<PAGE>
The Global Yield
Fund, Inc.
- -------------------------------------------------------------------
Annual Report
December 31, 1993
(sm)The mark is a service mark of The Prudential Insurance
Company of America.
<PAGE>
LETTER TO
SHAREHOLDERS
February 4, 1994
Dear Shareholder:
The divergence of global economic growth patterns during the last 12 months and
the further disruption of the European exchange rate mechanism in August
contributed to the volatile global bond markets. Despite this environment, The
Global Yield Fund, Inc. was able to perform competitively.
The Fund seeks high current yield by investing in a portfolio of high-quality,
foreign-denominated securities throughout the world.
FUND PERFORMANCE
As of December 31, 1993
<TABLE>
<CAPTION>
12 month Total Return
Total Return Since Inception
(since 1/1/93) (7/7/86)
<S> <C> <C>
The Global Yield Fund, Inc.* 18.12% 123.09%
JP Morgan Global Traded Government
Bond Index** 12.27% 102.55%
</TABLE>
*Total return of the Fund as calculated herein represents the change in net
asset value from the beginning of the period noted through 12/31/93 and assumes
the reinvestment of dividends and distributions. Shares of the Fund are traded
on the NYSE. Past performance is no guarantee of future results.
**JP Morgan Global Traded Government Bond Index is a weighted index of the total
return of foreign government bonds from 13 countries, including Australia,
Belgium, Canada, Denmark, France, Germany, Italy, Japan, Netherlands, Spain,
Sweden, United Kingdom and the United States and provides a broad measure of
market performance.
COUNTRY ALLOCATION*
As of Dec. 31, 1993
(PIE CHART)
*Percent of Net Assets
Your Fund's net asset value rose from $8.10 on December 31, 1992 to $8.76 on
December 31, 1993 and paid dividends and distributions totaling $0.72 per share
during the year.
Portfolio Review and Bond Market Yields
During 1993, recession in Europe, slow and uneven growth in the dollar bloc
nations of Australia, Canada, New Zealand and the U.S., and lower global
inflationary pressures encouraged bond yields to fall around the world. Our
increased holdings of longer-dated bonds allowed us to take advantage of
declining yields and help capture significant capital gains. As of December 31,
1993, the Fund's portfolio had a weighted average maturity of 7.1 years.
Decreases in overseas bond yields continued to outpace declines in the North
American markets. In particular, the Fund's European bond holdings offered
significantly higher total returns than comparable U.S. Treasuries. Sluggish
economic growth in Europe caused its interest rates to decline sharply
-1-
<PAGE>
since the end of June. As the accompanying pie chart shows, the Fund was well
positioned to take advantage of this situation since approximately 54% of total
net assets were held in European countries as of December 31, 1993.
We held a relatively small position in U.S. bonds during the period as stronger
U.S. economic data pointed to sustained growth and possible higher interest
rates. Although inflationary pressures do not seem to be a major threat, U.S.
government bond yields rose when the Federal Reserve implied that it may move to
increase short-term rates in 1994 if any signs of inflation emerge.
The Mexican peso has been relatively stable. Following the passage of NAFTA, we
increased the Fund's position in Mexican Treasury bills to take advantage of
comparably higher yields. We also held a minor position in the Canadian bond
market where economic growth is present, but lagging the U.S.#x#We also
benefitted from our holdings in Japan. The Japanese economy continued to weaken
and inflation remained extremely low. Yields fell dramatically on Japanese
securities as prior government intervention intended to help the economy has
only been modestly successful. The bond market should continue to prosper as
long as these conditions persist.
The Fund benefitted from bond and currency positions held in Australia and New
Zealand. Modest growth, high unemployment and low inflation presented a
favorable backdrop for their bond and currency markets. The currencies were
further buoyed by rising commodity prices.
STOCK LISTING
The Global Yield Fund, Inc.'s common stock is traded on the New York Stock
Exchange under the symbol "PGY" and is frequently listed as "GlobYldFd" or
"GlbYld" in the financial sections of newspapers. It is also listed in a
closed-end fund table every Monday in The Wall Street Journal.
Currency Markets and the Fund's Reaction
During the first six months of last year, the U.S. dollar was mixed. The
dollar, however, strengthened during the second half of 1993 on data that
indicated there was an increasing divergence of growth patterns between the U.S.
and most other major industrialized nations. The Japanese yen, after
strengthening dramatically during the first six months of the year, has come
under downward pressure against the dollar as growth prospects in Japan remain
bleak.
In Europe, tight monetary policy continues to drag down economic growth. Since
most European countries are already burdened with high budget deficits, currency
markets have been anticipating future monetary policy actions, including further
cuts in official interest rates in the coming months. Since this would help to
depreciate many European currencies against a rising U.S. dollar, a significant
portion of the Fund's foreign currency exposure remains hedged back to the U.S.
dollar. Current economic fundamentals should support the Australian and New
Zealand dollars, so we presently intend to hold our positions in those nations
on an unhedged basis.
Outlook
The prospects for the global bond market are positive. Given the low level of
U.S. interest rates, economic weakness abroad, and generally stable worldwide
inflation, global bonds should remain attractive in 1994. We will attempt
-2-
<PAGE>
to maintain diversified holdings in various world bond markets in order to
capture both high current yields and potential capital gains resulting from
falling interest rates. In coming months, we will continue to focus on
investments outside of the United States. In addition, if the U.S. dollar
appreciates further we will apply currency hedges as necessary to help protect
the portfolio.#x#As always, it is a pleasure to have you as a shareholder of The
Global Yield Fund, Inc. and to take the opportunity to report our activities to
you.
Sincerely,
Lawrence C. McQuade
President
Jeffrey E. Brumette
Portfolio Manager
-3-
<PAGE>
<PAGE>
- ----------------------------------------------------------
THE GLOBAL YIELD FUND, INC.
Portfolio of Investments
December 31, 1993
<TABLE>
<CAPTION>
- --------------------------------------------------------
Principal Description US$
Amount Value
(000) (Note 1)
- --------------------------------------------------------
<C> <S> <C>
LONG-TERM INVESTMENTS--87.3%
Australia--4.7%
Australian Government
Bonds,
A$ 7,400# 12.50%, 3/15/97......... $ 5,978,898
10,620# 6.25%, 3/15/99.......... 7,196,362
Queensland Treasury
Corp.,
19,500# 8.00%, 5/14/97.......... 14,004,097
------------
27,179,357
------------
Canada--5.6%
Canadian Government
Bonds,
C$ 10,000 Zero Coupon, 9/1/01..... 4,510,231
18,000 Zero Coupon, 9/15/01.... 8,139,485
Ontario Hydro
Commission,
15,000# 7.25%, 3/31/98.......... 11,860,930
Province of Quebec,
10,000# 8.00%, 3/30/98.......... 8,112,588
------------
32,623,234
------------
Denmark--4.6%
Danish Government Bonds,
DKr 178,500# 6.00%, 2/10/96.......... 26,541,234
------------
France--10.9%
French Government Bonds,
FF 185,420 Zero Coupon, 10/25/98... 24,608,590
120,000# 5.75%, 11/12/98......... 20,889,268
12,300# 6.75%, 10/25/03......... 2,252,392
70,000# 8.50%, 4/25/23.......... 15,325,974
------------
63,076,224
------------
Germany--5.4%
German Government Bonds,
DM 24,250# 6.375%, 5/20/98......... 14,696,700
29,950# 6.00%, 6/20/16.......... 16,860,885
------------
31,557,585
------------
Ireland--3.5%
Irish Government Bonds,
IEP 2,000# 8.75%, 7/27/97.......... 3,068,243
2,000# 9.25%, 7/11/03.......... 3,382,390
10,000# 6.25%, 10/18/04......... 13,955,273
------------
20,405,906
------------
Italy--8.2%
Export Finance of
Norway,
Lira 1,000,000# 12.25%, 8/5/96.......... $ 638,874
Italian Government Bonds,
7,485,000# 10.00%, 8/1/96.......... 4,535,265
30,000,000# 9.00%, 10/1/96.......... 17,849,422
15,000,000# 12.00%, 1/20/98......... 9,727,858
22,200,000# 12.00%, 1/17/99......... 14,679,428
------------
47,430,847
------------
Japan--8.9%
Austrian Government
Bonds,
(yen) 1,000,000# 6.25%, 10/16/03......... 10,985,108
European Investor Bank,
500,000# 6.625%, 3/15/00......... 5,353,943
Japanese Government
Bonds,
3,555,000# 4.90%, 9/22/08.......... 35,458,417
------------
51,797,468
------------
Netherlands--3.4%
Dutch Government Bonds,
DG 32,500# 7.50%, 1/15/23.......... 19,649,514
------------
New Zealand--3.9%
Electric Corp. of New
Zealand,
NZ$ 5,000# 10.00%, 10/15/01........ 3,426,108
New Zealand Government
Bonds,
30,000# 10.00%, 7/15/97......... 19,144,619
------------
22,570,727
------------
Spain--5.3%
Spanish Government
Bonds,
Pts 600,000# 11.85%, 8/30/96......... 4,599,075
1,700,000# 10.55%, 11/30/96........ 12,744,180
1,900,000# 9.00%, 2/28/97.......... 13,620,285
------------
30,963,540
------------
</TABLE>
-4- See Notes to Financial Statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------
Principal Description US$
Amount Value
(000) (Note 1)
- --------------------------------------------------------
<C> <S> <C>
Sweden--5.2%
Caisse,
SKr 75,000# 7.00%, 3/20/96.......... $ 9,024,702
Statens Bostad Housing
Fund,
150,000# 11.00%, 1/21/99......... 20,938,454
------------
29,963,156
------------
United Kingdom--6.2%
United Kingdom Treasury
Bonds,
(brpd) 6,301# 9.00%, 3/3/00........... 10,809,352
7,700# 7.00%, 11/6/01.......... 12,076,780
5,000# 6.75%, 11/26/04......... 7,772,310
3,120# 7.75%, 9/8/06........... 5,195,830
------------
35,854,272
------------
United States--11.5%
United States Treasury
Notes,
US$ 4,000 7.875%, 8/15/01......... 4,553,125
800 7.50%, 11/15/01......... 892,750
15,000 6.375%, 8/15/02......... 15,649,219
United States Treasury
Bonds,
29,500 7.125%, 2/15/23......... 31,910,703
14,000 6.25%, 8/15/23.......... 13,818,438
------------
66,824,235
------------
Total long-term
investments
(cost
US$502,764,463)....... 506,437,299
------------
SHORT-TERM INVESTMENTS--11.0%
Mexico--4.6%
Mexican Treasury
Bills,**
MPts 10,000# 12.88%, 2/24/94......... 3,160,414
21,991# 12.86%, 3/3/94.......... 6,951,272
27,000# 11.75%, 9/29/94......... 8,056,334
29,247# 11.75%, 10/6/94......... 8,710,666
------------
26,878,686
------------
New Zealand--1.0%
New Zealand Treasury
Bills,**
NZ$ 10,000# 6.35%, 2/9/94........... 5,561,349
------------
United States--3.7%
Joint Repurchase
Agreement Account,
US$ 21,446 3.15%, 1/3/94 (Note
5).................... $ 21,446,000
------------
OUTSTANDING OPTIONS
PURCHASED*--1.7%
Contracts Call Options
(000)
- --------------
Japanese Yen,
20,400 expiring Jan. '94
@(yen)109.20.......... 458,184
87,200 expiring May '94
@(yen)105.00.......... 680,160
1,010,000 expiring June '94
@(yen)110.34.......... 121,091
1,000,000 expiring June '94
@(yen)110.50.......... 109,319
------------
1,368,754
------------
Put Options
German Deutschemarks,
61,800 expiring April '94
@DM1.68............... 3,145,620
French Francs,
20,600 expiring April '94
@FF6.08............... 362,560
22,800 expiring May '94
@FF6.00............... 528,960
Japanese Yen,
22,200 expiring Jan. '94
@(yen)110.00.......... 452,880
Swiss Francs,
44,400 expiring Mar. '94
@SF1.51............... 661,560
82,400 expiring Dec. '94
@SF1.52............... 3,172,400
------------
8,323,980
------------
Total short-term
investments
(cost US$63,767,499).... 63,578,769
------------
Total Investments Before
Outstanding Options
Written--98.3%
(cost US$566,531,962;
Note 3)............... 570,016,068
------------
Outstanding Call Options
Written*--(0.2%)
German Deutschemarks,
48,400 expiring Jan. '94
@DM1.73............... (692,120)
Japanese Yen,
20,400 expiring Jan. '94
@(yen)110.20.......... (308,244)
22,200 expiring Jan. '94
@(yen)111.00.......... (321,900)
------------
Total outstanding call
options written
(premiums received
US$647,250)........... (1,322,264)
------------
</TABLE>
-5- See Notes to Financial Statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------
US$
Value
(Note 1)
Description
- --------------------------------------------------------
<C> <S> <C>
Total Investments, Net
of Outstanding Options
Written--98.1%........ $568,693,804
Other assets in excess
of
liabilities--1.9%..... 11,248,525
------------
Net Assets--100%........ $579,942,329
------------
------------
<FN>
- ------------------
Portfolio securities are classified according to the security's
currency denomination. Option contracts are expressed in local
currency units.
* Non-income producing security.
** Percentages quoted represent yields to maturity as of purchase date.
# Principal amount segregated as collateral for forward currency contracts and
options written. Approximate aggregate value of segregated
securities--$434,795,000.
</TABLE>
See Notes to Financial Statements. -6-
<PAGE>
<PAGE>
- ----------------------------------------------------------
THE GLOBAL YIELD FUND, INC.
Statement of Assets and Liabilities
December 31, 1993
- ----------------------------------------------------------
<TABLE>
<S> <C>
Assets
Investments, at value (cost
$566,531,962)........................ $570,016,068
Interest receivable.................... 13,669,144
Other assets........................... 72,276
------------
Total assets....................... 583,757,488
------------
Liabilities
Outstanding call options written, at
value (premiums received $647,250)... 1,322,264
Forward contracts-net amount payable to
counterparties....................... 960,299
Dividends payable...................... 770,298
Due to Manager......................... 305,252
Withholding taxes payable.............. 293,850
Accrued expenses....................... 163,196
------------
Total liabilities.................. 3,815,159
------------
Net Assets............................. $579,942,329
------------
------------
Net assets were comprised of:
Common stock, at par................. $ 662,077
Paid-in capital in excess of par..... 596,175,991
Cost of 3,548,600 shares held in
treasury............................. (29,345,536)
------------
567,492,532
Accumulated net realized gains on
investment
transactions....................... 10,931,431
Net unrealized appreciation on
investments and
foreign currencies................. 1,518,366
------------
Net assets, December 31, 1993........ $579,942,329
------------
------------
Net asset value per share:
($579,942,329 (div) 66,207,699 shares
of common stock outstanding)....... $8.76
------------
------------
</TABLE>
See Notes to Financial Statements.
- ----------------------------------------------------------
THE GLOBAL YIELD FUND, INC.
Statement of Operations
Year Ended December 31, 1993
- ----------------------------------------------------------
<TABLE>
<S> <C>
Net Investment Income
Income
Interest and discount earned (net of
foreign
withholding taxes of $404,704)..... $ 48,046,062
-------------
Expenses
Management fee....................... 4,201,489
Custodian's fees and expenses........ 753,000
Transfer agent's fees and expenses... 220,000
Reports to shareholders.............. 210,000
Insurance............................ 165,000
Directors' fees...................... 96,000
Audit................................ 49,000
Legal................................ 30,000
Miscellaneous........................ 37,771
-------------
Total operating expenses........... 5,762,260
-------------
Net investment income................ 42,283,802
-------------
Realized and Unrealized Gain (Loss) on
Investment and Foreign Currency
Transactions
Net realized gain (loss) on:
Security transactions................ 61,091,716
Foreign currency transactions........ (50,386,163)
Written option transactions.......... 4,334,411
-------------
15,039,964
-------------
Net change in unrealized appreciation on:
Securities........................... 37,379,220
Foreign currencies................... (2,888,781)
Written options...................... (675,014)
-------------
33,815,425
-------------
Net gain on investments and foreign
currencies........................... 48,855,389
-------------
Net Increase In Net Assets
Resulting from Operations.............. $ 91,139,191
-------------
-------------
</TABLE>
See Notes to Financial Statements.
-7-
<PAGE>
<PAGE>
- ----------------------------------------------------------
THE GLOBAL YIELD FUND, INC.
Statement of Changes in Net Assets
- ----------------------------------------------------------
Increase (Decrease)
in Net Assets
<TABLE>
<CAPTION>
December 31,
----------------------------
1993 1992
------------ ------------
<S> <C> <C>
Operations:
Net investment income..... $ 42,283,802 $ 53,605,977
Net realized gain on
investment and foreign
currency transactions... 15,039,964 3,098,634
Net change in unrealized
appreciation/depreciation
on investments and
foreign currencies...... 33,815,425 (62,476,133)
------------ ------------
Net increase (decrease) in
net assets resulting
from operations......... 91,139,191 (5,771,522)
------------ ------------
Dividends and distributions:
Dividends from net
investment income....... (19,539,619) (49,421,557)
Distributions from net
capital gains........... (15,039,964) (3,401,599)
Distributions in excess of
net
capital gains........... (13,034,919) --
------------ ------------
Total dividends and
distributions............. (47,614,502) (52,823,156)
------------ ------------
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions......... 770,334 865,821
------------ ------------
Total increase (decrease)... 44,295,023 (57,728,857)
Net Assets
Beginning of year........... 535,647,306 593,376,163
------------ ------------
End of year................. $579,942,329 $535,647,306
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements.
- ----------------------------------------------------------
THE GLOBAL YIELD FUND, INC.
Notes to Financial Statements
- ----------------------------------------------------------
The Global Yield Fund, Inc. (the ``Fund'') was organized in Maryland on May
6, 1986 as a closed-end, non-diversified management investment company.
Investment operations commenced on July 7, 1986.
The investment objective of the Fund is to achieve high current yield,
relative to current yields available from similar type U.S. dollar denominated
debt securities, by choosing selectively among securities denominated in various
foreign currencies. All of the Fund's investments will be rated A or better by
Moody's or Standard and Poor's or will, in the investment manager's judgment, be
of equivalent quality. The ability of the issuers of the debt securities held by
the Fund to meet their obligations may be affected by economic developments in a
specific country or industry.
Note 1. Accounting The following is a summary of
Policies significant accounting policies
followed by the Fund in the preparation of its
financial statements.
Securities Valuation: In valuing the Fund's assets, quotations of foreign
securities in a foreign currency are converted to U.S. dollar equivalents at the
then current currency value. Portfolio securities that are actively traded in
the over-the-counter market, including listed securities for which the primary
market is believed to be over-the-counter, are valued at the mean between the
most recently quoted bid and asked prices provided by principal market makers.
Any security for which the primary market is on an exchange is valued at the
last sale price on such exchange on the day of valuation or, if there was no
sale on such day, the last bid price quoted on such day. Forward currency
contracts are valued at the current cost of covering or offsetting the contract
on the day of valuation. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Directors of the Fund.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost.
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian takes possession of the
underlying collateral securities, the value of which exceeds the principal
amount of the repurchase transaction including accrued interest. If the seller
defaults and the value of the collateral declines or if bankruptcy proceedings
are commenced with respect to the seller
-8-
<PAGE>
<PAGE>
of the security, realization of the collateral by the Fund may be delayed or
limited.
Foreign Currency Translation: The books and records of the Fund are maintained
in United States dollars. Foreign currency amounts are translated into United
States dollars on the following basis:
(i) market value of investment securities, other assets and liabilities--at
the current rates of exchange.
(ii) purchases and sales of investment securities, income and expenses--at
the rates of exchange prevailing on the respective dates of such
transactions.
Although the net assets of the Fund are presented at the foreign exchange
rates and market values at the close of the year, the Fund does not isolate that
portion of the results of operations arising as a result of changes in the
foreign exchange rates from the fluctuations arising from changes in the market
prices of the securities held at year end. Similarly, the Fund does not isolate
the effect of changes in foreign exchange rates from the fluctuations arising
from changes in the market prices of long-term debt securities sold during the
year. Accordingly, realized foreign currency gains (losses) are included in the
reported net realized gains on security transactions.
Net realized losses on foreign currency transactions represents net foreign
exchange losses from sales and maturities of short-term securities and forward
currency contracts, disposition of foreign currencies, currency gains or losses
realized between the trade and settlement dates on securities transactions, and
the difference between the amounts of interest, discount and foreign taxes
recorded on the Fund's books and the U.S. dollar equivalent amounts actually
received or paid. Net currency gains from valuing foreign currency denominated
assets (excluding investments) and liabilities at year end exchange rates are
reflected as a component of unrealized appreciation/depreciation on investments
and foreign currencies.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. companies as a result of,
among other factors, the possibility of political and economic instability and
the level of governmental supervision and regulation of foreign securities
markets.
Forward Currency Contracts: The Fund enters into forward currency contracts in
order to hedge its exposure to changes in foreign currency exchange rates on its
foreign portfolio holdings. A forward contract is a commitment to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss arising from the difference between the settlement value of the original
contract and the renegotiated forward contract is isolated and is included in
net realized losses from foreign currency transactions. Risks may arise upon
entering into these contracts from the potential inability of the counterparties
to meet the terms of their contracts.
Option Writing: When the Fund writes an option, an amount equal to the premium
received by the Fund is recorded as a liability and is subsequently adjusted to
the current market value of the option written. Premiums received from writing
options which expire unexercised are treated by the Fund on the expiration date
as realized gains from written options transactions. The difference between the
premium and the amount paid on effecting a closing purchase transaction,
including brokerage commissions, is also treated as a realized gain, or if the
premium is less than the amount paid for the closing purchase transaction, as a
realized loss. If a call option is exercised, the premium is added to the
proceeds from the sale of the underlying security or currency in determining
whether the Fund has realized a gain or loss. If a put option is exercised, the
premium reduces the cost basis of the securities or currencies purchased by the
Fund. The Fund as writer of an option has no control over whether the underlying
securities or currency may be sold (called) or purchased (put) and as a result
bears the market risk of an unfavorable change in the price of the security or
currency underlying the written option.
Security Transactions and Investment Income: Security transactions are recorded
on the trade date. Realized and unrealized gains and losses from security and
currency transactions are calculated on the identified cost basis. Interest
income which is comprised of three elements: stated coupon, original issue
discount and market discount is recorded on the accrual basis.
Dividends and Distributions: Dividends are declared quarterly. Distributions of
long-term capital gains, if any, will be declared annually. Dividends and
distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for foreign currencies and loss deferrals.
Reclassification of Capital Accounts: Effective January 1, 1993, the Fund began
accounting and reporting for distributions to shareholders in accordance with
Statement of Position 93-2: Determination, Disclosure, and Financial Statement
Presentation of Income, Capital Gain, and Return of Capital Distributions by
Investment Companies. As a result of
-9-
<PAGE>
<PAGE>
this statement, the Fund changed the classification of distributions to
shareholders to better disclose the differences between financial statement
amounts and distributions determined in accordance with income tax regulations.
The effect caused by adopting this statement was to decrease paid-in capital by
$41,224,153, decrease undistributed net investment income by $19,262,812 and
increase accumulated net realized gains on investment transactions by
$60,486,965 compared to amounts previously reported through December 31, 1992.
During the year ended December 31, 1993, the Fund reclassified $22,744,183 of
foreign currency losses to undistributed net investment income from accumulated
net realized gains on investment transactions. Net investment income, net
realized gains and net assets were not affected by this change.
Taxes: It is the Fund's policy to continue to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders. Therefore, no federal
income or excise tax provision is required.
Withholding taxes on foreign interest have been provided for in accordance
with the Fund's understanding of the applicable country's tax rules and rates.
Note 2. Agreements The Fund has a management
agreement with Prudential Mutual Fund Management,
Inc. (``PMF''). Pursuant to this agreement PMF has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PMF has entered into a subadvisory agreement with The Prudential
Investment Corporation (``PIC''); PIC furnishes investment advisory services in
connection with the management of the Fund. PMF pays for the cost of the
subadviser's services, the compensation of officers of the Fund, occupancy and
certain clerical and bookkeeping costs of the Fund. The Fund bears all other
costs and expenses.
The management fee paid PMF is computed weekly and payable monthly, at the
annual rate of 0.75% of the Fund's average weekly net assets up to US$500
million, 0.70% of such assets between US$500 million and US$1 billion, and 0.65%
of such assets in excess of US$1 billion.
PMF and PIC are indirect, wholly-owned subsidiaries of The Prudential
Insurance Company of America (``Prudential'').
Note 3. Portfolio Purchases and sales of invest-
Securities ment securities, other than
short-term investments and written options, for
the year ended December 31, 1993 aggregated $1,868,463,162 and $1,839,129,812,
respectively.
Transactions in written options during the year ended December 31, 1993 were
as follows:
<TABLE>
<CAPTION>
Number of
Contracts Premiums
(000) Received
---------- ------------
<S> <C> <C>
Options written................. 2,595,000 $ 11,036,420
Options terminated in closing
purchase
transactions.................. (990,000) (8,155,124)
Options expired................. (197,000) (1,386,360)
Options exercised............... (1,317,000) (847,686)
---------- ------------
Options outstanding at December
31,
1993.......................... 91,000 $ 647,250
---------- ------------
---------- ------------
</TABLE>
At December 31, 1993, the Fund had outstanding forward currency contracts,
both to purchase and sell foreign currencies, as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Purchase Settlement Date Current Appreciation/
Contracts Payable Value (Depreciation)
- ------------------------- ---------------- ------------ ---------------
<S> <C> <C> <C>
Australian Dollars
expiring
1/24/94-2/1/94......... $ 30,140,147 $ 30,481,959 $ 341,812
British Pound
expiring 1/31/94....... 23,177,060 22,993,570 (183,490)
Canadian Dollars
expiring
1/19/94-2/14/94........ 42,956,815 43,044,774 87,959
Danish Krona
expiring 2/1/94........ 13,523,828 13,382,084 (141,744)
Deutschemarks
expiring
1/14/94-3/3/94......... 235,260,800 229,793,212 (5,467,588)
French Francs
expiring
2/7/94-2/14/94......... 115,760,996 113,885,346 (1,875,650)
Italian Lira
expiring 4/5/94........ 3,492,428 3,270,992 (221,436)
Japanese Yen
expiring
1/10/94-1/31/94........ 69,090,220 68,236,401 (853,819)
New Zealand Dollars
expiring 2/2/94........ 6,725,605 6,901,196 175,591
Spanish Pesetas
expiring 1/27/94....... 53,284,801 51,413,208 (1,871,593)
Swedish Krona
expiring 1/24/94....... 13,923,775 13,987,281 63,506
Swiss Francs
expiring 1/12/94....... 48,400,000 47,397,561 (1,002,439)
---------------- ------------ ---------------
$655,736,475 $644,787,584 $ (10,948,891)
---------------- ------------ ---------------
---------------- ------------ ---------------
</TABLE>
<TABLE>
<CAPTION>
Value at
Foreign Currency Sale Settlement Date Current Appreciation/
Contracts Receivable Value (Depreciation)
- ------------------------- ---------------- ------------ ---------------
<S> <C> <C> <C>
Australian Dollars
expiring 1/24/94....... $ 9,973,454 $ 9,961,453 $ 12,001
Belgian Francs
expiring 1/10/94....... 30,179,854 29,702,918 476,936
British Pounds
expiring 1/31/94....... 12,219,304 12,098,157 121,147
Canadian Dollars
expiring
1/19/94-2/14/94........ 64,050,542 64,229,487 (178,945)
Danish Krona
expiring
1/10/94-2/1/94......... 39,769,260 39,630,150 139,110
Deutschemarks
expiring
1/14/94-3/3/94......... 295,538,933 289,626,534 5,912,399
French Francs
expiring
1/10/94-2/14/94........ 155,763,884 157,041,579 (1,277,695)
</TABLE>
-10-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Value at
Foreign Currency Sale Settlement Date Current Appreciation/
Contracts Receivable Value (Depreciation)
- ------------------------- ---------------- ------------ ---------------
<S> <C> <C> <C>
Italian Lira
expiring 1/24/94....... $ 3,344,807 $ 3,301,477 $ 43,330
Japanese Yen
expiring
1/10/94-1/31/94........ 104,831,144 101,728,827 3,102,317
Netherland Guilders
expiring 1/10/94....... 18,517,110 18,262,905 254,205
New Zealand Dollars
expiring 2/2/94........ 1,822,600 1,814,492 8,108
Spanish Pesetas
expiring
1/14/94-2/4/94......... 108,720,754 106,887,026 1,833,728
Swedish Krona
expiring 1/24/94....... 20,481,998 20,587,163 (105,165)
Swiss Francs
expiring
1/12/94-1/18/94........ 47,900,000 48,252,883 (352,883)
---------------- ------------ ---------------
$913,113,644 $903,125,051 $ 9,988,593
---------------- ------------ ---------------
---------------- ------------ ---------------
</TABLE>
The United States federal income tax basis of the Fund's investments at
December 31, 1993 was $566,881,595 and, accordingly, net unrealized appreciation
for United States federal income tax purposes was $3,134,473 (gross unrealized
appreciation--$12,421,017; gross unrealized depreciation-- $9,286,544).
Note 4. Capital There are 200 million shares
of $.01 par value common stock authorized. Of the
66,207,699 shares outstanding as of December 31, 1993, Prudential owned 12,020
shares.
The Fund issued 98,288 shares and 107,288 shares during the years ended
December 31, 1993 and December 31, 1992, respectively, in connection with the
reinvestment of dividends and distributions paid to shareholders enrolled in the
dividend reinvestment plan.
Note 5. Joint The Fund, along with other
Repurchase affiliated registered invest
Agreement ment companies, transfers
Account uninvested cash balances into
a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements collateralized
by U.S. Treasury or federal agency obligations. As of December 31, 1993, the
Fund has a 1.80% undivided interest in the joint account. The undivided interest
for the Fund represents $21,446,000 in the principal amount. As of such date,
each repurchase agreement in the joint account and the collateral therefor were
as follows:
Barclays de Zoete Wedd, Inc., 3.10%, in the principal amount of $100,000,000,
repurchase price $100,025,883, due 1/3/94; collateralized by $32,000,000 U.S.
Treasury Notes, 7.50%, due 11/15/01; $7,305,000 U.S. Treasury Notes, 8.50%, due
2/15/00 and $49,000,000 U.S. Treasury Notes, 8.875%, due 11/15/98; approximate
aggregate value including accrued interest--$102,043,014.
Bear Stearns & Co., Inc., 3.18%, in the principal amount of $323,000,000,
repurchase price $323,085,595, due 1/3/94; collateralized by $200,000,000 U.S.
Treasury Notes, 3.875%, due 3/31/95; $5,745,000 U.S. Treasury Notes, 4.25%, due
7/31/95; $85,000 U.S. Treasury Notes, 7.375%, due 5/15/96; $30,000,000 U.S.
Treasury Notes, 5.625%, due 1/31/98 and $80,030,000 U.S. Treasury Notes, 7.50%,
due 11/15/01; approximate aggregate value including accrued interest--
$329,564,341.
Goldman, Sachs & Co., 3.10%, in the principal amount of $399,000,000,
repurchase price $399,103,075, due 1/3/94; collateralized by $363,720,000 U.S.
Treasury Bonds, 7.50%, due 11/15/16; approximate value including accrued
interest-- $408,104,889.
Kidder, Peabody & Co. Inc., 3.20%, in the principal amount of $375,000,000,
repurchase price $375,100,000, due 1/3/94; collateralized by $200,000,000 U.S.
Treasury Bonds, 11.625%, due 11/15/04; $38,000,000 U.S. Treasury Bonds, 12.75%,
due 11/15/10; $11,730,000 U.S. Treasury Notes, 7.25%, due 11/15/96; $90,000 U.S.
Treasury Bonds, 9.00%, due 2/15/94 and $15,000,000 U.S. Treasury Notes, 7.375%,
due 5/15/96; approximate aggregate value including accrued interest--
$382,608,562.
Note 6. Dividend On February 10, 1994, the
Board of Directors of the Fund declared a dividend
of $.11 per share from net investment income and a distribution of $.135 per
share from short-term capital gains payable on March 31, 1994 to shareholders of
record on March 8, 1994.
-11-
<PAGE>
<PAGE>
Note 7. Quarterly Data
(Unaudited)
<TABLE>
<CAPTION>
Net realized and
unrealized
gains (losses) on Net increase (decrease)
investments in net assets
Net investment and foreign resulting from
Quarterly Total income currencies operations
period ended income Amount Per share Amount Per share Amount Per share
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------- ----------- ------------------------- -------------------------- --------------------------
March 31, 1992 $14,937,918 $13,430,383 $ .20 $(22,676,763) $(.33) $ (9,246,380) $(.13)
June 30, 1992 15,018,139 13,571,943 .21 13,137,345 .20 26,709,288 .41
September 30, 1992 11,244,877 13,488,790 .20 (51,864,028) (.79) (38,375,238) (.59)
December 31, 1992 18,182,283 13,114,861 .20 2,025,947 .02 15,140,808 .22
March 31, 1993 14,245,001 12,895,901 .20 11,154,194 .17 24,050,095 .37
June 30, 1993 11,904,937 10,510,910 .16 23,340,174 .35 33,851,084 .51
September 30, 1993 11,665,435 10,207,392 .15 6,574,267 .10 16,781,659 .25
December 31, 1993 10,230,689 8,669,599 .13 7,786,754 .12 16,456,353 .25
<CAPTION>
Dividends Share
Quarterly and distributions price
period ended Amount Per share High Low
<S> <C> <C> <C> <C>
- ---------------------- ------------------------- ------------
March 31, 1992 $13,200,425 $ .20 $81/2 $8
June 30, 1992 13,200,425 .20 85/8 8 1/8
September 30, 1992 13,200,425 .20 9 7 7/8
December 31, 1992 13,221,881 .20 81/4 7 1/4
March 31, 1993 13,221,881 .20 83/8 8 1/4
June 30, 1993 13,221,881 .20 81/2 8
September 30, 1993 10,577,508 .16 83/4 8 1/8
December 31, 1993 10,593,232 .16 81/4 7 5/8
</TABLE>
-12-
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
THE GLOBAL YIELD FUND, INC.
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE: 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
----------- ------------ ------------ ------------ ------------
Net asset value, beginning of year...................... $ 8.10 $ 8.99 $ 8.96 $ 8.57 $ 9.41
----------- ------------ ------------ ------------ ------------
Net investment income................................... .64 .81 .84 .89 .94
Net realized and unrealized gain (loss) on investments
and foreign curencies................................. .74 (.90) (.19) .36 (.70)
----------- ------------ ------------ ------------ ------------
Total from investment operations...................... 1.38 (.09) .65 1.25 .24
----------- ------------ ------------ ------------ ------------
Dividends from net investment income.................... (.30) (.75) (.62) (.88) (.94)
Distributions from net capital gains.................... (.23) (.05) -- -- --
Distributions in excess of net capital gains............ (.19) -- -- -- --
Distributions from paid-in capital in excess of par..... -- -- -- -- (.14)
----------- ------------ ------------ ------------ ------------
Total dividends and distributions..................... (.72) (.80) (.62) (.88) (1.08)
----------- ------------ ------------ ------------ ------------
Increase resulting from Fund share transactions......... -- -- -- .02 --
----------- ------------ ------------ ------------ ------------
Net asset value, end of year............................ $ 8.76 $ 8.10 $ 8.99 $ 8.96 $ 8.57
----------- ------------ ------------ ------------ ------------
----------- ------------ ------------ ------------ ------------
Market price per share, end of year..................... $ 8.00 $ 7.50 $ 8.13 $ 8.00 $ 7.88
----------- ------------ ------------ ------------ ------------
----------- ------------ ------------ ------------ ------------
TOTAL INVESTMENT RETURN(dag)............................ 16.50% 1.75% 9.42% 12.89% (5.06)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)........................... $579,942 $535,647 $593,376 $591,339 $595,824
Average net assets (000)................................ $567,128 $570,812 $571,767 $596,824 $613,520
Ratio of expenses to average net assets................. 1.02% 1.01% .99% 1.03% 1.07%
Ratio of net income to average net assets............... 7.67% 9.39% 9.69% 10.03% 10.63%
Portfolio turnover rate................................. 370% 192% 141% 221% 734%
<FN>
- ---------------
(dag) Total investment return is calculated assuming a purchase of common stock at the current market value on
the first day and a sale at the current market value on the last day of each year reported. Dividends
and distributions are assumed for purposes of this calculation to be reinvested at prices obtained under
the dividend reinvestment plan. This calculation does not reflect brokerage commissions.
Contained above is selected data for a share of common stock outstanding, total investment return,
ratios to average net assets and other supplemental data for the years indicated. This information has
been determined based upon information provided in the financial statements and market price data for
the Fund's shares.
</TABLE>
See Notes to Financial Statements. -13-
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors of
The Global Yield Fund, Inc.
We have audited the accompanying statement of assets and liabilities
including the portfolio of investments of The Global Yield Fund, Inc., as of
December 31, 1993, the related statements of operations for the year then ended
and of changes in net assets for each of the years in the two year period then
ended, and the financial highlights for each of the years in the five year
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
December 31, 1993, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The Global Yield
Fund, Inc. as of December 31, 1993, the results of its operations, the changes
in its net assets and the financial highlights for the respective stated periods
in conformity with generally accepted accounting principles.
Deloitte & Touche
New York, New York
February 10, 1994
-14-
<PAGE>
<PAGE>
TAX INFORMATION
As required by the Internal Revenue Code, we are to advise you within 60 days
of the Fund's fiscal year end (December 31, 1993) as to the federal tax status
of dividends and distributions paid by the Fund.
During its year ended December 31, 1993, the Fund paid dividends and
distributions of $.72 per share. Of this amount, $.637 per share represents
dividends from net investment income and are taxable as ordinary income. The
remaining $.083 per share represents distribution from long-term capital gains
and is taxable as such. We wish to advise you that the corporate dividends
received deduction for the Fund is zero. Only funds that invest in U.S. equity
securities are entitled to pass-through a corporate dividends received
deduction.
For the purpose of preparing your annual federal income tax return, however,
you should report the amounts as reflected on the appropriate Form 1099 DIV, or
substitute Form 1099 DIV, which you should have received in January 1994.
-15-
<PAGE>
<PAGE>
OTHER INFORMATION
Dividend Reinvestment Plan. Shareholders may elect to have all distributions
of dividends and capital gains automatically reinvested in Fund shares (Shares)
pursuant to the Fund's Dividend Reinvestment Plan (the Plan). Shareholders who
do not participate in the Plan will receive all distributions in cash paid by
check in United States dollars mailed directly to the shareholders of record (or
if the shares are held in street or other nominee name, then to the nominee) by
the custodian, as dividend disbursing agent. Shareholders who wish to
participate in the Plan should contact the Fund at (800) 451-6788.
State Street Bank and Trust Co. (the Plan Agent) serves as agent for the
shareholders in administering the Plan. After the Fund declares a dividend or
determines to make a capital gains distribution, if (1) the market price is
lower than net asset value, the participants in the Plan will receive the
equivalent in Shares valued at the market price determined as of the time of
purchase (generally, following the payment date of the dividend or
distribution); or if (2) the market price of Shares on the payment date of the
dividend or distribution is equal to or exceeds their net asset value,
participants will be issued Shares at the higher of net asset value or 95% of
the market price. If net asset value exceeds the market price of Shares on the
payment date or the Fund declares a dividend or other distribution payable only
in cash, the Plan Agent will, as agent for the participants, receive the cash
payment and use it to buy Shares in the open market. If, before the Plan Agent
has completed its purchases, the market price exceeds the net asset value per
share, the average per share purchase price paid by the Plan Agent may exceed
the net asset value per share, resulting in the acquisition of fewer shares than
if the dividend or distribution had been paid in shares issued by the Fund. The
Fund will not issue Shares under the Plan below net asset value.
There is no charge to participants for reinvesting dividends or capital gain
distributions, except for certain brokerage commissions, as described below. The
Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Fund. There will be no brokerage commissions
charged with respect to shares issued directly by the Fund. However, each
participant will pay a pro rata share of brokerage commissions incurred with
respect to the Plan Agent's open market purchases in connection with the
reinvestment of dividends and distributions. The automatic reinvestment of
dividends and distributions will not relieve participants of any federal income
tax that may be payable on such dividends or distributions.
The Fund reserves the right to amend or terminate the Plan upon 90 days'
written notice to shareholders of the Fund.
Participants in the Plan may withdraw from the Plan upon written notice to
the Plan Agent and will receive certificates for whole Shares and cash for
fractional Shares.
All correspondence concerning the Plan should be directed to the Plan Agent,
State Street Bank & Trust Company, P.O. Box 8200, Boston, MA 02266-8200.
-16-
<PAGE>
<PAGE>
Directors
Edward D. Beach
Robert W. Doran
Harry A. Jacobs, Jr.
Thomas T. Mooney
Richard A. Redeker
Sir Michael Sandberg
Robin B. Smith
Nancy H. Teeters
Officers
Lawrence C. McQuade, President
Robert F. Gunia, Vice President
Susan C. Cote, Treasurer
S. Jane Rose, Secretary
Ronald Amblard, Assistant Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Custodian and Transfer Agent
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Independent Accountants
Deloitte & Touche
1633 Broadway
New York, NY 10019
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Notice is hereby given in accordance with
Section 23(c) of the Investment Company Act of 1940 that the Fund
may purchase, from time to time, shares of its common stock at
market prices.
This report is for stockholder information. This is not a
prospectus intended for use in the purchase or sale of Fund
shares.
The Global Yield Fund, Inc.
One Seaport Plaza
New York, NY 10292
for information call toll free
(800) 451-6788
or for information
regarding net asset value
(212) 214-3332
37936L204
