<PAGE>
(ICON)
Prudential
Europe
Growth
Fund, Inc.
SEMI
ANNUAL
REPORT
Oct. 31, 1999
(LOGO)
<PAGE>
A Message from the Fund's President December 15, 1999
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(PHOTO)
Dear Shareholder,
European stocks were volatile through the six months ended October 31, 1999,
finishing only slightly above their starting level. Prudential Europe Growth
Fund Class A shares returned 1.01%, trailing the 2.38% Lipper Average of Europe
Region funds primarily because the Fund was particularly exposed to the
interest-rate concerns that drove the uncertainty. Despite low inflation,
investors' fear of interest-rate increases led them to doubt the expected
returns on long-term growth stocks of the kind the Fund prefers. Moreover, the
Fund's financial stocks did poorly because interest-rate increases tend to hurt
bank stocks. In addition, a surprise rate hike in the United Kingdom--where the
Fund has its largest country focus--caused stocks there to trail the rest of
Europe instead of leading, as they did earlier in the year. The Fund's
performance over the past 12 months, which also included a more optimistic
market, was modestly above average.
Despite increases in European interest rates, they are still much below the
double-digit rates that were common not too long ago. European stocks, however,
have not yet had the growth surge that accompanied historically low interest
rates in the United States. Although economies are speeding up considerably
throughout Europe, recent stock-price increases have been modest. We think
Europe is still in the early stages of a prolonged economic expansion, similar
to U.S. progress of the past decade, with potential long-term benefits to
shareholders.
Prudential generally recommends that investors, in consultation with their
financial advisers, establish a diversified asset allocation strategy to help
stabilize their returns over time. Over the past few years, European, Japanese,
and U.S. stocks have had periods of substantially superior performance, while
shifts in market favor from one region to another can happen very swiftly.
Prudential Europe Growth Fund can play an important role in your geographic
diversification.
Yours sincerely,
John R. Strangfeld
President
Prudential Europe Growth Fund, Inc.
<PAGE>
Performance Review
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(PHOTOS)
Steve Auth, Bill Higgins, and Jean-Yves Chereau--Fund Managers
Investment Goals and Style
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.
Bill Higgins focuses on the Fund's core holdings, while Jean-Yves Chereau, head
of Prudential's Europe-based team, focuses on tactical positions 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.
A focus on long-term growth
The core of our portfolio has remained relatively stable for some time, focused
on leading companies in industries that we expect to grow substantially over
several years. Our five largest holdings, described individually in our five
largest holdings table, have been among our top 10 for at least a year and, in
some cases, for much longer. We believe Europe is benefiting from the recovery
of exports to Asian countries, as well as from a trend toward better consumer
service, technological innovations, and cross-border competition and corporate
restructuring that increase productivity and profitability. European economic
growth may be on the verge of a sustained rise such as it has not seen in a
long time. The kind of growth-oriented companies we prefer should be the
greatest beneficiaries.
Our largest focuses on October 31, 1999, were telecommunications, finance, and
services (including outsourcing and media). We added to our holdings of
advertising and media firms. We dropped Volkswagen AG--among our larger sales--
because it wasn't showing the earnings growth we expected from strong car
markets and improved productivity. Our comparative performance was probably
hurt because we owned little in the energy sector, which outperformed the
average over our six-month reporting period. In addition, the portion of our
assets we allocate for more active trading detracted from our return.
Strengthening our media theme
Outsourcing (Capita Group PLC) and media companies were prominent among the
greatest contributors to this half-year return. We believe media companies are
currently among the greatest beneficiaries of the growth of the Internet, as
new electronic commerce businesses advertise in conventional media to build
their customer bases. Media companies also are likely to benefit from the
increasing consumer focus and competitive environment throughout Europe, as
well as from economic growth and deregulation. For example, newly deregulated
utilities are using advertising to improve their relations with their
customers. We added Aegis Group SA, a U.K.-based firm that is the leading media
purchasing agency in Europe. We already owned Havas Advertising (France).
British Sky Broadcasting Group PLC, the U.K.-based pay-television company, also
was a large contributor and should benefit from the arrival of digital
broadcasting in Europe. All three were among the largest contributors to our
return in this reporting period.
<PAGE>
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Telecommunications still strong
Telecommunications was one of our largest industry focuses at period end, and
has been the only European growth sector with strong performance in 1999. This
was driven by the expansion of cellular telephony and the prospect of new
services on both fixed and mobile telephones. Europe is well ahead of the
United States in the development of advanced telecommunications services. Nokia
Corp., our largest holding (see description in table), made the largest
contribution to our performance. Vodafone Group PLC and COLT Telecom Group PLC
were also major contributors. Both are U.K. based--the former offers mobile
phone service globally; the latter offers bundled phone services to businesses,
and is expanding across Europe.
Banks are restructuring
We continue to believe that the banking industry will benefit from growing
economies, bank consolidation, higher-revenue services (such as mutual funds),
and a growing interest in investing on the part of European consumers. The
financial sector was hurt during our reporting period by the wave of Central
Bank interest-rate increases. These threatened to slow economic growth and the
pace of lending activity, but we believe further large increases are
unnecessary
Performance at a Glance
Cumulative Total Returns1 As of 10/31/99
<TABLE>
<CAPTION>
Six One Five Since
Months Year Years Inception2
<S> <C> <C> <C> <C>
Class A 1.01% 10.80% 106.08% 110.23%
Class B 0.60 9.84 97.94 101.41
Class C 0.66 9.71 97.91 101.38
Class Z 1.17 11.07 N/A 80.28
Lipper European Region Fund Avg.3 2.38 10.72 109.13 ***
</TABLE>
Average Annual Total Returns1 As of 9/30/99
<TABLE>
<CAPTION>
One Five Since
Year Years Inception2
<S> <C> <C> <C>
Class A 11.00% 14.71% 13.75%
Class B 10.86 14.83 13.85
Class C 13.56 14.71 13.74
Class Z 17.11 N/A 17.91
</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 LLC 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 charge 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 and service (12b-1) fees.
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
six-month, one-, and five-year periods in the European Region Fund category.
The Lipper average is unmanaged. European Region funds concentrate their
investment in equity securities whose primary trading markets or operations
are concentrated in the European region or a single country within this region.
*** Lipper Since Inception returns are 122.93% for Class A, B, and C, and
71.56% for Class Z, based on all funds in each share class.
1
<PAGE>
Review Cont'd.
- -------------------------------------------------------------------------------
because inflation rates have not exceeded their targets. Moreover, global
competition, greater consumer pricing power, and increasing productivity are
all continuing to hold inflation in check.
Nonetheless, we reduced our holdings of Kredietbank NV(Belgium) and Standard
Chartered PLC--the latter on concerns about Hong Kong where it has most of its
business. We also reduced our commitment to Banco Santander Central Hispano SA,
which had become one of our largest holdings. We sold Allied Irish Banks PLC
because we felt we no longer needed two Irish banks (we own Bank of Ireland).
Looking Ahead
We believe that the long-term trends in which we have invested are well
entrenched, and we see little reason to change our portfolio significantly. We
believe European stocks were hurt when investors overlooked the benefits of a
restructuring European economy because they were distracted by the strong U.S.
economy and by their perception that emerging markets had resumed their growth.
The combination of low interest rates and benign inflation should stimulate
what has been a sluggish European economic picture. Consumer sentiment is
strengthening. In addition, the revival of the Pacific Basin and Latin America
should increase European exports to those regions. The overall investment
picture is promising, as reflected in sharp successive accelerations of
European stocks in October 1999 and November 1999 (after the end of our
reporting period).
Geographic Concentration
Expressed as a percentage of net assets as of 10/31/99
United Kingdom 29.4%
France 15.1
Other Continental Europe 9.1
Federal Republic of Germany 8.6
Italy 8.4
Spain 6.5
Sweden 5.8
Netherlands 5.3
Switzerland 4.9
Cash & Equivalents 6.9
Five Largest Holdings Expressed as a percentage of net assets as of 10/31/99
Security/Industry Comments
% of Net Assets
Nokia Corp. The leading global manufacturer of wireless
Telecommunication Equipment telephones, a market that has beaten all growth
3.4% forecasts. New digital services, such as short
messaging and Internet access, are soon to add
to revenue growth. Net income grew 77% in 1998.
Compass Group PLC The leading global food service company. Its
Food Products & Services customers outsource their vending and
2.8% institutional dining (corporate, educational
institutions, prisons, and military) needs to
Compass, which also operates franchises in
institutional settings for Burger King, T.G.I.
Friday's, and Pizza Hut.
Hays PLC Outsourcer of business services, such as
Business & Public Services delivery of everything from industrial goods
2.7% to groceries, and temporary and permanent
personnel procurement. Hays is expanding
throughout Europe with the growth of outsourcing
as a way to reduce costs.
Telefonica SA Spanish-based telecommunications service
Telecommunication Services provider with large Latin American holdings
2.7% for which it has substantially improved service.
Usage of its fixed lines is increasing in Spain,
as are value-added services such as Internet and
data transmission. Telefonica has a rapidly
expanding World Wide Web business, exploiting
its Spanish-language advantage in Spain and
Latin America.
Hennes & Moritz AB A leader in consumer-friendly retailing, H&M
Retail operates about 550 stores throughout Europe,
2.7% and is expanding to the United States. 1998
earnings per share grew 35%; same-store sales
in Germany increased even in a shrinking
overall market. H&M's value-for-money focus is
still rare in Europe, and wins customers.
2
<PAGE>
Portfolio of Investments as of
October 31, 1999 (Unaudited) PRUDENTIAL EUROPE GROWTH FUND, INC.
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<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ----------------------------------------------------------------
LONG-TERM INVESTMENTS--93.1%
COMMON STOCKS--90.5%
- ----------------------------------------------------------------
Belgium--1.4%
73,262 KBC Bancassurance Holding $ 3,784,944
- ------------------------------------------------------------
Federal Republic of Germany--6.0%
13,426 DePfa Deutsche Pfandbriefbank AG 1,167,137
18,423 Epcos AG(a) 757,158
46,970 Karstadt AG 2,129,480
23,200 Mannesmann AG 3,656,906
31,441 Metallgesellschaft AG 654,709
11,000 Philipp Holzmann AG(a) 1,600,503
12,112 SAP AG 4,510,464
32,300 SGL Carbon AG 2,072,277
------------
16,548,634
- ------------------------------------------------------------
Finland--4.4%
80,850 Nokia Corp. 9,275,418
98,350 Sonera Oyj 2,960,500
------------
12,235,918
- ------------------------------------------------------------
France--15.1%
26,946 Carrefour SA(a) 5,000,249
40,741 Compagnie Generale de Geophysique
SA 2,126,285
14,500 Havas Advertising SA 4,074,270
21,783 Legrand SA 5,224,969
39,264 Rexel SA 3,518,829
167,037 Rhodia SA 3,231,717
30,166 SEITA 1,685,692
27,006 Sidel SA 2,705,008
52,529 Societe Generale d'Enterprises SA 2,447,970
41,360 Total Fina SA $ 5,603,615
107,508 Usinor SA 1,497,367
61,740 Valeo SA 4,446,026
------------
41,561,997
- ------------------------------------------------------------
Ireland--1.5%
447,236 Bank of Ireland 3,498,850
127,497 Eircom PLC(a) 532,328
------------
4,031,178
- ------------------------------------------------------------
Italy--8.4%
338,475 Autogrill SpA 3,625,809
58,800 Bipop-Carire SpA 2,495,329
267,500 Class Editori 2,259,129
2,972,100 Seat Pagine Gialle SpA 4,246,072
1,063,832 Telecom Italia SpA 6,662,606
848,961 UniCredito Italiano SpA 3,983,203
------------
23,272,148
- ------------------------------------------------------------
Netherlands--5.3%
19,830 DSM NV 752,679
89,870 Heineken NV 4,594,641
46,226 Nutreco Holding NV 1,583,997
42,200 Randstad Holding NV 2,144,589
44,400 Royal Dutch Petroleum Co. 2,660,390
38,100 United Pan-Europe Communications
NV(a) 2,936,480
------------
14,672,776
</TABLE>
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See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as of
October 31, 1999 (Unaudited) PRUDENTIAL EUROPE GROWTH FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ----------------------------------------------------------------
Norway--1.4%
97,835 Tomra Systems ASA $ 3,747,654
- ------------------------------------------------------------
Portugal--0.4%
8,904 Telecel-Comunicacoes Pessoais SA(a) 1,158,470
- ------------------------------------------------------------
Spain--6.5%
560,692 Banco Santander Central Hispano SA 5,834,803
75,567 Centros Comerciales Continente SA 1,812,584
87,837 NH Hoteles SA 995,567
450,753 Telefonica SA(a) 7,432,930
361,509 TelePizza SA(a) 1,936,277
------------
18,012,161
- ------------------------------------------------------------
Sweden--5.8%
276,560 Hennes & Mauritz AB 7,369,492
121,300 Mo och Domsjoe AB 3,579,917
105,400 Modern Times Group MTG AB(a) 3,419,156
36,789 NetCom AB(a) 1,532,165
------------
15,900,730
- ------------------------------------------------------------
Switzerland--4.9%
1,712 Ares-Serono Group 2,666,562
2,870 Holderbank Financiere Glarus AG 3,540,346
1,530 Julius Baer Holding Ltd. $ 4,610,311
839 Mikron Holding AG 260,809
2,618 Stratec Holding AG 973,835
1,963 The Swatch Group AG 1,566,169
------------
13,618,032
- ------------------------------------------------------------
United Kingdom--29.4%
1,343,976 Aegis Group PLC 3,534,977
218,130 Barclays PLC 6,694,756
603,207 Bodycote International PLC 2,459,196
462,788 British Sky Broadcasting PLC(a) 4,990,694
246,842 Capita Group PLC 3,266,555
140,700 COLT Telecom Group(a) 4,202,658
730,590 Compass Group PLC 7,806,604
345,224 Dixons Group PLC 6,117,793
658,945 Electrocomponents PLC 5,903,651
417,520 GKN PLC 6,719,470
649,646 Hays PLC 7,390,229
752,162 Invensys PLC 3,703,252
523,159 Misys PLC 4,373,204
42,032 SEMA Group PLC 549,316
253,008 SmithKline Beecham PLC 3,264,968
216,300 Standard Chartered PLC 3,029,501
1,552,880 Vodafone Group PLC 7,237,124
------------
81,243,948
------------
Total common stocks
(cost $168,413,487) 249,788,590
------------
</TABLE>
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See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments as of
October 31, 1999 (Unaudited) PRUDENTIAL EUROPE GROWTH FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ----------------------------------------------------------------
PREFERRED STOCKS--2.6%
- ------------------------------------------------------------
Federal Republic of Germany--2.6%
1,156 Porsche AG $ 3,156,765
2,778 SAP AG 1,227,244
101,152 Wella AG 2,826,214
------------
Total preferred stocks
(cost $6,061,406) 7,210,223
------------
Total long-term investments
(cost $174,474,893) 256,998,813
------------
SHORT-TERM INVESTMENTS--2.4%
- ------------------------------------------------------------
Principal
Amount
(000)
United States
- ------------------------------------------------------------
Repurchase Agreements--2.4%
$ 6,638 Joint Repurchase Agreement Account,
5.21%, 11/1/99
(cost $6,638,000; Note 5) 6,638,000
------------
- ------------------------------------------------------------
Total Investments--95.5%
(cost $181,112,893; Note 4) 263,636,813
Other assets in excess of
liabilities--4.5% 12,418,864
------------
Net Assets--100% $276,055,677
------------
------------
</TABLE>
- ---------------
(a) Non-income producing security.
The industry classification of portfolio holdings and other assets in excess of
liabilities shown as a percentage of net assets as of October 31, 1999 was as
follows:
<TABLE>
<S> <C>
Telecommunication Services............................ 15.9%
Banking............................................... 12.7
Retail................................................ 8.7
Electrical & Electronics.............................. 5.6
Automobiles & Auto Parts.............................. 5.2
Computer Products & Services.......................... 3.8
Oil & Natural Gas Production.......................... 3.7
Food Products & Services.............................. 3.4
Media................................................. 3.1
Advertising........................................... 2.8
Business & Public Services............................ 2.7
Medical Products & Services........................... 2.5
Machinery & Engineering............................... 2.4
Publishing............................................ 2.3
Chemicals............................................. 2.2
Restaurants........................................... 2.0
Human Resources....................................... 2.0
Building Materials & Components....................... 1.9
Beverages............................................. 1.6
Diversified Operations................................ 1.6
Waste Management...................................... 1.4
Paper & Forest Products............................... 1.3
Cosmetics & Toiletries................................ 1.0
Manufacturing......................................... 0.9
Construction.......................................... 0.9
Tobacco............................................... 0.6
Steel & Metal Producers............................... 0.5
Hotels................................................ 0.4
Other assets in excess of liabilities
(including Repurchase Agreement).................... 6.9
-----
100.0%
-----
-----
</TABLE>
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See Notes to Financial Statements. 5
<PAGE>
Statement of Assets and Liabilities
(Unaudited) PRUDENTIAL EUROPE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets October 31, 1999
<S> <C>
Investments, at value (cost $181,112,893)................................................................. $263,636,813
Foeign currency, at value (cost $11,680,740).............................................................. 11,493,287
Cash...................................................................................................... 1,887
Receivable for investments sold........................................................................... 1,551,554
Receivable for Fund shares sold........................................................................... 699,645
Prepaid and other assets.................................................................................. 273,200
Dividends and interest receivable......................................................................... 85,189
----------------
Total assets........................................................................................... 277,741,575
----------------
Liabilities
Payable for Fund shares reacquired........................................................................ 975,465
Accrued expenses.......................................................................................... 351,952
Distribution fee payable.................................................................................. 174,926
Management fee payable.................................................................................... 173,561
Foreign withholding taxes payable......................................................................... 9,994
----------------
Total liabilities...................................................................................... 1,685,898
----------------
Net Assets................................................................................................ $276,055,677
----------------
----------------
Net assets were comprised of:
Common stock, at par................................................................................... $ 14,870
Paid-in capital in excess of par....................................................................... 187,179,289
----------------
187,194,159
Distributions in excess of net investment income....................................................... (3,503,826)
Accumulated net realized gain on investments and foreign currency transactions......................... 10,047,985
Net unrealized appreciation on investments and foreign currencies...................................... 82,317,359
----------------
Net Assets, October 31, 1999.............................................................................. $276,055,677
----------------
----------------
Class A:
Net asset value and redemption price per share
($75,515,893 / 3,975,793 shares of common stock issued and outstanding)............................. $18.99
Maximum sales charge (5% of offering price)............................................................ 1.00
----------------
Maximum offering price to public....................................................................... $19.99
----------------
----------------
Class B:
Net asset value, offering price and redemption price per share
($175,352,210 / 9,544,327 shares of common stock issued and outstanding)............................ $18.37
----------------
----------------
Class C:
Net asset value and redemption price per share
($14,322,060 / 779,513 shares of common stock issued and outstanding)............................... $18.37
Sales charge (1% of offering price).................................................................... .19
----------------
Offering price to public............................................................................... $18.56
----------------
----------------
Class Z:
Net asset value, offering price and redemption price per share
($10,865,514 / 570,336 shares of common stock issued and outstanding)............................... $19.05
----------------
----------------
</TABLE>
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See Notes to Financial Statements. 6
<PAGE>
PRUDENTIAL EUROPE GROWTH FUND, INC.
Statement of Operations (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Loss October 31, 1999
<S> <C>
Income
Dividends (net of foreign withholding
taxes of $321,900)................... $ 2,134,914
Interest................................ 43,735
----------------
Total income......................... 2,178,649
----------------
Expenses
Management fee.......................... 1,065,952
Distribution fee--Class A............... 93,287
Distribution fee--Class B............... 920,165
Distribution fee--Class C............... 72,600
Transfer agent's fees and expenses...... 245,000
Custodian's fees and expenses........... 245,000
Reports to shareholders................. 60,000
Registration fees....................... 37,000
Audit fees and expenses................. 18,000
Directors' fees and expenses............ 12,000
Legal fees and expenses................. 8,000
Miscellaneous........................... 3,438
----------------
Total expenses....................... 2,780,442
----------------
Net investment loss........................ (601,793)
----------------
Realized and Unrealized Gain (Loss) on
Investment and Foreign Currency
Transactions
Net realized gain (loss) on:
Investment transactions................. 14,383,022
Foreign currency transactions........... (3,037,370)
----------------
11,345,652
----------------
Net change in unrealized depreciation of:
Investments............................. (7,891,418)
Foreign currencies...................... (179,901)
----------------
(8,071,319)
----------------
Net gain on investments and foreign
currencies.............................. 3,274,333
----------------
Net Increase in Net Assets
Resulting from Operations.................. $ 2,672,540
----------------
----------------
</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 1999 1999
<S> <C> <C>
Operations
Net investment loss.......... $ (601,793) $ (1,048,076)
Net realized gain on
investment and foreign
currency transactions..... 11,345,652 3,092,402
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies................ (8,071,319) 566,716
------------- -------------
Net increase in net assets
resulting from
operations................ 2,672,540 2,611,042
------------- -------------
Dividends and distributions
(Note 1):
Dividends in excess of net
investment income
Class A................... -- (830,201)
Class B................... -- (1,011,041)
Class C................... -- (71,585)
Class Z................... -- (135,753)
------------- -------------
-- (2,048,580)
------------- -------------
Distributions from net
realized gains
Class A................... -- (4,081,825)
Class B................... -- (11,930,280)
Class C................... -- (844,703)
Class Z................... -- (572,100)
------------- -------------
-- (17,428,908)
------------- -------------
Fund share transactions (net of
share conversions) (Note 6):
Net proceeds from shares
sold...................... 157,417,437 334,649,118
Net asset value of shares
issued in reinvestment of
distributions............. -- 18,358,228
Cost of shares reacquired.... (184,399,810) (281,351,717)
------------- -------------
Net increase (decrease) in
net assets
from Fund share
transactions.............. (26,982,373) 71,655,629
------------- -------------
Total increase (decrease)....... (24,309,833) 54,789,183
Net Assets
Beginning of period............. 300,365,510 245,576,327
------------- -------------
End of period................... $ 276,055,677 $ 300,365,510
------------- -------------
------------- -------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7
<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 loss on foreign currency transactions of $3,037,370 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.
- --------------------------------------------------------------------------------
8
<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.
- ------------------------------------------------------------
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 Investments Management
Services LLC ('PIMS'), which acts as the distributor of the Class A, Class B,
Class C and Class Z shares. The Fund compensates 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. 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 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, 1999.
PIMS has advised the Fund that it has received approximately $59,200 and $10,600
in front-end sales charges resulting from sales of Class A shares and Class C
shares, respectively, during the six months ended October 31, 1999. From these
fees, PIMS paid such sales charges to affiliated broker-dealers, which in turn
paid commissions to salespersons and incurred other distribution costs.
PIMS has also advised the Fund that for the six months ended October 31, 1999,
it has received approximately $188,800 and $5,400 in contingent deferred sales
charges imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
PIFM, PIC, PIMS and PRICOA are wholly owned subsidiaries of The Prudential
Insurance Company of America ('Prudential').
As of March 11, 1999, the Fund, along with other affiliated registered
investment companies (the 'Funds'), entered into a syndicated credit agreement
('SCA') with an unaffiliated lender. The maximum commitment under the SCA is $1
billion. Interest on any borrowings will be at market rates. The Funds pay a
commitment fee at an annual rate of .065 of 1% on the unused portion of the
credit facility, which is accrued and paid quarterly on a pro rata basis by the
Funds. The SCA expires on March 9, 2000. The Fund did not borrow any amounts
pursuant to the agreement for the six months ended October 31, 1999. The purpose
of the agreements is to serve as an alternative source of funding for capital
share redemptions.
- ------------------------------------------------------------
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,
1999, the Fund incurred fees of approximately $206,500 for the services of PMFS.
As of October 31, 1999, approximately $34,700 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 six months ended October 31, 1999 were $70,825,184 and $109,334,162,
respectively.
The cost basis of investments for federal income tax purposes at October 31,
1999 was $181,127,301 and, accordingly, net unrealized appreciation for federal
income tax purposes was $82,509,512 (gross unrealized appreciation--$86,660,294;
gross unrealized depreciation--$4,150,782).
- ------------------------------------------------------------
Note 5. Joint Repurchase Agreement Account
The Fund, along with other affiliated registered investment companies, transfers
uninvested cash balances into a single joint account, the daily
- --------------------------------------------------------------------------------
9
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL EUROPE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
aggregate balance of which is invested in one or more repurchase agreements
collateralized by U.S. Treasury or Federal agency obligations. As of October 31,
1999, the Fund had a 0.7% undivided interest in repurchase agreements in the
joint account. The undivided interest for the Fund represents $6,638,000 in
principal amount. As of such date, each repurchase agreement in the joint
account and the value of the collateral therefor were as follows:
Bear, Stearns & Co. Inc., 5.23%, in the principal amount of $250,000,000,
repurchase price $250,108,958, due 11/1/99. The value of the collateral
including accrued interest was $255,352,721.
Goldman, Sachs & Co., 5.18%, in the principal amount of $194,830,000, repurchase
price $194,914,102, due 11/1/99. The value of the collateral including accrued
interest was $198,727,175.
Morgan (J.P.) Securities, Inc., 5.22%, in the principal amount of $250,000,000,
repurchase price $250,108,750, due 11/1/99. The value of the collateral
including accrued interest was $255,000,115.
Salomon Smith Barney, Inc., 5.22%, in the principal amount of $250,000,000,
repurchase price $250,108,750, due 11/1/99. The value of the collateral
including accrued interest was $255,452,608.
- ------------------------------------------------------------
Note 6. 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 November 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. 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, 1999:
Shares sold........................ 6,052,381 $ 112,532,343
Shares reacquired.................. (6,345,327) (118,644,060)
----------- -------------
Net decrease in shares outstanding
before conversion................ (292,946) (6,111,717)
Shares issued upon conversion from
Class B.......................... 115,526 2,176,215
----------- -------------
Net decrease in shares
outstanding...................... (177,420) $ (3,935,502)
----------- -------------
----------- -------------
Year ended April 30, 1999:
Shares sold........................ 8,345,087 $ 157,661,177
Shares issued in reinvestment of
dividends and distributions...... 262,851 4,634,072
Shares reacquired.................. (7,460,560) (140,333,930)
----------- -------------
Net increase in shares outstanding
before conversion................ 1,147,378 21,961,319
Shares issued upon conversion from
Class B.......................... 217,986 4,151,642
----------- -------------
Net increase in shares
outstanding...................... 1,365,364 $ 26,112,961
----------- -------------
----------- -------------
<CAPTION>
Class B
- -----------------------------------
<S> <C> <C>
Six months ended October 31, 1999:
Shares sold........................ 1,029,150 $ 18,517,563
Shares reacquired.................. (2,112,184) (38,184,914)
----------- -------------
Net decrease in shares outstanding
before conversion................ (1,083,034) (19,667,351)
Shares reacquired upon conversion
into Class A..................... (119,158) (2,176,215)
----------- -------------
Net decrease in shares
outstanding...................... (1,202,192) $ (21,843,566)
----------- -------------
----------- -------------
Year ended April 30, 1999:
Shares sold........................ 5,915,979 $ 110,988,705
Shares issued in reinvestment of
dividends and distributions...... 706,372 12,142,534
Shares reacquired.................. (4,740,107) (86,581,806)
----------- -------------
Net increase in shares outstanding
before conversion................ 1,882,244 36,549,433
Shares reacquired upon conversion
into Class A..................... (224,271) (4,151,642)
----------- -------------
Net increase in shares
outstanding...................... 1,657,973 $ 32,397,791
----------- -------------
----------- -------------
</TABLE>
- --------------------------------------------------------------------------------
10
<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, 1999:
Shares sold........................ 1,041,988 $ 18,769,565
Shares reacquired.................. (1,088,290) (19,695,641)
----------- -------------
Net decrease in shares
outstanding...................... (46,302) $ (926,076)
----------- -------------
----------- -------------
Year ended April 30, 1999:
Shares sold........................ 1,963,862 $ 36,030,413
Shares issued in reinvestment of
dividends and distributions...... 51,609 887,682
Shares reacquired.................. (1,763,515) (32,324,685)
----------- -------------
Net increase in shares
outstanding...................... 251,956 $ 4,593,410
----------- -------------
----------- -------------
<CAPTION>
Class Z
- -----------------------------------
<S> <C> <C>
Six months ended October 31, 1999:
Shares sold........................ 407,381 $ 7,597,966
Shares reacquired.................. (419,764) (7,875,195)
----------- -------------
Net decrease in shares outstanding
before conversion................ (12,383) $ (277,229)
----------- -------------
----------- -------------
Year ended April 30, 1999:
Shares sold........................ 1,543,484 $ 29,968,823
Shares issued in reinvestment of
dividends and distributions...... 39,317 693,940
Shares reacquired.................. (1,155,152) (22,111,296)
----------- -------------
Net increase in shares
outstanding...................... 427,649 $ 8,551,467
----------- -------------
----------- -------------
</TABLE>
- ------------------------------------------------------------
Note 7. Distributions
On December 13, 1999 the Board of Directors of the Fund declared a long-term
capital gain distribution of $0.96 per share for Class A, Class B, Class C and
Class Z shares respectively, payable on December 15, 1999 to shareholders of
record on December 14, 1999.
- --------------------------------------------------------------------------------
11
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL EUROPE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------
Six months
Ended Years Ended April 30,
October 31, -------------------------------------------
1999(c) 1999(c) 1998(c) 1997 1996(c)
----------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period......................... $ 18.80 $ 19.91 $ 15.46 $ 13.69 $ 11.77
----------- ------- ------- ------- -------
Income from investment operations
Net investment income........................................ .01 .03 .01 .09 .06
Net realized and unrealized gain on investment and foreign
currency transactions..................................... .18 .28 6.38 2.24 1.86
----------- ------- ------- ------- -------
Total from investment operations.......................... .19 .31 6.39 2.33 1.92
----------- ------- ------- ------- -------
Less Distributions
Distributions in excess of net investment income............. -- (.24) (.14) -- --
Distributions from net realized gains on investment and
foreign currency transactions............................. -- (1.18) (1.80) (.56) --
----------- ------- ------- ------- -------
Total distributions....................................... -- (1.42) (1.94) (.56) --
----------- ------- ------- ------- -------
Net asset value, end of period............................... $ 18.99 $ 18.80 $ 19.91 $ 15.46 $ 13.69
----------- ------- ------- ------- -------
----------- ------- ------- ------- -------
TOTAL RETURN(d):............................................. 1.01% 2.03% 44.93% 17.20% 16.31%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).............................. $75,516 $78,074 $55,507 $38,807 $47,789
Average net assets (000)..................................... $74,224 $67,286 $42,885 $37,834 $47,183
Ratios to average net assets:
Expenses, including distribution fees..................... 1.44%(a) 1.43% 1.39% 1.36% 1.53%
Expenses, excluding distribution fees..................... 1.19%(a) 1.18% 1.14% 1.11% 1.28%
Net investment income..................................... .07%(a) .15% .08% .57% .44%
For Class A, B, C and Z shares:
Portfolio turnover rate...................................... 26% 62% 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 on investment and foreign
currency transactions..................................... .36
------
Total from investment operations.......................... .37
------
Less Distributions
Distributions in excess of net investment income............. --
Distributions 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 weighted 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. 12
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL EUROPE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------------
Six months
Ended Years Ended April 30,
October 31, -----------------------------------------------
1999(c) 1999(c) 1998(c) 1997 1996(c)
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period......................... $ 18.26 $ 19.35 $ 15.12 $ 13.49 $ 11.69
----------- -------- -------- -------- --------
Income from investment operations
Net investment loss.......................................... (.06) (.11) (.11) (.04) (.04)
Net realized and unrealized gain on investment and foreign
currency transactions..................................... .17 .30 6.15 2.23 1.84
----------- -------- -------- -------- --------
Total from investment operations.......................... .11 .19 6.04 2.19 1.80
----------- -------- -------- -------- --------
Less Distributions
Distributions in excess of net investment income............. -- (.10) (.01) -- --
Distributions from net realized gains on investment and
foreign currency transactions............................. -- (1.18) (1.80) (.56) --
----------- -------- -------- -------- --------
Total distributions....................................... -- (1.28) (1.81) (.56) --
----------- -------- -------- -------- --------
Net asset value, end of period............................... $ 18.37 $ 18.26 $ 19.35 $ 15.12 $ 13.49
----------- -------- -------- -------- --------
----------- -------- -------- -------- --------
TOTAL RETURN(d):............................................. 0.60% 1.39% 43.35% 16.41% 15.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).............................. $ 175,352 $196,247 $175,857 $139,277 $125,868
Average net assets (000)..................................... $ 183,033 $191,220 $147,492 $133,135 $122,255
Ratios to average net assets:
Expenses, including distribution fees..................... 2.19%(a) 2.18% 2.14% 2.11% 2.28%
Expenses, excluding distribution fees..................... 1.19%(a) 1.18% 1.14% 1.11% 1.28%
Net investment loss....................................... (.65)%(a) (.57)% (.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 on investment and foreign
currency transactions..................................... .35
-------
Total from investment operations.......................... .29
-------
Less Distributions
Distributions in excess of net investment income............. --
Distributions 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 weighted 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. 13
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL EUROPE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
-------------------------------------------------------------
Six months
Ended Years Ended April 30,
October 31, ------------------------------------------
1999(c) 1999(c) 1998(c) 1997 1996(c)
-------------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period......................... $ 18.25 $ 19.38 $ 15.12 $13.49 $11.69
------ ------- ------- ------ -------
Income from investment operations
Net investment loss.......................................... (.06) (.11) (.11) (.04) (.04)
Net realized and unrealized gain on investment and foreign
currency transactions..................................... .18 .26 6.18 2.23 1.84
------ ------- ------- ------ -------
Total from investment operations.......................... .12 .15 6.07 2.19 1.80
------ ------- ------- ------ -------
Less Distributions
Distributions in excess of net investment income............. -- (.10) (.01) -- --
Distributions from net realized gains on investment and
foreign currency transactions............................. -- (1.18) (1.80) (.56) --
------ ------- ------- ------ -------
Total distributions....................................... -- (1.28) (1.81) (.56) --
------ ------- ------- ------ -------
Net asset value, end of period............................... $ 18.37 $ 18.25 $ 19.38 $15.12 $13.49
------ ------- ------- ------ -------
------ ------- ------- ------ -------
TOTAL RETURN(d):............................................. 0.66% 1.18% 43.55% 16.41% 15.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).............................. $ 14,322 $15,073 $11,122 $8,010 $7,741
Average net assets (000)..................................... $ 14,441 $13,465 $ 8,526 $8,002 $7,768
Ratios to average net assets:
Expenses, including distribution fees..................... 2.19%(a) 2.18% 2.14% 2.11% 2.28%
Expenses, excluding distribution fees..................... 1.19%(a) 1.18% 1.14% 1.11% 1.28%
Net investment loss....................................... (.67)%(a) (.61)% (.66)% (.25)% (.30)%
<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 on investment and foreign
currency transactions..................................... .35>
-----
Total from investment operations.......................... .29
-----
Less Distributions
Distributions in excess of net investment income............. --
Distributions 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).............................. $7,260
Average net assets (000)..................................... $6,094
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 weighted 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 Z
--------------------------------------------------
Six months
Ended Years Ended April 30,
October 31, -------------------------------
1999(c) 1999(c) 1998(c) 1997
-------------- ------- ------- -------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period......................... $ 18.83 $ 19.93 $ 15.51 $ 13.68
------ ------- ------- -------
Income from investment operations
Net investment income........................................ .03 .05 .04 .02
Net realized and unrealized gain on investment and foreign
currency transactions..................................... .19 .31 6.37 2.37
------ ------- ------- -------
Total from investment operations.......................... .22 .36 6.41 2.39
------ ------- ------- -------
Less Distributions
Distributions in excess of net investment income............. -- (.28) (.19) --
Distributions from net realized gains on investment and
foreign currency transactions............................. -- (1.18) (1.80) (.56)
------ ------- ------- -------
Total distributions....................................... -- (1.46) (1.99) (.56)
------ ------- ------- -------
Net asset value, end of period............................... $ 19.05 $ 18.83 $ 19.93 $ 15.51
------ ------- ------- -------
------ ------- ------- -------
TOTAL RETURN(d):............................................. 1.17% 2.35% 44.95% 17.66%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).............................. $ 10,866 $10,972 $ 3,090 $11,949
Average net assets (000)..................................... $ 11,011 $ 8,572 $12,148 $ 7,958
Ratios to average net assets:
Expenses, including distribution fees..................... 1.19%(a) 1.18% 1.14% 1.11%
Expenses, excluding distribution fees..................... 1.19%(a) 1.18% 1.14% 1.11%
Net investment income..................................... .33%(a) .25% .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........................................ .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 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..................................... .54%(a)
</TABLE>
- ---------------
(a) Annualized.
(b) Commencement of class operations.
(c) Based on weighted 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>
<PAGE>
Getting the Most from Your Prudential Mutual Fund
How many times have you read these reports--or other financial materials--and
stumbled across a word that you don't understand?
Many shareholders have run into the same problem. We'd like to help. So we'll
use this space from time to time to explain some of the words you might have
read, but not understood. And if you have a favorite word that no one can
explain to your satisfaction, please write to us.
Basis Point: 1/100th of 1%. For example, one-half of one percent is 50 basis
points.
Collateralized Mortgage Obligations (CMOs): Mortgage-backed bonds that
separate mortgage pools into different maturity classes, called tranches.
These instruments are sensitive to changes in interest rates and homeowner
refinancing activity. They are subject to prepayment and maturity extension
risk.
Derivatives: Securities that derive their value from other securities. The rate
of return of these financial instruments rises and falls--sometimes very
suddenly--in response to changes in some specific interest rate, currency,
stock, or other variable.
Discount Rate: The interest rate charged by the Federal Reserve on loans to
member banks.
Federal Funds Rate: The interest rate charged by one bank to another on
overnight loans.
Futures Contract: An agreement to purchase or sell a specific amount of a
commodity or financial instrument at a set price at a specified date in the
future.
Leverage: The use of borrowed assets to enhance return. The expectation is that
the interest rate charged on borrowed funds will be lower than the return on
the investment. While leverage can increase profits, it can also magnify
losses.
Liquidity: The ease with which a financial instrument (or product) can be
bought or sold (converted into cash) in the financial markets.
Price/Earnings Ratio: The price of a share of stock divided by the earnings
per share for a 12-month period.
Option: An agreement to purchase or sell something, such as shares of stock, by
a certain time for a specified price. An option need not be exercised.
Spread: The difference between two values; often used to describe the
difference between "bid" and "asked" prices of a security, or between the
yields of two similar maturity bonds.
Yankee Bond: A bond sold by a foreign company or government in the U.S. market
and denominated in U.S. dollars.
<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
Robert E. LaBlanc
David R. Odenath, Jr.
Robin B. Smith
Stephen Stoneburn
John R. Strangfeld
Nancy H. Teeters
Clay T. Whitehead
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Robert C. Rosselot, Secretary
Stephen M. Ungerman, Assistant Treasurer
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.
115 Houndsditch
London EC3A7BU
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
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 & Cromwell
125 Broad Street
New York, NY 10004
Prudential Investments is a unit of The Prudential Insurance Company of
America, 751 Broad Street, Newark, NJ 07102.
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, 1999, 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
Permit 6807
New York, NY
Class NASDAQ Cusip
A PRAEX 74431N103
B PRBEX 74431N202
C -- 74431N301
Z -- 74431N400 MF160E2
