate...................................... 27%
50% 31% 65%
<CAPTION>
July 13, 1994(b)
Through
April 30,
1995(c)
- ----------------
<S>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period......................... $ 11.40
- ------
Income from investment operations
Net investment
income........................................ .01
Net realized and unrealized gain (loss) on investment and
foreign currency
transactions............................. .36
- ------
Total from investment
operations.......................... .37
- ------
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............................... $ 11.77
- ------
- ------
TOTAL
RETURN(d):.............................................
3.25%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000).............................. $ 41,963
Average net assets
(000)..................................... $ 29,598
Ratios to average net assets:
Expenses, including distribution
fees..................... 1.84%(a)
Expenses, excluding distribution
fees..................... 1.59%(a)
Net investment
income.....................................
.06%(a)
For Class A, B, C and Z shares:
Portfolio turnover
rate...................................... 25%
</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 (Unaudited) PRUDENTIAL
EUROPE GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class B
- --------------------------------------------------
Six Months
Ended Years Ended April 30,
October 31, ----------------------------------
1998(c) 1998(c) 1997 1996(c)
- ----------- -------- -------- --------
<S>
<C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period......................... $ 19.35 $ 15.12
$ 13.49 $ 11.69
- ----------- -------- -------- --------
Income from investment operations
Net investment
loss..........................................
(.03) (.11) (.04) (.04)
Net realized and unrealized gain (loss) on investment and
foreign currency
transactions............................. (1.35)
6.15 2.23 1.84
- ----------- -------- -------- --------
Total from investment
operations.......................... (1.38)
6.04 2.19 1.80
- ----------- -------- -------- --------
Less Distributions
Distributions in excess of net investment
income............. -- (.01) --
- --
Distributions paid to shareholders from net realized gains
on
investment and foreign currency
transactions.............. -- (1.80)
(.56) --
- ----------- -------- -------- --------
Total
distributions.......................................
- -- (1.81) (.56) --
- ----------- -------- -------- --------
Net asset value, end of
period............................... $ 17.97 $
19.35 $ 15.12 $ 13.49
- ----------- -------- -------- --------
- ----------- -------- -------- --------
TOTAL
RETURN(d):.............................................
(7.13)% 43.35% 16.41% 15.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000).............................. $ 180,090
$175,857 $139,277 $125,868
Average net assets
(000)..................................... $ 186,400
$147,492 $133,135 $122,255
Ratios to average net assets:
Expenses, including distribution
fees..................... 2.07%(a) 2.14%
2.11% 2.28%
Expenses, excluding distribution
fees..................... 1.07%(a) 1.14%
1.11% 1.28%
Net investment
loss.......................................
(.27)%(a) (.69)% (.27)% (.33)%
<CAPTION>
July 13, 1994(b)
Through
April 30,
1995(c)
- ----------------
<S>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period......................... $ 11.40
- -------
Income from investment operations
Net investment
loss..........................................
(.06)
Net realized and unrealized gain (loss) on investment and
foreign currency
transactions............................. .35
- -------
Total from investment
operations.......................... .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............................... $ 11.69
- -------
- -------
TOTAL
RETURN(d):.............................................
2.54%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000).............................. $106,081
Average net assets
(000)..................................... $ 85,623
Ratios to average net assets:
Expenses, including distribution
fees..................... 2.59%(a)
Expenses, excluding distribution
fees..................... 1.59%(a)
Net investment
loss.......................................
(.71)%(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.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 15
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL
EUROPE GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class C
- ------------------------------------------------------------
- -------
Six Months July 13,
1994(b)
Ended Years Ended April 30, Through
October 31, ------------------------------ April
30,
1998(c) 1998(c) 1997 1996(c) 1995(c)
- ----------- ------- ------ ------- ---------
- -------
<S>
<C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period......................... $ 19.38 $ 15.12
13.49 $11.69 $11.40
- ----------- ------- ------ ------- ---
- --
Income from investment operations
Net investment
loss.......................................... (.03)
(.11) (.04) (.04) (.06)
Net realized and unrealized gain (loss) on investment and
foreign currency
transactions............................. (1.36)
6.18 2.23 1.84 .35
- ----------- ------- ------ ------- ---
- --
Total from investment
operations.......................... (1.39)
6.07 2.19 1.80 .29
- ----------- ------- ------ ------- ---
- --
Less Distributions
Distributions in excess of net investment
income............. -- (.01) --
- -- --
Distributions paid to shareholders from net realized gains
on
investment and foreign currency
transactions.............. -- (1.80)
(.56) -- --
- ----------- ------- ------ ------- ---
- --
Total
distributions....................................... -
- - (1.81) (.56) -- --
- ----------- ------- ------ ------- ---
- --
Net asset value, end of
period............................... $ 17.99 $
19.38 $15.12 $13.49 $11.69
- ----------- ------- ------ ------- ---
- --
- ----------- ------- ------ ------- ---
- --
TOTAL
RETURN(d):.............................................
(7.17)% 43.55% 16.41% 15.40 % 2.54%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000).............................. $12,676
$11,122 $8,010 $7,741 $7,260
Average net assets
(000)..................................... $12,236
$ 8,526 $8,002 $7,768 $6,094
Ratios to average net assets:
Expenses, including distribution
fees..................... 2.07%(a) 2.14%
2.11% 2.28 % 2.59%(a)
Expenses, excluding distribution
fees..................... 1.07%(a) 1.14%
1.11% 1.28 % 1.59%(a)
Net investment
loss.......................................
(.32)%(a) (.66)% (.25)% (.30 )%
(.71)%(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.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 16
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL
EUROPE GROWTH FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class Z
- ---------------------------------------------------------
Six Months Years Ended April April 15, 1996(b)
Ended 30, Through
October 31, ------------------- April 30,
1998(c) 1998(c) 1997 1996(c)
- ----------- ------- ------- -----------------
<S>
<C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period......................... $ 19.93 $ 15.51
$ 13.68 $ 13.40
- ----- ------- ------- -----
Income from investment operations
Net investment
income........................................ .04
.04 .02 .28
Net realized and unrealized gain (loss) on investment and
foreign currency
transactions............................. (1.40)
6.37 2.37 --
- ----- ------- ------- -----
Total from investment
operations.......................... (1.36)
6.41 2.39 .28
- ----- ------- ------- -----
Less Distributions
Distributions in excess of net investment
income............. -- (.19) --
- --
Distributions paid to shareholders from net realized gains
on
investment and foreign currency
transactions.............. -- (1.80)
(.56) --
- ----- ------- ------- -----
Total
distributions....................................... -
- - (1.99) (.56) --
- ----- ------- ------- -----
Net asset value, end of
period............................... $ 18.57 $
19.93 $ 15.51 $ 13.68
- ----- ------- ------- -----
- ----- ------- ------- -----
TOTAL
RETURN(d):.............................................
(6.78)% 44.95% 17.66% 2.09%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000).............................. $ 8,410 $
3,090 $11,949 $ 204(e)
Average net assets
(000)..................................... $ 6,803
$12,148 $ 7,958 $ 203(e)
Ratios to average net assets:
Expenses, including distribution
fees..................... 1.07%(a) 1.14%
1.11% 1.28%(a)
Expenses, excluding distribution
fees..................... 1.07%(a) 1.14%
1.11% 1.28%(a)
Net investment
income..................................... .39%(a)
.26% .22% .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. 17
<PAGE>
Getting The Most From Your Prudential Mutual Fund.
Some mutual fund shareholders won't ever read this -- they
don't
read annual and semi-annual reports. It's quite
understandable.
These annual and semi-annual reports are
prepared to comply with Federal regulations. They are often
written
in language that is difficult to understand. So when most
people run
into those particularly daunting sections of these reports,
they
don't read them.
We think that's a mistake.
At Prudential Mutual Funds, we've made some changes to our
report
to make it easier to understand and more pleasant to read,
in hopes
you'll find it profitable to spend a few minutes
familiarizing
yourself with your investment. Here's what you'll
find in the report:
At A Glance
Since an investment's performance is often a shareholder's
primary
concern, we present performance information in two different
formats.
You'll find it first on the "At A Glance" page where we
compare the
Fund and the comparable average calculated by Lipper
Analytical
Services, a nationally recognized mutual fund rating agency.
We
report both the cumulative total returns and the average
annual
total returns. The cumulative total return is the total
amount of
income and appreciation the Fund has achieved in various
time periods.
The average annual total return is an annualized
representation of
the Fund's performance -- it generally smoothes out returns
and
gives you an idea how much the Fund has earned in an average
year,
for a given time period. Under the performance box, you'll
see
legends that explain the performance information, whether
fees
and sales charges have been included in returns, and the
inception
dates for the Fund's share classes.
See the performance comparison charts at the back of the
report for
more performance information. And keep in mind that past
performance
is not indicative of future results.
Portfolio Manager's Report
The portfolio manager who invests your money for you reports
on successful -- and not-so-successful -- strategies in this
section of your report. Look for recent purchases and sales
here, as well as information about the sectors the portfolio
manager
favors and any changes that are on the drawing board.
Portfolio Of Investments
This is where the report begins to look technical, but it's
really just a listing of each security held at the end of
the
reporting period, along with valuations and other
information.
Please note that sometimes we discuss a security in the
Portfolio Manager's Report that doesn't appear in this
listing
because it was sold before the close of the reporting
period.
<PAGE>
Statement Of Assets And Liabilities
The balance sheet shows the assets (the value of the Fund's
holdings), liabilities (how much the Fund owes) and net
assets
(the Fund's equity, or holdings after the Fund pays its
debts)
as of the end of the reporting period. It also shows how we
calculate the net asset value per share for each class of
shares.
The net asset value is reduced by payment of your dividend,
capital
gain, or other distribution, but remember that the money or
new
shares are being paid or issued to you. The net
asset value fluctuates daily along with the value of every
security in the portfolio.
Statement Of Operations
This is the income statement, which details income (mostly
interest and dividends earned) and expenses (including what
you pay us to manage your money). You'll also see capital
gains
here -- both realized and unrealized.
Statement Of Changes In Net Assets
This schedule shows how income and expenses translate into
changes
in net assets. The Fund is required to pay out the bulk of
its
income to shareholders every year, and this statement shows
you
how we do it -- through dividends and distributions --
and how that affects the net assets. This statement also
shows
how money from investors flowed into and out of the Fund.
Notes To Financial Statements
This is the kind of technical material that can intimidate
readers, but it does contain useful information. The Notes
provide a brief history and explanation of your Fund's
objectives.
In addition, they also outline how Prudential Mutual Funds
prices securities. The Notes also explain who manages and
distributes the Fund's shares, and more importantly, how
much
they are paid for doing so. Finally, the Notes explain how
many
shares are outstanding and the number issued and redeemed
over
the period.
Financial Highlights
This information contains many elements from prior pages,
but on
a per share basis. It is designed to help you understand how
the
Fund performed and to compare this year's performance and
expenses
to those of prior years.
Independent Auditor's Report
Once a year, an outside auditor looks over our books and
certifies
that the information is fairly presented and complies with
generally
accepted accounting principles.
Tax Information
This is information which we report annually about how much
of your
total return is taxable. Should you have any questions, you
may want
to consult a tax advisor.
Performance Comparison
These charts are included in the annual report and are
required by
the Securities Exchange Commission. Performance is presented
here
as a hypothetical $10,000 investment in the Fund since its
inception
or for 10 years (whichever is shorter). To help you put that
return
in context, we are required to include the performance of an
unmanaged,
broad based securities index, as well. The index does not
reflect the
cost of buying the securities it contains or the cost of
managing a
mutual fund. Of course, the index holdings do not mirror
those of
the fund -- the index is a broadly based reference point
commonly
used by investors to measure how well they are doing. A
definition
of the selected index is also provided. Investors generally
cannot
invest directly in an index.
<PAGE>
Getting The Most From Your Prudential Mutual Fund.
When you invest through Prudential Mutual Funds, you receive
financial advice through a Prudential Securities financial
advisor or Prudential/Pruco Securities registered
representative.
Your advisor or representative can provide you with the
following
services:
There's No Reward Without Risk; But Is This Risk Worth It?
Your financial advisor or registered representative can help
you match the reward you seek with the risk you can
tolerate.
And risk can be difficult to gauge --sometimes even the
simplest
investments bear surprising risks. The educated investor
knows
that markets seldom move in just one direction -- there are
times
when a market sector or asset class will lose value or
provide
little in the way of total return. Managing your own
expectations
is easier with help from someone who understands the
markets and who knows you!
Keeping Up With The Joneses.
A financial advisor or registered representative can help
you wade
through the numerous mutual funds available to find the ones
that
fit your own individual investment profile and risk
tolerance.
While the newspapers and popular magazines are full
of advice about investing, they are aimed at generic groups
of
people or representative individuals, not at you personally.
Your
financial advisor or registered representative will review
your
investment objectives with you. This means you can make
financial decisions based on the assets and liabilities in
your
current portfolio and your risk tolerance -- not just based
on
the current investment fad.
Buy Low, Sell High.
Buying at the top of a market cycle and selling at the
bottom
are among the most common investor mistakes. But sometimes
it's
difficult to hold on to an investment when it's losing value
every
month. Your financial advisor or registered
representative can answer questions when you're confused or
worried
about your investment, and remind you that you're investing
for the
long haul.
<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
Delayne Dedrick Gold
Robert F. Gunia
Don G. Hoff
Robert E. LaBlanc
Mendel A. Melzer, CFA
Robin B. Smith
Stephen Stoneburn
Brian M. Storms
Nancy H. Teeters
Officers
Brian M. Storms, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Robert C. Rosselot, Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
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
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Sullivan & Cromwel
l125 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.
The accompanying financial statements as of October 31, 1998
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>
(LOGO)
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
BULK RATE
U.S. POSTAGE
PAID
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