GLOBAL YIELD FUND INC, DEFS14A, 1994-10-04

GLOBAL YIELD FUND INC
DEFS14A, 1994-10-04

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INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

Filed by the registrant [X]

Filed by a party other than the registrant [ ]

Check the appropriate box:

[ ] Preliminary proxy statement

[X] Definitive proxy statement

[ ] Definitive additional materials

[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

THE GLOBAL YIELD FUND, INC.

- -------------------------------------------------------------------------------

(Name of Registrant as Specified in Its Charter)

THE GLOBAL YIELD FUND, INC.

- -------------------------------------------------------------------------------

(Name of Person(s) Filing Proxy Statement)

Payment of filing fee (Check the appropriate box):

[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(j)(2).

[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

<PAGE>

THE GLOBAL YIELD FUND, INC.
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292

------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

------------

.
To our Shareholders:

Notice is hereby given that the Annual Meeting of Shareholders of The Global
Yield Fund, Inc. (the Fund) will be held on November 17, 1994, at 3:00 P.M., at
199 Water Street, New York, New York 10292, for the following purposes:

1. To elect three directors.

2. To approve a change in the Fund's investment objective to seek total
return.

3. To approve an amendment to the Fund's Articles of Incorporation to
change the name of the Fund to "The Global Total Return Fund, Inc."

4. To approve an amendment to the Fund's investment restrictions to permit
the use of futures contracts and related options.

5. To ratify the selection by the Board of Directors of Deloitte & Touche
LLP as independent accountants for the year ending December 31, 1994.

6. To consider and act upon any other business as may properly come before
the Meeting or any adjournment thereof.

Only holders of Common Stock of record at the close of business on September
2, 1994 are entitled to notice of and to vote at the Meeting or any adjournment
thereof.

S. JANE ROSE
Secretary

Dated: October 3, 1994

- --------------------------------------------------------------------------------
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND PROMPTLY
RETURN THE ENCLOSED PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE. IN ORDER TO
AVOID THE ADDITIONAL EXPENSE TO THE FUND OF FURTHER SOLICITATION, WE ASK YOUR
COOPERATION IN MAILING IN YOUR PROXY PROMPTLY.
- --------------------------------------------------------------------------------

<PAGE>

THE GLOBAL YIELD FUND, INC.
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292

-----------

PROXY STATEMENT

-----------

This statement is furnished by the Board of Directors of The Global Yield
Fund, Inc. (the Fund) in connection with their solicitation of proxies for use
at the Annual Meeting of Shareholders to be held on November 17, 1994, at 3:00
P.M., at 199 Water Street, New York, New York 10292, the Fund's principal
executive office. The purpose of the Meeting and the matters to be acted upon
are set forth in the accompanying Notice of Annual Meeting.

If the accompanying form of Proxy is executed properly and returned, shares
represented by it will be voted at the Meeting in accordance with the
instructions on the Proxy. However, if no instructions are specified, shares
will be voted for the election of directors and for the other proposals. A Proxy
may be revoked at any time prior to the time it is voted by written notice to
the Secretary of the Fund or by attendance at the Meeting. If sufficient votes
to approve one or more of the proposed items are not received, the persons named
as proxies may propose one or more adjournments of the Meeting to permit further
solicitations of proxies. Any such adjournment will require the affirmative vote
of a majority of those shares present at the Meeting or represented by proxy.
When voting on a proposed adjournment, the persons named as proxies will vote
for the proposed adjournment all shares that they are entitled to vote with
respect to each item, unless directed to disapprove the item, in which case such
shares will be voted against the proposed adjournment.

If a Proxy that is properly executed and returned accompanied by
instructions to withhold authority to vote represents a broker "non-vote" (that
is, a Proxy from a broker or nominee indicating that such persons have not
received instructions from the beneficial owner or other person entitled to vote
shares on a particular matter with respect to which the broker or nominee does
not have discretionary power), the shares represented thereby will be considered
not to be present at the Meeting for purposes of determining the existence of a
quorum for the transaction of business and be deemed not cast with respect to
such proposal. If no instructions are received by the broker or nominee from the
shareholder with reference to routine matters, the shares represented thereby
may be considered for purposes of determining the existence of a quorum for the
transaction of business and will be deemed cast with respect to such proposal.
Also, a properly executed and returned Proxy marked with an abstention will be
considered present at the Meeting for purposes of determining the existence of a
quorum for the transaction of business. However, abstentions and broker
"non-votes" do not consititute a vote "for" or "against" the matter, but have
the effect of a negative vote on matters which require approval by a requisite
percentage of the outstanding shares.

1
<PAGE>

The close of business on September 2, 1994 has been fixed as the record date
for the determination of shareholders entitled to notice of, and to vote at, the
Meeting. On that date, the Fund had 66,206,273 shares of Common Stock
outstanding and entitled to vote. Each share will be entitled to one vote at the
Meeting. It is expected that the Notice of Annual Meeting, Proxy Statement and
form of Proxy will first be mailed to shareholders on or about October 7, 1994.

Management does not know of any person or group who owned beneficially 5% or
more of the Fund's outstanding Common Stock on the record date.

The expense of solicitation will be borne by the Fund and will include
reimbursement of brokerage firms and others for expenses in forwarding proxy
solicitation material to beneficial owners. The solicitation of proxies will be
largely by mail. The Board of Directors has authorized the retention of
Shareholder Communications Corporation, a professional proxy solicitation firm,
to assist in the solicitation of proxies for a fee plus reasonable out-of-pocket
expenses not expected to exceed $87,000, the cost of which will be borne by the
Fund. In addition, solicitation may include, without cost to the Fund,
telephonic, telegraphic or oral communication by regular employees of Prudential
Securities Incorporated (Prudential Securities).

ELECTION OF DIRECTORS
(Proposal No. 1)

As prescribed in the Fund's Articles of Incorporation, the Board of
Directors has been divided into three classes with each class serving for a term
of three years and until their successors have been duly elected and qualified.
The classes and terms of office have been fixed as follows: Class I: Lawrence C.
McQuade, Sir Michael Sandberg and Nancy H. Teeters-whose term expires in 1996;
Class II: Harry A. Jacobs, Jr., Thomas T. Mooney and Richard A. Redeker-whose
term expires in 1994; and Class III: Edward D. Beach, Robert W. Doran and Robin
B. Smith-whose term expires in 1995.

Accordingly, Class II Directors will be elected at the 1994 Annual Meeting
to serve until the Fund's 1997 Annual Meeting of Shareholders and until their
successors have been elected and qualified. It is the intention of the persons
named in the enclosed Proxy to vote in favor of the election of Messrs. Jacobs,
Mooney and Redeker. Each of the nominees has consented to be named in this Proxy
Statement and to serve as a Director if elected. All of the Directors have
previously been elected by shareholders except for Mr. Redeker. All of the
Directors except for Messrs. McQuade, Doran and Redeker were first elected as
Directors in 1986. Messrs. McQuade and Doran were first elected as Directors of
the Fund in 1991. Mr. Redeker was first elected as a Director in 1993.

The Board of Directors has no reason to believe that any of the nominees
named above will become unavailable for election as a Director, but if that
should occur before the Meeting, proxies will be voted for such persons as the
Board of Directors may recommend.

The following table sets forth certain information concerning each of the
Directors of the Fund:

2
<PAGE>

INFORMATION REGARDING DIRECTORS

<TABLE>
<CAPTION>
<S> <C> <C>
Shares of
Name, age, business Common Stock
experience during the past Position Owned at
five years and directorships with Fund September 2, 1994
- ---------------------------- --------- -----------------

Class I (Term Expiring in 1996)

*Lawrence C. McQuade (67), Vice Chairman of PMF President and 1,605
(since 1988); Managing Director, Investment Director
Banking, Prudential Securities (1988-1991);
Director of Quixote Corporation (since February
1992) and BUNZL, PLC (since June 1991); formerly,
Director of Crazy Eddie Inc. (1987-1990), Kaiser
Tech Ltd. and Kaiser Aluminum and Chemical Corp.
(March 1987-November 1988), and Executive Vice
President and Director (May 1983-January 1987) of
WR Grace & Co.; President and Director of
Prudential Adjustable Rate Securities Fund, Inc.,
Prudential Europe Growth Fund, Inc., Prudential
Equity Fund, Inc., Prudential Global Fund, Inc.,
Prudential Global Genesis Fund, Inc., Prudential
Global Natural Resources Fund, Inc., Prudential
GNMA Fund, Inc., Prudential Government Income Fund,
Inc., Prudential Growth Opportunity Fund, Inc.,
Prudential High Yield Fund, Inc., Prudential
IncomeVertible(R) Fund, Inc., Prudential
Institutional Liquidity Portfolio, Inc., Prudential
Intermediate Global Income Fund, Inc., Prudential
MoneyMart Assets, Prudential Multi-Sector Fund,
Inc., Prudential National Municipals Fund, Inc.,
Prudential Pacific Growth Fund, Inc., Prudential
Short-Term Global Income Fund, Inc., Prudential
Special Money Market Fund, Prudential Strategist
Fund, Inc., Prudential Structured Maturity Fund,
Inc., Prudential Tax-Free Money Fund, Prudential
Utility Fund, Inc., The Global Government Plus
Fund, Inc., The Global Yield Fund, Inc. and The
High Yield Income Fund, Inc.; President and Trustee
of the BlackRock Government Income Trust, Command
Government Fund, Command Money Fund, Command
Tax-Free Fund, Prudential Allocation Fund,
Prudential California Municipal Fund, Prudential
Equity Income Fund, Prudential Government
Securities Trust, Prudential Municipal Bond Fund,
Prudential Municipal Series Fund,

</TABLE>

3
<PAGE>

Prudential U.S. Government Fund and The Target
Portfolio Trust.

Sir Michael Sandberg (67), Director of International Director -0-
Totalizer Systems, Broadstreet, Inc., The Global
Yield Fund, Inc. and Global Utility Fund, Inc.;
Chairman and Director of PRICOA Worldwide Investors
Portfolio; Former Chairman of Hong Kong and
Shanghai Banking Corporation and British Bank of
the Middle East (1977-1986).

Nancy H. Teeters (64), Economist; formerly Vice Director -0-
President and Chief Economist (March 1986-June
1990) of International Business Machines
Corporation; Member of the Board of Governors of
the Horace H. Rackham School of Graduate Studies of
the University of Michigan; Director of Inland
Steel Industries (since July 1991); Director of
Prudential MoneyMart Assets, Prudential Special
Money Market Fund, Global Utility Fund, Inc.,
Prudential Equity Fund, Inc., Prudential GNMA Fund,
Inc., The Global Yield Fund, Inc. and First
Financial Fund, Inc.; Trustee of The BlackRock
Government Income Trust, Command Government Fund,
Command Money Fund, Command Tax-Free Fund,
Prudential California Municipal Fund and Prudential
Municipal Series Fund.

Class II (Term Expiring in 1997)

*Harry A. Jacobs, Jr. (73), Senior Director (since Director -0-
January 1986) of Prudential Securities; formerly
Interim Chairman and Chief Executive Officer of
Prudential Mutual Fund Management, Inc. (PMF)
(June-September 1993); Chairman of the Board of
Prudential Securities (1982-1985) and Chairman of
the Board and Chief Executive Officer of Bache
Group Inc. (1977-1982); Director of the Center for
National Policy, Prudential Adjustable Rate
Securities Fund, Inc., Prudential Equity Fund,
Inc., Prudential Global Fund, Inc., Prudential GNMA
Fund, Prudential Government Income Fund, Inc.,
Prudential Growth Opportunity Fund, Inc.,
Prudential High Yield Fund, Inc., Prudential
IncomeVertible(R)
</TABLE>

4
<PAGE>

Fund, Inc., Prudential MoneyMart Assets, Prudential
National Municipals Fund, Inc., Prudential Pacific
Growth Fund, Inc., Prudential Short-Term Global
Income Fund, Inc., Prudential Special Money Market
Fund, Prudential Structured Maturity Fund, Inc.,
Prudential Tax-Free Money Fund, Prudential Utility
Fund, Inc., The First Australia Fund, Inc., The
First Australia Prime Income Fund, Inc., The Global
Government Plus Fund, Inc. and The Global Yield
Fund, Inc.; Trustee of the Trudeau Institute, The
BlackRock Government Income Trust, Command Money
Fund, Command Government Fund, Command Tax-Free
Fund, Prudential California Municipal Fund,
Prudential Municipal Series Fund and Prudential
U.S. Government Fund.

Thomas T. Mooney (52), President of the Greater Director 2,019
Rochester Metro Chamber of Commerce; former
Rochester City Manager; Trustee for Center for
Governmental Research, Inc.; Director of Blue Cross
of Rochester, Monroe County Water Authority,
Rochester Jobs Inc., Northeast-Midwest Institute,
The Business Council of New York State, Executive
Service Corps of Rochester, Monroe County
Industrial Development Corporation, Prudential
Adjustable Rate Securities Fund, Inc., Prudential
Equity Fund, Inc., Prudential Equity Income Fund,
Prudential Global Genesis Fund, Inc., Prudential
Global Natural Resources Fund, Inc., Prudential
GNMA Fund, Inc., Prudential Government Income Fund,
Inc., Prudential Multi-Sector Fund, Inc., Global
Utility Fund, Inc., First Financial Fund, Inc., The
High Yield Plus Fund, Inc., The Global Government
Plus Fund, Inc. and The Global Yield Fund, Inc.;
Trustee of Prudential Allocation Fund, Prudential
California Municipal Fund, Prudential Municipal
Bond Fund and Prudential Municipal Series Fund.

*Richard A. Redeker (51), President, Chief Executive Director -0-
Officer and Director (since October 1993),
Prudential Mutual Fund Management, Inc. (PMF);
Executive Vice President, Director and Member of
</TABLE>

5
<PAGE>

the Operating Committee (since October 1993),
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 Global
Utility Fund, Inc., Prudential Adjustable Rate
Securities Fund, Inc., Prudential Europe Growth
Fund, Inc., Prudential Equity Fund, Inc.,
Prudential Global Fund, Inc., Prudential Global
Genesis Fund, Inc., Prudential Global Natural
Resources Fund, Inc., Prudential GNMA Fund, Inc.,
Prudential Government Income Fund, Inc., Prudential
Growth Opportunity Fund, Inc., Prudential High
Yield Fund, Inc., Prudential IncomeVertible(R)
Fund, Inc., Prudential Institutional Liquidity
Portfolio, Inc., Prudential Intermediate Global
Income Fund, Inc., Prudential MoneyMart Assets,
Prudential Multi-Sector Fund, Inc., Prudential
Pacific Growth Fund, Inc., Prudential Short-Term
Global Income Fund, Inc., Prudential Special Money
Market Fund, Prudential Strategist Fund, Inc.,
Prudential Structured Maturity Fund, Inc.,
Prudential Utility Fund, Inc., The Global Yield
Fund, Inc., The Global Government Plus Fund, Inc.
and The High Yield Income Fund, Inc.; Trustee of
the BlackRock Government Income Trust, Command
Government Fund, Command Money Fund, Command
Tax-Free Fund, Prudential Allocation Fund,
Prudential California Municipal Fund, Prudential
Equity Income Fund, Prudential Government
Securities Trust, Prudential Municipal Bond Fund,
Prudential Municipal Series Fund, Prudential U.S.
Government Fund and The Target Portfolio Trust.

Class III (Term Expiring in 1995)

Edward D. Beach (69), President and Director of Director 800
BMC Fund, Inc., a closed-end investment company;
prior thereto, Vice Chairman of Broyhill Furniture
Industries, Inc.; Certified Public Accountant;
Secretary and Treasurer of Broyhill Family
Foundation Inc.; President, Director and Treasurer
</TABLE>

6
<PAGE>

of First Financial Fund, Inc. and The High Yield
Plus Fund, Inc.; President and Director of Global
Utility Fund, Inc.; Director of Prudential
Adjustable Rate Securities Fund, Inc., Prudential
Equity Fund, Inc., Prudential Global Genesis Fund,
Inc., Prudential Global Natural Resources Fund,
Inc., Prudential GNMA Fund, Inc., Prudential
Government Income Fund, Inc., Prudential
Multi-Sector Fund, Inc., Prudential Special Money
Market Fund, The Global Government Plus Fund, Inc.
and The Global Yield Fund, Inc.; Trustee of The
BlackRock Government Income Trust, Command
Government Fund, Command Money Fund, Command
Tax-Free Fund, Prudential Allocation Fund,
Prudential California Municipal Fund, Prudential
Equity Income Fund, Prudential Municipal Bond Fund
and Prudential Municipal Series Fund.

Robert W. Doran (61), Chairman and Managing Director 2,000
Partner of Wellington Management Company; Chief
Executive Officer of Wellington Management Company
until January 1994; Chairman of Wellington Trust
Company, N.A.; Trustee of the Museum of Fine Arts
(Boston); Director of The Global Yield Fund, Inc.

Robin B. Smith (54), President (since September Director 1,149
1981) and Chief Executive Officer (since January
1988) of Publishers Clearing House; Director of The
Omnicom Group, Inc., Huffy Corporation, Texaco
Inc., Spring Industries Inc., First Financial Fund,
Inc., Global Utility Fund, Inc., The Global Yield
Fund, Inc., The High Yield Income Fund, Inc., The
High Yield Plus Fund, Inc., Prudential Europe
Growth Fund, Inc., and Prudential Institutional
Liquidity Portfolio, Inc.; Trustee of The Target
Portfolio Trust.

<FN>
- ----------------
*Indicates "interested person," as defined in the Investment Company Act of
1940, as amended (the Investment Company Act).
</TABLE>

The executive officers of the Fund, other than as shown above, are: Robert
F. Gunia, Vice President, having held such office since November 17, 1987, S.
Jane Rose, Secretary, having held such office since June 16, 1986, Ronald
Amblard, Assistant Secretary, having held such office since September 1, 1988,
and Susan C. Cote, Treasurer and Principal

7
<PAGE>

Financial and Accounting Officer, having held such offices since February 14,
1990. Mr. Gunia is 47 years old and is currently Chief Administrative Officer
(since July 1990),Director, Executive Vice President, Treasurer and Chief
Financial Officer of PMF and Senior Vice President of Prudential Securities. He
is also Vice President and Director (since May 1989) of The Asia Pacific Fund,
Inc. Ms. Rose is 48 years old and is currently Senior Vice President (since
January 1991) and Senior Counsel of PMF and a Senior Vice President and Senior
Counsel of Prudential Securities (since July 1992). Prior thereto, she was First
Vice President (June 1987-December 1990) of PMF and Vice President and Associate
General Counsel of Prudential Securities. Mr. Amblard is 36 years old and is
currently First Vice President (since January 1994) and Associate General
Counsel (since January 1992) of PMF and Vice President and Associate General
Counsel of Prudential Securities (since January 1992). Prior thereto, he was
Assistant General Counsel (August 1988-December 1991), and an Associate Vice
President (January 1989-December 1990) and Vice President (January 1991-December
1993) of PMF. Ms. Cote is 39 years old and is currently Senior Vice President of
PMF and a Senior Vice President of Prudential Securities (since January 1992).
Prior thereto, she was Vice President (January 1986-December 1991) of Prudential
Securities. The executive officers of the Fund are elected annually by the Board
of Directors at their meeting following the Annual Meeting of Shareholders.

The directors and officers of the Fund as a group owned beneficially 7,573
shares of the Fund at September 2, 1994, which represented less than l% of the
shares then outstanding.

The Fund pays annual compensation of $8,000, plus $1,500 for attendance in
person per meeting of the Board of Directors, plus certain out-of-pocket
expenses, to each of the six Directors not affiliated with PMF or the Fund's
investment adviser. Ms. Smith receives her Director's fee pursuant to a deferred
fee agreement with the Fund. Under the terms of the agreement, the Fund accrues
daily the amount of such Director's fee which accrues 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 exemptive order of the
Securities and Exchange Commission (SEC), at the rate of return of the Fund.
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. For the year ended December 31, 1993, directors' fees
and expenses amounted to $96,000 and $13,000, respectively.

There were four meetings of the Fund's Board of Directors held during the
year ended December 31, 1993, all of which were regular meetings. The Board of
Directors has an Audit Committee. The Audit Committee makes recommendations to
the full Board with respect to the engagement of independent accountants and
reviews with the independent accountants the plan and results of the audit
engagement and matters having a material effect upon the Fund's financial
operations. The members of the Audit Committee are Messrs. Beach, Doran, Mooney
and Sandberg and Mmes. Smith and Teeters, the non-affiliated Directors of the
Fund. The Audit Committee met twice during the year ended December 31, 1993. For
the year ended December 31, 1993, Mr. Doran and

8
<PAGE>

Ms. Smith attended fewer than 75% of the aggregate of the total number of
meetings of the Board of Directors and any committee thereof, of which such
director is a member.

Required Vote

Directors must be elected by a vote of a plurality of the shares present at
the meeting in person or by proxy and entitled to vote thereupon, provided that
a quorum is present.

MANAGEMENT OF THE FUND

The Manager

Prudential Mutual Fund Management, Inc. (PMF), One Seaport Plaza, New York,
New York 10292, serves as the Fund's Manager under a management agreement dated
as of October 3, 1988 (the Management Agreement).

The Management Agreement was last approved by the Directors of the Fund,
including a majority of the Directors who are not interested persons (as defined
in the

Investment Company Act) on May 5, 1994 and was approved by shareholders on
September 29, 1988. For the fiscal year ended December 31, 1993, PMF received a
management fee of $4,201,489.

Terms of the Management Agreement

Pursuant to the Management Agreement, PMF, subject to the supervision of
the Board of Directors and in conformity with the stated policies of the Fund,
is responsible for managing or providing for the management of the investment of
the Fund's assets. In this regard, PMF provides supervision of the Fund's
investments, furnishes a continuous investment program for the Fund's portfolio
and places purchase and sale orders for portfolio securities of the Fund and
other investments. The Prudential Investment Corporation (PIC), a wholly-owned
subsidiary of The Prudential Insurance Company of America (Prudential), provides
such services pursuant to a subadvisory agreement dated October 3, 1988 with PMF
(the Subadvisory Agreement). PMF also administers the Fund's corporate affairs,
subject to the supervision of the Fund's Board of Directors and, in connection
therewith, furnishes the Fund with office facilities, together with those
ordinary clerical and bookkeeping services which are not being furnished by the
Fund's Transfer and Dividend Disbursing Agent and Custodian.

PMF has authorized any of its directors, officers and employees who have
been elected as Directors or officers of the Fund to serve in the capacities in
which they have been elected. All services furnished by PMF under the Management
Agreement may be furnished by any such directors, officers or employees of PMF.
In connection with its administration of the corporate affairs of the Fund, PMF
bears the following expenses:

(a) the salaries and expenses of all personnel of the Fund and PMF,
except the fees and expenses of Directors not affiliated with PMF or the
Fund's investment adviser;

(b) all expenses incurred by PMF or by the Fund in connection with
administering the ordinary course of the Fund's business, other than those
assumed by the Fund, as described below; and

9
<PAGE>

The Fund pays PMF for the services performed and the facilities furnished by
it a fee at an annual rate of .75 of 1% of the Fund's average daily net assets
up to $500 million, .70 of 1% of such assets between $500 million and $1 billion
and .65 of 1% of such assets in excess of $1 billion. This fee is computed
weekly and paid monthly.

The Management Agreement provides that PMF will not be liable to the Fund
for any error of judgment by PMF or for any loss suffered by the Fund in
connection with the matters to which the Management Agreement relates except a
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or willful misfeasance, bad faith, gross negligence or
reckless disregard of duty. Except as indicated above, the Fund is responsible
under the Management Agreement for the payment of its expenses, including (a)
the fees payable to PMF, (b) the fees and expenses of Directors who are not
affiliated with PMF or the investment adviser, (c) the fees and certain expenses
of the Fund's Custodian and Transfer and Dividend Disbursing Agent, including
the cost of providing records of the Fund and of pricing Fund shares, (d) the
charges and expenses of the Fund's legal counsel and independent accountants,
(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
association of which the Fund may be a member, (h) the cost of fidelity and
liability insurance, (i) the fees and expenses involved in registering and
maintaining registration of the Fund and of its shares with the Securities and
Exchange Commission and registering the Fund and qualifying its shares under
state securities laws, including the preparation and printing of the Fund's
registration statement and prospectus for such purposes, (j) allocable
communications expenses with respect to investor services and all expenses of
shareholders' and Board of Directors' meetings and of preparing, printing and
mailing prospectuses and reports to shareholders, (k) litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the Fund's business and (l) the cost of any stock
certificates representing shares of the Fund.

The Management Agreement also provides that it will terminate automatically
if assigned and that it may be terminated without penalty by the Board of
Directors of the Fund, by vote of a majority of the Fund's outstanding voting
securities (as defined in the Investment Company Act) or by the Manager, upon
not more than 60 days' nor less than 30 days' written notice.

Information about PMF

PMF, a subsidiary of Prudential Securities and an indirect, wholly-owned
subsidiary of Prudential, was organized in May 1987 under the laws of the State
of Delaware. Prudential's address is Prudential Plaza, Newark, New Jersey 07102.
PMF acts as manager for the following investment companies:

Open-End Management Investment Companies: Command Government Fund, Command
Money Fund, Command Tax-Free Fund, Prudential Adjustable Rate Securities

<PAGE>

Fund, Inc., Prudential Allocation Fund, Prudential California Municipal Fund,
Prudential Equity Fund, Inc., Prudential Equity Income Fund, Prudential Europe
Growth Fund, Inc., Prudential Global Fund, Inc., Prudential Global Genesis Fund,
Inc., Prudential Global Natural Resources Fund, Inc., Prudential GNMA Fund,
Inc., Prudential Government Income Fund, Inc., Prudential Government Securities
Trust, Prudential Growth Opportunity Fund, Inc., Prudential High Yield Fund,
Inc., Prudential IncomeVertible(R) Fund, Inc., Prudential-Bache MoneyMart Assets
Fund, Inc., (d/b/a Prudential Money-Mart Assets), Prudential Multi-Sector Fund,
Inc., Prudential Municipal Bond Fund, Prudential Municipal Series Fund,
Prudential National Municipals Fund, Inc., Prudential Pacific Growth Fund, Inc.,
Prudential Short-Term Global Income Fund, Inc., Prudential-Bache Special Money
Market Fund, Inc. (d/b/a Prudential Special Money Market Fund), Prudential
Strategist Fund, Inc., Prudential Structured Maturity Fund, Inc.,
Prudential-Bache Tax-Free Money Fund, Inc. (d/b/a Prudential Tax-Free Money
Fund), Prudential U.S. Government Fund, Prudential Utility Fund, Inc.,
Prudential Institutional Liquidity Portfolio, Inc., Prudential Intermediate
Global Income Fund, Inc., Global Utility Fund, Inc., Nicholas-Applegate Fund,
Inc. and The BlackRock Government Income Trust.

Closed-End Management Investment Companies: The Global Government Plus
Fund, Inc., The Global Yield Fund, Inc. and The High Yield Income Fund, Inc.

The consolidated statement of financial condition of PMF and subsidiaries as
of December 31, 1993 is set forth as Exhibit A to this Proxy Statement.

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>
<S> <C> <C>
Name and Address Position with PMF Principal Occupations
- ---------------- ----------------- ---------------------

Brendan D. Boyle .......... Executive Vice Executive Vice President and
President and Director of Marketing,
Director of PMF; Senior Vice President,
Marketing Prudential Securities

John D. Brookmeyer, Jr. ... Director Senior Vice President,
51 JFK Parkway Prudential
Short Hills, NJ 07078

Susan C. Cote ............. Senior Vice Senior Vice President, PMF;
President Senior Vice President,
Prudential Securities

Stephen P. Fisher ......... Senior Vice Senior Vice President, PMF;
President Senior Vice President,
Prudential Securities

Frank W. Giordano ......... Executive Vice Executive Vice President,
President, General General Counsel and
Counsel and Secretary, PMF; Senior
Secretary Vice President, Prudential
Securities

</TABLE>

11
<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C>
Name and Address Position with PMF Principal Occupations
- ---------------- ----------------- ---------------------

Robert F. Gunia ........... Executive Vice Executive Vice President,
President, Chief Chief Financial and
Financial and Administrative Officer,
Administrative Treasurer and Director,
Officer, Treasurer PMF; Senior Vice
and Director President, Prudential
Securities

Eugene B. Heimberg ........ Director Senior Vice President,
Prudential Plaza Prudential; President,
Newark, NJ 07102 Director and Chief
Investment Officer, PIC

Lawrence C. McQuade ....... Vice Chairman Vice Chairman, PMF

Leland B. Paton ........... Director Executive Vice President,
Director and Member of
the Operating Committee,
Prudential Securities;
Director, PSG

Richard A. Redeker ........ President, Chief President, Chief Executive
Executive Officer Officer and Director, PMF;
and Director Executive Vice President,
Director and Member of
the Operating Committee,
Prudential Securities;
Director, PSG; Vice
President, PIC

S. Jane Rose .............. Senior Vice President, Senior Vice President, Senior
Senior Counsel and Counsel and Assistant
Assistant Secretary Secretary, PMF; Senior
Vice President and Senior
Counsel, Prudential
Securities

Donald G. Southwell ....... Director Senior Vice President,
213 Washington Street Prudential; Director, PSG
Newark, NJ 07102

</TABLE>

The Subadviser

Investment advisory services are provided to the Fund by PMF through its
affiliate, The Prudential Investment Corporation (PIC or the Subadviser),
Prudential Plaza, Newark, New Jersey 07101, under a Subadvisory Agreement. The
Subadvisory Agreement was last approved by the Board of Directors of the Fund,
including a majority of the Directors who are not parties to such contract or
interested persons of such parties (as defined in the Investment Company Act),
on May 5, 1994 and was approved by shareholders on September 29, 1988.

Terms of the Subadvisory Agreement

Pursuant to the Subadvisory Agreement, PIC, subject to the supervision of
PMF and the Board of Directors and in conformity with the stated policies of the
Fund, manages the

12
<PAGE>

investment operations of the Fund and the composition of the Fund's portfolio,
including the purchase, retention and disposition of securities and other
investments. PIC is reimbursed by PMF for reasonable costs and expenses incurred
by it in furnishing such services. The fees paid by the Fund to PMF under the
Management Agreement with PMF are not affected by this arrangement. PIC keeps
certain books and records required to be maintained pursuant to the Investment
Company Act. The investment advisory services of PIC to the Fund are not
exclusive under the terms of the Subadvisory Agreement and PIC is free to, and
does, render investment advisory services to others.

PIC has authorized any of its directors, officers and employees who may be
elected as Directors or officers of the Fund to serve in the capacities in which
they have been elected. Services furnished by PIC under the Subadvisory
Agreement may be furnished by any such directors, officers or employees of PIC.
The Subadvisory Agreement provides that PIC shall not be liable for any error or
judgment or for any loss suffered by the Fund or PMF in connection with the
matters to which the Subadvisory Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on PIC's part in the
performance of its duties or from its reckless disregard of duty. The
Subadvisory Agreement provides that it shall terminate automatically if assigned
or upon termination of the Management Agreement and that it may be terminated
without penalty by either party upon not more than 60 days' nor less than 30
days' written notice.

Information about PIC

The business and other connections of PIC's directors and executive officers
are set forth below. Except as otherwise indicated, the address of each person
is Prudential Plaza, Newark, NJ 07101.

<TABLE>
<CAPTION>
<S> <C> <C>
Name and Address Position with PIC Principal Occupations
- ---------------- ----------------- ---------------------

Martin A. Berkowitz ....... Senior Vice President, Vice President, Prudential;
Chief Financial and Senior Vice President,
Compliance Officer Chief Financial and
Compliance Officer, PIC

William M. Bethke ......... Senior Vice President Senior Vice President,
Two Gateway Center Prudential; Senior Vice
Newark, NJ 07102 President, PIC

John D. Brookmeyer, Jr. ... Senior Vice President Senior Vice President,
51 JFK Parkway Prudential; Senior Vice
Short Hills, NJ 07078 President, PIC

Eugene B. Heimberg ........ President, Director and Senior Vice President,
Chief Investment Prudential; President,
Officer Director and Chief
Investment Officer, PIC

Garnett L. Keith, Jr. ..... Director Vice Chairman and Director,
Prudential; Director, PIC

Harry E. Knapp, Jr. ....... Vice President Vice President,
Four Gateway Center Prudential; Vice
Newark, NJ 07102 President, PIC

William P. Link ........... Senior Vice President Executive Vice President,
Four Gateway Center Prudential; Senior Vice
Newark, NJ 07102 President, PIC

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C>
Name and Address Position with PIC Principal Occupations
- ---------------- ----------------- ---------------------

Richard A. Redeker ........ Vice President President, Chief Executive
One Seaport Plaza Officer and Director, PMF;
New York, NY 10292 Executive Vice President,
Director and Member of
the Operating Committee,
Prudential Securities;
Director, PSG; Vice
President, PIC

James W. Stevens .......... Executive Vice Executive Vice President,
Four Gateway Center President Prudential; Executive Vice
Newark, NJ 07102 President, PIC; Director,
PSG

Robert C. Winters ......... Director Chairman of the Board and
Chief Executive Officer,
Prudential; Director, PIC;
Chairman of the Board,
PSG

Claude J. Zinngrabe, Jr. .. Executive Vice Vice President, Prudential;
51 JFK Parkway President Executive Vice President,
Short Hills, NJ 07078 PIC
</TABLE>

Portfolio Transactions

The Manager is responsible for decisions to buy and sell securities for the
Fund, the selection of brokers and dealers to effect the transactions and the
negotiation of brokerage commissions, if any. For purposes of this section, the
term "Manager" includes the "Subadviser."

Fixed-income 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 usually 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 in any transaction in which Prudential Securities acts as principal.

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 the policy of obtaining the most favorable price and efficient
execution, the Manager will consider research and research related services
provided by brokers or dealers who effect or are parties to portfolio
transactions of the Fund, the Manager or the Manager's other 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

<PAGE>

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 furnishing such services may be selected for the
execution of transactions of such other accounts, whose aggregate assets are far
larger than the Fund, and the services furnished by such brokers may be used by
the Manager in providing investment management for the Fund. Commission rates
are established pursuant to negotiations with the broker based on the quality
and quantity of execution services provided by the broker or dealer in the light
of generally prevailing rates. The Manager's policy is to pay higher commissions
to brokers, other than Prudential Securities, for particular transactions than
might be charged if a different broker had been selected, on occasions when, in
the Manager's opinion, this policy furthers the objective of obtaining best
price and execution. In addition, the Manager is authorized to pay higher
commissions on brokerage transactions for the Fund to brokers other than
Prudential Securities in order to secure research and investment services
described above, subject to the primary consideration of obtaining the most
favorable price and efficient execution in the circumstances and 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 and the
commission rates paid are reviewed periodically by the Board of Directors.

Purchases and sales of securities on a securities exchange, while
infrequent, will be effected through brokers who charge a commission for their
services. Orders may be directed to any broker including, to the extent and in
the manner permitted by applicable law, Prudential Securities and its
affiliates. In order for Prudential Securities or its affiliates to effect any
portfolio transactions for the Fund, the commissions, fees or other remuneration
received by Prudential Securities or its affiliates must be reasonable and fair
compared to the commissions, fees or other remuneration paid to other brokers in
connection with comparable transactions involving similar securities being
purchased or sold on a securities exchange during a comparable period of time.
This standard would allow Prudential Securities or its affiliates 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 directors who are
not "interested" directors, has adopted procedures which are reasonably designed
to provide that any commissions, fees or other remuneration paid to Prudential
Securities or its affiliates are consistent with the foregoing standard.
Brokerage transactions with Prudential Securities or its affiliates are also
subject to such fiduciary standards as may be imposed upon Prudential Securities
or its affiliates by applicable law.

For the fiscal year ended December 31, 1993, the Fund paid no brokerage
commissions.

APPROVAL OF A CHANGE IN THE INVESTMENT OBJECTIVE
OF THE FUND
(Proposal No. 2)

At a meeting held on August 17, 1994, and at the request of the Subadviser,
the Board of Directors has considered and recommends for shareholder approval a
change in the

15
<PAGE>

Fund's investment objective. The current investment objective of the Fund is "to
achieve high current yield relative to current yields (equal or greater)
available from similar type U.S. dollar denominated securities by choosing
selectively among securities denominated in various specified foreign currencies
expected by the Investment Manager to be stable or appreciate versus the U.S.
dollar and securities denominated in the U.S. dollar." The Fund also may
"achieve incidental capital appreciation in periods when interest rates
decline." It is proposed that the investment objective be changed to "total
return, the components of which are current income and capital appreciation."
Capital appreciation may result, for example, from an improvement in the credit
standing of an issuer whose securities are held in the Fund's portfolio or from
a general lowering of interest rates, or a combination of both. Capital
appreciation may also result from the Fund's investment in currencies that
appreciate relative to the U.S. dollar. The achievement of the Fund's investment
objective will depend upon the investment adviser's analytical and portfolio
management skills. There is no assurance that the objective will be achieved.
The adoption of this proposal will not result in a significant change in
direction for the Fund.

The Fund invests in governmental (including supranational),
semi-governmental or government agency securities (collectively, Governmental
Securities) or in short-term bank securities or deposits in the United States
and in foreign countries denominated in U.S. dollars or in foreign currencies.
Under normal market conditions, the Fund invests at least 65% of its total
assets in such securities. The remainder is generally invested in corporate
securities or longer term bank securities. In addition, the Fund is normally
invested in securities denominated in at least three currencies and will not
normally invest in debt securities denominated in a particular currency, if
immediately thereafter debt securities denominated in such currency would exceed
40% of total asset value. Currently, the Fund invests in high-quality debt
securities, which are rated at least A by Standard & Poor's Rating Group (S&P),
or A by Moody's Investors Service, Inc. (Moody's) or if unrated, are of
equivalent quality in the view of the Subadviser. The Subadviser would like to
broaden the universe of debt securities in which the Fund may invest to take
advantage of investment opportunities in emerging markets, including those of
Latin America and Asia. Under normal circumstances, the Fund would continue to
invest at least 65% of its assets in Governmental Securities, and would continue
to invest in at least three currencies.

Based upon the recommendation of the Subadviser, the Board of Directors
believes that the Fund should be permitted to invest primarily in investment
grade bonds, i.e., bonds rated within the four highest quality grades as
determined by Moody's (currently Aaa, Aa, A and Baa for bonds, MIG 1, MIG 2, MIG
3 and MIG 4 for notes and P-1 for commercial paper), or S&P (currently AAA, AA,
A and BBB for bonds, SP-1 and SP-2 for notes and A -1 for commercial paper), or
by another nationally recognized statistical rating organization, or in unrated
securities of equivalent quality.

In addition, the Board of Directors believes that the Subadviser should be
permitted to invest up to 10% of the Fund's total assets in bonds rated below
investment grade with a minimum rating of B or, if unrated, deemed by the
Subadviser to be of equivalent quality. The 10% limitation on the purchase of
bonds rated below investment grade is determined at the time of investment. If
subsequent to purchase, a security is assigned a rating lower than

16
<PAGE>

investment grade, the investment adviser is not required to dispose of the
security, but if the 10% limitation is exceeded the Fund may not purchase
additional securities rated below investment grade until such time as the
percentage of the Fund's total assets invested in securities rated below
investment grade drops below 10%.

These changes (i) would allow the Fund to take advantage of investment
opportunities in emerging markets throughout the world consistent with its
investment objective and (ii) would add significant diversification. They would
also allow the Fund to move more quickly into countries with improving economic
fundamentals and improving credit conditions. These changes would also result in
greater credit risk and political risk to the Fund. Countries whose debt could
be purchased after this change (i.e., investment grade debt rated lower than A)
include Portugal, the Czech Republic, Greece, South Korea, Hong Kong, Malaysia,
Indonesia, Thailand, China, Israel, Chile and Colombia. It is anticipated that
this list will expand over time.

Permitting the Fund to invest up to 10% of its total assets in securities
rated B or BB by S&P or B or Ba by Moody's would provide the investment adviser
with the flexibility to move assets into areas with improving credit where the
rating agencies have not yet acted. This would allow the Fund to invest in debt
securities of various countries including Venezuela, Turkey, Argentina and
Mexico. The Subadviser believes that investing in the debt securities of
emerging markets offers the Fund an opportunity for capital appreciation as well
as higher yield. Such investments may also entail a higher degree of risk.

In the view of the Subadviser, the current credit quality limitations
deprive the Fund of opportunities to achieve greater total return by investing
in lower quality securities. Lower quality securities generally offer a higher
current yield and a greater chance for capital appreciation than those in the
higher-rated categories. Also, the market price of such securities may increase
as their credit quality improves.

Special Risk Considerations

Debt securities which are rated Baa by Moody's are described by Moody's as
being investment grade but are also characterized as having speculative
characteristics. Bonds rated below Baa by Moody's and BBB by Standard & Poor's,
commonly known as "junk bonds," are considered speculative.

Lower rated (i.e., high yield) securities are more likely to react adversely
to developments affecting market and credit risk than are more highly rated
securities, which react primarily to movements in the general level of interest
rates. Lower quality debt securities, however, present higher risks of untimely
interest and principal payments, default and price volatility than higher
quality securities. These securities may present problems of liquidity and
valuation because, to the extent that there is no established retail secondary
market, there may be thin trading of lower rated bonds. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, may decrease
the value and liquidity of lower rated bonds. As a result, the Subadviser could
find it more difficult to sell these securities or may be able to sell the
securities only at prices lower than if such securities were widely traded, and
it may be difficult for the Board of Directors to determine the fair valuation
of such securities. The Subadviser considers both credit risk

17
<PAGE>

and market risk in making investment decisions for the Fund. Credit rating alone
may fail to adequately address the credit risks of lower quality debt
securities, especially with respect to subsequent events affecting the
securities; thus, the Subadviser may need to depend on its independent analysis
of the risks of such securities.

Summary of Proposed Changes

For the reasons set forth above, the Board of Directors believes that the
Fund and its shareholders would benefit if the Fund were permitted to invest
with a "total return" approach in investment grade debt securities with a 10%
basket in securities rated below investment grade with a minimum rating of B or,
if unrated, deemed by the Subadviser to be of equivalent quality.

The current investment objective emphasizes (i) high relative current yield
and incidental capital appreciation and (ii) investment in high quality debt
securities. The lowering of the credit quality of the Fund would necessitate a
change in the fundamental investment objective. High quality debt securities do
not include bonds rated below investment grade and with more speculative
elements. Securities rated B or Ba by Moody's or B or BB by S&P are considered
by such rating services to have speculative elements. Furthermore, the revised
investment objective would also reflect the increased volatility in the foreign
currency markets, particularly brought upon by the changes in the European
Monetary System's Exchange Rate Mechanism. Under the Exchange Rate Mechanism or
ERM, a group of European countries agreed to maintain their exchange rates
within predetermined bands. This agreement was modified after several countries
stopped participating in the ERM in 1992. The remaining members of the ERM
agreed in 1993 to allow their currencies to fluctuate against one another to a
much wider degree. A fund that is exposed to currency fluctuations will, under
certain market conditions, have risk to principal.

The Board of Directors has concluded that adoption of Proposal No. 2 is in
the best interests of the Fund and its shareholders.

Required Vote

A change in investment objective is a change in "fundamental policy" which
requires the approval of a majority of the outstanding voting securities of the
Fund, as defined in the Investment Company Act. Under the Investment Company
Act, a majority of outstanding voting securities is defined as the lesser of (i)
67% of the outstanding shares represented at a meeting at which more than 50% of
the outstanding shares are present in person or represented by proxy, or (ii)
more than 50% of the Fund's outstanding shares. If the proposed change in
investment objective is not approved, the current investment objective would
remain unchanged and the Fund would be limited to investing principally in high
quality debt securities.

THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT YOU VOTE "FOR" THIS
PROPOSAL NO. 2.

18
<PAGE>

APPROVAL OF AMENDMENT OF ARTICLES OF INCORPORATION
TO CHANGE THE NAME OF THE FUND
(Proposal No. 3)

At a meeting held on August 17, 1994, and at the request of the Subadviser,
the Board of Directors considered and recommends for shareholder approval a
change in the name of the Fund from "The Global Yield Fund, Inc." to "The Global
Total Return Fund, Inc." and that the Articles of Incorporation of the Fund be
amended to effect the name change.

The Board of Directors discussed the rationale for the current name, which
emphasizes the current investment objective of achieving high relative yield.
The Board of Directors considered the name change in connection with the
proposed change in the Fund's investment objective discussed in Proposal No. 2
above. In light of the Fund's proposed shift away from yield and toward total
return, the Directors agreed that it would be appropriate to drop "Yield" from
the Fund's name in favor of "Total Return."

The Board of Directors believes that the proposed name change is in the best
interests of shareholders.

Required Vote

The name change must be approved by the holders of a majority of the Fund's
shares of common stock in accordance with the Fund's Articles of Incorporation.
Subject to approval of Proposal No. 2, the name change will be effected as soon
as is practicable after shareholder approval.

THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT YOU VOTE "FOR" THIS
PROPOSAL NO. 3.

APPROVAL OF AN AMENDMENT OF THE FUND'S
INVESTMENT POLICIES AND RESTRICTIONS TO
PERMIT THE FUND TO ENTER INTO
FUTURES CONTRACTS AND OPTIONS THEREON
(Proposal No. 4)

At a meeting held on August 17, 1994, and at the request of the Subadviser,
the Board of Directors of the Fund approved an amendment to Investment
Restriction No. 4 which, if approved by shareholders, would allow the Fund to
buy and sell futures contracts and options thereon. Currently, the Fund is
permitted to purchase and write (i.e., sell) put and call options on foreign
currencies and debt securities and enter into forward foreign currency exchange
contracts. The proposed amendment will permit the Fund (i) to enter into futures
contracts that are traded on U.S. and foreign commodity and futures exchanges on
(a) debt securities, aggregates of debt securities and certain foreign
government debt securities and (b) foreign currencies or composite foreign
currencies (financial futures contracts) and (ii) to enter into options on
financial futures contracts.

The Fund's transactions in futures contracts and options thereon as
discussed below would be utilized for hedging, risk management/return
enhancement and currency transaction purposes.

Currently the Fund uses options on bonds and currencies and forward
contracts on currencies for these purposes. The use of futures contracts will
increase the Fund's

19
<PAGE>

flexibility for these purposes and could, in some cases, increase the risks. The
Board of Directors believes that the ability to enter into these transactions
will benefit the Fund and recommends that shareholders of the Fund approve the
proposed amendment. If shareholders approve the proposed amendment, Investment
Restriction No. 4 will be amended to read in its entirety as follows with the
proposed changes underlined:

The Fund will not:

Buy or sell commodities, commodity contracts, real estate or
interests in real estate. Transactions in foreign currencies,
financial futures contracts and forward contracts and any
----------------------------- ---
related options thereon are not considered by the Fund
------- -------
to be transactions in commodities or commodity contracts.

Set forth below is a discussion of interest rate and currency futures
contracts and options thereon and their proposed use.

Futures Contracts

It is proposed that the Fund be permitted to enter into futures contracts.
These futures contracts would include contracts for the purchase or sale of debt
securities, aggregates of debt securities and certain foreign government debt
securities (collectively, interest rate futures contracts).The Fund would also
enter into futures contracts for the purchase or sale of foreign currencies or
composite foreign currencies (such as the European Currency Unit) (currency
futures contracts).

A "purchase" of a futures contract (or a "long" futures position) means the
assumption of a contractual obligation to acquire a specified quantity of the
securities or currency underlying the contract at a specified price at a
specified future date.

A "sale" of a futures contract (or a "short" futures position) means the
assumption of a contractual obligation to deliver a specified quantity of the
securities or currency underlying the contract at a specified price at a
specified future date.

At the time a futures contract is purchased or sold, the Fund would be
required to deposit cash or securities with a futures commission merchant or in
a segregated custodial account representing between approximately 1-1/2% to 5%
of the contract amount, called "initial margin." Thereafter, the futures
contract would be valued daily and the payment in cash of "maintenance" or
"variation margin" may be required, resulting in the Fund's paying or receiving
cash that reflects any decline or increase in the contract's value, a process
known as "mark-to-the-market."

Some futures contracts by their terms may call for the actual delivery or
acquisition of the underlying assets and other futures contracts must be "cash
settled." In most cases the contractual obligation is extinguished before the
expiration of the contract by buying (to offset an earlier sale) or selling (to
offset an earlier purchase) an identical futures contract calling for delivery
or acquisition in the same month. The purchase (or sale) of an offsetting
futures contract is referred to as a "closing transaction."

20
<PAGE>

Limitations on the Purchase and Sale of Futures Contracts and Related Options

CFTC Limits. In accordance with Commodity Futures Trading Commission (CFTC)
regulations, the Fund would not be permitted to purchase or sell interest rate
futures contracts or options thereon for return enhancement or risk management
purposes if immediately thereafter the sum of the amounts of initial margin
deposits on the Fund's existing futures and premiums paid for options on futures
exceed 5% of the liquidation value of the Fund's total assets (the "5% CFTC
limit"). This restriction would not apply to the purchase and sale of interest
rate futures contracts and options thereon for bona fide hedging purposes nor
for currency futures contracts or options thereon.

Segregation Requirements. To the extent the Fund enters into futures
contracts it is required by the SEC to maintain a segregated asset account with
the Fund's custodian sufficient to cover the Fund's obligations with respect to
such futures contracts, which will consist of cash, U.S. Government securities
or other liquid high-grade debt obligations from its portfolio in an amount
equal to the difference between the fluctuating market value of such futures
contracts and the aggregate value of the initial margin deposited by the Fund
with its Custodian with respect to such futures contracts. Offsetting the
contract by another identical contract eliminates the segregation requirement.

With respect to options on futures, there are no segregation requirements
for options that are purchased and owned by the Fund. However, written options,
since they involve potential obligations of the Fund, may require segregation of
Fund assets if the options are not "covered" as described below under "Options
on Futures Contracts." If the Fund writes a call option that is not "covered,"
it must segregate and maintain with the custodian for the term of the option
cash, U.S. government securities or other liquid high-grade debt obligations
equal to the fluctuating value of the optioned futures. If the Fund writes a put
option that is not "covered," the segregated amount would have to be at all
times equal in value to the exercise price of the put (less any initial margin
deposited by the Fund with its custodian with respect to such option).

Use of Interest Rate Futures Contracts

Interest rate futures contracts would be used for bona fide hedging and
risk management/return enhancement purposes.

Position Hedging. The Fund might sell interest rate futures contracts to
protect the Fund against a rise in interest rates which would be expected to
decrease the value of debt securities which the Fund holds. This would be
considered a bona fide hedge and, therefore, is not subject to the 5% CFTC
limit. For example, if interest rates are expected to increase, the Fund might
sell futures contracts on debt securities, the values of which historically have
closely correlated or are expected to closely correlate to the values of the
Fund's portfolio securities. Such a sale would have an effect similar to selling
an equivalent value of the Fund's portfolio securities. If interest rates
increase, the value of the Fund's portfolio securities will decline, but the
value of the futures contracts to the Fund will increase at approximately an
equivalent rate thereby keeping the net asset value of the Fund from declining
as much as it otherwise would have. The Fund could

21
<PAGE>

accomplish similar results by selling debt securities with longer maturities and
investing in debt securities with shorter maturities when interest rates are
expected to increase. However, since the futures market may be more liquid than
the cash market, the use of futures contracts as a hedging technique would allow
the Fund to maintain a defensive position without having to sell its portfolio
securities. If in fact interest rates decline rather than rise, the value of the
futures contract will fall but the value of the bonds should rise and should
offset all or part of the loss. If futures contracts are used to hedge 100% of
the bond position and correlate precisely with the bond positions, there should
be no loss or gain with a rise (or fall) in interest rates. However, if only 50%
of the bond position is hedged with futures, then the value of the remaining 50%
of the bond position would be subject to change because of interest rate
fluctuations. Whether the bond positions and futures contracts correlate is a
significant risk factor.

Anticipatory Position Hedging. Similarly, when it is expected that interest
rates may decline and the Fund intends to acquire debt securities, the Fund
might purchase interest rate futures contracts. The purchase of futures
contracts for this purpose would constitute an anticipatory hedge against
increases in the price of debt securities (caused by declining interest rates)
which the Fund subsequently acquires and would normally qualify as a bona fide
hedge not subject to the 5% CFTC limit. Since fluctuations in the value of
appropriately selected futures contracts should approximate that of the debt
securities that would be purchased, the Fund could take advantage of the
anticipated rise in the cost of the debt securities without actually buying
them. Subsequently, the Fund could make the intended purchase of the debt
securities in the cash market and concurrently liquidate its futures position.

Risk Management/Return Enhancement. The Fund might sell interest rate
futures contracts covering bonds. This has the same effect as selling bonds in
the portfolio and holding cash and reduces the duration of the portfolio. This
should lessen the risks associated with a rise in interest rates. In some
circumstances, this may serve as a hedge against a loss of principal, but is
usually referred to as an aspect of risk management.

The Fund might buy interest rate futures contracts covering bonds with a
longer maturity than the portfolio average. This would tend to increase the
duration and should increase the gain in the overall portfolio if interest rates
fall. This is often referred to as risk management rather than hedging but, if
it works as intended, has the effect of increasing principal value. If it
doesn't work as intended because interest rates rise instead of fall, the loss
will be greater than would otherwise have been the case. Futures contracts used
for these purposes are not considered bona fide hedges and, therefore, are
subject to the 5% CFTC limit.

Use of Currency Futures Contracts

Currency futures contracts would be used for the same purposes for which
the Fund currently uses currency forwards and currency options. These purposes
are:

Position Hedging. The Fund might seek to establish the number of dollars it
would receive for delivery of a certain amount of a foreign currency by selling
currency futures. In this way, whenever the Fund anticipated a decline in the
value of a foreign currency

22
<PAGE>

against the U.S. dollar, it might attempt to "lock in" the U.S. dollar value of
some or all of the securities held in its portfolio that were denominated in
that currency. This can also be done by selling a futures contract in another
currency whose value is expected to closely correlate with the value of the
currency in which the security is denominated. This is referred to as cross
hedging.

Anticipatory Hedging. Also by purchasing currency futures, the Fund could
establish the number of dollars it would be required to pay for a specified
amount of foreign currency in a future month. Thus if the Fund intended to buy
securities in the future and expected the U.S. dollar to decline against the
relevant foreign currency during the period before the purchase is effected, the
Fund could attempt to "lock in" the price in U.S. dollars of the securities it
intended to acquire.

Currency Transactions. The Fund might also seek to establish the number of
U.S. dollars it would have to pay to buy another currency at a future time by
purchasing currency futures contracts on U.S. and foreign commodity and futures
exchanges. This might be considered an anticipatory hedge but if the Subadviser
has no specific intention to purchase securities denominated in that currency,
it would generally be considered as creating a synthetic short-term security
denominated in that currency. The return on the currency transaction should be
approximately the same as the return on a short-term government security of the
same maturity as the currency future denominated in that currency. If the value
of the currency purchased declines against the dollar the Fund will have a
currency loss. If the value of the currency purchased rises against the dollar
the Fund will have a currency gain.

Currency futures contracts are not subject to the 5% CFTC limit.

Options on Futures Contracts

It is proposed that the Fund be permitted to enter into options on futures
contracts for certain bona fide hedging and risk management/return enhancement
purposes. These are the same uses for which interest rate and currency type
options are currently used. This would include the ability to purchase put and
call options and write (i.e., sell) "covered" put and call options on futures
contracts that are traded on U.S. and foreign commodity and futures exchanges.

If the Fund purchased an option on a futures contract, it has the right but
not the obligation, in return for the premium paid, to assume a position in a
futures contract (a long position if the option is a call or a short position if
the option is a put) at a specified exercise price at any time during the option
exercise period.

Unlike purchasing an option, which is similar to purchasing insurance to
protect against a possible rise or fall of security prices or currency values,
the writer or seller of an option undertakes an obligation upon exercise of the
option to either buy or sell the underlying futures contract at the exercise
price. A writer of a call option has the obligation upon exercise to assume a
short futures position and a writer of a put option has the obligation to assume
a long futures position. Upon exercise of the option, the assumption of
offsetting futures positions by the writer and holder of the option will be

23
<PAGE>

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. If
there is no balance in the writer's margin account, the option is "out of the
money" and will not be exercised. The Fund, as the writer, has income in the
amount it was paid for the option. If there is a margin balance, the Fund will
have a loss in the amount of the balance less the premium it was paid for
writing the option.

When the Fund writes a put or a call option on futures contracts, the
option must either be "covered" or, to the extent not "covered," will be subject
to segregation requirements.

The Fund will be considered "covered" with respect to a call option it
writes on a futures contract if the Fund owns the securities or currency which
is deliverable under the futures contract or an option to purchase that futures
contract having a strike price equal to or less than the strike price of the
"covered" option.

The Fund will be considered "covered" with respect to a put option it
writes on a futures contract if it owns an option to sell that futures contract
having a strike price equal to or greater than the strike price of the "covered"
option.

To the extent the Fund is not "covered" as described above with respect to
written options, it will segregate and maintain with its custodian for the term
of the option cash, U.S. Government securities or other liquid high-grade debt
obligations as described above under "Segregation Requirements."

Use of Options on Futures Contracts

Options on interest rate and currency futures contracts would be used for
the same purposes that interest rate and currency options are currently used.
They are:

Position Hedging. The Fund would purchase put options on interest rate or
currency futures contracts to hedge its portfolio against the risk of a decline
in the value of the debt securities it owns as a result of rising interest rates
or falling foreign currency exchange rates.

Anticipatory Hedging. The Fund would also purchase call options on futures
contracts as a hedge against an increase in the value of securities the Fund
might intend to acquire as a result of declining interest rates or rising
foreign currency exchange rates.

Writing a put option on a futures contract would serve as a partial
anticipatory hedge against an increase in the value of debt securities the Fund
might intend to acquire. If the futures price at expiration of the option is
above the exercise price, the Fund would retain the full amount of the option
premium which would provide a partial hedge against any increase that may have
occurred in the price of the debt securities the Fund intended to acquire. If
the market price of the underlying futures contract is below the exercise price
when the option is exercised, the Fund would incur a loss, which may be wholly
or partially offset by the decrease in the value of the securities the Fund
might intend to acquire. The Fund could also write put options on currency
futures for this purpose.

24
<PAGE>

Whether options on interest rate futures contracts are subject to or exempt
from the 5% CFTC limit depends on whether the purpose of writing the options,
taking into account the intended use of the underwriting futures contract,
constitutes a bona fide hedge.

Risk Management/Return Enhancement. Writing a put option that does not
relate to securities the Fund intends to acquire would be a return enhancement
strategy which would result in a loss if interest rates rise or, in the case of
a currency option, if the foreign currency's value fell.

Similarly, writing a covered call option on a futures contract is also a
return enhancement strategy. If the market price of the underlying futures
contract at expiration of a written call option is below the exercise price, the
Fund would retain the full amount of the option premium increasing the income of
the Fund. If the future's price when the option is exercised is above the
exercise price, however, the Fund would sell the underlying securities or
currency which was the "cover" for the contract and incur a gain or loss
depending on the cost basis for the underlying asset.

Writing a covered call option as in any return enhancement strategy can
also be considered a partial hedge against a decrease in the value of the Fund's
portfolio securities. The amount of the premium received acts as a partial hedge
against any decline that may have occurred in the Fund's debt securities or
currency exposure.

Risks Relating to Transactions in Futures Contracts and Options Thereon

The Fund's ability to establish and close out positions in futures contracts
and options on futures contracts would be impacted by the liquidity of these
markets. Although the Fund generally would purchase or sell only those futures
contracts and options thereon for which there appeared to be a liquid market,
there would be no assurance that a liquid market on an exchange will exist for
any particular futures contract or option at any particular time. In the event
no liquid market exists for a particular futures contract or option thereon in
which the Fund maintains a position, it would not be possible to effect a
closing transaction in that contract or to do so at a satisfactory price and the
Fund would have to either make or take delivery under the futures contract or,
in the case of a written call option, wait to sell the underlying securities
until the option expired or was exercised, or, in the case of a purchased
option, exercise the option. In the case of a futures contract or an option on a
futures contract which the Fund had written and which the Fund was unable to
close, the Fund would be required to maintain margin deposits on the futures
contract or option and to make variation margin payments until the contract is
closed.

Risks inherent in the use of these strategies include (1) dependence on the
investment adviser's ability to predict correctly movements in the direction of
interest rates, securities prices and markets; (2) imperfect correlation between
the price of futures contracts and options thereon and movements in the prices
of the securities or currencies being hedged; (3) the fact that the 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

25
<PAGE>

sell a portfolio security at a time that otherwise would be favorable for it to
do so. In the event it did sell the security and eliminated its "cover," it
would have to replace its "cover" with an appropriate futures contract or option
or segregate securities with the required value, as described under "Segregation
Requirements."

Although futures prices themselves have the potential to be extremely
volatile, in the case of any strategy involving interest rate or currency
futures contracts and options thereon when the Subadviser's expectations are not
met, assuming proper adherence to the segregation requirement, the volatility of
the Fund as a whole should be no greater than if the same strategy had been
pursued in the cash market.

To the extent futures contracts and options thereon are traded on foreign
exchanges, such transactions may not be regulated as effectively as similar
transactions in the U.S., may not involve a clearing mechanism and related
guarantees, and are subject to the risk of governmental actions affecting
trading in, or the prices of, foreign securities. The value of such positions
also could be adversely affected by (i) other complex foreign political, legal
and economic factors, (ii) lesser availability than in the U.S. of data on which
to make trading decisions, (iii) delays in the Fund's ability to act upon
economic events occurring in the foreign markets during non-business hours in
the U.S., (iv) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the U.S. and (v) lesser trading
volume.

Exchanges on which futures and related options trade may impose limits on
the positions that the Fund may take in certain circumstances. In addition, the
hours of trading of financial futures contracts and options thereon may not
conform to the hours during which the Fund may trade the underlying securities.
To the extent 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.

Pursuant to the requirements of the Commodity Exchange Act, as amended (the
Commodity Exchange Act), all U.S. futures contracts and options thereon must be
traded on an exchange. Since a clearing corporation effectively acts as the
counterparty on every futures contract and option thereon, the counterparty risk
depends on the strength of the clearing or settlement corporation associated
with the exchange. Additionally, although the exchanges provide a means of
closing out a position previously established, there can be no assurance that a
liquid market will exist for a particular contract at a particular time. In the
case of options on futures, if such a market does not exist, the Fund, as the
holder of an option on futures contracts, would have to exercise the option and
comply with the margin requirements for the underlying futures contract to
realize any profit, and if the Fund were the writer of the option, its
obligation would not terminate until the option expired or the Fund was assigned
an exercise notice.

The Subadviser has informed the Board of Directors of the Fund that it
believes that in many cases the utilization of futures contracts and options
thereon of the above-described hedging and risk management/return enhancement
strategies that are hedges would allow the Fund to either hedge or anticipate or
react more efficiently and inexpensively to changes in the value of the Fund's
portfolio securities, in accordance with

26
<PAGE>

the rules and regulations of the CFTC. In the case of risk management/return
enhancement and currency transactions strategies that are not hedges, the
Subadviser believes that the use of futures contracts and options thereon would
add a new tool to those that presently are available with which the Subadviser
could seek to achieve an objective of total return.

The Board of Directors believes that adoption of Proposal No. 4 is in the
best interests of the Fund and its shareholders because it would provide
additional flexibility in the management of the Fund's portfolio.

Required Vote

Adoption of Proposal No. 4 requires the approval of a majority of the
outstanding voting securities of the Fund. Under the Investment Company Act, a
majority of the Fund's outstanding voting securities is defined as the lesser of
(i) 67% of the Fund's outstanding voting shares represented at a meeting at
which more than 50% of the Fund's outstanding voting shares are present in
person or by proxy, or (ii) more than 50% of the Fund's outstanding voting
shares. If the proposed change in Investment Restriction No. 4 and related
investment policy are not approved, the Fund would not be able to purchase and
sell futures contracts on debt securities and options thereon and futures
contracts on foreign currencies and options thereon.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL NO. 4.

SELECTION OF INDEPENDENT ACCOUNTANTS
(Proposal No. 5)

A majority of the members of the Board of Directors who are not interested
persons of the Fund have selected Deloitte & Touche LLP as independent
accountants for the Fund for the year ending December 31, 1994. The ratification
of the selection of independent accountants is to be voted upon at the meeting
and it is intended that the persons named in the accompanying proxy vote for
Deloitte & Touche LLP. No representative of Deloitte & Touche LLP is expected to
be present at the Annual Meeting of Shareholders.

The Board of Directors' policy regarding engaging independent accountants'
services is that management may engage the Fund's principal independent
accountants to perform any service(s) normally provided by independent
accounting firms, provided that such service(s) meets any and all of the
independent requirements of the American Institute of Certified Public
Accountants and the Securities and Exchange Commission. The Audit Committee will
review and approve services provided by the independent accountant prior to
their being rendered. The Board of Directors also receives a report from its
Audit Committee relating to all services after they have been performed by the
Fund's independent accountants.

Required Vote

The affirmative vote of at least a majority of the shares present at the
meeting, in person or by proxy and entitled to vote thereupon, is required for
ratification.

THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT YOU VOTE "FOR" THIS
PROPOSAL NO. 5.

<PAGE>

OTHER MATTERS

No business other than as set forth herein is expected to come before the
Meeting, but should any other matter requiring a vote of shareholders arise,
including any question as to an adjournment of the Meeting, the persons named in
the enclosed proxy will vote thereon according to their best judgment in the
interests of the Fund, taking into account all relevant circumstances.

SHAREHOLDER PROPOSALS

A shareholder's proposal intended to be presented at the Fund's Annual
Meeting of Shareholders in 1995 must be received by the Fund on or before
February 28, 1995, in order to be included in the Fund's proxy statement and
form of proxy relating to that meeting. The mere submission of a proposal by a
shareholder does not guarantee that such proposal will be included in the proxy
statement because certain rules under the Federal securities laws must be
complied with before inclusion of the proposal is required.

S. JANE ROSE

Secretary

Dated: October 3, 1994

Shareholders who do not expect to be present at the Meeting and who wish to
have their shares voted are requested to date and sign the enclosed proxy and
return it in the enclosed envelope. No postage is required if mailed in the
United States.

28
<PAGE>

Exhibit A

PRUDENTIAL MUTUAL FUND MANAGEMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1993

ASSETS

Cash and short-term investments ............................ $ 42,667,507
Loan to affiliate .......................................... 85,000,000
Management, administration and other fees receivable ....... 17,897,292
Transfer agency and fiduciary fees receivable .............. 3,744,874
Furniture, equipment and leasehold improvements, net ....... 10,495,702
Other assets ............................................... 4,676,430
------------
$164,481,805
------------
------------

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Due to affiliates .......................................... $ 48,794,366
Accounts payable and accrued expenses ...................... 11,208,209
Income taxes payable to affiliate - net .................... 2,937,828
------------
62,940,403
------------

COMMITMENTS (Note 6)

STOCKHOLDERS' EQUITY:
Class A common stock, $1 par value (1,000
shares authorized, 850 shares outstanding) ............... 850
Class B common stock, $1 par value (1,000
shares authorized, 150 shares outstanding) ............... 150
Additional paid-in capital ................................. 24,999,000
Retained earnings .......................................... 76,541,402
------------
101,541,402
------------
$164,481,805
------------
------------

See notes to consolidated statement of financial condition.

A-1

<PAGE>

PRUDENTIAL MUTUAL FUND MANAGEMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
December 31, 1993

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Prudential Mutual Fund Management, Inc. ("PMF") and subsidiaries (the
"Company"), an indirect wholly-owned subsidiary of The Prudential Insurance
Company of America (the "Prudential"), were created to operate as the
manager, distributor and/or transfer agent for investment companies.

Principles of Consolidation

The consolidated financial statement includes the accounts of PMF and
its wholly-owned subsidiaries, Prudential Mutual Fund Services, Inc.
("PMFS") and Prudential Mutual Fund Distributors, Inc. ("PMFD"). All
intercompany profits, transactions and balances have been eliminated.

Income Taxes

The Company is a member of a group of affiliated companies which join
in filing a consolidated Federal income tax return. Pursuant to a tax
allocation agreement, tax expense is determined for individual profitable
companies on a separate return basis. Profit members pay this amount to an
affiliated company which in turn apportions the payment among the loss
members in proportion to their losses. In January 1993, the Company adopted
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109). The adoption of SFAS 109 did not have a material effect
on the Company's financial position.

2. SHORT-TERM INVESTMENTS

At December 31, 1993, the Company had invested $35,411,571 in several
money market funds which PMF manages.

3. FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Furniture, equipment and leasehold improvements consist of the
following:

Furniture .................................................$ 6,481,799
Equipment ................................................. 9,181,984
Leasehold improvements .................................... 3,407,213
-----------
19,070,996
Less accumulated depreciation and amortization ............ 8,575,294
-----------
$10,495,702
-----------
-----------

A-2
<PAGE>

4. RELATED PARTY TRANSACTIONS

In the ordinary course of business, the Company participates in a
variety of financial and administrative transactions with affiliates.

The loan to affiliate bears interest at 3.45 percent at December 31,
1993 and is due on demand.

The caption "Due to affiliates" includes $18,241,795 at December 31,
1993 for reimbursement of employee compensation and benefits, and other
administrative and operating expenses. This amount is noninterest-bearing
and payable on demand.

The Company has entered into subadvisory agreements with The
Prudential Investment Corporation ("PIC"), a wholly-owned subsidiary of
Prudential. Under these agreements, PIC furnishes investment advisory
services to substantially all the funds for which the Company acts as
Manager. At December 31 , 1993 there were unpaid fees due to PIC of
$23,926,277, included in the caption "Due to affiliates."

Distribution expenses include commissions and account servicing fees
paid to, or on account of, financial advisors of Prudential Securities
Incorporated ("Prudential Securities") and Pruco Securities Corporation
("PruSec"), affiliated broker-dealers and indirect wholly-owned
subsidiaries of Prud ential, advertising expenses, the cost of printing and
mailing prospectuses to potential investors, and indirect and overhead
costs of Prudential Securities and PruSec, including lease, utility,
communications and sales promotion expenses. At December 31, 1993 there
were unpaid distribution expenses of approximately $6,626,000, included in
the caption "Due to affiliates."

5. CAPITAL

PMFD is subject to the SEC Uniform Net Capital Rule (Rule 15c3-1),
which requires the maintenance of minimum net capital and requires that the
ratio of aggregate indebtedness to net capital, both as defined, shall not
exceed 15 to 1. At December 31, 1993, PMFD had net capital of $2,308,981,
which was $1,859,405 in excess of its required net capital of $449,576.
PMFD had a ratio of aggregate indebtedness to net capital of 2.9 to 1.

6. COMMITMENTS

The Company leases office space under operating leases expiring in
2003. The leases are subject to escalation based upon certain costs
incurred by the lessor. Future minimum rentals, as of December 31, 1993,
under the leases, are as follows:

Year Minimum Rental

1994 $ 2,738,000
1995 2,865,000
1996 3,375,000
1997 3,385,000
1998 3,230,000
Thereafter 13,800,000
-----------
$29,393,000
-----------

A-3
<PAGE>

7. PENSION AND OTHER POSTRETIREMENT BENEFITS

The Company has two defined benefit pension plans (the "Plans")
sponsored by the Prudential and Prudential Securities. The Plans cover
substantially all of the Company's employees. The funding policy is to
contribute annually the amount necessary to satisfy the Internal Revenue
Service funding standards. In addition, the Company has two defined
benefit plans for key executives, the Supplemental Retirement Plan (SRP)
for which estimated pension costs are currently accrued but not funded.

The Company provides certain health care and life insurance benefits
for eligible retired employees. Effective January 1, 1993, the Company
adopted Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" ("SFAS 106").
SFAS 106 changed the practice of accounting for postretirement benefits on
a cash basis to an accrual basis, whereby employers record the projected
future cost of providing such postretirement benefits as employees render
services instead of when benefits are paid. This new accounting method has
no effect on the Company's cash outlays for these retirement benefits. The
adoption of SFAS 106 did not materially impact the Company's financial
position.

The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits," ("SFAS 112") which is effective for fiscal years
beginning after December 15, 1993. Although several benefits are fully
insured which result in no SFAS 112 obligation, the Company currently has
an obligation and resulting expense under SFAS 112 for medical benefits
provided under long-term disability. The Company will adopt SFAS 112 on
January 1, 1994. Management believes that implementation will have no
material effect on the Company's financial position.

8. CONTINGENCY

On October 12, 1993, a purported class action lawsuit was instituted
against PMF, et al and certain current and former directors of a fund
managed by PMF. The plaintiffs seek damages in an unspecified amount for
excessive management and distribution fees they allege were incurred by
them. Although the outcome of this litigation cannot be predicted at this
time, the defendants believe they have meritorious defenses to the claims
asserted in the complaint and intend to defend this action vigorously. In
any case, management does not believe that the outcome of this action is
likely to have a material adverse effect on the Company's financial
position.

A-4
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors of
Prudential Mutual Fund Management, Inc.:

We have audited the accompanying consolidated statement of financial
condition of Prudential Mutual Fund Management, Inc. and subsidiaries as of
December 31, 1993. This consolidated financial statement is the
responsibility of the Company's management. Our responsibility is to
express an opinion on this consolidated financial statement based on our
audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statement is free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated statement of financial condition. 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 audit provides a reasonable basis for our
opinion.

In our opinion, such consolidated statement of financial condition
presents fairly, in all material respects, the financial position of
Prudential Mutual Fund Management, Inc. and subsidiaries at December 31,
1993 in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP
New York, New York
January 26, 1994

A-5

<PAGE>

The Global Yield Fund, Inc.

Needs

Your Proxy Vote

Before

November 17, 1994

Many shareholders think their votes are not important.

On the contrary, they are vital.

The Annual Meeting on November 17, 1994 will have to be adjourned without
conducting any business if less than a majority of the eligible shares are
represented. And the Fund, at shareholders' expense, will have to continue to
solicit votes until a quorum is obtained. Your vote, then, could be critical in
allowing the Fund to hold the Meeting as scheduled, so please return your proxy
card as soon as possible.

All shareholders will benefit from your cooperation.

Thank you.

<PAGE>

THE GLOBAL YIELD FUND, INC.
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292

Proxy for the Annual Meeting of Shareholders, November 17, 1994.

This Proxy is Solicited on Behalf of the Board of Directors

The undersigned hereby appoints Susan C. Cote, S. Jane Rose and Ronald
Amblard as Proxies, each with the power of substitution, and hereby
authorizes each of them to represent and to vote, as designated below, all
the shares of Common Stock of The Global Yield Fund, Inc. held of record by
the undersigned on September 2, 1994 at the Annual Meeting of Shareholders
to be held on November 17, 1994, or any adjournment thereof.

This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy
will be voted for Proposals 1 through 6.

Address changes: __________________________________________________________

__________________________________________________________

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.

<PAGE>

[X] PLEASE MARK VOTES AS IN
THIS EXAMPLE

With- For All
For hold Except
1.) Election of Directors.
Class II (Term Expiring in 1997) [ ] [ ] [ ]

Harry A. Jacobs, Jr., Thomas T. Mooney
and Richard A. Redeker

INSTRUCTION: To withhold authority for any individual nominee, mark
the "For All Except" box and strike a line through that nominee(s)
name in the list above.

-------------------------------------------------------------------

REGISTRATION

-------------------------------------------------------------------

--------------------------
Date
Please be sure to sign and date this Proxy.
- --------------------------------------------------------------------------------

- ----------Shareholder sign here------------------------Co-owner sign here-------

___________________________________________________________________________

2.) To approve a change in the Fund's For Against Abstain
investment objective to seek total [ ] [ ] [ ]
return.

3.) To approve an amendment to the For Against Abstain
Fund's Articles of Incorporation to [ ] [ ] [ ]
change the name of the Fund to "The
Global Total Return Fund Inc."

4.) To approve an amendment to the For Against Abstain
Fund's investment restrictions to [ ] [ ] [ ]
permit the use of futures contracts
and related options.

5.) To ratify the selection by the Board For Against Abstain
of Directors of Deloitte & Touche [ ] [ ] [ ]
LLP as independent accountants for
the year ending December 31, 1994.

6.) To consider and act upon such other For Against Abstain
business as may properly come before [ ] [ ] [ ]
the Meeting.

Mark box at right if address change [ ]
have been noted on the reverse side
of this card.

NOTE: Please sign exactly as name appears above. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in
full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.

RECORD DATE SHARES: