The Global
Government Plus
Fund, Inc.
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Semi-Annual Report
June 30, 1994
(sm)The mark is a service mark of The Prudential Insurance
Company of America
<PAGE>
Letter to Shareholders
August 12, 1994
Dear Shareholder:
In the first half of 1994, higher than expected economic growth and
inflationary fears dragged down global bond markets, As a result,
domestic and foreign interest rates rose dramatically. In this
environment, The Global Government Plus Fund, Inc. was adversely
affected by these developments.
The Fund seeks high total return by investing in a portfolio of
longer-term government debt securities throughout the world.
<TABLE>
Fund Performance
Total Returns as of June 30, 1994
<CAPTION>
6 Months Since Inception (7/31/87)
<S> <C> <C>
The Global Gov't Plus Fund, Inc.* -4.65% +62.62%
JP Morgan Global Traded
Government Bond Index** -0.35% +86.89%
</TABLE>
STOCK LISTING
The Global Government Plus Fund, Inc.'s common stock is traded on the
New York Stock Exchange under the symbol "GOV" and is frequently
listed as "GlobGvtFd" or "GlbGvt" in the financial sections of
newspapers. It is also listed in a closed-end fund table
every Monday in The Wall Street Journal.
*Total return of the Fund represents the change in net asset value
from the beginning of the period noted through 6/30/94 and assumes
the reinvestment of dividends and distributions. Shares of the Fund are
traded on the NYSE. Past performance is no guarantee of future results.
**JP Morgan Global Traded Government Bond Index is a weighted index of
the total return of foreign government bonds from 13 countries, including
Australia, Belgium, Canada, Denmark, France, Germany, Italy, Japan,
Netherlands, Spain, Sweden, United Kingdom and the United States and
provides a broad measure of market performance.
Your Fund's net asset value was $7.09 on June 30, 1994. The Fund also
paid dividends and distributions of $0.34 per share during the period.
A Roller Coaster Ride
During the first few months of this year, the dramatic upswing in
global interest rates took many investors by surprise. Although
fundamental factors pointed to lower interest rates, particularly
in Europe, political instability and market technicals prevailed
and greatly increased the volatility of the global fixed-income markets.
The actions by the Fed to raise short-term interest rates in early
February set in motion a chain of events that caused global bond
markets to go on a roller coaster ride. Up to then, some market
participants were so certain that rates would continue
to drop that many were heavily leveraging their investment portfolios,
often through the use of derivative securities. However, as
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<PAGE>
Country Allocation*
As of June 30, 1994
(CHART)
* Percent of Net Assets
yields rose and bond prices fell, there was a scramble to sell fixed-income
securities. In this environment, the investors with leveraged portfolios
were more adversely affected than others and had to dump securities
sooner. In addition, a stronger than expected U.S. economy as well
as improving European growth had further aggravated the markets and
helped to push yields even higher.
The currency markets, which reacted to the failure of the recent
bilateral U.S.-Japan trade talks by weakening the dollar against
the yen, were only further aggravated by the U.S. government's stance
on the dollar. While many market analysts feel the Fed has moved too
slowly to raise short-term rates, many appeared to be critical of the
Fed's aggressive stance. This turmoil as well as large speculative
positions caused the dollar to fall versus many European
currencies, especially the German deutschemark. While recent
speculation may have set the tone for the current currency markets,
U.S. inflationary fears and the apparent failure of the major central
banks to do anything about the dollar's decline
have further magnified its weakness.
Portfolio Review
In anticipation of higher U.S. interest rates, we decreased our U.S.
bond exposure. However, we still anticipated that European bond
markets would improve over the period and held large
positions there. Unfortunately, European bond markets unexpectedly
moved in sympathy with U.S. bonds. As a result, our European holdings
were adversely affected.
During this period, we moved to reduce interest rate exposure by
shortening our weighted average maturities (WAM) in most markets.
As of June 30, 1994, the portfolio's overall WAM was a relatively
short 6.0 years. In addition, we also reduced our holdings in some
of the more volatile markets, particularly Italy, Spain and
Sweden. The accompanying pie chart shows the allocation of the
portfolio as of June 30, 1994.
We expected the U.S. dollar to strengthen and had much of our
foreign securities hedged back into the dollar. As a result, we
did not benefit significantly from the dollar's unforeseen weakness.
Please note that at the Annual Meeting of Stockholders in April,
shareholders approved a change in the Fund's investment objective
to maximize total return, the components of which are current
income and capital appreciation. The approval of this proposal
will not result in a significant change in direction for the Fund.
This change will also permit us to invest in investment grade bonds
(bonds rated in the top four highest quality grades as determined by
Moody's or Standard & Poor's, or in unrated securities of comparable
quality), with up to 10% of total assets to be invested in securities
rated below investment grade with a minimum rating of B. Although there
are specific risks associated with
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<PAGE>
securities rated below investment grade, we believe that the
Fund will be able to take advantage of investment
opportunities in emerging markets and will also have
greater flexibility in managing the portfolio in accordance
with its investment objective. There can be no assurance, however,
that this objective will be achieved.
Future Strategy & Outlook
Our outlook for global bonds is mixed. Stronger economic growth in
the "dollar-bloc" countries have led to higher interest rates. Although
inflationary pressures have not yet emerged, these bond markets have
already discounted much of this growth. As long as markets continue
to focus on growth rather than inflation, we will decrease our holdings in
these nations.
In Japan, we believe that higher commodity prices will add inflationary
pressures and lower the real yields of Japanese bonds. With 10-year
Japanese bond yields already at about 4%, we believe that their bond
market is currently unattractive and do not expect the prospects to
improve anytime soon.
We believe that European bond markets offer value. While signs of
growth have surfaced in many European nations, economic activity
generally remains modest and unemployment is staying high. Despite
these favorable economic fundamentals, however, European bond market
sentiment currently remains poor. In this environment, we will continue
to keep maturities shorter and will favor the core European bond markets
of Germany and the Netherlands. As the trend in European fixed-income
markets improves, we will once again look to take more aggressive bond
positions in Europe. We have also increased the Fund's currency
exposure towards Europe and Japan. Although dollar
trends are down, we will reinstate defensive currency hedges when
they improve.
As always, it is a pleasure to have you as a shareholder of The
Global Government Plus Fund, Inc. and to take the opportunity to
report our activities to you.
Sincerely,
Lawrence C. McQuade
President
Andrew Barnett
Portfolio Manager
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<PAGE>
Tax Update:
As a result of higher hedging costs in the European and Japanese
markets this year, it is likely that some of the dividends paid in the
current calendar year will be considered return of capital (A non
taxable distribution) under the Internal Revenue Code. Provisions
in the Internal Revenue Code require the Fund's currency losses,
which includes the Fund's hedging costs, to be
treated as ordinary losses and offsets ordinary income (less
operating expenses).
In January 1995, you will receive a Form 1099 DIV (or substitute
Form 1099 DIV) that will reflect the total amount of distributions
that constitute a tax return of capital. Such amount is not
included as taxable income for calendar year 1994, but should
be reflected as an adjustment in the cost basis of your Fund's
shares.
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<PAGE>
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THE GLOBAL GOVERNMENT PLUS FUND, INC.
Portfolio of Investments
June 30, 1994
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------
Principal US$
Amount Value
(000) Description (Note 1)
- --------------------------------------------------------
<C> <S> <C>
LONG-TERM INVESTMENTS--80.4%
Australia--3.7%
Australian Gov't. Bonds,
A$ 14,700 12.50%, 9/15/97.......... $ 11,909,822
------------
Canada--2.4%
Canadian Gov't. Bonds,
C$ 12,000# 7.50%, 12/1/03........... 7,735,063
------------
France--3.8%
French Gov't. Bonds,
FF 77,510# 5.50%, 4/25/04........... 12,251,855
------------
Germany--14.8%
Fed. Rep. of Germany
Bonds,
DM 13,900# 8.00%, 3/20/97........... 9,118,728
5,500# 8.00%, 7/22/02........... 3,635,731
25,500# 6.75%, 4/22/03........... 15,767,243
Treuhandanstalt,
30,000# 7.75%, 10/1/02........... 19,405,953
------------
47,927,655
------------
Ireland--3.1%
Irish Gov't. Bonds,
IEP 2,335# 6.25%, 4/1/99............ 3,242,662
4,365# 9.00%, 7/15/01........... 6,718,041
------------
9,960,703
------------
Italy--2.6%
Italian Gov't. Bonds,
Lira 7,275,000# 12.00%, 9/1/97........... 4,761,836
5,665,000# 12.00%, 1/20/98.......... 3,725,884
------------
8,487,720
------------
Japan--5.7%
Japan Development Bank,
(YEN) 961,000# 5.00%, 10/1/99........... 10,145,754
168,000# 6.50%, 9/20/01........... 1,907,109
Japanese Gov't. Bonds,
551,000# 6.60%, 6/20/01........... 6,353,421
------------
18,406,284
------------
- --------------------------------------------------------
Principal US$
Amount Value
(000) Description (Note 1)
- --------------------------------------------------------
Netherlands--0.4%
Netherlands Gov't. Bonds,
DG 2,200# 7.50%, 6/15/99........... $ 1,272,194
------------
New Zealand--5.2%
New Zealand Gov't. Bonds,
NZ$ 18,200# 10.00%, 7/15/97.......... 11,507,031
9,000# 8.00%, 7/15/98........... 5,415,977
------------
16,923,008
------------
Spain--2.5%
Spanish Gov't. Bonds,
Pts 1,042,000# 11.45%, 8/30/98.......... 8,212,093
------------
Sweden--1.3%
Swedish Gov't. Bonds,
Skr 30,000# 11.00%, 1/21/99.......... 4,110,632
------------
United Kingdom--12.8%
United Kingdom Treasury
Bonds,
(BR PD) 10,650# 10.00%, 11/15/96......... 17,318,448
11,000# 9.50%, 1/15/99........... 17,617,618
175# 8.00%, 6/10/03........... 256,867
4,500# 6.75%, 11/26/04.......... 6,042,100
------------
41,235,033
------------
United States--22.1%
United States Treasury
Bonds,
US$ 18,629 6.25%, 2/15/03........... 17,368,632
4,300 5.875%, 2/15/04.......... 3,864,625
17,500 7.25%, 5/15/04........... 17,401,562
9,100 6.25%, 8/15/23........... 7,646,844
United States Treasury
Notes,
8,750 5.50%, 2/28/99........... 8,270,117
6,575 6.75%, 5/31/99........... 6,516,441
9,450 5.50%, 4/15/00........... 8,787,023
United States Treasury
Strip,**
13,000 6.81%, 5/15/21........... 1,641,497
------------
71,496,741
------------
Total long-term
investments
(cost US$264,092,269).... 259,928,803
------------
SHORT-TERM INVESTMENTS--16.6%
United States--16.5%
Mitsubishi Bank, Ltd.,
T.D.,
US$ 5,590 4.4375%, 7/1/94.......... 5,590,000
</TABLE>
See Notes to Financial Statements.
-5-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------
<C> <S> <C>
Principal US$
Amount Value
(000) Description (Note 1)
- --------------------------------------------------------
Sakura Bank, Ltd., T.D.,
US$ 15,990 4.4375%, 7/1/94.......... $ 15,990,000
Sanwa Bank, Ltd., T.D.,
15,620 4.4375%, 7/1/94.......... 15,620,000
United States Treasury
Bills,**
16,400 4.21%, 9/15/94........... 16,257,238
------------
53,457,238
------------
<CAPTION>
Contracts
(000) Outstanding Options Purchased*--0.1%
- -------------
<C> <S> <C>
Call Options
Australian Dollars,
expiring 8/19/94 @ US$
26,595 .746................... 98,401
German Deutschemarks,
expiring 7/25/94 @ DM
36,285 1.71................... 3,629
Japanese Gov't Bonds,
4.10%, 12/22/03,
expiring 7/15/94 @
1,658,000 (YEN)99.659............ 4,974
Japanese Yen,
expiring 8/10/94 @
18,175 (YEN)105............... 20,901
------------
127,905
------------
Cross-Currency Put Options
German Deutschemarks,
expiring 1/12/95 @ Lira
16,400 971.7.................. 57,400
expiring 1/25/95 @ Skr
31,595 4.5412................. 78,988
------------
136,388
------------
Total short-term
investments
(cost US$55,257,851)..... 53,721,531
------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------
US$
Contracts Value
(000) Description (Note 1)
- --------------------------------------------------------
<C> <S> <C>
Total Investments Before
Outstanding Call
Options Written--97.0%
(cost US$319,350,120;
Note 3)................ $313,650,334
------------
Outstanding Call Options
Written*--(0.3%)
German Deutschemarks,
expiring 1/12/95 @ Lira
16,400 1025................... (157,440)
expiring 1/24/95 @ SKr
31,595 4.75................... (824,630)
------------
Total outstanding call
options
written (premiums
received
US$712,301)............ (982,070)
------------
Total Investments, Net of
Outstanding Call
Options Written--96.7%
(cost $318,637,819)...... 312,668,264
Other assets in excess of
liabilities--3.3%........ 10,741,797
------------
Net Assets--100%......... $323,410,061
------------
------------
</TABLE>
- ---------------
Portfolio securities are classified according to the
security's currency denomination. Option contracts are
expressed in local currency units.
T.D.--Time Deposit.
* Non-income producing security.
** Percentages quoted represent yields to maturity as
of purchase date.
# Principal amount segregated as collateral for
forward currency contracts and options written.
Aggregate value of segregated
securities--$176,522,240.
See Notes to Financial Statements.
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<PAGE>
<PAGE>
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THE GLOBAL GOVERNMENT PLUS FUND, INC.
Statement of Assets and Liabilities
June 30, 1994
(Unaudited)
- ----------------------------------------------------------
<TABLE>
<S> <C>
Assets
Investments, at value (cost
$319,350,120)........................ $313,650,334
Foreign currency, at value ($44,217)... 43,990
Cash................................... 4,223
Forward contracts--amount receivable
from counterparties.................. 12,793,884
Receivable for investments sold........ 10,116,648
Interest receivable.................... 6,608,112
Deferred expenses and other assets..... 81,863
------------
Total assets....................... 343,299,054
------------
Liabilities
Forward contracts--amount payable to
counterparties....................... 12,932,219
Dividends payable...................... 5,477,101
Outstanding call options written, at
value
(premiums received $712,301)......... 982,070
Management fee payable................. 201,398
Accrued expenses and other
liabilities.......................... 208,721
Withholding taxes payable.............. 87,484
------------
Total liabilities.................. 19,888,993
------------
Net Assets............................. $323,410,061
------------
------------
Net assets were comprised of:
Common stock, at par................. $ 526,425
Paid-in capital in excess of par..... 404,401,640
Cost of 7,000,000 shares held in
treasury........................... (50,685,700)
------------
354,242,365
Distributions in excess of net
investment income.................. (9,805,365)
Accumulated net realized losses on
investment
transactions....................... (15,127,246)
Net unrealized depreciation on
investments
and foreign currencies............. (5,899,693)
------------
Net assets, June 30, 1994............ $323,410,061
------------
------------
Net asset value per share:
($323,410,061 / 45,642,508 shares of
common stock issued and
outstanding)....................... $7.09
------------
------------
</TABLE>
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THE GLOBAL GOVERNMENT PLUS FUND, INC.
Statement of Operations
Six Months Ended June 30, 1994
(Unaudited)
- ----------------------------------------------------------
<TABLE>
<S> <C>
Net Investment Income
Income
Interest and discount earned (net of
foreign
withholding tax of $82,842)......... $ 12,285,712
------------
Expenses
Management fee........................ 1,275,423
Custodian's fees and expenses......... 280,000
Reports to shareholders............... 77,000
Transfer agent's fees and expenses.... 72,000
Directors' fees....................... 37,000
Audit fee............................. 36,000
Insurance............................. 35,000
Legal fees and expenses............... 10,000
Miscellaneous......................... 24,232
------------
Total expenses...................... 1,846,655
------------
Net investment income................. 10,439,057
------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign
Currency Transactions
Net realized gain (loss) on:
Investment transactions............... (20,141,036)
Foreign currency transactions......... (3,889,876)
Written option transactions........... 1,632,933
Financial futures transactions........ 28,052
------------
(22,369,927)
------------
Net change in unrealized
appreciation/depreciation on:
Investments........................... (6,394,880)
Foreign currencies.................... (652,879)
Written options....................... 115,147
Financial futures..................... 8,750
------------
(6,923,862)
------------
Net loss on investments and foreign
currencies............................ (29,293,789)
------------
Net Decrease In Net Assets
Resulting from Operations............... $(18,854,732)
------------
------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
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<PAGE>
<PAGE>
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THE GLOBAL GOVERNMENT PLUS FUND, INC.
Statement of Changes in Net Assets
(Unaudited)
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease)
in Net Assets
<S> <C> <C>
Six Months Year
Ended Ended
June 30, December 31,
1994 1993
------------ ------------
Operations:
Net investment income... $ 10,439,057 $ 25,056,831
Net realized gain (loss)
on investments and
foreign currency
transactions.......... (22,369,927) 24,733,757
Net change in unrealized
appreciation/depreciation
on investments and
foreign currencies.... (6,923,862) 8,867,561
------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ (18,854,732) 58,658,149
------------ ------------
Dividends and
distributions:
Dividends from net
investment income..... (1,148,579) (10,398,530)
Distributions from net
realized gains........ (4,564,084) (24,733,757)
Distributions in excess
of net investment
income................ (9,805,365) --
Distributions in excess
of net realized
gains................. -- (2,522,669)
------------ ------------
Total dividends and
distributions........... (15,518,028) (37,654,956)
------------ ------------
Total increase
(decrease).............. (34,372,760) 21,003,193
Net Assets
Beginning of period....... 357,782,821 336,779,628
------------ ------------
End of period............. $323,410,061 $357,782,821
------------ ------------
------------ ------------
</TABLE>
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THE GLOBAL GOVERNMENT PLUS FUND, INC.
Notes to Financial Statements
(Unaudited)
- ----------------------------------------------------------
The Global Government Plus Fund, Inc. (the ``Fund'') was organized in
Maryland on April 20, 1987, as a closed-end, non-diversified management
investment company. Investment operations commenced on July 31, 1987.
The Fund's investment objective is to maximize total return, the components
of which are current income and capital appreciation. The ability of 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 The following is a summary of
Policies significant accounting policies
followed by the Fund in the preparation of its
financial statements.
Securities Valuation: In valuing the Fund's assets, quotations of foreign
securities in a foreign currency are converted to U.S. dollar equivalents at the
then current currency value. Portfolio securities that are actively traded in
the over-the-counter market, including listed securities for which the primary
market is believed to be over-the-counter, are valued at the mean between the
most recently quoted bid and asked prices provided by principal market makers.
Any security for which the primary market is on an exchange is valued at the
last sale price on such exchange on the day of valuation or, if there was no
sale on such day, the last bid price quoted on such day. Forward currency
contracts are valued at the current cost of covering or offsetting the contract
on the day of valuation. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Directors of the Fund.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost.
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian or designated
subcustodians, as the case may be under triparty repurchase agreements, takes
possession of the 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
See Notes to Financial Statements.
-8-
<PAGE>
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 losses on security transactions.
Net realized losses on foreign currency transactions represent net foreign
exchange losses from sales and maturities of short-term securities and forward
currency contracts, disposition of foreign currencies, currency gains or losses
realized between the trade and settlement dates on securities transactions, and
the difference between the amounts of interest, discount and foreign taxes
recorded on the Fund's books and the US dollar equivalent amounts actually
received or paid. Net currency gains (losses) from valuing foreign currency
denominated assets (excluding investments) and liabilities at period end
exchange rates are reflected as a component of unrealized depreciation on
investments and foreign currencies.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. companies as a result of,
among other factors, the possibility of political or economic instability and
the level of governmental supervision and regulation of foreign securities
markets.
Forward Currency Contracts: The Fund enters into forward currency contracts in
order to hedge its exposure to changes in currency exchange rates on its
portfolio holdings. A forward contract is a commitment to purchase or sell a
foreign currency at a future date at a negotiated forward rate. The gain or loss
arising from the difference between the settlement value of the original
contract and the renegotiated forward contract is isolated and is included in
net realized losses from foreign currency transactions. Risks may arise upon
entering into these contracts from the potential inability of the counterparties
to meet the terms of their contracts.
Option Writing: When the Fund writes an option, an amount equal to the premium
received by the Fund is recorded as a liability and is subsequently adjusted to
the current market value of the option written. Premiums received from writing
options which expire unexercised are treated by the Fund on the expiration date
as realized gains from written options transactions. The difference between the
premium and the amount paid on effecting a closing purchase transaction,
including brokerage commissions, is also treated as a realized gain, or if the
premium is less than the amount paid for the closing purchase transaction, as a
realized loss. If a call option is exercised, the premium is added to the
proceeds from the sale of the underlying security or currency in determining
whether the Fund has realized a gain or loss. If a put option is exercised, the
premium reduces the cost basis of the securities or currencies purchased by the
Fund. The Fund as writer of an option may have no control over whether the
underlying securities or currencies may be sold (called) or purchased (put) and
as a result bears the market risk of an unfavorable change in the price of the
security or currency underlying the written option.
Financial Futures Contracts: A financial futures contract is an agreement to
purchase (long) or sell (short) an agreed amount of debt securities at a set
price for delivery on a future date. Upon entering into a financial futures
contract, the Fund is required to pledge to the broker an amount of cash and/or
other assets equal to a certain percentage of the contract amount. The amount is
known as the ``initial margin''. Subsequent payments, known as ``variation
margin'', are made or received by the Fund each day, depending on the daily
fluctuations in the value of the underlying security. Such variation margin is
recorded for financial statement purposes on a daily basis as unrealized gain or
loss.
The Fund invests in financial futures contracts solely for the purpose of
hedging its existing portfolio securities or securities the Fund intends to
purchase against fluctuations in value caused by changes in prevailing market
interest rates. Should interest rates move unexpectedly the Fund may not achieve
the anticipated benefits of the financial futures contracts and may realize a
loss. The use of futures transactions involves the risk of imperfect correlation
in movements in the price of futures contracts, interest rates and the
underlying hedged
-9-
<PAGE>
<PAGE>
assets. There were no financial futures contracts outstanding at June 30, 1994.
Security Transactions and Investment Income: Security transactions are recorded
on the trade date. Realized and unrealized gains and losses from security and
currency transactions are calculated on the identified cost basis. Interest
income which is comprised of three elements: stated coupon, original issue
discount and market discount, is recorded on the accrual basis.
Dividends and Distributions: Dividends are declared quarterly. Distributions of
long-term capital gains, if any, will be declared annually. Dividends and
distributions are recorded on the ex-dividend dates.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for foreign currencies and loss deferrals.
Reclassification of Capital Accounts: The Fund accounts for and reports
distributions to shareholders in accordance with Statement of Position 93-2:
Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies. The
effect of applying this statement was to increase distributions in excess of net
investment income by $9,290,478 and decrease accumulated net realized losses on
investment transactions by $9,290,478 for realized foreign currency losses
incurred during the period. 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 rates.
Note 2. Agreements The Fund has a management
agreement with Prudential Mutual Fund Management,
Inc. (``PMF''). Pursuant to this agreement PMF has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PMF has entered into a subadvisory agreement with The Prudential
Investment Corporation (``PIC''); PIC furnishes investment advisory services in
connection with the management of the Fund. PMF pays for the cost of the
subadviser's services, the compensation of officers of the Fund, occupancy and
certain clerical and bookkeeping costs of the Fund. The Fund bears all other
costs and expenses.
The management fee paid PMF is computed weekly and payable monthly, at the
annual rate of 0.75% of the Fund's average weekly net assets up to US $1 billion
and 0.70% of average weekly net assets in excess of US $1 billion.
PMF and PIC are indirect wholly-owned subsidiaries of The Prudential
Insurance Company of America (``Prudential'').
Note 3. Portfolio Purchases and sales of invest-
Securities ment securities, other than
short-term investments and options written, for
the six months ended June 30, 1994 aggregated $1,015,361,597 and $1,064,634,968,
respectively.
At June 30, 1994, the Fund had outstanding forward currency contracts, both
to purchase and sell foreign currencies, as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Purchase Contracts Payable Value (Depreciation)
- ------------------ --------------- ------------ --------------
<S> <C> <C> <C>
Australian
Dollars,
expiring 7/8/94-
8/5/94.......... $ 154,503,617 $154,425,070 $ (78,547)
Belgian Francs,
expiring
7/28/94......... 10,180,739 10,266,503 85,764
British Pounds,
expiring
7/20/94......... 8,019,549 8,059,840 40,291
Canadian Dollars,
expiring
7/11/94-
7/20//94........ 23,265,992 23,417,378 151,386
Danish Kroner,
expiring
7/25/94......... 4,916,612 4,942,847 26,235
French Francs,
expiring 7/5/94-
8/5/94.......... 40,471,312 41,295,627 824,315
German
Deutschemarks,
expiring 7/5/94-
8/5/94.......... 263,323,595 269,319,599 5,996,004
Irish Pounds,
expiring
7/15/94......... 2,778,849 2,865,254 86,405
Italian Lira,
expiring
7/20/94-
8/1/94.......... 22,396,528 22,322,355 (74,173)
Japanese Yen,
expiring
7/11/94-
7/22/94......... 63,170,438 66,092,846 2,922,408
New Zealand
Dollars,
expiring
7/11/94-
7/22/94......... 29,607,705 30,338,631 730,926
Spanish Pesetas,
expiring
7/11/94......... 4,414,562 4,535,636 121,074
</TABLE>
-10-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Purchase Contracts Payable Value (Depreciation)
- ------------------ --------------- ------------ --------------
<S> <C> <C> <C>
Swedish Kroner,
expiring
7/11/94-
7/13/94......... $ 19,199,387 $ 19,709,540 $ 510,153
Swiss Francs,
expiring
7/22/94......... 9,422,306 9,465,451 43,145
--------------- ------------ --------------
$ 655,671,191 $667,056,577 $ 11,385,386
--------------- ------------ --------------
--------------- ------------ --------------
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- ------------------ --------------- ------------ --------------
<S> <C> <C> <C>
Australian
Dollars,
expiring 7/8/94-
8/5/94.......... $ 160,429,454 $160,021,490 $ 407,964
British Pounds,
expiring
7/20/94-
9/2/94.......... 31,457,383 31,929,588 (472,205)
Canadian Dollars,
expiring
7/11/94-
8/5/94.......... 32,809,765 32,881,026 (71,261)
French Francs,
expiring 7/5/94-
7/11/94......... 32,295,922 32,924,868 (628,946)
German
Deutschemarks,
expiring 7/5/94-
8/9/94.......... 235,469,306 241,366,137 (5,896,831)
Irish Pounds,
expiring
7/15/94......... 15,297,758 15,663,775 (366,017)
Italian Lira,
expiring
7/20/94......... 14,462,000 14,598,686 (136,686)
Japanese Yen,
expiring 7/8/94-
7/28/94......... 18,462,312 19,461,741 (999,429)
Netherland
Guilders,
expiring
7/8/94.......... 34,567,214 36,239,274 (1,672,060)
New Zealand
Dollars,
expiring
7/11/94-
7/22/94......... 49,368,182 49,785,339 (417,157)
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- ------------------ --------------- ------------ --------------
<S> <C> <C> <C>
Spanish Pesetas,
expiring
7/11/94......... $ 6,672,597 $ 6,939,863 $ (267,266)
Swedish Kroner,
expiring
7/11/94-
7/15/94......... 31,636,122 32,589,055 (952,933)
Swiss Francs,
expiring
7/22/94......... 11,685,889 11,736,783 (50,894)
--------------- ------------ --------------
$ 674,613,904 $686,137,625 $ (11,523,721)
--------------- ------------ --------------
--------------- ------------ --------------
</TABLE>
Transactions in options written for the six months ended June 30, 1994 were
as follows:
<TABLE>
<CAPTION>
Number
of
Contracts Premiums
(000) Received
-------- ------------
<S> <C> <C>
Options outstanding at December
31, 1993...................... 118,012 $ 665,215
Options written................. 389,463 2,723,694
Options terminated in closing
purchase transactions......... (92,530 ) (538,226 )
Options expired................. (212,920) (1,226,775 )
Options exercised............... (154,030) (911,607 )
-------- ------------
Options outstanding at June 30,
1994.......................... 47,995 $ 712,301
-------- ------------
-------- ------------
</TABLE>
The federal income tax basis of the Fund's investments at June 30, 1994 was
$320,389,966 and, accordingly, net unrealized depreciation for United States
federal income tax purposes was $6,739,632 (gross unrealized appreciation--
$2,239,008; gross unrealized depreciation--$8,978,640).
Note 4. Capital There are 200 million shares
of $.01 par value common stock authorized. Of the
45,642,508 shares outstanding at June 30, 1994, Prudential owned 11,000 shares.
-11-
<PAGE>
<PAGE>
Note 5. Quarterly Data
<TABLE>
<CAPTION>
Net realized and
unrealized
gains (losses) on Net increase (decrease)
investments in net assets
Quarterly Net Investment and foreign resulting from
period Total income currencies operations
ended income Amount Per share Amount Per share Amount Per share
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------- ---------- ------------------------ -------------------------- --------------------------
March 31, 1992 $8,721,610 $7,530,009 $0.16 $(15,275,625) $ (0.33) $ (7,745,616) $ (0.17)
June 30, 1992 8,641,563 7,707,659 0.17 8,166,616 0.18 15,874,275 0.35
Sept. 30, 1992 9,467,544 8,430,220 0.19 (27,683,080) (0.61) (19,252,860) (0.42)
Dec. 31, 1992 7,780,717 6,774,628 0.15 2,926,792 0.06 9,701,420 0.21
March 31, 1993 7,647,932 6,639,056 0.15 14,834,350 0.33 21,473,406 0.48
June 30, 1993 7,413,933 6,508,833 0.14 11,850,346 0.26 18,359,179 0.40
Sept. 30, 1993 7,289,441 6,284,989 0.14 1,423,613 0.03 7,708,602 0.17
Dec. 31, 1993 6,588,904 5,623,953 0.12 5,493,009 0.12 11,116,962 0.24
March 31, 1994 6,244,690 5,303,162 0.12 (18,489,710) (0.41) (13,186,548) (0.29)
June 30, 1994 6,041,022 5,135,895 0.11 (10,804,079) (0.23) (5,668,184) (0.12)
<CAPTION>
Dividends
Quarterly and Share
period distributions price
ended Amount Per share High Low
<S> <C> <C> <C> <C>
- --------------- ------------------------- ------------
March 31, 1992 $ 7,987,439 $ 0.175 $73/4 $7 1/2
June 30, 1992 7,987,439 0.175 77/8 7 3/8
Sept. 30, 1992 7,987,439 0.175 81/8 7 3/8
Dec. 31, 1992 15,746,665 0.345 75/8 6 7/8
March 31, 1993 7,302,526 0.16 73/4 7
June 30, 1993 7,302,526 0.16 73/4 7 1/8
Sept. 30, 1993 7,302,526 0.16 77/8 7 3/8
Dec. 31, 1993 15,747,378 0.345 73/4 7
March 31, 1994 10,040,927 0.22 71/4 6 1/4
June 30, 1994 5,477,101 0.12 61/2 5 5/8
</TABLE>
-12-
<PAGE>
- --------------------------------------------------------------------------------
THE GLOBAL GOVERNMENT PLUS FUND, INC.
Financial Highlights
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Years Ended December 31,
June 30, ----------------------------------------------------
PER SHARE OPERATING PERFORMANCE: 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
---------- -------- -------- -------- -------- --------
Net asset value, beginning of period................... $ 7.84 $ 7.38 $ 8.28 $ 8.25 $ 8.25 $ 8.95
---------- -------- -------- -------- -------- --------
Net investment income.................................. .23 .55 .67 .66 .59 .59
Net realized and unrealized gain (loss) on investments
and foreign currencies............................... (.64) .74 (.70) .09 .06 (.19)
---------- -------- -------- -------- -------- --------
Total from investment operations..................... (.41) 1.29 (.03) .75 .65 .40
---------- -------- -------- -------- -------- --------
Dividends from net investment income................... (.03) (.23) (.67) (.66) (.59) (.59)
Distributions from net capital gains................... (.10) (.54) (.20) -- -- --
Distributions in excess of net investment income....... (.21) -- -- -- -- --
Distributions in excess of net capital gains........... -- (.06) -- -- -- --
Distributions from paid-in capital in excess of par.... -- -- -- (.06) (.21) (.51)
---------- -------- -------- -------- -------- --------
Total dividends and distributions.................... (.34) (.83) (.87) (.72) (.80) (1.10)
---------- -------- -------- -------- -------- --------
Increase resulting from Fund share transactions........ -- -- -- -- .15 --
---------- -------- -------- -------- -------- --------
Net asset value, end of period......................... $ 7.09 $ 7.84 $ 7.38 $ 8.28 $ 8.25 $ 8.25
---------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- --------
Per share market price, end of period.................. $ 6.00 $ 7.00 $ 7.00 $ 7.75 $ 7.25 $ 7.50
---------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN+............................... (9.63)% 11.57% 1.25% 17.44% 8.04% (5.89)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........................ $ 323,410 $357,783 $336,780 $377,911 $376,722 $434,245
Average net assets (000)............................... $ 342,118 $361,374 $364,037 $364,072 $382,943 $440,037
Ratio of expenses to average net assets................ 1.09%* 1.07% 1.15% 1.29% 1.47% 1.59%
Ratio of net investment income to average net assets... 6.16%* 6.93% 8.36% 8.30% 7.40% 7.00%
Portfolio turnover rate................................ 336% 441% 346% 267% 503% 477%
</TABLE>
- ---------------
* Annualized.
(D) Total investment return is calculated assuming a purchase of common
stock at the current market value on the first day and a sale at
the current market value on the last day of each period reported.
Dividends and distributions are assumed for purposes of this
calculation to be reinvested at prices obtained under the dividend
reinvestment plan. This calculation does not reflect brokerage
commissions.
Contained above is selected data for a share of
common stock outstanding, total investment return, ratios
to average net assets and other supplemental data for the
periods indicated. This information has been determined based
upon information provided in the financial statements and
market price data for the Fund's shares.
[/TABLE]
See Notes to Financial Statements.
-13-
<PAGE>
<PAGE>
OTHER INFORMATION
Dividend Reinvestment Plan. Shareholders may elect to have all distributions
of dividends and capital gains automatically reinvested in Fund shares (Shares)
pursuant to the Fund's Dividend Reinvestment Plan (the Plan). Shareholders who
do not participate in the Plan will receive all distributions in cash paid by
check in United States dollars mailed directly to the shareholders of record (or
if the shares are held in street or other nominee name, then to the nominee) by
the transfer agent, as dividend disbursing agent. Shareholders who wish to
participate in the Plan should contact the Fund at (800) 451-6788.
State Street Bank & Trust Co. (the Plan Agent) serves as agent for the
shareholders in administering the Plan. After the Fund declares a dividend or
determines to make a capital gains distribution, if (1) the market price is
lower than net asset value, the participants in the Plan will receive the
equivalent in Shares valued at the market price determined as of the time of
purchase (generally, following the payment date of the dividend or
distribution); or if (2) the market price of Shares on the payment date of the
dividend or distribution is equal to or exceeds their net asset value,
participants will be issued Shares at the higher of net asset value or 95% of
the market price. If net asset value exceeds the market price of Shares on the
payment date or the Fund declares a dividend or other distribution payable only
in cash, the Plan Agent will, as agent for the participants, receive the cash
payment and use it to buy Shares in the open market. If, before the Plan Agent
has completed its purchases, the market price exceeds the net asset value per
Share, the average per share purchase price paid by the Plan Agent may exceed
the net asset value per share, resulting in the acquisition of fewer shares than
if the dividend or distribution had been paid in shares issued by the Fund. The
Fund will not issue Shares under the Plan below net asset value.
There is no charge to participants for reinvesting dividends or capital gain
distributions, except for certain brokerage commissions, as described below. The
Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Fund. There will be no brokerage commissions
charged with respect to shares issued directly by the Fund. However, each
participant will pay a pro rata share of brokerage commissions incurred with
respect to the Plan Agent's open market purchases in connection with the
reinvestment of dividends and distributions. The automatic reinvestment of
dividends and distributions will not relieve participants of any federal income
tax that may be payable on such dividends or distributions.
The Fund reserves the right to amend or terminate the Plan upon 90 days'
written notice to shareholders of the Fund.
Participants in the Plan may withdraw from the Plan upon written notice to
the Plan Agent and will receive certificates for whole Shares and cash for
fractional Shares.
All correspondence concerning the Plan should be directed to the Plan Agent,
State Street Bank & Trust Company, P.O. Box 8200, Boston, MA 02266-8200.
-14-
<PAGE>
<PAGE>
Directors
Edward D. Beach
Harry A. Jacobs, Jr.
Donald D. Lennox
Douglas H. McCorkindale
Lawrence C. McQuade
Thomas T. Mooney
Richard A. Redeker
Louis A. Weil, III
Officers
Lawrence C. McQuade, President
Robert F. Gunia, Vice President
Susan C. Cote, Treasurer
S. Jane Rose, Secretary
Marguerite E.H. Morrison, Assistant Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Custodian and Transfer Agent
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Dechert Price & Rhoads
1500 K Street., NW
Washington, D.C. 20005
Notice is hereby given in accordance with Section 23(c) of the
Investment Company Act of 1940 that the Fund may purchase, from
time to time, shares of its common stock in the open market.
The accompanying financial statements as of June 30, 1994 were
not audited and, accordingly, no opinion is expressed on them.
This report is for stockholder information. This is not a
prospectus intended for use in the purchase or sale of Fund
shares.
The Global Government Plus Fund, Inc.
One Seaport Plaza
New York, NY 10292
for information call toll free
(800) 451-6788
or for information regarding
net asset value call collect
(212) 214-5572
378907109
<PAGE>
