SEMI-ANNUAL REPORT June 30, 1995
The Global Total
Return Fund, Inc.
<PAGE>
sm The mark is a service mark of The Prudential Insurance
Company of America.
<PAGE>
Letter to Shareholders
August 15, 1995
Global bonds produced generous returns in the first six months of 1995. The
global bond rally was led largely by the U.S. bond market where yields declined
sharply amid slower economic growth and diminishing inflation fears. For the six
months ended June 30, 1995, we're pleased to report that The Global Total
Return Fund, Inc. performed significantly better than the average fund in
Lipper's Closed-End World Income Fund - Developed Nations category. Your Fund
also surpassed its peers for the one year period ended June 30, 1995.
Stock Listing
The Global Total Return Fund, Inc.'s common stock is traded on the New York
Stock Exchange under the symbol "PGY" and is frequently listed as "GlblTotFd"
in the financial sections of newspapers. It is also listed in a closed-end
fund table every Monday in The Wall Street Journal and on Saturdays in
Barron's.
TOTAL RETURNS BASED ON NET ASSET VALUE
As of June 30, 1995
<TABLE>
<CAPTION>
6 Months One Year Since Inception
(7/7/86)
<S> <C> <C> <C>
The Global Total
Return Fund, Inc.1 15.7% 13.8% 137.4%
Lipper Rank2 3/14 4/14 N/A
Lipper Closed-End
World Income Fund -
Developed Nations
Average3 9.3 10.4 N/A
</TABLE>
1. Source: Lipper Analytical Services, Inc. Total return of the Fund represents
the change in net asset value from the beginning of the respective period
through 6/30/95 and assumes the reinvestment of dividends and distributions.
Shares of the Fund are traded on the New York Stock Exchange.
Past performance is no guarantee of future results.
2. As determined by Lipper. It measures the Fund's net asset value performance
and ranking in the Closed-End World Income Fund - Developed Nations category.
3. Source: Lipper. This is the average return of 14 funds in the Closed-End
World Income - Developed Nations category for the six months and one-year ended
June 30, 1995.
-1-
<PAGE>
TOTAL RETURNS BASED ON MARKET PRICE
As of June 30, 1995
6 Months One Year
[S] [C] [C]
The Global Total
Return Fund, Inc.4 14.1% 12.0%
4. 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 period 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. Total return for a period less than one year is not
annualized.
The Fund's Objective
The Global Total Return Fund, Inc. seeks to maximize total return by
investing primarily in a portfolio of domestic and foreign government securities
throughout the world. The Fund maintains a weighted average maturity of 10
years or less.
Our overall strategy is to emphasize country and currency allocations with
the most attractive combination of yield and total return potential, rather
than particular types of bonds. This "top-down" approach begins with a
fundamental review of the world's 18 to 20 largest bond markets. We review
factors such as economic trends, business and political changes and supply and
demmand, then evaluate which countries' bonds offer the best value under those
conditions.
During the first half of 1995, the world bond markets turned in solid results
as global expectations shifted from strong growth to steady, non-inflationary
growth, sending interest rates lower. This shift was most pronounced in the
United States, which has led the world's recent bond recovery. In response, we
have shifted assets toward dollar bloc bonds after the recent historical lows
reached by the U.S. dollar, and moved away from low-yielding bonds in Japan.
What Went Well
U.S. Bonds Rallied. Our large position in U.S. securities (33% as of June 30,
1995) contributed to the Fund's positive performance. As U.S. economic growth
began to slow in 1995, 10-year U.S. Treasury yields fell to 6.2% from 7.2%,
sending bond prices up 9.0% for the six months ended June 30 and 4.7% in the
second quarter, as measured by the Lehman Brothers Intermediate Government Bond
Index.
-2-
<PAGE>
Weak U.S. Dollar Improved Returns From Foreign-Currency Denominated Holdings
in First Quarter. In the first quarter, the weakness of the dollar relative to
the German mark and Japanese yen had a positive impact on your Fund's returns
from Europe and Japan. Returns from core European country bonds rose an extra
10% to 12% when translated into U.S. dollars. Japanese bonds turned in even
more impressive gains. The yen's rise against the dollar from December 30, 1994
to June 30, 1995 resulted in a total return of just below 33%.
Increased U.S. Dollar Exposure in Second Quarter. We sharply curtailed the
Fund's foreign currency exposure in the second quarter, from just over 60% to
less than 20%, and raised U.S. dollar exposure. After reaching historic lows
early in the year, the dollar stabilized during the second quarter, leading us
to believe there was a greater risk of the dollar rising than falling. Our
shift to dollar-based securities would reduce currency risk if the dollar did
rise. In fact, the dollar has gained over 10% vis-a-vis the Japanese yen over
the past several months.
Reduced Japanese Exposure.
We reduced our position in the Japanese market from 20% as of March 31, 1995
to 7% of assets, locking in gains earned earlier this year. The powerful rally
in the Japanese market has left little room for additional price gains and
resulted in historically low yields on those bonds. There are economic
concerns, as well, and we remain guarded about Japan's overall economic health
and other unsettling events, such as its banking crisis.
And Not So Well
Lack of Leveraging. Many of our peers in the Lipper category use leverage, or
borrow at short-term rates in an attempt to invest the proceeds in longer-term,
higher yielding securities. This aggressive strategy worked well in the second
quarter as interest rates and short-term borrowing costs declined. Your Fund
does not leverage to generate extra returns, and thus underperformed some of
these funds in the second quarter. However, for the six months, we
significantly outperformed many of our peers.
-3-
<PAGE>
Looking Ahead
For the remainder of the year, the outlook for global bonds is positive,
yet cautious.
We expect world inflation to remain low, which should continue to support
bond prices and current yield levels. The prospect for additional price gains
will be more limited than the first half of the year. Clouding this picture
slightly is the uncertainty over the direction of the U.S. dollar. By most
measures, the dollar is significantly undervalued against other leading
currencies. Until the dollar rebounds fully, we will remain somewhat neutral
on currency exposure.
Additionally, the Fund's Board of Directors has recently approved the
conversion of your Fund from a closed-end fund to an open-end fund. This
conversion is subject to shareholder approval. It is expected that a
shareholder meeting will be scheduled for the fourth quarter of 1995. The
proposal to open-end the Fund must be approved by a favorable vote of at least
a majority of the outstanding shares of the Fund's common stock.
As always, it is a pleasure to have you as a shareholder of The Global Total
Return Fund, Inc. and to take this opportunity to report our activities to you.
Sincerely,
J. Gabriel Irwin
Portfolio Manager
Simon Wells
Portfolio Manager
Richard A. Redeker
President
-4-
<PAGE>
----------------------------------------------------------
THE GLOBAL TOTAL RETURN FUND, INC.
Portfolio of Investments
June 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
--------------------------------------------------------
Principal Description US$
Amount Value
(000) (Note 1)
--------------------------------------------------------
<C> <S> <C>
LONG-TERM INVESTMENTS(a)--89.7%
Australia--4.4%
Australian Government
Bond,
A$ 29,520 9.00%, 9/15/04.......... $ 20,701,082
New South Wales Treasury
Corp.,
7,000 6.50%, 5/1/06........... 3,958,905
------------
24,659,987
------------
Canada--5.0%
British Columbia
Provincial Bond,
C$ 8,000 7.75%, 6/16/03.......... 5,702,005
Canadian Government
Bond,
28,600 9.00%, 12/1/04.......... 22,192,702
------------
27,894,707
------------
Denmark--7.2%
Danish Government Bonds,
DKr 59,940 8.00%, 11/15/01......... 10,929,108
76,600 8.00%, 5/15/03.......... 13,762,610
91,940 7.00%, 12/15/04......... 15,310,370
------------
40,002,088
------------
Germany--10.9%
German Government Bonds,
DM 21,630 6.125%, 3/26/98......... 15,816,156
16,380 5.375%, 2/22/99......... 11,687,319
14,180 6.75%, 4/22/03.......... 10,102,225
16,300 7.375%, 1/3/05.......... 12,030,672
18,140 6.25%, 1/4/24........... 11,068,808
------------
60,705,180
------------
Ireland--3.7%
Irish Government Bonds,
IEP 6,500 8.75%, 7/27/97.......... 10,788,448
6,500 6.25%, 4/1/99........... 9,846,388
------------
20,634,836
------------
Italy--3.2%
Export Finance Corp. of
Norway,
Lira 1,000,000 12.25%, 8/5/96.......... 613,904
--------------------------------------------------------
Principal Description US$
Amount Value
(000) (Note 1)
--------------------------------------------------------
Italian Government Bond,
Lira 31,950,000 8.5%, 8/1/99............ $ 17,252,712
------------
17,866,616
------------
Japan--7.2%
Japanese Government
Bonds,
(Y) 1,200,000 6.60%, 6/20/01.......... 17,401,697
1,660,000 4.60%, 9/20/04.......... 22,327,040
------------
39,728,737
------------
Netherlands--3.0%
Dutch Government Bonds,
DG 14,000 7.00%, 6/15/05.......... 9,036,395
12,000 7.50%, 1/15/23.......... 7,682,780
------------
16,719,175
------------
New Zealand--0.7%
New Zealand Government
Bond,
NZ$ 6,000 10.00%, 7/15/97......... 4,148,149
------------
Sweden--4.2%
Swedish Government
Bonds,
SKr 51,200 11.00%, 1/21/99......... 7,099,233
120,000 10.25%, 5/5/00.......... 16,203,653
------------
23,302,886
------------
United Kingdom--7.7%
Guaranteed Export
Finance Corp.,
BP 1,750 7.25%, 12/15/98......... 2,701,757
United Kingdom Treasury
Bond,
13,000 7.75%, 9/8/06........... 19,593,844
United Kingdom Treasury
Notes,
3,180 7.00%, 11/6/01.......... 4,726,494
10,200 8.00%, 9/27/13.......... 15,495,402
------------
42,517,497
------------
United States--32.5%
U.S Government Bonds--30.6%
United States Treasury
Bond,
US$ 26,190 7.50%, 11/15/24......... 28,976,878
</TABLE>
-5- See Notes to Financial Statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------
<C> <S> <C>
Principal Description US$
Amount Value
(000) (Note 1)
--------------------------------------------------------
United States (cont'd.)
United States Treasury
Notes,
US$ 12,100 7.375%, 11/15/97........ $ 12,493,250
14,000 5.00%, 1/31/99.......... 13,575,660
56,000 6.75%, 6/30/99.......... 57,443,680
10,000 7.75%, 11/30/99......... 10,665,600
14,100 7.75%, 1/31/00.......... 15,065,004
13,500 5.50%, 4/15/00.......... 13,238,370
16,810 7.875%, 11/15/04........ 18,722,137
------------
170,180,579
------------
Sovereign Bonds--1.8%
Argentina Cedulas,
Rural Mortgage Bonds
3,050 7.90%, 9/1/00........... 2,836,500
National Bank of
Hungary,
3,000 7.95%, 11/1/03.......... 2,583,000
Republic of Colombia,
3,000 8.75%, 10/6/99.......... 3,129,378
Republic of Poland
2,000 7.125%, 10/27/14........ 1,195,000
------------
9,743,878
------------
Supranational Bond--0.1%
Corporation Andina de
Fomento
500 6.625%, 10/14/98........ 491,250
------------
180,415,707
------------
Total long-term
investments
(cost
US$483,018,477)....... 498,595,565
------------
SHORT-TERM INVESTMENTS--7.8%
Mexico
Mexican Tesobonos,(b)
US$ 134(a) 8.45%, 7/27/95.......... 132,712
94(a) 8.35%, 8/3/95........... 92,725
------------
225,437
------------
--------------------------------------------------------
Principal Description US$
Amount Value
(000) (Note 1)
--------------------------------------------------------
Netherlands--0.7%
Netherlands Time
Deposit,
DG 5,900(a) 4.00%, 7/3/95........... $ 3,805,911
------------
New Zealand--3.4%
New Zealand Government
Bond,
NZ$ 12,000(a) 8.00%, 11/15/95......... 7,989,296
New Zealand Time
Deposit,
16,400(a) 8.50%, 7/3/95........... 10,960,149
------------
18,949,445
------------
United States--3.7%
Joint Repurchase
Agreement Account,
US$ 20,347 6.12%, 7/3/95, (Note
5).................... 20,347,000
------------
Total short-term
investments
(cost
US$43,420,982)........ 43,327,793
------------
Total Investments--97.5%
(cost $526,439,459; Note
3).................... 541,923,358
Other assets in excess
of
liabilities--2.5%..... 13,648,725
------------
Net Assets--100%........ $555,572,083
------------
------------
</TABLE>
------------------
Portfolio securities are classified according to the security's
currency denomination.
(a) Principal amount segregated as collateral for
forward currency contracts.
(b) Percentages quoted represent yields to maturity as
of purchase date.
-6- See Notes to Financial Statements.
<PAGE>
<PAGE>
----------------------------------------------------------
THE GLOBAL TOTAL RETURN FUND, INC.
Statement of Assets and Liabilities
June 30, 1995
(Unaudited)
----------------------------------------------------------
<TABLE>
<S> <C>
Assets
Investments, at value (cost
$526,439,459)........................ $541,923,358
Foreign currency, at value (cost
$252,404)............................ 254,617
Cash................................... 411
Receivable for investments sold........ 9,809,908
Interest receivable.................... 8,918,690
Forward contracts--amount receivable
from counterparties.................. 7,287,127
Other assets........................... 126,257
------------
Total assets....................... 568,320,368
------------
Liabilities
Forward contracts--amount payable to
counterparties....................... 7,550,489
Payable for investments purchased...... 4,144,952
Income distribution payable............ 461,510
Management fee payable................. 401,957
Accrued expenses and other
liabilities.......................... 189,377
------------
Total liabilities.................. 12,748,285
------------
Net Assets............................. $555,572,083
------------
------------
Net assets were comprised of:
Common stock, at par................. $ 662,077
Paid-in capital in excess of par..... 547,112,546
------------
547,774,623
Undistributed net investment income.... 21,362,604
Accumulated net realized losses on
investments.......................... (28,817,778)
Net unrealized appreciation on
investments
and foreign currencies............... 15,252,634
------------
Net assets, June 30, 1995.............. $555,572,083
------------
------------
Net asset value per share:
($555,572,083 / 66,207,699 shares of
common stock outstanding).......... $8.39
------------
------------
</TABLE>
----------------------------------------------------------
THE GLOBAL TOTAL RETURN FUND, INC.
Statement of Operations
June 30, 1995
(Unaudited)
----------------------------------------------------------
<TABLE>
<S> <C>
Net Investment Income
Income
Interest and discount earned (net of
foreign
withholding taxes of $6,903)........ $19,253,219
-----------
Expenses
Management fee........................ 1,973,039
Custodian's fees and expenses......... 273,000
Reports to shareholders............... 100,000
Transfer agent's fees and expenses.... 86,000
Insurance............................. 56,000
Directors' fees....................... 52,000
Legal fees............................ 26,000
Audit fee............................. 24,000
Miscellaneous......................... 48,135
-----------
Total expenses...................... 2,638,174
-----------
Net investment income................. 16,615,045
-----------
Realized and Unrealized Gain (Loss) on
Investment and Foreign Currency
Transactions
Net realized gain (loss) on:
Investment transactions............... 6,291,168
Foreign currency transactions......... 35,087,803
Written option transactions........... (15,075)
-----------
41,363,896
-----------
Net change in unrealized appreciation/
depreciation on:
Investments........................... 19,081,926
Foreign currencies.................... 120,452
Written options....................... 304,000
-----------
19,506,378
-----------
Net gain on investments and foreign
currencies............................ 60,870,274
-----------
Net Increase in Net Assets
Resulting from Operations............... $77,485,319
-----------
-----------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
-7-
<PAGE>
<PAGE>
----------------------------------------------------------
THE GLOBAL TOTAL RETURN FUND, INC.
Statement of Changes in Net Assets
(Unaudited)
----------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease)
in Net Assets
Six Months
Ended Year Ended
June 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Operations:
Net investment income..... $ 16,615,045 $ 34,580,973
Net realized gain (loss)
on investment and
foreign currency
transactions............ 41,363,896 (75,052,921)
Net change in unrealized
appreciation/depreciation
on investment and
foreign currency
transactions............ 19,506,378 (5,772,110)
------------ ------------
Net increase (decrease) in
net
assets resulting from
operations................ 77,485,319 (46,244,058)
------------ ------------
Dividends and distributions:
Dividends from net
investment income....... (15,558,284) (11,402,165)
Distributions from net
realized gains.......... -- (8,933,149)
Tax return of capital
distribution -- (19,717,909)
------------ ------------
Total dividends and
distributions............. (15,558,284) (40,053,223)
------------ ------------
Total increase (decrease)... 61,927,035 (86,297,281)
Net Assets
Beginning of period......... 493,645,048 579,942,329
------------ ------------
End of period............... $555,572,083 $493,645,048
------------ ------------
------------ ------------
</TABLE>
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THE GLOBAL TOTAL RETURN FUND, INC.
Notes to Financial Statements
(Unaudited)
----------------------------------------------------------
The Global Total Return 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 seek total return, the components
of which are current income and capital appreciation. The Fund invests primarily
in investment grade bonds, i.e., bonds rated within the four highest quality
grades as determined by Moody's Investor's Service or Standard & Poor's Rating's
Group, or in unrated securities of equivalent quality. In addition the Fund is
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 on unrated securities 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, or designated
subcustodians as the case may be under triparty repurchase agreements, takes
possession of the
See Notes to Financial Statements. -8-
<PAGE>
<PAGE>
underlying collateral securities, the value of which exceeds the principal
amount of the repurchase transaction including accrued interest. If the seller
defaults and the value of the collateral declines or if bankruptcy proceedings
are commenced with respect to the seller of the security, realization of the
collateral by the Fund may be delayed or limited.
Foreign Currency Translation: The books and records of the Fund are maintained
in 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 period end. Similarly, the Fund does not
isolate the effect of changes in foreign exchange rates from the fluctuations
arising from changes in the market prices of long-term debt securities sold
during the period. Accordingly, realized foreign currency gains (losses) are
included in the reported net realized gains on investment transactions.
Net realized gains on foreign currency transactions represents net foreign
exchange gains 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 period end exchange rates are
reflected as a component of unrealized appreciation 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: A forward currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. 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 or on specific receivables and payables denominated in a foreign
currency. The contracts are valued daily at current exchange rates and any
unrealized gain or loss is included in net unrealized appreciation or
depreciation on investments. Gain or loss is realized on the settlement date of
the contract equal to the difference between the settlement value of the
original and renegotiated forward contracts. This gain or loss, if any, is
included in net realized gain (loss) on 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: The Fund may either purchase or write options in order to hedge
against adverse market movements or fluctuations in value caused by changes in
prevailing interest rates or foreign currency exchange rates with respect to
securities or currencies which the Fund currently owns or intends to purchase.
When the Fund purchases an option, it pays a premium and an amount equal to that
premium is recorded as an investment. When the Fund writes an option, it
receives a premium and an amount equal to that premium is recorded as a
liability. The investment or liability is adjusted daily to reflect the current
market value of the option. If an option expires unexercised, the Fund realizes
a gain or loss to the extent of the premium received or paid. If an option is
exercised, the premium received or paid is an adjustment to the proceeds from
the sale or the cost of the purchase in determining whether the Fund has
realized a gain or loss. The difference between the premium and the amount
received or paid on effecting a closing purchase or sale transaction is also
treated as a realized gain or loss. Gain or loss on purchased options is
included in net realized gain (loss) on investment transactions. Gain or loss
on
written options is presented separately as net realized gain (loss) on written
option transactions.
The Fund, as writer of an option, may have no control over whether the
underlying securities or currencies may be sold (called) or purchased (put). As
a result, the Fund bears the market risk of an unfavorable change in the price
of the security or currency underlying the written option. The Fund, as
purchaser of an option, bears the risk of the potential inability of the
counterparties to meet the terms of their contracts. There were no written
options outstanding at June 30, 1995.
Security Transactions and Investment Income: Security transactions are recorded
on the trade date. Realized and unrealized gains and losses from security and
currency
-9-
<PAGE>
<PAGE>
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: The Fund accounts for and reports
distributions to shareholders in accordance with The American Institute of
Certified Public Accountants' Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. The effect of applying
this statement was to increase accumulated net investment income and increase
accumulated net realized losses on investments by $20,305,843 for realized
foreign currency gains during the fiscal period ended June 30, 1995. 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 six months ended June 30, 1995 aggregated $917,708,901 and $906,948,964,
respectively.
Transactions in written options during the six months ended June 30, 1995
were as follows:
<TABLE>
<CAPTION>
Number of
Contracts Premiums
(000) Received
--------- -----------
<S> <C> <C>
Options outstanding at December
31, 1994........................ 76,000 $ 661,200
Options written................... 124,863 828,787
Options terminated in closing
purchase
transactions.................... 200,863 (1,489,987)
--------- -----------
Options outstanding at June 30,
1995............................ 0 0
--------- -----------
--------- -----------
</TABLE>
At June 30, 1995, the Fund had outstanding forward currency contracts, both
to purchase and sell foreign currencies, as follows:
<TABLE>
<CAPTION>
Foreign Currency Value at
Purchase Settlement Date Current
Appreciation/
Contracts Payable Value
(Depreciation)
----------------------- ---------------- --------------
---------------
<S> <C> <C> <C>
Belgian Francs,
expiring 10/10/95.... $ 11,691,795 $ 11,692,924 $ 1,129
French Francs,
expiring 10/10/95.... 29,704,039 29,612,191 (91,848)
German Deutschemarks,
expiring 11/1/95..... 12,604,279 13,598,471 994,192
Spanish Pesetas,
expiring 9/11/95..... 89,508,558 95,263,846 5,755,288
---------------- ------------ ---------------
$143,508,671 $150,167,432 $ 6,658,761
---------------- ------------ ---------------
---------------- ------------ ---------------
</TABLE>
-10-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Value at
Foreign Currency Sale Settlement Date Current Appreciation/
Contracts Receivable Value (Depreciation)
----------------------- ---------------- ------------ ---------------
<S> <C> <C> <C>
Australian Dollars,
expiring 7/27/95..... $ 7,367,955 $ 7,282,699 $ 85,256
Belgian Francs,
expiring 10/10/95.... 11,489,199 11,692,924 (203,725)
British Pounds,
expiring 7/27/95..... 26,292,940 26,443,257 (150,317)
French Francs,
expiring
10/10/95-11/9/95..... 29,155,255 29,525,235 (369,980)
German Deutschemarks,
expiring
7/27/95-11/1/95...... 108,138,075 108,017,279 120,796
Irish Punts,
expiring 7/27/95..... 10,158,180 10,175,133 (16,953)
Japanese Yen,
expiring 7/27/95..... 20,097,329 19,906,364 190,965
Spanish Pesetas,
expiring
9/11/95-10/2/95...... 88,596,372 95,302,296 (6,705,924)
Swedish Kroner,
expiring 7/27/95..... 7,603,595 7,556,051 47,544
Swiss Francs,
expiring 7/27/95..... 16,791,564 16,711,349 80,215
---------------- ------------ ---------------
$325,690,464 $332,612,587 $(6,922,123)
---------------- ------------ ---------------
---------------- ------------ ---------------
</TABLE>
The United States federal income tax basis of the Fund's investments at June
30, 1995 was $526,684,745 and, accordingly, net unrealized appreciation for
United States federal income tax purposes was $15,238,613 (gross unrealized
appreciation--$17,292,726; gross unrealized depreciation--$2,054,113).
For federal income tax purposes, the Fund had a capital loss carryforward as
of December 31, 1994 of approximately $32,431,000 which will expire in 2002.
Accordingly, no capital gains distribution is expected to be paid to
shareholders until net gains have been realized in excess of such amounts.
The Fund has elected to treat approximately $6,212,600 of net capital losses
and approximately $10,344,800 of net currency losses incurred in the two month
period ended December 31, 1994 as having been incurred in the following fiscal
year.
Note 4. Capital There are 200 million shares
of $.01 par value common stock authorized. Of the
66,207,699 shares outstanding as of June 30, 1995, Prudential owned 12,020
shares.
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 June 30, 1995, the Fund
had a 3.0% undivided interest in the joint account. The undivided interest for
the Fund represented $20,347,000 in the principal amount. As of such date, each
repurchase agreement in the joint account and the collateral therefor were as
follows:
Bear, Stearns & Co. Inc., 6.125%, in the principal amount of $200,000,000,
repurchase price $200,102,083, due 7/3/95. The value of the collateral including
accrued interest was $204,321,562.
CS First Boston Corp., 6.13%, in the principal amount of $160,000,000,
repurchase price $160,081,733, due 7/3/95. The value of the collateral including
accrued interest was $163,246,196.
Goldman Sachs & Co., 6.10%, in the principal amount of $116,557,000,
repurchase price $116,616,250, due 7/3/95. The value of the collateral including
accrued interest was $118,889,059.
Smith Barney, Inc., 6.13%, in the principal amount of $200,000,000,
repurchase price $200,102,166, due 7/3/95. The value of the collateral including
accrued interest was $204,000,775.
Note 6. Dividend On July 31, 1995, the Board
of Directors of the Fund declared a dividend of
$0.145 per share from net investment income payable on September 29, 1995 to
shareholders of record on September 15, 1995.
Note 7. Subsequent At a special meeting held on
Event August 15, 1995, The Board
of Directors of the Fund approved the conversion
of the Fund from a closed-end fund to an open-end fund subject to shareholder
approval. At a special meeting of the Board to be held in or about September,
Directors will be asked, among other things, to approve specific changes to the
Fund's Articles of Incorporation and investment restrictions to facilitate the
conversion and to submit these changes and a proposal to convert the Fund to an
open-end fund for shareholder approval. These matters will be considered at a
special meeting of shareholders to be scheduled for the fourth quarter of 1995.
If shareholders approve the proposed conversion of the Fund to an open-end fund,
it is expected that a 2% redemption fee payable to the Fund will be imposed on
all redemptions of Fund shares during the first six months following the
conversion.
-11-
<PAGE>
<PAGE>
Note 8. Quarterly Data
<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, 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
March 31, 1994 10,004,223 8,562,473 .13
(37,140,649) (.56) (28,578,176) (.43)
June 30, 1994 9,470,430 8,070,788 .12
(16,776,369) (.25) (8,705,581) (.13)
September 30, 1994 10,323,100 9,001,986 .14
(13,445,332) (.21) (4,443,346) (.07)
December 31, 1994 10,388,192 8,945,726 .13
(13,462,681) (.20) (4,516,955) (.07)
March 31, 1995 9,278,978 8,009,531 .12
44,611,081 .67 52,620,612 .79
June 30, 1995 9,974,241 8,605,514 .13
16,259,193 .25 24,864,707 .38
<CAPTION>
Dividends Share
Quarterly and distributions price
period ended Amount Per share High Low
<S> <C> <C> <C> <C>
---------------------- ------------------------- ------------
March 31, 1993 $13,221,881 $ .20 $8 3/8 $8 1/4
June 30, 1993 13,221,881 .20 8 1/2 8
September 30, 1993 10,577,508 .16 8 3/4 8 1/8
December 31, 1993 10,593,232 .16 8 1/4 7 5/8
March 31, 1994 16,220,886 .245 8 1/4 7
June 30, 1994 7,282,847 .11 7 1/8 6 1/2
September 30, 1994 8,273,528 .125 6 3/4 6 1/8
December 31, 1994 8,275,962 .125 6 5/8 6
March 31, 1995 8,275,962 .125 6 1/2 6
June 30, 1995 7,282,322 .11 7 6 3/8
</TABLE>
-12-
<PAGE>
<PAGE>
--------------------------------------------------------------------------------
THE GLOBAL TOTAL RETURN FUND, INC.
Financial Highlights
(Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six
Months
Ended
Years Ended December 31,
June 30,
--------------------------------------------------------
PER SHARE OPERATING PERFORMANCE: 1995 1994
1993 1992 1991 1990
-------- --------
-------- -------- -------- --------
<S> <C> <C> <C>
<C> <C> <C>
Net asset value, beginning of period............ $ 7.46 $ 8.76 $
8.10 $ 8.99 $ 8.96 $ 8.57
-------- --------
-------- -------- -------- --------
Net investment income........................... .25 .52
.64 .81 .84 .89
Net realized and unrealized gain (loss) on
investments and foreign currencies............ .92 (1.22)
.74 (.90) (.19) .36
-------- --------
-------- -------- -------- --------
Total from investment operations.............. 1.17 (.70)
1.38 (.09) .65 1.25
-------- --------
-------- -------- -------- --------
Dividends from net investment income............ (.24) (.17)
(.30) (.75) (.62) (.88)
Distributions from net capital gains............ -- (.13)
(.23) (.05) -- --
Distributions in excess of net capital gains.... -- --
(.19) -- -- --
Tax return of capital distribution.............. -- (.30)
-- -- -- --
-------- --------
-------- -------- -------- --------
Total dividends and distributions............. (.24) (.60)
(.72) (.80) (.62) (.88)
-------- --------
-------- -------- -------- --------
Increase resulting from Fund share
transactions.................................. -- --
-- -- -- .02
-------- --------
-------- -------- -------- --------
Net asset value, end of period.................. $ 8.39 $ 7.46 $
8.76 $ 8.10 $ 8.99 $ 8.96
-------- --------
-------- -------- -------- --------
-------- --------
-------- -------- -------- --------
Market price per share, end of period........... $ 6.75 $ 6.13 $
8.00 $ 7.50 $ 8.13 $ 8.00
-------- --------
-------- -------- -------- --------
-------- --------
-------- -------- -------- --------
TOTAL INVESTMENT RETURN(b)...................... 14.12% (16.12)%
16.50% 1.75% 9.42% 12.89%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)................. $555,572 $493,645
$579,942 $535,647 $593,376 $591,339
Average net assets (000)........................ $533,816 $536,230
$567,128 $570,812 $571,767 $596,824
Ratio of expenses to average net assets......... 1.00%(a) 1.04%
1.02% 1.01% .99% 1.03%
Ratio of net income to average net assets....... 6.28%(a) 6.45%
7.67% 9.39% 9.69% 10.03%
Portfolio turnover rate......................... 191% 583%
370% 192% 141% 221%
</TABLE>
---------------
(a) Annualized.
(b) 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 period 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 periods indicated. This information has been
determined based upon information provided in the financial statements
and market price data for the Fund's shares.
See Notes to Financial Statements. -13-
<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 Transfer Agent, 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.
Investment Update. In addition to the change in its investment objective and
policies, including the use of futures contracts and related options, approved
by shareholders at the 1994 Annual Meeting of Shareholders, during fiscal year
1994 the Board of Directors approved a change in the Fund's investment policies
to permit it to cross hedge its currency exposure under circumstances where the
investment adviser believes that the currency in which a security is denominated
may deteriorate against the dollar and that the possible loss in value can be
hedged, return can be enhanced and risks can be managed by entering into forward
contracts to sell the deteriorating currency and buy a currency that is expected
to appreciate in relation to the dollar.
See Notes to Financial Statements.
-14-
<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
Richard A. Redeker, President
Robert F. Gunia, Vice President
Eugene S. Stark, Treasurer
Stephen M. Ungerman, Assistant 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 LLP
Two World Financial Center
New York, NY 10281
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.
The accompanying financial statements as of June 30, 1995
were not audited and, accordingly, no opinion is expressed
on them.
This report is for stockholder information. This is not a
prospectus intended for use in the purchase or sale of Fund
shares.
The Global Total Return Fund, Inc.
One Seaport Plaza
New York, NY 10292
for information call toll free
(800) 451-6788
or collect (212) 214-5572
or for information regarding net asset value
call (212) 214-3332
37936L204
