As filed with the Securities and Exchange Commission on June 30, 1994
Registration Statement No. 2-89725
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933 /X/
` Pre-Effective Amendment No. / /
Post-Effective Amendment No. 16 /X/
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 17 /X/
(Check appropriate box or boxes)
--------------
PRUDENTIAL GLOBAL FUND, INC.
(Exact name of registrant as specified in charter)
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292
(Address of Principal Executive Offices) (Zip Code)
--------------
Registrant's Telephone Number, Including Area Code: (212) 214-1250
S. Jane Rose, Esq.
One Seaport Plaza
New York, New York 10292
(Name and Address of Agent for Service of Process)
--------------
Approximate date of proposed public offering: As soon as practicable
after the effective date of this Registration Statement.
It is proposed that this filing will become effective (check
appropriate box):
/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/X/ 60 days after filing pursuant to paragraph (a)
/ / on (date) pursuant to paragraph (a), of Rule 485.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant
has previously registered an Indefinite number of shares of its Common Stock par
value $.01 per share. The Registrant will file a notice under such Rule for its
fiscal year ended October 31, 1994 on or before December 31, 1994.
================================================================================
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 495)
<TABLE>
<CAPTION>
N-1A Item No. Location
------------- --------
<S> <C>
Part A
Item 1. Cover Page ........................................................ Cover Page
Item 2. Synopsis .......................................................... Fund Expenses; Fund Highlights
Item 3. Condensed Financial Information ................................... Fund Expenses; Financial Highlights;
How the Fund Calculates Performance
Item 4. General Description of Registrant ................................. Cover Page; Fund Highlights;
How the Fund Invests; General Information
Item 5. Management of Fund ................................................ Financial Highlights; How the Fund is Managed
Item 6. Capital Stock and Other Securities ................................ Dividends, Distributions and Taxes;
General Information
Item 7. Purchase of Securities Being Offered .............................. Shareholder Guide; How the Fund Values Its Shares
Item 8. Redemption or Repurchase .......................................... Shareholder Guide; How the Fund Values Its Shares
Item 9. Pending Legal Proceedings ......................................... Not Applicable
Part B
Item 10. Cover Page ........................................................ Cover Page
Item 11. Table of Contents ................................................. Table of Contents
Item 12. General Information and History ................................... Not Applicable
Item 13. Investment Objectives and Policies ................................ Investment Objective and Policies;
Investment Restrictions
Item 14. Management of the Fund ............................................ Directors and Officers; Manager; Distributor
Item 15. Control Persons and Principal Holders of Securities ............... Not Applicable
Item 16. Investment Advisory and Other Services ............................ Manager; Distributor; Custodian, Transfer and
Dividend Disbursing Agent and Independent Accountants
Item 17. Brokerage Allocation and Other Practices .......................... Portfolio Transactions and Brokerage
Item 18. Capital Stock and Other Securities ................................ Not Applicable
Item 19. Purchase, Redemption and Pricing of Securities Being Offered ...... Purchase and Redemption of Fund Shares;
Shareholder Investment Account
Item 20. Tax Status ........................................................ Dividends, Distributions and Taxes
Item 21. Underwriters ...................................................... Distributor
Item 22. Calculation of Performance Data ................................... Performance Information
Item 23. Financial Statements .............................................. Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Post-Effective
Amendment to the Registration Statement.
<PAGE>
Prudential Global Fund, Inc.
--------------------------------------------------------------------------------
Prospectus dated , 1994
--------------------------------------------------------------------------------
Prudential Global Fund, Inc. (the Fund) is an open-end, diversified management
investment company. Its investment objective is to seek long-term growth of
capital, with income as a secondary objective. The Fund seeks to achieve its
objective through investment in a diversified portfolio of securities which will
consist of marketable securities of U.S. and non-U.S. issuers. The Fund may
invest in all types of common stocks and equivalents (such as convertible debt
securities and warrants), preferred stocks, bonds and other debt obligations,
including money market instruments, of foreign and domestic companies and
governments, governmental agencies and international organizations. The Fund may
also invest in stock options, options on debt securities, options on stock
indices, stock index futures and options on stock index futures. See "How the
Fund Invests--Investment Objective and Policies". The Fund's address is One
Seaport Plaza, New York, New York 10292, and its telephone number is (800)
225-1852.
The Fund is not intended to constitute a complete investment program. The Fund
intends to pay annual dividends consisting of substantially all of its net
investment income and net short-term and long-term capital gains, if any.
Because of its objective and policies, including its international orientation,
the Fund may be considered of a speculative nature and subject to greater
investment risks than are assumed by certain other investment companies which
invest solely in domestic securities. See "How the Fund Invests--Special
Considerations and Risks".
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. Additional information
about the Fund has been filed with the Securities and Exchange Commission in a
Statement of Additional Information, dated _____________, 1994, which
information is incorporated herein by reference (is legally considered a part of
this Prospectus) and is available without charge upon request to the Fund, at
the address or telephone number noted above.
--------------------------------------------------------------------------------
Investors are advised to read this Prospectus and retain it for future
reference.
--------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
--------------------------------------------------------------------------------
FUND HIGHLIGHTS
--------------------------------------------------------------------------------
The following summary is intended to highlight certain information
contained in this Prospectus and is qualified in its entirety by the more
detailed information appearing elsewhere herein.
--------------------------------------------------------------------------------
What is Prudential Global Fund, Inc.?
Prudential Global Fund, Inc. is a mutual fund. A mutual fund pools the
resources of investors by selling its shares to the public and investing the
proceeds of such sale in a portfolio of securities designed to achieve its
investment objective. Technically, the Fund is an open-end, diversified
management investment company.
What is the Fund's Investment Objective?
The Fund's investment objective is to seek long-term growth of capital
with income as a secondary objective. The Fund seeks to achieve its objective
through investment in a diversified portfolio of marketable securities of U.S.
and non-U.S. issuers. See "How the Fund Invests--Investment Objective and
Policies" at page 7.
What are the Fund's Special Characteristics and Risks?
While the Fund is not required to maintain any particular geographic or
currency mix of its investments, under normal circumstances the Fund intends to
maintain investments in a minimum of four countries, which may include the
United States. The Fund may, from time to time, invest up to 65% of its assets
in companies and governments located in any one country. The Fund may invest in
all types of common stocks and equivalents, preferred stocks, bonds and other
debt obligations of foreign and domestic companies, governments, government
agencies and international organizations. See "How the Fund Invests--Investment
Objective and Policies" at page 7. Investing in securities of foreign companies
and countries involves certain considerations and risks not typically
associated with investing in Securities and those of domestic companies. See
"How the Fund Invests--Special Considerations and Risks" at page 12. The Fund
may also engage in hedging and income enhancement strategies, including the
purchase and sale of put and call options, foreign currency forward contracts,
options and futures transactions and related short-term trading. See "How the
Fund Invests--Hedging and Income Enhancement Strategies" at page 8.
Who Manages the Fund?
Prudential Mutual Fund Management, Inc. (PMF or the Manager) is the
Manager of the Fund and is compensated for its services at an annual rate of .75
of 1% of the Fund's average daily net assets. As of March 31, 1994, PMF served
as manager or administrator to [66] investment companies, including [37] mutual
funds, with aggregate assets of approximately [$49] billion. The Prudential
Investment Corporation (PIC or the Subadviser) furnishes investment advisory
services in connection with the management of the Fund under a Subadvisory
Agreement with PMF. See "How the Fund is Managed--Manager" at page 13.
Who Distributes the Fund's Shares?
Prudential Mutual Fund Distributors, Inc. (PMFD) acts as the
Distributor of the Fund's Class A shares and is currently paid for its services
at an annual rate of .25 of 1% of the average daily net assets of the Class A
shares.
Prudential Securities Incorporated (Prudential Securities or PSI), a
major securities underwriter and securities and commodities broker, acts as the
Distributor of the Fund's Class B and Class C shares and is paid for its
services at an annual rate of up to 1% of the average daily net assets of each
of the Class B and Class C shares. See "How the Fund is Managed--Distributor" at
page 14.
--------------------------------------------------------------------------------
2
<PAGE>
What is the Minimum Investment?
The minimum initial investment for Class A and Class B shares is $1,000
per class and $5,000 for Class C shares. The minimum subsequent investment is
$100 for all classes. There is no minimum investment requirement for certain
retirement and employee savings plans or custodial accounts for the benefit of
minors. For purchases made through the Automatic Savings Accumulation Plan the
minimum initial and subsequent investment is $50. See "Shareholder Guide--How to
Buy Shares of the Fund" at page 19 and "Shareholder Guide--Shareholder Services"
at page 25.
How Do I Purchase Shares?
You may purchase shares of the Fund through Prudential Securities,
Pruco Securities Corporation (Prusec) or directly from the Fund, through its
transfer agent, Prudential Mutual Fund Services, Inc. (PMFS or the Transfer
Agent) at the net asset value per share (NAV) next determined after receipt of
your purchase order by the Transfer Agent or Prudential Securities plus a sales
charge which may be imposed either (i) at the time of purchase (Class A shares)
or (ii) on a deferred basis (Class B or Class C shares) See "How The Fund Values
Its Shares" at page 16 and "Shareholder Guide--How to Buy Shares of the Fund" at
page 19.
What Are My Purchase Alternatives?
The Fund offers three classes of shares:
o Class A Shares: Sold with an initial sales charge of up to 5% of the
offering price.
o Class B Shares: Sold without an initial sales charge but are subject to a
contingent deferred sales charge or CDSC (declining from
5% to zero of the lower of the amount invested or the
redemption proceeds) which will be imposed on certain
redemptions made within six years of purchase. Although
Class B shares are subject to higher ongoing
distribution-related expenses than Class A shares, Class
B shares will automatically convert to Class A shares
(which are subject to lower ongoing expenses)
approximately seven years after purchase.
o Class C Shares: Sold without an initial sales charge and for one year
after purchase, are subject to a 1% CDSC on redemptions.
Like Class B shares, Class C shares are subject to
higher ongoing distribution-related expenses than Class
A shares but do not convert to another class.
See "Shareholder Guide--Alternative Purchase Plan" at page 20.
How Do I Sell My Shares?
You may redeem shares at any time at the NAV next determined after
Prudential Securities or the Transfer Agent receives your sell order. However,
the proceeds of redemptions of Class B and Class C shares may be subject to a
CDSC. See "Shareholder Guide--How to Sell Your Shares" at page 22.
How are Dividends and Distributions Paid?
The Fund expects to pay dividends of net investment income and make
distributions of any net capital gains at least annually. Dividends and
distributions will be automatically reinvested in additional shares of the Fund
at NAV without a sales charge unless you request that they be paid to you in
cash. See "Taxes, Dividends and Distributions" at page 17.
3
<PAGE>
FUND EXPENSES
<TABLE>
<CAPTION>
Shareholder Transactions Expenses+ Class A Shares Class B Shares Class C Shares
-------------- -------------- --------------
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price) ............................ 5% None None
Maximum Sales Load or Deferred Sales Load Imposed on
Reinvested Dividends ..................................... None None None
Deferred Sales Load (as a percentage of original purchase
price or redemption proceeds, whichever is lower) ........ None 5% during the first year, 1% on redemptions
decreasing by 1% annually made within one
to 1% in the fifth and sixth year of purchase
years and 0% the seventh
year*
Redemption Fees ........................................... None None None
Exchange Fees ............................................. None None None
Annual Fund Operating Expenses
(as a percentage of average net assets) Class A Shares Class B Shares Class C Shares**
-------------- -------------- --------------
Management Fees ........................................... .75% .75% .75%
12b-1 Fees ................................................ .25%++ .88% 1.00%**
Other Expenses ............................................ .61% .61% .61%
---- ---- ----
Total Fund Operating Expenses ............................. 1.61% 2.24% 2.36%
==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
1 3 5 10
Example Year Years Years Years
----- ----- ----- -----
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period:
Class A ................................................... $66 $ 98 $133 $232
Class B ................................................... $73 $100 $130 $234
Class C** ................................................. $34 $ 74 $126 $270
You would pay the following expenses on the same
investment, assuming no redemption:
Class A ................................................... $68 $101 $136 $234
Class B ................................................... $23 $ 70 $120 $234
Class C** ................................................. $24 $ 74 $ 126 $270
</TABLE>
The above example with respect to Class A and Class B shares is based on
restated data for the Fund's fiscal year ended October 31, 1993. The above
example with respect to Class C shares is based on expenses expected to have
been incurred if Class C shares had been in existence during the fiscal year
ended October 31, 1993. The example should not be considered a representation of
past or future expenses. Actual expenses may be greater or less than those
shown.
The purpose of this table is to assist investors in understanding the various
costs and expenses that an investor in the Fund will bear, whether directly or
indirectly. For more complete descriptions of the various costs and expenses,
see "How the Fund is Managed". "Other Expenses" includes operating expenses of
the Fund such as directors' and professional fees, registration fees, reports to
shareholders, transfer agency and custodian fees and franchise taxes.
___________
* Class B shares will automatically convert to Class A shares approximately
seven years after purchase. See "Shareholder Guide--Conversion
Feature--Class B Shares."
** Estimated based on expenses expected to have been incurred if Class C
shares had been in existence during the fiscal year ended October 31, 1993.
+ Pursuant to rules of the National Association of Securities Dealers, Inc.,
the aggregate initial sales charges, deferred sales charges and asset-based
sales charges on shares of the Fund may not exceed 6.25% of total gross
sales, subject to certain exclusions. This 6.25% limitation is imposed on
the Fund rather than on a per shareholder basis. Therefore long-term Class
B and Class C shareholders of the Fund may pay more in total sales charges
than the economic equivalent of 6.25% of such shareholders' investment in
such shares. See "How the Fund is Managed--Distributor."
++ Although the Class A Distribution and Service Plan provides that the Fund
may pay up to an annual rate of .30 of 1% of the average daily net assets
of the Class A shares, the Distributor has agreed to limit its distribution
expenses with respect to Class A shares of the Fund to .25 of 1% of the
average daily net asset value of the Class A shares for the fiscal year
ending October 31, 1994. See "How the Fund is Managed--Distributor".
4
<PAGE>
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(for a share outstanding throughout each of the indicated periods)
(Class A Shares)
--------------------------------------------------------------------------------
The following financial highlights (with the exception of the six months
ended April 30, 1994)have been audited by Deloitte & Touche, independent
accountants, whose report thereon was unqualified. This information should be
read in conjunction with the financial statements and notes thereto, which
appear in the Statement of Additional Information. The following financial
highlights contain selected data for a Class A share of common stock
outstanding, total return, ratios to average net assets and other supplemental
data for the periods indicated. The information is based on data contained in
the financial statements. No Class C shares were outstanding during the
periods indicated.
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------
January 22,
Six Months 1990+
Ended Year ended October 31, through
April 30, ----------------------------- October 31,
1994 (unaudited) 1993 1992 1991 1990
---------------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:(1)
Net asset value, beginning of period ................ $ 13.17 $ 9.58 $10.08 $ 9.19 $10.38
Income from investment operations:
Net investment income (loss) ........................ (.02) 0.02 0.03 0.07 0.12
Net realized and unrealized gain (loss) on investment
and foreign currency transactions .................. (.83) 3.57 (.53) 1.02 (1.31)
Total from investment operations .................... .81 3.59 (.50) 1.09 (1.19)
Less distributions:
Dividends from net investment income ................ -- -- -- (0.16) --
Distributions from net realized gains on investment
and foreign currency transactions .................. -- -- -- (0.04) --
Total distributions ................................. -- -- -- (0.20) --
Net asset value, end of period ...................... $ 13.98 $13.17 $ 9.58 $10.08 $ 9.19
TOTAL RETURN*** ..................................... 6.15% 37.47% (4.96)% 12.11% (11.46)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ..................... $59,205 $42,021 $13,973 $14,154 $ 8,727
Average net assets (000) ............................ $52,804 $21,409 $14,758 $10,593 $ 7,151
Ratios to average net assets:
Expenses, including distribution fees .............. 1.38%* 1.56% 1.71% 1.72% 1.57%*
Expenses, excluding distribution fees .............. 1.15%* 1.36% 1.51% 1.52% 1.37%*
Net investment income (loss) ....................... (0.26)%* 0.20% 0.22% 0.65% 1.61%*
Portfolio turnover rate ............................. 28% 69% 58% 126% 35%
</TABLE>
____________
* Annualized.
+ Commencement of offering of Class A shares.
*** 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.
(1) Based on average month-end shares outstanding, by class.
5
<PAGE>
FINANCIAL HIGHLIGHTS
(for a share outstanding throughout each of the indicated periods)
(Class B Shares)
The following financial highlights (with the exception of the six months
ended April 30, 1994) for the five years ended October 31, 1993 have been
audited by Deloitte & Touche, independent accountants, whose report thereon
was unqualified. This information should be read in conjunction with the
financial statements and notes thereto, which appear in the Statement of
Additional Information. The following financial highlights contain selected
data for a Class B share of common stock outstanding, total return, ratios to
average net assets and other supplemental data for the periods indicated. The
information is based on data contained in the financial statements. No Class C
shares were outstanding during the periods indicated.
<TABLE>
<CAPTION>
Class B
------------------------------------------------------------
Six Months
Ended Year ended October 31,
April 30, ------------------------------------------------
1994 (unaudited) 1993(1) 1992(1) 1991(1) 1990(1) 1989(1)
---------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period ....................... $12.94 $ 9.47 $10.05 $ 9.14 $10.46 $10.09
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income (loss) ..... (.06) (0.04) (0.05) -- 0.05 0.15
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions .................... .81 3.51 (0.53) 1.02 (1.10) 0.53
------ ------ ------ ------ ------ ------
Total from investment
operations ...................... .75 3.47 (0.58) 1.02 (1.05) 0.68
------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income ............... -- -- -- (0.07) (0.18) (0.19)
Distributions paid to
shareholders from net realized
gains on investment and foreign
currency transactions ........... -- -- -- (0.04) (0.09) (0.12)
------ ------ ------ ------ ------ -----
Total distributions .............. -- -- -- (0.11) (0.27) (0.31)
------ ------ ------ ------ ------ -----
Net asset value, end of period ... $13.69 $12.94 $ 9.47 $10.05 $ 9.14 10.46
====== ====== ====== ====== ====== =====
TOTAL RETURN**** ................. 5.80% 36.64% (5.77)% 11.29% (10.43)% 6.92%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) .. $355,615 $251,133 $178,438 $249,582 $261,555 $385,578
Average net assets (000) ......... $316,030 $183,741 $210,464 $253,866 $328,467 $448,737
Ratios to average net assets:
Expenses, including
distribution fees ............. 2.08%* 2.24% 2.40% 2.44% 2.23% 1.82%
Expenses, excluding
distribution fees ............. 1.15%* 1.36% 1.51% 1.53% 1.37% 1.34%
Net investment income (loss) .... (0.95)%* (0.39)% (0.47)% (0.01)% 0.51% 1.45%
Portfolio turnover rate .......... 28% 69% 58% 126% 35% 60%
Class B
------------------------------------------------
May 16,
1984++
Year ended October 31, through
----------------------------------- October 31,
1988(1)*** 1987(1) 1986(1) 1985** 1984**
---------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period ....................... $ 9.86 $9.96 $6.95 $5.23 $5.00
------ ----- ----- ----- -----
Income from investment operations:
Net investment income (loss) ..... 0.17+ 0.06 (0.01)+ 0.08+ 0.08+
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions .................... 1.11 0.79 3.23 1.72 0.15
------ ----- ----- ----- -----
Total from investment
operations ...................... 1.28 0.85 3.22 1.80 0.23
------ ----- ----- ----- -----
Less distributions:
Dividends from net
investment income ............... (0.07) -- (0.02) (0.05) --
Distributions paid to
shareholders from net realized
gains on investment and foreign
currency transactions ........... (0.98) (0.95) (0.19) (0.03) --
------ ----- ----- ----- -----
Total distributions .............. (1.05) (0.95) (0.21) (0.08) --
------ ----- ----- ----- -----
Net asset value, end of period ... $10.09 $9.86 $9.96 $6.95 $5.23
====== ===== ===== ===== =====
TOTAL RETURN**** ................. 13.58% 8.81% 46.45% 34.93% 4.60%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) .. $523,743 $628,542 $376,839 $61,673 $7,818
Average net assets (000) ......... $571,420 $697,486 $238,239 $26,087 $5,687
Ratios to average net assets:
Expenses, including
distribution fees ............. 1.86%+ 1.96% 1.89%+ 2.07%+ 2.30%+
Expenses, excluding
distribution fees ............. 1.17%+ 1.14% 1.03%+ 1.39%+ 1.59%+
Net investment income (loss) .... 1.71%+ 0.52% (0.13)%+ 1.81%+ 3.94%+
Portfolio turnover rate .......... 82% 135% 80% 123% 6%
</TABLE>
____________
* Annualized.
** Adjusted for 2-for-1 stock split paid to shareholders of record on May 15,
1986.
*** On March 1, 1988, Prudential Mutual Fund Management, Inc. succeeded The
Prudential Insurance Company of America as investment adviser and since
then has acted as manager of the Fund. See "Manager" in the Statement of
Additional Information.
**** 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.
+ Net of expense subsidy or reimbursement.
++ Commencement of offering of Class B shares.
(1) Based on average month-end shares outstanding, by class.
6
<PAGE>
--------------------------------------------------------------------------------
HOW THE FUND INVESTS
--------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek long-term growth of
capital, with income as a secondary objective. The Fund will seek to achieve its
objectives through investment in a diversified portfolio of securities which
will consist of marketable securities of U.S. and non-U.S. issuers. Marketable
securities are those for which market quotations are readily available. There
can be no assurance that the Fund will achieve its investment objectives. See
"Investment Objective and Policies" in the Statement of Additional Information.
The Fund may invest in all types of common stocks and equivalents (such
as convertible debt securities and warrants), preferred stocks, bonds and other
debt obligations, including money market instruments, of foreign and domestic
companies and governments, governmental agencies and international
organizations. The Fund may also invest in stock options, options on debt
securities, options on stock indices, stock index futures and options on stock
index futures.
Although the Fund is not required to maintain any particular geographic
or currency mix of its investments, nor required to maintain any particular
proportion of stocks, bonds or other securities in its portfolio, the Fund, in
view of its investment objective, presently expects to invest its assets
primarily in common stocks of U.S. and non-U.S. issuers. The Fund may, however,
invest substantially or primarily in debt securities of U.S. and non-U.S.
issuers when it appears that the capital appreciation available from investments
in such securities will equal or exceed the capital appreciation available from
investments in equity securities, or when the Fund is temporarily in a defensive
position. Moreover, should extraordinary market conditions warrant, the Fund may
temporarily be invested primarily in securities of U.S. issuers.
The Fund is intended to provide investors with the opportunity to
invest in a portfolio of securities of companies and governments located
throughout the world. In making the allocation of assets among the various
countries and geographic regions, the Fund's investment adviser ordinarily
considers such factors as prospects for relative economic growth between foreign
countries; expected levels of inflation and interest rates; government policies
influencing business conditions; the range of individual investment
opportunities available to international investors; and other pertinent
financial, tax, social, political and national factors--all in relation to the
prevailing prices of the securities in each country or region.
Investments may be made in companies based in (or governments of or
within) the Pacific Basin (such as Japan, Australia, Singapore, Malaysia and
Hong Kong) and Western Europe (such as the United Kingdom, Germany, Switzerland,
the Netherlands, France, Belgium, Spain and Scandinavia), as well as the United
States, Canada and such other areas and countries as the investment adviser may
determine from time to time. The Fund intends to maintain investments in a
minimum of four countries, which may include the United States, but may, from
time to time, invest up to 65% of its assets in companies and governments
located in any one country.
The Fund may invest in securities not listed on securities exchanges.
These securities will generally have an established market (such as the
over-the-counter market), the depth and liquidity of which may vary from time to
time and from security to security. In addition, the Fund may invest to a
limited extent in securities of companies which have been in existence for less
than three years, in securities for which market quotations are not readily
available and in securities of other registered investment companies. See
"Investment Restrictions" in the Statement of Additional Information.
In analyzing companies for investment, the investment adviser
ordinarily looks for one or more of the following characteristics: prospects for
above-average earnings growth per share; high return on invested capital;
healthy balance sheet; sound financial and accounting policies and overall
financial strength; strong competitive advantages; effective research and
product development and marketing; efficient service; pricing flexibility;
strength of management; and general operating characteristics which will enable
the companies to compete successfully in their marketplace--all in relation to
the prevailing prices of the securities of such companies.
7
<PAGE>
The Fund's investment objective is a fundamental policy and may not be
changed without the approval of the holders of a majority of the Fund's
outstanding voting securities as defined in the Investment Company Act of 1940
(the Investment Company Act). Fund policies that are not fundamental may be
modified by the Board of Directors.
HEDGING AND INCOME ENHANCEMENT STRATEGIES
The Fund may also engage in various portfolio strategies to reduce
certain risks of its investments and to attempt to enhance income. These
strategies include the purchase and sale of put and call options, and the
purchase and sale of stock index futures and combinations thereof. The Manager
will use such techniques as market conditions warrant. The Fund's ability to use
these strategies may be limited by market conditions, regulatory limits and tax
considerations and there can be no assurance that any of these strategies will
succeed. See "Investment Objective and Policies" in the Statement of Additional
Information. New financial products and risk management techniques continue to
be developed and the Fund may use these new investments and techniques to the
extent consistent with its investment objective and policies.
Options Transactions
Exchange-Traded Options. The Fund may purchase and write (i.e., sell)
exchange traded put and call options on equity securities, debt securities or
stock indices.
A call option on equity securities gives the purchaser, in exchange for
a premium paid, the right for a specified period of time to purchase the
securities subject to the option at a specified price (the "exercise price" or
"strike price"). The writer of a call option, in return for the premium, has the
obligation, upon exercise of the option, to deliver, depending upon the terms of
the option contract, the underlying securities to the purchaser upon receipt of
the exercise price. When the Fund writes a call option, the Fund gives up the
potential for gain on the underlying securities in excess of the exercise price
of the option during the period that the option is open.
A put option on equity securities gives the purchaser, in return for a
premium, the right, for a specified period of time, to sell the securities
subject to the option to the writer of the put at the specified exercise price.
The writer of the put option, in return for the premium, has the obligation,
upon exercise of the option, to acquire the securities underlying the option at
the exercise price. The Fund as the writer of a put option might, therefore, be
obligated to purchase underlying securities for more than their current market
price.
Options on stock indices are similar to options on equity securities
except that, rather than the right to take or make delivery of stock at a
specified price, an option on a stock index gives the holder the right, in
return for a premium paid, to receive, upon exercise of the option, an amount of
cash if the closing level of the stock index upon which the option is based is
greater than, in the case of a call, or less than, in the case of a put, the
exercise price of the option. The writer of an index option, in return for the
premium, is obligated to pay the amount of cash due upon exercise of the option.
The Fund will write only "covered" options. An option is covered if the
Fund, so long as it is obligated under the option, owns an offsetting position
in the underlying securities or maintains cash, U.S. Government securities or
other liquid high-grade debt obligations with a value sufficient at all times to
cover its obligations in a segregated account. See "Investment Objective and
Policies--Limitations on Purchase and Sale of Stock Options, Options on Stock
Indices and Stock Index Futures" in the Statement of Additional Information.
There is no limitation on the amount of call options the Fund may
write. The Fund may only write covered put options to the extent that cover for
such options does not exceed 25% of the Fund's net assets. The Fund will not
purchase an option if, as a result of such purchase, more than 20% of its total
assets would be invested in premiums for such options.
Over-the-Counter Options. The Fund may also purchase and write (i.e.,
sell) put and call options on equity and debt securities and on stock indexes in
the over-the-counter market (OTC options). Unlike exchange-traded options, OTC
options are contracts between the Fund and its counterparty without the
interposition of any clearing organization. Thus, the value of an
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OTC option is particularly dependent on the financial viability of the OTC
counterparty. The Fund's ability to purchase and write OTC options may be
limited by market conditions, regulatory limits and tax considerations. There
are certain risks associated with investments in OTC options. See "Investment
Objectives and Policies--Special Risks of Purchasing OTC Options" in the
Statement of Additional Information.
Stock Index Futures
The Fund may purchase and sell stock index futures which are traded on
a commodities exchange or board of trade for certain hedging and risk management
purposes in accordance with regulations of the Commodity Futures Trading
Commission.
A stock index futures contract is an agreement in which one party
agrees to deliver to another an amount of cash equal to a specific dollar amount
times the difference between a specific stock index at the close of the last
trading day of the contract and the price at which the agreement is made. No
physical delivery of the underlying stocks in the index is made. The Fund may
not purchase or sell stock index futures if, immediately thereafter, more than
one-third of its net assets would be hedged. In addition, except in the case of
a call written and held on the same index, the Fund will write call options on
indices or sell stock index futures only if the amount resulting from the
multiplication of the then current level of the index (or indices) upon which
the options or futures contract(s) is based, the applicable multiplier(s), and
the number of futures or options contracts which would be outstanding would not
exceed one-third of the value of the Fund's net assets. The Fund also may not
purchase or sell stock index futures for risk management purposes if immediately
thereafter the sum of the amount of margin deposits on the Fund's existing
futures positions and premiums paid for such options would exceed 5% of the
liquidation value of the Fund's total assets. The Fund may purchase and sell
stock index futures, without limitation, for bona fide hedging purposes.
The Fund's successful use of stock index futures contracts and options
on indices depends upon its ability to predict the direction of the market
underlying the index and is subject to various additional risks. The correlation
between movements in the price of the stock index future and the price of the
securities being hedged is imperfect and there is a risk that the value of the
securities being hedged may increase or decrease at a greater rate than the
related futures contract, resulting in losses to the Fund. Certain futures
exchanges or boards of trade have established daily limits on the amount that
the price of a futures contract or related options may vary, either up or down,
from the previous day's settlement price. These daily limits may restrict the
Fund's ability to purchase or sell certain futures contracts or related options
on any particular day. In addition, if the Fund purchases futures to hedge
against market advances before it can invest in common stock in an advantageous
manner and the market declines, the Fund might create a loss on the futures
contract. In addition, the ability of the Fund to close out a futures position
or an option depends on a liquid secondary market. There is no assurance that
liquid secondary markets will exist for any particular futures contract or
option at any particular time. See "Investment Objective and Policies" in the
Statement of Additional Information.
The Fund's ability to enter into stock index futures and listed options
is limited by the requirements of the Internal Revenue Code of 1986, as amended
(the Internal Revenue Code), for qualification as a regulated investment
company. See "Taxes" in the Statement of Additional Information.
Special Risks of Hedging and Income Enhancement Strategies
Participation in the options or futures markets involves investment
risks and transaction costs to which the Fund would not be subject absent the
use of these strategies. If the investment adviser's prediction of movements in
the direction of the securities markets is inaccurate, the adverse consequences
to the Fund may leave the Fund in a worse position than if such strategies were
not used. Risks inherent in the use of options and stock index futures include
(1) dependence on the investment adviser's ability to predict correctly
movements in the direction of specific securities being hedged or the movement
in stock indices; (2) imperfect correlation between the price of options and
stock index futures and options thereon and movements in the prices of the
securities being hedged; (3) the fact that skills needed to use these strategies
are different from those needed to select portfolio securities; (4) the possible
absence of a liquid secondary market for any particular instrument at any time;
(5) the possible need to defer closing out certain hedged positions to avoid
adverse tax consequences; and (6) the possible inability of the Fund to purchase
or sell a portfolio security at a time
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that otherwise would be favorable for it to do so, or the possible need for the
Fund to sell a portfolio security at a disadvantageous time, due to the need for
the Fund to maintain "cover" or to segregate securities in connection with
hedging transactions. See "Investment Objective and Policies" and "Taxes" in the
Statement of Additional Information.
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These contracts are traded in the
interbank market conducted directly between currency traders (typically large
commercial banks) and their customers. A forward contract generally has no
deposit requirements, and no commissions are charged for such trades. See
"Investment Objective and Policies--Forward Foreign Currency Exchange Contracts"
in the Statement of Additional Information.
When the Fund invests in foreign securities, the Fund may enter into
forward contracts in several circumstances to protect the value of its
portfolio. The Fund may not use forward contracts to generate income, although
the use of such contracts may incidentally generate income. There is no
limitation on the value of forward contracts into which the Fund may enter.
However, the Fund's dealings in forward contracts will be limited to hedging
involving either specific transactions or portfolio positions. Transaction
hedging is the purchase or sale of a forward contract with respect to specific
receivables or payables of the Fund generally arising in connection with the
purchase or sale of its portfolio securities and accruals of interest or
dividends receivable and Fund expenses. Position hedging is the sale of a
foreign currency with respect to portfolio security positions denominated or
quoted in that currency. The Fund will not speculate in forward contracts. The
Fund may not position hedge with respect to a particular currency for an amount
greater than the aggregate market value (determined at the time of making any
sale of a forward contract) of securities held in its portfolio denominated or
quoted in, or currently convertible into, such currency.
When the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when the Fund anticipates the
receipt in a foreign currency of dividends or interest payments on a security
which it holds, the Fund may desire to "lock in" the U.S. dollar price of the
security or the U.S. dollar equivalent of such dividend or interest payment, as
the case may be. By entering into a forward contract for a fixed amount of
dollars for the purchase or sale of the amount of foreign currency involved in
the underlying transaction, the Fund will be able to protect itself against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the subject foreign currency during the period between the date
on which the security is purchased or sold, or on which the dividend or interest
payment is declared, and the date on which such payments are made or received.
Additionally, when the investment adviser believes that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar, the Fund may enter into a forward contract, for a fixed amount of
dollars, to sell the amount of foreign currency approximating the value of some
or all of the portfolio securities of the Fund denominated in such foreign
currency. Requirements under the Internal Revenue Code for qualification as a
regulated investment company may limit the Fund's ability to engage in
transactions in forward contracts. See "Taxes" in the Statement of Additional
Information.
Futures Contracts On Foreign Currencies and Options On Futures Contracts
The Fund may buy and sell futures contracts on foreign currencies and
groups of foreign currencies (futures contracts) such as the European Currency
Unit and related options thereon solely for hedging purposes. A European
Currency Unit is a basket of specified amounts of the currencies of certain
member states of the European Economic Community, a Western European economic
cooperative organization including, inter alia, France, Germany, The Netherlands
and the United Kingdom. The Fund will engage in transactions in only those
futures contracts and options thereon that are traded on a commodities exchange
or a board of trade. A "sale" of a futures contract means the assumption of a
contractual obligation to deliver the specified amount of foreign currency at a
specified price in a specified future month. A "purchase" of a futures contract
means the assumption of a contractual obligation to acquire the currency called
for by the contract at a specified price in a specified future month. At the
time a futures contract is purchased or sold, the Fund must allocate cash or
securities as a deposit payment (initial margin). Thereafter, the futures
contract is valued daily and the payment of "variation margin" may be required,
resulting in the Fund's providing or receiving cash that reflects any decline or
increase in the contract's value, a process known as "marking to market".
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The Fund intends to engage in futures contracts on foreign currencies
and options on these futures transactions as a hedge against changes in the
value of the currencies to which the Fund is subject or to which the Fund
expects to be subject in connection with future purchases, in accordance with
the rules and regulations of the Commodity Futures Trading Commission (the
CFTC). The Fund also intends to engage in such transactions when they are
economically appropriate for the reduction of risks inherent in the ongoing
management of the Fund.
Options On Foreign Currencies
The Fund may purchase and write put and call options on foreign
currencies traded on securities exchanges or boards of trade (foreign and
domestic) for hedging purposes in a manner similar to that in which forward
foreign currency exchange contracts and futures contracts on foreign currencies
will be employed. Options on foreign currencies are similar to options on stock,
except that the Fund has the right to take or make delivery of a specified
amount of foreign currency, rather than stock.
The Fund may purchase and write options to hedge the Fund's portfolio
securities denominated in foreign currencies. If there is a decline in the
dollar value of a foreign currency in which the Fund's portfolio securities are
denominated, the dollar value of such securities will decline even though the
foreign currency value remains the same. See "Special Considerations and Risks"
below. To hedge against the decline of the foreign currency, the Fund may
purchase put options on such foreign currency. If the value of the foreign
currency declines, the gain realized on the put option would offset, in whole or
in part, the adverse effect such decline would have on the value of the
portfolio securities. Alternatively, the Fund may write a call option on the
foreign currency. If the value of the foreign currency declines, the option
would not be exercised and the decline in the value of the portfolio securities
denominated in such foreign currency would be offset in part by the premium the
Fund received for the option.
If, on the other hand, the investment adviser anticipates purchasing a
foreign security and also anticipates a rise in the value of such foreign
currency (thereby increasing the cost of such security), the Fund may purchase
call options on the foreign currency. The purchase of such options could offset,
at least partially, the effects of the adverse movements of the exchange rates.
Alternatively, the Fund could write a put option on the currency and, if the
exchange rates move as anticipated, the option would expire unexercised.
Risks of Investing In Foreign Currency, Forward Contracts, Options and Futures
The Fund's successful use of forward foreign currency exchange
contracts, options on foreign currencies, futures contracts on foreign
currencies and options on such contracts depends upon the investment adviser's
ability to predict the direction of the market and political conditions, which
requires different skills and techniques than predicting changes in the
securities markets generally. For instance, if the value of the securities being
hedged moves in a favorable direction, the advantage to the Fund would be wholly
or partially offset by a loss in the forward contracts or futures contracts.
Further, if the value of the securities being hedged does not change, the Fund's
net income would be less than if the Fund had not hedged since there are
transactional costs associated with the use of these investment practices.
These practices are subject to various additional risks. The
correlation between movements in the price of options and futures contracts and
the price of the currencies being hedged is imperfect. The use of these
instruments will hedge only the currency risks associated with investments in
foreign securities, not market risks. In addition, if the Fund purchases these
instruments to hedge against currency advances before it invests in securities
denominated in such currency and the currency market declines, the Fund might
incur a loss on the futures contract. The Fund's ability to establish and
maintain positions will depend on market liquidity. The ability of the Fund to
close out a futures position or an option depends upon a liquid secondary
market. There is no assurance that liquid secondary markets will exist for any
particular futures contract or option at any particular time. See "Risks of
Transactions in Options" and "Risks of Transactions in Futures Contracts" under
"Investment Objective and Policies" in the Statement of Additional Information.
Limitations On Options and Futures Contracts
The Fund will not (a) write puts having aggregate exercise prices
greater than 25% of total assets, or (b) purchase (i) put options on foreign
currencies or (ii) call options on foreign currencies if, after any such
purchase, the
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aggregate premiums paid for such options would exceed 10% of the Fund's total
assets. There are no other limitations on the amount of foreign currencies that
may be hedged, and no limitations on the use of assets to cover options, except
that the aggregate value of the obligations underlying put options will not
exceed 50% of the Fund's assets. Requirements for qualification as a regulated
investment company under the Internal Revenue Code may limit the Fund's ability
to engage in transactions in options on foreign currencies. See "Taxes" in the
Statement of Additional Information.
OTHER INVESTMENT PRACTICES
Repurchase Agreements
The Fund may on occasion enter into repurchase agreements, whereby the
seller of a security agrees to repurchase that security from the Fund at a
mutually agreed-upon time and price. The repurchase date is usually within a day
or two of the original purchase, although it may extend over a number of months.
The resale price is in excess of the purchase price, reflecting an agreed-upon
rate of return effective for the period of time the Fund's money is invested in
the security. The Fund's repurchase agreements will at all times be fully
collateralized in an amount at least equal to the purchase price including
accrued interest earned on the underlying securities. The instruments held as
collateral are valued daily, and, as the value of instruments declines, the Fund
will require additional collateral. If the seller defaults and the value of the
collateral securing the repurchase agreement declines, the Fund may incur a
loss. The Fund participates in a joint repurchase account with other investment
companies managed by Prudential Mutual Fund Management, Inc. pursuant to an
order of the Securities and Exchange Commission. The Fund may invest up to 5% of
its net assets in illiquid securities including repurchase agreements which have
a maturity of longer than seven days, securities with legal or contractual
restrictions on resale (restricted securities) and securities that are not
readily marketable. Restricted securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933, as amended (the Securities Act), that
have a readily available market are not considered illiquid for purposes of this
limitation. The investment adviser will monitor the liquidity of such restricted
securities under the supervision of the Board of Directors. Repurchase
agreements subject to demand are deemed to have a maturity equal to the
applicable notice period.
Illiquid Securities
The Fund may invest up to 5% of its net assets in illiquid securities,
including repurchase agreements which have a maturity of longer than seven days,
securities with legal or contractual restrictions on resale (restricted
securities) and securities that are not readily marketable. Restricted
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933, as amended, (the Securities Act) that have a readily available market are
not considered illiquid for purposes of this limitation. The investment adviser
will monitor the liquidity of such restricted securities under the supervision
of the Board of Directors. Repurchase agreements subject to demand are deemed to
have a maturity equal to the applicable notice period.
The staff of the SEC has taken the position that purchased
over-the-counter options and the assets used as "cover" for written
over-the-counter options are illiquid securities unless the Fund and the
counterparty have provided for the Fund, at the Fund's election, to unwind the
over-the-counter option. The exercise of such an option ordinarily would involve
the payment by the Fund of an amount designed to reflect the counterparty's
economic loss from an early termination, but does allow the Fund to treat the
assets used as "cover" as "liquid."
Securities Lending
The Fund may lend its portfolio securities to brokers or dealers, banks
or other recognized institutional borrowers of securities, provided that the
borrower at all times maintains cash or equivalent collateral or secures a
letter of credit in favor of the Fund in an amount equal to at least 100% of the
market value of the securities loaned. During the time portfolio securities are
on loan, the borrower will pay the Fund an amount equivalent to any dividend or
interest paid on such securities and the Fund may invest the cash collateral and
earn additional income, or it may receive an agreed-upon amount of interest
income from the borrower. The Fund does not presently intend to lend more than
5% of the value of its total assets and, as a matter of fundamental policy, the
Fund cannot lend more than 10% of the value of its total assets. Loans are
subject to termination at the option of the Fund or the borrower. The Fund may
pay reasonable administrative
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and custodial fees in connection with a loan and may pay a negotiated portion of
the interest earned on the cash or equivalent collateral to the borrower or
placing broker. The Fund does not have the right to vote securities on loan, but
would terminate the loan and regain the right to vote if such vote was
considered important with respect to the Fund's investment in the securities on
loan.
The Fund will enter into securities lending transactions only with
parties who meet creditworthiness standards approved by the Board of Directors.
The investment adviser monitors the creditworthiness of such parties under the
Board of Directors' general supervision.
Borrowing
The Fund may borrow an amount equal to no more than 20% of the value of
its total assets (calculated when the loan is made) for temporary, extraordinary
or emergency purposes or for the clearance of transactions. The Fund may pledge
up to 20% of its total assets to secure these borrowings.
Portfolio Turnover
The Fund anticipates that its annual portfolio turnover rate will not
exceed 100% in normal circumstances.
SPECIAL CONSIDERATIONS AND RISKS
Investing in securities of foreign companies and countries involves
certain considerations and risks which are not typically associated with
investing in U.S. Government securities and those of domestic companies. Foreign
companies are not generally subject to uniform accounting, auditing and
financial standards and requirements comparable to those applicable to U.S.
companies. There may also be less government supervision and regulation of
foreign securities exchanges, brokers and listed companies than exists in the
United States. Dividends paid by foreign issuers may be subject to withholding
and other foreign taxes which may decrease the net return on such investments as
compared to dividends and interest paid to the Fund by the U.S. Government or by
domestic companies. In addition, there may be the possibility of expropriations,
confiscatory taxation, political, economic or social instability or diplomatic
developments which could affect assets of the Fund held in foreign countries.
There may be less publicly available information about foreign
companies and governments compared to reports and ratings published about U.S.
companies. Foreign securities markets have substantially less volume than the
New York Stock Exchange and securities of some foreign companies are less liquid
and more volatile than securities of comparable U.S. companies. Brokerage
commissions and other transaction costs on foreign securities exchanges are
generally higher than in the United States.
The operating expense ratio of the Fund can be expected to be higher
than that of an investment company investing exclusively in domestic securities
since the expenses of the Fund, such as custodial costs, valuation costs and
communication costs, as well as the rate of the management fee (.75 of 1% of the
Fund's average daily net assets), though similar to such expenses of other
international funds, are higher than those costs incurred by other investment
companies.
INVESTMENT RESTRICTIONS
The Fund is subject to certain investment restrictions which, like its
investment objective, constitute fundamental policies. Such fundamental policies
cannot be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities. See "Investment Restrictions" in the
Statement of Additional Information.
--------------------------------------------------------------------------------
HOW THE FUND IS MANAGED
--------------------------------------------------------------------------------
The Fund has a Board of Directors which, in addition to overseeing the
actions of the Fund's Manager, Subadviser and Distributor, as set forth below,
decides upon matters of general policy. The Fund's Manager conducts and
supervises the daily business operations of the Fund. The Fund's Subadviser
furnishes daily investment advisory services.
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For the fiscal year ended October 31, 1993, the Fund's total expenses
as a percentage of average net assets for the Fund's Class A and Class B shares
were 1.56% and 2.24%, respectively. See "Financial Highlights". No Class C
shares were outstanding during the fiscal year ended October 31, 1993.
MANAGER
Prudential Mutual Fund Management, Inc. (PMF or the Manager), One
Seaport Plaza, New York, New York 10292, is the Manager of the Fund and is
compensated for its services at an annual rate of .75 of 1% of the Fund's
average daily net assets. It was incorporated in May 1987 under the laws of the
State of Delaware. For the fiscal year ended October 31, 1993, the Fund paid
management fees to PMF of .75% of the Fund's average net assets. See "Manager"
in the Statement of Additional Information.
As of March 31, 1994, PMF served as the manager of [37] open-end
investment companies, constituting all of the Prudential Mutual Funds, and as
manager or administrator of [29] closed-end investment companies, with aggregate
assets of approximately [$49] billion.
Under the Management Agreement with the Fund, PMF manages the
investment operations of the Fund and also administers the Fund's corporate
affairs. See "Manager" in the Statement of Additional Information.
Under a Subadvisory Agreement between PMF and The Prudential Investment
Corporation (PIC or the Subadviser), PIC furnishes investment advisory services
in connection with the management of the Fund and is reimbursed by PMF for its
reasonable costs and expenses incurred in providing such services. Under the
Management Agreement, PMF continues to have responsibility for all investment
advisory services and supervises PIC's performance of such services.
The current portfolio manager of the Fund is Daniel J. Duane, a
Managing Director and Chief Investment Officer for Global Equity Investments of
Prudential Investment Advisors, a unit of The Prudential Investment Corporation
(PIC). Mr. Duane has responsibility for the day-to-day management of the Fund's
portfolio. Mr. Duane has been employed by PIC as a portfolio manager since 1990.
He was formerly with First Investors Asset Management from 1986 to 1990 as
senior portfolio manager and head of global equity investments. Mr. Duane is a
Chartered Financial Analyst. Mr. Duane also serves as the portfolio manager of
the Prudential Series Fund Global Equity Portfolio, Prudential Global Genesis
Fund and Prudential Pacific Growth Fund, Inc.
PMF and PIC are indirect, wholly-owned subsidiaries of The Prudential
Insurance Company of America (Prudential), a major diversified insurance and
financial services company.
DISTRIBUTOR
Prudential Mutual Fund Distributors, Inc. (PMFD), One Seaport Plaza,
New York, New York 10292, is a corporation organized under the laws of the State
of Delaware and serves as the distributor of the Class A shares of the Fund. It
is a wholly-owned subsidiary of PMF.
Prudential Securities Incorporated (Prudential Securities or PSI), One
Seaport Plaza, New York, New York 10292, is a corporation organized under the
laws of the State of Delaware and serves as the distributor of the Class B and
Class C shares of the Fund. It is an indirect, wholly-owned subsidiary of
Prudential.
Under separate Distribution and Service Plans (the Class A Plan, the
Class B Plan and the Class C Plan, collectively, the Plans) adopted by the Fund
under Rule 12b-1 under the Investment Company Act and separate distribution
agreements (the Distribution Agreements), PMFD and Prudential Securities
(collectively, the Distributor) incur the expenses of distributing the Fund's
Class A, Class B and Class C shares. These expenses include commissions and
account servicing fees paid to, or on account of, financial advisers of
Prudential Securities and Pruco Securities Corporation (Prusec), an affiliated
broker-dealer, commissions and account servicing fees paid to, or on account of,
other broker-dealers or financial institutions (other than national banks) which
have entered into agreements with the Distributor, advertising expenses, the
cost of printing and mailing prospectuses to potential investors and indirect
and overhead costs of Prudential Securities and Prusec
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<PAGE>
associated with the sale of Fund shares, including lease, utility,
communications and sales promotion expenses. The State of Texas requires that
shares of the Fund may be sold in that state only by dealers or other financial
institutions which are registered there as broker-dealers.
Under the Plans, the Fund is obligated to pay distribution and/or
service fees to the Distributor as compensation for its distribution and service
activities, not as reimbursement for specific expenses incurred. If the
Distributor's expenses exceed its distribution and service fees, the Fund will
not be obligated to pay any additional expenses. If the Distributor's expenses
are less than such distribution and service fees, it will retain its full fees
and realize a profit.
Under the Class A Plan, the Fund may pay PMFD for its
distribution-related expenses with respect to Class A shares at an annual rate
of up to .30 of 1% of the average daily net assets of the Class A shares. The
Class A Plan provides that (i) up to .25 of 1% of the average daily net assets
of the Class A shares may be used to pay for personal service and/or the
maintenance of shareholder accounts (service fee) and (ii) total distribution
fees (including the service fee of up to .25 of 1%) may not exceed .30 of 1% of
the average daily net assets of the Class A shares. PMFD has agreed to limit its
distribution-related fees payable under the Class A Plan to .25 of 1% of the
average daily net assets of the Class A shares for the fiscal year ending
October 31, 1994.
For the fiscal year ended October 31, 1993, PMFD received payments of
$42,818, under the Class A Plan as reimbursement of expenses related to the
distribution of Class A shares. This amount was primarily expended for payment
of account servicing fees to financial advisers and other persons who sell Class
A shares. For the fiscal year ended October 31, 1993, PMFD also received
approximately $220,700 in initial sales charges.
Under the Class B Plan, the Fund pays Prudential Securities for its
distribution-related expenses with respect to Class B shares at an annual rate
of .75 of 1% of average daily net assets of the Class B shares up to the level
of the average daily net assets of the Fund as of February 26, 1986, plus 1% of
average daily net assets of the Class B shares in excess of such level. Under
the Class C Plan, the Fund pays Prudential Securities for its
distribution-related expenses with respect to the Class C shares at an annual
rate of 1% of average daily net assets of Class C shares. The Class B and Class
C Plans provide for the payment to Prudential Securities of (i) an asset-based
sales charge of, with respect to the Class B shares, .50 of 1% of the average
daily net assets of the Class B shares up to the level of the average daily net
assets of the Fund on February 26, 1986, plus .75 of 1% of the average daily net
assets of the Class B shares in excess of such level, and, with respect to the
Class C shares, .75 of 1% of the average daily net assets of the Class C shares
and (ii) a service fee of .25 of 1% of the average daily net assets of the Class
B and Class C shares, respectively. The service fee is used to pay for personal
service and/or the maintenance of shareholders accounts. Prudential Securities
also receives contingent deferred sales charges from certain redeeming
shareholders. See "Shareholder Guide--How to Sell Your Shares--Contingent
Deferred Sales Charges."
For the fiscal year ended October 31, 1993, Prudential Securities
incurred distribution expenses of approximately $2,541,600 under the Class B
Plan and received $1,609,543 from the Fund under the Class B Plan. In addition,
Prudential Securities received approximately $290,200 in contingent deferred
sales charges from redemptions of Class B shares during this period. No Class C
shares were outstanding during the fiscal year ended October 31, 1993.
For the fiscal year ended October 31, 1993, the Fund paid distribution
expenses of .20% and .88% of the average net assets of the Class A and Class B
shares, respectively. The Fund records all payments made under the Plans as
expenses in the calculation of net investment income. No Class C shares were
outstanding during fiscal year ended October 31, 1993.
Distribution expenses attributable to the sale of shares of the Fund
will be allocated to each class based upon the ratio of sales of each class to
the sales of all shares of the Fund other than expenses allocable to a
particular class. The distribution fee and sales charge of one class will not be
used to subsidize the sale of another class.
Each Plan provides that it shall continue in effect from year to year
provided that a majority of the Board of Directors of the Fund, including a
majority of the Directors who are not "interested persons" of the Fund (as
defined in the Investment Company Act) and who have no direct or indirect
financial interest in the operation of the Plan or any agreement related to the
Plan (the Rule 12b-1 Directors), vote annually to continue the Plan. Each Plan
may be terminated at any time by vote of a majority of the Rule 12b-1 Directors
or of a majority of the outstanding shares of the applicable class of the Fund.
The Fund will not be obligated to pay expenses incurred under any plan if it is
terminated or not continued.
15
<PAGE>
In addition to distribution and service fees paid by the Fund under the
Class A, Class B and Class C Plans, the Manager (or one of its affiliates) may
make payments to dealers and other persons which distribute shares of the Fund.
Such payment may be calculated by reference to the net asset value of shares
sold by such persons or otherwise.
The Distributor is subject to the rules of the National Association of
Securities Dealers, Inc. governing maximum sales charges. See "Distributor" in
the Statement of Additional Information.
PORTFOLIO TRANSACTIONS
Prudential Securities may act as a broker or futures commission
merchant for the Fund provided that the commissions, fees or other remuneration
it receives are fair and reasonable. See "Portfolio Transactions and Brokerage"
in the Statement of Additional Information.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Fund's portfolio securities and
cash and, in that capacity, maintains certain financial and accounting books and
records pursuant to an agreement with the Fund. Its mailing address is P.O. Box
1713, Boston, Massachusetts 02105.
Prudential Mutual Fund Services, Inc., Raritan Plaza One, Edison, New
Jersey 08837, serves as Transfer Agent and Dividend Disbursing Agent and in
those capacities maintains certain books and records for the Fund. PMFS is a
wholly-owned subsidiary of PMF. Its mailing address is P.O. Box 15005, New
Brunswick, New Jersey 08906-5005.
--------------------------------------------------------------------------------
HOW THE FUND VALUES ITS SHARES
--------------------------------------------------------------------------------
The Fund's net asset value per share or NAV is determined by
subtracting its liabilities from the value of its assets, and dividing the
remainder by the number of outstanding shares. NAV is calculated separately for
each class. For valuation purposes, quotations of foreign securities in a
foreign currency are converted to U.S. dollar equivalents. The Board of
Directors has fixed the specific time of day for the computation of the Fund's
net asset value to be as of 4:15 P.M., New York time.
Portfolio securities are valued based on market quotations or, if not
readily available, at fair value as determined in good faith under procedures
established by the Fund's Board of Directors. See "Net Asset Value" in the
Statement of Additional Information.
The Fund will compute its NAV once daily on days that the New York
Stock Exchange is open for trading except on days on which no orders to
purchase, sell or redeem shares have been received by the Fund or days on which
changes in the value of the Fund's portfolio securities do not materially affect
the NAV. The New York Stock Exchange is closed on the following holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.
Although the legal rights of each class of shares are substantially
identical, the different expenses borne by each class will result in different
NAVs and dividends. The NAV of Class B and Class C shares will generally be
lower than the NAV of Class A shares as a result of the larger
distribution-related fee to which Class B and Class C shares are subject. It is
expected, however, that the NAV of the three classes will tend to converge
immediately after the recording of dividends, if any, which will differ by
approximately the amount of the distribution-related expense accrual
differential among the classes.
16
<PAGE>
--------------------------------------------------------------------------------
HOW THE FUND CALCULATES PERFORMANCE
--------------------------------------------------------------------------------
From time to time the Fund may advertise its total return (including
"average annual" total return and "aggregate" total return) and yield in
advertisements or sales literature. Total return and yield are calculated
separately for Class A, Class B and Class C shares. These figures are based on
historical earnings and are not intended to indicate future performance. The
"total return" shows how much an investment in the Fund would have increased
(decreased) over a specified period of time (i.e., one, five or ten years or
since inception of the Fund) assuming that all distributions and dividends by
the Fund were reinvested on the reinvestment dates during the period and less
all recurring fees. The "aggregate" total return reflects actual performance
over a stated period of time. "Average annual" total return is a hypothetical
rate of return that, if achieved annually, would have produced the same
aggregate total return if performance had been constant over the entire period.
"Average annual" total return smooths out variations in performance and takes
into account any applicable initial or contingent deferred sales charges.
Neither "average annual" total return nor "aggregate" total return takes into
account any federal or state income taxes which may be payable upon redemption.
The "yield" refers to the income generated by an investment in the Fund over a
one-month or 30-day period. This income is then "annualized"; that is, the
amount of income generated by the investment during that 30-day period is
assumed to be generated each 30-day period for twelve periods and is shown as a
percentage of the investment. The income earned on the investment is also
assumed to be reinvested at the end of the sixth 30-day period. The Fund may
also include comparative performance information in advertising or marketing the
Fund's shares. Such performance information may include data from Lipper
Analytical Services, Inc., other industry publications, business periodicals,
and market indices. See "Performance Information" in the Statement of Additional
Information. The Fund will include performance data for each class of the Fund
in any advertisement or information including performance data of the Fund.
Further performance information is contained in the Fund's annual and
semi-annual reports to shareholders, which may be obtained without charge. See
"Shareholder Guide--Shareholder Services--Reports to Shareholders."
--------------------------------------------------------------------------------
TAXES, DIVIDENDS AND DISTRIBUTIONS
--------------------------------------------------------------------------------
Taxation of the Fund
The Fund has elected to qualify and intends to remain qualified as a
regulated investment company under the Internal Revenue Code. Accordingly, the
Fund will not be subject to federal income taxes on its net investment income
and capital gains, if any, that it distributes to its shareholders. See "Taxes"
in the Statement of Additional Information.
The Fund may, from time to time, invest in Passive Foreign Investment
Companies ("PFICs"). PFICs are foreign corporations which derive a majority of
their income from passive sources. For tax purposes, the Fund's investments in
PFICs may subject the Fund to federal income taxes and a charge in the nature of
interest with respect to certain gains and income realized by the Fund. Under
proposed Treasury regulations, the Fund would be able to avoid such taxes and
interest by electing to "mark-to-market" its investments in PFIC'S i.e., treat
them as sold for fair market value at the end of the year.
Under the Internal Revenue Code, special rules apply to the treatment
of certain options and futures contracts (Section 1256 contracts). At the end of
each year, such investments held by the Fund will be required to be "marked to
market" for federal income tax purposes; that is, treated as having been sold at
market value. Sixty percent of any gain or loss recognized on these "deemed
sales" and on actual dispositions will be treated as long-term capital gain or
loss, and the remainder will be treated as short-term capital gain or loss. See
"Taxes" in the Statement of Additional Information.
Taxation of Shareholders
All dividends out of net investment income, together with distributions
of net short-term capital gains, will be taxable as ordinary income to the
shareholder whether or not reinvested. Any net long-term capital gains (i.e.,
the excess of net long-term capital gains over
17
<PAGE>
net short-term capital losses) distributed to shareholders will be taxable as
such to the shareholders, whether or not reinvested and regardless of the length
of time a shareholder has owned his or her shares. The maximum long-term capital
gains rate for individuals is 28%. The maximum long-term capital gains rate for
corporate shareholders is currently the same as the maximum tax rate for
ordinary income.
Dividends paid by the Fund will be eligible for the 70%
dividends-received deduction for corporate shareholders to the extent that the
Fund's income is derived from certain dividends received from domestic
corporations. Capital gains distributions are not eligible for the 70%
dividends-received deduction.
The Fund has obtained an opinion of counsel to the effect that the
conversion of Class B shares into Class A shares does not constitute a taxable
event for U.S. income tax purposes. However, such opinion is not binding on the
Internal Revenue Service.
Shareholders are advised to consult their own tax advisers regarding
specific questions as to federal, state or local taxes. See "Taxes" in the
Statement of Additional Information.
Withholding Taxes
Under U.S. Treasury Regulations, the Fund is required to withhold and
remit to the U.S. Treasury 31% of dividend, capital gain income and redemption
proceeds on the accounts of those shareholders who fail to furnish their tax
identification numbers on IRS Form W-9 (or IRS Form W-8 in the case of certain
foreign shareholders) with the required certifications regarding the
shareholder's status under the federal income tax law. Dividends of net
investment income and net short-term capital gains to a foreign shareholder will
generally be subject to U.S. withholding tax at the rate of 30% (or lower treaty
rate).
Investment income received by the Fund from sources within foreign
countries may be subject to foreign income taxes withheld at source. If the Fund
should have more than 50% of the value of its assets invested in securities of
foreign corporations at the close of its taxable year, which is the Fund's
present intention, the Fund may elect to permit its shareholders to take, either
as a credit or as a deduction, their proportionate share of the foreign income
taxes paid.
Dividends and Distributions
The Fund expects to distribute annually to its shareholders all of its
net investment income and any net capital gains. Dividends paid by the Fund with
respect to each class of shares, to the extent any dividends are paid, will be
calculated in the same manner, at the same time, on the same day and will be in
the same amount except that each class will bear its own distribution charges,
generally resulting in lower dividends for Class B and Class C shares.
Distribution or net capital gains, if any, will be paid in the same amount for
each class of shares. See "How the Fund Values its Shares." As of October 31,
1993, the Fund has a capital loss carryforward for federal income tax purposes
of approximately $11,527,100, of which $1,370,900 expires in 1998, $6,017,600
expires in 1999 and $4,138,600 expires in 2000. Accordingly, no capital gains
distribution is expected to be paid to shareholders until net gains have been
realized in excess of such carryforward.
Dividends and distributions will be paid in additional Fund shares
based on the NAV of each class on the record date, or such other date as the
Board of Directors may determine, unless the shareholder elects in writing not
less than five business days prior to the record date to receive such dividend
and distributions in cash. Such election should be submitted to Prudential
Mutual Fund Services, Inc., Attention: Account Maintenance, P.O. Box 15015,
New Brunswick, New Jersey 08906-5015. The Fund will notify each shareholder
after the close of the Fund's taxable year both of the dollar amount and the
taxable status of that year's dividends and distributions on a per share
basis. If you hold shares through Prudential Securities, you should contact
your financial adviser to elect to receive dividends and distributions in
cash.
When the Fund goes "ex-dividend," the NAV of each class is reduced by
the amount of the dividend or distribution allocable to each class. If you buy
shares just prior to the ex-dividend date (which generally occurs four business
days prior to the record date), the price you pay will include the dividend or
distribution and a portion of your investment will be returned to you as a
taxable distribution. You should, therefore, consider the timing of dividends
and distributions when making your purchases.
18
<PAGE>
--------------------------------------------------------------------------------
GENERAL INFORMATION
--------------------------------------------------------------------------------
DESCRIPTION OF COMMON STOCK
The Fund was incorporated in Maryland on February 28, 1984. The Fund is
authorized to issue 500 million shares of common stock, $.01 par value per
share, divided into three classes, designated Class A, Class B and Class C
common stock, each of which consists of 166 2/3 million authorized shares. Each
class of common stock represents an interest in the same assets of the Fund and
is identical in all respects except that (i) each class bears different
distribution expenses, (ii) each class has exclusive voting rights with respect
to its distribution and service plan (except that the Fund has agreed with the
SEC in connection with the offering of a conversion feature on Class B shares to
submit any amendment of the Class A distribution and service plan to both Class
A and Class B shareholders), (iii) each class has a different exchange privilege
and (iv) only Class B shares have a conversion feature. See "How the Fund is
Managed--Distributor." The Fund has received an order from the SEC permitting
the issuance and sale of multiple classes of common stock. Currently, the Fund
is offering three classes, designated Class A, Class B and Class C shares. In
accordance with the Fund's Articles of Incorporation, the Board of Directors may
authorize the creation of additional series of common stock and classes within
such series, with such preferences, privileges, limitations and voting and
dividend rights as the Board may determine.
The Board of Directors may increase or decrease the number of
authorized shares without the approval of shareholders. Shares of the Fund, when
issued, are fully paid, nonassessable, fully transferable and redeemable at the
option of the holder. Shares are also redeemable at the option of the Fund under
certain circumstances as described under "Shareholder Guide--How to Sell Your
Shares." Each share of each class of common stock is equal as to earnings,
assets and voting privileges, except as noted above, and each class bears the
expenses related to the distribution of its shares. Except for the conversion
feature applicable to the Class B shares, there are no conversion, preemptive or
other subscription rights. In the event of liquidation, each share of common
stock of the Fund is entitled to its portion of all of the Fund's assets after
all debt and expenses of the Fund have been paid. Since Class B and Class C
shares generally bear higher distribution expenses than Class A shares, the
liquidation proceeds to shareholders of those classes are likely to be lower
than to Class A shareholders. The Fund's shares do not have cumulative voting
rights for the election of Directors.
The Fund does not intend to hold annual meetings of shareholders unless
otherwise required by law. The Fund will not be required to hold annual meetings
of shareholders unless, for example, the election of Directors is required to be
acted on by shareholders under the Investment Company Act. Shareholders have
certain rights, including the right to call a meeting upon a vote of 10% of the
Fund's outstanding shares for the purpose of voting on the removal of one or
more Directors or to transact any other business.
ADDITIONAL INFORMATION
This Prospectus, including the Statement of Additional Information
which has been incorporated by reference herein, does not contain all the
information set forth in the Registration Statement filed by the Fund with the
SEC under the Securities Act of 1933. Copies of the Registration Statement may
be obtained at a reasonable charge from the SEC or may be examined, without
charge, at the office of the SEC in Washington, D.C.
19
<PAGE>
--------------------------------------------------------------------------------
SHAREHOLDER GUIDE
--------------------------------------------------------------------------------
HOW TO BUY SHARES OF THE FUND
You may purchase shares of the Fund through Prudential Securities,
Prusec or directly from the Fund through its Transfer Agent, Prudential Mutual
Fund Services, Inc. (PMFS or the Transfer Agent). Attention: Investment
Services, P.O. Box 15020, New Brunswick, New Jersey 08906-5020. The minimum
initial investment for Class A and Class B shares is $1,000 per class and $5,000
for Class C shares. The minimum subsequent investment is $100 for all classes.
All minimum investment requirements are waived for certain retirement and
employee savings plans or custodial accounts for the benefit of minors. For
purchases through the Automatic Savings Accumulation Plan, the minimum initial
and subsequent investment is $50 See "Shareholder Services".
The purchase price is the NAV next determined following receipt of an
order by the Transfer Agent or Prudential Securities plus a sales charge which,
at your option, may be imposed either (i) at the time of purchase (Class A
shares) or (ii) on a deferred basis (Class B or Class C shares). See
"Alternative Purchase Plan" below. See also "How the Fund Values its Shares."
Application forms can be obtained from PMFS, Prudential Securities or
Prusec. If a stock certificate is desired, it must be requested in writing for
each transaction. Certificates are issued only for full shares. Shareholders who
hold their shares through Prudential Securities will not receive stock
certificates.
The Fund reserves the right to reject any purchase order (including an
exchange) or to suspend or modify the continuous offering of its shares. See
"How to Sell Your Shares".
Your dealer is responsible for forwarding payment promptly to the Fund.
The Distributor reserves the right to cancel any purchase order for which
payment has not been received by the fifth business day following the
investment.
Transactions in Fund shares may be subject to postage and handling
charges imposed by your dealer.
Purchase By Wire. For an initial purchase of shares of the Fund by
wire, you must first telephone PMFS at (800) 225-1852 (toll-free) to receive an
account number. The following information will be requested: your name, address,
tax identification number, class election, dividend distribution election,
amount being wired and wiring bank. Instructions should then be given by you to
your bank to transfer funds by wire to State Street Bank and Trust Company,
Boston, Massachusetts, Custody and Shareholder Services Division, Attention:
Prudential Global Fund, Inc., specifying on the wire the account number assigned
by PMFS and your name and identifying the sales charge alternative (Class A,
Class B or Class C shares).
If you arrange for receipt by State Street of Federal Funds prior to
4:15 P.M., New York time, on a business day, you may purchase shares of the Fund
as of that day.
In making a subsequent purchase order by wire, you should wire State
Street directly and should be sure that the wire specifies Prudential Global
Fund, Inc., Class A, Class B or Class C shares and your name and individual
account number. It is not necessary to call PMFS to make subsequent purchase
orders utilizing Federal Funds. The minimum amount which may be invested by wire
is $1,000.
ALTERNATIVE PURCHASE PLAN
The Fund offers three classes of shares (Class A, Class B and Class C
shares) which allows you to choose the most beneficial sales charge structure
for your individual circumstances given the amount of the purchase, the length
of time you expect to hold the shares and other relevant circumstances
(Alternative Purchase Plan).
20
<PAGE>
<TABLE>
<CAPTION>
Annual 12b-1 Fees
(as a % of average daily
Sales Charge net assets) Other Information
------------------------------------- ------------------------ --------------------------------------
<S> <C> <C> <C>
Class A Maximum initial sales charge of 5% of 0.30 of 1% (Currently Initial sales charge waived or reduced
the public offering price being charged at a rate for certain purchases
of 0.25 of 1%)
Class B Maximum contingent deferred sales 1% Shares convert to Class A shares
charge or CDSC of 5% of the lesser of approximately seven years after
the amount invested or the redemption purchase
proceeds; declines to zero after six
years
Class C Maximum CDSC of 1% of the lesser 1% Shares do not convert to another class
of the amount invested or the
redemption proceeds on redemptions
made within one year of purchase
</TABLE>
The three classes of shares represent an interest in the same portfolio
of investments of the Funds and have the same rights, except that (i) each class
bears the separate expenses of its Rule 12b-1 distribution and service plan,
(ii) each class has exclusive voting rights with respect to its plan (except as
noted under the heading "General Information--Description of Common Stock"), and
(iii) only Class B shares have a conversion feature. The three classes also have
separate exchange privileges. See "How to Exchange Your Shares" below. The
income attributable to each class and the dividends payable on the shares of
each class will be reduced by the amount of the distribution fee of each class.
Class B and Class C shares bear the expenses of a higher distribution fee which
will generally cause them to have higher expense ratios and to pay lower
dividends than the Class A shares.
Financial advisers and other sales agents who sell shares of the Fund
will receive different compensation for selling Class A, Class B and Class C
shares and will generally receive more compensation initially for selling Class
A and Class B shares than for selling Class C shares.
In selecting a purchase alternative, you should consider, among other
things, (1) the length of time you expect to hold your investment, (2) the
amount of any applicable sales charge (whether imposed at the time of purchase
or redemption) and distribution-related fees, as noted above, (3) whether you
qualify for any reduction or waiver of any applicable sales charge, (4) the
various exchange privileges among the different classes of shares (see "How to
Exchange Your Shares" below) and (5) that Class B shares automatically convert
to Class A shares approximately seven years after purchase (see "Conversion
Feature--Class B Shares" below).
The following is provided to assist you in determining which method of
purchase best suits your individual circumstances and is based on current fees
and expenses being charged to the Fund:
If you intend to hold your investment in the Fund for less than 7 years
and do not qualify for a reduced sales charge on Class A shares, since Class A
shares are subject to an initial sales charge of 5% and Class B shares are
subject to a CDSC of 5% which declines to zero over a 6 year period, you should
consider purchasing Class C shares over either Class A or Class B shares.
If you intend to hold your investment for 7 years or more and do not
qualify for a reduced sales charge on Class A shares, since Class B shares
convert to Class A shares approximately 7 years after purchase and because all
of your money would be invested initially in the case of Class B shares, you
should consider purchasing Class B shares over either Class A or Class C shares.
If you qualify for a reduced sales charge on Class A shares, it may be
more advantageous for you to purchase Class A shares over either Class B or
Class C shares regardless of how long you intend to hold your investment.
However, unlike Class B and Class C shares, you would not have all of your money
invested initially because the sales charge on Class A shares is deducted at the
time of purchase.
If you do not qualify for a reduced sales charge on Class A shares and
you purchase Class B or Class C shares, you would have to hold your investment
for more than 6 years in the case of Class B shares and Class C shares for the
higher cumulative annual
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<PAGE>
distribution-related fee on those shares to exceed the initial sales charge plus
cumulative annual distribution-related fee on Class A shares. This does not take
into account the time value of money, which further reduces the impact of the
higher Class B or Class C distribution-related fee on the investment,
fluctuations in net asset value, the effect of the return on the investment over
this period of time or redemptions during which the CDSC is applicable.
All purchases of $1 million or more, either as part of a single
investment or under Rights of Accumulation or Letters of Intent, must be for
Class A shares. See "Reduction and Waiver of Initial Sales Charges" below.
Class A Shares
The offering price of Class A shares for investors choosing the initial
sales charge alternative is the next determined NAV plus a sales charge
(expressed as a percentage of the offering price and of the amount invested) as
shown in the following table:
Sales Charge As Sales Charge As Dealer Concession
Percentage of Percentage of Net as Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
------------------ --------------- ----------------- -----------------
$0 to $24,999 5.00% 5.26% 4.75%
$25,000 to $49,999 4.50 4.71 4.25
$50,000 to $99,999 4.00 4.17 3.75
$100,000 to $249,999 3.25 3.36 3.00
$250,000 to $499,999 2.50 2.56 2.40
$500,000 to $999,999 2.00 2.04 1.90
$1,000,000 and above None None None
Selling dealers may be deemed to be underwriters, as that term is
defined in the Securities Act.
Reduction and Waiver of Initial Sales Charges. Reduced sales charges
are available through Rights of Accumulation and Letters of Intent. Shares of
the Fund and shares of other Prudential Mutual Funds (excluding money market
funds other than those acquired pursuant to the exchange privilege) may be
aggregated to determine the applicable reduction. See "Reduction and Waiver of
Initial Sales Charges -- Class A shares" in the Statement of Additional
Information. Class A shares may be purchased at NAV, without payment of an
initial sales charge, by pension, profit-sharing or other employee benefit
plans qualified under Section 401 of the Internal Revenue Code and deferred
compensation and annuity plans under Sections 457 and 403(b)(7) of the
Internal Revenue Code (Benefit Plans), provided that the plan has existing
assets of at least $1 million invested in shares of Prudential Mutual Funds
(excluding money market funds other than those acquired pursuant to the
exchange privilege) or 1,000 eligible employees or members. In the case of
Benefit Plans whose accounts are held directly with the Transfer Agent and for
which the Transfer Agent does individual account record keeping (Direct
Account Benefit Plans) and Benefit Plans sponsored by PSI or its subsidiaries
(PSI Subsidiary Prototype Benefit Plans), Class A shares may be purchased at
NAV by participants who are repaying loans made from such plans to the
participant. Additional information concerning the reduction and waiver of
initial sales charges is set forth in the Statement of Additional Information.
In addition, Class A shares may be purchased at NAV, through Prudential
Securities or the Transfer Agent, by the following persons: (a) Directors and
officers of the Fund and other Prudential Mutual Funds, (b) employees of
Prudential Securities and PMF and their subsidiaries and members of the families
of such persons who maintain an "employee related" account at Prudential
Securities or the Transfer Agent, (c) employees and special agents of Prudential
and its subsidiaries and all persons who have retired directly from active
service with Prudential or one of its subsidiaries, (d) registered
representatives and employees of dealers who have entered into a selected dealer
agreement with Prudential Securities provided that purchases at NAV are
permitted by such person's employer and (e) investors who have a business
relationship with a financial adviser who joined Prudential Securities from
another investment firm, provided that (i) the purchase is made within 90 days
of the commencement of the financial adviser's employment at Prudential
Securities, (ii) the purchase is made with proceeds of a redemption of shares of
any open-end, non-money market fund sponsored by the financial adviser's
previous employer (other than a fund which imposes a distribution or service fee
of .25 of 1% or less) on which no deferred sales load, fee or other charge was
imposed on redemption and (iii) the financial adviser served as the client's
broker on the previous purchases.
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<PAGE>
You must notify the Transfer Agent either directly or through
Prudential Securities or Prusec that you are entitled to the reduction or waiver
of the sales charge. The reduction or waiver will be granted subject to
confirmation of your entitlement. No initial sales charges are imposed upon
Class A shares purchased upon the reinvestment of dividends and distributions.
See "Purchase and Redemption of Fund Shares--Reduction and Waiver of Initial
Sales Charges--Class A Shares" in the Statement of Additional Information.
Class B and Class C Shares
The offering price of Class B and Class C shares for investors choosing
one of the deferred sales charge alternatives is the NAV next determined
following receipt of an order by the Transfer Agent or Prudential Securities.
Although there is no sales charge imposed at the time of purchase, redemptions
of Class B and Class C shares may be subject to a CDSC. See "How to Sell Your
Shares--Contingent Deferred Sales Charge".
HOW TO SELL YOUR SHARES
You can redeem shares of the Fund at any time for cash at the NAV next
determined after the redemption request is received in proper form by the
Transfer Agent or Prudential Securities. See "How The Fund Values Its Shares."
In certain cases, however, redemption proceeds will be reduced by the amount of
any applicable contingent deferred sales charge, as described below. See
"Contingent Deferred Sales Charges" below.
If you hold shares of the Fund through Prudential Securities, you must
redeem your shares by contacting your Prudential Securities financial adviser.
If you hold shares in non-certificate form, a written request for redemption
signed by you exactly as the account is registered is required. If you hold
certificates, the certificates signed in the name(s) shown on the face of the
certificates, must be received by the Transfer Agent in order for the redemption
request to be processed. If redemption is requested by a corporation,
partnership, trust or fiduciary, written evidence of authority acceptable to the
Transfer Agent must be submitted before such request will be accepted. All
correspondence and documents concerning redemptions should be sent to the Fund
in care of its Transfer Agent, Prudential Mutual Fund Services, Inc., Attention:
Redemption Services, P.O. Box 15010, New Brunswick, New Jersey 08906-5010.
If the proceeds of the redemption (a) exceed $50,000, (b) are to be
paid to a person other than the record owner, (c) are to be sent to an address
other than the address on the Transfer Agent's records, or (d) are to be paid to
a corporation, partnership, trust or fiduciary, the signature(s) on the
redemption request and on the certificates, if any, or stock power must be
guaranteed by an "eligible guarantor institution." An "eligible guarantor
institution" includes any bank, broker, dealer or credit union. The Transfer
Agent reserves the right to request additional information from, and make
reasonable inquiries of, any eligible guarantor institution. For clients of
Prusec, a signature guarantee may be obtained from the agency or office manager
of most Prudential Insurance and Financial Services or Prudential Preferred
Financial Services offices.
Payment for shares presented for redemption will be made by check
within seven days after receipt by the Transfer Agent of the certificate and/or
written request except as indicated below. Such payment may be postponed or the
right of redemption suspended at times (a) when the New York Stock Exchange is
closed for other than customary weekends and holidays, (b) when trading on such
Exchange is restricted, (c) when an emergency exists as a result of which
disposal by the Fund of securities owned by it is not reasonably practicable or
it is not reasonably practicable for the Fund fairly to determine the value of
its net assets, or (d) during any other period when the SEC, by order, so
permits; provided that applicable rules and regulations of the SEC shall govern
as to whether the conditions prescribed in (b), (c) or (d) exist.
Payment for redemption of recently purchased shares will be delayed
until the Fund or its Transfer Agent has been advised that the purchase check
has been honored, up to 10 calendar days from the time of receipt of the
purchase check by the Transfer Agent. Such delay may be avoided by purchasing
shares by wire or by certified or official bank check.
Redemption In Kind. If the Board of Directors determines that it would
be detrimental to the best interests of the remaining shareholders of the Fund
to make payment wholly or partly in cash, the Fund may pay the redemption price
in whole or in part by a
23
<PAGE>
distribution in kind of securities from the investment portfolio of the Fund, in
lieu of cash, in conformity with applicable rules of the SEC. Securities will be
readily marketable and will be valued in the same manner as in a regular
redemption. See "How The Fund Values Its Shares". If your
shares are redeemed in kind, you would incur transaction costs in converting the
assets into cash. The Fund, however, has elected to be governed by Rule 18f-1
under the Investment Company Act, under which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net asset value
of the Fund during any 90-day period for any one shareholder.
Involuntary Redemption. In order to reduce expenses of the Fund, the
Board of Directors may redeem all of the shares of any shareholder, other than a
shareholder which is an IRA or other tax-deferred retirement plan, whose account
has a net asset value of less than $500 due to a redemption. The Fund will give
such shareholders 60 days' prior written notice in which to purchase sufficient
additional shares to avoid such redemption. No contingent deferred sales charge
will be imposed on any involuntary redemption.
30-Day Repurchase Privilege. If you redeem your shares and have not
previously exercised the repurchase privilege you may reinvest any portion or
all of the proceeds of such redemption in shares of the Fund at the net asset
value next determined after the order is received, which must be within 30 days
after the date of the redemption. No sales charge will apply to such
repurchases. You will receive pro rata credit for any contingent deferred sales
charge paid in connection with the redemption of your shares. You must notify
the Fund's Transfer Agent, either directly or through Prudential Securities or
Prusec, at the time the repurchase privilege is exercised that you are entitled
to credit for the contingent deferred sales charge previously paid. Exercise of
the repurchase privilege will generally not affect federal income tax treatment
of any gain realized upon redemption. If the redemption resulted in a loss, some
or all of the loss, depending on the amount reinvested, will not be allowed for
federal income tax purposes.
Contingent Deferred Sales Charges
Redemptions of Class B shares will be subject to a contingent deferred
sales charge or CDSC declining from 5% to zero over a six-year period. Class C
shares redeemed within one year of purchase will be subject to a 1% CDSC. The
CDSC will be deducted from the redemption proceeds and reduce the amount paid to
you. The CDSC will be imposed on any redemption by you which reduces the current
value of your Class B or Class C shares to an amount which is lower than the
amount of all payments by you for shares during the preceding six years, in the
case of Class B shares, and one year, in the case of Class C shares. A CDSC will
be applied on the lesser of the original purchase price or the current value of
the shares being redeemed. Increases in the value of your shares or shares
purchased through reinvestment of dividends or distributions are not subject to
a CDSC. The amount of any contingent deferred sales charge will be paid to and
retained by the Distributor. See "How the Fund is Managed--Distributor" and
"Waiver of the Contingent Deferred Sales Charges" below.
The amount of the CDSC, if any, will vary depending on the number of
years from the time of payment for the purchase of your shares until the time of
redemption of such shares. Solely for purposes of determining the number of
years from the time of any payment for the purchase of shares, all payments
during a month will be aggregated and deemed to have been made on the last day
of the month.
24
<PAGE>
The following table sets forth the rates of the CDSC applicable to
redemptions of Class B shares:
Contingent Deferred Sales
Charge as a Percentage of
Year Since Purchase Dollars Invested or
Payment Made Redemption Proceeds
------------ -------------------------
First ................................ 5.0%
Second ............................... 4.0%
Third ................................ 3.0%
Fourth ............................... 2.0%
Fifth ................................ 1.0%
Sixth ................................ 1.0%
Seventh .............................. None
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible rate.
It will be assumed that the redemption is made first of amounts representing
shares acquired pursuant to the reinvestment of dividends and distributions;
then of amounts representing the increase in net asset value above the total
amount of payments for the purchase of Fund shares made during the preceding six
years, (five years for Class B shares purchased prior to January 22, 1990); then
of amounts representing the cost of shares held beyond the applicable CDSC
period, and finally, of amounts representing the cost of shares held for the
longest period of time within the applicable CDSC period.
For example, assume you purchased 100 Class B shares at $10 per share
for a cost of $1,000. Subsequently, you acquired 5 additional Class B shares
through dividend reinvestment. During the second year after the purchase you
decided to redeem $500 of your investment. Assuming at the time of the
redemption the NAV had appreciated to $12 per share, the value of your Class B
shares would be $1,260 (105 shares at $12 per share). The CDSC would not be
applied to the value of the reinvested dividend shares and the amount which
represents appreciation ($260). Therefore, $240 of the $500 redemption proceeds
($500 minus $260) would be charged at a rate of 4% (the applicable rate in the
second year after purchase) for a total CDSC of $9.60.
For federal income tax purposes, the amount of the CDSC will reduce the
gain or increase the loss, as the case may be, on the amount recognized on the
redemption of shares.
Waiver of the Contingent Deferred Sales Charges--Class B Shares. The
CDSC will be waived in the case of a redemption following the death or
disability of a shareholder or, in the case of a trust account, following the
death or disability of the grantor. The waiver is available for total or partial
redemptions of shares owned by a person, either individually or in joint tenancy
(with rights of survivorship), or a trust, at the time of death or initial
determination of disability, provided that the shares were purchased prior to
death or disability.
The CDSC will also be waived in the case of a total or partial
redemption in connection with certain distributions made without penalty under
the Internal Revenue Code from a tax-deferred retirement plan, an IRA or Section
403(b) custodial account. These distributions include a lump-sum or other
distribution after retirement, or for an IRA or Section 403(b) custodial
account, after attaining age 591/2, a tax-free return of an excess contribution
or plan distributions following the death or disability of the shareholder,
(provided that the shares were purchased prior to death or disability). The
waiver does not apply in the case of a tax-free rollover or transfer of assets,
other than one following a separation from service. In the case of Direct
Account and PSI or Subsidiary Prototype Benefit Plans, the CDSC will also be
waived on the redemptions which represent borrowings from such plans. Shares
purchased with amounts used to repay a loan from such plans on which a CDSC was
not previously deducted will thereafter be subject to a CDSC without regard to
the time such amounts were previously invested. In the case of 401(k) plan, the
CDSC will also be waived upon the redemption of shares purchased with amounts
used to repay loans made from the account to the participant and from which a
CDSC was previously deducted.
In addition, the CDSC will be waived on redemptions of shares held by
Directors of the Fund.
You must notify the Transfer Agent either directly or through
Prudential Securities or Prusec, at the time of redemption, that you are
entitled to waiver of the CDSC. The waiver will be granted subject to
confirmation of your entitlement.
25
<PAGE>
A quantity discount may apply to redemptions of Class B shares purchased
prior to , 1994. See "Purchase and Redemption of Fund Shares--Quantity
Discount--Class B Shares Purchased Prior To _______, 1994" in the Statement of
Additional Information.
CONVERSION FEATURE--CLASS B SHARES
Class B shares will automatically convert to Class A shares on a
quarterly basis approximately seven years after purchase. Conversions will occur
during the month following each calendar quarter and will be effected at
relative net asset value without the imposition of any additional sales charge.
It is currently anticipated that conversions will occur on the first Friday of
the month following each calendar quarter or, if not a business day on the next
Friday of the month.
Since the Fund tracks amounts paid rather than the number of shares
bought on each purchase of Class B shares, the number of Class B shares eligible
to convert to Class A shares (excluding shares acquired through the automatic
reinvestment of dividends and other distributions) (the Eligible Shares) will be
determined on each conversion date in accordance with the following formula: (i)
the ratio of (a) the amounts paid for Class B shares purchased at least seven
years prior to the conversion date to (b) the total amount paid for all Class B
shares purchased and then held in your account (ii) multiplied by the total
number of Class B shares then in your account. Each time any Eligible Shares in
your account convert to Class A shares, all shares or amounts representing Class
B shares then in your account that were acquired through the automatic
reinvestment of dividends and other distributions will convert to Class A
shares.
For purposes of determining the number of Eligible Shares, if the Class
B shares in your account on any conversion date are the result of multiple
purchases at different net asset values per share, the number of Eligible Shares
calculated as described above will generally be either more or less than the
number of shares actually purchased approximately [seven] years before such
conversion date. For example, if 100 shares were initially purchased at $10 per
share (for a total of $1,000) and a second purchase of 100 shares was
subsequently made at $11 per share (for a total of $1,100), 95.24 shares would
convert approximately [seven] years from the initial purchase (i.e., $1,000
divided by $2,100 (47.62%) multiplied by 200 shares equals 95.24 shares). The
Manager reserves the right to modify the formula for determining the number of
Eligible Shares in the future as it deems appropriate on notice to shareholders.
Since annual distribution-related fees are lower for Class A shares
than Class B shares, the per share net asset value of the Class A shares may be
higher than that of the Class B shares at the time of conversion. Thus, although
the aggregate dollar value will be the same, you may receive fewer Class A
shares than Class B shares converted. See "How the Fund Values its Shares."
For purposes of calculating the applicable holding period for
conversions, all payments for Class B shares during a month will be deemed to
have been made on the last day of the month, or for Class B shares acquired
through exchange, or a series of exchanges, on the last day of the month in
which the original payment for purchases of such Class B shares was made. For
Class B shares previously exchanged for shares of a money market fund, the time
period during which such shares were held in the money market fund will be
excluded. For example, Class B shares held in a money market fund for one year
will not convert to Class A shares until approximately eight years from
purchase. For purposes of measuring the time period during which shares are held
in a money market fund, exchanges will be deemed to have been made on the last
day of the month. Class B shares acquired through exchange will convert to Class
A shares after expiration of the conversion period applicable to the original
purchase of such shares. It is currently anticipated that the first conversion
of Class B shares will occur in or about January, 1995. At that time all amounts
representing Class B shares then outstanding beyond the applicable conversion
period will automatically convert to Class A shares together with all shares or
amounts representing Class B shares acquired through the automatic reinvestment
of dividends and distributions then held in your account.
The conversion feature may be subject to the continuing availability of
opinions of counsel or rulings of the Internal Revenue Service (i) that the
dividends and other distributions paid on Class A, Class B, and Class C shares
will not constitute "preferential dividends" under the Internal Revenue Code and
(ii) that the conversion of shares does not constitute a taxable event. The
conversion of Class B shares into Class A shares may be suspended if such
opinions or rulings are no longer available. If the conversions are suspended,
Class B shares of the Fund will continue to be subject, possibly indefinitely,
to their higher annual distribution and service fee.
HOW TO EXCHANGE YOUR SHARES
As a shareholder of the Fund you have an exchange privilege with
certain other Prudential Mutual Funds, including one or more specified money
market funds, subject to the minimum investment requirement of such
26
<PAGE>
funds. Class A, Class B and Class C shares may be exchanged for Class A, Class B
and Class C shares, respectively, of another fund on the basis of the relative
NAV. Any applicable CDSC payable upon the redemption of shares exchanged will be
calculated from the first day of the month after the initial purchase, excluding
the time shares were held in a money market fund. Class B and Class C shares may
not be exchanged into money market funds other than Prudential Special Money
Market Fund. For purposes of calculating the seven year holding period
applicable to the Class B conversion feature, the time period during which Class
B shares were held in a money market fund will be excluded. See "Conversion
Feature--Class B Shares" above. If your investment in shares of Prudential
Mutual Funds (excluding money market funds other than those acquired pursuant to
the exchange privilege) reaches $1 million and you then hold Class B and/or
Class C shares of the Fund which are free of CDSC, you will be so notified and
offered the opportunity to exchange those shares for Class A shares of the Fund
without the imposition of any sales charge. In the case of tax-exempt
shareholders, if no response is received within 60 days of the mailing of such
notice, eligible Class B and/or Class C shares will be automatically exchanged
for Class A shares. All other shareholders must affirmatively elect to have
their eligible Class B and/or Class C shares exchanged for Class A shares. An
exchange will be treated as a redemption and purchase for tax purposes. See
"Shareholder Investment Account--Exchange Privilege" in the Statement of
Additional Information.
In order to exchange shares by telephone, you must authorize the
telephone exchange privilege on your initial application form or by written
notice to the Transfer Agent and hold shares in non-certificate form.
Thereafter, you may call the Fund at 1 (800) 225-1852 to execute a telephone
exchange of shares on weekdays, except holidays, between the hours of 8:00 a.m.
and 6:00 p.m., New York time. For your protection and to prevent fraudulent
exchanges, your telephone call will be recorded and you will be asked to provide
your personal identification number. A written confirmation of the exchange
transaction will be sent to you. Neither the Fund nor its agents will be liable
for any loss, liability or cost which results from acting upon instructions
reasonably believed to be genuine under the foregoing procedures. All exchanges
will be made on the basis of the relative NAV of the two funds next determined
after the request is received in good order. The Exchange Privilege is available
only in states where the exchange may legally be made.
If you hold shares through Prudential Securities or through a dealer
which has entered into a selected dealer agreement with the Fund's Distributor,
you must exchange your shares by contacting your financial adviser.
If you hold certificates, the certificates, signed in the name(s) shown
on the face of the certificates must be returned in order for the shares to be
exchanged. See "How to Sell Your Shares" above.
You may also exchange shares by mail by writing to Prudential Mutual
Fund Services, Inc., Attention: Exchange Processing, P.O. Box 15010, New
Brunswick, New Jersey 08906-5010.
In periods of severe market or economic conditions the telephone
exchange of shares may be difficult to implement and shareholders should make
exchanges by mail by writing to Prudential Mutual Fund Services, Inc., at the
address noted above.
The Exchange Privilege may be modified or terminated at any time on 60
days' notice.
SHAREHOLDER SERVICES
In addition to the exchange privilege, as a shareholder in the Fund,
you can take advantage of the following additional services and privileges:
Automatic Reinvestment of Dividends and/or Distributions Without Sales
Charge. For your convenience, all dividends and distributions are automatically
reinvested in full and fractional shares of the Fund at NAV without a sales
charge. You may direct the Transfer Agent in writing not less than 5 full
business days prior to the record date to have subsequent dividends and/or
distributions sent in cash rather than reinvested. If you hold shares through
Prudential Securities, you should contact your financial adviser.
Automatic Savings Accumulation Plan (ASAP). Under ASAP you may make
regular purchases of the Fund's shares in amounts as little as $50 via an
automatic debit to a bank account or Prudential Securities account (including a
Command Account). For additional information about this service, you may contact
your Prudential Securities financial adviser, Prusec registered representative
or the Transfer Agent directly.
27
<PAGE>
Tax Deferred Retirement Plans. Various tax-deferred retirement plans,
including a 401(k) plan, self-directed individual retirement accounts and
"tax-sheltered accounts" under Section 403(b)(7) of the Internal Revenue Code
are available through the Distributor. These plans are for use by both
self-employed individuals and corporate employers. These plans permit either
self-direction of accounts by participants, or a pooled account arrangement.
Information regarding the establishment of these plans, the administration,
custodial fees and other details is available from Prudential Securities or the
Transfer Agent. If you are considering adopting such a plan, you should consult
with your own legal or tax adviser with respect to the establishment and
maintenance of such a plan.
Systematic Withdrawal Plan. A systematic withdrawal plan is available
to shareholders which provides for monthly or quarterly checks. Withdrawals of
Class B and Class C shares may be subject to a CDSC. See "How to Sell Your
Shares--Contingent Deferred Sales Charges."
Reports to Shareholders. The Fund will send you annual and semi-annual
reports. The financial statements appearing in annual reports are audited by
independent accountants. In order to reduce duplicate mailing and printing
expenses the Fund will provide one annual report and semi-annual shareholder
report and annual prospectus per household. You may request additional copies of
such reports by calling (800) 225-1852 or by writing to the Fund at One Seaport
Plaza, New York, NY 10292. In addition, monthly unaudited financial data is
available upon request from the Fund.
Shareholder Inquiries. Inquiries should be addressed to the Fund at One
Seaport Plaza, New York, New York 10292, or by telephone, at 1-800-225-1852 or,
from outside the U.S.A., at 1-908-417-7555 (collect).
For additional information regarding the services and privileges
described above, see "Shareholder Investment Account" in the Statement of
Additional Information.
28
<PAGE>
--------------------------------------------------------------------------------
THE PRUDENTIAL MUTUAL FUND FAMILY
--------------------------------------------------------------------------------
Prudential Mutual Fund Management offers a broad range of mutual funds
designed to meet your individual needs. We welcome you to review the investment
options available through our family of funds. For more information on the
Prudential Mutual Funds, including charges and expenses, contact your Prudential
Securities financial adviser or Prusec registered representative or telephone
the Fund at 1 (800) 225-1852 for a free prospectus. Read the prospectus
carefully before you invest or send money.
--------------------------------------------------------------------------------
-------------------------------
Taxable Bond Funds
-------------------------------
Prudential Adjustable Rate Securities Fund, Inc.
Prudential GNMA Fund
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential Structured Maturity Fund, Inc.
Income Portfolio
Prudential U.S. Government Fund
The BlackRock Government Income Trust
-------------------------------
Tax-Exempt Bond Funds
-------------------------------
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Yield Series
Insured Series
Modified Term Series
Prudential Municipal Series Fund
Arizona Series
Florida Series
Georgia Series
Maryland Series
Massachusetts Series
Michigan Series
Minnesota Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
-------------------------------
Global Funds
-------------------------------
Prudential Global Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Global Natural Resources Fund, Inc.
Prudential Intermediate Global Income Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential Short-Term Global Income Fund, Inc.
Global Assets Portfolio
Short-Term Global Income Portfolio
Global Utility Fund, Inc.
-------------------------------
Equity Funds
-------------------------------
Prudential Allocation Fund
Conservatively Managed Portfolio
Strategy Portfolio
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Prudential Growth Opportunity Fund, Inc.
Prudential IncomeVertible(R) Fund, Inc.
Prudential Multi-Sector Fund, Inc.
Prudential Strategist Fund, Inc.
Prudential Utility Fund, Inc.
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
-------------------------------
Money Market Funds
-------------------------------
o Taxable Money Market Funds
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund
Money Market Series
Prudential MoneyMart Assets
o Tax-Free Money Market Funds
Prudential Tax-Free Money Fund
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
o Command Funds
Command Money Fund
Command Government Fund
Command Tax-Free Fund
o Institutional Money Market Funds
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
--------------------------------------------------------------------------------
A-1
<PAGE>
No dealer, sales representative or any other person has been authorized to give
any information or to make any representations, other than those contained in
this Prospectus, in connection with the offer contained herein, and, if given or
made, such other information or representations must not be relied upon as
having been authorized by the Fund or the Distributor. This Prospectus does not
constitute an offer by the Fund or by the Distributor to sell or a solicitation
of any offer to buy any of the securities offered hereby in any jurisdiction to
any person to whom it is unlawful to make such offer in such jurisdiction.
------------------------------------------------------
TABLE OF CONTENTS
Page
----
FUND HIGHLIGHTS ................................ 2
FUND EXPENSES .................................. 4
FINANCIAL HIGHLIGHTS ........................... 5
HOW THE FUND INVESTS ........................... 7
Investment Objective and Policies ............. 7
Hedging and Income Enhancement Strategies ..... 8
Other Investment Practices .................... 12
Special Considerations and Risks .............. 13
Investment Restrictions ....................... 13
HOW THE FUND IS MANAGED ........................ 13
Manager ....................................... 13
Distributor ................................... 14
Portfolio Transactions ........................ 15
Custodian and Transfer and Dividend Disbursing
Agent ........................................ 16
HOW THE FUND VALUES ITS SHARES ................. 16
HOW THE FUND CALCULATES PERFORMANCE ............ 16
TAXES, DIVIDENDS AND DISTRIBUTIONS ............. 17
GENERAL INFORMATION ............................ 18
Description of Common Stock ................... 18
Additional Information ........................ 19
SHAREHOLDER GUIDE .............................. 19
How to Buy Shares of the Fund ................. 19
Alternative Purchase Plan ..................... 20
How to Sell Your Shares ....................... 22
How to Exchange Your Shares ................... 24
Shareholder Services .......................... 26
THE PRUDENTIAL MUTUAL FUND FAMILY .............. A-1
-----------------------------------------------------
115A 444010J
Class A: 744332107
CUSIP NOS.: Class B: 744332206
Class C:
Prudential
Global Fund, Inc.
-------------------------
Prudential Mutual Funds
Building Your Future [LOGO]
On Our Strength(sm)
<PAGE>
PRUDENTIAL GLOBAL FUND, INC.
Statement of Additional Information
, 1994
Prudential Global Fund, Inc. (the Fund) is an open-end, diversified
management investment company. Its investment objective is to seek long-term
growth of capital, with income as a secondary objective. The Fund will seek to
achieve its objective through investment in a diversified portfolio ofsecurities
which will consist of marketable securities of U.S. and non-U.S.issuers. The
Fund may invest in all types of common stocks and equivalents (such as
convertible debt securities and warrants), preferred stocks, bonds and other
debt obligations, including money market instruments, of foreign and domestic
companies and governments, governmental agencies and international
organizations. See "Investment Objective and Policies."
The Fund's address is One Seaport Plaza, New York, New York 10292, and
its telephone number is (800) 225-1852.
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Fund's Prospectus, dated ______ , 1994, a copy
of which may be obtained from the Fund at the address noted above.
TABLE OF CONTENTS
Cross-reference
to page in
Page Prospectus
Investment Objective and Policies .............. B-2 7
Investment Restrictions ........................ B-9 13
Directors and Officers ......................... B-10 13
Manager ........................................ B-13 13
Distributor .................................... B-15 14
Net Asset Value ................................ B-16 16
Portfolio Transactions and Brokerage ........... B-17 15
Purchase and Redemption of Fund Shares ......... B-18 19
Shareholder Investment Account ................. B-20 25
Performance Information ........................ B-23 16
Taxes .......................................... B-25 17
Custodian, Transfer and Dividend Disbursing
Agent and Independent Accountants ............. B-27 16
Financial Statements ........................... B-28 --
Independent Auditor's Report ................... B-39 --
--------------------------------------------------------------------------------
MF115B
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek long-term growth of
capital, with income as a secondary objective. The Fund will seek to achieve its
objective through investment in a diversified portfolio of securities which will
consist of marketable securities of U.S. and non-U.S. issuers. The Fund may
invest in all types of common stocks and equivalents (such as convertible debt
securities and warrants), preferred stocks, bonds and other debt
obligations,including money market instruments, of foreign and domestic
companies and governments, governmental agencies and international
organizations. The Fund has no fixed policy with respect to portfolio turnover;
however, it is anticipated that the Fund's annual portfolio turnover rate will
not normally exceed 100%,though the Fund is not restricted from investing in
short-term obligations. Fora further description of the Fund's investment
objective and policies, see "How the Fund Invests--Investment Objective and
Policies" in the Prospectus.
Limitations on Purchase and Sale of Options,
Options on Stock Indices and Stock Index Futures
The Fund may write put and call options only if they are covered, and
such options must remain covered so long as the Fund is obligated as a writer.
The Fund will not write put options on indices. The Fund has undertaken with
certain state securities commissions that, so long as shares of the Fund are
registered in those states, it will not (a) write puts having aggregate exercise
prices greater than 25% of total net assets; or (b) purchase (i) put options on
stocks not held in the Fund's portfolio, (ii) put options on stock indices or
(iii)call options on stocks or stock indices if, after any such purchase, the
aggregate premiums paid for such options would exceed 20% of the Fund's total
net assets.
Call Options. The Fund may, from time to time, write call options on
its portfolio securities. The Fund may write only call options which are
"covered," meaning that the Fund either owns the underlying security or has an
absolute and immediate right to acquire that security, without additional cash
consideration, upon conversion or exchange of other securities currently held in
its portfolio. In addition, the Fund will not permit the call to become
uncovered prior to the expiration of the option or termination through a closing
purchase transaction as described below. If the Fund writes a call option, the
purchaser of the option has the right to buy (and the Fund has the obligation to
sell) the underlying security at the exercise price throughout the term of the
option. The amount paid to the Fund by the purchaser of the option is the
"premium." The Fund's obligation to deliver the underlying security against
payment of the exercise price would terminate either upon expiration of the
option or earlier if the Fund were to effect a "closing purchase transaction"
through the purchase of an equivalent option on an exchange. There can be no
assurance that a closing purchase transaction can be effected.
The Fund would not be able to effect a closing purchase transaction
after it had received notice of exercise. In order to write a call option, the
Fund is required to comply with the rules of The Options Clearing Corporation,
with respect to options traded on a Unites States exchange, and the various
exchanges with respect to collateral requirements. The Fund may not purchase
call options except in connection with a closing purchase transaction. It is
possible that the cost of effecting a closing purchase transaction may be
greater than the premium received by the Fund for writing the option.
Generally, the investment adviser intends to write listed covered call
options during periods when it anticipates declines in the market values of
portfolio securities because the premiums received may offset to some extent the
decline in the Fund's net asset value occasioned by such declines in market
value. Except as part of the "sell discipline" described below, the investment
adviser will generally not write listed covered call options when it anticipates
that the market values of the Fund's portfolio securities will increase.
One reason for the Fund to write call options is as part of a "sell
discipline." If the investment adviser decides that a portfolio security would
be overvalued and should be sold at a certain price higher than the current
price, the Fund could write an option on the security at the higher price.
Should the security subsequently reach that price and the option is
exercised,the Fund would, in effect, have increased the selling price of that
security, which it would have sold at that price in any event, by the amount of
the premium. In the event the market price of the security declined and the
option were not exercised, the premium would offset all or some portion of the
decline. It is possible that the price of the security could increase beyond the
exercise price; in that event, the Fund would forego the opportunity to sell the
security at that higher price.
In addition, call options may be used as part of a different strategy
in connection with sales of portfolio securities. If, in the judgment of the
investment adviser, the market price of a security is overvalued and it should
be sold, the Fund may elect to write a call option with an exercise price
substantially below the current market price. As long as the value of the
underlying security remains above the exercise price during the term of the
option, the option will, in all probability, be exercised, in which case the
Fund will be required to sell the security at the exercise price. If the sum of
the premium and the exercise price exceeds the market price of the security at
the time the call option is written, the Fund would, in effect, have increased
the selling price of the security. The Fund would not write a call option in
these circumstances if the sum of the premium and the exercise price were less
than the current market price of the security.
Put Options. The Fund may also write listed put options. If the Fund
writes a put option, it is obligated to purchase a given security at a specified
price at any time during the term of the option.
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Writing listed put options is a useful portfolio investment strategy
when the Fund has cash or other reserves available for investment as a result of
sales of Fund shares or, more importantly, because the investment adviser
believes a more defensive and less fully invested position is desirable in light
of market conditions. If the Fund wishes to invest its cash or reserves in a
particular security at a price lower than current market value, it may write a
put option on that security at an exercise price which reflects the lower price
it is willing to pay. The buyer of the put option generally will not exercise
the option unless the market price of the underlying security declines to a
price near or below the exercise price. If the Fund writes a listed put, the
price of the underlying security declines and the option is exercised, the
premium, net of transaction charges, will reduce the purchase price paid by the
Fund for the security. The price of the security may decline by an amount in
excess of the premium, in which event the Fund would have foregone an
opportunity to purchase the security at a lower price.
If, prior to the exercise of a put option, the investment adviser
determines that it no longer wishes to invest in the security on which the put
option had been written, the Fund may be able to effect a closing purchase
transaction on an exchange by purchasing a put option of the same series as the
one which it has previously written. The cost of effecting a closing purchase
transaction may be greater than the premium received on writing the put option
and there is no guarantee that a closing purchase transaction can be effected.
At the time a put option is written, the Fund will be required to
establish, and will maintain until the put is exercised or has expired, a
segregated account with its custodian consisting of cash, short-term U. S.
Government securities or other high-grade short-term debt obligations equal in
value to the amount the Fund will be obligated to pay upon exercise of the put
option.
Stock Index Options. Except as described below, the Fund will write
call options on indices only if on such date it holds a portfolio of stocks at
least equal to the value of the index times the multiplier times the number of
contracts. When the Fund writes a call option on a broadly-based stock market
index, the Fund will segregate or put into escrow with its Custodian, or pledge
to a broker as collateral for the option, one or more "qualified securities"
with a market value at the time the option is written of not less than 100% of
the current index value times the multiplier times the number of contracts.
If the Fund has written an option on an industry or market segment
index,it will segregate or put into escrow with its Custodian, or pledge to a
broker as collateral for the option, at least ten "qualified securities," which
are securities of an issuer in such industry or market segment, with a market
value at the time the option is written of not less than 100% of the current
index value times the multiplier times the number of contracts. Such securities
will include stocks which represent at least 50% of the weighting of the
industry or market segment index and will represent at least 50% of the Fund's
holdings in that industry or market segment. No individual security will
represent more than 25% of the amount so segregated, pledged or escrowed. If at
the close of business on any day the market value of such qualified securities
so segregated, escrowed or pledged falls below 100% of the current index value
times the multiplier times the number of contracts, the Fund will so segregate,
escrow or pledge an amount in cash, Treasury bills or other high-grade
short-term obligations equal in value to the difference. In addition, when the
Fund writes a call on an index which is in-the-money at the time the call is
written, the Fund will segregate with its Custodian or pledge to the broker as
collateral cash, short-term U.S. Government securities or other high-grade
short-term debt obligations equal in value to the amount by which the call is
in-the-money times the multiplier times the number of contracts. Any amount
segregated pursuant to the foregoing sentence may be applied to the Fund's
obligation to segregate additional amounts in the event that the market value of
the qualified securities falls below 100% of the current index value times the
multiplier times the number of contracts. A "qualified security" is an equity
security which is listed on a national securities exchange or listed on the
National Association of Securities Dealers Automated Quotation System against
which the Fund has not written a stock call option and which has not been hedged
by the Fund by the sale of stock index futures. However, if the Fund holds a
call on the same index as the call written where the exercise price of the call
held is equal to or less than the exercise price of the call written or greater
than the exercise price of the call written if the difference is maintained by
the Fund in cash, Treasury bills or other high-grade short-term obligations in a
segregated account with its Custodian, it will not be subject to the
requirements described in this paragraph.
Stock Index Futures. The Fund will engage in transactions in stock
index futures contracts as a hedge against changes resulting from market
conditions in the values of securities which are held in the Fund's portfolio or
which it intends to purchase. The Fund will engage in such transactions when
they are economically appropriate for the reduction of risks inherent in the
ongoing management of the Fund. The Fund may not purchase or sell stock index
futures if, immediately thereafter, more than one-third of its net assets would
be hedged and, in addition, except as described above in the case of a call
written and held on the same index, will write call options on indices or sell
stock index futures only if the amount resulting from the multiplication of the
then current level of the index (or indices) upon which the option or future
contract(s) is based, the applicable multiplier(s), and the number of futures or
options contracts which would be outstanding, would not exceed one-third of the
value of the Fund's net assets. The Fund also may not purchase or sell stock
index futures for risk management purposes if, immediately thereafter, the sum
of the amount of margin deposits on the Fund's existing futures positions and
premiums paid for such options would exceed 5% of the liquidation value of the
Fund's total assets after taking into account unrealized profits and unrealized
losses on any such contracts, provided, however, that in the case of an option
that is in-the-money, the in-the-money amount may be excluded in
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computing such 5%. The above restriction does not apply to the purchase and sale
of stock index futures for bona fide hedging purposes. In instances involving
the purchase of stock index futures contracts by the Fund, an amount of cash,
short-term U.S. Government securities or other high-grade short-term debt
obligations, equal to the market value of the futures contracts, will be
deposited in a segregated account with the Fund's Custodian and/or in a margin
account with a broker to collateralize the position and thereby insure that the
use of such futures is unleveraged.
Under regulations of the Commodity Exchange Act, investment companies
registered under the Investment Company Act of 1940, as amended (the Investment
Company Act), are exempt from the definition of "commodity pool operator,"
subject to compliance with certain conditions. The exemption is conditioned upon
a requirement that all of the Fund's commodity futures or commodity options
transactions constitute bona fide hedging transactions within the meaning of the
CFTC's regulations. The Fund will use stock index futures and options on futures
as described herein in a manner consistent with this requirement. The Fund may
also enter into commodity futures or commodity options contracts for income
enhancement and risk management purposes if the aggregate initial margin and
option premiums do not exceed 5% of the liquidation value of the Fund's total
assets.
Risks of Transactions in Stock Options. Writing of options involves the
risk that there will be no market in which to effect a closing transaction. An
option position may be closed out only on an exchange which provides a secondary
market for an option of the same series. Although the Fund will generally write
only those options for which there appears to be an active secondary
market,there is no assurance that a liquid secondary market on an exchange will
exist for any particular option, or at any particular time, and for some options
no secondary market on an exchange may exist. If the Fund as a covered call
option writer is unable to effect a closing purchase transaction in a secondary
market, it will not be able to sell the underlying security until the option
expires or it delivers the underlying security upon exercise.
Risks of Options on Indices. The Fund's purchase and sale of options on
indices will be subject to risks described above under "Risks of Transactions in
Stock Options." In addition, the distinctive characteristics of options on
indices create certain risks that are not present with stock options.
Because the value of an index option depends upon movements in the
level of the index rather than the price of a particular stock, whether the Fund
will realize a gain or loss on the purchase or sale of an option on an index
depends upon movements in the level of stock prices in the stock market
generally or in an industry or market segment rather than movements in the price
of a particular stock. Accordingly, successful use by the Fund of options on
indices would be subject to the investment adviser's ability to predict
correctly movements in the direction of the stock market generally or of a
particular industry. This requires different skills and techniques than
predicting changes in the price of individual stocks.
Index prices may be distorted if trading of certain stocks included in
the index is interrupted. Trading in the index options also may be interrupted
in certain circumstances, such as if trading were halted in a substantial number
of stocks included in the index. If this occurred, the Fund would not be able to
close out options which it had purchased or written and, if restrictions on
exercise were imposed, may be unable to exercise an option it holds, which could
result in substantial losses to the Fund. It is the Fund's policy to purchase or
write options only on indices which include a number of stocks sufficient to
minimize the likelihood of a trading halt in the index.
Trading in index options commenced in April 1983 with the S&P 100
option (formerly called the CBOE 100). Since that time a number of additional
index option contracts have been introduced including options on industry
indices. Although the markets for certain index option contracts have developed
rapidly, the markets for other index options are still relatively illiquid. The
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid secondary market. It is not certain
that this market will develop in all index option contracts. The Fund will not
purchase or sell any index option contract unless and until, in the investment
adviser's opinion, the market for such options has developed sufficiently that
such risk in connection with such transactions is no greater than such risk in
connection with options on stocks.
Special Risks of Writing Calls on Indices. Because exercises of index
options are settled in cash, a call writer such as the Fund cannot determine the
amount of its settlement obligations in advance and, unlike call writing on
specific stocks, cannot provide in advance for, or cover, its potential
settlement obligations by acquiring and holding the underlying securities.
However, the Fund will write call options on indices only under the
circumstances described above under "Limitations on Purchase and Sale of
Options, Options on Stock Indices, Stock Index Futures and Options on Stock
Index Futures."
Price movements in the Fund's portfolio probably will not correlate
precisely with movements in the level of the index and, therefore, the Fund
bears the risk that the price of the securities held by the Fund may not
increase as much as the index. In such event, the Fund would bear a loss on the
call which is not completely offset by movements in the price of the Fund's
portfolio. It is also possible that the index may rise when the Fund's portfolio
of stocks does not rise. If this occurred, the Fund would experience a loss on
the call which is not offset by an increase in the value of its portfolio and
might also experience a loss in its portfolio. However, because the value of a
diversified portfolio will, over time, tend to move in the same direction as the
market, movements in the value of the Fund in the opposite direction as the
market would be likely to occur for only a short period or to a small degree.
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Unless the Fund has other liquid assets which are sufficient to satisfy
the exercise of a call, the Fund would be required to liquidate portfolio
securities in order to satisfy the exercise. Because an exercise must be settled
within hours after receiving the notice of exercise, if the Fund fails to
anticipate an exercise, it may have to borrow (in amounts not exceeding 20% of
the Fund's total assets) pending settlement of the sale of securities in its
portfolio and would incur interest charges thereon.
When the Fund has written a call, there is also a risk that the market
may decline between the time the Fund has a call exercised against it, at a
price which is fixed as of the closing level of the index on the date of
exercise, and the time the Fund is able to sell stocks in its portfolio. As with
stock options, the Fund will not learn that an index option has been exercised
until the day following the exercise date but, unlike a call on stock where the
Fund would be able to deliver the underlying securities in settlement, the Fund
may have to sell part of its stock portfolio in order to make settlement in
cash,and the price of such stocks might decline before they can be sold. This
timing risk makes certain strategies involving more than one option
substantially more risky with index options than with stock options. For
example, even if an index call which the Fund has written is "covered" by an
index call held by the Fund with the same strike price, the Fund will bear the
risk that the level of the index may decline between the close of trading on the
date the exercise notice is filed with the clearing corporation and the close of
trading on the date the Fund exercises the call it holds or the time the Fund
sells the call which in either case would occur no earlier than the day
following the day the exercise notice was filed.
Special Risks of Purchasing Puts and Calls on Indices. If the Fund
holds an index option and exercises it before final determination of the closing
index value for that day, it runs the risk that the level of the underlying
index may change before closing. If such a change causes the exercised option to
fallout-of-the-money, the Fund will be required to pay the difference between
the closing index value and the exercise price of the option (times the
applicable multiple) to the assigned writer. Although the Fund may be able to
minimize this risk by withholding exercise instructions until just before the
daily cut off time or by selling rather than exercising an option when the index
level is close to the exercise price, it may not be possible to eliminate this
risk entirely because the cut off times for index options may be earlier than
those fixed for other types of options and may occur before definitive closing
index values are announced.
Special Risks of Purchasing OTC Options. When the Fund writes an OTC
option, it generally will be able to close out the OTC option prior to its
expiration only by entering into a closing purchase transaction with the dealer
with which the Fund originally wrote the OTC option. Any such cancellation, if
agreed to, may require the Fund to pay a premium to the counterparty. While the
Fund will enter into OTC options only with dealers which agree to, and which are
expected to be capable of, entering into closing transactions with the
Fund,there can be no assurance that the Fund will be able to liquidate an OTC
option at a favorable price at any time prior to expiration. Until the Fund is
able to effect a closing purchase transaction in a covered OTC call option the
Fund has written, it will not be able to liquidate securities used as cover
until the option expires or is exercised or different cover is substituted.
Alternatively,the Fund could write an OTC call option to, in effect, close an
existing OTC call option or write an OTC put option to close its position on an
OTC put option. However, the Fund would remain exposed to each counter party's
credit risk on the put or call until such option is exercised or expires. There
is no guarantee that the Fund will be able to write put or call options, as the
case may be, that would effectively close an existing position. In the event of
insolvency of the counterparty, the Fund may be unable to liquidate an OTC
option.
In entering into OTC options, the Fund will be exposed to the risk that
the counterparty will default on, or be unable to complete, due to bankruptcy or
otherwise, its obligation on the option. In such event, the Fund may lose the
benefit of the transaction. The value of an OTC option to the Fund is dependent
upon the financial viability of the counterparty. If the Fund decides to enter
into transactions in OTC options, the Adviser will take into account the credit
quality of counter parties in order to limit the risk of default by the
counterparty.
OTC options may also be illiquid securities with respect to which no
secondary market exists. Similarly, the assets used to "cover" OTC options
written by the Fund will be treated as illiquid. OTC options are sold to
qualified dealers who agree that the Fund may repurchase any OTC options it
writes for a maximum price to be calculated by a formula set forth in the option
agreement. The "cover" for an OTC option written subject to this procedure would
be considered illiquid only to the extent that the maximum repurchase price
under the formula exceeds the intrinsic value of the option. Accordingly,to the
extent that OTC options are illiquid securities, investments in illiquid OTC
options will be subject to the limitations applicable to investments in illiquid
securities. See "Investment Restrictions."
Forward Foreign Currency Exchange Contracts
Since investments in foreign companies will usually involve currencies
of foreign countries, and since the Fund may temporarily hold funds in bank
deposits in foreign currencies during the completion of investment programs, the
value of the assets of the Fund as measured in U.S. dollars may be affected
favorably or unfavorably by changes in foreign currency exchange rates and
exchange control regulations, and the Fund may incur costs in connection with
conversions between various currencies. The Fund will conduct its foreign
currency exchange transactions either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market, or through entering
into forward contracts to purchase or sell foreign
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currencies. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are
traded in the inter bank market conducted directly between currency traders
(usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for such trades.
The Fund may enter into forward foreign currency exchange contracts in
several circumstances. When the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, or when the Fund
anticipates the receipt in a foreign currency of dividends or interest payments
on a security which it holds, the Fund may desire to "lock-in" the U.S. dollar
price of the security or the U.S. dollar equivalent of such dividend or interest
payment, as the case may be. By entering into a forward contract for a fixed
amount of dollars, for the purchase or sale of the amount of foreign currency
involved in the underlying transactions, the Fund will be able to protect itself
against a possible loss resulting from an adverse change in the relationship
between the U.S. dollar and the subject foreign currency during the period
between the date on which the security is purchased or sold, or on which the
dividend or interest payment is declared, and the date on which such payments
are made or received.
Additionally, when management of the Fund believes that the currency of
a particular foreign country may suffer a substantial decline against the U.S.
dollar, the Fund may enter into a forward contract for a fixed amount of
dollars, to sell the amount of foreign currency approximating the value of some
or all of the Fund's portfolio securities denominated in such foreign currency.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible since the future value of
securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date on which the forward
contract is entered into and the date it matures. The projection of short-term
currency market movement is extremely difficult, and the successful execution of
a short-term hedging strategy is highly uncertain. The Fund will not enter into
such forward contracts or maintain a net exposure to such contracts where the
consummation of the contracts would obligate the Fund to deliver an amount of
foreign currency in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency. Under normal
circumstances, consideration of the prospect for currency parities will be
incorporated into the long-term investment decisions made with regard to overall
diversification strategies. However, the Fund believes that it is important to
have the flexibility to enter into such forward contracts when it determines
that the best interests of the Fund will thereby be served. The Fund's Custodian
will place cash or liquid equity or debt securities into a segregated account of
the Fund in an amount equal to the value of the Fund's total assets committed to
the consummation of forward foreign currency exchange contracts. If the value of
the securities placed in the segregated account declines, additional cash or
securities will be placed in the account on a daily basis so that the value of
the account will equal the amount of the Fund's commitments with respect to such
contracts.
The Fund generally will not enter into a forward contract with a term
of greater than one year. At the maturity of a forward contract, the Fund may
either sell the portfolio security and make delivery of the foreign currency, or
it may retain the security and terminate its contractual obligation to deliver
the foreign currency by purchasing an "offsetting" contract with the same
currency trader obligating it to purchase, on the same maturity date, the same
amount of the foreign currency.
It is impossible to forecast with absolute precision the market value
of a particular portfolio security at the expiration of the contract.
Accordingly, it may be necessary for the Fund to purchase additional foreign
currency on the spot market (and bear the expense of such purchase) if the
market value of the security is less than the amount of foreign currency that
the Fund is obligated to deliver and if a decision is made to sell the security
and make delivery of the foreign currency.
If the Fund retains the portfolio security and engages in an off
setting transaction, the Fund will incur a gain or a loss (as described below)
to the extent that there has been movement in forward contract prices. Should
forward prices decline during the period between the Fund's entering into a
forward contract for the sale of a foreign currency and the date it enters into
an offsetting contract for the purchase of the foreign currency, the Fund will
realize a gain to the extent that the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, the Fund will suffer a loss to the extent that the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell.
The Fund's dealing in forward foreign currency exchange contracts will
be limited to the transactions described above. Of course, the Fund is not
required to enter into such transactions with regard to its foreign
currency-denominated securities. It also should be realized that this method of
protecting the value of the Fund's portfolio securities against a decline in the
value of a currency does not eliminate fluctuations in the underlying prices of
the securities which are unrelated to exchange rates. It simply establishes a
rate of exchange which one can achieve at some future point in time.
Additionally, although such contracts tend to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time, they tend to
limit any potential gain which might result should the value of such currency
increase.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend physically to convert its holdings of foreign currencies into
U.S. dollars on a daily basis. It will do so from time to time, and investors
should be aware of the costs of
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currency conversion. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the spread)
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate,
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer.
Risks of Transactions in Options on Foreign Currencies
An option position may be closed out only on an exchange, board of
trade or other trading facility which provides a secondary market for an option
of the same series. Although the Fund will generally purchase or write only
those options for which there appears to be an active secondary market, there is
no assurance that a liquid secondary market on an exchange will exist for any
particular option, or at any particular time, and for some options no secondary
market on an exchange or otherwise may exist. In such event it might not be
possible to effect closing transactions in particular options, with the result
that the Fund would have to exercise its options in order to realize any profits
and would incur brokerage commissions upon the exercise of call options and upon
the subsequent disposition of underlying currencies acquired through the
exercise of call options or upon the purchase of underlying currencies for the
exercise of put options. If the Fund as a covered call option writer is unable
to effect a closing purchase transaction in a secondary market, it will not be
able to sell the underlying currency until the option expires or it delivers the
underlying currency upon exercise.
Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or a clearing
corporation may not at all times be adequate to handle current trading volume;or
(vi) one or more exchanges could, for economic or other reasons, decide or be
compelled at some future date to discontinue the trading of options (or a
particular class or series of options), in which event the secondary market on
that exchange (or in the class or series of options) would cease to
exist,although outstanding options on that exchange that had been issued by a
clearing corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms. There is no assurance that higher
than anticipated trading activity or other unforeseen events might not, at
times, render certain of the facilities of any of the clearing corporations
inadequate, and thereby result in the institution by an exchange of special
procedures which may interfere with the timely execution of customers' orders.
The Fund intends to purchase and sell only those options which are cleared by a
clearinghouse whose facilities are considered to be adequate to handle the
volume of options transactions.
Risks of Options on Foreign Currencies
Options on foreign currencies involve the currencies of two nations and
therefore, developments in either or both countries can affect the values of
options on foreign currencies. Risks include those described in the Prospectus
under "How the Fund Invests--Special Considerations and Risks," including
government actions affecting currency valuation and the movements of currencies
from one country to another. The quality of currency underlying option contracts
represent odd lots in a market dominated by transactions between banks; this can
mean extra transaction costs upon exercise. Options markets may be closed while
round-the-clock interbank currency markets are open, and this can create price
and rate discrepancies.
Risks of Transactions in Futures Contracts
There are several risks in connection with the use of futures contracts
as a hedging device. Due to the imperfect correlation between the price of
futures contracts and movements in the currency or group of currencies, the
price of a futures contract may move more or less than the price of the
currencies being hedged. Therefore, a correct forecast of currency rates, market
trends or international political trends by the Manager or Subadviser may still
not result in a successful hedging transaction.
Although the Fund will purchase or sell futures contracts only on
exchanges where there appears to be an adequate secondary market, there is no
assurance that a liquid secondary market on an exchange will exist for any
particular contract or at any particular time. Accordingly, there can be no
assurance that it will be possible, at any particular time, to close a futures
position. In the event the Fund could not close a futures position and the value
of such position declined, the Fund would be required to continue to make daily
cash payments of variation margin. There is no guarantee that the price
movements of the portfolio securities denominated in foreign currencies will, in
fact, correlate with the price movements in the futures contracts and thus
provide an offset to losses on a futures contract. Currently, futures contracts
are available on the Australian Dollar, British Pound, Canadian Dollar, Japanese
Yen, Swiss Franc, DeutscheMark and Eurodollar.
Under regulations of the Commodity Exchange Act, investment companies
registered under the Investment Company Act, are exempt from the definition of
"commodity pool operator," subject to compliance with certain conditions. The
exemption is conditioned upon a requirement that all of the Fund's futures or
options transactions constitute bona fide hedging transactions within the
meaning of the Commodity Future Trading Commission's (CFTC's) regulations. The
Fund will use currency futures and
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options on futures in a manner consistent with this requirement. The Fund may
also enter into futures or related options contracts for income enhancement and
risk management purposes if the aggregate initial margin and option premiums do
not exceed 5% of the liquidation value of the Fund's total assets.
Successful use of futures contracts by the Fund is also subject to the
ability of the Fund's Manager or Subadviser to predict correctly movements in
the direction of markets and other factors affecting currencies generally. For
example, if the Fund has hedged against the possibility of an increase in the
price of securities in its portfolio and price of such securities increases
instead, the Fund will lose part or all of the benefit of the increased value of
its securities because it will have offsetting losses in its futures positions.
In addition, in such situations, if the Fund has insufficient cash to meet daily
variation margin requirements, it may need to sell securities to meet such
requirements. Such sales of securities may be, but will not necessarily be, at
increased prices which reflect the rising market. The Fund may have to sell
securities at a time when it is disadvantageous to do so.
The hours of trading of futures contracts may not conform to the hours
during which the Fund may trade the underlying securities. To the extent that
the futures markets close before the securities markets, significant price and
rate movements can take place in the securities markets that cannot be reflected
in the futures markets.
Options on Futures Contracts
An option on a futures contract gives the purchaser the right, but not
the obligation, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option exercise period. The writer of the
option is required upon exercise to assume an offsetting futures position (a
short position if the option is a call and a long position if the option is a
put). Upon exercise of the option, the assumption of offsetting futures
positions by the writer and holder of the option will be accompanied by delivery
of the accumulated cash balance in the writer's futures margin account which
represents the amount by which the market price of the futures contract, at
exercise, exceeds, in the case of a call, or is less than, in the case of a
put,the exercise price of the option on the futures contract. Currently options
can be purchased or written with respect to futures contracts on the Australian
Dollar, British Pound, Canadian Dollar, Japanese Yen, Swiss Franc, DeutscheMark
and Eurodollar.
The holder or writer of an option may terminate its position by selling
or purchasing an option of the same series. There is no guarantee that such
closing transactions can be effected.
Limitations on Purchase and Sale of Options on Foreign Currencies
and Futures Contracts on Foreign Currencies
The Fund will write put options on foreign currencies and futures
contracts on foreign currencies only if they are covered by segregating with the
Fund's Custodian an amount of cash or short-term investments equal to the
aggregate exercise price of the puts. The Fund will not (a) write puts having
aggregate exercise prices greater than 25% of total net assets; or (b) purchase
(i) put options on currencies or futures contracts on foreign currencies or (ii)
call options on foreign currencies if, after any such purchase, the aggregate
premiums paid for such options would exceed 10% of the Fund's total net assets.
The Fund intends to engage in futures contracts and options on futures
transactions as a hedge against changes in the value of the currencies to which
the Fund is subject or to which the Fund expects to be subject in connection
with future purchases. The Fund also intends to engage in such transactions when
they are economically appropriate for the reduction of risks inherent in the
ongoing management of the Fund.
Illiquid Securities
The Fund may invest up to 5% of its net assets in illiquid securities
including repurchase agreements which have a maturity of longer than seven days,
securities with legal or contractual restrictions on resale (restricted
securities) and securities that are not readily marketable. Restricted
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933, as amended (the Securities Act), that have a readily available market are
not considered illiquid for purposes of this limitation. The Subadviser will
monitor the liquidity of such restricted securities under the supervision of the
Board of Directors. Repurchase agreements subject to demand are deemed to have a
maturity equal to the notice period.
The staff of the SEC has also taken the position that purchased
over-the-counter options and the assets used as "cover" for written
over-the-counter options are illiquid securities unless the Fund and the
counterparty have provided for the Fund at its option to unwind the OTC option.
The exercise of such an option ordinarily would involve the payment by the Fund
of an amount designed to reflect the counterparty's economic loss from an early
termination, but does allow the Fund to treat the assets used as "cover" as
"liquid".
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (Securities Act),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or
B-8
<PAGE>
in the secondary market. Mutual funds typically have not held a significant
amount of restricted or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a mutual fund
might be unable to dispose of restricted or other illiquid securities promptly
or at reasonable prices and might thereby experience difficulty satisfying
redemptions within seven days. A mutual fund might also have to register such
restricted securities in order to dispose of them, resulting in additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act
including repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.
Rule 144A allows for a broader institutional trading market for
securities otherwise subject to restriction on resale to the general public.
Rule 144A establishes a "safe harbor" from the registration requirements of the
Securities Act for resales of certain securities to qualified institutional
buyers. The investment adviser anticipates that the market for certain
restricted securities such as foreign convertible securities will expand further
as a result of this new regulation and the development of automated systems for
the trading, clearance and settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL System sponsored by the NASD.
The investment adviser will monitor the liquidity of restricted
securities in the Fund's portfolio under the supervision of the Board of
Directors. In reaching liquidity decisions, the investment adviser will
consider, inter alia, the following factors:
1. the frequency of trades and quotes for the security;
2. the number of dealers wishing to purchase or sell the security and
the number of other potential purchasers;
3. dealer undertakings to make a market in the security; and
4. the nature of the security and the nature of the marketplace trades
(e.g., the time needed to dispose of the security, the method of soliciting
offers and the mechanics of the transfer).
Position Limits
Transactions by the Fund in futures contracts and options will be
subject to limitations, if any, established by each of the exchanges, boards of
trade or other trading facilities (including NASDAQ) governing the maximum
number of options in each class which may be written or purchased by a single
investor or group of investors acting in concert, regardless of whether the
options are written on the same or different exchanges, boards of trade or other
trading facilities or are held or written in one or more accounts or through one
or more brokers. Thus, the number of futures contracts and options which the
Fund may write or purchase may be affected by the futures contracts and options
written or purchased by other investment advisory clients of the Adviser. An
exchange,board of trade or other trading facility may order the liquidations of
positions found to be in excess of these limits, and it may impose certain other
sanctions.
When-Issued and Delayed Delivery Securities
The Fund may purchase or sell securities on a when-issued or delayed
delivery basis. When-issued or delayed delivery transactions arise when
securities are purchased or sold by the Fund with payment and delivery taking
place in the future in order to secure what is considered to be an advantageous
price and yield to the Fund at the time of entering into the transaction. The
Fund's Custodian will maintain, in a segregated account of the Fund, cash, U.S.
Government securities or other liquid high-grade debt obligations having a value
equal to or greater than the Fund's purchase commitments; the Custodian will
likewise segregate securities sold on a delayed delivery basis.
B-9
<PAGE>
INVESTMENT RESTRICTIONS
The following restrictions, other than the undertaking described below,
are fundamental policies, which cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities.
The Fund may not:
1. Purchase securities on margin (but the Fund may obtain such
short-term credits as may be necessary for the clearance of transactions);
provided that the deposit or payment by the Fund of initial or maintenance
margin in connection with futures or options is not considered the purchase of a
security on margin.
2. Make short sales of securities or maintain a short position.
3. Issue senior securities, borrow money or pledge its assets, except
that the Fund may borrow up to 20% of the value of its total assets (calculated
when the loan is made) for temporary, extraordinary or emergency purposes or for
the clearance of transactions. The Fund may pledge up to 20% of the value of its
total assets to secure such borrowings. For the purpose of this restriction,
obligations of the Fund to Directors pursuant to deferred compensation
arrangements, the purchase and sale of securities on a when-issued or delayed
delivery basis, the purchase and sale of forward foreign exchange contracts,
options and futures contracts and any collateral arrangements with respect to
the purchase and sale of forward foreign exchange contracts, options and futures
contracts are not deemed to be the issuance of a senior security or a pledge of
assets.
4. Purchase any security (other than obligations of the U.S.
Government, its agencies, or instrumentalities) if as a result: (i) with respect
to 75% of the Fund's total assets, more than 5% of the Fund's total assets
(taken at current value) would then be invested in securities of a single
issuer, or (ii) more than 25% of the Fund's total assets (taken at current
value) would be invested in a single industry.
5. Purchase any security if as a result the Fund would then hold more
than 10% of the outstanding voting securities of an issuer.
6. Purchase any security if as a result the Fund would then have more
than 5% of its total assets (taken at current value) invested in securities of
companies (including predecessors) less than three years old.
7. Buy or sell commodities or commodity contracts or real estate or
invest in real estate, although it may purchase or sell securities which are
secured by real estate and securities of companies which invest or deal in real
estate (for the purposes of this restriction, stock options, options on debt
securities, options on stock indices, stock indices futures, options on stock
index futures, futures contracts on currencies, options on such contracts and
forward foreign exchange contracts are not deemed to be a commodity or commodity
contract).
8. Act as underwriter except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an underwriter under
certain federal securities laws.
9. Make investments for the purpose of exercising control or
management.
10. Invest in securities of other registered investment companies,
except by purchases in the open market involving only customary brokerage
commissions and as a result of which not more than 5% of its total assets (taken
at current value) would be invested in such securities, or except as part of a
merger, consolidation or other acquisition.
11. Invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in the common stocks of companies
which invest in or sponsor such programs.
12. Make loans, except through (i) repurchase agreements and (ii) loans
of portfolio securities (limited to 10% of the Fund's total assets).
13. Purchase warrants if as a result the Fund would then have more than
5% of its total assets (taken at current value) invested in warrants.
Although not fundamental policies, the Fund has agreed with various
state securities commission's that the Fund will not (i) invest in securities of
any issuer if, to the knowledge of the Fund, any officer or director of the Fund
or of the Manager owns more than 1/2 of 1% of the outstanding securities of such
issuer, and such officers and directors who own more than 1/2 of 1% own in the
aggregate more than 5% of the outstanding securities of such issuer and, (ii)
purchase warrants if, as a result, the Fund would have more than 5% of its
assets (determined at the time of investment) invested in warrants. Warrants
will be valued at the lower of cost or market and investment in warrants which
are not listed on the New York Stock Exchange, American Stock Exchange or any
major foreign stock exchange will be limited to 2% of the Fund's net assets.
Whenever any fundamental investment policy or investment restriction
states a maximum percentage of the Fund's assets, it is intended that if the
percentage limitation is met at the time the investment is made, a later change
in percentage resulting from
B-10
<PAGE>
changing total or net asset values will not be considered a violation of such
policy. However, in the event that the Fund's asset coverage for borrowings
falls below 300%, the Fund will take prompt action to reduce its borrowings, as
required by applicable law.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
Position with Principal Occupations
Name and Address Fund During Past Five Years
---------------- ------------- ----------------------
<S> <C> <C>
Stephen C. Eyre Director Executive Director, The John A. Hartford Foundation, Inc. (charitable
c/o Prudential Mutual Fund foundation) (since May 1985); Director of Faircom, Inc.
Management, Inc.
One Seaport Plaza
New York, NY
Delayne Dedrick Gold Director Marketing and Management Consultant.
c/o Prudential Mutual Fund
Management, Inc.
One Seaport Plaza
New York, NY
Don G. Hoff Director Chairman and Chief Executive Officer of Intertec, Inc. (investments)
c/o Prudential Mutual Fund since 1980; Director of Innovative Capital Management Inc. the Asia
Management, Inc. Pacific Fund and The Greater China Fund.
One Seaport Plaza
New York, NY
*Harry A. Jacobs, Jr. Director Senior Director (since January 1986) of Prudential Securities
One Seaport Plaza Incorporated (Prudential Securities); formerly Interim Chairman and
New York, NY Chief Executive Officer of Prudential Mutual Fund Management Inc.
(PMF); June-September 1993; formerly Chairman of the Board of
Prudential Securities (1982-1985); Chairman and Chief Executive
Officer of Bache Group Inc. (1977-1982); Trustee of The Trudeau
Institute; Director of The First Australia Fund, Inc. The First
Australia Prime Income Fund, Inc. The Global Government Plus Fund,
Inc. The Global Yield Fund, Inc. and the Center for National Policy.
Sidney R. Knafel Director Managing Partner of SRK Management Company (investments) since 1981;
c/o Prudential Mutual Fund Chairman of Insight Communications Company, L.P. and Microbiological
Management, Inc. Associates, Inc.; Director of Cellular Communications, Inc., Cellular
One Seaport Plaza Communications International, Inc., Cellular Communications of Puerto
New York, NY Rico, Inc., IGENE Biotechnology, Inc., International CabelTel
Incorporated, Medical Imaging Centers of America, Inc. and a number
of private companies.
Robert E. LaBlanc Director President of Robert E. LaBlanc Associates, Inc. (telecommunications)
c/o Prudential Mutual Fund since 1981; Director of Contel Cellular, Inc., M/A-COM, Inc., Storage
Management, Inc. Technology Corporation, TIE/communications, Inc., Tribune Company,
One Seaport Plaza Trustee of Manhattan College and Prudential U.S. Government Fund.
New York, NY
*Lawrence C. McQuade President and Vice Chairman of PMF (since 1988) and Managing Director, Investment
One Seaport Plaza Director Banking of Prudential Securities (1988-1991); Director, BUNZL, P.L.C.
New York, NY (since June 1991); Director, Quixote Corporation (since February
1992); formerly Director of Crazy Eddie Inc. (1987-1990) of Kaiser
Tech, Ltd., Kaiser Aluminum and Chemical Corp. (March 1987-November
1988); formerly Executive Vice President and Director of W. R. Grace
& Co. (1975-1987); President and Director of The High Yield Income
Fund, Inc., The Global Yield Fund, Inc. and The Global Government
Plus Fund, Inc.
</TABLE>
B-11
<PAGE>
<TABLE>
<CAPTION>
Position with Principal Occupations
Name and Address Fund During Past Five Years
---------------- ------------- ----------------------
<S> <C> <C>
Thomas A. Owens, Jr. Director Consultant.
c/o Prudential Mutual Fund
Management, Inc.
One Seaport Plaza
New York, NY
*Richard A. Redeker Director President, Chief Executive Officer and Director (since October 1993);
One Seaport Plaza Prudential Mutual Fund Management, Inc. (PMF); Executive Vice
New York, NY President; Director and Member of the Operating Committee (since
October 1933); Prudential Securities Incorporated (Prudential
Securities); Director (since October 1993) of Prudential Securities
Group, Inc. (PSG). Formerly Senior Executive Vice President and
Director of Kemper Financial Services, Inc. (September 1978-September
1993); Director of The Global Government Plus Fund, Inc. and The High
Yield Income Fund, Inc.
Clay T. Whitehead Director President of National Exchange Inc. (since May 1983).
c/o Prudential Mutual Fund
Management, Inc.
One Seaport Plaza
New York, NY
David W. Drasnin Vice President Vice President and Branch Manager of Prudential Securities.
39 Public Square,
Suite 500 Wilkes Barre, PA
Robert F. Gunia Vice President Chief Administrative Officer (since July 1990), Director (since
One Seaport Plaza January 1989) and Executive Vice President, Treasurer and Chief
New York, NY Financial Officer (since June 1987) of PMF; Senior Vice President
(since March 1987) of Prudential Securities; Vice President and
Director (since May 1989) of The Asia Pacific Fund, Inc.
S. Jane Rose Secretary Senior Vice President (since January 1991), Senior Counsel (since
One Seaport Plaza June 1987) and First Vice President (June 1987-December 1990) of
New York, NY PMF; Senior Vice President and Senior Counsel of Prudential
Securities (since July 1992); formerly Vice President and Associate
General Counsel of Prudential Securities.
Susan C. Cote Treasurer and Senior Vice President of PMF; Senior Vice President (since January
One Seaport Plaza Principal 1992) and Vice President (January 1986-December 1991) of
New York, NY Financial and Prudential Securities.
Accounting
Officer
Domenick Pugliese Assistant Vice President (since June 1992) and Associate General Counsel
One Seaport Plaza Secretary (since March 1992) of PMF; Vice President and Associate General
New York, NY Counsel of Prudential Securities (since July 1992); prior thereto, he
was associated with the law firm of Battle Fowler.
</TABLE>
____________
* "Interested" director, as defined in the Investment Company Act, by reason
of his affiliation with Prudential or PMF.
B-12
<PAGE>
Directors and officers of the Fund are also trustees, directors and
officers of some or all of the other investment companies distributed by
Prudential Securities or Prudential Mutual Fund Distributors, Inc.(PMFD).
The officers conduct and supervise the daily business operations of the
Fund, while the Directors, in addition to their functions set forth under
"Manager" and "Distributor," review such actions and decide on general policy.
The Fund pays each of its Directors who is not an "affiliated" person of PMF
annual compensation of $12,000, in addition to certain out-of-pocket expenses.
The chairman of the Audit Committee receives an additional $4,000 per year.
Directors may receive their Directors' fees pursuant to a deferred fee
agreement with the Fund. Under the terms of such agreement, the Fund accrues
daily the amount of Directors' fees which accrue interest at a rate equivalent
to the prevailing rate applicable to 90-day U.S. Treasury Bills at the beginning
of each calendar quarter or, pursuant to an SEC exemptive order, at the daily
rate of return of the Fund (the Fund rate). Payment of the interest so accrued
is also deferred and accruals become payable at the option of the Director. The
Fund's obligation to make payments of deferred Directors' fees, together with
interest thereon, is a general obligation of the Fund.
As of June 17, 1994, the Directors and officers of the Fund, as a
group, owned less than 1% of the outstanding common stock of the Fund.
As of June 17, 1994, Prudential Securities was the record holder for
other beneficial owners of 1,407,233 Class A shares (or 32.2% of the outstanding
Class A shares) and 17,098,536 Class B shares (or 64.7% of the outstanding Class
B shares) of the Fund. In the event of any meetings of shareholders, Prudential
Securities will forward, or cause the forwarding of, proxy materials to the
beneficial owners for which it is the record holder.
MANAGER
The manager of the Fund is Prudential Mutual Fund Management, Inc. (PMF
or the Manager), One Seaport Plaza, New York, New York 10292. PMF serves as
manager to substantially all of the other investment companies that, together
with the Fund, comprise the "Prudential Mutual Funds." See "How the Fund is
Managed" in the Prospectus. As of March 31, 1994, PMF managed and/or
administered open-end and closed-end management investment companies with assets
of approximately $[49] billion and, according to the Investment Company
Institute, as of December 31, 1993 the Prudential Mutual Funds were the 12th
largest family of mutual funds in the United States.
Pursuant to the Management Agreement with the Fund (the Management
Agreement), PMF, subject to the supervision of the Fund's Board of Directors and
in conformity with the stated policies of the Fund, manages both the investment
operations of the Fund and the composition of the Fund's portfolio, including
the purchase, retention, disposition and loan of securities. In connection
therewith, PMF is obligated to keep certain books and records of the Fund. PMF
also administers the Fund's corporate affairs and, in connection therewith,
furnishes the Fund with office facilities, together with those ordinary clerical
and bookkeeping services which are not being furnished by State Street Bank and
Trust Company, the Fund's custodian, and Prudential Mutual Fund Services,
Inc.(PMFS or the Transfer Agent), the Fund's transfer and dividend disbursing
agent. The management services of PMF for the Fund are not exclusive under the
terms of the Management Agreement and PMF is free to, and does, render
management services to others.
For its services, PMF receives, pursuant to the Management Agreement, a
fee at an annual rate of .75 of 1% of the Fund's average daily net assets. The
fee is computed daily and payable monthly. The Management Agreement also
provides that, in the event the expenses of the Fund (including the fees of PMF,
but excluding interest, taxes, brokerage commissions, distribution fees and
litigation and indemnification expenses and other extraordinary expenses not
incurred in the ordinary course of the Fund's business) for any fiscal year
exceed the lowest applicable annual expense limitation established and enforced
pursuant to the statutes or regulations of any jurisdiction in which the Fund's
shares are qualified for offer and sale, the compensation due to PMF will be
reduced by the amount of such excess. Reductions in excess of the total
compensation payable to PMF will be paid by PMF to the Fund. Currently, the Fund
believes that the most restrictive expense limitation of state securities
commissions is 2-1/2% of the Fund's average daily net assets up to $30 million,
2% of the next $70 million of such assets and 1-1/2% of such assets in excess of
$100 million. Because the expenses incurred by the Fund are anticipated to be
higher than those of funds that invest only in U.S. securities, the Fund has
received waivers from applicable state expense limitations to exclude certain
foreign transactional expenses from expenses subject to the limitation.
In connection with its management of the corporate affairs of the Fund,
PMF bears the following expenses:
(a) the salaries and expenses of all of its and the Fund's personnel
except the fees and expenses of Directors who are not affiliated persons of PMF
or the Fund's investment adviser;
(b) all expenses incurred, by PMF or by the Fund in connection with
managing the ordinary course of the Fund's business, other than those assumed by
the Fund as described below; and
B-13
<PAGE>
(c) the costs and expenses payable to The Prudential Investment
Corporation (PIC) pursuant to the subadvisory agreement between PMF and PIC (the
Subadvisory Agreement).
Under the terms of the Management Agreement, the Fund is responsible
for the payment of the following expenses: (a) the fees payable to the Manager,
(b) the fees and expenses of Directors who are not affiliated persons of the
Manager or the Fund's investment adviser, (c) the fees and certain expenses of
the Custodian and Transfer and Dividend Disbursing Agent, including the cost of
providing records to the Manager in connection with its obligation of
maintaining required records of the Fund and of pricing the Fund's shares, (d)
the charges and expenses of legal counsel and independent accountants for the
Fund, (e) brokerage commissions and any issue or transfer taxes chargeable to
the Fund in connection with its securities transactions, (f) all taxes and
corporate fees payable by the Fund to governmental agencies, (g) the fees of any
trade associations of which the Fund may be a member, (h) the cost of stock
certificates representing shares of the Fund, (i) the cost of fidelity and
liability insurance, (j) the fees and expenses involved in registering and
maintaining registration of the Fund and of its shares with the Securities and
Exchange Commission, registering the Fund and qualifying its shares under state
securities laws, including the preparation and printing of the Fund's
registration statements and prospectuses for such purposes, (k) allocable
communications expenses with respect to investor services and all expenses of
shareholders' and Directors' meetings and of preparing, printing and mailing
reports, proxy statements and prospectuses to shareholders in the amount
necessary for distribution to the shareholders, (l) litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the Fund's business and (m) distribution fees.
The Management Agreement provides that PMF will not be liable for any
error of judgment or for any loss suffered by the Fund in connection with the
matters to which the Management Agreement relates, except a loss resulting from
willful misfeasance, bad faith, gross negligence or reckless disregard of duty.
The Management Agreement provides that it will terminate automatically if
assigned, and that it may be terminated without penalty by either party upon not
more than 60 days' nor less than 30 days' written notice. The Management
Agreement will continue in effect for a period of more than two years from the
date of execution only so long as such continuance is specifically approved at
least annually in conformity with the Investment Company Act. The Management
Agreement was last approved by the Board of Directors of the Fund, including all
of the Directors who are not parties to the contract or interested persons of
any such party as defined in the Investment Company Act on June 3, 1993 and by
shareholders of the Fund on February 25, 1988. For the fiscal years ended
October 31, 1993, 1992 and 1991, PMF received management fees of $1,538,624,
$1,689,209 and $1,987,424, respectively.
PMF has entered into a Subadvisory Agreement (the Subadvisory
Agreement) with PIC (the Subadviser), a wholly-owned subsidiary of Prudential.
The Subadvisory Agreement provides that PIC will furnish investment advisory
services in connection with the management of the Fund. In connection therewith,
PIC is obligated to keep certain books and records of the Fund. PMF continues to
have responsibility for all investment advisory services pursuant to the
Management Agreement and supervises PIC's performance of such services. PIC is
reimbursed by PMF for the reasonable costs and expenses incurred by PIC in
furnishing those services.
The Subadvisory Agreement was last approved by the Board of Directors,
including a majority of the Directors who are not interested persons of the Fund
and who have no direct or indirect financial interest in the Subadvisory
Agreement, on June 3, 1993, and by shareholders of the Fund on February 25,1988.
The Subadvisory Agreement provides that it will terminate in the event
of its assignment (as defined in the Investment Company Act) or upon the
termination of the Management Agreement. The Subadvisory Agreement may be
terminated by the Fund, PMF or PIC upon not more than 60 days', nor less than 30
days', written notice. The Subadvisory Agreement provides that it will continue
in effect for a period of more than two years from its execution only so long as
such continuance is specifically approved at least annually in accordance with
the requirements of the Investment Company Act.
The Manager and the Subadviser (The Prudential Investment Corporation)
are subsidiaries of The Prudential which, as of December 31, 1993, was the
largest insurance company in North America. Prudential has been engaged in the
insurance business since 1875. In July 1993, Institutional Investor ranked The
Prudential the third largest institutional money manager of the 300 largest
money management organizations in the United States as of December 31, 1992.
B-14
<PAGE>
DISTRIBUTOR
Prudential Mutual Fund Distributors, Inc. (PMFD), One Seaport Plaza,
New York, New York 10292, acts as the distributor of the Class A shares of the
Fund. Prudential Securities Incorporated, One Seaport Plaza, New York, New York
10292 (Prudential Securities), acts as the distributor of the Class B and Class
C shares of the Fund.
Pursuant to separate Distribution and Service Plans (the Class A Plan,
the Class B Plan and the Class C Plan, collectively the Plans) adopted by the
Fund under Rule 12b-1under the Investment Company Act and separate distribution
agreements (the Distribution Agreements), PMFD and Prudential Securities
(collectively the Distributor) incur the expenses of distributing the Fund's
Class A, Class B and Class C shares. See "How the Fund is Managed--Distributor"
in the Prospectus.
Prior to January 22, 1990, the Fund offered only one class of shares
(the existing Class B shares). On October 17, 1989, the Board of Directors,
including a majority of the Directors who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Class A or Class B Plan or in any agreement related to either Plan (the Rule
12b-1 Directors), at a meeting called for the purpose of voting on each Plan,
adopted a new plan of distribution for the Class A shares of the Fund (the Class
A Plan) and approved an amended and restated plan of distribution with respect
to the Class B shares of the Fund (the Class B Plan). On June 3, 1993, the Board
of Directors, including a majority of the Rule 12b-1 Directors, at a meeting
called for the purpose of voting on each Plan, approved the continuance of the
Plans and Distribution Agreements and approved modifications of the Fund's Class
A and Class B Plans and Distribution Agreements to conform them with recent
amendments to the National Association of Securities Dealers, Inc. (NASD)
maximum sales charge rule described below. As modified, the Class A Plan
provides that (i) up to .25 of 1% of the average daily net assets of the Class A
shares may be used to pay for personal service and the maintenance of
shareholder accounts (service fee) and (ii) total distribution fees (including
the service fee of .25 of 1%) may not exceed .30 of 1%. As modified, the Class B
Plan provides that (i) up to .25 of 1% of the average daily net assets of the
Class B shares may be paid as a service fee and .50 of 1% (not including the
service fee) per annum of the Fund's average daily net assets up to the level of
average daily net assets as of February 26, 1986, plus .75 of 1%(not including
the service fee) per annum of average daily net assets in excess of such level
may be used as reimbursement for distribution-related expenses with respect to
the Class B shares (asset-based sales charge). On June 3, 1993 the Board of
Directors, including a majority of the Rule 12b-1 Directors, at a meeting called
for the purpose of voting on each Plan, adopted a plan of distribution for the
Class C shares of the Fund and approved further amendments to the plans of
distribution for the Fund's Class A and Class B shares changing them from
reimbursement type plans to compensation type plans. The Plans were last
approved by the Board of Directors, including a majority of the Rule 12b-1
Directors, on June 3, 1993. The Class A Plan, as amended, was approved by Class
A and Class B shareholders, and the Class B Plan, as amended, was approved by
Class B shareholders on , 1994. The Class C Plan was approved by the sole
shareholder of Class A shares on , 1994.
Class A Plan. For the fiscal year ended October 31, 1993 PMFD received
payments of $42,818 under the Class A Plan as reimbursement of expenses related
to the distribution of Class A shares. This amount was primarily expended for
payment of account servicing fees to financial advisors and other persons who
sell Class A shares. For the fiscal year ended October 31, 1993. PMFD also
received approximately $220,700 in initial sales charges.
Class B Plan. For the fiscal year ended October 31, 1993, Prudential
Securities received $1,609,543 from the Fund under the Class B Plan and spent
approximately $2,541,600 in distributing the Fund's Class B shares. It is
estimated that of the latter amount approximately 0.1% ($3,000) was spent on
printing and mailing of prospectuses to other than current shareholders; 4.3%
($108,400) on compensation to Pruco Securities Corporation, an affiliated
broker-dealer, for commissions to its financial advisers and other expenses,
including an allocation of overhead and other branch office distribution-related
expenses, incurred by it for distribution of Fund shares; 14.9% ($378,400) in
interest and/or carrying charges and 80.7% ($2,051,800) on the aggregate of (i)
payments of commission and account servicing fees to financial advisers (52.2%
or $1,325,600) and (ii) an allocation of overhead and other branch office
distribution-related expenses (28.5% or $726,200). The term "overhead and other
branch office distribution-related expenses" represents (a) the expenses of
operating Prudential Securities' branch offices in connection with the sale of
Fund shares, including lease costs, the salaries and employee benefits of
operations and sales support personnel, utility costs, communications costs and
the costs of stationery and supplies, (b) the costs of client sales seminars,
(c) expenses of mutual fund sales coordinators to promote the sale of Fund
shares and (d) other incidental expenses relating to branch promotion of Fund
sales.
Prudential Securities also receives the proceeds of contingent deferred
sales charges paid by holders of Class B shares upon certain redemptions of
Class B shares. See "Shareholder Guide--How to Sell Your Shares--Contingent
Deferred Sales Charges" in the Prospectus. For the fiscal year ended October 31,
1993, Prudential Securities received approximately $290,200 in contingent
deferred sales charges.
B-15
<PAGE>
Class C Plan. Prudential Securities receives the proceeds of contingent
deferred sales charges paid by investors upon certain redemptions of Class C
shares. See "Shareholder Guide--How to Sell Your Shares--Contingent Deferred
Sales Charges" in the Prospectus. Prior to the date of this Statement of
Additional Information, no distribution expenses were incurred under the Class C
Plan.
The Class A, Class B and Class C Plans continue in effect from year to
year, provided that each such continuance is approved at least annually by a
vote of the Board of Directors, including a majority vote of the Rule 12b-1
Directors, cast in person at a meeting called for the purpose of voting on such
continuance. The Plans may each be terminated at any time, without penalty, by
the vote of a majority of the Rule 12b-1 Directors or by the vote of the holders
of a majority of the outstanding shares of the applicable class on not more than
30 days' written notice to any other party to the Plans. The Plans may not be
amended to increase materially the amounts to be spent for the services
described therein without approval by the shareholders of the applicable class
(by both Class A and Class B shareholders, voting separately, in the case of
material amendments to the Class A Plan), and all material amendments are
required to be approved by the Board of Directors in the manner described above.
Each Plan will automatically terminate in the event of its assignment. The Fund
will not be contractually obligated to pay expenses incurred under any Plan if
it is terminated or not continued.
Pursuant to each Plan, the Board of Directors will review at least
quarterly a written report of the distribution expenses incurred on behalf of
each class of shares of the Fund by the Distributor. The report includes an
itemization of the distribution expenses and the purposes of such expenditures.
In addition, as long as the Plans remain in effect, the selection and nomination
of Rule 12b-1 Directors shall be committed to the Rule 12b-1 Directors.
Pursuant to each Distribution Agreement, the Fund has agreed to
indemnify PMFD and Prudential Securities to the extent permitted by applicable
law against certain liabilities under the Securities Act of 1933, as amended.
NASD Maximum Sales Charge Rule. Pursuant to rules of the NASD., the
Distributor is required to limit aggregate initial sales charges, deferred sales
charges and asset-based sales charges to 6.25% of total gross sales of each
class of shares. In the case of Class B shares, interest charges on unreimbursed
distribution expenses equal to the prime rate plus one percent per annum may be
added to the 6.25% limitation. Sales from the reinvestment of dividends and
distributions are not included in the calculation of the 6.25% limitation. The
annual asset-based sales charge on shares of the Fund may not exceed .75 of 1%
per class. The 6.25%limitation applies to the Fund rather than on a per
shareholder basis. If aggregate sales charges were to exceed 6.25% of total
gross sales of any class, all sales charges on shares of that class would be
suspended.
NET ASSET VALUE
The net asset value per share is the net worth of the Fund (assets,
including securities at value, minus liabilities) divided by the number of
shares outstanding. Net asset value is calculated separately for each class. For
valuation purposes, quotations of foreign securities in a foreign currency are
converted to U.S. dollar equivalents. The Board of Directors has fixed the
specific time of day for the computation of the Fund's net asset value to be as
of 4:15 P.M., New York time.
The value of investments listed on a securities exchange is based on
the last sale prices. In the absence of recorded sales, the average of readily
available closing bid and asked prices on such exchanges will be used. Should an
extraordinary event, which is likely to affect the value of the security, occur
after the close of an exchange on which a portfolio security is traded, such
security will be valued at its fair value as determined in good faith by the
Investment Adviser under procedures established by and under the general
supervision of the Fund's Board of Directors.
Unlisted securities are valued at the average of the quoted bid and
asked prices in the over-the-counter market. Securities or other assets for
which market quotations are not readily available are valued by appraisal at
their fair value as determined in good faith by the Investment Adviser under the
procedures described above.
The Fund will compute its net asset value once daily on days that the
New York Stock Exchange is open for trading except on days on which no orders to
purchase, sell or redeem Fund shares have been received or days on which changes
in the value of the Fund's portfolio securities do not affect the net asset
value. The New York Stock Exchange is closed on the following holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.
In the event that the New York Stock Exchange or the national
securities exchanges on which stock options are traded adopt different trading
hours on either a permanent or temporary basis, the Board of Directors of the
Fund will reconsider the time at which net asset value is computed. In addition
the Fund may compute its net asset value as of any time permitted pursuant to
any exemption, order or statement of the Securities and Exchange Commission or
its staff.
The net asset value of Class B and Class C shares will generally be
lower than the net asset value of Class A shares as a result of the larger
distribution-related fee to which Class B and Class C shares are subject. It is
expected, however, that the net asset value per share of each class will tend to
converge immediately after the recording of dividends which will differ by
approximately the amount of the distribution expense accrual differential among
the classes.
B-16
<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Manager is responsible for decisions to buy and sell securities,
options and futures contracts for the Fund, the selection of brokers, dealers
and futures commission merchants to effect the transactions and the negotiation
of brokerage commissions, if any. Purchases and sales of securities, options or
futures on a national securities exchange or board of trade are effected through
brokers or futures commission merchants who charge a negotiated commission for
their services; on foreign securities exchanges, commissions may be fixed.
Orders may be directed to any broker or futures commission merchant including,
to the extent and in the manner permitted by applicable law, Prudential
Securities and its affiliates. The term "Manager" as used in this section
includes the Subadviser.
In the over-the-counter market, securities are generally traded on a
"net" basis with dealers acting as principal for their own accounts without a
stated commission, although the price of the security usually includes a profit
to the dealer. In underwritten offerings, securities are purchased at a fixed
price which includes an amount of compensation to the underwriter, generally
referred to as the underwriter's concession or discount. On occasion, certain
money market instruments may be purchased directly from an issuer, in which case
no commissions or discounts are paid. The Fund will not deal with Prudential
Securities or any affiliate in any transaction in which Prudential Securities or
any affiliate acts as principal. Thus, it will not deal in over-the-counter
securities with Prudential Securities acting as market maker, and it will not
execute a negotiated trade with Prudential Securities if execution involves
Prudential Securities' acting as principal with respect to any part of the
Fund's order.
Portfolio securities may not be purchased from any underwriting or
selling syndicate of which Prudential Securities (or any affiliate), during the
existence of the syndicate, is a principal underwriter (as defined in the
Investment Company Act), except in accordance with rules of the SEC. This
limitation, in the opinion of the Fund, will not significantly affect the Fund's
ability to pursue its present investment objective. However, in the future, in
other circumstances, the Fund may be at a disadvantage because of this
limitation in comparison to other funds with similar objectives but not subject
to such limitations.
In placing orders for portfolio securities of the Fund, the Manager is
required to give primary consideration to obtaining the most favorable price and
efficient execution. This means that the Manager will seek to execute each
transaction at a price and commission, if any, which provide the most favorable
total cost or proceeds reasonably attainable in the circumstances. While the
Manager generally seeks reasonably competitive spreads or commissions, the Fund
will not necessarily be paying the lowest spread or commission available. Within
the framework of this policy, the Manager will consider research and investment
services provided by brokers, dealers or futures commission merchants who effect
or are parties to portfolio transactions of the Fund, the Manager or its
clients. Such research and investment services are those which brokerage houses
customarily provide to institutional investors and include statistical and
economic data and research reports on particular companies and industries. Such
services are used by the Manager in connection with all of its investment
activities, and some of such services obtained in connection with the execution
of transactions for the Fund may be used in managing other investment accounts.
Conversely, brokers, dealers or futures commission merchants furnishing such
services may be selected for the execution of transactions of such other
accounts, whose aggregate assets are far larger than those of the Fund, and the
services furnished by such brokers, dealers or futures commission merchants may
be used by the Manager in providing investment management for the Fund.
Commission rates are established pursuant to negotiations with the broker,
dealer or futures commission merchant based on the quality and quantity of
execution services provided by the broker, dealer or futures commission merchant
in the light of generally prevailing rates. The Manager is authorized to pay
higher commissions on brokerage transactions for the Fund to brokers, dealers or
futures commission merchants other than Prudential Securities in order to secure
research and investment services described above, subject to review by the
Fund's Board of Directors from time to time as to the extent and continuation of
this practice. The allocation of orders among brokers, dealers and futures
commission merchants and the commission rates paid are reviewed periodically by
the Fund's Board of Directors.
Subject to the above considerations, Prudential Securities may act as a
broker or futures commission merchant for the Fund. In order for Prudential
Securities (or any affiliate) to effect any portfolio transactions for the Fund,
the commissions,fees or other remuneration received by Prudential Securities (or
any affiliate) must be reasonable and fair compared to the commissions, fees or
other remuneration paid to other brokers or futures commission merchants in
connection with comparable transactions involving similar securities or futures
being purchased or sold on a securities exchange or board of trade during a
comparable period of time. This standard would allow Prudential Securities (or
any affiliate) to receive no more than the remuneration which would be expected
to be received by an unaffiliated broker in a commensurate arm's-length
transaction. Furthermore, the Board of Directors of the Fund, including a
majority of the Rule 12b-1 directors, has adopted procedures which are
reasonably designed to provide that any commissions, fees or other remuneration
paid to Prudential Securities (or any affiliate) are consistent with the
foregoing standard. In accordance with Section 11(a) under the Securities
Exchange Act of 1934, Prudential Securities may not retain compensation for
effecting transactions on a national securities exchange for the Fund unless the
Fund has expressly authorized the retention of such compensation. Prudential
Securities must furnish to the Fund at least annually a statement setting forth
the total amount of all compensation retained by Prudential Securities from
transactions effected for the Fund during the
B-17
<PAGE>
applicable period. Brokerage transactions with Prudential Securities (or any
affiliate) are also subject to such fiduciary standards as may be imposed upon
Prudential Securities (or such affiliate) by applicable law.
The table presented below shows certain information regarding the
payment of commissions by the Fund, including the amount of such commissions
paid to Prudential Securities, for the three year period ended October 31, 1993.
<TABLE>
<CAPTION>
Fiscal Years ended October 31,
---------------------------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Total brokerage commissions paid by the Fund .................................. $952,800 $1,048,900 $2,865,300
Total brokerage commissions paid to Prudential Securities ..................... $ 0 $ 11,600 $ 72,200
Percentage of total brokerage commissions paid to Prudential Securities ....... 0% 1.1% 2.5%
</TABLE>
Of the total brokerage commissions, $1,134,731 or 97.02% were paid to
firms which provided research, statistical or other services to PMF during the
fiscal year ended October 31, 1993. PMF has not separately identified a portion
of such brokerage commissions as allocable to the provision of such research,
statistical or other services.
PURCHASE AND REDEMPTION OF FUND SHARES
Shares of the Fund may be purchased at a price equal to the next
determined net asset value per share plus a sales charge which, at the election
of the investor, may be imposed either (i) at the time of purchase (Class A
shares), or (ii) on a deferred basis (Class B or Class C shares). See
"Shareholder Guide--Alternative Purchase Plan" in the Prospectus.
Each class of shares represents an interest in the same portfolio of
investments of the Fund and has the same rights, except that (i) each class
bears the separate expenses of its Rule 12b-1 distribution and service plan (ii)
each class has exclusive voting rights with respect to its plan (except that the
Fund has agreed with the SEC in connection with the offering of a conversion
feature on Class B shares to submit any amendment of the Class A distribution
and service plan to both Class A and Class B shareholders) and (iii) only Class
B shares have a conversion feature. See "Distributor." Each class also has
separate exchange privileges. See "Shareholder Investment Account--Exchange
Privilege."
Specimen Price Make-up
Under the current distribution arrangements between the Fund and the
Distributor, Class A shares are sold at a maximum sales charge of 5% and Class
B* and Class C* shares are sold at net asset value. Using the Fund's net asset
value at October 31, 1993, the maximum offering price of the Fund's shares is as
follows:
Class A
Net asset value and redemption price per Class A share ........... $13.17
Maximum sales charge (5% of offering price) ...................... .73
------
Offering price to public ......................................... $13.90
======
Class B
Net asset value, offering price and redemption price
per Class B share* ............................................ $12.94
======
Class C
Net asset value, offering price and redemption price
per Class C share* ............................................ $12.94
======
-----------
* Class B and Class C shares are subject to a contingent deferred sales
charge on certain redemptions. See "Shareholder Guide--How to Sell Your
Shares--Contingent Deferred Sales Charges" in the Prospectus.
Reduced Initial Sales Charges--Class A Shares
Combined Purchase and Cumulative Purchase Privilege. If an investor or
eligible group of related investors purchases Class A shares of the Fund
concurrently with Class A shares of other Prudential Mutual Funds, the purchases
may be combined to take advantage of the reduced sales charges applicable to
larger purchases. See the table of break points under "Shareholder
Guide--Alternative Purchase Plan" in the Prospectus.
An eligible group of related Fund investors includes any combination of
the following:
(a) an individual;
(b) the individual's spouse, their children and their parents;
B-18
<PAGE>
(c) the individual's and spouse's Individual Retirement Account (IRA);
(d) any company controlled by the individual (a person, entity or group
that holds 25% or more of the outstanding voting securities of a company will be
deemed to control the company, and a partnership will be deemed to be controlled
by each of its general partners);
(e) a trust created by the individual, the beneficiaries of which are
the individual, his or her spouse, parents or children;
(f) a Uniform Gifts to Minors Act/Uniform Transfers to Minors Act
account created by the individual or the individual's spouse; and
(g) one or more employee benefit plans of a company controlled by an
individual.
[In addition, an eligible group of related Fund investors may include
the following an employer (or group of related employers) and one or more
qualified retirement plans of such employer or employers (an employer
controlling, controlled by or under common control with another employer is
deemed related to that employer).]
The Distributor must be notified at the time of purchase that the
investor is entitled to a reduced sales charge. The reduced sales charge will be
granted subject to confirmation of the investor's holdings. The Combined
Purchase and Cumulative Purchase Privilege does not apply to individual
participants in the retirement and group plans described above under "Retirement
and Group Plans."
Rights of Accumulation. Reduced sales charges are also available
through Rights of Accumulation, under which an investor or an eligible group of
related investors, as described above under "Combined Purchase and Cumulative
Purchase Privilege," may aggregate the value of their existing holdings of the
shares of the Fund and shares of other Prudential Mutual Funds (excluding money
market funds other than those acquired pursuant to the exchange privilege) to
determine the reduced sales charge. However, the value of shares held directly
with the Transfer Agent and through Prudential Securities will not be aggregated
to determine the reduced sales charge. All shares must be held either directly
with the Transfer Agent or through Prudential Securities. The value of existing
holdings for purposes of determining the reduced sales charge is calculated
using the maximum offering or price (net asset value plus maximum sales charge)
as of the previous business day. See "How the Fund Values Its Shares" in the
Prospectus. The Distributor must be notified at the time of purchase that the
investor is entitled to a reduced sales charge. The reduced sales charges will
be granted subject to confirmation of the investor's holdings. Rights of
accumulation are not available to individual participants in any retirement or
group plans.
Letters of Intent. Reduced sales charges are available to investors or
an eligible group of related investors who enter into a written Letter of Intent
providing for the purchase, within a thirteen-month period, of shares of the
Fund and shares of other Prudential Mutual Funds. All shares of the Fund and
shares of other Prudential Mutual Funds (excluding money market funds other than
acquired pursuant to the exchange privilege) which were previously purchased and
are still owned are also included in determining the applicable reduction.
However, the value of shares held directly with the Transfer Agent and through
Prudential Securities will not be aggregated to determine the reduced sales
charge. All shares must be held either directly with the Transfer Agent or
through Prudential Securities. Letters of Intent are not available to individual
participants in any retirement or group plans.
A Letter of Intent permits a purchaser to establish a total investment
goal to be achieved by any number of investments over a thirteen-month period.
Each investment made during the period will receive the reduced sales charge
applicable to the amount represented by the goal, as if it were a single
investment. Escrowed Class A shares totaling 5% of the dollar amount of the
Letter of Intent will be held by the Transfer Agent in the name of the
purchaser. The effective date of a Letter of Intent may be back-dated up to 90
days, in order that any investments made during this 90-day period, valued at
the purchaser's cost, can be applied to the fulfillment of the Letter of
Intent goal.
The Letter of Intent does not obligate the investor to purchase, nor
the Fund to sell, the indicated amount. In the event the Letter of Intent goal
is not achieved within the thirteen-month period, the purchaser is required to
pay the difference between the sales charge otherwise applicable to the
purchases made during this period and sales charges actually paid. Such payment
may be made directly to the Distributor or, if not paid, the Distributor will
liquidate sufficient escrowed shares to obtain such difference. If the goal is
exceeded in an amount which qualifies for a lower sales charge, a price
adjustment is made by refunding to the purchaser the amount of excess sales
charge, if any, paid during the thirteen-month period. Investors electing to
purchase Class A shares of the Fund pursuant to a Letter of Intent should
carefully read such Letter of Intent.
Quantity Discount--Class B Shares Purchased Prior to , 1994
The CDSC is reduced on redemptions of Class B shares of the Fund
purchased prior to , 1994 if immediately after a purchase of such shares, the
aggregate cost of all Class B shares of the Fund owned by you in a single
account exceeded
B-19
<PAGE>
$500,000. For example, if you purchased $100,000 of Class B shares of the Fund
and the following year purchased an additional $450,000 of Class B shares with
the result that the aggregate cost of your Class B shares of the Fund following
the second purchase was $550,000, the quantity discount would be available for
the second purchase of $450,000 but not for the first purchase of $100,000. The
quantity discount will be imposed at the following rates depending on whether
the aggregate value exceeded $500,000 or $1 million:
Contingent Deferred Sales Charge
as a Percentage of Dollars Invested
or Redemption Proceeds
Year Since Purchase ------------------------------------------
Payment Made $500,001 to $1 million Over $1 million
------------------- ---------------------- ---------------
First ............................... 3.0% 2.0%
Second .............................. 2.0% 1.0%
Third ............................... 1.0% 0%
Fourth and thereafter ............... 0% 0%
SHAREHOLDER INVESTMENT ACCOUNT
Upon the initial purchase of Fund shares, a Shareholder Investment
Account is established for each investor under which a record of the shares held
is maintained by the Transfer Agent. If a stock certificate is desired, it must
be requested in writing for each transaction. Certificates are issued only for
full shares and may be redeposited in the Account at any time. There is no
charge to the investor for issuance of a certificate. Whenever a transaction
takes place in the Shareholder Investment Account, the shareholder will be
mailed a statement showing the transaction and the status of the Account. The
Fund makes available to the shareholders the following privileges and plans.
Automatic Reinvestment of Dividends and/or Distributions
For the convenience of investors, all dividends and distributions are
automatically reinvested in full and fractional shares of the Fund at the net
asset value per share at the close of business on the record date. An investor
may direct the Transfer Agent in writing not less than five full business days
prior to the record date to have subsequent dividends and/or distributions sent
in cash rather than reinvested. In the case of recently purchased shares for
which registration instructions have not been received on the record date, cash
payment will be made directly to the dealer. Any shareholder who receives a cash
payment representing a dividend or distribution may reinvest such distribution
at net asset value by returning the check or the proceeds to the Transfer Agent
within 30 days after the payment date. Such investment will be made at the net
asset value per share next determined after receipt of the check or proceeds by
the Transfer Agent. Such shareholder will receive credit for any contingent
deferred sales charge paid in connection with the amount of proceeds being
reinvested.
Exchange Privilege
The Fund makes available to its shareholders the privilege of
exchanging their shares of the Fund for shares of certain other Prudential
Mutual Funds, including one or more specified money market funds, subject in
each case to the minimum investment requirements of such funds. Shares of such
other Prudential Mutual Funds may also be exchanged for shares,of the Fund. All
exchanges are made on the basis of relative net asset value next determined
after receipt of an order in proper form. An exchange will be treated as a
redemption and purchase for tax purposes. Shares may be exchanged for shares of
another fund only if shares of such fund may legally be sold under applicable
state laws. For retirement and group plans having a limited menu of Prudential
Mutual Funds, the Exchange Privilege is available for those funds eligible for
investment in the particular program.
It is contemplated that the exchange privilege may be applicable to new
mutual funds whose shares may be distributed by the Distributor.
Class A. Shareholders of the Fund may exchange their Class A shares for
Class A shares of certain other Prudential Mutual Funds, shares of Prudential
Structured Maturity Fund and Prudential Government Securities Trust
(Intermediate Term Series) and shares of the money market funds specified below.
No fee or sales load will be imposed upon the exchange. Shareholders of money
market funds who acquired such shares upon exchange of Class A shares may use
the Exchange Privilege only to acquire Class A shares of the Prudential Mutual
Funds participating in the Exchange Privilege.
B-20
<PAGE>
The following money market funds participate in the Class A Exchange
Privilege:
Prudential California Municipal Fund
(California Money Market Series)
Prudential Government Securities Trust
(Money Market Series)
(U.S. Treasury Money Market Series)
Prudential Municipal Series Fund
(Connecticut Money Market Series)
(Massachusetts Money Market Series)
(New Jersey Money Market Series)
(New York Money Market Series)
Prudential Money Mart Assets
Prudential Tax-Free Money Fund
Class B and Class C. Shareholders of the Fund may exchange their Class B and
Class C shares for Class B and Class C shares, respectively, of certain other
Prudential Mutual Funds and shares of Prudential Special Money Market Fund, a
money market fund. No CDSC will be payable upon such exchange, but a CDSC may be
payable upon the redemption of Class B and Class C shares acquired as a result
of the exchange. The applicable sales charge will be that imposed by the fund in
which shares were initially purchased and the purchase date will be deemed to be
the date of the initial purchase, rather than the date of the exchange.
Class B and Class C shares of the Fund may also be exchanged for shares
of an eligible money market fund without imposition of any CDSC at the time of
exchange. Upon subsequent redemption from such money market fund or after
re-exchange into the Fund, such shares may be subject to the CDSC calculated
without regard to the time such shares were held in the money market fund. In
order to minimize the period of time in which shares are subject to a CDSC
shares exchanged out of the money market fund will be exchanged on the basis of
their remaining holding periods, with the longest remaining holding periods
being transferred first. In measuring the time period shares are held in a money
market fund and "tolled" for purposes of calculating the CDSC holding period,
exchanges are deemed to have been made on the last day of the month. Thus, if
shares are exchanged into the Fund from a money market fund during the month
(and are held in the Fund at the end of the month), the entire month will be
included in the CDSC holding period. Conversely, if shares are exchanged into a
money market fund prior to the last day of the month (and are held in the money
market fund on the last day of the month), the entire month will be excluded
from the CDSC holding period. For purposes of calculating the seven year holding
period applicable to the Class B conversion feature, the time period during
which Class B shares were held in a money market fund will be excluded.
At any time after acquiring shares of other funds participating in the
Class B and Class C exchange privilege, a shareholder may again exchange those
shares (and any reinvested dividends and distributions) for Class B and Class C
shares of the Fund, respectively, without subjecting such shares to any CDSC.
Shares of any fund participating in the Class B or Class C exchange privilege
that were acquired through reinvestment of dividends or distributions may be
exchanged for Class B or Class C shares of other funds, respectively, without
being subject to any CDSC.
Additional details about the Exchange Privilege and prospectuses for
each of the Prudential Mutual Funds are available from the Fund's Transfer
Agent, Prudential Securities or Prusec. The Exchange Privilege may be modified,
terminated or suspended on sixty days' notice, and any fund, including the Fund,
or the Distributor, has the right to reject any exchange application relating to
such fund's shares.
B-21
<PAGE>
Dollar Cost Averaging
Dollar cost averaging is a method of accumulating shares by investing a
fixed amount of dollars in shares at set intervals. An investor buys more shares
when the price is low and fewer shares when the price is high. The average cost
per share is lower than it would be if a constant number of shares were bought
at set intervals.
Dollar cost averaging may be used, for example, to plan for retirement,
to save for a major expenditure, such as the purchase of a home, or to finance a
college education. The cost of a year's education at a four-year college today
averages around $14,000 at a private college and around $4,800 at a public
university. Assuming these costs increase at a rate of 7% a year, as has been
projected, for the freshman class of 2007, the cost of four years at a private
college could reach $163,000 and over $97,000 at a public university.1
----------
1 Source information concerning the costs of education at public
universities is available from The College Board Annual Survey of Colleges,
1992. Information about the costs of private colleges is from the Digest of
Education Statistics,1992; The National Center for Educational Statistics; and
the U.S. Department of Education. Average costs for private institutions include
tuition, fees, room and board.
The following chart shows how much you would need in monthly
investments to achieve specified lump sums to finance your investment goals.2
Period of
Monthly investments: $100,000 $150,000 $200,000 $250,000
-------------------- -------- -------- -------- --------
25 Years .............. $ 110 $ 165 $ 220 $ 275
20 Years .............. 176 264 352 440
15 Years .............. 296 444 592 740
10 Years .............. 555 833 1,110 1,388
5 Years ............... 1,371 2,057 2,742 3,428
See "Automatic Savings Accumulation Plan."
----------
2 The chart assumes an effective rate of return of 8% (assuming monthly
compounding). This example is for illustrative purposes only and is not intended
to reflect the performance of an investment in shares of the Fund. The
investment return and principal value of an investment will fluctuate so that an
investor's shares when redeemed may be worth more or less than their original
cost.
Automatic Savings Accumulation Plan (ASAP)
Under ASAP, an investor may arrange to have a fixed amount
automatically invested in shares of the Fund monthly by authorizing his or her
bank account or Prudential Securities Account (including a Command Account) to
be debited to invest specified dollar amounts in shares of the Fund. The
investor's bank must be a member of the Automatic Clearing House System. Stock
certificates are not issued to ASAP participants.
Further information about this program and an application form can be
obtained from the Transfer Agent, PrudentialSecurities or Prusec.
Systematic Withdrawal Plan
A systematic withdrawal plan is available to shareholders through
Prudential Securities or the Transfer Agent. Such withdrawal plan provides for
monthly or quarterly checks in any amount, except as provided below, up to the
value of the shares in the shareholder's account. Withdrawals of Class B or
Class C shares may be subject to a CDSC. See "Shareholder Guide--How to Sell
Your Shares--Contingent Deferred Sales Charges" in the Prospectus.
In the case of shares held through the Transfer Agent (i) a $10,000
minimum account value applies, (ii) withdrawals may not be for less than $100
and (iii) the shareholder must elect to have all dividends and/or distributions
automatically reinvested in additional full and fractional shares at net asset
value on shares held under this plan. See "Shareholder Investment
Account--Automatic Reinvestment of Dividends and/or Distributions."
Prudential Securities and the Transfer Agent act as agents for the
shareholder in redeeming sufficient full and fractional shares to provide the
amount of the periodic withdrawal payment. The systematic withdrawal plan may be
terminated at any time, and the Distributor reserves the right to initiate a fee
of up to $5 per withdrawal, upon 30 days' written notice to the shareholder.
B-22
<PAGE>
Withdrawal payments should not be considered as dividends, yield or
income. If periodic withdrawals continuously exceed reinvested dividends and
distributions, the shareholder's original investment will be correspondingly
reduced and ultimately exhausted.
Furthermore, each withdrawal constitutes a redemption of shares, and
any gain or loss realized must be recognized for federal income tax purposes. In
addition, withdrawals made concurrently with purchases of additional shares are
inadvisable because of the sales charge applicable to (i) the purchase of Class
A shares and (ii) the withdrawal of Class B and Class C shares. Each shareholder
should consult his or her own tax adviser with regard to the tax consequences of
the systematic withdrawal plan, particularly if used in connection with a
retirement plan.
Tax-Deferred Retirement Plans
Various qualified retirement plans, including a 401(k) Plan,
self-directed individual retirement accounts and "tax sheltered accounts" under
Section 403(b)(7) of the Internal Revenue Code are available through the
Distributor. These plans are for use by both self-employed individuals and
corporate employers. These plans permit either self-direction of accounts by
participants, or a pooled account arrangement. Information regarding the
establishment of these plans, the administration, custodial fees and other
details are available from Prudential Securities or the Transfer Agent.
Investors who are considering the adoption of such a plan should
consult with their own legal counsel or tax adviser with respect to the
establishment and maintenance of any such plan.
Tax-Deferred Retirement Accounts
Individual Retirement Accounts. An individual retirement account (IRA)
permits the deferral of federal income tax on income earned in the account until
the earnings are withdrawn. The following chart represents a comparison of the
earnings in a personal savings account with those in an IRA, assuming a $2,000
annual contribution, an 8% rate of return and a 39.6% federal income tax bracket
and shows how much more retirement income can accumulate within an IRA as
opposed to a taxable individual savings account.
Tax-Deferred Compounding1
Contributions Personal
Made Over: Savings IRA
----------- --------- ------
10 years $ 26,165 $ 31,291
15 years 44,676 58,649
20 years 68,109 98,846
25 years 97,780 157,909
30 years 135,346 244,692
------------
1The chart is for illustrative purposes only and does not represent the
performance of the Fund or any specific investment. It shows taxable versus
tax-deferred compounding for the periods and on the terms indicated. Earnings in
the IRA account will be subject to tax when withdrawn from the account.
B-23
<PAGE>
PERFORMANCE INFORMATION
Average Annual Total Return. The Fund may from time to time advertise
its average annual total return. Average annual total return is determined
separately for Class A, Class B and Class C shares.
Average annual total return is computed according to the following
formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1000.
T = average annual total return.
n = number of years.
ERV = ending redeemable at the end of the 1, 5 or 10 year
periods (or fractional portion thereof) of a
hypothetical $1,000 payment made at the beginning of
the 1, 5 or 10 year periods.
Average annual total return takes into account any applicable initial
or contingent deferred sales charge but does not take into account any federal
or state income taxes that may be payable upon redemption.
The average annual total return with respect to the Class B shares of
the Fund for the one and five year periods ended on April 30, 1994 and from
inception of the Fund on May 16, 1984 through April 30, 1994 was 22.47%,
7.05% and 14.13%, respectively. The average annual total return with respect to
the Class B shares of the Fund for the one and five year periods ended on
April 30, 1994 and from inception of the Fund through April 30, 1994, would
have been , and , respectively, without the subsidy of
expenses. See "Manager." The average annual total return with respect to the
Class A shares of the Fund for the one year ended April 30, 1994 and for the
period January 22, 1990 through April 30, 1994 was 28.37% and 7.77%,
respectively, with and without the subsidy of expenses. During these periods, no
Class C shares were outstanding. See "How the Fund Calculates Performance" in
the Prospectus.
Yield. The Fund may from time to time advertise its yield as calculated
over a 30-day period. Yield is calculated separately for Class A, Class B and
Class C shares. This yield will be computed by dividing the Fund's net
investment income per share earned during this 30-day period by the maximum
offering price per share on the last day of this period. Yield is calculated
according to the following formula:
a-b
YIELD = 2 [(----------- +1)^6-1]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
Yield fluctuates and an annualized yield quotation is not a
representation by the Fund as to what an investment in the Fund will actually
yield for any given period. Yields for the Fund will vary based on a number of
factors including changes in net asset value, market conditions, the level of
interest rates and the level of Fund income and expenses.
Aggregate Total Return. The Fund may also advertise its aggregate total
return. Aggregate total return is determined separately for Class A, Class B and
Class C shares. See "How the Fund Calculates Performance" in the Prospectus.
Aggregate total return represents the cumulative change in the value of
an investment in the Fund and is computed according to the following formula:
ERV - P
-------
P
Where: P = a hypothetical initial payment of $1000.
ERV = ending redeemable value at the end of the 1,5 or 10
year periods (or fractional portion thereof)
of a hypothetical $1000 payment made at the beginning of
the 1, 5 or 10 year periods.
Aggregate total return does not take into account any federal or state
income taxes that may be payable upon redemption or any applicable initial or
contingent deferred sales charges.
B-24
<PAGE>
The aggregate total return with respect to the Class B shares of the
Fund for the one and five year periods ended on October 31, 1993 and from
inception of the Fund on May 16, 1984 through October 31, 1993 was 36.64%,
37.23% and 250.58%, respectively. The aggregate total return with respect to the
Class B shares of the Fund for the one and five year periods ended on October
31, 1993 and from inception of the Fund through October 31, 1993, would have
been 36.64%, 37.23% and 248.95%, respectively, without the subsidy of expenses.
See"Manager." The aggregate total return with respect to the Class A shares of
the Fund for the one year ended October 31, 1993 and for the period January
22,1990 through October 31, 1993 was 37.47% and 29.69%, respectively with and
without the subsidy of expenses. During these periods, no Class C shares were
outstanding.
Performance Chart. From time to time, the performance of the Fund may
be measured against various indices. Set forth below is a chart which compares
the performance of different types of investment over the long-term and the rate
of inflation.1
GRAPHIC
1 Source: Ibbotson Associates, "Stocks, Bonds, Bills and Inflation--1993
Yearbook" (annually updates the work of Roger G. Ibbotson and Rex A.
Sinquefield). Common stock returns are based on the Standard & Poor's 500 Stock
Index, a market-weighted, unmanaged index of 500 common stocks in a variety of
industry sectors. It is a commonly used indicator of broad stock price
movements. This chart is for illustrative purposes only, and is not intended to
represent the performance of any particular investment or fund.
B-25
<PAGE>
TAXES
The Fund has elected to qualify and intends to remain qualified as a
regulated investment company under the Internal Revenue Code for each taxable
year. Accordingly, the Fund must, among other things, (a) derive at least 90% of
its gross income from dividends, interest, proceeds from loans of securities and
gains from the sale or other disposition of securities or foreign currencies, or
other income (including, but not limited to, gains from options, futures or
forward contracts) derived with respect to its business of investing in such
securities or currencies; (b)derive less than 30% of its gross income from the
sale or other disposition of securities or certain options, futures and forward
contracts held less than three months; and (c) diversify its holdings so that,
at the end of each fiscal quarter, (i) at least 50% of the market value of the
Fund's assets is represented by cash, U.S. Government securities, securities of
other regulated investment companies and other securities, with such other
securities limited in respect of any one issuer to an amount not greater than 5%
of the Fund's assets, and not greater than 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than U.S. Government
securities or the securities of other regulated investment companies). These
requirements may limit the Fund's ability to invest in other types of assets.
As a regulated investment company, the Fund will not be subject to
federal income tax on its net investment income and capital gains, if any, that
it distributes to its shareholders, provided (among other things) that at least
90%of the Fund's net investment income including net short-term capital gains
earned in the taxable year is distributed. The Fund intends to distribute
annually to its shareholders all of its taxable net investment income, which
includes dividends, interest and any net short-term capital gains in excess of
net long-term capital losses. The Board of Directors of the Fund will determine
once a year whether to distribute any net long-term capital gains in excess of
any net short-term capital losses. In determining the amount of capital gains to
be distributed, any capital loss carryovers from prior years will be offset
against capital gains. A 4% nondeductible excise tax will be imposed on the Fund
to the extent the Fund does not meet certain distribution requirements by the
end of each calendar year.
Gains or losses attributable to foreign currency contracts, or to
fluctuations in exchange rates between the time the Fund accrues income,
expenses or other liabilities denominated in a foreign currency and the time the
Fund actually collects such income or pays such liabilities, are treated as
ordinary income or ordinary loss for federal income tax purposes. Similarly,
gains or losses on the disposition of debt securities held by the Fund, if
any,denominated in a foreign currency, to the extent attributable to
fluctuations in exchange rates between the acquisition and disposition dates are
also treated as ordinary income or loss.
Gains or losses on sales of securities by the Fund will be treated as
long-term capital gains or losses if the securities have been held by it form
ore than one year except in certain cases where the Fund acquires a put or
writes a call thereon. Other gains or losses on the sale of securities will be
short-term capital gains or losses. Gains and losses on the sale, lapse or other
termination of options on securities will generally be treated as gains and
losses from the sale of securities. If an option written by the Fund on
securities lapses or is terminated through a closing transaction, such as are
purchase by the Fund of the option from its holder, the Fund will generally
realize short-term capital gain or loss, depending on whether the premium income
is greater or less than the amount paid by the Fund in the closing transactions.
If securities are sold by the Fund pursuant to the exercise of a call option
written by it, the Fund will include the premium received in the sale proceeds
of the securities delivered in determining the amount of gain or loss on the
sale. The requirement that the Fund derive less than 30% of its gross income
from gains from the sale of stocks or securities held less than three months may
limit the Fund's ability to write or acquire options. Certain of the Fund's
transactions may be subject to wash sale and short sale provisions of the
Internal Revenue Code which may, among other things, require the Fund to defer
losses. In addition, debt securities acquired by the Fund may be subject to
original issue discount and market discount rules which may, among other
things,cause the Fund to accrue income in advance of the receipt of cash with
respect to interest.
Special rules apply to most options on stock indices, futures contracts
and options thereon, and forward foreign currency exchange contracts in which
the Fund may invest. See "Investment Objective and Policies." These investments
will generally constitute Section 1256 contracts and will be required to
be"marked to market" for federal income tax purposes at the end of the Fund's
taxable year; that is, treated as having been sold at market value. Sixty
percent of any capital gain or loss recognized on such deemed sales and on
actual dispositions will be treated as long-term capital gain or loss, and the
remainder will be treated as short-term capital gain or loss.
Forward currency contracts, options and futures contracts entered into
by the Fund may create "straddles" for federal income tax purposes and this may
affect the character and timing of gains or losses realized by the Fund on such
contracts or options or on the underlying securities. Straddles may also result
in the loss of the holding period of underlying property, and therefore, the
Fund's ability to enter into forward currency contracts, options and futures
contracts may be limited by the 30% of gross income test described above.
A "passive foreign investment company" ("PFIC") is a foreign
corporation that, in general, meets either of the following tests: (a) at least
75% of its gross income is passive or (b) an average of at least 50% of its
assets produce, or are held for the
B-26
<PAGE>
production of, passive income. If the Fund acquires and holds stock in a PFIC
beyond the end of the year of its acquisition, the Fund will be subject to
federal income tax on a portion of any "excess distribution" received on the
stock or of any gain from disposition of the stock (collectively "PFIC income"),
plus interest thereon, even if the Fund distributes the PFIC income as a taxable
dividend to its shareholders. If the Fund elects to treat any PFIC in which it
invests as a "qualified electing fund," then in lieu of the foregoing tax and
interest obligation, the Fund will be required to include in income each year
its pro rata share of the qualified electing fund's annual ordinary earnings and
net capital gain, even if they are not distributed to the Fund; those amounts
would be subject to the distribution requirements applicable to the Fund
described above. It may be very difficult, if not impossible, to make this
election because of certain requirements thereof. Under proposed Treasury
regulations, if the Fund does not or cannot elect to treat such a PFIC as a
"qualified electing fund", the Fund can make a "mark-to-market" election, i.e.,
treat the shares of the PFIC as sold on the last day of the Fund's taxable year,
and thus avoid the special tax and interest charge. The gains the Fund
recognizes from the mark-to-market election would be included as ordinary income
in the net investment income the Fund must distribute to shareholders,
notwithstanding that the Fund would receive no cash in respect of such gains.
Proposed legislation in Congress could dramatically change the manner in which
U.S. shareholders of foreign corporations are taxed. There can be no assurance
that any such legislation will become law or, if so, what its impact on U.S.
shareholders of foreign corporations would be.
Dividends of net investment income will be taxable to a U.S.
shareholder as ordinary income regardless of whether such shareholder receives
such dividends in additional shares or in cash. Dividends received from the Fund
will be eligible for the dividends received deduction for corporate shareholders
only to the extent that the Fund's income is derived from certain dividends
received from domestic corporations. The amount of dividends qualifying for the
dividends received deduction will be designated as such in a written notice to
shareholders mailed not later than 60 days after the end of the Fund's taxable
year. Distributions of net long-term capital gains, if any, will be taxable as
long-term capital gains regardless of whether the shareholder receives such
distribution in additional shares or in cash and regardless of how long the
shareholder has held the Fund's shares, and will not be eligible for the
dividends received deduction for corporations. Any gain or loss realized upon a
sale or redemption of Fund shares by a shareholder who is not a dealer
insecurities will be treated as long-term capital gain or loss if the shares
have been held for more than one year and otherwise as short-term capital gain
or loss. However, any loss realized by a shareholder upon the sale of shares in
the Fund held for six months or less will be treated as a long-term capital loss
to the extent of any net long-term capital gain distributions received by the
shareholder. Additionally, any loss realized on a sale, redemption or exchange
of shares of the Fund by a shareholder will be disallowed to the extent the
shares are replaced within a 61-day period (beginning 30 days before the
disposition of shares). Shares purchased pursuant to the reinvestment of a
dividend will constitute a replacement of shares.
Any dividends or capital gains distributions received by a shareholder
will have the effect of reducing the net asset value of the Fund's shares by the
exact amount of the dividend or capital gains distribution. If the net asset
value of the shares should be reduced below a shareholder's cost as a result of
a dividend or capital gains distribution, such dividend or capital gains
distribution, although constituting a return of capital, will be taxable as
described above. Prior to purchasing shares of the Fund, therefore, the investor
should carefully consider the impact of dividends or capital gains distributions
which are expected to be or have been announced.
A shareholder who sells or otherwise disposes of shares of the Fund
within 90 days of acquisition may not be allowed to include certain sales
charges incurred in acquiring such shares for purposes of calculating gain or
loss realized upon a sale or exchange of shares of the Fund.
Distributions of net investment income made to a nonresident alien
individual fiduciary, of a foreign estate or trust, foreign corporation or
foreign partnership (foreign shareholder) will be subject to U.S. withholding
tax at a rate of 30% (or lower treaty rate), unless the dividends are
effectively connected with the U.S. trade or business of the shareholder. Gains
realized upon the sale or redemption of shares of the Fund by a foreign
shareholder, and distributions of net long-term capital gains to a foreign
shareholder will generally not be subject to U.S. income tax unless the gain is
effectively connected with a trade or business carried on by the shareholder
within the United States or, in the case of a shareholder who is a nonresident
alien individual, the shareholder is present in the United States for more
than182 days during the taxable year and certain other conditions are met. In
the case of a foreign shareholder who is a nonresident alien individual, the
Fund may be required to withhold U.S. federal income tax at the rate of 31% of
distributions of net long-term capital gains unless IRS Form W-8 is provided. If
distributions are effectively connected with a U.S. trade or business carried on
by a foreign shareholder, distributions of net investment income and net
long-term capital gains will be subject to U.S. income tax at the graduated
rates applicable to U.S. citizens or domestic corporations. Transfers by gift of
shares of the Fund by a foreign shareholder who is a nonresident alien
individual will not be subject to U.S. federal gift tax, but the value of the
shares of the Fund held by such a shareholder at his death will be includable in
his gross estate for U.S. federal estate tax purposes. The tax consequences to a
foreign shareholder entitled to claim the benefits of an applicable tax treaty
may be different from those described herein. Foreign shareholders are advised
to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in the Fund.
B-27
<PAGE>
Income received by the Fund from sources within foreign countries may
be subject to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to determine the effective rate of
foreign tax in advance since the amount of the Fund's assets to be invested in
various countries is not known.
If the Fund is liable for foreign taxes, the Fund expects to meet the
requirements of the Internal Revenue Code for "passing-through" to its
shareholders foreign income taxes paid, but there can be no assurance that the
Fund will be able to do so. Under the Internal Revenue Code, if more than 50% of
the value of the Fund's total assets at the close of its taxable year consists
of stock or securities of foreign corporations, the Fund will be eligible and
may file an election with the Internal Revenue Service to "pass-through" to the
Fund's shareholders the amount of foreign income taxes paid by the Fund.
Pursuant to this election shareholders will be required to: (i) include in gross
income (in addition to taxable dividends actually received) their pro rata share
of the foreign income taxes paid by the Fund; (ii) treat their pro rata share of
foreign income taxes as paid by them; and (iii) either deduct their pro rata
share of foreign income taxes in computing their taxable income or, subject to
certain limitations, use it as a foreign tax credit against U.S. income taxes
imposed on foreign source income. For this purpose, the portion of dividends
paid by the Fund from its foreign source income will be treated as such. No
deduction for foreign taxes may be claimed by a shareholder who does not itemize
deductions. A shareholder that is a nonresident alien individual or foreign
corporation may be subject to U.S. withholding tax on the income resulting from
the election described in this paragraph, but may not be able to claim a credit
or deduction against such tax for the foreign taxes treated as having been paid
by such shareholder. A tax-exempt shareholder will not ordinarily benefit from
this election. The amount of foreign taxes for which a shareholder may claim a
credit in any year will generally be subject to various limitations including a
separate limitation for "passive income," which includes, among other things,
dividends, interest and certain foreign currency gains.
Each shareholder will be notified within 60 days after the close of the
Fund's taxable year whether the foreign income taxes paid by the Fund will
"pass-through" for that year and, if so, such notification will designate (a)
the shareholder's portion of the foreign income taxes paid to each such country
and (b) the portion of the dividend which represents income derived from sources
within each such country.
The per share dividends on Class B and Class C shares will be lower
than the per share dividends on Class A shares as a result of the higher
distribution-related fee applicable to the Class B and Class C shares. The per
share distributions of net capital gains, if any, will be paid in the same
amount for Class A, Class B and Class C shares. See "Net Asset Value."
Distributions may be subject to additional state and local taxes.
Pennsylvania Personal Property Tax. The Fund has received a written
letter of determination from the Pennsylvania Department of Revenue that the
Fund will be subject to the Pennsylvania foreign franchise and corporate net
income tax. Accordingly, it is believed that Fund shares are exempt from
Pennsylvania personal property taxes. The Fund anticipates that it will continue
such business activities but reserves the right to suspend them at any
time,resulting in the termination of the exemption.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT AND
INDEPENDENT ACCOUNTANTS
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Fund's portfolio securities and
cash and in that capacity maintains certain financial and accounting books and
records pursuant to an agreement with the Fund. Sub custodians provide custodial
services for the Fund's foreign assets held outside the United States. See
"General Information--Custodian and Transfer and Dividend Disbursing Agent" in
the Prospectus.
Prudential Mutual Fund Services, Inc. (PMFS), Raritan Plaza One,
Edison,New Jersey 08837, serves as the Transfer and Dividend Disbursing Agent of
the Fund. Its mailing address is P.O. Box 15005, New Brunswick, New Jersey
08906-5005. PMFS is a wholly-owned subsidiary of PMF. PMFS provides customary
transfer agency services to the Fund, including the handling of shareholder
communications, the processing of shareholder transactions, the maintenance of
shareholder account records, payment of dividends and distributions, and related
functions. For these services, PMFS receives an annual fee per shareholder
account, a new account set-up fee for each manually-established account and a
monthly inactive zero balance account fee per shareholder account. PMFS is also
reimbursed for its out-of-pocket expenses, including but not limited to
postage,stationery, printing, allocable communications expenses and other costs.
For the fiscal year ended October 31, 1993, the Fund incurred fees of
approximately $520,000 for the services of PMFS.
Deloitte & Touche, 1633 Broadway, New York, New York 10019, serves as the
Fund's independent accountants, and in that capacity audits the Fund's annual
financial statements.
B-28
<PAGE>
PRUDENTIAL GLOBAL FUND, INC. Portfolio of Investments
October 31, 1993
--------------------------------------------------------------------------------
Shares Description Value
(Note 1)
--------------------------------------------------------------------------------
Statement of Additional Information
LONG-TERM INVESTMENTS - 94.4%
Common Stocks - 83.9%
Australia - 2.4%
223,000 Broken Hill Proprietary
Company, Ltd. .............. $ 2,630,743
(Energy sources)
1,272,405 BTR Nylex, Ltd. ............... 2,659,896
(Industrial components)
270,000 Coca Cola Amatil, Ltd. ........ 1,851,445
(Food & household products) ------------
7,142,084
------------
Belgium - 1.5%
4,400 Bekaert S.A., N.V. ............ 2,365,234
(Industrial components)
9,700 Krediet Bank N.V. ............. 2,024,440
(Banking)
9,700 Krediet Bank N.V. (Rights) .... 7,192
(Banking) ------------
4,396,866
------------
Federal Republic of Germany - 1.5%
4,090 Bilfinger & Berger Bau AG ..... 2,230,688
(Construction & housing)
11,050 Commerzbank AG ................ 2,244,101
(Banking) ------------
4,474,789
------------
France - 4.4%
7,000 Guyenne et Gascogne ........... 2,106,468
(Merchandising)
25,000 Imetal S.A. ................... 2,267,526
(Miscellaneous materials &
commodities)
28,500 La Farge Coppee ............... 2,087,310
(Building materials &
components)
14,915 Plastic Omnium ................ 1,656,239
(Automotive)
20,500 Societe Generale .............. 2,422,395
(Banking)
13,200 Valeo ......................... 2,437,026
(Automotive) ------------
12,976,964
------------
Hong Kong - 6.4%
5,500,000 CDL Hotels International ...... 2,455,513
(Real estate)
4,000,000 Giordano Holdings ............. 2,562,276
(Merchandising)
1,200,000 Guoco Group, Ltd. ............. 5,241,022
(Financial services)
1,270,000 Hopewell Holdings, Ltd. ....... 1,273,697
(Real estate)
8,990,000 Hung Hing Printing Group, Ltd. 3,170,198
(General manufacturing)
1,112,000 Hutchison Whampoa, Ltd. ....... 4,187,537
(Multi-industry) ------------
18,890,243
------------
Indonesia - 1.0%
867,000 Kabel Metal Industries, Ltd.* 2,887,868
(Wire & cable) ------------
Japan - 13.2%
153,000 Aiwa Co. ...................... 2,498,247
(Consumer electronics)
63,000 Aoyama Trading Co. ............ 4,719,188
(Merchandising)
6,500 Autobacs Seven Co. ............ 791,513
(Merchandising)
53,000 Higashi Nihon House ........... 2,958,026
(Housing)
200,000 Kamigumi Co., Ltd. ............ 2,269,373
(Transportation &
warehousing)
--------------------------------------------------------------------------------
See Notes to Financial Statements.
B-29
<PAGE>
PRUDENTIAL GLOBAL FUND, INC.
--------------------------------------------------------------------------------
Shares Description Value
(Note 1)
--------------------------------------------------------------------------------
Japan - (cont'd.)
47,000 Kyocera Ltd. .................. $ 2,666,513
(Public works-electronics)
170,000 Mitsui Fudosan Co., Ltd. ...... 2,054,428
(Real estate)
111,000 Mitsui Home Co. ............... 2,191,328
(Housing)
75,000 Mr. Max Corp. ................. 2,075,646
(Merchandising)
150,000 Murata Manufacturing Co., Ltd. 5,272,140
(Electronic components)
40,000 Namco ......................... 1,014,760
(Recreation & other
consumer goods)
41,000 Nissen Co., Ltd. .............. 1,758,764
(Merchandising)
355,000 Ricoh Corp., Ltd. ............. 2,344,834
(Data processing &
reproduction)
73,200 Sega Enterprises, Ltd. ........ 6,118,007
(Recreation & other
consumer goods) ------------
38,732,767
------------
Korea - 2.5%
2,000 Daewoo Securities Co., Ltd. ... 51,241
(Financial services)
23,843 Dong-Ah Construction Co. (New) 424,951
(Housing)
123,090 Dong-Ah Construction Co. (Old) 3,336,433
(Housing)
60,000 Kun Young Construction Corp. .. 995,111
(Housing)
1,326 Samsung Electronics (New)* .... 42,999
(Electronics)
46,383 Samsung Electronics (Old) ..... 2,365,220
(Electronics) ------------
7,215,955
------------
Malaysia - 12.7%
100,000 Aokam Perdana Berhad .......... $ 1,134,541
(Forest products & paper)
533,000 Arab-Malaysian Finance Berhad* 2,074,782
(Banking)
79,000 Arab Malaysian Merchant Bank
Berhad ..................... 233,344
(Banking)
1,000,000 Bedford Berhad ................ 2,073,471
(Real estate)
417,000 Granite Industries Berhad* .... 2,349,204
(Leisure)
2,400,000 IJM Corp. Berhad .............. 4,600,757
(Construction & housing)
514,000 Kedah Cement Holdings ......... 840,546
(Building materials &
components)
1,687,500 Magnum Corp. Berhad ........... 4,159,168
(Leisure & tourism)
2,631,000 Pilecon Engineering Berhad .... 4,693,617
(Machinery & engineering)
2,962,000 Renong Berhad* ................ 4,148,491
(Infrastructure)
1,192,000 Resorts World ................. 6,528,696
(Leisure & tourism)
1,000,000 Tech Resources Industries Berhad* 4,420,797
(Data processing &
reproduction) ------------
37,257,414
------------
Mexico - 3.2%
385,000 Apasco, S.A.* ................. 2,591,287
(Building materials &
components)
310,000 Banacci* ...................... 1,913,030
(Banking)
--------------------------------------------------------------------------------
See Notes to Financial Statements.
B-30
<PAGE>
PRUDENTIAL GLOBAL FUND, INC.
--------------------------------------------------------------------------------
Shares Description Value
(Note 1)
--------------------------------------------------------------------------------
Mexico - (cont'd.)
860,000 Cifra, S.A. de C.V.* .......... $ 2,166,843
(Merchandising)
530,000 Fomento Economico Mexicano,
S.A. de C.V.* .............. 2,728,377
(Merchandising) ------------
9,399,537
------------
Netherlands - 1.9%
223,700 Royal Boskalis Westminster N.V. 5,561,144
(Construction & housing) ------------
Singapore - 7.5%
1,637,000 Kim Eng Holdings .............. 3,487,588
(Financial services)
1,020,250 Sembawang Maritime, Ltd. ...... 4,823,117
(Transportation)
789,000 Sembawang Maritime, Ltd.
Convertible unsecured loan
stock ...................... 1,243,302
(Transportation)
395,000 Sembawang Shipyard, Ltd. ...... 3,286,479
(Machinery & engineering)
440,000 Singapore Airlines, Ltd. ...... 3,439,017
(Transportation)
2,250,000 Wing Tai Holdings ............. 5,616,135
(Multi-industry) ------------
21,895,638
------------
Spain - 2.2%
159,962 Centros Commerciale (Pryca) ... 1,700,967
(Merchandising)
123,200 Dragados y Construcciones ..... 1,958,236
(Construction & housing)
149,900 Vallehermoso .................. 2,765,847
(Real estate) ------------
6,425,050
------------
Sweden - 2.3%
156,000 Astra B Free .................. 3,320,448
(Health & personal care)
114,000 Hennes & Mauritz B Free ....... $ 3,416,597
(Merchandising) ------------
6,737,045
------------
Thailand - 0.9%
140,000 Land & House Public Co., Ltd.* 2,541,436
(Housing) ------------
United Kingdom - 7.0%
290,000 Barclays Bank PLC ............. 2,440,332
(Banking)
276,000 BAT Industries PLC ............ 2,036,297
(Multi-industry)
175,000 Carlton Communications PLC .... 1,983,363
(Television & communication
equipment)
272,000 Guest Keen & Nettlefolds ...... 1,926,191
(Automotive)
308,571 Kingfisher PLC ................ 3,000,040
(Merchandising)
235,000 S.G. Warburg Group PLC ........ 3,220,418
(Financial services)
325,000 Siebe PLC ..................... 2,638,557
(Machinery & engineering)
397,230 Vodafone Group ................ 3,242,621
(Telecommunications) ------------
20,487,819
------------
United States - 13.3%
92,000 Adaptec, Inc.* ................ 3,317,750
(Electronics/semiconductors)
45,000 Avon Products (Rights) ........ 2,272,500
(Health & personal care)
120,000 Cirrus Logic Corp.* ........... 4,185,000
(Electronics/semiconductors)
10,400 General Electric Co. .......... 1,008,800
(Electronics)
43,200 Intel Corp. ................... 2,737,800
(Electronics/semiconductors)
--------------------------------------------------------------------------------
See Notes to Financial Statements.
B-31
<PAGE>
PRUDENTIAL GLOBAL FUND, INC.
--------------------------------------------------------------------------------
Shares Description Value
(Note 1)
--------------------------------------------------------------------------------
United States - (cont'd.)
112,500 Mattel, Inc. .................. $ 3,262,500
(Recreation & other
consumer goods)
16,400 Microsoft Corp.* .............. 1,314,050
(Computer services)
35,000 Mobil Corp. (Rights) .......... 2,852,500
(Energy sources)
35,600 Motorola, Inc. ................ 3,729,100
(Television & electronics)
37,900 Nationsbank Corp. ............. 1,767,087
(Banking)
60,000 Norwest Corp. ................. 1,545,000
(Banking)
50,000 Novell, Inc.* ................. 1,078,125
(Electronics)
54,000 Society Corp. ................. 1,545,750
(Banking)
83,600 Southern Pacific Rail Corp.* .. 1,494,350
(Transportation)
100,000 Time Warner, Inc. ............. 4,475,000
(Broadcasting &
publishing)
46,500 U.S. West, Inc. ............... 2,330,812
(Telecommunications) ------------
38,916,124
------------
Total common stocks
(cost US$184,492,411) ...... 245,938,743
------------
Warrants* - 2.7%
Federal Republic Of Germany - 0.1%
276 Commerzbank AG ................ 208,843
Warrants expiring July '05 ------------
@ DM300
(Banking)
France - 0.1%
3,500 La Farge Coppee ............... $ 256,336
Warrants expiring April '96 ------------
@ FF460
(Building materials &
components)
Japan - 1.3%
50 Autobacs Seven Co ............. 193,125
Warrants expiring Feb. '95
@ (Y)8,089
(Merchandising)
400 Autobacs Seven Co ............. 1,475,000
Warrants expiring Mar. '96
@ (Y)8,231.10
(Merchandising)
1,000 Kamigumi Co., Ltd ............. 287,834
Warrants expiring Sept. '96
@ (Y)1,079
(Transportation & warehousing)
1,900 Mr. Max Corp .................. 473,591
Warrants expiring July '95
@ (Y)2,194.40
(Merchandising)
1,136 Nissen Co., Ltd ............... 1,415,786
Warrants expiring Nov. '96 ------------
@ (Y)1,681
(Merchandising)
3,845,336
------------
Singapore - 1.2%
1,076,000 United Overseas Bank, Ltd.* ... 3,662,401
Warrants expiring Nov. '94 ------------
@ SGD3.16
(Banking)
Total warrants
(cost US$3,994,534) ........ 7,972,916
------------
--------------------------------------------------------------------------------
See Notes to Financial Statements.
B-32
<PAGE>
PRUDENTIAL GLOBAL FUND, INC.
--------------------------------------------------------------------------------
Shares Description Value
(Note 1)
--------------------------------------------------------------------------------
Preferred Stocks - 5.1%
Federal Republic of Germany - 0.9%
1,600 Krones ........................ $ 2,544,807
(Machinery & engineering) ------------
Finland - 2.5%
132,200 Nokia Corp.* .................. 7,292,976
(Television & electronics) ------------
Korea - 1.7%
70,000 Daewoo Securities Co., Ltd.* .. 1,689,461
(Financial services)
45,000 Daishin Securities Co. ........ 941,271
(Financial services)
63,700 Mando Machinery Corp .......... 2,310,056
(Automotive parts) ------------
4,940,788
------------
Total preferred stocks
(cost US$10,714,688) ....... 14,778,571
------------
Principal Convertible Bonds - 2.7%
Amount France
(000) Societe Generale
--------
FF 820 3.50%, 1/1/00 .............. 111,215
(Banking) ------------
Japan - 1.5%
Capcom, Ltd.
(Y)299,000 3.90%, 9/30/96 ............. 4,275,368
(Recreation & other ------------
consumer goods)
Korea - 0.9%
USD1,470 Samsung Electronics
3.75%, 12/31/07 ............ 2,763,600
(Electronics) ------------
Thailand - 0.3%
USD 600 Land & House Public Co., Ltd.
5.00%, 4/29/03 ............. 843,000
(Housing) ------------
Total convertible bonds
(cost US$6,255,282) ........ 7,993,183
------------
Total long-term investments
(cost US$205,456,915) ...... 276,683,413
------------
SHORT-TERM INVESTMENTS - 4.2%
Repurchase Agreement
Joint Repurchase Agreement Account,
$12,337 2.93%, 11/1/93
(cost US$12,337,000; Note 5) 12,337,000
------------
Total Investments - 98.6%
(cost US$217,793,915; Note 4) 289,020,413
Other assets in excess
of liabilities 1.4% ........ 4,133,814
------------
Net Assets 100% $293,154,227
============
----------
* Non-income producing security.
--------------------------------------------------------------------------------
See Notes to Financial Statements.
B-33
<PAGE>
--------------------------------------------------------------------------------
PRUDENTIAL GLOBAL FUND, INC.
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
October 31,
Assets 1993
-------------
Investments, at value (cost $217,793,915) .................. $ 289,020,413
Foreign currency, at value (cost $1,610,156) ............... 1,589,147
Cash ....................................................... 680,353
Receivable for Fund shares sold ............................ 7,090,863
Receivable for investments sold ............................ 1,479,478
Dividends and interest receivable .......................... 500,785
Deferred expenses and other assets ......................... 8,129
-------------
Total assets ............................................. 300,369,168
-------------
Liabilities
Payable for investments purchased .......................... 5,937,596
Payable for Fund shares reacquired ......................... 508,240
Accrued expenses ........................................... 378,990
Due to Distributors ........................................ 188,621
Due to Manager ............................................. 174,837
Withholding taxes payable .................................. 26,657
-------------
Total liabilities ........................................ 7,214,941
-------------
Net Assets ................................................. $ 293,154,227
=============
Net assets were comprised of:
Common stock, at par ..................................... $ 225,923
Paid-in capital in excess of par ......................... 230,506,276
-------------
230,732,199
Undistributed net investment income ...................... 2,750,711
Accumulated net realized loss on
investment and foreign currency transactions ........... (11,500,429)
Net unrealized appreciation on investments
and foreign currencies ................................. 71,171,746
-------------
Net assets, October 31, 1993 ............................. $ 293,154,227
=============
Class A:
Net asset value and redemption price per
share ($42,020,875/3,190,724 shares of
common stock issued and outstanding) ................... $ 13.17
Maximum sales charge (5.25% of offering price) ........... .73
-------------
Maximum offering price to public ......................... $ 13.90
=============
Class B:
Net asset value, offering price and redemption
price per share ($251,133,352/19,401,536
shares of common stock issued and outstanding) ......... $ 12.94
=============
See Notes to Financial Statements
B-34
<PAGE>
--------------------------------------------------------------------------------
PRUDENTIAL GLOBAL FUND, INC.
Statement of Operations
--------------------------------------------------------------------------------
Net Investment Income
Year Ended
October 31,
1993
-----------
Income
Dividends (net of foreign withholding taxes
of $294,359) ........................................ $ 3,288,939
Interest (net of foreign withholding taxes
of $6,434) .......................................... 479,039
------------
Total income ...................................... 3,767,978
------------
Expenses
Distribution fee--Class A ............................ 42,818
Distribution fee--Class B ............................ 1,609,543
Management fee ....................................... 1,538,624
Transfer agent's fees and expenses ................... 617,000
Custodian's fees and expenses ........................ 382,000
Directors' fees ...................................... 88,000
Audit fee ............................................ 50,000
Registration fees .................................... 41,000
Reports to shareholders .............................. 30,000
Legal fees ........................................... 22,000
Insurance expense .................................... 6,100
Miscellaneous ........................................ 10,870
------------
Total operating expenses ............................ 4,437,955
------------
Net investment loss ..................................... (669,977)
------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions
Net realized gain (loss) on:
Investment transactions .............................. 12,614,934
Foreign currency transactions ........................ (453,947)
------------
12,160,987
------------
Net change in unrealized appreciation on:
Investments .......................................... 55,661,915
Foreign currencies ................................... 327,849
------------
55,989,764
------------
Net gain on investments and foreign
currencies ........................................... 68,150,751
------------
Net Increase in Net Assets
Resulting from Operations ............................... $ 67,480,774
============
See Notes to Financial Statements
--------------------------------------------------------------------------------
PRUDENTIAL GLOBAL FUND, INC.
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
Increase (Decrease) in Year Ended October 31,
Net Assets -------------------------------
1993 1992
------------- -------------
Operations
Net investment loss ............... $ (669,977) $ (958,626)
Net realized gain (loss) on
investment and foreign
currency transactions ........... 12,160,987 (3,775,768)
Net change in unrealized
appreciation/depreciation
of investments and
foreign currencies .............. 55,989,764 (8,705,423)
------------- -------------
Net increase (decrease) in
net assets resulting
from operations ................. 67,480,774 (13,439,817)
------------- -------------
Net equalization credits
(debits) .......................... 134,235 (162,632)
------------- -------------
Fund share transactions (Note 6)
Net proceeds from shares
subscribed ...................... 153,827,341 83,542,120
Cost of shares
reacquired ...................... (120,699,004) (141,264,598)
------------- -------------
Net increase (decrease) in
net assets from Fund
share transactions .............. 33,128,337 (57,722,478)
------------- -------------
Total increase
(decrease) ........................ 100,743,346 (71,324,927)
Net Assets
Beginning of year .................... 192,410,881 263,735,808
------------- -------------
End of year .......................... $ 293,154,227 $ 192,410,881
============= =============
See Notes to Financial Statements
B-35
<PAGE>
--------------------------------------------------------------------------------
PRUDENTIAL GLOBAL FUND, INC.
Notes to Financial Statements
--------------------------------------------------------------------------------
Prudential Global 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, with income as a secondary objective, by investing in a diversified
portfolio of securities consisting of marketable securities of U.S. and non-U.S.
issuers.
Note 1. Account 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.
Short-term securities which mature in more than 60 days are valued based
upon current market quotations. Short-term securities which mature in 60 days or
less are valued at amortized cost which approximates market value.
In connection with transactions in repurchase agreements with U.S.
financial institutions, it is the Fund's policy that its custodian takes
possession of the underlying collateral securities, the value of which exceeds
the principal amount of the repurchase transaction including accrued interest.
If the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
Foreign Currency Translation: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(i) market value of investment securities, other assets and liabilities--at
the closing daily rate of exchange as reported by a major bank;
(ii) purchases and sales of investment securities, income and expenses--at
the rate of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange
rates and market values at the close of the fiscal year, the Fund does not
isolate that portion of the results of operations arising as a result of changes
in the foreign exchange rates from the fluctuations arising from changes in the
market prices of securities held at fiscal year end. Similarly, the Fund does
not isolate the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of long-term portfolio
securities sold during the fiscal year.
Net realized losses on foreign currency transactions of $453,947 represent
net foreign exchange gains or losses from sales and maturities of short-term
securities, holding of foreign currencies, currency gains or losses realized
between the trade and settlement dates on security transactions, and the
difference between the amounts of dividends, interest and foreign taxes recorded
on the Fund's books and the U.S. dollar equivalent amounts actually received or
paid. Net currency gains and losses from valuing foreign currency denominated
assets and liabilities (other than investments) at year end exchange rates are
reflected as a component of unrealized appreciation on foreign currencies.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of domestic origin
as a result of, among other factors, the possibility of political and economic
instability and the level of governmental supervision and regulation of foreign
securities markets.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses from investment and
currency transactions are calculated on the identified cost basis. Dividend
income is recorded on the ex-dividend date, and interest income is recorded on
an accrual basis.
Net investment income (other than distribution fees) and unrealized and
realized gains or losses are allocated daily to each class of shares of the Fund
based upon the relative proportion of net assets of each class at the beginning
of the day.
Equalization: The Fund follows the accounting practice known as equalization by
which a portion of the proceeds from sales and costs of reacquisitions of Fund
shares, equivalent on a per share basis to the amount of distributable net
investment income on the date of the transaction, is credited or charged to
undistributed net investment income. As a result, undistributed net investment
income per share is unaffected by sales or reacquisitions of the Fund's shares.
Reclassification of Capital Accounts: Effective November 1, 1992, the Fund began
accounting and reporting for distributions to shareholders in accordance with
Statement of Position 93-2: Determination, Disclosure, and Financial Statement
Presentation of Income, Capital Gain, and Return of Capital Distributions by
Investment Companies. As a result of this statement, the Fund changed the
classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions determined in
accordance with income tax regulations. The effect caused by adopting this
statement was to decrease paid-in capital by $2,292,122, increase undistributed
net investment income by $2,681,567 and decrease accumulated net realized losses
on investments by $389,445 with respect to amounts reported through October 31,
1993. Net investment income, net realized gains and net assets were not affected
by this change.
Dividends and Distributions: The Fund expects to pay dividends of net investment
income and distributions of net
B-36
<PAGE>
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 withholding taxes.
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 and interest 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 Mutual Fund Management, Inc.
("PMF"). Pursuant to this agreement, PMF has responsibility for all investment
advisory services and supervises the subadviser's performance of such services.
PMF has entered into a subadvisory agreement with The Prudential Investment
Corporation ("PIC"); PIC furnishes investment advisory services in connection
with the management of the Fund. PMF pays for the cost of the subadviser's
services, the compensation of officers of the Fund, occupancy and certain
clerical and bookkeeping costs of the Fund. The Fund bears all other costs and
expenses.
The management fee paid PMF is computed daily and payable monthly, at an
annual rate of .75 of 1% of the average daily net assets of the Fund.
The Fund has distribution agreements with Prudential Mutual Fund
Distributors, Inc. ("PMFD"), which acts as the distributor of the Class A shares
of the Fund, and with Prudential Securities Incorporated ("PSI"), which acts as
distributor of the Class B shares of the Fund (collectively the "Distributors").
To reimburse the Distributors for their expenses incurred in distributing and
servicing the Fund's Class A and B shares, the Fund, pursuant to plans of
distribution, pays the Distributors a reimbursement, accrued daily and payable
monthly.
Pursuant to the Class A plan, the Fund reimburses PMFD for its expenses
with respect to Class A shares at an annual rate of up to .30 of 1% of the
average daily net assets of the Class A shares. Such expenses under the Class A
Plan were .20 of 1% of the average daily net assets of the Class A shares for
the fiscal year ended October 31, 1993. PMFD pays various broker-dealers,
including PSI and Pruco Securities Corporation ("Prusec"), affiliated
broker-dealers, for account servicing fees and other expenses incurred by such
broker-dealers.
Pursuant to the Class B plan, the Fund reimburses PSI for its
distribution-related expenses with respect to the Class B shares at an annual
rate of up to .75 of 1% of the average daily net assets up to the level of
average daily net assets as of February 26, 1986, plus 1% of the average daily
net assets in excess of such level.
The Class B distribution expenses include commission credits for payments
of commissions and account servicing fees to financial advisers and an
allocation for overhead and other distribution-related expenses, interest and/or
carrying charges, the cost of printing and mailing prospectuses to potential
investors and of advertising incurred in connection with the distribution of
shares.
The Distributors recover the distribution expenses and account servicing
fees incurred through the receipt of reimbursement payments from the Fund under
the plans and receipt of initial sales charges (Class A only) and contingent
deferred sales charges (Class B only) from shareholders.
PMFD has advised the Fund that it has received approximately $220,700 in
front-end sales charges resulting from sales of Class A shares during the fiscal
year ended October 31, 1993. From these fees, PMFD paid such sales charges to
dealers (PSI and Prusec) which in turn paid commissions to salespersons.
With respect to the Class B Plan, at any given time, the amount of expenses
incurred by PSI in distributing the Fund's shares and not recovered through the
imposition of contingent deferred sales charges in connection with certain
redemptions of shares may exceed the total payments made by the Fund pursuant to
the Class B Plan. PSI has advised the Fund that for the fiscal year ended
October 31, 1993, that it received approximately $290,200 in contingent deferred
sales charges imposed upon certain redemptions by investors. PSI, as
distributor, has also advised the Fund that at October 31, 1993, the amount of
distribution expenses incurred by PSI and not yet reimbursed by the Fund or
recovered through contingent deferred sales charges approximated $11,678,000.
This amount may be recovered through future payments under the Class B Plan or
contingent deferred sales charges.
In the event of termination or noncontinuation of the Class B Plan, the
Fund would not be contractually obligated to pay PSI, as distributor, for any
expenses not previously reimbursed or recovered through contingent deferred
sales charges.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are indirect,
wholly-owned subsidiaries of The Prudential Insurance Company of America.
Note 3. Other Transactions With Affiliates
Prudential Mutual Fund Services, Inc. ("PMFS"), a wholly owned subsidiary of
PMF, serves as the Fund's transfer agent and during the fiscal year ended
October 31, 1993, the Fund incurred fees of approximately $520,000 for the
services of PMFS. As of October 31, 1993, approximately $44,000 of such fees
were due to PMFS. Transfer agent fees and expenses in the Statement of
Operations include certain out-of-pocket expenses paid to non-affiliates.
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the fiscal year ended October 31, 1993 were $162,876,729 and $137,928,274,
respectively.
The United States federal income tax basis of the Fund's investments is
substantially the same as for financial reporting purposes and, accordingly, as
of October 31, 1993 net unrealized appreciation for federal income tax purposes
was
B-37
<PAGE>
$71,226,498 (gross unrealized appreciation--$77,167,676; gross unrealized
depreciation--$5,941,178).
For federal income tax purposes, the Fund has a capital loss carryforward
as of October 31, 1993 of approximately $11,527,100 of which $1,370,900 expires
in 1998 and $6,017,600 expires in 1999 and $4,138,600 expires in 2000. During
the fiscal year ended October 31, 1993 the Fund utilized approximately
$12,614,900 of its capital loss carryforward. Accordingly, no capital gains
distribution is expected to be paid to shareholders until net gains have been
realized in excess of such carryforward.
Note 5. Joint Repurchase Agreement Account
The Fund, along with other affiliated registered investment companies, transfers
uninvested cash balances into a single joint account, the daily 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, 1993, the Fund
has a 0.9% undivided interest in the repurchase agreements in the joint account.
The undivided interest for the Fund represents $12,337,000 in the principal
amount. As of such date, each repurchase agreement in the joint account and the
collateral therefor were as follows:
CS First Boston Corp., 2.93%, in the principal amount of $360,000,000,
repurchase price $360,087,900, due 11/1/93, collateralized by $47,400,000 U.S.
Treasury Notes, 6.75%, due 2/28/97; $40,000,000 U.S. Treasury Notes, 11.25%, due
2/15/95; $100,000,000 U.S. Treasury Bonds, 7.50%, due 11/15/16; $50,000,000 U.S.
Treasury Bonds, 10.375%, due 11/15/12 and $50,000,000 U.S. Treasury Bonds,
12.00%, due 5/15/05; aggregate value including accrued interest--$368,368,052.
Goldman Sachs & Co., 2.93%, in the principal amount of $450,154,000,
repurchase price $450,263,913, due 11/1/93, collateralized by $104,915,000 U.S.
Treasury Bonds, 12.00%, due 8/15/13 and $200,000,000 U.S. Treasury Bonds,
10.75%, due 8/15/05; aggregate value including accrued interest--$462,739,932.
Kidder, Peabody & Co. Inc., 2.95%, in the principal amount of $305,000,000,
repurchase price $305,074,979, due 11/1/93, collateralized by $210,030,000 U.S.
Treasury Bonds, 9.875%, due 11/15/15; value including accrued
interest--$311,527,136.
Nomura Securities International, Inc., 2.90%, in the principal amount of
$60,889,000, repurchase price $60,903,715, due 11/1/93, collateralized by
$8,280,000 U.S. Treasury Notes, 7.75%, due 2/15/95; $25,000,000 U.S. Treasury
Notes, 7.375%, due 5/15/96 and $22,775,000 U.S. Treasury Notes, 8.875%, due
2/15/96; aggregate value including accrued interest--$62,140,276.
Smith Barney Shearson, Inc., 2.94%, in the principal amount of
$175,000,000, repurchase price $175,042,875, due 11/1/93, collateralized by
$4,465,000 U.S. Treasury Bonds, 12.00%, due 5/15/05; $11,435,000 U.S. Treasury
Notes, 9.125%, due 5/15/99; $75,000,000 U.S. Treasury Bonds, 8.125%, due 8/15/19
and $50,000,000 U.S. Treasury Bonds, 8.00%, due 11/15/21; aggregate value
including accrued interest--$178,771,706.
Note 6. Capital
The Fund offers both Class A and Class B shares. Class A shares are sold with a
front-end sales charge of up to 5.25%. 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. Both 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 500 million shares of common stock, $.01 par value
per share, divided into two classes, designated Class A and Class B common
stock, each of which consists of 250 million authorized shares.
Transactions in shares of common stock were as follows:
Class A Shares Amount
---------- ------------
Year ended October 31, 1993:
Shares sold ............................ 7,605,778 $ 81,814,374
Shares reacquired ...................... (5,873,417) (61,680,363)
---------- ------------
Net increase in shares outstanding ..... 1,732,361 $ 20,134,011
========== ============
Year ended October 31, 1992:
Shares sold ............................ 5,694,636 $ 55,067,359
Shares reacquired ...................... (5,640,760) (54,729,390)
---------- ------------
Net increase in shares outstanding ..... 53,876 $ 337,969
========== ============
Class B
Year ended October 31, 1993:
Shares sold ............................ 6,320,592 $ 72,012,967
Shares reacquired ...................... (5,752,085) (59,018,641)
---------- ------------
Net increase in shares outstanding ..... 568,507 $ 12,994,326
========== ============
Year ended October 31, 1992:
Shares sold ............................ 2,945,501 $ 28,474,761
Shares reacquired ...................... (8,948,802) (86,535,208)
---------- ------------
Net decrease in shares outstanding ..... (6,003,301) $(58,060,447)
========== ============
B-38
<PAGE>
--------------------------------------------------------------------------------
PRUDENTIAL GLOBAL FUND, INC.
Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class B
-------------------------------------- ---------------------------------------------
January 22.
1990@
Year Ended October 31, through Year Ended October 31,
------------------------- October 31, ---------------------------------------------
PER SHARE OPERATING 1993 1992 1991 1990 1993 1992 1991 1990 1989
PERFORMANCE (1) ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,beginning of period $ 9.58 $10.08 $ 9.19 $ 10.38 $ 9.47 $10.05 $ 9.14 $ 10.46 $10.09
------ ------ ------ ------- ------ ------ ------ ------- ------
Income from investment operations
Net investment income (loss) ....... .02 .03 .07 .12 (.04) (.05) -- .05 .15
Net realized and unrealized gain
(loss) on investment and foreign
currency transactions ............. 3.57 (.53) 1.02 (1.31) 3.51 (.53) 1.02 (1.10) .53
------ ------ ------ ------- ------ ------ ------ ------- ------
Total from investment operations ... 3.59 (.50) 1.09 (1.19) 3.47 (.58) 1.02 (1.05) .68
Less distributions
Dividends from net investment income -- -- (.16) -- -- -- (.07) (.18) (.19)
Distributions paid to shareholders
from net realized gains on
investment and foreign currency
transactions ...................... -- -- (.04) -- -- -- (.04) (.09) (.12)
------ ------ ------ ------- ------ ------ ------ ------- ------
Total distributions ............... -- -- (.20) -- -- -- (.11) (.27) (.31)
------ ------ ------ ------- ------ ------ ------ ------- ------
Net asset value, end of period ..... $13.17 $ 9.58 $10.08 $ 9.19 $12.94 $ 9.47 $10.05 $ 9.14 $10.46
====== ====== ====== ======= ====== ====== ====== ======= ======
TOTAL RETURN#: ..................... 37.47% (4.96)% 12.11% (11.46)% 36.64% (5.77)% 11.29% (10.43)% 6.92%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) .... $42,021 $13,973 $14,154 $8,727 $251,133 $178,438 $249,582 $261,555 $385,578
Average net assets (000) ........... $21,409 $14,758 $10,593 $7,151 $183,741 $210,464 $253,866 $328,467 $448,737
Ratios to average net assets:
Expenses, including distribution
fees ............................ 1.56% 1.71% 1.72% 1.57%* 2.24% 2.40% 2.44% 2.23% 1.82%
Expenses, excluding distribution
fees ............................ 1.36% 1.51% 1.52% 1.37%* 1.36% 1.51% 1.53% 1.37% 1.34%
Net investment income/loss ......... 0.20% 0.22% 0.65% 1.61%* (0.39)% (0.47)% (0.01)% 0.51% 1.45%
Portfolio turnover rate ............ 69% 58% 126% 35% 69% 58% 126% 35% 60%
-----------
</TABLE>
* Annualized.
@ Commencement of offering of Class A shares.
(1) Based on average shares outstanding, by class.
# 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
B-39
<PAGE>
--------------------------------------------------------------------------------
I N D E P E N D E N T A U D I T O R S ' R E P O R T
--------------------------------------------------------------------------------
The Shareholders and Board of Directors
Prudential Global Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
Prudential Global Fund, Inc., including the portfolio of investments, as of
October 31, 1993, the related statements of operations for the year then ended
and of changes in net assets for each of the two years in the period then ended,
and the financial highlights for each of the five years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
October 31, 1993 by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Prudential Global
Fund, Inc. as of October 31, 1993, the results of its operations, the changes in
its net assets and the financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche
New York, New York
December 15, 1993
B-40
<PAGE>
PRUDENTIAL GLOBAL FUND, INC. Portfolio of Investments
April 30, 1994 (Unaudited)
Value
Shares Description (Note 1)
LONG-TERM INVESTMENTS--97.4%
Common Stocks--88.4%
Australia--5.0%
321,000 Brambles Industries, Ltd. $ 3,311,219
........................
(Business & public
services)
403,000 Broken Hill Proprietary
Company, Ltd.* 4,900,852
(Energy sources)
1,760,539 BTR Nylex, Ltd.* ......... 3,841,165
(Industrial components)
760,051 Coca Cola Amatil, Ltd. ... 4,621,461
(Food & household
products)
800,000 Western Mining Corp. 4,005,951
Holdings, Ltd. ------------
(Non-ferrous metals)
20,680,648
------------
Belgium--0.9%
4,400 Bekaert S.A., N.V.* ...... 3,431,604
(Industrial components)
2,175 Krediet Bank N.V.* ....... 446,396
(Banking) ------------
3,878,000
------------
Federal Republic Of Germany--3.8%
4,700 Asko Deutsch Kaufhaus AG* 2,945,125
........................
(Merchandising)
20,000 BASF AG .................. 3,975,853
(Chemicals)
4,990 Bilfinger & Berger Bau AG* 2,557,507
........................
(Construction & housing)
1,105 Commerzbank AG (New)* .... 232,140
(Banking)
11,050 Commerzbank AG (Old)* .... 2,394,778
(Banking)
13,000 Preussag AG .............. 3,751,283
(Multi-industry) ------------
15,856,686
------------
Finland--0.8%
162,000 Kymmene Corp. ............ $ 3,321,807
(Forest products & paper) ------------
France--4.6%
24,000 Alcatel Alsthom* ......... 2,899,088
(Telecommunications)
7,000 Guyenne et Gascogne* ..... 1,975,047
(Merchandising)
39,000 Imetal S.A.* ............. 4,263,986
(Miscellaneous materials
& commodities)
3,850 La Farge Coppee (New) .... 311,626
(Building materials)
44,450 La Farge Coppee (Old) .... 3,597,856
(Building materials)
14,915 Plastic Omnium* .......... 1,962,102
(Automotive)
17,300 Valeo* ................... 4,240,532
(Automotive) ------------
19,250,237
------------
Hong Kong--5.0%
5,500,000 CDL Hotels International* 2,100,345
........................
(Real estate)
1,804,000 Giordano Holdings, Ltd.* 811,519
........................
(Merchandising)
1,600,000 Guoco Group, Ltd. ........ 7,404,627
(Financial services)
8,990,000 Hung Hing Printing Group, 2,473,005
Ltd. ...................
(General manufacturing)
1,312,000 Hutchison Whampoa, Ltd.* 5,392,432
........................
(Multi-industry)
877,000 New World Development Co., 2,690,636
Ltd. ------------
(Real estate)
20,872,564
------------
B-41 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL GLOBAL FUND, INC.
Value
Shares Description (Note 1)
Indonesia--0.6%
867,000 Kabel Metal Industries, $ 2,422,253
Ltd.* .................. ------------
(Wire & cable)
Japan--18.1%
21,000 Acom Co., Ltd. ........... 1,105,916
(Financial services)
228,000 Aiwa Co. ................. 5,835,220
(Consumer electronics)
7,150 Autobacs Seven Co. ....... 914,952
(Merchandising)
53,000 Higashi Nihon House* ..... 2,811,989
(Housing)
32,000 I O Data Device, Inc.* ... 5,701,349
(Electronic components)
31,200 Japan Associates Finance 4,023,231
Co. ....................
(Financial services)
350,000 Kamigumi Co., Ltd. ....... 4,203,170
(Transportation &
warehousing)
46,200 Keyence Corp. ............ 4,911,507
(Electronic components)
67,000 Kyocera Corp. ............ 4,220,888
(Public works -
electronics)
235,000 Mitsumi Electric Co., Ltd. 4,626,440
........................
(Electronic components)
62,700 Mr. Max Corp. ............ 1,709,607
(Merchandising)
110,000 Murata Manufacturing Co., 4,764,248
Ltd. ...................
(Electronic components)
88,400 Nichiei Co. .............. 7,874,988
(Financial services)
73,200 Nissen Co., Ltd. ......... 2,882,173
(Merchandising)
33,750 Promise Co., Ltd. ........ 2,169,382
(Financial services)
103,000 Rohm Co., Ltd. ........... 4,106,211
(Financial services)
70,350 Sony Corp. ............... $ 4,501,181
(Consumer goods)
265,000 Suzuki Motor Co., Ltd. ... 3,521,508
(Automotive)
161,000 Tokyo Electronic Co., Ltd. 5,118,908
........................ ------------
(Electronic components)
75,002,868
------------
Korea--3.4%
5,459 Daewoo Securities Co., 208,168
Ltd.* ..................
(Financial services)
8,200 Daishin Securities Co.* 187,817
........................
(Financial services)
146,933 Dong-Ah Construction Co.* 6,367,036
........................
(Housing)
60,000 Kun Young Construction 1,047,419
Corp.* .................
(Housing)
61,922 Samsung Electronics ...... 6,117,835
(Electronics) ------------
13,928,275
------------
Malaysia--7.5%
300,000 Aokam Perdana Berhad ..... 2,912,947
(Forest products & paper)
533,000 Arab-Malaysian Finance 1,970,609
Berhad* .
(Banking)
79,000 Arab Malaysian Merchant
Bank Berhad 275,852
(Banking)
800,000 Granite Industries Berhad* 2,166,038
........................
(Leisure)
310,000 Hong Leong Industries 1,609,217
Berhad .................
(Building & related
industries)
1,881,000 Pilecon Engineering Berhad 3,217,306
........................
(Machinery & engineering)
627,000 Pilecon Engineering Berhad
(Rights) . 99,048
(Machinery & engineering)
B-42 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL GLOBAL FUND, INC.
Value
Shares Description (Note 1)
Malaysia--(cont'd)
2,882,000 Renong Berhad ............ $ 3,917,719
(Infrastructure)
1,091,000 Resorts World* ........... 6,111,588
(Leisure & tourism)
1,052,000 Technology Resources
Industries Berhad* ..... 4,518,056
(Data processing &
reproduction)
1,350,000 Time Engineering Berhad* 4,260,185
........................ ------------
(Telecommunications)
31,058,565
------------
Mexico--3.7%
495,000 Apasco, S.A.* ............ 4,241,775
(Building materials)
1,380,000 Cifra, S.A. de C.V. ...... 3,801,071
(Merchandising)
750,000 Fomento Economico Mexicano,
S.A. 3,488,905
de C.V.* ...............
(Merchandising)
Grupo Financiero Banamex
Accival,
S.A. de C.V.
540,000 Class C (Old)*............. 3,660,596
15,500 Class L (New) ............ 105,073
(Banking) ------------
15,297,420
------------
Netherlands--1.3%
223,700 Royal Boskalis Westminster 5,293,251
N.V.* . ------------
(Construction & housing)
New Zealand--0.9%
1,963,600 Fletcher Challenge, Ltd. 3,818,534
........................ ------------
(Forest products & paper)
Singapore--3.8%
708,000 Kim Eng Holdings ......... 1,256,804
(Financial services)
935,250 Sembawang Maritime, Ltd. 4,240,746
........................
(Transportation)
415,000 Sembawang Shipyards, Ltd. $ 3,336,442
........................
(Machinery & engineering)
540,000 Singapore Airlines, Ltd. 4,237,201
........................
(Transportation)
1,500,000 Wing Tai Holdings ........ 2,585,541
(Multi-industry) ------------
15,656,734
------------
Spain--2.3%
203,962 Centros Commerciale 2,919,145
(Pryca)* ...............
(Merchandising)
170,200 Dragados y Construcciones* 2,947,104
........................
(Construction & housing)
24,983 Vallehermoso (New)* ...... 481,689
(Real estate)
169,900 Vallehermoso (Old) ....... 3,338,784
(Real estate) ------------
9,686,722
------------
Sweden--4.0%
156,000 Astra B Free* ............ 3,124,472
(Health & personal care)
114,000 Hennes & Mauritz B Free* 5,641,016
........................
(Merchandising)
89,100 Missouri Och Domsjo AB* 3,499,126
........................
(Forest products & paper)
46,000 Volvo AB ................. 4,281,422
(Automotive) ------------
16,546,036
------------
Thailand--0.6%
110,702 Land & House Public Co., 2,523,548
Ltd. ................... ------------
(Housing)
United Kingdom--7.5%
290,000 Barclays Bank PLC ........ 2,230,938
(Banking)
160,000 British Land Co. PLC ..... 976,452
(Real estate)
B-43 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL GLOBAL FUND, INC.
Value
Shares Description (Note 1)
United Kingdom--(cont'd)
290,000 Carlton Communications PLC $ 4,005,149
........................
(Television &
communication equipment)
220,000 Great Portland Estates PLC 726,281
........................
(Real estate)
355,000 Guest Keen & Nettlefolds 3,341,145
........................
(Automotive)
490,000 J. Sainsbury PLC ......... 2,767,774
(Merchandising)
100,000 MEPC PLC ................. 736,730
(Real estate)
350,000 PowerGen PLC* ............ 2,538,805
(Utilities - electric &
gas)
235,000 S.G. Warburg Group PLC ... 2,572,954
(Financial services)
522,500 Siebe PLC ................ 4,901,775
(Machinery & engineering)
175,000 Slough Estates PLC ....... 675,778
(Real estate)
672,230 Vodafone Group ........... 5,532,778
(Telecommunications) ------------
31,006,559
------------
United States--14.6%
240,400 Adaptec, Inc. ............ 3,816,350
(Electronics/semiconductors)
93,000 Arvind Mills, Ltd. (ADR)* 511,500
........................
(Textiles)
134,300 Cirrus Logic Corp.* ...... 4,834,800
(Electronics/semiconductors)
202,500 Electronic Arts, Inc.* ... 4,353,750
(Consumer goods)
199,625 Mattel, Inc. ............. 5,015,578
(Recreation & other
consumer goods)
173,100 MCI Communications Corp. $ 3,948,844
........................
(Telecommunications)
51,200 Microsoft Corp.* ......... 4,742,400
(Computer services)
56,800 Mobil Corp. .............. 4,444,600
(Energy sources)
104,100 Mohawk Industries, Inc.* 2,849,737
........................
(Appliances & household
durables)
105,200 Motorola, Inc. ........... 4,694,550
(Television &
electronics)
180,500 Norwest Corp. ............ 4,647,875
(Banking)
136,000 Oracle Systems Corp. ..... 4,080,000
(Business & public
services)
170,000 Silicon Graphics, Inc.* 4,271,250
........................
(Electronic components)
139,800 Southern Pacific Rail 3,075,600
Corp.* .................
(Transportation)
89,600 Synoptics Communications, 1,803,200
Inc.* .
(Electronic components)
100,000 Time Warner, Inc. ........ 3,550,000
(Broadcasting & ------------
publishing)
60,640,034
------------
Total common stocks
(cost US$311,292,105).... 366,740,741
------------
Preferred Stocks--4.8%
Federal Republic Of Germany--0.6%
1,600 Krones ................... 2,752,792
(Machinery & engineering) ------------
Finland--2.7%
132,200 Nokia Corp. .............. 11,237,326
(Television & ------------
electronics)
B-44 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL GLOBAL FUND, INC.
Value
Shares Description (Note 1)
Korea--1.5%
72,100 Daewoo Securities Co., $ 2,436,957
Ltd.* ..................
(Financial services)
45,961 Daishin Securities Co.* 927,528
........................
(Financial services)
63,700 Mando Machinery Corp. .... 2,720,874
(Automotive Parts) ------------
6,085,359
------------
Total preferred stocks
(cost US$10,716,018)..... 20,075,477
------------
Warrants*--2.5%
Federal Republic Of Germany--0.1%
Commerzbank AG
276 Warrants expiring July '05 199,939
@ DM300.................. ------------
(Banking)
France
La Farge Coppee
3,500 Warrants expiring April '96 41,352
@ FF460.................. ------------
(Building materials & components)
Japan--1.1%
Autobacs Seven Co.
50 Warrants expiring Feb. '95 240,000
@ (YEN)8,089 ...........
(Merchandising)
Autobacs Seven Co.
400 Warrants expiring Mar. '96 1,840,000
@ (YEN)8,231.10 ........
(Merchandising)
Kamigumi Co., Ltd.
1,000 Warrants expiring Sept. '96 298,219
@ (YEN)902 .............
(Transportation &
warehousing)
Mr. Max Corp.
1,900 Warrants expiring July '95 $ 556,294
@ (YEN)2,194.40 ........
(Merchandising)
Nissen Co., Ltd.
1,136 Warrants expiring Nov. '96 1,512,152
@ (YEN)1,681 ........... ------------
(Merchandising)
4,446,665
------------
Singapore--1.3%
Kim Eng Holdings
327,400 Warrants expiring Feb. '97 284,275
@ SGD2.00................
(Financial services)
United Overseas Bank, Ltd.
1,076,000 Warrants expiring Nov. '94 5,121,173
@ SGD3.16 .............. ------------
(Banking)
5,405,448
------------
Switzerland
Swiss Reinsurances
46,000 Warrants expiring Jan. '96 110,589
@ CMF800................. ------------
(Insurance)
Total warrants
(cost US$4,077,967)...... 10,203,993
------------
Convertible Loan Stocks--1.7%
Malaysia--1.4%
2,400,000 IJM Corp. Berhad ......... 5,355,341
(Construction & housing)
95,000 Time Engineering Berhad* 282,052
........................ ------------
(Telecommunications)
5,637,393
------------
Singapore--0.2%
270,400 Kim Eng Holdings* ........ 155,652
(Financial services)
B-45 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL GLOBAL FUND, INC.
Shares Description Value
(Note 1)
Singapore--(cont'd)
524,000 Sembawang Maritime, Ltd. $ 775,147
........................ ------------
(Transportation)
930,799
------------
United Kingdom--0.1%
71,000 Guest Keen & Nettlefolds 403,195
........................ ------------
(Automotive)
Total convertible loan
stocks
(cost US$3,001,429)...... 6,971,387
------------
Total long-term investments
(cost US$329,087,519).... 403,991,598
------------
Total Investments--97.4%
(cost US$329,087,519; Note 403,991,598
4).......................
Other assets in excess of
liabilities--2.6%........ 10,828,815
------------
Net Assets--100%........... $414,820,413
------------
------------
---------------
*Non-income producing security.
ADR--American Depository Receipt
B-46 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL GLOBAL FUND, INC.
Statement of Assets and Liabilities
(Unaudited)
<TABLE>
<CAPTION>
Assets April 30, 1994
--------------
<S> <C>
Investments, at value (cost $329,087,519)................................................. $ 403,991,598
Foreign currency, at value (cost $8,003,552).............................................. 8,165,205
Cash...................................................................................... 1,554,670
Receivable for investments sold........................................................... 10,165,442
Receivable for Fund shares sold........................................................... 2,919,066
Dividends and interest receivable......................................................... 980,706
Deferred expenses and other assets........................................................ 16,233
--------------
Total assets........................................................................ 427,792,920
--------------
Liabilities
Payable for investments purchased......................................................... 11,427,777
Payable for Fund shares reacquired........................................................ 645,219
Distribution fee payable.................................................................. 277,250
Management fee payable.................................................................... 248,157
Withholding taxes payable................................................................. 211,970
Accrued expenses.......................................................................... 162,134
--------------
Total liabilities................................................................... 12,972,507
--------------
Net Assets................................................................................ $ 414,820,413
--------------
--------------
Net assets were comprised of:
Common stock, at par.................................................................... $ 302,198
Paid-in capital in excess of par........................................................ 335,404,357
--------------
335,706,555
Undistributed net investment income..................................................... 1,573,555
Accumulated net realized gain on investment and foreign currency transactions........... 2,622,489
Net unrealized appreciation on investments and foreign currencies....................... 74,917,814
--------------
Net assets, April 30, 1994.............................................................. $ 414,820,413
--------------
--------------
Class A:
Net asset value and redemption price per share
($59,205,525 / 4,234,909 shares of common stock issued and outstanding)............... $13.98
Maximum sales charge (5.25% of offering price).......................................... 0.77
--------------
Maximum offering price to public........................................................ $14.75
--------------
--------------
Class B:
Net asset value, offering price and redemption price per share
($355,614,888 / 25,984,923 shares of common stock issued and outstanding)............. $13.69
--------------
--------------
</TABLE>
See Notes to Financial Statements.
B-47
<PAGE>
PRUDENTIAL GLOBAL FUND, INC.
Statement of Operations
(Unaudited)
Six Months
Ended
April 30,
Net Investment Income 1994
-----------
Income
Dividends (net of foreign
withholding taxes of $230,360)... $ 1,894,092
Interest (net of foreign
withholding taxes of $4,434)..... 163,579
-----------
Total income..................... 2,057,671
-----------
Expenses
Distribution fee--Class A.......... 61,734
Distribution fee--Class B.......... 1,454,167
Management fee..................... 1,371,761
Transfer agent's fees and
expenses........................... 325,000
Custodian's fees and expenses...... 259,000
Directors' fees.................... 44,000
Audit fee.......................... 25,000
Registration fees.................. 37,000
Legal fees......................... 20,000
Insurance expense.................. 3,500
Miscellaneous...................... 16,286
-----------
Total operating expenses......... 3,617,448
-----------
Net investment loss.................. (1,559,777)
-----------
Realized and Unrealized Gain
on Investments and Foreign Currency
Transactions
Net realized gain on:
Investment transactions............ 14,122,918
Foreign currency transactions...... 282,738
-----------
14,405,656
-----------
Net change in unrealized appreciation
on:
Investments........................ 3,677,581
Foreign currencies................. 68,487
-----------
3,746,068
-----------
Net gain on investments and foreign
currencies......................... 18,151,724
-----------
Net Increase in Net Assets
Resulting from Operations............ $16,591,947
-----------
-----------
PRUDENTIAL GLOBAL FUND, INC.
Statement of Changes in Net Assets
(Unaudited)
Six Months
Ended Year Ended
Increase (Decrease) in April 30, October 31,
Net Assets 1994 1993
------------- -------------
Operations
Net investment loss... $ (1,559,777) $ (669,977)
Net realized gain on
investment and
foreign currency
transactions........ 14,405,656 12,160,987
Net change in
unrealized
appreciation of
investments and
foreign
currencies.......... 3,746,068 55,989,764
------------- -------------
Net increase in net
assets resulting
from operations..... 16,591,947 67,480,774
------------- -------------
Net equalization
credits............... 99,883 134,235
------------- -------------
Fund share transactions
(Note 5)
Net proceeds from
shares subscribed... 215,094,764 153,827,341
Cost of shares
reacquired............ (110,120,408) (120,699,004)
------------- -------------
Net increase in net
assets from Fund
share
transactions........ 104,974,356 33,128,337
------------- -------------
Total increase.......... 121,666,186 100,743,346
Net Assets
Beginning of period..... 293,154,227 192,410,881
------------- -------------
End of period........... $ 414,820,413 $ 293,154,227
------------- -------------
------------- -------------
See Notes to Financial Statements.
B-48
<PAGE>
PRUDENTIAL GLOBAL FUND, INC.
Notes to Financial Statements
(Unaudited)
Prudential Global 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, with income as a secondary objective, by investing in a diversified
portfolio of securities consisting of marketable securities of U.S. and non-U.S.
issuers.
Note 1. Accounting The following is a summary
Policies 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.
Short-term securities which mature in more than 60 days are valued based upon
current market quotations. Short-term securities which mature in 60 days or less
are valued at amortized cost which approximates market value.
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian or designated
subcustodians, as the case may be under triparty repurchase agreements, take
possession of the underlying collateral securities, the value of which exceeds
the principal amount of the repurchase transaction including accrued interest.
If the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
Foreign Currency Translation: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(i) market value of investment securities, other assets and liabilities--at
the closing daily rate of exchange as reported by a major bank;
(ii) purchases and sales of investment securities, income and expenses--at
the rate of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange
rates and market values at the close of the fiscal year, the Fund does not
isolate that portion of the results of operations arising as a result of changes
in the foreign exchange rates from the fluctuations arising from changes in the
market prices of securities held at fiscal year end. Similarly, the Fund does
not isolate the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of long-term portfolio
securities sold during the fiscal year.
Net realized gains on foreign currency transactions of $282,738 represent net
foreign exchange gains or losses from sales and maturities of short-term
securities, holding of foreign currencies, currency gains or losses realized
between the trade and settlement dates on security transactions, and the
difference between the amounts of dividends, interest and foreign taxes recorded
on the Fund's books and the U.S. dollar equivalent amounts actually received or
paid. Net currency gains and losses from valuing foreign currency denominated
assets and liabilities (other than investments) at year end exchange rates are
reflected as a component of unrealized appreciation on foreign currencies.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of domestic origin as a result of,
among other factors, the possibility of political and economic instability and
the level of governmental supervision and regulation of foreign securities
markets.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses from investment and
currency transactions are calculated on the identified cost basis. Dividend
income is recorded on the ex-dividend date, and interest income is recorded on
an accrual basis.
Net investment income (other than distribution fees) and unrealized and
realized gains or losses are allocated daily to each class of shares of the Fund
based upon the relative proportion of net assets of each class at the beginning
of the day.
Equalization: The Fund follows the accounting practice known as equalization by
which a portion of the proceeds from sales and costs of reacquisitions of Fund
shares, equivalent on a per share basis to the amount of distributable net
investment income on the date of the transaction, is credited or charged to
undistributed net investment income. As a result, undistributed net investment
income per share is unaffected by sales or reacquisitions of the Fund's shares.
B-49
<PAGE>
Reclassification of Capital Accounts: The Fund accounts and reports for
distributions to shareholders in accordance with the A.I.C.P.A.'s Statement of
Position 93-2: Determination, Disclosure, and Financial Statement Presentation
of Income, Capital Gain, and Return of Capital Distributions by Investment
Companies. As a result of this statement, the Fund changed the classification of
distributions to shareholders to better disclose the differences between
financial statement amounts and distributions determined in accordance with
income tax regulations. During the period ended April 30, 1994, the Fund
reclassified $282,738 of foreign currency gains to undistributed net investment
income from accumulated net realized gains on investment and foreign currency
transactions. Net investment income, net realized gains and net assets were not
affected by this change.
Dividends and Distributions: The Fund expects to pay dividends of net investment
income and distributions of net realized capital and currency gains, if any,
annually. Dividends and distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for foreign currency transactions.
Federal Income Taxes: It is the Fund's policy to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to shareholders.
Therefore, no federal income tax provision is required.
Withholding taxes on foreign dividends and interest 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 Mutual Fund Management, Inc. (``PMF'').
Pursuant to this agreement, PMF has responsibility for all investment advisory
services and supervises the subadviser's performance of such services. PMF has
entered into a subadvisory agreement with The Prudential Investment Corporation
(``PIC''); PIC furnishes investment advisory services in connection with the
management of the Fund. PMF pays for the cost of the subadviser's services, the
compensation of officers of the Fund, occupancy and certain clerical and
bookkeeping costs of the Fund. The Fund bears all other costs and expenses.
The management fee paid PMF is computed daily and payable monthly, at an
annual rate of .75 of 1% of the average daily net assets of the Fund.
The Fund has distribution agreements with Prudential Mutual Fund
Distributors, Inc. (``PMFD''), which acts as the distributor of the Class A
shares of the Fund, and with Prudential Securities Incorporated (``PSI''), which
acts as distributor of the Class B shares of the Fund (collectively the
``Distributors''). To reimburse the Distributors for their expenses incurred in
distributing and servicing the Fund's Class A and B shares, the Fund, pursuant
to plans of distribution, pays the Distributors a reimbursement, accrued daily
and payable monthly.
Pursuant to the Class A plan, the Fund reimburses PMFD for its expenses with
respect to Class A shares at an annual rate of up to .30 of 1% of the average
daily net assets of the Class A shares. Such expenses under the Class A Plan
were .20 of 1% of the average daily net assets of the Class A shares for the two
months ended December 31, 1993 and .25 of 1% of the average daily net assets of
the Class A shares thereafter. PMFD pays various broker-dealers, including PSI
and Pruco Securities Corporation (``Prusec''), affiliated broker-dealers, for
account servicing fees and other expenses incurred by such broker-dealers.
Pursuant to the Class B plan, the Fund reimburses PSI for its
distribution-related expenses with respect to the Class B shares at an annual
rate of up to .75 of 1% of the average daily net assets up to the level of
average daily net assets as of February 26, 1986, plus 1% of the average daily
net assets in excess of such level.
The Class B distribution expenses include commission credits for payments of
commissions and account servicing fees to financial advisers and an allocation
for overhead and other distribution-related expenses, interest and/or carrying
charges, the cost of printing and mailing prospectuses to potential investors
and of advertising incurred in connection with the distribution of shares.
The Distributors recover the distribution expenses and account servicing fees
incurred through the receipt of reimbursement payments from the Fund under the
plans and receipt of initial sales charges (Class A only) and contingent
deferred sales charges (Class B only) from shareholders.
PMFD has advised the Fund that it has received approximately $365,800 in
front-end sales charges resulting from sales of Class A shares during the six
months ended April 30, 1994. From these fees, PMFD paid such sales charges to
dealers (PSI and Prusec) which in turn paid commissions to salespersons.
With respect to the Class B Plan, at any given time, the amount of expenses
incurred by PSI in distributing the Fund's shares and not recovered through the
imposition of contingent deferred sales charges in connection with certain
B-50
<PAGE>
redemptions of shares may exceed the total payments made by the Fund pursuant to
the Class B Plan. PSI has advised the Fund that for the six months ended April
30, 1994, that it received approximately $197,100 in contingent deferred sales
charges imposed upon certain redemptions by investors. PSI, as distributor, has
also advised the Fund that at April 30, 1994, the amount of distribution
expenses incurred by PSI and not yet reimbursed by the Fund or recovered through
contingent deferred sales charges approximated $13,420,100. This amount may be
recovered through future payments under the Class B Plan or contingent deferred
sales charges.
In the event of termination or noncontinuation of the Class B Plan, the Fund
would not be contractually obligated to pay PSI, as distributor, for any
expenses not previously reimbursed or recovered through contingent deferred
sales charges.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are indirect,
wholly-owned subsidiaries of The Prudential Insurance Company of America.
Note 3. Other Prudential Mutual Fund Ser-
Transactions vices, Inc. (``PMFS''), a
With Affiliates wholly owned subsidiary of PMF, serves as the
Fund's transfer agent and during the six months
ended April 30, 1994, the Fund incurred fees of approximately $294,000 for the
services of PMFS. As of April 30, 1994, approximately $74,000 of such fees were
due to PMFS. Transfer agent fees and expenses in the Statement of Operations
include certain out-of-pocket expenses paid to non-affiliates.
For the six months ended April 30, 1994, PSI and/or its foreign affiliates
earned approximately $2,200 in brokerage commissions from portfolio transactions
executed on behalf of the Fund.
Note 4. Portfolio Purchases and sales of invest-
Securities ment securities, other than short-term
investments, for the six months ended April 30,
1994 were $209,544,552 and $100,315,178, respectively.
The United States federal income tax basis of the Fund's investments is
substantially the same as for financial reporting purposes and, accordingly, as
of April 30, 1994 net unrealized appreciation for federal income tax purposes
was $74,904,079 (gross unrealized appreciation--$89,953,225; gross unrealized
depreciation--$15,049,146).
For federal income tax purposes, the Fund had a capital loss carryforward as
of October 31, 1993 of approximately $11,527,100 of which $1,370,900 expires in
1998 and $6,017,600 expires in 1999 and $4,138,600 expires in 2000. Accordingly,
no capital gains distribution is expected to be paid to shareholders until net
gains have been realized in excess of such carryforward.
Note 5. Capital The Fund offers both Class A and Class B shares.
Class A shares are sold with a front-end sales
charge of up to 5.25%. 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. Both 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
500 million shares of common stock, $.01 par value per share, divided into two
classes, designated Class A and Class B common stock, each of which consists of
250 million authorized shares.
Transactions in shares of common stock were as follows:
Class A Shares Amount
------------------------------ ---------- ------------
Six months ended April 30,
1994:
Shares sold................... 4,556,049 $ 63,321,604
Shares reacquired............. (3,511,864) (48,888,587)
---------- ------------
Net increase in shares
outstanding................. 1,044,185 $ 14,433,017
---------- ------------
---------- ------------
Year ended October 31, 1993:
Shares sold................... 7,605,778 $ 81,814,374
Shares reacquired............. (5,873,417) (61,680,363)
---------- ------------
Net increase in shares
outstanding................. 1,732,361 $ 20,134,011
---------- ------------
---------- ------------
Class B
------------------------------
Six months ended April 30,
1994:
Shares sold................... 11,085,047 $151,773,160
Shares reacquired............. (4,501,660) (61,231,821)
---------- ------------
Net increase in shares
outstanding................. 6,583,387 $ 90,541,339
---------- ------------
---------- ------------
Year ended October 31, 1993:
Shares sold................... 6,320,592 $ 72,012,967
Shares reacquired............. (5,752,085) (59,018,641)
---------- ------------
Net increase in shares
outstanding................. 568,507 $ 12,994,326
---------- ------------
---------- ------------
-------------
These financial statements are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the results for the interim
period presented.
B-51
<PAGE>
PRUDENTIAL GLOBAL FUND, INC.
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------- Class B
January 22, ----------------------------------
Six Months 1990@ Six Months Year Ended October
Ended Year Ended October 31, through Ended 31,
PER SHARE OPERATING April 30, ----------------------------- October 31, April 30, --------------------
PERFORMANCE (1): 1994 1993 1992 1991 1990 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C>
---------- ------- ------- ------- ------------ ---------- -------- --------
Net asset value, beginning of
period..................... $ 13.17 $ 9.58 $ 10.08 $ 9.19 $10.38 $ 12.94 $ 9.47 $ 10.05
---------- ------- ------- ------- ------ ---------- -------- --------
Income from investment
operations
Net investment income
(loss)..................... (.02) .02 .03 .07 .12 (.06) (.04) (.05)
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions............... .83 3.57 (.53) 1.02 (1.31) .81 3.51 (.53)
---------- ------- ------- ------- ------ ---------- -------- --------
Total from investment
operations............... .81 3.59 (.50) 1.09 (1.19) .75 3.47 (.58)
Less distributions
Dividends from net investment
income..................... -- -- -- (.16) -- -- -- --
Distributions paid to
shareholders from net
realized gains on
investment and foreign
currency transactions...... -- -- -- (.04) -- -- -- --
------
---------- ------- ------- ------- ---------- -------- --------
Total distributions........ -- -- -- (.20) -- -- -- --
------
---------- ------- ------- ------- ---------- -------- --------
Net asset value, end of
period..................... $ 13.98 $ 13.17 $ 9.58 $ 10.08 $ 9.19 $ 13.69 $ 12.94 $ 9.47
---------- ------- ------- ------- ------ ---------- -------- --------
---------- ------- ------- ------- ------ ---------- -------- --------
TOTAL RETURN#:............... 6.15% 37.47% (4.96)% 12.11% (11.46)% 5.80% 36.64% (5.77)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)...................... $ 59,205 $42,021 $13,973 $14,154 $8,727 $ 355,615 $251,133 $178,438
Average net assets (000)..... $ 52,804 $21,409 $14,758 $10,593 $7,151 $ 316,030 $183,741 $210,464
Ratios to average net assets:
Expenses, including
distribution fees........ 1.38%* 1.56% 1.71% 1.72% 1.57%* 2.08%* 2.24% 2.40%
Expenses, excluding
distribution fees........ 1.15%* 1.36% 1.51% 1.52% 1.37%* 1.15%* 1.36% 1.51%
Net investment
income/loss................ (0.26)%* 0.20% 0.22% 0.65% 1.61%* (0.95)%* (0.39)% (0.47)%
Portfolio turnover rate...... 28% 69% 58% 126% 35% 28% 69% 58%
---------------
</TABLE>
PER SHARE OPERATING
PERFORMANCE (1): 1991 1990 1989
-------- -------- --------
Net asset value, beginning of
period..................... $ 9.14 $ 10.46 $ 10.09
-------- -------- --------
Income from investment
operations
Net investment income
(loss)..................... -- .05 .15
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions............... 1.02 (1.10) .53
-------- -------- --------
Total from investment
operations............... 1.02 (1.05) .68
Less distributions
Dividends from net investment
income..................... (.07) (.18) (.19)
Distributions paid to
shareholders from net
realized gains on
investment and foreign
currency transactions...... (.04) (.09) (.12)
-------- -------- --------
Total distributions........ (.11) (.27) (.31)
-------- -------- --------
Net asset value, end of
period..................... $ 10.05 $ 9.14 $ 10.46
-------- -------- --------
-------- -------- --------
TOTAL RETURN#:............... 11.29% (10.43)% 6.92%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)...................... $249,582 $261,555 $385,578
Average net assets (000)..... $253,866 $328,467 $448,737
Ratios to average net assets:
Expenses, including
distribution fees........ 2.44% 2.23% 1.82%
Expenses, excluding
distribution fees........ 1.53% 1.37% 1.34%
Net investment
income/loss................ (0.01)% 0.51% 1.45%
Portfolio turnover rate...... 126% 35% 60%
---------------
* Annualized.
@ Commencement of offering of Class A shares.
(1) Based on average shares outstanding, by class. # 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.
B-52
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
(1) The following financial statement is included in the Prospectus as
constituting Part A of this Post-Effective Amendment to the Registration
Statement:
Financial Highlights.
(2) The following financial statements are included in the Statement
of Additional Information constituting Part B of this Post-Effective
Amendment to the Registration Statement:
Independent Auditors' Report.
Portfolio of Investments at October 31, 1993.
Statement of Assets and Liabilities at October 31, 1993.
Statement of Operations for the year ended October 31, 1993.
Statement of Changes in Net Assets for the years ended
October 31, 1993 and 1992.
Notes to Financial Statements.
Financial Highlights.
Portfolio of Investments at April 30, 1994 (unaudited)
Statements of Assets and Liabilities of April 30, 1994 (unaudited)
Statement of Operations for the six months ended April 30, 1994
(unaudited)
Notes to Financial Statements (unaudited)
Financial Highlights (unaudited)
(b) Exhibits:
1. (a) Articles of Incorporation of Registrant, incorporated by
reference to Exhibit No. 1 to Registration Statement on Form N-1A
(File No. 2-89725).
(b) Amendment to Articles of Incorporation, incorporated by
reference to Exhibit No. 1 to Post-Effective Amendment No. 11 to
the Registration Statement on Form N-1A (File No. 2-89725).
(c) Amendment to Articles of Incorporation, incorporated by
reference to Exhibit No. 1 to Post-Effective Amendment No. 12 to
the Registration Statement on Form N-1A (File No. 2-89725).
(d) Form of Amended and Restated Articles of Incorporation,
incorporated by reference to Exhibit (d) to Post-Effective
Amendment No. 15 to the Registration Statement on Form N-1A
(File No. 2-89725 filed via EDGAR).
2. Amended and Restated By-Laws of the Registrant, incorporated by
reference to Exhibit 2 to Post-Effective Amendment No. 15 to
the Registration Statement on Form N-1A (File No. 2-89725 filed
via EDGAR).
4. (a) Specimen Certificate for shares of Common Stock of the
Registrant, incorporated by reference to Exhibit No. 4 to the
Registration Statement on Form N-1A, Pre-Effective Amendment No.
1 (File No. 2-89725).
(b) Specimen Certificate for shares of Common Stock of the
Registrant for Class A Shares, incorporated by reference to
Exhibit 4(b) to Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A (File No. 2-89725).
(c) Instruments defining rights of shareholders, incorporated by
reference to Exhibit No. 4(c) to the Registration Statement on
Form N-1A, Post-Effective Amendment No. 14 (File No. 2-89725
filed via EDGAR).
5. (a) Management Agreement between the Registrant and Prudential
Mutual Fund Management, Inc., incorporated by reference to
Exhibit No. 5(a) to Post-Effective Amendment No. 7 to
Registration Statement on Form N-1A (File No. 2-89725.)
(b) Subadvisory Agreement between Prudential Mutual Fund
Management, Inc. and The Prudential Investment Corporation,
incorporated by reference to Exhibit No. 5(b) to Post-Effective
Amendment No. 7 to the Registration Statement on Form N-1A (File
No. 2-89725).
C-1
<PAGE>
6. (a) Amended and Restated Distribution Agreement between the
Registrant and Prudential Mutual Fund Distributors for Class A
shares dated July 1, 1993, incorporated by reference to Exhibit
No. 6(a) to the Registration Statement on Form N-1A,
Post-Effective Amendment No. 14 (File No. 2-89725) filed via
EDGAR.
(b) Amended and Restated Distribution Agreement between the
Registrant and Prudential Securities Incorporated for Class B
shares dated July 1, 1993, incorporated by reference to Exhibit
No. 6(b) to the Registration Statement on Form N-1A,
Post-Effective Amendment No. 14 (File No. 2-89725) filed via
EDGAR.
(c) Form of Distribution and Service Agreement for Class A
shares, incorporated by reference to Exhibit 6(c) to Post-
Effective Amendment No. 15 to the Registration Statement on
Form N-1A (File No. 2-89725 filed via EDGAR).
(d) Form of Distribution and Service Agreement for Class B
shares, incorporated by reference to Exhibit 6(d) to Post-
Effective Amendment No. 15 to the Registration Statement on
Form N-1A (File No. 2-89725 filed via EDGAR).
(e) Form of Distribution and Service Agreement for Class C
shares, incorporated by reference to Exhibit 6(e) to Post-
Effective Amendment No. 15 to the Registration Statement on
Form N-1A (File No. 2-89725 filed via EDGAR).
8. Custodian Agreement between the Registrant and State Street Bank
and Trust Company, incorporated by reference to Exhibit No. 8 to
Registration Statement on Form N-1A (File No. 2-89725).
9. Transfer Agency and Service Agreement between the Registrant and
Prudential Mutual Fund Services, Inc., incorporated by reference
to Exhibit No. 9 to the Registration Statement on Form N-1A,
Post-Effective Amendment No. 7 (File No. 2-89725).
10. Opinion of Sullivan & Cromwell, incorporated by reference to
Exhibit No. 10 to the Registration Statement on Form N-1A,
Pre-Effective Amendment No. 1 (File No. 2-89725).
11. Consent of Independent Accountants.*
13. Purchase Agreement incorporated by reference to Exhibit No. 13 to
the Registration Statement on Form N-1A, Pre-Effective Amendment
No. 1 (File No. 2-89725).
15. (a) Amended and Restated Distribution and Service Plan for Class
A shares dated July 1, 1993, incorporated by reference to Exhibit
No.15(d) to the Registration Statement on Form N-1A,
Post-Effective Amendment No. 14 (File No. 2-89725) filed via
EDGAR.
(b) Amended and Restated Distribution and Service Plan for Class
B shares dated July 1, 1993, incorporated by reference to Exhibit
No.15(e) to the Registration Statement on Form N-1A,
Post-Effective Amendment No. 14 (File No. 2-89725) filed via
EDGAR.
(c) Form of Distribution and Service Plan for Class A shares,
incorporated by reference to Exhibit 15(c) to Post-Effective
Amendment No. 15 to the Registration Statement on Form N-1A
(File No. 2-89725 filed via EDGAR).
(d) Form of Distribution and Service Plan for Class B shares,
incorporated by reference to Exhibit 15(d) to Post-Effective
Amendment No. 15 to the Registration Statement on Form N-1A
(File No. 2-89725 filed via EDGAR).
(e) Form of Distribution and Service Plan for Class C shares,
incorporated by reference to Exhibit 15(e) to Post-Effective
Amendment No. 15 to the Registration Statement on Form N-1A
(File No. 2-89725 filed via EDGAR).
16. Schedule of Computation of Performance Quotations, incorporated
by reference to Exhibit No. 16 to the Registration Statement on
Form N-1A, Post-Effective Amendment No. 1 (File No. 2-89725).
Other Exhibits.
----------------
*Filed herewith.
Item 25. Persons Controlled by or under Common Control with Registrant
None.
Item 26. Number of Holders of Securities
As of June 17, 1994 there were 11,531 and 61,759 record holders of Class A
and Class B common stock, $.01 par valueper share, of the Registrant,
respectively.
Item 27. Indemnification
As permitted by Section 17(h) and (i) of the Investment Company Act of 1940
(the 1940 Act) and pursuant to Article VI of the Fund's By-Laws (Exhibit 2 to
the Registration Statement), officers, directors, employees and agents of the
Registrant will not be
C-2
<PAGE>
liable to the Registrant, any stockholder, officer, director, employee, agent
or other person for any action or failure to act, except for bad faith,
willful misfeasance, gross negligence or reckless disregard of duties, and
those individuals may be indemnified against liabilities in connection with
the Registrant, subject to the same exceptions. Section 2-418 of Maryland
General Corporation Law permits indemnification of directors who acted in good
faith and reasonably believed that the conduct was in the best interests of
the Registrant. As permitted by Section 17(i) of the 1940 Act, pursuant to
Section 10 of each Distribution Agreement (Exhibits 6(b) and (c) to the
Registration Statement), each Distributor of the Registrant may be indemnified
against liabilities which it may incur, except liabilities arising from bad
faith, gross negligence, willful misfeasance or reckless disregard of duties.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (Securities Act) may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
1940 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant by such
director, officer or controlling person in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1940 Act and will be governed by the
final adjudication of such issue.
The Registrant has purchased an insurance policy insuring its officers and
directors against liabilities, and certain costs of defending claims against
such officers and directors, to the extent such officers and directors are not
found to have committed conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of their duties. The
insurance policy also insures the Registrant against the cost of indemnification
payments to officers and directors under certain circumstances.
Section 9 of the Management Agreement (Exhibit 5(a) to the Registration
Statement) and Section 4 of the Subadvisory Agreement (Exhibit 5(b) to the
Registration Statement) limit the liability of Prudential Mutual Fund
Management, Inc. (PMF) and The Prudential Investment Corporation (PIC),
respectively, to liabilities arising from willful misfeasance, bad faith or
gross negligence in the performance of their respective duties or from reckless
disregard by them of their respective obligations and duties under the
agreements.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its By-Laws and each Distribution Agreement in a manner consistent
with Release No. 11330 of the Securities and Exchange Commission under the 1940
Act so long as the interpretation of Section 17(h) and 17(i) of such Act remain
in effect and are consistently applied.
Item 28. Business and other Connections of Investment Adviser
(a) Prudential Mutual Fund Management, Inc.
See "How the Fund is Managed Manager" in the Prospectus constituting Part
A of this Registration Statement and "Manager" in the Statement of Additional
Information constituting Part B of this Registration Statement.
The business and other connections of the officers of PMF are listed in
Schedules A and D of Form ADV of PMF as currently on file with the Securities
and Exchange Commission, the text of which is hereby incorporated by reference
(File No. 801-3110, filed in October , 1993).
The business and other connections of PMF's directors and principal
executive officers are set forth below. Except as otherwise indicated, the
address of each person is One Seaport Plaza, New York, NY 10292.
<TABLE>
<CAPTION>
Name and Address Position with PMF Principal Occupations
---------------- ----------------- ---------------------
<S> <C> <C>
Brendan D. Boyle Executive Vice President, Executive Vice President, PMF; Senior Vice President,
Director of Marketing Prudential Securities Incorporated (Prudential
Securities)
John D. Brookmeyer, Jr. Director Senior Vice President, The Prudential Insurance
Two Gateway Center Cmpany of America (Prudential)
Newark, NJ 07102
Susan C. Cote Senior Vice President Senior Vice President, PMF; Senior Vice President,
Prudential Securities
C-3
<PAGE>
Name and Address Position with PMF Principal Occupations
---------------- ----------------- ---------------------
Fred A. Fiandaca Executive Vice President, Executive Vice President, Chief Operating Officer and
Raritan Plaza One Chief Operating Officer Director, PMF; Chairman, Chief Operating Officer and
Edison, NJ 08847 and Director Director, Prudential Mutual Fund Services, Inc.
Stephen P. Fisher Senior Vice President Senior Vice President, PMF; Senior Vice President,
Prudential Securities
Frank W. Giordano Executive Vice Executive Vice President, General Counsel and Secretary,
President, General PMF; Senior Vice President, Prudential Securities
Counsel and Secretary
Robert F. Gunia Executive Vice Executive Vice President, Chief Administrative Officer,
President, Chief Chief Financial Officer and Director, PMF; Senior Vice
Administrative Officer, President, Prudential Securities
Chief Financial Officer and
Director
Eugene B. Heimberg Director Senior Vice President, Prudential; President, Director and
Prudential Plaza Chief Investment Officer, PIC
Newark, NJ 07101
Lawrence C. McQuade Vice Chairman Vice Chairman, PMF
Leland B. Paton Director Executive Vice President and Director, Prudential
Securities; Director, Prudential Securities Group, Inc. (PSG)
Richard A. Redeker President, Chief President, Chief Executive Officer and Director, PMF;
Executive Officer and Executive Vice President, Director and Member of Operating
Director Committee, Prudential Securities; Director, PSG
S. Jane Rose Senior Vice President, Senior Vice President and Senior Counsel and Assistant
Senior Counsel Secretary, PMF; Senior Vice President and Senior Counsel,
and Assistant Prudential Securities
Secretary
Donald G. Southwell Director Senior Vice President, Prudential; Director, PSG
213 Washington Street
Newark, NJ 07102
</TABLE>
(b) Prudential Investment Corporation (PIC) See
"How the Fund is Managed Subadvisor" in the Prospectus constituting Part A
of this Registration Statement and "Subadvisor" in the Statement of Additional
Information constituting Part B of this Registration Statement.
The business and other connections of PIC's directors and executive
officers are as set forth below. Except as otherwise indicated, the address of
each person is Prudential Plaza, Newark, NJ 07101.
<TABLE>
<CAPTION>
Name and Address Position with PIC Principal Occupations
---------------- ----------------- ---------------------
<S> <C> <C>
Martin A. Berkowitz Senior Vice President, Senior Vice President, Chief Financial Officer and Chief
Chief Financial Officer Compliance Officer, PIC; Vice President, Prudential
and Chief Compliance
Officer
William M. Bethke Senior Vice President Senior Vice President, Prudential; Senior Vice President, PIC
Two Gateway Center
Newark, NJ 07102
John D. Brookmeyer, Jr. Senior Vice President Senior Vice President, Prudential; Senior Vice President, PIC
Two Gateway Center
Newark, NJ 07102
Eugene B. Heimberg President, Director and Senior Vice President, Prudential; President, Director and
Chief Investment Officer Chief Investment Officer, PIC
C-4
<PAGE>
Name and Address Position with PIC Principal Occupations
---------------- ----------------- ---------------------
Garnett L. Keith, Jr. Director Vice Chairman and Director, Prudential; Director, PIC
William P. Link Senior Vice Executive Vice President, Prudential; Senior Vice President,
Four Gateway Center President PIC
Newark, NJ 07102
Robert E. Riley Executive Vice Executive Vice President, Prudential; Executive Vice
800 Boylston Avenue President President, PIC; Director, PSG
Boston, MA 02199
James W. Stevens Executive Vice Executive Vice President, Prudential; Executive Vice
Four Gateway Center President President, PIC; Director, PSG
Newark, NJ 07102
Robert C. Winters Director Chairman of the Board and Chief Executive Officer,
Prudential; Chairman of the Board and Director, PSG
Claude J. Zinngrabe, Jr. Executive Vice President Vice President, Prudential; Executive Vice President, PIC
</TABLE>
Item 29. Principal Underwriters
(a)(i) Prudential Securities
Prudential Securities is distributor for Prudential Government Securities
Trust (Intermediate Term Series), The Target Portfolio Trust, for Class D shares
of Prudential Municipal Series Fund (Florida Series) and for Class B shares of
Prudential Adjustable Rate Securities Fund, Inc., BlackRock Government Income
Trust, Prudential California Municipal Fund (California Income Series and
California Series), Prudential Equity Fund, Inc., Prudential Equity Income Fund,
Prudential FlexiFund, Prudential Global Fund, Inc., Prudential-Bache Global
Genesis Fund, Inc. (d/b/a Prudential Global Genesis Fund), Prudential-Bache
Global Natural Resources Fund, Inc. (d/b/a Prudential Global Natural Resources
Fund), Prudential-Bache GNMA Fund, Inc. (d/b/a Prudential GNMA Fund),
Prudential-Bache Government Plus Fund, Inc. (d/b/a Prudential Government Plus
Fund), Prudential Growth Fund, Inc., Prudential-Bache Growth Opportunity Fund,
Inc. (d/b/a Prudential Growth Opportunity Fund), Prudential-Bache High Yield
Fund, Inc. (d/b/a Prudential High Yield Fund), Prudential IncomeVertible (R)
Plus Fund, Inc., Prudential Intermediate Global Income Fund, Inc., Prudential
Multi-Sector Fund, Inc., Prudential Municipal Bond Fund, Prudential Municipal
Series Fund (except Connecticut Money Market Series, Massachusetts Money Market
Series, New York Money Market Series, New Jersey Money Market Series and Florida
Series), Prudential-Bache National Municipals Fund, Inc. (d/b/a Prudential
National Municipals Fund), Prudential Pacific Growth Fund, Inc., Prudential
Short-Term Global Income Fund, Inc., Prudential-Bache Structured Maturity Fund
(d/b/a Prudential Structured Maturity Fund), Prudential U.S. Government Fund,
Prudential-Bache Utility Fund, Inc. (d/b/a Prudential Utility Fund), Global
Utility Fund, Inc. and Nicholas-Applegate Fund, Inc. (Nicholas-Applegate Growth
Equity Fund). Prudential Securities is also a depositor for the following unit
investment trusts:
The Corporate Income Fund
Corporate Investment Trust Fund
Equity Income Fund
Government Securities Income Fund
International Bond Fund
Municipal Investment Trust
Prudential Equity Trust
Shares National Equity Trust
Prudential Unit Trusts
Government Securities Equity Trust
National Municipal Trust
C-5
<PAGE>
(ii) Prudential Mutual Fund Distributors, Inc.
Prudential Mutual Fund Distributors, Inc. is distributor for Command
Government Fund, Command Money Fund, Command Tax-Free Fund, Prudential
California Municipal Fund (California Money Market Series), Prudential
Government Securities Trust (Money Market Series and U.S. Treasury Money Market
Series), Prudential-Bache MoneyMart Assets (d/b/a Prudential MoneyMart Assets),
Prudential Municipal Series Fund (Connecticut Money Market Series, Massachusetts
Money Market Series, New York Money Market Series and New Jersey Money Market
Series), Prudential Institutional Liquidity Portfolio, Inc.,
Prudential-Bache Special Money Market Fund, Inc. (d/b/a Prudential Special Money
Market Fund), Prudential-Bache Structured Maturity Fund, Inc. (d/b/a Prudential
Structured Maturity Fund), Prudential-Bache Tax-Free Money Fund, Inc. (d/b/a
Prudential Tax-Free Money Fund), and for Class A shares of Prudential Adjustable
Rate Securities Fund, Inc., The BlackRock Government Income Trust, Prudential
California Municipal Fund (California Series), Prudential Equity Fund, Inc.,
Prudential Equity Income Fund, Prudential FlexiFund, Prudential Global Fund,
Inc., Prudential-Bache Global Genesis Fund, Inc. (d/b/a Prudential Global
Genesis Fund), Prudential-Bache Global Natural Resources Fund, Inc. (d/b/a
Prudential Global Natural Resources Fund), Prudential-Bache GNMA Fund, Inc.
(d/b/a Prudential GNMA Fund), Prudential-Bache Government Plus Fund, Inc. (d/b/a
Prudential Government Plus Fund), Prudential Growth Fund, Inc., Prudential-Bache
Growth Opportunity Fund, Inc. (d/b/a Prudential Growth Opportunity Fund),
Prudential-Bache High Yield Fund, Inc. (d/b/a Prudential High Yield Fund),
Prudential IncomeVertibler Fund, Inc., Prudential Intermediate Global Income
Fund, Inc., Prudential Multi-Sector Fund, Inc., Prudential Municipal Bond Fund,
Prudential Municipal Series Fund (Arizona Series, Georgia Series, Maryland
Series, Massachusetts Series, Michigan Series, Minnesota Series, New Jersey
Series, North Carolina Series, Ohio Series and Pennsylvania Series),
Prudential-Bache National Municipals Fund, Inc. (d/b/a Prudential National
Municipals Fund), Prudential Pacific Growth Fund, Inc., Prudential Short-Term
Global Income Fund, Inc.,Prudential-Bache Structured Maturity Fund (d/b/a
Prudential Structured Maturity Fund), Prudential U.S. Government Fund and
Prudential-Bache Utility Fund, Inc. (d/b/a Prudential Utility Fund), Global
Utility Fund, Inc., and Nicholas-Applegate Fund, Inc. (Nicholas-Applegate Growth
Equity Fund).
(b)(i) Information concerning the directors and officers of Prudential
Securities Incorporated is set forth below.
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name(1) Underwriter Registrant
------- -------------- --------------
<S> <C> <C>
Alan D. Hogan .............. Executive Vice President, Chief Administrative Officer and Director None
Howard A. Knight ........... Executive Vice President, Director, Corporate Strategy and None
New Business Development
George A. Murray ........... Executive Vice President, Director None
John P. Murray ............. Executive Vice President and Director of Risk Management None
Leland B. Paton ............ Executive Vice President and Director None
Richard A. Redeker ......... Director Director
Hardwick Simmons ........... Chief Executive Officer, President and Director None
Lee B. Spencer, Jr.......... General Counsel, Executive Vice President and Director None
</TABLE>
C-6
<PAGE>
(ii) Information concerning the officers and directors of Prudential Mutual
Fund Distributors, Inc. is set forth below.
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name(1) Underwriter Registrant
------- -------------- --------------
<S> <C> <C>
Joanne Accurso-Soto Vice President None
Dennis Annarumma Vice President, Assistant Treasurer and Assistant Comptroller None
Phyllis J. Berman Vice President None
Fred A. Fiandaca President, Chief Executive Officer and Director None
Raritan Plaza One
Edison, NJ 08847
Stephen P. Fisher Vice President None
Frank W. Giordano Executive Vice President, General Counsel, Secretary and Director None
Robert F. Gunia Executive Vice President, Treasurer, Comptroller and Director Vice President
Andrew J. Varley Vice President None
Anita L. Whelan Vice President and Assistant Secretary None
</TABLE>
(1) The address of each person named is One Seaport Plaza, New York, NY
10292 unless otherwise indicated.
(c) Registrant has no principal underwriter who is not an affiliated person
of the Registrant.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the Rules thereunder are maintained at the
offices of State Street Bank and Trust Company, 1776 Heritage Drive, North
Quincy, Massachusetts, The Prudential Investment Corporation, Prudential Plaza,
745 Broad Street, Newark, New Jersey, the Registrant, One Seaport Plaza, New
York, New York, and Prudential Mutual Fund Services, Inc., Raritan Plaza One,
Edison, New Jersey. Documents required by Rules 31a-1(b)(5), (6), (7), (9), (10)
and (11) and 31a-1(f) will be kept at Two Gateway Center, documents required by
Rules 31a-1(b)(4) and (11) and 31a-1(d) at One Seaport Plaza and the remaining
accounts, books and other documents required by such other pertinent provisions
of Section 31(a) and the Rules promulgated thereunder will be kept by State
Street Bank and Trust Company and Prudential Mutual Fund Services, Inc.
Item 31. Management Services
Other than as set forth under the captions "How the Fund is Managed
Manager" and "How the Fund is Managed Distributor" in the Prospectus and the
captions "Manager" and "Distributor" in the Statement of Additional
Information, constituting Parts A and B, respectively, of this Registration
Statement, Registrant is not a party to any management-related service contract.
Item 32. Undertakings
The Registrant undertakes to furnish to each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
and State of New York, on the 30th day of June, 1994.
PRUDENTIAL GLOBAL FUND, INC.
/s/ Lawrence C. McQuade
----------------------------------
(Lawrence C. McQuade, President)
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Lawrence C. McQuade President and Director June 30, 1994
-----------------------------------
Lawrence C. McQuade
/s/ Stephen C. Eyre Director June 30, 1994
-----------------------------------
Stephen C. Eyre
/s/ Delayne D. Gold Director June 30, 1994
-----------------------------------
Delayne D. Gold
/s/ Dan G. Hoff Director June 30, 1994
-----------------------------------
Dan G. Hoff
/s/ Harry A. Jacobs, Jr. Director June 30, 1994
-----------------------------------
Harry A. Jacobs, Jr.
/s/ Sidney R. Knafel Director June 30, 1994
-----------------------------------
Sidney R. Knafel
/s/ Robert E. LaBlanc Director June 30, 1994
-----------------------------------
Robert E. LaBlanc
/s/ Thomas A. Owens, Jr. Director June 30, 1994
-----------------------------------
Thomas A. Owens, Jr.
/s/ Richard A. Redeker Director June 30, 1994
-----------------------------------
Richard A. Redeker
/s/ Clay T. Whitehead Director June 30, 1994
-----------------------------------
Clay T. Whitehead
/s/ Susan C. Cote Treasurer, Principal Financial and June 30, 1994
----------------------------------- Accounting Officer
Susan C. Cote
</TABLE>
<PAGE>
EXHIBIT INDEX
1. (a) Articles of Incorporation of Registrant, incorporated by reference to
Exhibit No. 1 to Registration Statement on Form N-1A (File No. 2-89725).
(b) Amendment to Articles of Incorporation, incorporated by reference to
Exhibit No. 1 to Post-Effective Amendment No. 11 to the Registration
Statement on Form N-1A (File No. 2-89725).
(c) Amendment to Articles of Incorporation, incorporated by reference to
Exhibit No. 1 to Post-Effective Amendment No. 12 to the Registration
Statement on Form N-1A (File No. 2-89725).
(d) Form of Amended and Restated Articles of Incorporation, incorporated by
reference to Exhibit 1(d) to Post-Effective Amendment No. 15 to the
Registration Statement on Form N-1A (File No. 2-89725) filed via EDGAR.
2. Amended and Restated By-Laws of the Registrant, incorporated by
reference to Exhibit 2 to Post-Effective Amendment No. 15 to the
Registration Statement on Form N-1A (File No. 2-89725) filed via EDGAR.
4. (a) Specimen Certificate for shares of Common Stock of the Registrant,
incorporated by reference to Exhibit No. 4 to the Registration Statement on
Form N-1A, Pre-Effective Amendment No. 1 (File No. 2-89725).
(b) Specimen Certificate for shares of Common Stock of the Registrant for
Class A Shares, incorporated by reference to Exhibit No. 4(b) to
Post-Effective Amendment No. 11 to the Registration Statement on Form N-1A
(File No. 2-89725).
(c) Instruments defining rights of shareholders, incorporated by reference
to Exhibit No. 4(c) to the Registration Statement on Form N-1A,
Post-Effective Amendment No. 14 (File No. 2-89725) filed via EDGAR.
5. (a) Management Agreement between the Registrant and Prudential Mutual Fund
Management, Inc., incorporated by reference to Exhibit No. 5(a) to
Post-Effective Amendment No. 7 to Registration Statement on Form N-1A (File
No. 2-89725.)
(b) Subadvisory Agreement between Prudential Mutual Fund Management, Inc.
and The Prudential Investment Corporation, incorporated by reference to
Exhibit No. 5(b) to Post-Effective Amendment No. 7 to the Registration
Statement on Form N-1A (File No. 2-89725).
6. (a) Amended and Restated Distribution Agreement between the Registrant and
Prudential Mutual Fund Distributors for Class A shares dated July 1, 1993,
incorporated by reference to Exhibit No. 6(a) to the Registration Statement
on Form N-1A, Post-Effective Amendment No. 14 (File No. 2-89725) filed via
EDGAR.
(b) Amended and Restated Distribution Agreement between the Registrant and
Prudential Securities Incorporated for Class B shares dated July 1, 1993,
incorporated by reference to Exhibit No. 6(b) to the Registration Statement
on Form N-1A, Post-Effective Amendment No. 14 (File No. 2-89725) filed via
EDGAR.
(c) Form of Distribution and Service Agreement for Class A shares,
incorporated by reference to Exhibit 6(c) to Post-Effective Amendment No.
15 to the Registration Statement on Form N-1A (File No. 2-89725) filed via
EDGAR.
(d) Form of Distribution and Service Agreement for Class B shares,
incorporated by reference to Exhibit 6(d) to Post-Effective Amendment No.
15 to the Registration Statement on Form N-1A (File No. 2-89725) filed via
EDGAR.
(e) Form of Distribution and Service Agreement for Class C shares,
incorporated by reference to Exhibit 6(e) to Post-Effective Amendment No.
15 to the Registration Statement on Form N-1A (File No. 2-89725) filed via
EDGAR.
8. Custodian Agreement between the Registrant and State Street Bank and Trust
Company, incorporated by reference to Exhibit No. 8 to Registration
Statement on Form N-1A (File No. 2-89725).
9. Transfer Agency and Service Agreement between the Registrant and Prudential
Mutual Fund Services, Inc., incorporated by reference to Exhibit No. 9 to
the Registration Statement on Form N-1A, Post-Effective Amendment No. 7
(File No. 2-89725).
10. Opinion of Sullivan & Cromwell, incorporated by reference to Exhibit No. 10
to the Registration Statement on Form N-1A, Pre-Effective Amendment No. 1
(File No. 2-89725).
11. Consent of Independent Accountants.*
13. Purchase Agreement incorporated by reference to Exhibit No. 13 to the
Registration Statement on Form N-1A, Pre-Effective Amendment No. 1 (File
No. 2-89725).
15. (a) Amended and Restated Distribution and Service Plan for Class A shares
dated July 1, 1993, incorporated by reference to Exhibit No. 15(d) to the
Registration Statement on Form N-1A, Post-Effective Amendment No. 14 (File
No. 2-89725) filed via EDGAR.
<PAGE>
(b) Amended and Restated Distribution and Service Plan for Class B shares
dated July 1, 1993, incorporated by reference to Exhibit No. 15(e) to the
Registration Statement on Form N-1A, Post-Effective Amendment No. 14 (File
No. 2-89725) filed via EDGAR.
(c) Form of Distribution and Service Plan for Class A shares, incorporated
by reference to Exhibit 15(c) to Post-Effective Amendment No. 15 to the
Registration Statement on Form N-1A (File No. 2-89725) filed via EDGAR.
(d) Form of Distribution and Service Plan for Class B shares, incorporated
by reference to Exhibit 15(d) to Post-Effective Amendment No. 15 to the
Registration Statement on Form N-1A (File No. 2-89725) filed via EDGAR.
(e) Form of Distribution and Service Plan for Class C shares, incorporated
by reference to Exhibit 15(e) to Post-Effective Amendment No. 15 to the
Registration Statement on Form N-1A (File No. 2-89725) filed via EDGAR.
16. Schedule of Computation of Performance Quotations, incorporated by
reference to Exhibit No. 16 to the Registration Statement on Form N-1A,
Post-Effective Amendment No. 1 (File No. 2-89725).
-------------
*Filed herewith.
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in Post-Effective Amendment No. 16 to Registration
Statement No. 2-89725 of Prudential Global Fund, Inc. of our report dated
December 15, 1993. appearing in the Statement of Additional Information, which
is a part of such Registration Statement, and to the references to us under
the headings "Financial Highlights" in the Prospectus, which is a part of such
Registration Statement, and "Custodian, Transfer and Dividend Disbursing Agent
and Independent Accountants" in the Statement of Additional Information.
Deloitte & Touche
New York, New York
June 29, 1994
