The Global
Government Plus
Fund, Inc.
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Annual Report
December 31, 1994
<PAGE>
smThe mark is a service mark of The Prudential Insurance
Company of America.
<PAGE>
Letter to
Shareholders
February 15, 1995
Dear Shareholder:
Bond markets around the world had a difficult time in 1994. This stood
in sharp contrast to the prior year, as interest rates rose dramatically
in response to investor concerns that rapid US growth would be accompanied
by inflation and spur growth in foreign markets, causing rates to rise
further and faster than would be expected over the course of a normal
business cycle. Global fixed income funds and The Global Government
Plus Fund, Inc. were no exceptions.
Overall, your Fund continued to provide investors with a well-diversified
portfolio, which slightly outperformed the Lipper Closed-End General World
Income Funds -- Developed Nations Average for the year. Funds in the universe
posted a wide range of returns from +7.3% to -21.9%.
The Fund seeks total return by investing primarily in a portfolio of
long-term government debt securities throughout the world.
<TABLE>
FUND PERFORMANCE
As of December 31, 1994
<CAPTION>
Total Return
12-Month Since Inception
Total Return (7/31/87)
<S> <C> <C>
The Global Government -5.6% 1 55.1%2
Plus Fund, Inc.
Lipper Closed-End -13.5 N/A
World Income Funds --
Developed Nations Average3
</TABLE>
1 Source: Prudential Mutual Fund Management, Inc. Total return of the Fund
represents the change in net asset value from the beginning of the year
(1/1/94) through 12/31/94 and assumes the reinvestment of dividends and
distributions. Shares of the Fund are traded on the NYSE. Past performance
is no guarantee of future results.
2 Source: Lipper Analytical Services, Inc.
3 This is the average return of 14 funds in the closed-end general world
income category for one year as determined by Lipper Analytical Services,
Inc.
-1-
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.
A Tough Environment for Global Bond Markets
Demand for capital and fears of inflation pushed interest rates up around
the world, making this one of the worst years on record for bonds.
Whatever Central Banks did - whether raising rates or lowering them - their
actions were greeted by the markets with upward pressure on long-term rates,
and negative bond market performance. Market returns in every one of the
countries represented in the Salomon Brothers World Government Bond Index
posted negative returns in local currency terms (see table below). In
Germany, ten-year yields rose over 200 basis points, despite the
Bundesbank's lowering of short- term rates by 100 basis points.
The following table shows the year's performance for the worldwide
bond markets individually:
<TABLE>
<CAPTION>
Total Return
(Local currency terms)
<S> <C>
United States -3.4%
Japan -2.7%
Germany -1.8%
France -5.7%
United Kingdom -6.9%
Canada -4.5%
Italy -0.9%
Australia -6.5%
Belgium -1.2%
Denmark -3.8%
Netherlands -4.5%
Spain -3.7%
Sweden -4.7%
Austria 0.0%
* Source: Salomon Brothers World Government Bond Index
Fourth Quarter Activity
During the fourth quarter, strong economic activity in the United States led
to yet another rate hike of 75 basis points by the US Federal Reserve, the
largest single move this year. The action was mirrored throughout the
dollar bloc markets. In Europe, where economic activity was also stronger
than expected, yields rose as well. One of the few bond markets which was
able to post slightly lower rates for the fourth quarter (although not for
the year) was Japan, where a still tepid recovery caused yields to edge down
slightly. In this environment, the Fund maintained a well-diversified
posture and limited interest rate exposure by holding limited maturity
bonds virtually across the board.
-2-
<PAGE>
Exposure to Emerging Markets
Much of the global fixed income activity at the end of the year centered
around Mexico's decision to first devalue, then float the Mexican Peso.
The Fund held a security and cash position of about 5% in Mexican Pesos
(which was cut before the full measure of the decline in value of the
Peso to the U.S. Dollar was realized) and some dollar-denominated Mexican
holdings which were somewhat, but much less strongly, affected by the
Mexican Government's actions.
We remain concerned about Mexico, but do find other markets'
dollar-denominated debt attractive, particularly in an environment
in which developed bond markets are generally not expected to allow
for interest rates to decline. We are conservatively positioned in
emerging markets debt, primarily in the dollar-denominated securities
of these markets.
Currency Exposure
The year was also characterized by volatility in other currency markets,
with strong ups and downs for the US Dollar producing a tough ride for
most global funds. During much of the year, we hedged some of our foreign
currency holdings back into the dollar, missing out on some foreign
currency gains.
Outlook
Our interest rate outlook is still cautious, particularly in the US
market, where supply pressures, strength of economic growth and capacity
constraints suggest that rates can continue to rise. We are keeping a
relatively low average maturity in the Fund, overall, and are slightly
more positive on foreign bonds than on the US bond market.
We expect that the US Dollar will continue to be weighed down by trade
imbalance issues, and slightly favor the Deutschemark at current levels.
We cautiously hold small amounts of primarily dollar-denominated emerging
markets exposure, and expect that these securities will provide attractive
risk-adjusted returns for the portfolio.
-3-
<PAGE>
Please remember, foreign securities are not guaranteed and may be
influenced by currency fluctuations, political and social developments.
We appreciate your continued support of the Fund in this difficult
economic environment and remain committed to managing it for your benefit.
Sincerely,
Lawrence C. McQuade
President
Andrew Barnett
Portfolio Manager
Tax Update:
As a result of higher hedging costs and currency losses in the European
and Japanese markets this year, approximately 43% of the dividends paid
in the current calendar year were considered a 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
include those derived from hedging transactions, to be treated as ordinary
losses and thus offset net investment or ordinary income (less operating
expenses).
In January 1995, you should have received a Form 1099 DIV (or substitute
Form 1099 DIV) that reflects the total amount of 1994 distributions that
are taxable as well as the portion that constitutes a tax return of
capital. A return of capital distribution is not included in your taxable
income, but would be reflected as an adjustment in the cost basis of your
Fund's shares.
-4-
<PAGE>
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THE GLOBAL GOVERNMENT PLUS FUND, INC.
Portfolio of Investments
December 31, 1994
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------
Principal US$
Amount Value
(000) Description (Note 1)
- --------------------------------------------------------
<C> <S> <C>
LONG-TERM INVESTMENTS--83.2%
Australia--3.4%
Australian Gov't. Bond,
A$ 14,250# 9.00%, 9/15/04........... $ 10,348,572
------------
Belgium--2.0%
Belgium Gov't. Bonds,
BF 105,000# 7.00%, 4/29/99........... 3,196,629
106,000# 7.25%, 4/29/04........... 3,101,275
------------
6,297,904
------------
Canada--2.2%
Canadian Gov't. Bond,
C$ 10,750 7.50%, 12/1/03........... 6,907,604
------------
Denmark--2.6%
Danish Gov't. Bond,
DKr 51,700 8.00%, 5/15/03........... 7,949,561
------------
France--2.6%
French Gov't. Bonds,
FF 39,230 4.50%, 5/12/96........... 7,091,924
56,700 Zero Coupon, 4/25/23..... 971,946
------------
8,063,870
------------
Germany--12.4%
Fed. Rep. of Germany,
DM 9,100 8.00%, 3/20/97........... 6,028,919
5,500 8.00%, 7/22/02........... 3,606,615
4,100 7.75%, 10/1/02........... 2,667,578
42,500 6.75%, 4/22/03........... 25,890,773
------------
38,193,885
------------
Ireland--1.7%
Irish Gov't. Bonds,
IEP 2,335 6.25%, 4/1/99............ 3,275,165
1,335 9.00%, 7/15/01........... 2,084,390
------------
5,359,555
------------
Italy--1.9%
Italian Gov't. Bonds,
Lira 8,475,000 8.50%, 8/1/97............ 4,849,348
1,780,000 8.50%, 4/1/04............ 887,579
------------
5,736,927
------------
- --------------------------------------------------------
Principal US$
Amount Value
(000) Description (Note 1)
- --------------------------------------------------------
Japan--18.1%
Japanese Gov't. Bonds,
(Y) 430,000 5.00%, 9/21/98........... $ 4,503,340
525,000 4.80%, 6/21/99........... 5,460,442
1,330,000 6.60%, 6/20/01........... 14,962,083
824,000 4.10%, 12/22/03.......... 8,018,426
2,370,000 4.10%, 6/21/04........... 22,939,943
------------
55,884,234
------------
Netherlands--0.4%
Netherlands Gov't. Bond,
NLG 2,200 7.50%, 6/15/99........... 1,270,333
------------
Spain--2.6%
Spanish Gov't. Bond,
Pts 1,042,000 11.45%, 8/30/98.......... 7,899,308
------------
United Kingdom--7.5%
United Kingdom Treasury
Bond,
BP 3,900# 13.25%, 1/22/97.......... 6,668,923
United Kingdom Treasury
Note,
7,075# 9.75%, 1/19/98........... 11,400,076
3,500# 8.00%, 9/27/13........... 5,196,856
------------
23,265,855
------------
United States--25.8%
Sovereign Bonds--3.6%
Republic of Argentina,
7.90%*, 9/1/00 Series
US$ 1,000 CHR1................... 885,000
BOCON,
1,550 6.125%*, 4/1/01.......... 1,150,577
1,500 FRB 6.50%*, 3/31/05...... 956,250
Republic of Brazil,
1,642 IDU, 6.0625%*, 1/1/01.... 1,370,653
2,500 6.6875%*, 4/15/24........ 1,550,000
Republic of Ecuador,DD
1,650 Zero Coupon, 12/30/24.... 891,000
Republic of Poland,
Discount Bond,
3,725 6.8125%*, 10/27/24....... 2,668,031
Central Bank of the
Philippines
1,950 6.0625%*, 1/5/05......... 1,774,500
------------
11,246,011
------------
</TABLE>
See Notes to Financial Statements.
-5-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------
<C> <S> <C>
Principal US$
Amount Value
(000) Description (Note 1)
- --------------------------------------------------------
U.S. Government Bonds--22.2%
United States Treasury
Bonds,
US$ 2,580 6.25%, 8/15/23........... $ 2,097,463
29,800 7.50%, 11/15/24.......... 28,505,488
United States Treasury
Notes,
7,750 6.00%, 11/30/97.......... 7,390,323
6,575 6.75%, 5/31/99........... 6,304,833
16,400 6.75%, 6/30/99........... 15,726,124
9,450 5.50%, 4/15/00........... 8,500,558
------------
68,524,789
------------
79,770,800
------------
Total long-term
investments
(cost US$260,478,054).... 256,948,408
------------
SHORT-TERM INVESTMENTS--18.7%
Argentina--1.9%
Argentina Gov't. Treasury
Bill,D
AP 6,200# 9.03%, 2/24/95........... 6,038,698
------------
Mexico--4.0%
Mexican Tesobonos,D
US$ 9,849 8.45%, 7/27/95........... 8,824,390
3,842 8.35%, 8/3/95............ 3,430,357
------------
12,254,747
------------
United States--12.5%
Repurchase Agreements
Joint Repurchase
Agreement
Account,
5.82%, 1/3/95, (cost
$33,757,000) (Note
33,757 4)..................... 33,757,000
State Street Bank & Trust
Co., 4.75%, dated
12/30/94, due 1/3/95 in
the amount of
$4,826,546 (cost
$4,824,000;
collateralized by
$5,000,000 U.S.
Treasury Note, 5.125%
due 3/31/96;
approximate value
including accrued
4,824 interest--$4,927,266)... 4,824,000
------------
38,581,000
------------
<CAPTION>
Contracts
(000) OUTSTANDING OPTIONS PURCHASED**--0.3%
- -------------
<C> <S> <C>
Call Option--0.2%
German Deutschemark,
expiring 2/13/95 @
31,747 DM1.57................. 698,435
------------
Cross-Currency Options
Italian Lira,
expiring 1/12/95 @
Lira971.7 per German
16,400 Deutschemark........... --
<CAPTION>
- --------------------------------------------------------
US$
Contracts Value
(000) Description (Note 1)
- --------------------------------------------------------
<C> <S> <C>
Swedish Krona,
expiring 1/21/95 @
Skr4.54 per German
31,595 Deutschemark........... --
Put Options--0.1%
Japanese Yen,
expiring 2/2/95 @
22,305 (Y)100................. $ 142,752
------------
Total outstanding options
purchased.............. 841,187
------------
Total short-term
investments
(cost US$59,177,682)..... 57,715,632
------------
Total investments before
outstanding options
written--101.9%
(cost $319,655,736; Note
3)..................... 314,664,040
------------
OUTSTANDING OPTIONS WRITTEN**--(0.2%)
Call Option--(0.1%)
German Deutschemark,
expiring 12/13/95 @
31,747 DM1.545................ (403,187)
Cross-Currency Option--(0.1%)
Italian Lira, expiring
1/12/95
@ Italian Lira 1025 per
16,400 German Deutschemark.... (243,212)
------------
Total outstanding options
written
(premiums received
$531,268).............. (646,399)
------------
Total Investments, Net of
Outstanding Options
Written--101.7%........ 314,017,641
Other liabilities in
excess of
other assets--(1.7%)... (5,314,344)
------------
Net Assets--100%......... $308,703,297
------------
------------
</TABLE>
- ---------------
Portfolio securities are classified according to the
security's currency denomination. Option contracts are
expressed in local currency units.
* Rate shown reflects current rate on variable rate
instrument.
** Non-income producing security.
D Percentages quoted represent yields to maturity as
of purchase date.
DD When issued security.
# Principal amount segregated as collateral for
forward currency contracts and options written.
Aggregate value of segregated
securities--$45,951,029.
BOCON--Bonos de Consolidacion.
FRB--Floating Rate Bonds.
IDU--Interest Due and Unpaid Bonds.
See Notes to Financial Statements.
-6-
<PAGE>
- ----------------------------------------------------------
THE GLOBAL GOVERNMENT PLUS FUND, INC.
Statement of Assets and Liabilities
December 31, 1994
- ----------------------------------------------------------
<TABLE>
<S> <C>
Assets
Investments, at value (cost
$319,655,736)........................ $314,664,040
Foreign currency, at value (cost
$57,909)............................. 58,009
Cash................................... 736
Interest receivable.................... 5,948,214
Forward currency contracts--amount
receivable from counterparties....... 4,881,032
Receivable for investments sold........ 4,648,075
Deferred expenses and other assets..... 45,720
------------
Total assets....................... 330,245,826
------------
Liabilities
Payable for investments purchased...... 9,333,932
Forward currency contracts--amount
payable to counterparties............ 6,191,386
Dividend payable....................... 4,792,463
Outstanding call options written, at
value
(premiums received $531,268)......... 646,399
Accrued expenses and other
liabilities.......................... 309,309
Due to Manager......................... 201,507
Withholding taxes payable.............. 67,533
------------
Total liabilities.................. 21,542,529
------------
Net Assets............................. $308,703,297
------------
------------
Net assets were comprised of:
Common stock, at par................. $ 526,425
Paid-in capital in excess of par..... 394,006,793
Cost of 7,000,000 shares held in
treasury........................... (50,685,700)
------------
343,847,518
Accumulated net realized loss on
investments........................ (28,692,087)
Net unrealized depreciation on
investments
and foreign currencies............. (6,452,134)
------------
Net assets, December 31, 1994........ $308,703,297
------------
------------
Net asset value per share:
($308,703,297 / 45,642,508 shares of
common stock issued and
outstanding)....................... $6.76
------------
------------
</TABLE>
- ----------------------------------------------------------
THE GLOBAL GOVERNMENT PLUS FUND, INC.
Statement of Operations
Year Ended December 31, 1994
- ----------------------------------------------------------
<TABLE>
<S> <C>
Net Investment Income
Income
Interest and discount earned (net of
foreign
withholding tax of $128,461)........ $ 24,270,144
------------
Expenses
Management fee........................ 2,490,259
Custodian's fees and expenses......... 525,000
Reports to shareholders............... 250,000
Transfer agent's fees and expenses.... 143,000
Directors' fees....................... 73,000
Audit fees and expenses............... 72,000
Insurance............................. 70,000
Legal fees and expenses............... 15,000
Miscellaneous......................... 36,820
------------
Total expenses...................... 3,675,079
------------
Net investment income................. 20,595,065
------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign
Currency Transactions
Net realized gain (loss) on:
Investment transactions............... (28,892,278)
Foreign currency transactions......... (8,962,293)
Financial futures transactions........ 28,052
Written option transactions........... 959,400
------------
(36,867,119)
------------
Net change in unrealized
appreciation/depreciation of:
Investments........................... (5,434,762)
Foreign currencies.................... (2,320,076)
Financial futures..................... 8,750
Written options....................... 269,785
------------
(7,476,303)
------------
Net loss on investments and foreign
currency transactions................. (44,343,422)
------------
Net Decrease In Net Assets
Resulting from Operations............... $(23,748,357)
------------
------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
-7-
<PAGE>
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THE GLOBAL GOVERNMENT PLUS FUND, INC.
Statement of Changes in Net Assets
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease)
in Net Assets
<S> <C> <C>
Year Ended December 31,
-----------------------------
1994 1993
------------ ------------
Operations:
Net investment income... $ 20,595,065 $ 25,056,831
Net realized gain (loss)
on investments and
foreign currency
transactions.......... (36,867,119) 24,733,757
Net change in unrealized
appreciation/depreciation
on investments and
foreign currencies.... (7,476,303) 8,867,561
------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ (23,748,357) 58,658,149
------------ ------------
Dividends and
distributions:
Dividends from net
investment income..... (10,301,920) (10,398,530)
Distributions from net
realized gains........ (4,634,400) (24,733,757)
Distributions in excess
of net realized
gains................. -- (2,522,669)
Tax return of capital
distributions......... (10,394,847) --
------------ ------------
Total dividends and
distributions........... (25,331,167) (37,654,956)
------------ ------------
Total increase
(decrease).............. (49,079,524) 21,003,193
Net Assets
Beginning of year......... 357,782,821 336,779,628
------------ ------------
End of year............... $308,703,297 $357,782,821
------------ ------------
------------ ------------
</TABLE>
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THE GLOBAL GOVERNMENT PLUS FUND, INC.
Notes to Financial Statements
- ----------------------------------------------------------
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 year, the Fund does not isolate
that portion of the results of operations arising as a result of changes in
the foreign exchange rates from the fluctuations arising from changes in
the market prices of the securities held at year end. Similarly, the Fund
does not isolate the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of long-term debt
securities sold during the year. Accordingly, realized foreign currency gains
(losses) are included in the reported net realized losses on security
transactions.
Net realized losses on foreign currency transactions 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, U.S. 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 year end exchange rates are reflected as a component of net 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: A forward currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. The Fund enters into forward currency contracts in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings or on specific receivables and payables denominated in a
foreign currency. The contracts are valued daily at current exchange rates
and any unrealized gain or loss is included in net unrealized appreciation or
depreciation on investments. Gain or loss is realized on the settlement date
of the contract equal to the difference between the settlement value of the
original and renegotiated forward contracts. This gain or loss, if any, is
included in net realized gain (loss) on foreign currency transactions. Risks
may arise upon entering into these contracts from the potential inability of
the counterparties to meet the terms of their contracts.
Options: The Fund may either purchase or write options in order to hedge
against adverse market movements or fluctuations in value caused by changes
in prevailing interest rates or foreign currency exchange rates with
respect to securities or currencies which the Fund currently owns or intends
to purchase.
When the Fund purchases an option, it pays a premium and an amount equal to
that premium is recorded as an investment. When the Fund writes an option,
it receives a premium and an amount equal to that premium is recorded as a
liability. The investment or liability is adjusted daily to reflect the
current market value of the option. If an option expires unexercised, the
Fund realizes a gain or loss to the extent of the premium received or paid.
If an option is exercised, the premium received or paid is an adjustment to
the proceeds from the sale or the cost basis of the purchase in determining
whether the Fund has realized a gain or loss. The difference between the
premium and the amount received or paid on effecting a closing purchase or
sale transaction is also treated as a realized gain or loss. Gain or loss on
purchased options is included in net realized gain (loss) on investment
transactions. Gain or loss on written options is presented separately as net
realized gain (loss) on written option transactions.
The Fund, as writer of an option, has no control over whether the
underlying securities or currencies may be sold (called) or purchased (put).
As a result, the Fund bears the market risk of an unfavorable change in the
price of the security or currency underlying the written option. The Fund,
as purchaser of an option, bears the risk of the potential inability of the
counterparties to meet the terms of their contracts.
Financial Futures Contracts: A financial futures contract is an agreement to
purchase (long) or sell (short) an agreed amount of 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.
This amount is known as the ``initial margin''. Subsequent payments, known
as ``variation margin'', are made or
-9-
<PAGE>
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.
When the contract expires or is closed, the gain or loss is realized and is
presented in the statement of operations as net realized gain (loss) on
financial futures contracts.
The Fund invests in financial futures contracts in order to hedge its
existing portfolio securities, or securities the Fund intends to purchase,
against fluctuations in value caused by changes in prevailing 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 assets. There were no financial futures contracts
outstanding at December 31, 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 decrease paid-in capital in
excess of par by $10,394,847, increase undistributed net investment income
by $101,702 and decrease accumulated net realized loss on investments by
$10,293,145 for realized foreign currency losses incurred during the fiscal
year ended December 31, 1994. Net investment income, net realized gains and
net assets were not affected by this change.
Taxes: It is the Fund's policy to continue to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders. Therefore, no federal
income or excise tax provision is required.
Withholding taxes on foreign interest have been provided for in accordance
with the Fund's understanding of the applicable country's tax 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 year ended December 31, 1994 aggregated $1,546,319,642 and $1,590,991,337,
respectively.
At December 31, 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
3/15/95......... $ 13,078,796 $ 13,095,920 $ 17,124
Belgian Francs,
expiring
1/30/95......... 4,135,838 4,155,232 19,394
British Pounds,
expiring
1/23/95......... 32,720,942 31,979,539 (741,403)
Canadian Dollars,
expiring
2/9/95.......... 35,413,586 34,331,097 (1,082,489)
Danish Kroner,
expiring
3/6/95.......... 1,462,349 1,477,057 14,708
French Francs,
expiring
2/7/95.......... 11,142,380 10,849,428 (292,952)
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Purchase Contracts Payable Value (Depreciation)
- ------------------ --------------- ------------ --------------
<S> <C> <C> <C>
German
Deutschemarks,
expiring 1/6/95-
3/28/95......... $ 138,813,985 $138,906,631 $ 92,646
Italian Lira,
expiring
2/21/95......... 9,944,012 10,035,322 91,310
Japanese Yen,
expiring
2/14/95-
3/13/95......... 65,410,723 64,913,430 (497,293)
Netherland
Guilders,
expiring
3/6/95.......... 7,673,665 7,803,321 129,656
New Zealand
Dollars,
expiring
2/14/95-
4/26/95......... 23,108,783 23,663,144 554,361
Swedish Krona,
expiring
2/7/95.......... 3,596,352 3,546,855 (49,497)
Swiss Francs,
expiring
1/23/95......... 16,376,027 16,403,317 27,290
--------------- ------------ --------------
$ 362,877,438 $361,160,293 $ (1,717,145)
--------------- ------------ --------------
--------------- ------------ --------------
</TABLE>
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- ------------------ --------------- ------------ --------------
<S> <C> <C> <C>
Australian
Dollars,
expiring
2/17/95-
3/6/95.......... $ 14,053,319 $ 14,382,016 $ (328,697)
Belgian Francs,
expiring
1/30/95......... 2,793,000 2,797,317 (4,317)
British Pounds,
expiring
1/23/95......... 39,462,316 39,333,077 129,239
Canadian Dollars,
expiring
2/9/95.......... 33,495,137 32,459,601 1,035,536
Danish Kroner,
expiring
2/6/95.......... 4,956,078 4,774,772 181,306
German
Deutschemarks,
expiring
1/23/95-
3/28/95......... 131,302,211 131,626,397 (324,186)
Irish Pounds,
expiring
3/10/95......... 5,463,530 5,503,398 (39,868)
Italian Lira,
expiring
2/21/95......... 11,083,874 11,158,053 (74,179)
Japanese Yen,
expiring
2/14/95-
3/13/95......... 42,165,662 41,761,961 403,701
New Zealand
Dollars,
expiring
2/14/95-
4/26/95......... 13,474,518 13,879,554 (405,036)
Spanish Pesetas,
expiring
2/22/95......... 2,407,782 2,392,780 15,002
Swiss Francs,
expiring
1/23/95......... 16,376,027 16,557,737 (181,710)
--------------- ------------ --------------
$ 317,033,454 $316,626,663 $ 406,791
--------------- ------------ --------------
--------------- ------------ --------------
</TABLE>
Transactions in options written for the year ended December 31, 1994 were
as follows:
<TABLE>
<CAPTION>
Number
of
Contracts Premiums
(000) Received
-------- ------------
<S> <C> <C>
Options outstanding at December
31, 1993...................... 118,012 $ 665,215
Options written................. 465,535 3,147,656
Options terminated in closing
purchase transactions......... (124,140) (995,458)
Options expired................. (240,300) (1,339,008)
Options exercised............... (170,960) (947,137)
-------- ------------
Options outstanding at December
31, 1994...................... 48,147 $ 531,268
-------- ------------
-------- ------------
</TABLE>
The federal income tax basis of the Fund's investments at December 31,
1994 was $320,400,181 and, accordingly, net unrealized depreciation for
United States federal income tax purposes was $5,736,141 (gross unrealized
appreciation--$1,313,460; gross unrealized depreciation--$7,049,601).
For federal income tax purposes, the Fund has a capital loss carryforward
as of December 31, 1994 of approximately $19,895,830 which will expire in
2002. Accordingly, no capital gains distribution is expected to be paid to
shareholders until net gains have been realized in excess of such amount.
The Fund has elected to treat approximately $2,362,300 of net capital
losses and approximately $6,843,600 of net currency losses incurred in the
two month period ended December 31, 1994 as having incurred in the following
fiscal year.
Note 4. Joint The Fund, along with other
Repurchase affiliated registered invest-
Agreement ment companies, transfers
Account uninvested cash balances into
a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements
collateralized by U.S. Treasury or Federal agency obligations.
As of December 31, 1994, the Fund has a 4.4% undivided interest in the
joint account. The undivided interest for the Fund represented $33,757,000
in the principal amount. As of such date, each repurchase agreement in the
joint account and the collateral therefor was as follows:
Goldman, Sachs & Co., 5.75%, in the principal amount of $250,000,000,
repurchase price $250,159,722, due 1/3/95. The value of the collateral
including accrued interest is $255,000,108.
Lehman Government Securities Inc., 5.90%, in the principal amount of
$70,000,000, repurchase price $70,045,889, due 1/3/95. The value of the
collateral including accrued interest is $71,379,084.
-11-
<PAGE>
<PAGE>
Morgan Stanley & Co., 5.75%, in the principal amount of $250,000,000,
repurchase price $250,159,722, due 1/3/95. The value of the collateral
including accrued interest is $255,146,220.
Smith Barney, Inc., 5.95%, in the principal amount of $200,000,000,
repurchase price $200,132,222, due 1/3/95. The value of the collateral
including accrued interest is $204,036,161.
Note 5. Capital There are 200 million shares
of $.01 par value common stock authorized. Of
the 45,642,508 shares outstanding at December 31, 1994, Prudential owned
11,000 shares.
Note 6. Quarterly Data
(Unaudited)
<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, 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)
Sept. 30, 1994 5,910,445 4,885,074 0.11 (6,032,968) (0.13) (1,147,894)
(0.02)
Dec. 31, 1994 6,073,987 5,270,934 0.11 (9,016,665) (0.20) (3,745,731)
(0.09)
<CAPTION>
Dividends
Quarterly and Share
period distributions price
ended Amount Per share High Low
<S> <C> <C> <C> <C>
- --------------- ------------------------- ------------
March 31, 1993 $7,302,526 $ 0.16 $7 3/4 $7
June 30, 1993 7,302,526 0.16 7 3/4 7 1/8
Sept. 30, 1993 7,302,526 0.16 7 7/8 7 3/8
Dec. 31, 1993 15,747,378 0.345 7 3/4 7
March 31, 1994 10,040,927 0.22 7 1/4 6 1/4
June 30, 1994 5,477,101 0.12 6 1/2 5 5/8
Sept. 30, 1994 5,020,675 0.11 6 1/4 5 3/4
Dec. 31, 1994 4,792,464 0.11 6 5 1/2
</TABLE>
-12-
<PAGE>
- --------------------------------------------------------------------------------
THE GLOBAL GOVERNMENT PLUS FUND, INC.
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
- ----------------------------------------------------
PER SHARE OPERATING PERFORMANCE: 1994 1993 1992 1991
1990
<S> <C> <C> <C> <C>
<C>
-------- -------- -------- --------
--------
Net asset value, beginning of year.............................. $ 7.84 $ 7.38 $ 8.28 $ 8.25
$ 8.25
-------- -------- -------- --------
--------
Net investment income........................................... .45 .55 .67 .66
.59
Net realized and unrealized gain (loss) on investments and
foreign currencies............................................ (.97) .74 (.70) .09
.06
-------- -------- -------- --------
--------
Total from investment operations.............................. (.52) 1.29 (.03) .75
.65
-------- -------- -------- --------
--------
Dividends from net investment income............................ (.23) (.23) (.67) (.66)
(.59)
Distributions from net capital gains............................ (.10) (.54) (.20)
- -- --
Distributions in excess of net capital gains.................... -- (.06) --
- -- --
Tax return of capital distributions............................. (.23) -- -- (.06)
(.21)
-------- -------- -------- --------
--------
Total dividends and distributions............................. (.56) (.83) (.87) (.72)
(.80)
-------- -------- -------- --------
--------
Increase resulting from Fund share transactions................. -- -- --
- -- .15
-------- -------- -------- --------
--------
Net asset value, end of year.................................... $ 6.76 $ 7.84 $ 7.38 $ 8.28
$ 8.25
-------- -------- -------- --------
--------
-------- -------- -------- --------
--------
Per share market price, end of year............................. $ 5.625 $ 7.00 $ 7.00 $ 7.75
$ 7.25
-------- -------- -------- --------
--------
-------- -------- -------- --------
--------
TOTAL INVESTMENT RETURN+........................................ (12.04)% 11.57% 1.25% 17.44%
8.04%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year(000).................................... $308,703 $357,783 $336,780 $377,911
$376,722
Average net assets (000)........................................ $331,421 $361,374 $364,037 $364,072
$382,943
Ratio of expenses to average net assets......................... 1.11% 1.07% 1.15% 1.29%
1.47%
Ratio of net investment income to average net assets............ 6.21% 6.93% 8.36% 8.30%
7.40%
Portfolio turnover rate......................................... 526% 441% 346% 267%
503%
</TABLE>
- ---------------
D Total investment return is calculated assuming a purchase of common
stock at the current market value on the first day and a sale at
the current market value on the last day of each year 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 years indicated. This
information has been determined based upon information provided
in the financial statements and market price data for the Fund's
shares.
See Notes to Financial Statements.
-13-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
The Global Government Plus Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Global Government Plus Fund,
Inc. (the ``Fund'') at December 31, 1994, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
``financial statements'') are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1994 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 28, 1995
-14-
<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.
-15-
<PAGE>
TAX INFORMATION
We are required by the Internal Revenue Code to advise you within 60 days of
the Fund's fiscal year end (December 31, 1994) as to the federal tax status of
dividends and distributions paid by the Fund.
During its year ended December 31, 1994, the Fund paid dividends and
distributions of $0.555 per share. Of this amount, $0.005 per share represents a
distribution from long-term capital gains and is taxable as such. We wish to
advise you that the corporate dividends received deduction for the Fund is zero.
Only funds that invest in U.S. equity securities are entitled to pass-through a
corporate dividends received deduction.
For the purpose of preparing your annual federal income tax return, however,
you should report the amounts as reflected on the appropriate Form 1099-DIV or
substitute Form 1099-DIV.
We are required by Massachusetts and Oregon to inform you that dividends
which have been derived from interest on federal obligations are not taxable to
shareholders. Please be advised that 34.42% of the dividends paid by the Fund
qualify for each of these states' tax exclusion.
-16-
<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.
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 collect (212) 214-5572
or for information regarding
net asset value call collect
(212) 214-3332
378907109
