(ICON)
The Global
Total Return
Fund, Inc.
SEMI-ANNUAL
REPORT
June 30, 1996
(LOGO)
<PAGE>
The Global Total Return Fund, Inc.
Performance At A Glance.
For the six-month period ended June 30, 1996, The Global Total
Return Fund
produced total returns that were ahead of similar funds tracked by
Lipper
Analytical Services. Fund returns, although modest, stood in sharp
contrast to
world bond markets, which generally were sluggish during the
reporting period.
Cumulative Total Returns1 As of
6/30/96
<TABLE>
<CAPTION>
Six One Five
Since
Months Year Years
Inception2
<S> <C> <C> <C>
<C>
Class A 4.5% 12.6% 57.4%
179.4%
Class B N/A N/A N/A
1.6
Class C N/A N/A N/A
1.6
Lipper Gen. World Inc. Avg3 1.7 8.7 49.4
123.8
<CAPTION>
Average Annual Total Returns1 As of
6/30/96
One Five Since
Year Years Inception2
<S> <C> <C> <C>
Class A 8.1% 8.6% 10.4%
Class B N/A N/A N/A
Class C N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
Dividends & Yields
As of 6/30/96
<S> <C> <C>
Total Dividends 30-Day
Paid for Six Mos. SEC Yield
Class A $0.42 6.07%
Class B $0.40 5.71
Class C $0.40 5.94
</TABLE>
Past performance is not indicative of future results. Investment
return and
principal value will fluctuate so that an investor's shares, when
redeemed, may
be worth more or less than their original cost.
Past performance numbers, with the exception of six-month returns,
do not fully
reflect the higher operating expenses incurred when the Fund
commenced
operations as an open-end mutual fund on January 15, 1996. If these
expenses
had applied since the Fund's inception, past performance returns
would have
been lower. Prior to January, the Fund operated as a closed-end
Fund with
shares being traded on the New York Stock Exchange.
1Source: Prudential Mutual Fund Management and Lipper Analytical
Services. The
cumulative total returns do not take into account applicable sales
charges. The
average annual total returns do take into account applicable sales
charges. The
Fund charges a maximum front end sales load of 4% for Class A
shares. Class B
shares are subject to a declining contingent deferred sales charge
(CDSC) of
5%, 4%, 3%, 2%, 1% and 1% for six years. Class C shares have a 1%
CDSC for one
year. Class B shares will automatically convert to Class A shares
on a
quarterly basis, after approximately seven years. The Fund
commenced operations
on July 7, 1986 as a closed-end investment company. Effective
January 15, 1996,
the Fund commenced operations as an open-end investment company.
Since Class B
and C shares have been in existence for less than a year, no
average annual
total returns are shown.
2Inception dates: 7/7/86 Class A; 1/15/96 Class B; 1/15/96 Class C.
3These are the average returns of 170 funds in the Lipper General
World Income
Fund category for six months; 158 funds for one year; 37 funds for
five years;
and three funds since inception of Class A (formerly closed-end)
shares on July
7, 1986, as determined by Lipper Analytical Services.
How Investments Compared.
(As of 6/30/96)
(GRAPH)
Source: Lipper Analytical Services. Financial markets change, so a
mutual
fund's past performance should never be used to predict future
results. The
risks to each of the investments listed above are different -- we
provide
12-month total returns for several Lipper mutual fund categories to
show you
that reaching for higher yields means tolerating more risk. The
greater the
risk, the larger the potential reward or loss. In addition, we've
included
historical 20-year average annual returns. These returns assume the
reinvestment of dividends.
U.S. Growth Funds will fluctuate a great deal. Investors have
received higher
historical total returns from stocks than from most other
investments. Smaller
capitalization stocks offer greater potential for long-term growth
but may be
more volatile than larger capitalization stocks.
General Bond Funds provide more income than stock funds, which can
help smooth
out their total returns year by year. But their prices still
fluctuate
(sometimes significantly) and their returns have been historically
lower than
those of stock funds.
General Municipal Debt Funds invest in bonds issued by state
governments, state
agencies and/or municipalities. This investment provides income
that is usually
exempt from federal and state income taxes.
Money Market Funds attempt to preserve a constant share value; they
don't
fluctuate much in price but, historically, their returns have been
generally
among the lowest of the major investment categories.
<PAGE>
Gabriel Irwin and Simon Wells, Fund Managers (PICTURE)
Portfolio
Managers'
Report
Your Fund seeks to maximize total return, which is its current
income plus any
capital appreciation of its underlying bonds. The Fund invests
primarily in
intermediate-term, investment grade government bonds issued
throughout the
world. The Fund may invest up to 10% of total net assets in bonds
rated below
investment grade with a minimum rating of "B" by S&P or Moody's or
of
comparable quality in our view. Lower rated securities are subject
to a greater
risk of loss of principal and interest than higher rated
securities. There are
special risks associated with foreign investing including social,
political and
currency risks. There can be no assurance that the Fund's
investment objective
will be achieved.
A Word About
Hedging.
One of the ways your Fund seeks to enhance return is to buy (or
have the option
to buy) "forward contracts" which predict how one country's
currency may rise
or fall in value compared to other currencies. These contracts
state the price
we are willing to pay for the currency (or will sell it for) at a
future date.
If our predictions are correct, we make money on the contract and
these profits
are passed along to the Fund. If we're wrong, the reverse occurs.
This
investment practice is sometimes called "hedging" and is often done
by funds
which invest in securities denominated in foreign currencies.
Strategy Session.
We follow a "top down" investment philosophy in our pursuit of
total return.
This means we set our strategy by making broad country and currency
allocations. We look for countries with well-managed economies and
well-established currencies. Both are critical in determining a
bond's value
and prospects for price appreciation. Only then do we look at the
specific
types of bonds and issuers within a particular country.
As might be expected, the larger countries of the U.S. and Western
Europe
dominate issuance in the world's bond markets. As such, most global
bond funds
have a significant percentage of assets in bonds from these
countries and ours
is no exception. On June 30, 1996, 29% of the Fund's total net
assets were
invested in the U.S. bond market, while 62% were invested in
non-U.S. bond
markets. Often times though, the most attractive bond market
opportunities
surface in lesser known markets such as in Eastern Europe. This was
certainly
the case during the past six months.
A Special Note.
Since we last wrote to you, there have been a high number of
redemptions from
the Fund. The Fund imposed a 2% redemption fee on all Class A share
redemptions
for six months following its conversion to an open-end mutual fund
until July
12, 1996. These fees were retained by the Fund and increased the
Fund's total
return for the reporting period.
Geographic Breakdown.
Expressed as a percentage of
total net assets as of 6/30/96.
(CHART)
<PAGE>
What Went Well.
The U.S. Dollar
Was King.
With the world's major bond markets generally sluggish, we had to
look for
other ways to earn money. One of these was by hedging currencies.
The U.S.
dollar continued to strengthen against the German mark and Japanese
yen -- two
of the world's most-dominant currencies -- during the past six
months. While
intuitively a strong dollar seems beneficial for the U.S., it
actually hurts
U.S. investors in foreign bonds, since it requires more marks and
yen to equal
the value of a single U.S. dollar. To help protect our Fund from
the strong
dollar, we purchased currency contracts that performed well as the
dollar rose.
It turned out to be a good strategy, and was the primary reason for
the Fund's
above-average return during the past six months.
Emerging Markets
Looked Good.
Emerging market countries in Eastern Europe were especially
attractive to us.
The Czech Republic and Poland were two of our favorites, thanks to
their
well-managed economies. Ratings of government and corporate bonds
sold in these
countries by Moody's or Standard & Poor's continued to improve and
many offered
very attractive yields. Although these emerging market countries
comprised only
about 2% of total net assets on June 30, 1996, they continued to
contribute
nicely to the Fund's total return.
And Not So Well.
More Dollars, Please.
Our currency hedging strategy greatly enhanced performance during
the past six
months. Looking back, we should have purchased even more contracts
tied to a
rising U.S. dollar.
Five Largest
Issuers.
18.4% United States Treasury
Notes
7.7% Dutch Gov't Bonds
7.2% German Gov't Bonds
7.1% Danish Gov't Bonds
6.1% Italian Gov't Bonds
Expressed as a percentage of total net assets as of 6/30/96.
Looking Ahead.
The world's economies, excluding the U.S., continue to grow slowly
with low
levels of inflation. In the U.S., the economy appears to be growing
too fast,
and higher interest rates may be on the way making bonds a less
attractive
investment. Normally, slow growth and low inflation would favor
bonds, but
the U.S. bond market is so large and influential that negative
sentiment in
the U.S. can easily spill over to bond markets worldwide.
For these reasons we see bond markets remaining sluggish for the
remainder of
1996. We hope to provide attractive Fund returns by continuing our
currency
hedging strategy and by looking for select opportunities in
smaller,
lesser-known markets.
1
<PAGE>
President's Letter August 1, 1996
(PICTURE)
Dear Shareholder:
Last year, U.S. stocks and bonds generally posted extraordinary
returns.
Investors celebrated this performance by putting record amounts of
new money
into mutual funds in the first few months of 1996. According to
figures
released by the Investment Company Institute, a mutual fund
industry trade
group, new investments in mutual funds reached an all-time monthly
high of $33
billion in January of 1996. An additional $66 billion was invested
in the
following three months, although this rapid inflow subsided
somewhat in late
spring.
While we are pleased that mutual funds are attracting new
investors, we're
concerned that some of them may be "buying last year's returns."
Few expect
1995's virtual non-stop returns from the stock and bond markets. In
fact,
1996's markets have been volatile so far (stock and bond prices go
down just as
they go up). There's no better time than now to be talking with
your Financial
Advisor or Registered Representative. She or he can help you
determine
reasonable expectations about both the potential performance and
risks
associated with your investments.
Board of Directors Election.
In addition to this report, we are including a notice about a
special
shareholder meeting to elect new Prudential mutual fund boards of
directors.
Your Board of Directors has approved a proposal to place a common
board of
experienced directors across many of Prudential's mutual funds to
improve
business efficiency. The enclosed material contains more complete
information
about this proposal.
Changes at Prudential.
Finally, there have been some important changes recently at
Prudential that
were made with you in mind. Prudential Mutual Funds has moved
under the
umbrella of Prudential's newly created "Money Management Group."
This group
manages and administers nearly $190 billion in client assets and
provides
mutual funds, annuities, defined benefit and defined contribution
plans to our
individual and institutional investors. We plan to improve the
range and
quality of investment products and services that we can provide you
by better
leveraging Prudential's strengths. There will, however, be no
change in the
service you receive from your Financial Advisor, Registered
Representative or
our Customer Service unit.
We're excited about our future and hope that you are, too. Thank
you for your
continued support and confidence in Prudential Mutual Funds.
Sincerely,
Richard A. Redeker
President
2
<PAGE>
THE GLOBAL TOTAL RETURN FUND, INC. Portfolio of Investments as
of
June 30, 1996 (Unaudited)
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount US$
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--88.1%
- ------------------------------------------------------------
Australia--3.0%
A$ 7,000 New South Wales Treasury
Corporation,
6.50%, 5/1/06 $ 4,591,523
7,250 Queensland Treasury
Corporation,
6.50%, 6/14/05 4,827,038
------------
9,418,561
- ------------------------------------------------------------
Canada--4.8%
C$ 8,000 British Columbia Provincial
Bond,
7.75%, 6/16/03 5,960,819
Canadian Government Bonds,
9,500(a) 9.00%, 12/1/04 7,594,284
2,100(a) 9.00%, 6/1/25 1,690,293
------------
15,245,396
- ------------------------------------------------------------
Czech Republic--0.8%
CZK 40,000 International Finance
Corporation,
10.50%, 11/30/98 1,447,856
30,000 Skoda Finance,
11.625%, 2/9/98 1,079,904
------------
2,527,760
- ------------------------------------------------------------
Denmark--7.1%
Danish Government Bonds,
DKr 40,000(a) 8.00%, 5/15/03 7,218,864
45,000(a) 7.00%, 12/15/04 7,592,577
44,750(a) 8.00%, 3/15/06 7,923,725
------------
22,735,166
- ------------------------------------------------------------
France--1.7%
FF 27,500 National Bank of Hungary,
8.00%, 11/12/99 5,545,344
Germany--10.3%
DM 9,215 DSL Finance BV,
7.375%, 2/15/00 $ 6,413,325
German Government Bonds,
12,000(a) 6.75%, 4/22/03 8,135,126
18,000(a) 7.375%, 1/3/05 12,515,579
4,000(a) 6.25%, 1/4/24 2,322,073
5,000 Republic of Columbia,
7.25%, 12/21/00 3,333,880
------------
32,719,983
- ------------------------------------------------------------
Ireland--3.8%
IEP 6,750(a) Irish Government Bond,
9.25%, 7/11/03 11,952,901
- ------------------------------------------------------------
Italy--6.9%
Lira 3,500,000(a) Bayerische Landesanstalt Bank,
10.625%, 5/12/00 2,420,555
Italian Government Bonds,
18,000,000 8.50%, 8/1/99 11,751,967
11,500,000(a) 10.00%, 8/1/03 7,869,338
------------
22,041,860
- ------------------------------------------------------------
Netherlands--7.7%
Dutch Government Bonds,
NLG 36,500 7.00%, 6/15/05 22,257,399
3,750(a) 7.50%, 1/15/23 2,310,848
------------
24,568,247
- ------------------------------------------------------------
New Zealand--2.9%
NZ$ 14,200 New Zealand Government Bond,
8.00%, 2/15/01 9,352,477
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements.
3
<PAGE>
<PAGE>
THE GLOBAL TOTAL RETURN FUND, INC. Portfolio of Investments as
of
June 30, 1996 (Unaudited)
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount US$
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Poland--0.2%
PLZ 2,000 General Electric Capital
Corporation,
18.25%, 2/27/98 $ 726,504
- ------------------------------------------------------------
Spain--6.5%
Pts 790,000 Republic of Argentina,
12.80%, 12/9/97 6,347,582
Spanish Government Bonds,
1,100,000(a) 10.30%, 6/15/02 9,314,188
700,000(a) 8.20%, 2/28/09 5,167,284
------------
20,829,054
- ------------------------------------------------------------
United Kingdom--4.3%
BP 2,900(a) Guaranteed Export Finance
Corporation,
7.25%, 12/15/98 4,554,573
2,350(a) United Kingdom Treasury Bond,
7.75%, 9/8/06 3,596,739
3,700(a) United Kingdom Treasury Note,
8.00%, 9/27/13 5,628,876
------------
13,780,188
- ------------------------------------------------------------
United States--28.1%
Corporate Bonds--4.7%
US$ 2,000 Banco Nacional de Commercial
Exterior (Mexico),
7.50%, 7/1/00 1,848,000
2,000 Bancomer SA (Mexico),
8.00%, 7/7/98 1,979,000
3,300 Cemex SA (Mexico),
8.875%, 6/10/98 3,286,800
3,750 Empresas La Moderna SA
(Mexico),
11.375%, 1/25/99 3,796,875
3,900 Financiera Energetica Nacional
(Colombia),
9.00%, 11/8/99 4,009,200
------------
14,919,875
------------
Sovereign Bonds--3.4%
US$ 1,500 Argentina Government Bond,
6.3125%(c), 3/31/05, FRN $ 1,160,156
2,500 National Bank of Romania,
9.75%, 6/25/99 2,535,938
2,500 Republic of Brazil,
6.375%(c), 1/1/01, FRB/IDU 2,176,781
Republic of Poland,
2,000 3.75%(c), 10/27/14, FRB 1,520,000
1,500 6.4375%(c), 10/27/24, FRN 1,398,750
2,000 United Mexican States,
10.8125%, 7/21/97 2,080,500
------------
10,872,125
------------
Supranational Bonds--1.6%
Corporacion Andina de Fomento,
500 6.625%, 10/14/98 496,000
4,800 7.375%, 7/21/00 4,800,000
------------
5,296,000
------------
U.S. Government Obligations--18.4%
United States Treasury Notes,
12,100(a) 7.375%, 11/15/97 12,315,501
6,500(a) 6.00%, 11/30/97 6,501,040
21,500(a) 6.75%, 6/30/99 21,748,540
16,810(a) 7.875%, 11/15/04 18,068,060
------------
58,633,141
------------
89,721,141
------------
Total long-term investments
(cost US$276,590,420) 281,164,582
------------
SHORT-TERM INVESTMENTS--11.8%
- ------------------------------------------------------------
Czech Republic--0.3%
CZK 30,000 ING Bank, Euro Commercial
Paper,
24.25%, 9/20/96 1,059,112
</TABLE>
- -----------------------------------------------------------------
- ---------------
4 See Notes to
Financial Statements.
<PAGE>
<PAGE>
THE GLOBAL TOTAL RETURN FUND, INC. Portfolio of Investments as
of
June 30, 1996 (Unaudited)
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount US$
(000) Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
New Zealand--1.3%
NZ$ 6,000 New Zealand Government Bond,
9.00%, 11/15/96 $ 4,097,320
- ------------------------------------------------------------
Poland--0.9%
Polish Treasury Bills,
PLZ 2,000 21.202%(b), 7/11/96 731,508
2,000 21.25%(b), 7/24/96 724,437
2,000 21.20%(b), 8/28/96 710,596
2,000 21.00%(b), 9/18/96 701,871
------------
2,868,412
- ------------------------------------------------------------
United States--9.3%
Corporate Bonds--0.6%
US$ 1,875 Financiera Energetica Nacional
(Colombia),
6.625%, 12/13/96 1,879,688
------------
Repurchase Agreement--8.7%
US$ 27,825 Joint Repurchase Agreement
Account,
5.46%, 7/1/96, (Note 5) $ 27,825,000
------------
29,704,688
------------
Total short-term investments
(cost US$37,675,683) 37,729,532
------------
- ------------------------------------------------------------
Total Investments--99.9%
(cost $314,266,103; Note 4) 318,894,114
Other assets in excess of
liabilities--0.1% 266,769
------------
Net Assets--100% $319,160,883
------------
------------
</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.
(c) Rate shown reflects current rate of variable rate instruments.
FRB--Floating Rate Bond.
FRN--Floating Rate Note.
IDU--Interest Due and Unpaid.
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements.
5
<PAGE>
<PAGE>
THE GLOBAL TOTAL RETURN FUND, INC. Statement of Assets and
Liabilities
(Unaudited)
- -----------------------------------------------------------------
- --------------
<TABLE>
<S>
<C>
Assets
June 30, 1996
Investments, at value (cost
$314,266,103)....................................................
............... $318,894,114
Foreign currency, at value (cost
$1,077,372)......................................................
.......... 1,076,654
Cash.............................................................
........................................... 21,653
Interest
receivable.......................................................
.................................. 6,570,280
Receivable for Fund shares
sold.............................................................
................ 79,480
Other
assets...........................................................
..................................... 79,372
Forward currency contracts - amount receivable from
counterparties..........................................
59,876
-------------
Total
assets...........................................................
.................................. 326,781,429
-------------
Liabilities
Dividends
payable..........................................................
................................. 5,175,102
Forward currency contracts - amount payable to
counterparties...............................................
743,367
Payable for investments
purchased........................................................
................... 708,979
Payable for Fund shares
reacquired.......................................................
................... 613,596
Management fee
payable..........................................................
............................ 197,750
Accrued expenses and other
liabilities......................................................
................ 140,622
Distribution fee
payable..........................................................
.......................... 41,130
-------------
Total
liabilities......................................................
.................................. 7,620,546
-------------
Net
Assets...........................................................
....................................... $319,160,883
-------------
-------------
Net assets were comprised of:
Common stock, at
par..............................................................
....................... $ 380,173
Paid-in capital in excess of
par..............................................................
........... 311,286,616
-------------
311,666,789
Undistributed net investment
income...........................................................
........... 17,229,426
Accumulated net realized loss on investment and foreign currency
transactions............................ (13,652,482)
Net unrealized appreciation on investments and foreign
currencies........................................
3,917,150
-------------
Net assets, June 30,
1996.............................................................
...................... $319,160,883
-------------
-------------
Class A:
Net asset value and redemption price per share
($319,137,381 / 38,014,508 shares of common stock issued and
outstanding)............................. $8.40
Maximum sales charge (4.0% of offering
price)...........................................................
.... .35
-------------
Maximum offering price to
public...........................................................
................. $8.75
-------------
-------------
Class B:
Net asset value, offering price and redemption price per share
($23,300 / 2,773 shares of common stock issued and
outstanding).......................................
$8.40
-------------
-------------
Class C:
Net asset value, offering price and redemption price per share
($202.06 / 24.057 shares of common stock issued and
outstanding)......................................
$8.40
-------------
-------------
</TABLE>
- -----------------------------------------------------------------
- ---------------
6 See Notes to
Financial Statements.
<PAGE>
<PAGE>
THE GLOBAL TOTAL RETURN FUND, INC.
Statement of Operations (Unaudited)
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Six Months
Ended
Net Investment Income June 30, 1996
Income
Interest and discount earned (net of
foreign withholding taxes of
$41,851)........................... $ 14,183,298
-----------------
Expenses
Management fee........................ 1,342,979
Distribution fee--Class A............. 245,864
Distribution fee--Class B............. 27
Distribution fee--Class C............. 1
Transfer agent's fees and expenses.... 150,000
Custodian's fees and expenses......... 144,000
Reports to shareholders............... 112,000
Registration fees..................... 61,000
Directors' fees....................... 45,000
Legal fees and expenses............... 29,000
Insurance............................. 26,000
Audit fee and expenses................ 25,000
Miscellaneous......................... 42,189
-----------------
Total expenses........................ 2,223,060
-----------------
Net investment income.................... 11,960,238
-----------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions
Net realized gain on:
Investment transactions............... 8,779,555
Foreign currency transactions......... 11,292,631
-----------------
20,072,186
-----------------
Net change in unrealized appreciation on:
Investments........................... (20,317,432)
Foreign currencies.................... 487,812
-----------------
(19,829,620)
-----------------
Net gain on investments and foreign
currencies............................ 242,566
-----------------
Net Increase in Net Assets
Resulting from Operations................ $ 12,202,804
-----------------
-----------------
</TABLE>
THE GLOBAL TOTAL RETURN FUND, INC.
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) June 30, December 31,
in Net Assets 1996 1995
<S> <C> <C>
Operations:
Net investment income.......... $ 11,960,238 $ 35,712,390
Net realized gain on investment
and foreign currency
transactions................ 20,072,186 55,340,546
Net change in unrealized
appreciation (depreciation)
on investments and foreign
currency transactions....... (19,829,620) 28,000,514
------------ ------------
Net increase in net assets
resulting from operations... 12,202,804 119,053,450
------------ ------------
Dividends and distributions (Note 1)
Dividends from net
investment income
Class A..................... (11,473,547) (35,712,390)
Class B..................... (390) --
Class C..................... (7) --
------------ ------------
(11,473,944) (35,712,390)
------------ ------------
Distribution in excess of net
investment income
Class A..................... (4,531,221) (17,914,921)
Class B..................... (107) --
Class C..................... (2) --
------------ ------------
(4,531,330) (17,914,921)
------------ ------------
Fund share transactions (Note 6)
Net proceeds from shares
sold........................ 2,010,946 --
Net asset value of shares
issued in reinvestment of
dividends and distributions.. 1,889,473 --
Cost of shares reacquired...... (240,008,253)(a) --
------------ ------------
Net decrease in net assets from
Fund share transactions..... (236,107,834) --
------------ ------------
Total increase (decrease)......... (239,910,304) 65,426,139
Net Assets
Beginning of period............... 559,071,187 493,645,048
------------ ------------
End of period..................... $319,160,883 $559,071,187
------------ ------------
------------ ------------
</TABLE>
- ---------------
(a) Net of $4,848,492 redemption fee retained by the Fund.
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements.
7
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) THE GLOBAL TOTAL
RETURN FUND, INC.
- -----------------------------------------------------------------
- ---------------
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. On December 6,
1995,
shareholders approved the conversion of the Fund to an open-end
fund. Effective
January 15, 1996, the Fund began operating as an open-end fund.
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 region.
- ------------------------------------------------------------
Note 1. Accounting Policies
The following is a summary of 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 underlying collateral securities, the value of
which exceeds
the principal amount of the repurchase transaction including
accrued interest.
To the extent that any repurchase transaction exceeds one business
day, the
value of the collateral is marked-to-market on a daily basis to
ensure the
adequacy of the collateral. 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 period, 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.
- -----------------------------------------------------------------
- ---------------
8
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) THE GLOBAL TOTAL
RETURN FUND, INC.
- -----------------------------------------------------------------
- ---------------
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.
Security Transactions and Net Investment Income: Security
transactions are
recorded on the trade date. Realized and unrealized gains and
losses from
security and currency transactions are calculated on the identified
cost basis.
Interest income which is comprised of three elements: stated
coupon, original
issue discount and market discount is recorded on the accrual
basis. Expenses
are recorded on the accrual basis which may require the use of
certain estimates
by management.
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 undistributed net investment income
by
$12,274,132 and increase accumulated net realized losses on
investments by
$12,274,132 for foreign currency gains realized or recognized
during the period
ended June 30, 1996. 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, compensation of officers of the Fund, occupancy and
certain clerical
and bookkeeping costs of the Fund. The Fund bears all other costs
and expenses.
Effective January 15, 1996, the management fee paid PMF is computed
daily and
payable monthly at an annual rate of 0.75% of the Fund's average
daily 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.
Prior thereto,
the management fee was computed on the Fund's average weekly net
assets.
Amendments to the management and subadvisory agreements to reflect
the provision
by PMF and PIC of certain services necessary for the operation of
the Fund as an
open-end investment company were approved by shareholders of the
Fund on
December 6, 1995.
Effective January 15, 1996, the Fund began operation as an open-end
fund and
entered into a distribution agreement with Prudential Securities
Incorporated
(``PSI''), which acts as distributor of the Class A, Class B and
Class C shares
of the Fund. The Fund compensates PSI for distributing and
servicing the Fund's
Class A, Class B, and Class C shares, pursuant to a plan of
distribution, (the
``Class A, B and C Plan'') regardless of expenses actually incurred
by them. The
distribution fees are accrued daily payable monthly.
Pursuant to the Class A, B and C Plan, the Fund compensates PSI for
distribution-related activities at an annual rate of up to .30 of
1%, 1% and
- -----------------------------------------------------------------
- ---------------
9
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) THE GLOBAL TOTAL
RETURN FUND, INC.
- -----------------------------------------------------------------
- ---------------
1% of the average daily net assets of the Class A, B, and C shares
respectively.
Such expenses under the Plans were .15 of 1%, .75 of 1% and .75 of
1% of the
average daily net assets of the Class A, B and C shares,
respectively, for the
period January 15, 1996 through June 30, 1996.
PSI has advised the Fund that it has received approximately $7,000
in front-end
sales charges resulting from sales of Class A shares during the
period January
15, 1996 through June 30, 1996. From these fees, PSI paid such
sales charges to
Pruco Securities Corporation, an affiliated broker-dealers, which
in turn paid
commissions to salespersons and incurred other distribution costs.
A redemption fee, paid to the Fund, of 2% was imposed on
redemptions of shares
acquired prior to the conversion during the first six months after
the
conversion (through July 12, 1996).
PMF and PIC are indirect, wholly-owned subsidiaries of The
Prudential Insurance
Company of America (``Prudential'').
- ------------------------------------------------------------
Note 3. Other Transactions with Affiliates
Effective January 15, 1996, Prudential Mutual Fund Services, Inc.
(``PMFS''), a
wholly-owned subsidiary of PMF, began serving as the Fund's
transfer agent.
During the period January 15, 1996 through June 30, 1996, the Fund
incurred fees
of approximately $136,000 for the services of PMFS. As of June 30,
1996,
approximately $23,000 of such fees were due to PMFS. Transfer agent
fees and
expenses in the Statement of Operations include certain
out-of-pocket expenses
paid to non-affiliates.
- ------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term
investments
and written options, for the period ended June 30, 1996 aggregated
$50,831,913
and $109,525,742, respectively.
At June 30, 1996, the Fund had outstanding forward currency
contracts to sell
foreign currencies, as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Sale Settlement Date Current
Appreciation/
Contracts Receivable Value
(Depreciation)
- --------------------------- ---------------- ------------
--------------
<S> <C> <C>
<C>
Canadian Dollars,
expiring 7/29/96.......... $ 8,533,227 $ 8,509,432
$ 23,795
French Francs,
expiring
7/29/96-9/16/96........... 14,307,184 14,349,638
(42,454)
German Deutschemarks,
expiring 7/29/96.......... 55,894,603 56,198,663
(304,060)
<CAPTION>
Value at
Foreign Currency Sale Settlement Date Current
Appreciation/
Contracts Receivable Value
(Depreciation)
- --------------------------- ---------------- ------------
--------------
<S> <C> <C>
<C>
Japanese Yen,
expiring 7/29/96.......... $ 4,405,530 $ 4,369,450
$ 36,080
Netherlands Guilders,
expiring 7/29/96.......... 46,150,954 46,400,461
(249,507)
Swiss Francs,
expiring 7/29/96.......... 15,860,428 16,007,773
(147,345)
---------------- ------------
--------------
$145,151,926 $145,835,417
$ (683,491)
---------------- ------------
--------------
---------------- ------------
--------------
</TABLE>
The United States federal income tax basis of the Fund's
investments at June 30,
1996 was $314,296,401 and, accordingly, net unrealized appreciation
for United
States federal income tax purposes was $4,597,713 (gross unrealized
appreciation--$9,127,077; gross unrealized
depreciation--$4,529,364).
For federal income tax purposes, the Fund had a capital loss
carryforward as of
December 31, 1995 of approximately $17,049,000 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
amount.
- ------------------------------------------------------------
Note 5. Joint Repurchase Agreement Account
The Fund, along with other affiliated registered investment
companies, transfers
uninvested cash balances into a single joint account, the daily
aggregate
balance of which is invested in one or more repurchase agreements
collateralized
by U.S. Treasury or federal agency obligations. As of June 30,
1996, the Fund
has a 2.51% undivided interest in the joint account. The undivided
interest for
the Fund represents $459,936,000 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., 5.40%, in the principal amount of
$369,000,000, repurchase
price $369,055,350, due 7/1/96. The value of the collateral
including accrued
interest was $377,194,429.
Goldman, Sachs & Co. Inc., 5.47%, in the principal amount of
$369,000,000,
repurchase price $369,056,068, due 7/1/96. The value of the
collateral including
accrued interest was $376,380,556.
Smith Barney, Inc., 5.50%, in the principal amount of $369,000,000,
repurchase
price $369,056,375, due 7/1/96. The value of the collateral
including accrued
interest was $376,380,118.
- -----------------------------------------------------------------
- ---------------
10
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) THE GLOBAL TOTAL
RETURN FUND, INC.
- -----------------------------------------------------------------
- ---------------
Note 6. Capital
On December 6, 1995, the existing shareholders approved the
conversion of the
Fund to an open-end investment company which offers three classes
of shares.
Offering of Class A (the existing shares prior to open-ending),
Class B and
Class C shares commenced on January 15, 1996. Class A shares are
sold with a
front-end sales charge of up to 4%. Class B shares are sold with a
contingent
deferred sales charge which declines from 5% to zero depending on
the period of
time the shares are held. Class C shares are sold with a contingent
deferred
sales charge of 1% during the first year. Class B shares
automatically convert
to Class A shares on a quarterly basis approximately seven years
after purchase.
A special exchange privilege is also available for shareholders who
qualified to
purchase Class A shares at net asset value.
There are 2 billion shares of common stock, $.01 par value per
share, authorized
divided into three classes, designated Class A, Class B and Class
C common
stock, consisting of 1 billion Class A shares, 500 million Class B
shares and
500 million Class C shares. As of June 30, 1996 Prudential owned
13,164 shares.
Transactions in shares of common stock for the period January 15,
1996 through
June 30, 1996 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- --------------------------------- ----------- -------------
<S> <C> <C>
Shares sold...................... 233,705 $ 1,987,644
Shares issued in reinvestment of
dividends and distributions.... 226,643 1,889,104
Shares reacquired................ (28,653,539)
(240,008,245)(a)
----------- -------------
Net decrease in shares
outstanding.................... (28,193,191) $(236,131,497)
----------- -------------
----------- -------------
<CAPTION>
Class B
- ---------------------------------
<S> <C> <C>
Shares sold...................... 2,731 $ 23,105
Shares issued in reinvestment of
dividends and distributions.... 43 361
Shares reacquired................ (1) (8)
----------- -------------
Net increase in shares
outstanding.................... 2,773 $ 23,458
----------- -------------
----------- -------------
<CAPTION>
Class C
- ---------------------------------
<S> <C> <C>
Shares sold...................... 23 $ 197
Shares issued in reinvestment of
dividends and distributions.... 1 8
----------- -------------
Net increase in shares
outstanding.................... 24 $ 205
----------- -------------
----------- -------------
</TABLE>
- ---------------
(a) Net of $4,848,492 redemption fee retained by the Fund.
- -----------------------------------------------------------------
- ---------------
11
<PAGE>
<PAGE>
Financial Highlights (Unaudited) THE GLOBAL TOTAL
RETURN FUND, INC.
- -----------------------------------------------------------------
- --------------
<TABLE>
<CAPTION>
Class A (d)
- -----------------------------------------------------------------
- -----------
Six Months
Ended
Year Ended December 31,
June 30,
- ------------------------------------------------------------
1996(g) 1995
1994 1993 1992 1991
<S> <C> <C>
<C> <C> <C> <C>
---------- --------
-------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $ 8.44 $ 7.46
$ 8.76 $ 8.10 $ 8.99 $ 8.96
---------- --------
-------- -------- -------- --------
Net investment income................... .26 .54
.52 .64 .81 .84
Net realized and unrealized gain (loss)
on
investments and foreign currencies... -- 1.25
(1.22) .74 (.90) (.19)
---------- --------
-------- -------- -------- --------
Total from investment operations..... .26 1.79
(.70) 1.38 (.09) .65
---------- --------
-------- -------- -------- --------
Dividends from net investment income.... (.30) (.54)
(.17) (.30) (.75) (.62)
Distributions from net realized capital
gains................................ -- --
(.13) (.23) (.05) --
Distributions in excess of net
investment income.................... (.12) (.27)
-- -- -- --
Distributions in excess of net capital
gains................................ -- --
-- (.19) -- --
Tax return of capital distribution...... -- --
(.30) -- -- --
---------- --------
-------- -------- -------- --------
Total dividends and distributions.... (.42) (.81)
(.60) (.72) (.80) (.62)
---------- --------
-------- -------- -------- --------
Redemption fee retained by Fund......... .12 --
-- -- -- --
---------- --------
-------- -------- -------- --------
Net asset value, end of period.......... $ 8.40 $ 8.44
$ 7.46 $ 8.76 $ 8.10 $ 8.99
---------- --------
-------- -------- -------- --------
---------- --------
-------- -------- -------- --------
Per share market price, end of year..... N/A $ 8.25
$ 6.13 $ 8.00 $ 7.50 $ 8.13
--------
-------- -------- -------- --------
--------
-------- -------- -------- --------
TOTAL INVESTMENT RETURN
BASED ON(a)
Market price......................... N/A 49.23%
(16.12)% 16.50% 1.75% 9.42%
Net asset value...................... 4.50% 25.45%
(6.78)% 18.12% (.68)% 8.09%
RATIOS/SUPPLEMENTAL DATA(f):
Net assets, end of period (000)......... $319,137 $559,071
$493,645 $579,942 $535,647 $593,376
Average net assets (000)................ $356,174 $549,407
$536,230 $567,128 $570,812 $571,767
Ratios to average net assets:
Expenses, including distribution
fees.............................. 1.26%(c) 1.02%
1.04% 1.02% 1.01% .99%
Expenses, excluding distribution
fees.............................. 1.11%(c) 1.02%
1.04% 1.02% 1.01% .99%
Net investment income................ 6.75%(c) 6.50%
6.45% 7.67% 9.39% 9.69%
Portfolio turnover rate................. 16% 256%
583% 370% 192% 141%
<CAPTION>
Class B (d) Class C
(d)
January 15, January
15,
1996(b) 1996(b)
Through Through
June 30, June 30,
1996(g) 1996(g)
<S> <C> <C>
-----------
- -----------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $ 8.51 $ 8.51
----- -----
Net investment income................... .17 .17
Net realized and unrealized gain (loss)
on investments and foreign currencies. -- --
----- -----
Total from investment operations..... .17 .17
----- -----
Dividends from net investment income.... (.28)
(.28)
Distributions from net realized capital
gains................................ -- --
Distributions in excess of net
investment income.................... (.12)
(.12)
Distributions in excess of net capital
gains................................ -- --
Tax return of capital distribution...... -- --
----- -----
Total dividends and distributions.... (.40)
(.40)
----- -----
Redemption fee retained by Fund......... .12 .12
----- -----
Net asset value, end of period.......... $ 8.40 $ 8.40
----- -----
----- -----
Per share market price, end of year..... N/A N/A
TOTAL INVESTMENT RETURN
BASED ON(a)
Market price......................... N/A N/A
Net asset value...................... 1.57%
1.57%
RATIOS/SUPPLEMENTAL DATA(f):
Net assets, end of period (000)......... $ 23 $
202(e)
Average net assets (000)................ $ 8 $
198(e)
Ratios to average net assets:
Expenses, including distribution
fees.............................. 1.86%(c)
1.86%(c)
Expenses, excluding distribution
fees.............................. 1.11%(c)
1.11%(c)
Net investment income................ 6.10%(c)
6.10%(c)
Portfolio turnover rate................. 16%
16%
</TABLE>
- ---------------
(a) Total investment return based on net asset value is calculated
assuming a
purchase of common stock at the current net asset value on the
first day and
a sale at the current net asset value on the last day of each
period
reported. Prior to January 15, 1996 the Fund operated as a
closed-end
investment company and total investment return was calculated
based on
market value 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 periods of less than one full year are not
annualized.
(b) Commencement of offering of Class B and Class C shares.
(c) Annualized.
(d) Prior to January 15, 1996 the Fund operated as a closed-end,
non-diversified
management investment company.
(e) Figure is actual and not rounded to nearest thousand.
(f) Because of the event referred to in (d) and the timing of such,
the ratios
for the Class A shares are not necessarily comparable to those
of prior
periods.
(g) Calculated based on weighted average shares outstanding during
the period.
- -----------------------------------------------------------------
- ---------------
12 See Notes to
Financial Statements.
<PAGE>
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
(800) 225-1852
http:\\www.prudential.com
Directors
Edward D. Beach
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
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributor
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
Independent Auditors
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
Legal Counsel
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
The views expressed in this report and information about the Fund's
portfolio
holdings are for the period covered by this report and are subject
to change
thereafter.
The accompanying financial statements as of June 30, 1996 were not
audited and,
accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective
investors unless
preceded or accompanied by a current prospectus.
<PAGE>
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One Seaport Plaza
New York, NY 10292
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