(ICON)
The Global
Total Return
Fund, Inc.
SEMI
ANNUAL
REPORT
June 30, 1998
(LOGO)
<PAGE>
The Global Total Return Fund, Inc.
Performance At A Glance.
Rapidly deteriorating economic conditions in Asia
during the past six months
increased investor appetite for better quality
debt securities such as
government bonds of the U.S., the U.K. and
Germany. The Global Total Return
Fund surpassed the return on the average
comparable fund because we emphasized
these "safe haven" investments and maintained a
below average exposure to
riskier emerging markets bonds.
<TABLE>
Cumulative Total Returns1
As of 6/30/98
<CAPTION>
Six One Five
Ten Since
Months Year
Years Years Inception2
<S> <C> <C> <C>
<C> <C>
Class A 4.33% 7.09%
53.41% 138.67% 229.93%
Class B 3.89 6.34
N/A N/A 20.97
Class C 3.89 6.34
N/A N/A 20.97
Class Z 4.27 7.12
N/A N/A 10.07
Lipper Global
Income Fund Avg.3 2.09 4.67
33.62 108.50 ***
</TABLE>
<TABLE>
Average Annual Total Returns1
As of 6/30/98
<CAPTION>
One Five
Ten Since
Year
Years Years Inception2
<S> <C> <C>
<C> <C>
Class A 2.81%
8.05% 8.65% 10.10%
Class B 1.34
N/A N/A 6.96
Class C 5.34
N/A N/A 8.06
Class Z 7.12
N/A N/A 7.74
</TABLE>
<TABLE>
<CAPTION>
Distributions & Yields
As of 6/30/98
Total Distributions
30-Day
Paid for Six Mos.
SEC Yield
<S> <C>
<C>
Class A $0.27
5.24%
Class B $0.25
4.84
Class C $0.25
4.84
Class Z $0.28
5.62
</TABLE>
Past performance is not indicative of future
results. Principal and investment
return 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 and one-year returns,
do not fully reflect the
higher operating expenses incurred since the Fund
commenced operations as an
open-end mutual fund on January 15, 1996. If these
expenses had been applied
since the Fund's inception, past performance
returns would have been lower.
Prior to January 15, 1996, the Fund operated as a
closed-end fund with shares
being traded on the New York Stock Exchange.
1Source: Prudential Investments Fund Management
and Lipper Analytical
Services. The cumulative total returns do not take
into account 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 and a declining contingent deferred sales
charge (CDSC) of 5%, 4%, 3%,
2%, 1% and 1% for six years for Class B shares.
Class B shares will
automatically convert to Class A shares, on a
quarterly basis, approximately
seven years after purchase. Class C shares have a
1% CDSC for one year. Class
Z shares are not subject to a sales charge or
distribution fee.
2Inception dates: Class A, 7/7/86; Class B and
Class C, 1/15/96; and Class Z,
3/17/97.
3Lipper average returns are for all funds in each
share class for the six-
month, one-, five-, and ten-year periods.
***Lipper Since Inception returns are 200.64% for
Class A; 14.61% for Class B
and Class C; and 7.81% for Class Z based on all
funds in each share class.
How Investments Compared.
(As of 6/30/98)
(GRAPH)
U.S. General General U.S.
Growth Bond Muni Debt Taxable
Funds Funds Funds Money Funds
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 returns 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.
U.S. Taxable Money 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
(PHOTOS)
Portfolio
Managers'Report
Your Fund seeks total return, which is current
income plus any capital
appreciation. The Fund invests primarily in
intermediate-term, investment
grade debt securities issued throughout the world.
The Fund may also invest
up to 10% of total assets in bonds rated below
investment grade with a minimum
rating of "B" by Standard & Poor's or Moody's or
of comparable quality in our
view. Lower rated securities carry 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 as
well as potential illiquidity. There can be no
assurance that the Fund will
achieve its investment objective.
U.S. Dollar Soars.
The U.S. dollar soared briefly to an eight-year
high against the Japanese yen
in June as investors worried about the slumping
Japanese economy and its
ailing banking system. The Fund's exposure to the
U.S. dollar as of June 30,
1998 stood at 68.5%.
Strategy Session.
Bondholders Eye Asian Crisis.
Global bond investors continued to focus on
economic developments in Asia
over the past six months. Despite soaring
corporate bankruptcies, tumbling
local currencies and banks burdened by bad loans,
some investors initially
anticipated an early resolution to the Asian
economic crisis. Indeed market
sentiment was so upbeat that investors eagerly
purchased $4.0 billion of bonds
sold in early April by the financially strapped
Republic of South Korea.
As the spring continued, however, market sentiment
shifted. The Japanese
economy sank into recession, casting doubt on
regional prospects for recovery.
Some investors feared a domino effect that could
spread into Latin America.
Under this scenario, a slumping Japanese yen might
cause devaluations in the
Hong Kong dollar and Chinese yuan that would then
pressure the Brazilian
currency. While this did not happen, investors
still shifted assets away from
Asia and other emerging market debt securities.
Russian financial markets also
sold off as investors feared that country's
currency might be devalued.
Shortly after the reporting period, the Russian
government announced it would
allow the ruble to fall this year and presented a
plan to restructure
repayment of short-term, ruble-denominated
government securities.
Across the ocean, the U.S. economy raced through
the first three months of
1998 at a 5.4% annualized pace then slowed to a
more sustainable rate of
growth in the spring, while core European
economies grew at a moderate pace.
Because economic conditions in the U.S. and
western Europe compared favorably
with chaotic events in Asia, demand soared for
U.S. Treasuries and bonds of
European countries such as Germany and France. As
a result, the 30-year
Treasury bond yield, which moves in the opposite
direction of its price, fell
in June to its lowest level since regular sales of
the securities began in
1977.
<PAGE>
What Went Well.
A Proven Track Record.
We disagreed with the bullish outlook for Asian
bonds that was prevalent in
fixed-income markets earlier in the year. However,
the cloud hovering over
Asia has a silver lining because it has helped
quell global inflationary
pressures as imports from countries such as Japan
sell at bargain basement
prices. Taken together, the Asian crisis and its
deflationary impact on world
economies led us to stick with better quality
bonds such as those of Germany,
the U.K., the U.S., Sweden and Denmark. This
proved to be a wise choice since
bonds from countries with a proven track record of
timely interest and
principal payments posted some of the best returns
for the six-month period.
Bonds of the U.K. and U.S. rallied, in part, as
their respective currencies
strengthened, while Moody's Investors Service's
decision to upgrade the
Swedish sovereign debt rating to AA2 from AA3
helped lift that country's
bonds. German bonds comprised our largest European
position, accounting for
16% of the Fund's total investments as of June 30,
1998. That was followed
by Denmark (7%) and the U.K. (5%). We took profits
on some of our U.K. bonds
because sterling will likely weaken as the British
economy slips into
recession.
Euro Wannabes.
Our very modest emerging markets exposure included
bonds of Hungary, Poland
and Greece. Prices on these bonds rose (and
yields fell) more in line with
debt securities of countries that will participate
in the single European
currency or Euro that is slated to begin in
January 1999. Hungary, Poland and
Greece are expected to join in the next three to
five years.
And Not So Well.
Russian Bear Stumbles.
Russian ruble-denominated bonds accounted for less
than half of one percent
of the Fund's total investments as of June 30.
While our dollar-denominated
Russian sovereign bonds (1.5% of total
investments) were not directly affected
by the devaluation of the ruble, the Russian fixed-
income market in general
came under pressure as a result of the
government's actions.
Portfolio Composition.
Sectors expressed as a percentage of
total investments as of 6/30/98.
(GRAPH)
Five Largest Issuers.
22.6% U.S. Treasury
Obligations
12.1% German Government
Bonds
6.9% Danish Government Bonds
5.0% New South Wales
Treasury Corporation
4.0% Spanish Government
Bonds
Expressed as a percentage of net assetsas of
6/30/98.
Looking Ahead.
We believe that economic turmoil in Asia will
continue to infect other sectors
of the emerging markets. As a precautionary
measure, the Fund will likely
maintain a below average exposure to emerging
markets bonds, focusing on
eastern European countries that provide
incremental yield over that of better
quality bonds.
- --------------------------------------------------
- -----------------------------
1
<PAGE>
President's Letter
August 4, 1998
(PHOTO)
Managing
Expectations.
Dear Shareholder:
For nearly eight years we've enjoyed above-
average, double-digit returns from
stocks--a bull market of unprecedented duration.
As a result, many of us have
grown accustomed to seeing the Dow Jones
Industrial Average, the S&P 500 and
other market indexes set new records. That's why
the fluctuations normally
seen in financial markets may take investors by
surprise.
Although the media has given ample coverage to the
factors that have caused
concern in 1998, we'd like to remind you that
there is also good news to
report: the US economy is healthy and continues to
grow. Inflation remains
subdued and employment is strong.
Even with a sound economy, it isn't easy to
maintain your investment
discipline when the market is fluctuating. Here
are some thoughts that may
help:
- - Manage Your Expectations. Experienced mutual
fund investors understand that
financial markets rise and fall. Over time,
however, stocks and bonds have
produced attractive returns that have kept ahead
of inflation.
- - Don't Invest Emotionally. If you have long-term
(several years or longer)
investment goals, it may be counter-productive
to sell an investment in
reaction to short-term market fluctuation. Over
he course of several years,
it's not unusual for stocks and bonds to
experience several periods of
market uncertainty.
- - Diversification Lessens Risk. Market sectors
seldom move in tandem. A well-
diversified portfolio that includes stock, bond,
and money market mutual
funds can lessen the effects of market
volatility over time.
- - We're On Your Side. Your Prudential professional
can help you understand
what's happening in the markets. He or she can
assist you in making
informed decisions based upon a thorough
knowledge of your financial
needs and long-term goals. Call your Prudential
professional today.
Thank you for your continued confidence in
Prudential mutual funds. We'll
do everything we can to keep you informed and to
earn your trust.
Sincerely,
Brian M. Storms
President, Prudential Mutual Funds & Annuities
- --------------------------------------------------
- -----------------------------
2
<PAGE>
Portfolio of Investments as of June 30, 1998
(Unaudited) THE
GLOBAL TOTAL RETURN FUND, INC.
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Principal
Amount
US$
(000) Description
Value (Note 1)
<C> <S>
<C>
- --------------------------------------------------
- -
LONG-TERM INVESTMENTS--81.2%
- --------------------------------------------------
- -
Australia--6.0%
A$ 2,750 Federal National Mortgage
Association,
6.375%, 8/15/07
$ 1,755,976
13,700 New South Wales Treasury
Corporation,
6.50%, 5/1/06
8,837,808
- ------------
10,593,784
- --------------------------------------------------
- ----------
Canada--4.1%
C$ 5,750 British Columbia Provincial
Bond,
6.00%, 6/9/08
4,042,509
4,500 Province of Quebec,
6.50%, 10/1/07
3,238,811
- ------------
7,281,320
- --------------------------------------------------
- ----------
Denmark--6.9%
Danish Government Bonds,
DKr 40,000 7.00%, 12/15/04
6,508,386
32,750 8.00%, 3/15/06
5,686,368
- ------------
12,194,754
- --------------------------------------------------
- ----------
Germany--13.8%
German Government Bonds,
DM 18,000 7.375%, 1/3/05
11,469,343
7,700 6.00%, 1/5/06
4,603,944
8,500 6.25%, 1/4/24
5,298,542
5,000 Republic of Colombia,
7.25%, 12/21/00
2,845,765
- ------------
24,217,594
- --------------------------------------------------
- ----------
Greece--2.0%
GRD 680,000 Hellenic Republic,
12.70%, 12/31/03
2,273,291
350,000 Hellenic Republic, FRN,
9.20%, 3/21/02
1,137,319
- ------------
3,410,610
Hungary--1.4%
Hungarian Government Bonds,
HUF 250,000 16.50%, 7/24/99
$ 1,141,530
300,000 16.00%, 4/12/00
1,353,464
- ------------
2,494,994
- --------------------------------------------------
- ----------
Netherlands--3.7%
Dutch Government Bonds,
NLG 7,500 7.00%, 6/15/05
4,186,911
3,750 7.50%, 1/15/23
2,384,975
- ------------
6,571,886
- --------------------------------------------------
- ----------
New Zealand--3.9%
NZ$ 6,700 Federal National Mortgage
Association,
7.25%, 6/20/02
3,428,871
3,300 International Bank of
Reconstruction Development,
7.25%, 5/27/03
1,715,356
3,100 New Zealand Government Bond,
8.00%, 4/15/04
1,705,379
- ------------
6,849,606
- --------------------------------------------------
- ----------
Russia--0.4%
European Bank of
Reconstruction
Development,
RUB 5,300 31.00%, 5/5/00
535,611
4,500 Zero Coupon, 5/28/02
144,370
- ------------
679,981
- --------------------------------------------------
- ----------
Spain--4.0%
Spanish Government Bonds,
Pts 125,000 10.30%, 6/15/02
981,861
750,000 8.20%, 2/28/09
6,123,196
- ------------
7,105,057
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as of June 30, 1998
(Unaudited) THE
GLOBAL TOTAL RETURN FUND, INC.
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Principal
Amount
US$
(000) Description
Value (Note 1)
<C> <S>
<C>
- --------------------------------------------------
- -
Sweden--2.2%
SEK 29,000 Swedish Government Bond,
6.00%, 2/9/05
$ 3,868,964
- --------------------------------------------------
- ----------
United Kingdom--4.5%
BP 300 Powergen PLC,
8.875%, 3/26/03
532,793
400 Republic of Argentina,
11.50%, 8/14/01
686,388
United Kingdom Treasury Strip,
9,100 7.75%, 9/8/06
834,067
450 Zero Coupon, 12/7/15
5,882,301
- ------------
7,935,549
- --------------------------------------------------
- ----------
United States--28.3%
Corporate Bonds--2.8%
US$ 1,000 Banco Ganadero Colombian Bond
(Colombia),
9.75%, 8/26/99
1,025,000
2,900 Financiera Energetica Nacional
(Colombia),
9.00%, 11/8/99
2,914,500
1,000 Romanian Commercial Bank,
9.125%, 3/10/00
962,500
- ------------
4,902,000
Sovereign Bonds--5.8%
US$ 3,500 Ministry of Finance (Russia),
10.00%, 6/26/07
2,660,000
1,250 Municipality of Rio De Janeiro
(Brazil),
10.375%, 7/12/99
1,250,000
1,000 Oman Sultanate (India),
7.125%, 3/20/02
1,020,000
1,425 Republic of Argentina, FRN,
6.625%, 3/31/05, Ser. L
1,257,563
1,750 Republic of Brazil, IDU, FRN,
6.875%, 1/1/01
1,662,500
1,849 Republic of Croatia, FRN,
6.50%, 7/31/06
$ 1,645,517
800 Republic of Lithuania
7.125%, 7/22/02
774,000
- ------------
10,269,580
Supranational Bonds--2.8%
Corporacion Andina de Fomento,
4,800 7.375%, 7/21/00
4,917,600
- --------------------------------------------------
- ----------
U.S. Government Obligations--16.9%
7,200 United States Treasury Bond,
6.625%, 2/15/27
8,122,320
United States Treasury Notes,
5,000 6.125%, 9/30/00
5,061,700
11,810 7.875%, 11/15/04
13,264,047
3,100 6.25%, 2/15/07
3,246,289
- ------------
29,694,356
- ------------
49,783,536
- ------------
Total long-term investments
(cost US$145,488,760)
142,987,635
- ------------
SHORT-TERM INVESTMENTS--18.0%
- --------------------------------------------------
- ----------
Germany--1.9%
DM 6,000 Time Deposit,
3.25%, 7/6/98
3,318,676
- --------------------------------------------------
- ----------
Mexico--0.4%
MP 8,000 Mexican Cetes,
20.50%(a), 9/17/98
793,013
- --------------------------------------------------
- ----------
Poland--1.4%
Polish Treasury Bills,
PLZ 2,700 20.45%(a), 8/12/98
756,084
3,800 20.15%(a), 2/17/99
950,790
1,200 20.35%(a), 3/3/99
297,128
2,000 20.095%(a), 4/28/99
478,512
- ------------
2,482,514
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments as of June 30, 1998
(Unaudited) THE
GLOBAL TOTAL RETURN FUND, INC.
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Principal
Amount
US$
(000) Description
Value (Note 1)
<C> <S>
<C>
- --------------------------------------------------
- -
United States--14.3%
Corporate Bond--0.6%
US$ 1,000 Petroleas Mexicano (Mexico),
FRN,
6.6875%, 3/8/99
$ 985,000
- --------------------------------------------------
- ----------
Repurchase Agreement--7.7%
13,534 Joint Repurchase Agreement
Account
5.72%, 7/1/98 (Note 5)
13,534,000
- --------------------------------------------------
- ----------
Supranational Bond--0.3%
Corporacion Andina de Fomento,
500 6.625%, 10/14/98
502,000
- --------------------------------------------------
- ----------
U.S. Government Obligation--5.7%
United States Treasury Notes,
10,000 6.75%, 6/30/99
10,120,300
- ------------
25,141,300
- ------------
Total short-term investments
(cost US$31,798,279)
31,735,503
- ------------
- --------------------------------------------------
- ----------
Total Investments--99.2%
(cost $177,287,039)
174,723,138
Other assets in excess of
liabilities--0.8%
1,440,540
- ------------
Net Assets--100%
$176,163,678
- ------------
- ------------
</TABLE>
- ---------------
Portfolio securities are classified according to
the security's
currency denomination.
(a) Percentages quoted represent yield-to-maturity
as of purchase date.
FRN--Floating Rate Note.
IDU--Interest Due and Unpaid Bonds.
PLC--Public Limited Company (British Corporation).
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 5
<PAGE>
Statement of Assets and Liabilities
(Unaudited) THE
GLOBAL TOTAL RETURN FUND, INC.
- --------------------------------------------------
- ------------------------------
<TABLE>
Assets
June 30, 1998
<S>
<C>
Investments, at value (cost
$177,287,039).....................................
.............................. $174,723,138
Foreign currency, at value (cost
$635,145).........................................
......................... 631,470
Interest
receivable........................................
.................................................
3,025,547
Forward currency contracts--amount receivable from
counterparties....................................
....... 176,650
Receivable for investments
sold..............................................
............................... 136,054
Receivable for Fund shares
sold..............................................
............................... 44,627
Other
assets............................................
..................................................
.. 4,595
- -------------
Total
assets............................................
.................................................
178,742,081
- -------------
Liabilities
Payable for investments
purchased.........................................
..................................
1,659,338
Forward currency contracts--amount payable to
counterparties....................................
............ 395,439
Accrued expenses and other
liabilities.......................................
............................... 200,530
Payable for Fund shares
reacquired........................................
..................................
189,250
Management fee
payable...........................................
...........................................
110,370
Distribution fee
payable...........................................
.........................................
23,476
- -------------
Total
liabilities.......................................
.................................................
2,578,403
- -------------
Net
Assets............................................
..................................................
.... $176,163,678
- -------------
- -------------
Net assets were comprised of:
Common stock, at
par...............................................
...................................... $
221,950
Paid-in capital in excess of
par...............................................
.......................... 178,204,223
- -------------
178,426,173
Distributions in excess of net investment
income............................................
............. (140,086)
Accumulated net realized gain on
investments.......................................
...................... 769,137
Net unrealized depreciation on investments and
foreign
currencies........................................
(2,891,546)
- -------------
Net assets, June 30,
1998..............................................
.....................................
$176,163,678
- -------------
- -------------
Class A:
Net asset value and redemption price per share
($170,680,385 / 21,504,537 shares of common
stock issued and
outstanding).............................
$7.94
Maximum sales charge (4% of offering
price)............................................
..................... .33
- -------------
Maximum offering price to
public............................................
................................ $8.27
- -------------
- -------------
Class B:
Net asset value, offering price and redemption
price per share
($3,239,085 / 407,921 shares of common stock
issued and
outstanding)..................................
$7.94
- -------------
- -------------
Class C:
Net asset value, offering price and redemption
price per share
($219,575 / 27,653 shares of common stock
issued and
outstanding).....................................
$7.94
- -------------
- -------------
Class Z:
Net asset value, offering price and redemption
price per share
($2,024,633 / 254,922 shares of common stock
issued and
outstanding)..................................
$7.94
- -------------
- -------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 6
<PAGE>
THE GLOBAL TOTAL RETURN FUND, INC.
Statement of Operations (Unaudited)
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income
June 30, 1998
<S>
<C>
Income
Interest and discount earned (net of
foreign withholding taxes of $290)......
$ 6,943,411
-
- ------------
Expenses
Management fee.............................
681,761
Distribution fee--Class A..................
133,212
Distribution fee--Class B..................
9,828
Distribution fee--Class C..................
790
Transfer agent's fees and expenses.........
164,000
Custodian's fees and expenses..............
112,000
Reports to shareholders....................
37,000
Registration fees..........................
25,000
Audit fee and expenses.....................
18,000
Directors' fees............................
13,000
Legal fees and expenses....................
12,000
Insurance..................................
1,000
Miscellaneous..............................
5,661
-
- ------------
Total expenses..........................
1,213,252
-
- ------------
Net investment income.........................
5,730,159
-
- ------------
Realized and Unrealized Gain
(Loss) on Investments and Foreign
Currency Transactions
Net realized gain on:
Investment transactions....................
606,390
Foreign currency transactions..............
2,888,864
-
- ------------
3,495,254
-
- ------------
Net change in unrealized appreciation
(depreciation) on:
Investments................................
(202,348)
Foreign currencies.........................
(1,504,602)
-
- ------------
(1,706,950)
-
- ------------
Net gain on investments and foreign
currencies.................................
1,788,304
-
- ------------
Net Increase in Net Assets
Resulting from Operations.....................
$ 7,518,463
-
- ------------
-
- ------------
</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 1998
1997
<S> <C>
<C>
Operations:
Net investment income.......... $ 5,730,159
$ 13,903,963
Net realized gain on investment
and foreign currency
transactions................ 3,495,254
7,846,372
Net change in unrealized
depreciation on investments
and foreign currencies...... (1,706,950)
(12,590,843)
------------
- ------------
Net increase in net assets
resulting from operations... 7,518,463
9,159,492
------------
- ------------
Dividends and distributions (Note
1)
Dividends from net investment
income
Class A..................... (5,783,585)
(16,523,696)
Class B..................... (85,532)
(108,586)
Class C..................... (6,477)
(32,330)
Class Z..................... (51,102)
(23,135)
------------
- ------------
(5,926,696)
(16,687,747)
------------
- ------------
Distributions in excess of net
investment income
Class A..................... (136,703)
(4,744,012)
Class B..................... (2,022)
(44,626)
Class C..................... (153)
(14,046)
Class Z..................... (1,208)
(11,622)
------------
- ------------
(140,086)
(4,814,306)
------------
- ------------
Fund share transactions (net of
conversions) (Note 6)
Net proceeds from shares
sold........................ 5,544,676
6,921,618
Net asset value of shares
issued in reinvestment of
dividends and
distributions............... 1,510,427
4,960,184
Cost of shares reacquired...... (18,573,078)
(43,255,074)
------------
- ------------
Net decrease in net assets from
Fund share transactions..... (11,517,975)
(31,373,272)
------------
- ------------
Total decrease.................... (10,066,294)
(43,715,833)
------------
- ------------
Net Assets
Beginning of period............... 186,229,972
229,945,805
------------
- ------------
End of period(a).................. $176,163,678
$186,229,972
------------
- ------------
------------
- ------------
- ---------------
(a) Includes undistributed
(distributions in excess of) net
investment income of $ (140,086)
$ 785,449
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 7
<PAGE>
Notes to Financial Statements (Unaudited) THE
GLOBAL TOTAL RETURN FUND, INC.
- --------------------------------------------------
- ------------------------------
The Global Total Return Fund, Inc., (the 'Fund')
is an open-end, nondiversified
management investment company whose investment
objective is to seek total
return, the components of which are current income
and capital appreciation. The
Fund invests primarily in governmental (including
supranational),
semi-governmental or governmental agency debt
securities or in short-term bank
debt securities or deposits in the United States
and in foreign countries
denominated in U.S. dollars or in foreign
currencies, including debt securities
issued or guaranteed by the U.S. Government and
foreign governments, their
agencies, authorities or instrumentalities (U.S.
Government Securities and
Foreign Government Securities, respectively). The
remainder is generally
invested in corporate debt securities or longer
term bank debt securities. The
bonds are primarily of investment grade, 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 debt securities
held by the Fund to meet their obligations may be
affected by economic and
political 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
exchange 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 under triparty repurchase agreements
as the case may be, take
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, such realized
foreign currency gains and losses
are included in the reported net realized gains on
investment transactions.
Net realized gains or losses on foreign currency
transactions represent net
foreign exchange gains or 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 and losses from
valuing foreign currency denominated assets
(excluding investments) and
liabilities at period-end exchange rates are
reflected as a component of net
unrealized appreciation or 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
or 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
- --------------------------------------------------
- ------------------------------
8
<PAGE>
Notes to Financial Statements (Unaudited) THE
GLOBAL TOTAL RETURN FUND, INC.
- --------------------------------------------------
- ------------------------------
exchange rates and any unrealized gain or loss is
included in net unrealized
appreciation or depreciation on investments and
foreign currencies. 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.
Net investment income (other than distribution
fees), and unrealized and
realized gains or losses are allocated daily to
each class of shares based upon
the relative proportion of net assets of each
class at the beginning of the day.
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.
Dividends and Distributions: Dividends are
declared quarterly. Distributions of
capital gains, if any, will be declared at least
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 currency transactions.
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 decrease undistributed net
investment income by $588,912
and increase accumulated net realized gain on
investments by $588,912 for
realized foreign currency losses realized and
recognized during the six months
ended June 30, 1998. Net investment income, net
realized gains and net assets
were not affected by this change.
Note 2. Agreements
The Fund has a management agreement with
Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has
responsibility for all
investment advisory services and supervises the
subadviser's performance of such
services. PIFM has entered into a subadvisory
agreement with The Prudential
Investment Corporation ('PIC'); PIC, through an
agreement with PRICOA Asset
Management Ltd. ('PRICOA'), furnishes investment
advisory services in connection
with the management of the Fund. PIFM 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.
The management fee paid PIFM is computed daily and
payable monthly at an annual
rate of .75 of 1% of the Fund's average daily net
assets up to $500 million, .70
of 1% of such assets between $500 million and $1
billion, and .65 of 1% of such
assets in excess of $1 billion.
The Fund had a distribution agreement with
Prudential Securities Incorporated
('PSI'), which acted as the distributor of the
Class A, B, C and Z shares of the
Fund. The Fund compensated PSI for distributing
and servicing the Fund's Class
A, Class B and Class C shares, pursuant to plans
of distribution (the 'Class A,
B and C Plans'), regardless of expenses actually
incurred by PSI. The
distribution fees were accrued daily and payable
monthly. No distribution or
service fees were paid to PSI as distributor of
the Class Z shares of the Fund.
Effective July 1, 1998, Prudential Investment
Management Services LLC ('PIMS')
became the distributor of the Fund and is serving
the Fund under the same terms
and conditions as under the arrangement with PSI.
Pursuant to the Class A, B and C Plans, the Fund
compensated PSI for
distribution-related activities at an annual rate
of up to .30 of 1%, 1% and 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 ended June 30, 1998.
PSI has advised the Fund that it has received
approximately $8,200 in front-end
sales charges resulting from sales of Class A
shares during the period ended
June 30, 1998. From these fees, PSI paid such
sales charges to Pruco Securities
Corporation, an affiliated broker-dealer, which in
turn paid commissions to
salespersons and incurred other distribution
costs.
PSI has advised the Fund that for the six months
ended June 30, 1998, it
received approximately $2,300 and $600 in
contingent deferred sales charges
imposed upon certain redemptions by Class B and
Class C shareholders,
respectively.
PSI, PIFM, PIC, PIMS and PRICOA are indirect,
wholly owned subsidiaries of The
Prudential Insurance Company of America.
- --------------------------------------------------
- ------------------------------
9
<PAGE>
Notes to Financial Statements (Unaudited) THE
GLOBAL TOTAL RETURN FUND, INC.
- --------------------------------------------------
- ------------------------------
The Fund, along with other affiliated registered
investment companies (the
'Funds'), entered into a credit agreement (the
'Agreement') with an unaffiliated
lender. The maximum commitment under the Agreement
is $200,000,000. Interest on
any such borrowings outstanding will be at market
rates. The purpose of the
Agreement is to serve as an alternative source of
funding for capital share
redemptions. The Fund did not borrow any amounts
pursuant to the Agreement
during the six months ended June 30, 1998. The
Funds pay a commitment fee at an
annual rate of .055 of 1% on the unused portion of
the credit facility. The
commitment fee is accrued and paid quarterly on a
pro rata basis by the Funds.
The Agreement expires on December 29, 1998.
- --------------------------------------------------
- ----------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a
wholly owned subsidiary of PIFM,
serves as the Fund's transfer agent and during the
six months ended June 30,
1998, the Fund incurred fees of approximately
$130,300 for the services of PMFS.
As of June 30, 1998, approximately $22,000 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 nonaffiliates.
- --------------------------------------------------
- ----------
Note 4. Portfolio Securities
Purchases and sales of investment securities,
other than short-term investments
for the six months ended June 30, 1998, aggregated
$35,271,415 and $46,539,470,
respectively.
At June 30, 1998, the Fund had outstanding forward
currency contracts to
purchase and sell foreign currencies as follows:
<TABLE>
<CAPTION>
Value
at
Foreign Currency Current
Settlement Date
Purchase Contract Value
Payable Appreciation
- ---------------------- ---------- ---------
- ------- ------------
<S> <C> <C>
<C>
Japanese Yen,
expiring 7/30/98..... $1,691,546
$1,671,807 $ 19,739
---------- ----
- ---- ------------
---------- ----
- ---- ------------
</TABLE>
<TABLE>
<CAPTION>
Value at
Foreign Currency Current
Settlement Date Appreciation/
Sale Contracts Value
Receivable (Depreciation)
- ---------------------- ----------- --------
- -------- --------------
<S> <C> <C>
<C>
Australian Dollars,
expiring 7/30/98..... $16,858,770 $
16,498,321 $ (360,449)
French Francs,
expiring 7/30/98..... 8,580,758
8,623,605 42,847
Japanese Yen,
expiring 7/30/98..... 1,706,797
1,671,807 (34,990)
Netherlands Guilders,
expiring 7/30/98..... 8,705,728
8,751,989 46,261
Swiss Francs,
expiring 7/30/98..... 11,102,410
11,170,213 67,803
----------- --------
- -------- --------------
$46,954,463 $
46,715,935 $ (238,528)
----------- --------
- -------- --------------
----------- --------
- -------- --------------
</TABLE>
The United States federal income tax basis of the
Fund's investments at June 30,
1998 was $177,317,337 and, accordingly, net
unrealized depreciation for United
States federal income tax purposes was $2,594,199
(gross unrealized
appreciation--$3,744,820; gross unrealized
depreciation--$(6,339,019).
For federal income tax purposes, the Fund had a
capital loss carryforward as of
December 31, 1997 of approximately $2,165,900
which expires in 2002.
Accordingly, no capital gains distribution is
expected to be paid to
shareholders until net capital 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, 1998, the Fund
had a 1.09% undivided interest in the joint
account. The undivided interest for
the Fund represents $13,534,000 in the principal
amount. As of such date, each
repurchase agreement in the joint account and the
collateral therefor were as
follows:
Bear, Stearns & Co. Inc., 5.85%, in the principal
amount of $345,000,000,
repurchase price $345,056,063, due 7/1/98. The
value of the collateral including
accrued interest was $353,215,323.
Goldman Sachs & Co. Inc., 5.20%, in the principal
amount of $206,264,000,
repurchase price $206,293,794, due 7/1/98. The
value of the collateral including
accrued interest was $210,389,609.
Salomon Smith Barney Inc., 5.70%, in the principal
amount of $345,000,000,
repurchase price $345,054,625, due 7/1/98. The
value of the collateral including
accrued interest was $352,383,850.
SBC Warburg Dillon Read Inc., 5.93%, in the
principal amount of $345,000,000,
repurchase price $345,056,829, due 7/1/98. The
value of the collateral including
accrued interest was $352,174,874.
- --------------------------------------------------
- ----------
Note 6. Capital
The Fund offers Class A, Class B, Class C and
Class Z shares. 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 will
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. Class
Z shares are not subject to any sales or
redemption charge and are offered
exclusively for sale to a limited group of
investors.
There are 2 billion authorized shares of common
stock at $.01 par value per
share, divided equally into Class A, B, C and Z
shares. As of June 30, 1998
Prudential owned 13,481 Class A shares, 25 Class B
shares, 26 Class C shares and
26 Class Z shares.
- --------------------------------------------------
- ------------------------------
10
<PAGE>
Notes to Financial Statements (Unaudited) THE
GLOBAL TOTAL RETURN FUND, INC.
- --------------------------------------------------
- ------------------------------
Transactions in shares of common stock were as
follows:
<TABLE>
<CAPTION>
Class A Shares
Amount
- ------------------------------------ ----------
- ------------
<S> <C>
<C>
Six months ended June 30, 1998:
Shares sold......................... 211,891
$ 1,705,512
Shares issued in reinvestment of
dividends and distributions....... 172,976
1,381,277
Shares reacquired................... (2,107,538)
(16,931,983)
----------
- ------------
Net decrease in shares outstanding
before conversion................. (1,722,671)
$(13,845,194)
Shares issued upon conversion from
Class B........................... 1,472
11,910
----------
- ------------
Net decrease in shares
outstanding....................... (1,721,199)
$(13,833,284)
----------
- ------------
----------
- ------------
Year ended December 31, 1997:
Shares sold......................... 376,715
$ 3,080,935
Shares issued in reinvestment of
dividends and distributions....... 594,942
4,768,393
Shares reacquired................... (5,157,652)
(42,386,320)
----------
- ------------
Net decrease in shares outstanding
before conversion................. (4,185,995)
$(34,536,992)
Shares issued upon conversion from
Class B........................... 2,660
21,866
----------
- ------------
Net decrease in shares
outstanding....................... (4,183,335)
$(34,515,126)
----------
- ------------
----------
- ------------
<CAPTION>
Class B
- ------------------------------------
Six months ended June 30, 1998:
Shares sold......................... 138,603
$ 1,113,616
Shares issued in reinvestment of
dividends and distributions....... 9,039
72,214
Shares reacquired................... (29,911)
(239,318)
----------
- ------------
Net increase in shares outstanding
before conversion................. 117,731
946,512
Shares reacquired upon conversion
into Class A...................... (1,472)
(11,910)
----------
- ------------
Net increase in shares
outstanding....................... 116,259
$ 934,602
----------
- ------------
----------
- ------------
Year ended December 31, 1997:
Shares sold......................... 288,417
$ 2,365,066
Shares issued in reinvestment of
dividends and distributions....... 14,347
114,426
Shares reacquired................... (29,348)
(240,044)
----------
- ------------
Net increase in shares outstanding
before conversion................. 273,416
$ 2,239,448
Shares reacquired upon conversion
into Class A...................... (2,660)
(21,866)
----------
- ------------
Net increase in shares
outstanding....................... 270,756
$ 2,217,582
----------
- ------------
----------
- ------------
<CAPTION>
Class C Shares
Amount
- ------------------------------------ ----------
- ------------
<S> <C>
<C>
Six months ended June 30, 1998:
Shares sold......................... 3,893
$ 31,062
Shares issued in reinvestment of
dividends and distributions....... 697
5,571
Shares reacquired................... (979)
(8,225)
----------
- ------------
Net increase in shares
outstanding....................... 3,611
$ 28,408
----------
- ------------
----------
- ------------
Year ended December 31, 1997:
Shares sold......................... 95,257
$ 776,731
Shares issued in reinvestment of
dividends and distributions....... 5,489
43,719
Shares reacquired................... (76,729)
(605,145)
----------
- ------------
Net increase in shares
outstanding....................... 24,017
$ 215,305
----------
- ------------
----------
- ------------
<CAPTION>
Class Z
- ------------------------------------
Six months ended June 30, 1998:
Shares sold......................... 334,507
$ 2,694,486
Shares issued in reinvestment of
dividends and distributions....... 6,431
51,365
Shares reacquired................... (172,999)
(1,393,552)
----------
- ------------
Net increase in shares
outstanding....................... 167,939
$ 1,352,299
----------
- ------------
----------
- ------------
March 17, 1997(a) through
December 31, 1997:
Shares sold......................... 85,634
$ 698,886
Shares issued in reinvestment of
dividends and distributions....... 4,243
33,646
Shares reacquired................... (2,894)
(23,565)
----------
- ------------
Net increase in shares
outstanding....................... 86,983
$ 708,967
----------
- ------------
----------
- ------------
</TABLE>
- ---------------
(a) Commencement of offering of Class Z shares.
- --------------------------------------------------
- ------------------------------
11
<PAGE>
Financial Highlights (Unaudited) THE
GLOBAL TOTAL RETURN FUND, INC.
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class A (b)
- --------------------------------------------------
- --------------------------
Six Months
Ended Year Ended December
31,
June 30, -----------------------------------
- -------------------------
1998(c) 1997(c) 1996 1995
1994 1993
- ----------- -------- -------- --------
- -------- --------
<S>
<C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..........
$ 7.88 $ 8.38 $ 8.44 $ 7.46
$ 8.76 $ 8.10
- ----------- -------- -------- --------
- -------- --------
Income from investment operations
Net investment income.........................
.25 .55 .62 .54
.52 .64
Net realized and unrealized gain (loss) on
investment and foreign currencies..........
.08 (.18) .32 1.25
(1.22) .74
- ----------- -------- -------- --------
- -------- --------
Total from investment operations...........
.33 .37 .94 1.79
(.70) 1.38
- ----------- -------- -------- --------
- -------- --------
Less distributions
Dividends from net investment income..........
(.26) (.68) (.62) (.54)
(.17) (.30)
Distributions in excess of net investment
income.....................................
(.01) (.19) (.50) (.27)
- -- --
Distributions from capital gains..............
- -- -- -- --
(.13) (.23)
Distributions in excess of capital gains......
- -- -- -- --
- -- (.19)
Tax return of capital distributions...........
- -- -- -- --
(.30) --
- ----------- -------- -------- --------
- -------- --------
Total distributions........................
(.27) (.87) (1.12) (.81)
(.60) (.72)
- ----------- -------- -------- --------
- -------- --------
Redemption fee retained by Fund...............
- -- -- .12 --
- -- --
- ----------- -------- -------- --------
- -------- --------
Net asset value, end of period................
$ 7.94 $ 7.88 $ 8.38 $ 8.44
$ 7.46 $ 8.76
- ----------- -------- -------- --------
- -------- --------
- ----------- -------- -------- --------
- -------- --------
Per share market price, end of period.........
N/A N/A N/A $ 8.25 $
6.13 $ 8.00
- -------- -------- --------
- -------- -------- --------
TOTAL INVESTMENT RETURN BASED ON (a):
Market price...............................
N/A N/A N/A 49.23%
(16.12)% 16.50%
Net asset value............................
4.33% 4.55% 13.15% 25.45%
(8.10)% 18.12%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...............
$ 170,680 $183,054 $229,770 $559,071
$493,645 $579,942
Average net assets (000)......................
$ 179,088 $204,795 $299,026 $549,407
$536,230 $567,128
Ratios to average net assets:
Expenses, including distribution fees......
1.33%(d) 1.39% 1.33% 1.02%
1.04% 1.02%
Expenses, excluding distribution fees......
1.18%(d) 1.24% 1.18% 1.02%
1.04% 1.02%
Net investment income......................
6.31%(d) 6.73% 7.01% 6.50%
6.45% 7.67%
For Class A, B, C, and Z shares:
Portfolio turnover rate....................
21% 43% 32% 256%
583% 370%
</TABLE>
- ---------------
(a) Total investment return based on net asset
value is calculated assuming a
purchase of shares on the first day and a sale
on the last day of each
period reported and includes reinvestment of
dividends and distributions.
Total return does not consider the effect of
sales load. 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 investment returns
for periods of less than a full year are not
annualized.
(b) Prior to January 15, 1996 the Fund operated as
a closed-end investment
company.
(c) Calculated based upon weighted average shares
outstanding during the period.
(d) Annualized.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 12
<PAGE>
Financial Highlights (Unaudited) THE
GLOBAL TOTAL RETURN FUND, INC.
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class B Class C
- ---------------------------------------------
- ----------------------------
January 15,
Six Months 1996(d)
Six Months Year Ended
Ended Year Ended Through
Ended December
June 30, December 31, December 31,
June 30, 31,
1998(f) 1997(f) 1996
1998(f) 1997(f)
- ----------- ------------ ------------
- ------------ -----------
<S>
<C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..........
$ 7.89 $ 8.39 $ 8.51
$ 7.89 $ 8.39
- ----- ----- -----
- ----- -----
Income from investment operations
Net investment income.........................
.23 .49 .57
.23 .49
Net realized and unrealized gain (loss) on
investment and foreign currencies..........
.07 (.16) .26
.07 (.16)
- ----- ----- -----
- ----- -----
Total from investment operations...........
.30 .33 .83
.30 .33
- ----- ----- -----
- ----- -----
Less distributions
Dividends from net investment income..........
(.24) (.64) (.57)
(.24) (.64)
Distributions in excess of net investment
income.....................................
(.01) (.19) (.50)
(.01) (.19)
- ----- ----- -----
- ----- -----
Total distributions........................
(.25) (.83) (1.07)
(.25) (.83)
- ----- ----- -----
- ----- -----
Redemption fee retained by Fund...............
- -- -- .12
- -- --
- ----- ----- -----
- ----- -----
Net asset value, end of period................
$ 7.94 $ 7.89 $ 8.39
$ 7.94 $ 7.89
- ----- ----- -----
- ----- -----
- ----- ----- -----
- ----- -----
TOTAL INVESTMENT RETURN(a):...................
3.89% 3.98% 11.99%
3.89% 3.98%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...............
$ 3,239 $2,300 $ 175
$ 220 $ 190
Average net assets (000)......................
$ 2,642 $1,246 $ 52
$ 212 $ 397
Ratios to average net assets:
Expenses, including distribution fees......
1.93%(c) 1.99% 1.93%(c)
1.93%(c) 1.99%
Expenses, excluding distribution fees......
1.18%(c) 1.24% 1.18%(c)
1.18%(c) 1.24%
Net investment income......................
5.75%(c) 6.13% 6.41%(c)
5.72%(c) 6.05%
<CAPTION>
Class C Class Z
-----
- ---------- ----------------------------
January 15, March 17,
1996(d) Six Months 1997(e)
Through Ended through
December 31, June 30, December 31,
1996 1998(f) 1997(f)
--
- ---------- ----------- ------------
<S>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..........
$ 8.51 $ 7.88 $ 8.32
- ----- ----- -----
Income from investment operations
Net investment income.........................
.57 .26 .39
Net realized and unrealized gain (loss) on
investment and foreign currencies..........
.26 .08 .05
- ----- ----- -----
Total from investment operations...........
.83 .34 .44
- ----- ----- -----
Less distributions
Dividends from net investment income..........
(.57) (.27) (.69)
Distributions in excess of net investment
income.....................................
(.50) (.01) (.19)
- ----- ----- -----
Total distributions........................
(1.07) (.28) (.88)
- ----- ----- -----
Redemption fee retained by Fund...............
.12 -- --
- ----- ----- -----
Net asset value, end of period................
$ 8.39 $ 7.94 $ 7.88
- ----- ----- -----
- ----- ----- -----
TOTAL INVESTMENT RETURN(a):...................
11.99% 4.27% 5.56%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...............
$ 210(b) $ 2,025 $ 686
Average net assets (000)......................
$ 204(b) $ 1,366 $ 257
Ratios to average net assets:
Expenses, including distribution fees......
1.93%(c) 1.18%(c) 1.24%(c)
Expenses, excluding distribution fees......
1.18%(c) 1.18%(c) 1.24%(c)
Net investment income......................
6.41%(c) 6.56%(c) 5.41%(c)
</TABLE>
- ---------------
(a) Total investment return is calculated assuming
a purchase of shares on the
first day and a sale on the last day of each
period reported and includes
reinvestment of dividends and distributions.
Total investment return does
not consider the effect of sales load. Total
investment returns for periods
of less than a full year are not annualized.
(b) Figure is actual and not rounded to nearest
thousand.
(c) Annualized.
(d) Commencement of offering of Class B and Class
C shares.
(e) Commencement of offering of Class Z shares.
(f) Calculated based upon weighted average shares
outstanding during the period.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 13
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Directors
Edward D. Beach
Delayne Dedrick Gold
Robert F. Gunia
Douglas H. McCorkindale
Mendel A. Melzer, CFA
Thomas T. Mooney
Stephen P. Munn
Richard A. Redeker
Robin B. Smith
Louis A. Weil, III
Clay T. Whitehead
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Marguerite E.H. Morrison, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
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, 1998 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>
(LOGO)
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
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