The Global Total
Return Fund, Inc.
- -------------------------------------------------------------------
Annual Report
December 31, 1994
smThe mark is a service mark of The Prudential Insurance
Company of America.
<PAGE>
!!!!!!!!!!!!!!!!!!!!!
Letter to Shareholders
February 9, 1995
Dear Shareholder:
Conditions in 1994 were extraordinarily difficult for global fixed income
funds, in general, and for The Global Total Return Fund, Inc. This was in
sharp contrast to the strong performance of global markets in 1993. Over
t Austria 0.0%
*he last year, the dramatic rise in interest rates around the world
translated into poor performance for global bonds just as it did for
many other financial asset groups.
Overall, your Fund slightly underperformed the Lipp Source: Salomon Brothers
World Government Bond Index Volatility in the Foreign Exchange Markets
The year was also characterized by volatility in the currency markets, with
strong ups and downs for the US Dollar producing a tough ride for most global
funds. During much of the year, we hedged some of our foreign currency holdings
back into the dollar, missing out on some foreign currency gains. During the
third quarter, we lifted the hedges to capture some of the dollar's short-term
decline, only to reestablish them again in the fourth quarter.
The Fourth Quarter
During the fourth quarter, further evidence of strong economic activity in the
United States led to yet another rate hike of 75 basis points by the US Federal
Reserve, the largest single move this year. It was
intended to assure the bond market of
the Fed's resolve to contain inflation. The effects were transmitted throughout
the dollar bloc markets, and led to, for example, interest rate hikes by the
Reserve Bank of Australia of 200 basis points during the fourth quarter.
In Europe, economic activity also continued to surprise the market on the upside
during the year, although inflation remained more subdued than in the dollar
bloc markets. The fourth quarter saw little further change in yields.
One of the few bond markets which was able to show slightly lower rates over the
quarter (although not for the year) was Japan, where a still tepid recovery
helped bond yields to edge down slightly.
In this environment, potential for gains from fixed income securities has been
extremely limited. As a result, the Fund has maintained a cautious stance, with
limited maturity exposure in its bond holdings virtually across the board.
Emerging Market Experience
Much of the global fixed income activity at year-end centered around Mexico's
decision to first devalue, then float the Mexican Peso. The rapid 40% decline
in the currency which followed that action reflected not only on Mexican
securities, but all through the emerging markets, particularly in Latin America
and even into other seemingly unrelated debt and equity markets of Europe and
Asia, as investors reexamined the risk inherent in their holdings.
The Fund held a security and cash position of about 5% in Mexican Pesos (which
was cut before the full measure of the decline in value of the Peso to the U.S.
Dollar was realized) and some dollar-denominated Mexican holdings (which were
somewhat, but much less strongly affected by the Mexican Government's actions).
We expect Mexico to continue to have problems, but find other markets'
dollar-denominated debt attractive, particularly in an environment in which
rates in the developed markets are generally not expected to fall. We will
attempt to position the Fund conservatively with respect to emerging markets'
debt, and to selectively include a limited portion of the Fund in
dollar-denominated securities of these markets.
Outlook
Going forward, we continue to be cautious regarding the worldwide interest rate
environment. Given the solid economic growth evident in most countries,
prospects are not great for sustained bond market rallies, and some further
upward rate movements are probably in the cards. Therefore, we are keeping the
average maturity of the Fund relatively low (about 7.4 years). However, the
current level of yields offers potential for excellent income opportunities.
We expect that trade imbalances will weigh heavily on the US currency, although
we believe the dollar is undervalued relative to the Yen at current levels. We
see the currency fairly valued against most Europeans, and will look for
selective opportunities to take advantage of shorter-term trends against those
and other dollar bloc currencies.
We cautiously hold small amounts of dollar-denominated emerging markets
exposure, and expect that these securities will provide attractive risk-adjusted
returns for the portfolio.
Please remember, foreign securities are not guaranteed and may be influenced by
currency fluctuations, political and social developments.
Looking forward to a more positive global environment for 1995, we appreciate
having you as a shareholder of The Global Total Return Fund, Inc. and remain
committed to managing it for your benefit.
Sincerely,
Lawrence C. McQuade Jeffrey E. Brumette
President Portfolio Manager
Tax Update
As a result of higher hedging costs in the European and Japanese markets this
year approximately 54% of the dividends paid in the current calendar year were
considered return of capital (a non-taxable distribution) under the Internal
Revenue Code. Provisions in the Internal Revenue Code require the Fund's
currency losses which includes the Fund's hedging costs to be treated as
ordinary losses and offsets ordinary income (less operating expenses).
In January 1995 you should have received a Form 1099 DIV (or substitute Form
1099 DIV) that reflects the total amount of distributions that constitute a tax
return of capital. Such amount is not included as taxable income for calendar
year 1994 but should be reflected as an adjustment in the cost basis of your
Fund's shares. 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.
!!!!!!!!!!!!!!!!! <PAGE>
<PAGE>
- --------er Closed-End World
Income Funds -- Developed Nations Average for the year. Funds in the
universe posted a wide range of returns from +7.32% to -21.9%.
The Fund seeks total return by investing primarily in a portfolio of
government debt securities throughout the world.
<TABLE>
FUND PERFORMANCE
As of December 31, 1994
<CAPTION>
12 Month Total Return
Total Return Since Inception
(Since 12/31/93) (7/7/86)
<S> <C> <C>
Global Total Return Fund -8.1%1 105.2%2
Lipper Closed-End World -6.2 N/A
Income Funds -- Developed
Nations Average3
</TABLE>
1 Source: Prudential Mutual Fund Management, Inc. Total return of the
Fund represents the change in net asset value from the beginning of the
year (1/1/94) through 12/31/94 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.
2 Source: Lipper Analytical Services, Inc.
3 These are the average returns of 14 funds in the closed-end world
income funds -- developed nations category for one year as determined
by Lipper Analytical Services, Inc.
Portfolio Positioning in a Tough Environment
Yields on most 10-year fixed income instruments around the world ended
the year substantially higher than they began. Long-term interest rates
rose, regardless of what central banks were doing. In Germany, 10-year
yields rose over 200 basis points (2%), despite the Bundesbank's lowering
of short-term
-1-
<PAGE>
rates by 100 basis points (1%). Worldwide demand for capital
was far greater than anticipated. Meanwhile, most market participants were
positioned for further declines in rates. This combination was explosive
and produced the worst year in bonds for many countries, as market investors
scrambled to reduce their interest rate exposure.
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 "Globl Tot Fd" in the financial sections of newspapers. It is also
listed in a closed-end fund table every Monday in the Wall Street Journal.
We began shortening our maturity exposure in the Fund during the first
quarter, and continued with that strategy throughout the rest of the year,
but were unable to avoid the losses battering the bond markets in general.
Bond market performance in 1994 was negative (in local currency terms)
in every one of the world's bond markets (as reflected in the Salomon
Index below). Total performance for the market index was the worst
since the index was begun a decade ago.
The following table shows the year's performance for the worldwide bond
markets individually:
<TABLE>
<CAPTION>
Total Return
(Local currency terms)
<S> <C>
United States -3.4%
Japan -2.7%
Germany -1.8%
France -5.7%
United Kingdom -6.9%
Canada -4.5%
Italy -0.9%
Australia -6.5%
Belgium -1.2%
Denmark -3.8%
Netherlands -4.5%
Spain -3.7%
Sweden -4.7%
Austria 0.0%
</TABLE>
* Source: Salomon Brothers World Government Bond Index
Volatility in the Foreign Exchange Markets
The year was also characterized by volatility in the currency markets,
with strong ups and downs for the US Dollar producing a tough ride for
most global funds. During much of the year, we hedged some of our
foreign currency holdings back into the dollar, missing out on some
foreign currency gains. During the third quarter, we lifted the hedges
to capture some of the dollar's short-term decline, only to reestablish
them again in the fourth quarter.
-2-
<PAGE>
The Fourth Quarter
During the fourth quarter, further evidence of strong economic activity in
the United States led to yet another rate hike of 75 basis points by the
US Federal Reserve, the largest single move this year. It was intended
to assure the bond market of the Fed's resolve to contain inflation.
The effects were transmitted throughout the dollar bloc markets, and
led to, for example, interest rate hikes by the Reserve Bank of Australia
of 200 basis points during the fourth quarter.
In Europe, economic activity also continued to surprise the market on the
upside during the year, although inflation remained more subdued than in
the dollar bloc markets. The fourth quarter saw little further change in
yields.
One of the few bond markets which was able to show slightly lower rates
over the quarter (although not for the year) was Japan, where a still
tepid recovery helped bond yields to edge down slightly.
In this environment, potential for gains from fixed income securities
has been extremely limited. As a result, the Fund has maintained a
cautious stance, with limited maturity exposure in its bond holdings
virtually across the board.
Emerging Market Experience
Much of the global fixed income activity at year-end centered around
Mexico's decision to first devalue, then float the Mexican Peso. The
rapid 40% decline in the currency which followed that action reflected
not only on Mexican securities, but all through the emerging markets,
particularly in Latin America and even into other seemingly unrelated
debt and equity markets of Europe and Asia, as investors reexamined
the risk inherent in their holdings.
The Fund held a security and cash position of about 5% in Mexican
Pesos (which was cut before the full measure of the decline in value
of the Peso to the U.S. Dollar was realized) and some dollar-denominated
Mexican holdings (which were somewhat, but much less strongly affected
by the Mexican Government's actions). We expect Mexico to continue to
have problems, but find other markets' dollar-denominated debt attractive,
particularly in an environment in which rates in the developed markets are
generally not expected to fall. We will attempt to position the Fund
conservatively with respect to emerging markets' debt, and to selectively
include a limited portion of the Fund in dollar-denominated securities of
these markets.
Outlook
Going forward, we continue to be cautious regarding the worldwide
interest rate environment. Given the solid economic growth evident in most
-3-
<PAGE>
countries, prospects are not great for sustained bond market rallies, and
some further upward rate movements are probably in the cards. Therefore,
we are keeping the average maturity of the Fund relatively low (about 7.4
years). However, the current level of yields offers potential for excellent
income opportunities.
We expect that trade imbalances will weigh heavily on the US currency,
although we believe the dollar is undervalued relative to the Yen at
current levels. We see the currency fairly valued against most Europeans,
and will look for selective opportunities to take advantage of shorter-term
trends against those and other dollar bloc currencies.
We cautiously hold small amounts of dollar-denominated emerging markets
exposure, and expect that these securities will provide attractive
risk-adjusted returns for the portfolio.
Please remember, foreign securities are not guaranteed and may be
influenced by currency fluctuations, political and social developments.
Looking forward to a more positive global environment for 1995, we
appreciate having you as a shareholder of The Global Total Return Fund,
Inc. and remain committed to managing it for your benefit.
Sincerely,
Lawrence C. McQuade Jeffrey E. Brumette
President Portfolio Manager
Tax Update
As a result of higher hedging costs in the European and Japanese markets
this year approximately 54% of the dividends paid in the current calendar
year were considered return of capital (a non-taxable distribution) under
the Internal Revenue Code. Provisions in the Internal Revenue Code require
the Fund's currency losses which includes the Fund's hedging costs to be
treated as ordinary losses and offsets ordinary income (less operating
expenses).
In January 1995 you should have received a Form 1099 DIV (or substitute
Form 1099 DIV) that reflects the total amount of distributions that
constitute a tax return of capital. Such amount is not included as
taxable income for calendar year 1994 but should be reflected as an
adjustment in the cost basis of your Fund's shares. 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.
-4-
<PAGE>
- ----------------------------------------------------------
THE GLOBAL TOTAL RETURN FUND, INC.
Portfolio of Investments
December 31, 1994
<TABLE>
<CAPTION>
- --------------------------------------------------------
Principal Description US$
Amount Value
(000) (Note 1)
- --------------------------------------------------------
<C> <S> <C>
LONG-TERM INVESTMENTS--86.3%
Australia--10.0%
Australian Government
Bonds,
A$ 2,450# 7.00%, 8/15/98.......... $ 1,730,193
8,000# 12.00%, 11/15/01........ 6,799,888
17,300# 9.00%, 9/15/04.......... 12,563,530
New South Wales Treasury
Corp.,
8,100# 12.50%, 4/1/97.......... 6,565,054
10,520# 7.50%, 2/1/98........... 7,577,358
8,350# 12.00%, 12/1/01......... 6,986,618
Queensland Treasury
Corp.,
4,450# 8.00%, 5/14/97.......... 3,295,005
5,700# 8.00%, 8/14/01.......... 3,929,617
------------
49,447,263
------------
Canada--5.4%
Canadian Government
Bonds,
C$ 5,200# 5.75%, 3/1/99........... 3,296,079
3,000# Zero Coupon, 9/15/01.... 1,160,711
9,750# 7.25%, 6/1/03........... 6,190,525
Province of British
Columbia,
24,500# 7.00%, 6/9/99........... 16,143,627
------------
26,790,942
------------
Denmark--2.6%
Danish Government Bonds,
Dkr 47,000# 6.25%, 2/10/97.......... 7,458,504
32,490# 9.00%, 11/15/00......... 5,348,034
------------
12,806,538
------------
France--4.8%
French Government Bonds,
FF 48,200# 6.50%, 10/12/96......... 8,887,154
39,800# 8.50%, 3/28/00.......... 7,590,798
42,500# 6.75%, 10/25/03......... 7,230,538
------------
23,708,490
------------
Germany--6.3%
German Government Bonds,
DM 9,000# 6.375%, 5/20/98......... 5,681,588
<CAPTION>
- --------------------------------------------------------
Principal Description US$
Amount Value
(000) (Note 1)
- --------------------------------------------------------
<C> <S> <C>
Germany (cont'd.)
German Government Bonds,
DM 9,700 8.75%, 5/22/00.......... $ 6,614,063
8,320 7.50%, 9/9/04........... 5,329,430
26,350 6.00%, 6/20/16.......... 13,626,088
------------
31,251,169
------------
Ireland--2.9%
Irish Government Bonds,
IEP 2,000 8.75%, 7/27/97.......... 3,113,406
8,820 6.25%, 10/18/04......... 11,262,243
------------
14,375,649
------------
Italy--1.2%
Export Finance Corp. of
Norway,
Lira 1,000,000 12.25%, 8/5/96.......... 622,530
Italian Government
Bonds,
700,000 9.00%, 10/1/96.......... 417,214
9,000,000 7.4375%, 4/1/99......... 4,927,701
------------
5,967,445
------------
Japan--16.1%
International Bank for
Reconstruction &
Development,
(Y) 860,000 5.25%, 3/20/02.......... 9,006,421
779,500 4.75%, 12/20/04......... 7,896,969
Japanese Government
Bonds,
520,000 6.40%, 3/20/00.......... 5,749,009
1,940,000 6.60%, 6/20/01.......... 21,807,116
2,100,000 4.10%, 12/22/03......... 20,412,131
1,450,000 4.60%, 9/20/04.......... 14,598,750
------------
79,470,396
------------
Netherlands--3.6%
Dutch Government Bonds,
DG 5,500 9.00%, 7/1/00........... 3,360,900
14,000 7.25%, 10/1/04.......... 7,774,083
12,000 7.50%, 1/15/23.......... 6,495,077
------------
17,630,060
------------
New Zealand--7.1%
New Zealand Government
Bonds,
NZ$ 34,600 9.00%, 11/15/96......... 22,013,224
</TABLE>
-5- See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------
Principal Description US$
Amount Value
(000) (Note 1)
- --------------------------------------------------------
<C> <S> <C>
New Zealand (cont'd.)
New Zealand Government
Bonds,
NZ$ 20,000 10.00%, 7/15/97......... $ 13,003,902
------------
35,017,126
------------
Spain--1.8%
Spanish Government
Bonds,
Pts 600,000 11.85%, 8/30/96......... 4,538,990
600,000 10.55%, 11/30/96........ 4,609,066
------------
9,148,056
------------
United Kingdom--7.8%
United Kingdom Treasury
Bonds,
BP 9,700 7.00%, 8/6/97........... 14,729,617
3,400 6.00%, 8/10/99.......... 4,779,349
3,534 7.00%, 11/6/01.......... 5,021,220
10,200 6.75%, 11/26/04......... 13,894,652
------------
38,424,838
------------
United States--16.7%
Sovereign Bonds--3.0%
National Bank of
Argentina,
US$ 8,250 Zero Coupon, 9/1/00..... 7,301,250
Republic of Brazil,
8,771 IDU 6.0625%, 1/1/01..... 7,323,785
------------
14,625,035
------------
U.S. Government Bonds--13.7%
United States Treasury
Bonds,
6,700 6.25%, 8/15/23.......... 5,446,899
23,250 7.50%, 11/15/24......... 22,240,020
United States Treasury
Notes,
5,000 7.50%, 12/31/96......... 4,982,031
700 6.00%, 11/30/97......... 667,513
10,000 7.75%, 11/30/99......... 9,962,500
800 7.50%, 11/15/01......... 785,376
500 7.25%, 5/15/04.......... 480,155
22,910 7.875%, 11/15/04........ 22,974,377
------------
67,538,871
------------
Total United States
Securities............ 82,163,906
------------
Total long-term
investments
(cost
US$435,055,641)....... 426,201,878
------------
SHORT-TERM INVESTMENTS--9.5%
New Zealand--1.7%
New Zealand Government Bonds,
NZ$ 10,000 8.00%, 11/15/95......... 6,327,283
New Zealand Treasury
Bills,**
1,960 7.14%, 2/8/95........... 1,245,772
1,575 9.56%, 6/21/95.......... 966,662
------------
8,539,717
------------
<CAPTION>
- --------------------------------------------------------
Principal Description US$
Amount Value
(000) (Note 1)
- --------------------------------------------------------
<C> <S> <C>
Mexico--1.2%
Mexican Tesobonos,**
US$ 4,118 8.45%, 7/27/95.......... $ 3,689,597
2,631 8.35%, 8/3/95........... 2,349,107
------------
6,038,704
------------
United States--6.2%
Joint Repurchase
Agreement
Account,
20,780 5.82%, 1/3/95, (Note
5).................... 20,780,000
United States Treasury
Bills,**
5,000 5.86%, 4/27/95.......... 4,903,795
5,000 6.84%, 12/14/95......... 4,673,780
------------
30,357,575
------------
Contracts OUTSTANDING OPTIONS
(000) PURCHASED*--0.4%
- --------------
Put Options--0.1%
United States Treasury
Bonds,
13,000 expiring 2/14/95 @
US$93.875............. 96,203
------------
Call Options--0.3%
German Deutschemarks,
76,000 expiring 2/13/95 @
DM1.57................ 1,672,000
Japanese Yen,
28,000 expiring 1/26/95 @
(Y)93.70.............. 840
------------
1,672,840
------------
Cross-Currency Call Options
41,000 Swedish Krona,
expiring 1/20/95
@ Skr4.60 per German
Deutschemark.......... 2,624
Italian Lira,
24,100 expiring 1/12/95
@ Lira 974.16 per
German
Deutschemark.......... --
14,400 expiring 1/12/95
@ Lira 972.30 per
German
Deutschemark.......... --
------------
2,624
------------
Total short-term
investments
(cost
US$41,698,000)........ 46,707,663
------------
Total Investments,
Before Outstanding
Options Written--95.8%
(cost US$476,753,641;
Note 3)............... 472,909,541
------------
</TABLE>
-6- See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------
Description US$
Contracts Value
(000) (Note 1)
- --------------------------------------------------------
<C> <S> <C>
OUTSTANDING CALL OPTION
WRITTEN*--(0.2%)
German Deutschemarks,
76,000 expiring 2/13/95
@DM1.545 (premiums
received
US$661,200)........... $ (965,200)
------------
Total Investments, Net
of Outstanding Call
Options
Written--95.6%........ 471,944,341
Other assets in excess
of
other
liabilities--4.4%..... 21,700,707
------------
Net Assets--100%........ $493,645,048
------------
------------
</TABLE>
- ------------------
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.
Aggregate value of segregated
securities--$112,753,233.
IDU--Interest Due and Unpaid bond.
See Notes to Financial Statements. -7-
<PAGE>
- ----------------------------------------------------------
THE GLOBAL TOTAL RETURN FUND, INC.
Statement of Assets and Liabilities
December 31, 1994
- ----------------------------------------------------------
<TABLE>
<S> <C>
Assets
Investments, at value (cost
$476,753,641)........................ $472,909,541
Foreign currency, at value (cost
$1,367,013).......................... 1,351,530
Cash................................... 4,948,567
Receivable for investments sold........ 18,128,388
Interest receivable.................... 8,605,262
Forward contracts--amount receivable
from counterparties.................. 7,689,368
Other assets........................... 68,118
------------
Total assets....................... 513,700,774
------------
Liabilities
Payable for investments purchased...... 10,026,917
Forward contracts--amount payable to
counterparties....................... 7,767,249
Outstanding call options written, at
value
(premiums received $661,200)......... 965,200
Dividends payable...................... 569,026
Due to Manager......................... 360,435
Accrued expenses and other
liabilities.......................... 366,899
------------
Total liabilities.................. 20,055,726
------------
Net Assets............................. $493,645,048
------------
------------
Net assets were comprised of:
Common stock, at par................. $ 662,077
Paid-in capital in excess of par..... 547,112,546
------------
547,774,623
Accumulated net realized losses on
investment
and foreign currency transactions.... (49,875,831)
Net unrealized depreciation on
investments
and foreign currencies............... (4,253,744)
------------
Net assets, December 31, 1994.......... $493,645,048
------------
------------
Net asset value per share:
($493,645,048 / 66,207,699 shares of
common stock outstanding).......... $7.46
------------
------------
</TABLE>
- ----------------------------------------------------------
THE GLOBAL TOTAL RETURN FUND, INC.
Statement of Operations
December 31, 1994
- ----------------------------------------------------------
<TABLE>
<S> <C>
Net Investment Income
Income
Interest and discount earned (net of
foreign
withholding taxes of $191,158)...... $ 40,185,945
------------
Expenses
Management fee........................ 3,968,777
Custodian's fees and expenses......... 709,000
Reports to shareholders............... 300,000
Transfer agent's fees and expenses.... 224,000
Insurance............................. 112,000
Directors' fees....................... 94,000
Audit................................. 49,000
Legal................................. 40,000
Miscellaneous......................... 108,195
------------
Total expenses...................... 5,604,972
------------
Net investment income................. 34,580,973
------------
Realized and Unrealized Gain (Loss) on
Investment and Foreign Currency
Transactions
Net realized loss on:
Investment transactions............... (42,726,992)
Foreign currency transactions......... (25,814,844)
Written option transactions........... (6,511,085)
------------
(75,052,921)
------------
Net change in unrealized appreciation/
depreciation on:
Investments........................... (7,328,206)
Foreign currencies.................... 1,184,882
Written options....................... 371,214
------------
(5,772,110)
------------
Net loss on investments and foreign
currencies............................ (80,825,031)
------------
Net Decrease in Net Assets
Resulting from Operations............... $(46,244,058)
------------
------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
-8-
<PAGE>
- ----------------------------------------------------------
THE GLOBAL TOTAL RETURN FUND, INC.
Statement of Changes in Net Assets
- ----------------------------------------------------------
<TABLE>
Increase (Decrease)
in Net Assets
<CAPTION>
Year Ended December 31,
----------------------------
1994 1993
------------ ------------
<S> <C> <C>
Operations:
Net investment income..... $ 34,580,973 $ 42,283,802
Net realized gain (loss)
on investment and
foreign currency
transactions............ (75,052,921) 15,039,964
Net change in unrealized
appreciation/depreciation
on investment and
foreign currency
transactions............ (5,772,110) 33,815,425
------------ ------------
Net increase (decrease) in
net
assets resulting from
operations................ (46,244,058) 91,139,191
------------ ------------
Dividends and distributions:
Dividends from net
investment income....... (11,402,165) (19,539,619)
Distributions from net
capital gains........... (8,933,149) (15,039,964)
Distributions in excess of
net
capital gains........... -- (13,034,919)
Tax return of capital
distribution (19,717,909) --
------------ ------------
Total dividends and
distributions............. (40,053,223) (47,614,502)
------------ ------------
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions......... -- 770,334
------------ ------------
Total increase (decrease)... (86,297,281) 44,295,023
Net Assets
Beginning of year........... 579,942,329 535,647,306
------------ ------------
End of year................. $493,645,048 $579,942,329
------------ ------------
------------ ------------
</TABLE>
- ----------------------------------------------------------
THE GLOBAL TOTAL RETURN FUND, INC.
Notes to Financial Statements
- ----------------------------------------------------------
The Global Total Return Fund, Inc., formerly known as 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 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. -9-
<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 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 losses 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 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: 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.
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
-10-
<PAGE>
<PAGE>
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 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 decrease paid-in capital in excess of
par by $19,717,909; decrease accumulated net investment income by $3,460,899,
and decrease accumulated net realized losses on investments by $23,178,808 for
realized foreign currency losses incurred during the fiscal year ended December
31, 1994. 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, 1994 aggregated $2,812,952,477 and $2,855,216,511,
respectively.
Transactions in written options during the year ended December 31, 1994 were
as follows:
<TABLE>
<CAPTION>
Number of
Contracts Premiums
(000) Received
---------- -----------
<S> <C> <C>
Options outstanding at December
31, 1993...................... 91,000 $ 647,250
Options written................. 1,873,542 13,031,893
Options terminated in closing
purchase
transactions.................. (1,544,195) (9,778,546)
Options expired................. (186,000) (2,212,365)
Options exercised............... (158,347) (1,027,032)
---------- -----------
Options outstanding at December
31, 1994...................... 76,000 $ 661,200
---------- -----------
---------- -----------
</TABLE>
At December 31, 1994, 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>
Australian Dollars
expiring 1/6/95...... $ 49,720,096 $ 50,773,051 $ 1,052,955
British Pounds
expiring 2/8/95...... 26,534,573 25,915,090 (619,483)
Canadian Dollars
expiring
1/23/95-2/13/95...... 60,817,932 59,760,494 (1,057,438)
German Deutschemarks
expiring
1/9/95-2/27/95....... 335,255,416 336,986,240 1,730,824
Italian Lira
expiring 2/13/95..... 3,400,996 3,423,830 22,834
Japanese Yen
expiring
1/18/95-1/31/95...... 132,549,213 132,191,009 (358,204)
Netherlands Guilder
expiring 1/3/95...... 7,788,629 7,915,547 126,918
Swedish Krona
expiring 2/7/95...... 9,956,457 10,064,789 108,332
Swiss Francs
expiring 1/17/95..... 29,928,730 30,243,871 315,141
---------------- ------------ ---------------
$655,952,042 $657,273,921 $ 1,321,879
---------------- ------------ ---------------
---------------- ------------ ---------------
<CAPTION>
Value at
Foreign Currency Sale Settlement Date Current Appreciation/
Contracts Receivable Value (Depreciation)
- ----------------------- ---------------- ------------ ---------------
<S> <C> <C> <C>
Australian Dollars
expiring 1/6/95...... $ 69,543,075 $ 71,045,053 $(1,501,978)
Belgian Francs
expiring 2/7/95...... 10,869,187 10,619,275 249,912
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
Value at
Foreign Currency Sale Settlement Date Current Appreciation/
Contracts Receivable Value (Depreciation)
- ----------------------- ---------------- ------------ ---------------
<S> <C> <C> <C>
British Pounds
expiring 2/8/95...... $ 19,947,284 $ 19,986,311 $ (39,027)
Canadian Dollars
expiring
1/23/95-2/13/95...... 75,187,350 73,839,682 1,347,668
Danish Kroner
expiring 2/27/95..... 40,883,010 41,263,643 (380,633)
French Francs
expiring 1/17/95..... 16,992,158 16,852,111 140,047
German Deutschemarks
expiring
1/9/95-1/31/94....... 192,199,487 194,441,521 (2,242,034)
Italian Lira
expiring 2/13/95..... 3,400,000 3,423,830 (23,830)
Japanese Yen
expiring
1/18/95-1/31/95...... 159,170,921 158,525,294 645,627
Netherlands Guilder
expiring
1/3/95-1/10/95....... 23,297,637 22,972,702 324,935
New Zealand Dollars
expiring 1/24/95..... 18,878,880 18,929,854 (50,974)
Spanish Pesetas
expiring 2/22/95..... 11,069,463 11,109,177 (39,714)
Swedish Krona
expiring 2/7/95...... 12,534,553 12,302,052 232,501
Swiss Francs
expiring 1/17/95..... 30,181,611 30,243,871 (62,260)
---------------- ------------ ---------------
$684,154,616 $685,554,376 $(1,399,760)
---------------- ------------ ---------------
---------------- ------------ ---------------
</TABLE>
The United States federal income tax basis of the Fund's investments at
December 31, 1994 was $476,161,435 and, accordingly, net unrealized depreciation
for United States federal income tax purposes was $3,251,894 (gross unrealized
appreciation--$4,441,472; gross unrealized depreciation--$7,693,366).
For federal income tax purposes, the Fund has 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 December 31, 1994, Prudential owned 12,020
shares.
The Fund issued 98,288 shares during the year ended December 31, 1993 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, 1994, the
Fund had a 2.70% undivided interest in the joint account. The undivided interest
for the Fund represented $20,780,000 in the principal amount. As of such date,
each repurchase agreement in the joint account and the collateral therefor were
as follows:
Goldman Sachs & Co., 5.75%, in the principal amount of $250,000,000,
repurchase price $250,159,722, due 1/3/95. The value of the collateral including
accrued interest is $255,000,108.
Lehman Government Securities, Inc., 5.90%, in the principal amount of
$70,000,000, repurchase price $70,045,889, due 1/3/95. The value of the
collateral including accrued interest is $71,379,084.
Morgan Stanley & Co., 5.75%, in the principal amount of $250,000,000,
repurchase price $250,159,722, due 1/3/95. The value of the collateral including
accrued interest is $255,146,220.
Smith Barney, Inc., 5.95%, in the principal amount of $200,000,000,
repurchase price $200,132,222, due 1/3/95. The value of the collateral including
accrued interest is $204,036,161.
Note 6. Dividend On February 9, 1995, the
Board of Directors of the Fund declared a dividend
of $0.125 per share from net investment income payable on March 31, 1995 to
shareholders of record on March 17, 1995.
-12-
<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, 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)
<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
</TABLE>
-13-
<PAGE>
- --------------------------------------------------------------------------------
THE GLOBAL TOTAL RETURN FUND, INC.
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
- ----------------------------------------------------
PER SHARE OPERATING PERFORMANCE: 1994 1993 1992 1991
1990
-------- -------- -------- --------
--------
<S> <C> <C> <C> <C>
<C>
Net asset value, beginning of year.............................. $ 8.76 $ 8.10 $ 8.99 $ 8.96
$ 8.57
-------- -------- -------- --------
--------
Net investment income........................................... .52 .64 .81 .84
.89
Net realized and unrealized gain (loss) on investments and
foreign currencies............................................ (1.22) .74 (.90) (.19)
.36
-------- -------- -------- --------
--------
Total from investment operations.............................. (.70) 1.38 (.09) .65
1.25
-------- -------- -------- --------
--------
Dividends from net investment income............................ (.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............................. (.60) (.72) (.80) (.62)
(.88)
-------- -------- -------- --------
--------
Increase resulting from Fund share transactions................. -- -- --
- -- .02
-------- -------- -------- --------
--------
Net asset value, end of year.................................... $ 7.46 $ 8.76 $ 8.10 $ 8.99
$ 8.96
-------- -------- -------- --------
--------
-------- -------- -------- --------
--------
Market price per share, end of year............................. $ 6.13 $ 8.00 $ 7.50 $ 8.13
$ 8.00
-------- -------- -------- --------
--------
-------- -------- -------- --------
--------
TOTAL INVESTMENT RETURND........................................ (16.12)% 16.50% 1.75% 9.42%
12.89%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)................................... $493,645 $579,942 $535,647 $593,376
$591,339
Average net assets (000)........................................ $536,230 $567,128 $570,812 $571,767
$596,824
Ratio of expenses to average net assets......................... 1.04% 1.02% 1.01% .99%
1.03%
Ratio of net income to average net assets....................... 6.45% 7.67% 9.39% 9.69%
10.03%
Portfolio turnover rate......................................... 583% 370% 192% 141%
221%
</TABLE>
- ---------------
D 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. -14-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors of
The Global Total Return Fund, Inc.
We have audited the accompanying statement of assets and liabilities
including the portfolio of investments of The Global Total Return Fund, Inc.,
(formerly known as The Global Yield Fund, Inc.) as of December 31, 1994, 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, 1994, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The Global Total
Return Fund, Inc. as of December 31, 1994, the results of its operations, the
changes in its net assets and its financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
New York, New York
February 9, 1995
-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 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.
-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 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.
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 collect
(212) 214-3332
37936L204
