(ICON)
The Global
Government
Plus Fund,
Inc.
SEMI
ANNUAL
REPORT
June 30, 1996
(LOGO)
<PAGE>
The Global Government Plus Fund, Inc.
Performance At A Glance.
For the six-month period ended June 30, 1996, The Global Government Plus Fund
produced total returns that were ahead of similar funds tracked by Lipper
Analytical Services. Fund returns stood in sharp contrast to world bond
markets, which generally were sluggish during the reporting period.
Cumulative Total Returns1 As of 6/30/96
<TABLE>
<CAPTION>
Six One Five Since
Months Year Years Inception2
<S> <C> <C> <C> <C>
Class A 5.0% 13.2% 67.3% 118.0%
Class B N/A N/A N/A 4.3
Class C N/A N/A N/A 4.3
Lipper Gen. World Inc. Avg3 1.7 8.7 49.4 105.4
<CAPTION>
Average Annual Total Returns1 As of 6/30/96
One Five Since
Year Years Inception2
<S> <C> <C> <C>
Class A 8.6% 9.9% 8.6%
Class B N/A N/A N/A
Class C N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
Dividends & Yields
As of 6/30/96
<S> <C> <C>
Total Dividends 30-Day
Paid for Six Mos. SEC Yield
Class A $0.26 6.08%
Class B $0.25 5.69
Class C $0.25 5.71
</TABLE>
Past performance is not indicative of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
Past performance numbers, with the exception of six-month returns, do not
fully reflect the higher operating expenses incurred when the Fund commenced
operations as an open-end mutual fund on January 15, 1996. If these expenses
had applied since the Fund's inception, past performance returns would have
been lower. Prior to January, the Fund operated as a closed-end Fund with
shares being traded on the New York Stock Exchange.
1Source: Prudential Mutual Fund Management and Lipper Analytical Services. The
cumulative total returns do not take into account applicable sales charges. The
average annual total returns do take into account applicable sales charges. The
Fund charges a maximum front end sales load of 4% for Class A shares. Class B
shares are subject to a declining contingent deferred sales charge (CDSC) of
5%, 4%, 3%, 2%, 1% and 1% for six years. Class C shares have a 1% CDSC for one
year. Class B shares will automatically convert to Class A shares on a
quarterly basis, after approximately seven years. The Fund commenced operations
on July 31, 1987 as a closed-end investment company. Effective January 15,
1996, the Fund commenced operations as an open-end investment company. Since
Class B and C shares have been in existence for less than a year, no average
annual total returns are shown.
2Inception dates: 7/31/87 Class A (formerly closed-end); 1/15/96 Class B;
1/15/96 Class C.
3These are the average returns of 170 funds in the Lipper General World Income
Fund category for six months; 158 funds for one year; 37 funds for five years;
and 16 funds since inception of Class A shares (formerly closed-end) on July
31, 1987, as determined by Lipper Analytical Services.
How Investments Compared.
(As of 6/30/96)
(GRAPH)
Source: Lipper Analytical Services. Financial markets change, so a mutual
fund's past performance should never be used to predict future results. The
risks to each of the investments listed above are different -- we provide
12-month total returns for several Lipper mutual fund categories to show you
that reaching for higher yields means tolerating more risk. The greater the
risk, the larger the potential reward or loss. In addition, we've included
historical 20-year average annual returns. These returns assume the
reinvestment of dividends.
U.S. Growth Funds will fluctuate a great deal. Investors have received higher
historical total returns from stocks than from most other investments. Smaller
capitalization stocks offer greater potential for long-term growth but may be
more volatile than larger capitalization stocks.
General Bond Funds provide more income than stock funds, which can help smooth
out their total returns year by year. But their prices still fluctuate
(sometimes significantly) and their returns have been historically lower than
those of stock funds.
General Municipal Debt Funds invest in bonds issued by state governments,
state agencies and/or municipalities. This investment provides income that is
usually exempt from federal and state income taxes.
Money Market Funds attempt to preserve a constant share value; they don't
fluctuate much in price but, historically, their returns have been generally
among the lowest of the major investment categories.
<PAGE>
Gabriel Irwin and Simon Wells, Fund Managers (PICTURE)
Portfolio
Managers'
Report
Your Fund seeks to maximize total return, which is its current income plus any
capital appreciation of its underlying bonds. The Fund invests primarily in
intermediate-term, investment grade government bonds issued throughout the
world. The Fund may invest up to 10% of total net assets in bonds rated below
investment grade with a minimum rating of "B" by S&P or Moody's or of
comparable quality in our view. Lower rated securities are subject to a greater
risk of loss of principal and interest than higher rated securities. There are
special risks associated with foreign investing including social, political and
currency risks. There can be no assurance that the Fund's investment objective
will be achieved.
A Word About Hedging.
One of the ways your Fund seeks to enhance return is to buy (or have the option
to buy) "forward contracts" which predict how one country's currency may rise
or fall in value compared to other currencies. These contracts state the price
we are willing to pay for the currency (or will sell it for) at a future date.
If our predictions are correct, we make money on the contract and these profits
are passed along to the Fund. If we're wrong, the reverse occurs. This
investment practice is sometimes called "hedging" and is often done by funds
which invest in securities denominated in foreign currencies.
Strategy Session.
We follow a "top down" investment philosophy i+n our pursuit of total return.
This means we set our strategy by making broad country and currency
allocations. We look for countries with well-managed economies and
well-established currencies. Both are critical in determining a bond's value
and prospects for price appreciation. Only then do we look at the specific
types of bonds and issuers within a particular country.
As might be expected, the larger countries of the U.S. and Western Europe
dominate issuance in the world's bond markets. As such, most global bond funds
have a significant percentage of assets in bonds from these countries and ours
is no exception. On June 30, 1996, 29% of the Fund's total net assets were
invested in the U.S. bond market, while 62% were invested in non-U.S. bond
markets. Often times though, the most attractive bond market opportunities
surface in lesser known markets such as in Eastern Europe. This was certainly
the case during the past six months.
A Special Note.
Since we last wrote to you, there have been a high number of redemptions from
the Fund. The Fund imposed a 2% redemption fee on all Class A share redemptions
for six months following its conversion to an open-end mutual fund until July
12, 1996. These fees were retained by the Fund and increased the Fund's total
return for the reporting period.
Geographic Breakdown.
Expressed as a percentage of
total net assets as of 6/30/96.
(CHART)
<PAGE>
What Went Well.
The U.S. Dollar
Was King.
With the world's major bond markets generally sluggish, we had to look for
other ways to earn money. One of these was by hedging currencies. The U.S.
dollar continued to strengthen against the German mark and Japanese yen -- two
of the world's most-dominant currencies -- during the past six months. While
intuitively a strong dollar seems beneficial for the U.S., it actually hurts
U.S. investors in foreign bonds, since it requires more marks and yen to equal
the value of a single U.S. dollar. To help protect our Fund from the strong
dollar, we purchased currency contracts that performed well as the dollar rose.
It turned out to be a good strategy, and was the primary reason for the Fund's
above-average return during the past six months.
Emerging Markets
Looked Good.
Emerging market countries in Eastern Europe were especially attractive to us.
The Czech Republic, Hungary and Poland were three of our favorites, thanks to
their well-managed economies. Ratings of government and corporate bonds sold in
these countries by Moody's or Standard & Poor's continued to improve and many
offered very attractive yields. Although these emerging market countries
comprised only about 2% of total net assets on June 30, 1996, they continued to
contribute nicely to the Fund's total return.
And Not So Well.
More Dollars, Please.
Our currency hedging strategy greatly enhanced performance during the past six
months. Looking back, we should have purchased even more contracts tied to a
rising U.S. dollar.
Five Largest
Issuers.
15.8% U.S. Treasury Notes
7.6% Dutch Gov't Bonds
7.1% Danish Gov't Bonds
6.9% German Gov't Bonds
5.7% Italian Gov't Bonds
Expressed as a percentage of total net assets as of 6/30/96.
Looking Ahead.
The world's economies, excluding the U.S., continue to grow slowly with low
levels of inflation. In the U.S., the economy appears to be growing too fast,
and higher interest rates may be on the way making bonds a less attractive
investment. Normally, slow growth and low inflation would favor bonds, but
the U.S. bond market is so large and influential that negative sentiment in
the U.S. can easily spill over to bond markets worldwide.
For these reasons we see bond markets remaining sluggish for the remainder of
1996. We hope to provide attractive Fund returns by continuing our currency
hedging strategy and by looking for select opportunities in smaller,
lesser-known markets.
1
<PAGE>
President's Letter August 1, 1996
(PICTURE)
Dear Shareholder:
Last year, U.S. stocks and bonds generally posted extraordinary returns.
Investors celebrated this performance by putting record amounts of new money
into mutual funds in the first few months of 1996. According to figures
released by the Investment Company Institute, a mutual fund industry trade
group, new investments in mutual funds reached an all-time monthly high of $33
billion in January of 1996. An additional $66 billion was invested in the
following three months, although this rapid inflow subsided somewhat in late
spring.
While we are pleased that mutual funds are attracting new investors, we're
concerned that some of them may be "buying last year's returns." Few expect
1995's virtual non-stop returns from the stock and bond markets. In fact,
1996's markets have been volatile so far (stock and bond prices go down just
as they go up). There's no better time than now to be talking with your
Financial Advisor or Registered Representative. She or he can help you
determine reasonable expectations about both the potential performance and
risks associated with your investments.
Board of Directors Election.
In addition to this report, we are including a notice about a special
shareholder meeting to elect new Prudential mutual fund boards of directors.
Your Board of Directors has approved a proposal to place a common board of
experienced directors across many of Prudential's mutual funds to improve
business efficiency. The enclosed material contains more complete information
about this proposal.
Changes at Prudential.
Finally, there have been some important changes recently at Prudential that
were made with you in mind. Prudential Mutual Funds has moved under the
umbrella of Prudential's newly created "Money Management Group." This group
manages and administers nearly $190 billion in client assets and provides
mutual funds, annuities, defined benefit and defined contribution plans to our
individual and institutional investors. We plan to improve the range and
quality of investment products and services that we can provide you by better
leveraging Prudential's strengths. There will, however, be no change in the
service you receive from your Financial Advisor, Registered Representative or
our Customer Service unit.
We're excited about our future and hope that you are, too. Thank you for your
continued support and confidence in Prudential Mutual Funds.
Sincerely,
Richard A. Redeker
President
2
<PAGE>
THE GLOBAL GOVERNMENT PLUS FUND, INC. Portfolio of Investments as of
June 30, 1996 (Unaudited)
- - ------------------------------------------------------------
- - ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description US$ Value (Note 1)
<C> <S> <C>
- - ------------------------------------------------------------
LONG-TERM INVESTMENTS--87.1%
- - ------------------------------------------------------------
<CAPTION>
Australia--3.1%
A$ 4,700 New South Wales Treasury
Corporation,
6.50%, 5/1/06 $ 3,082,879
4,500 Queensland Treasury Corporation,
6.50%, 6/14/05 2,996,093
------------
6,078,972
- - ------------------------------------------------------------
Canada--4.6%
C$ 5,000 British Columbia Provincial Bond,
7.75%, 6/16/03 3,725,512
Canadian Government Bonds,
5,200(a) 9.00%, 12/1/04 4,156,871
1,250(a) 9.00%, 6/1/25 1,006,127
------------
8,888,510
- - ------------------------------------------------------------
Czech Republic--0.8%
CZK 25,000 International Finance
Corporation,
10.50%, 11/30/98 904,910
20,000 Skoda Finance,
11.625%, 2/9/98 719,936
------------
1,624,846
- - ------------------------------------------------------------
Denmark--7.1%
Danish Government Bonds,
DKr 20,000(a) 8.00%, 5/15/03 3,609,432
30,000(a) 7.00%, 12/15/04 5,061,718
28,250(a) 8.00%, 3/15/06 5,002,128
------------
13,673,278
- - ------------------------------------------------------------
France--1.8%
FF 17,000 National Bank of Hungary,
8.00%, 11/12/99 3,428,031
- - ------------------------------------------------------------
Germany--10.0%
DM 5,750 DSL Finance BV,
7.375%, 2/15/00 4,001,804
German Government Bonds,
DM 12,000(a) 6.75%, 4/22/03 $ 8,135,126
5,300(a) 7.375%, 1/3/05 3,685,143
2,500(a) 6.25%, 1/4/24 1,451,295
3,000 Republic of Colombia,
7.25%, 12/21/00 2,000,328
------------
19,273,696
- - ------------------------------------------------------------
Ireland--3.8%
IEP 4,100(a) Irish Government Bond,
9.25%, 7/11/03 7,260,281
- - ------------------------------------------------------------
Italy--6.6%
Lira2,500,000(a) Bayerische Landesanstalt Bank,
10.625%, 5/12/00 1,728,968
Italian Government Bonds,
9,000,000 8.50%, 8/1/99 5,875,983
7,500,000(a) 10.00%, 8/1/03 5,132,177
------------
12,737,128
- - ------------------------------------------------------------
Netherlands--7.6%
Dutch Government Bonds,
NLG 22,000(a) 7.00%, 6/15/05 13,415,419
2,000(a) 7.50%, 1/15/23 1,232,452
------------
14,647,871
- - ------------------------------------------------------------
New Zealand--2.7%
NZ$ 8,000 New Zealand Government Bond,
8.00%, 2/15/01 5,269,001
- - ------------------------------------------------------------
Poland--0.2%
PLZ 1,250 General Electric Capital
Corporation,
18.25%, 2/27/98 454,065
</TABLE>
- - --------------------------------------------------------------------------------
See Notes to Financial Statements.
3
<PAGE>
<PAGE>
THE GLOBAL GOVERNMENT PLUS FUND, INC. Portfolio of Investments as of
June 30, 1996 (Unaudited)
- - ------------------------------------------------------------
- - ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description US$ Value (Note 1)
<C> <S> <C>
- - ------------------------------------------------------------
Spain--6.4%
Pts 480,000 Republic of Argentina,
12.80%, 12/9/97 $ 3,856,759
Spanish Government Bonds,
600,000 10.30%, 6/15/02 5,080,466
450,000(a) 8.20%, 2/28/09 3,321,825
------------
12,259,050
- - ------------------------------------------------------------
United Kingdom--4.3%
BP 2,600 Guaranteed Export Finance
Corporation,
7.25%, 12/15/98 4,083,411
1,100(a) United Kingdom Treasury Bond,
7.75%, 9/8/06 1,683,580
1,700(a) United Kingdom Treasury Note,
8.00%, 9/27/13 2,586,240
------------
8,353,231
- - ------------------------------------------------------------
United States--28.1%
Corporate Bonds--4.9%
US$ 1,000 Banco de Colombia,
8.625%, 6/2/00 1,011,250
1,250 Banco Nacional de Commercial
Exterior, (Mexico)
7.50%, 7/1/00 1,155,000
1,500 Cemex SA, (Mexico)
8.875%, 6/10/98 1,494,000
3,100 Empresas La Moderna SA, (Mexico)
11.375%, 1/25/99 3,138,750
2,550 Financiera Energetica Nacional,
(Colombia)
9.00%, 11/8/99 2,621,400
------------
9,420,400
- - ------------------------------------------------------------
Sovereign Bonds--5.3%
1,000 Argentina Government Bond,
6.3125%(c), 3/31/05, FRN 773,437
1,500 National Bank of Romania,
9.75%, 6/25/99 1,521,563
US$ 2,000 Republic of Brazil,
6.375%(c), 1/1/01, FRB, IDU $ 1,741,425
5,500 Republic of Poland,
6.4375%(c), 10/27/24, FRN 5,128,750
1,000 United Mexican States,
10.8125%, 7/21/97 1,040,250
------------
10,205,425
------------
Supranational Bond--2.1%
4,100 Corporacion Andina de Fomento,
7.375%, 7/21/00 4,100,000
------------
U.S. Government Obligations--15.8%
United States Treasury Notes,
12,750(a) 6.00%, 11/30/97 12,752,040
6,000(a) 6.75%, 6/30/99 6,069,360
10,800(a) 7.875%, 11/15/04 11,608,272
------------
30,429,672
------------
54,155,497
------------
Total long-term investments
(cost US$163,907,191) 168,103,457
------------
SHORT-TERM INVESTMENTS--11.2%
- - ------------------------------------------------------------
Czech Republic--0.3%
CZK 15,000 ING Bank, Euro Commercial Paper,
24.25%, 9/20/96 529,556
- - ------------------------------------------------------------
New Zealand--1.6%
NZ$ 4,500 New Zealand Government Bond,
9.00%, 11/15/96 3,072,990
- - ------------------------------------------------------------
Poland--0.9%
Polish Treasury Bills(b),
PLZ 1,250 21.20%, 7/11/96 457,192
1,250 21.25%, 7/24/96 452,895
1,250 21.20%, 8/28/96 443,857
1,250 21.00%, 9/18/96 438,927
------------
1,792,871
</TABLE>
- - --------------------------------------------------------------------------------
4 See Notes to Financial Statements.
<PAGE>
<PAGE>
THE GLOBAL GOVERNMENT PLUS FUND, INC.
Portfolio of Investments as of
June 30, 1996 (Unaudited)
- - ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(000) Description US$ Value (Note 1)
<C> <S> <C>
- - ------------------------------------------------------------
United States--8.4%
Corporate Bond--0.6%
US$ 1,190 Financiera Energetica Nacional,
(Colombia)
6.625%, 12/13/96 $ 1,192,957
Repurchase Agreement--7.8%
15,076 Joint Repurchase Agreement
Account,
5.46%, 7/1/96 (Note 5) 15,076,000
------------
16,268,957
------------
Total short-term investments
(cost US$21,615,167) 21,664,374
------------
- - ------------------------------------------------------------
Total Investments--98.3%
(cost $185,522,358; Note 4) 189,767,831
Other assets in excess of
liabilities--1.7% 3,326,334
------------
Net Assets--100% $193,094,165
------------
------------
</TABLE>
- - ---------------
Portfolio securities are classified according to the
security's currency denomination.
(a) Principal amount segregated as collateral for forward
currency contracts.
(b) Percentages quoted represent yields to maturity as of
purchase date.
(c) Rate shown reflects current rate of variable rate
instrument.
FRB--Floating Rate Bond.
FRN--Floating Rate Note.
IDU--Interest Due and Unpaid.
- - --------------------------------------------------------------------------------
See Notes to Financial Statements.
5
<PAGE>
<PAGE>
THE GLOBAL GOVERNMENT PLUS FUND, INC. Statement of Assets and Liabilities
(Unaudited)
- - --------------------------------------------------------------------------------
<TABLE>
<S>
<C>
Assets
June 30, 1996
Investments, at value (cost
$185,522,358)...................................................................
$189,767,831
Foreign currency, at value (cost
$680,861)..................................................................
680,418
Cash.........................................................................
............................... 2,396
Interest
receivable...................................................................
...................... 3,760,750
Receivable for Fund shares
sold.........................................................................
.... 40,187
Forward currency contracts--amount receivable from
counterparties........................................... 35,075
Other
assets.......................................................................
......................... 73,411
-------------
Total
assets.......................................................................
...................... 194,360,068
-------------
Liabilities
Payable for investments
purchased....................................................................
....... 443,112
Forward currency contracts --amount payable to
counterparties............................................... 432,905
Accrued expenses and other
liabilities..................................................................
.... 247,141
Management fee
payable......................................................................
................ 118,164
Distribution fee
payable......................................................................
.............. 24,581
-------------
Total
liabilities..................................................................
...................... 1,265,903
-------------
Net
Assets.......................................................................
........................... $193,094,165
-------------
-------------
Net assets were comprised of:
Common stock, at
par..........................................................................
........... $ 247,537
Paid-in capital in excess of
par.........................................................................
184,430,936
-------------
184,678,473
Undistributed net investment
income......................................................................
10,873,968
Accumulated net realized loss on investment and foreign currency
transactions............................ (6,291,961)
Net unrealized appreciation on investments and foreign
currencies........................................ 3,833,685
-------------
Net assets, June 30,
1996.........................................................................
.......... $193,094,165
-------------
-------------
Class A:
Net asset value and redemption price per share
($193,071,184 / 24,750,791 shares of common stock issued and
outstanding)............................. $7.80
Maximum sales charge (4.0% of offering
price)............................................................
.33
Maximum offering price to
public.........................................................................
$8.13
Class B:
Net asset value, offering price and redemption price per share
($11,298 / 1,449 shares of common stock issued and
outstanding)....................................... $7.80
Class C:
Net asset value, offering price and redemption price per share
($11,683 / 1,498 shares of common stock issued and
outstanding)....................................... $7.80
</TABLE>
- - --------------------------------------------------------------------------------
6 See Notes to Financial Statements.
<PAGE>
<PAGE>
THE GLOBAL GOVERNMENT PLUS FUND, INC.
Statement of Operations (Unaudited)
- - ------------------------------------------------------------
- - ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income June 30, 1996
<S> <C>
Income
Interest and discount earned (net of foreign
withholding taxes of $43,944)............ $ 8,491,458
-------------
Expenses
Management fee.............................. 809,839
Distribution fee --Class A.................. 147,471
Distribution fee --Class B.................. 8
Distribution fee --Class C.................. 13
Reports to shareholders..................... 124,000
Custodian's fees and expenses............... 122,000
Transfer agent's fees and expenses.......... 102,000
Registration fees........................... 57,000
Directors' fees............................. 37,000
Audit fees and expenses..................... 36,000
Insurance................................... 16,000
Legal fees and expenses..................... 16,000
Miscellaneous............................... 4,966
-------------
Total expenses........................... 1,472,297
-------------
Net investment income.......................... 7,019,161
-------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign
Currency Transactions
Net realized gain on:
Investment transactions..................... 7,496,987
Foreign currency transactions............... 6,933,743
-------------
14,430,730
-------------
Net change in unrealized appreciation on:
Investments................................. (13,252,993)
Foreign currencies.......................... 302,270
-------------
(12,950,723)
-------------
Net gain on investments and foreign
currencies.................................. 1,480,007
-------------
Net Increase in Net Assets
Resulting from Operations...................... $ 8,499,168
-------------
-------------
</TABLE>
THE GLOBAL GOVERNMENT PLUS FUND, INC.
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) June 30, December 31,
in Net Assets 1996 1995
<S> <C> <C>
Operations
Net investment income....... $ 7,019,161 $ 21,840,656
Net realized gain on
investment and foreign
currency transactions.... 14,430,730 28,051,264
Net change in unrealized
appreciation
(depreciation) on
investments and foreign
currency transactions.... (12,950,723) 23,236,542
------------- -----------------
Net increase in net assets
resulting from
operations............... 8,499,168 73,128,462
------------- -----------------
Dividends and distributions
(Note 1)
Dividends from net
investment income
Class A.................. (3,822,529) (21,840,656)
Class B.................. (63) --
Class C.................. (4) --
------------- -----------------
(3,822,596) (21,840,656)
------------- -----------------
Distributions in excess of
net investment income
Class A.................. (2,752,221) (9,652,194)
Class B.................. (48) --
Class C.................. (2) --
------------- -----------------
(2,752,271) (9,652,194)
------------- -----------------
Fund share transactions
(Note 6)
Net proceeds from shares
sold..................... 980,218 --
Net asset value of shares
issued in reinvestment of
dividends and
distributions............ 689,163 --
Cost of shares reacquired... (160,838,426)(a) --
------------- -----------------
Net decrease in net assets
from Fund share
transactions............. (159,169,045) --
------------- -----------------
Total increase (decrease)...... (157,244,744) 41,635,612
------------- -----------------
Net Assets
Beginning of period............ 350,338,909 308,703,297
------------- -----------------
End of period.................. $ 193,094,165 $ 350,338,909
------------- -----------------
------------- -----------------
</TABLE>
- - ---------------
(a) Net of $3,272,994 redemption fee retained by the the Fund.
- - --------------------------------------------------------------------------------
See Notes to Financial Statements.
7
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) THE GLOBAL GOVERNMENT PLUS FUND, INC.
- - --------------------------------------------------------------------------------
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. On January 12, 1996
the Fund concluded operations as a closed-end investment company. Effective
January 15, 1996, trading in the Fund's shares were suspended on the New York
and Pacific Stock Exchanges and the Fund commenced operations as an open-end,
non-diversified investment company offering three classes of shares (see Note
6).
The Fund's investment objective is to maximize total return, the components of
which are current income and capital appreciation. The Fund invests primarily
in
debt securities issued or guaranteed by governments, semi-governmental entities,
governmental agencies, supranational entities and other governmental entities
in
the United States and in other countries and denominated in the currencies of
such countries. The bonds are primarily of investment grade, i.e., bonds rated
within the four highest quality grades as determined by Moody's Investor's
Service or Standard & Poor's Rating's Group, or in unrated securities of
equivalent quality. In addition, the Fund is permitted to invest up to 10% of
the Fund's total assets in bonds rated below investment grade with a minimum
rating of B, or in unrated securities of equivalent quality. 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 Policies
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Securities Valuation: In valuing the Fund's assets, quotations of foreign
securities in a foreign currency are converted to U.S. dollar equivalents at the
then current currency value. Portfolio securities that are actively traded in
the over-the-counter market, including listed securities for which the primary
market is believed to be over-the-counter, are valued at the mean between the
most recently quoted bid and asked prices provided by principal market makers.
Any security for which the primary market is on an exchange is valued at the
last sale price on such exchange on the day of valuation or, if there was no
sale on such day, the last bid price quoted on such day. Forward currency
contracts are valued at the current cost of covering or offsetting the contract
on the day of valuation. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good faith by
or
under the direction of the Board of Directors of the Fund.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost.
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian or designated
subcustodians, as the case may be under triparty repurchase agreements, takes
possession of the underlying collateral securities, the value of which exceeds
the principal amount of the repurchase transaction including accrued interest.
To the extent that any repurchase transaction exceeds one business day, the
value of the collateral is marked-to-market on a daily basis to ensure the
adequecy of the collateral. If the seller defaults and the value of the
collateral declines or if bankruptcy proceedings are commenced with respect to
the seller of the security, realization of the collateral by the Fund may be
delayed or limited.
Foreign Currency Translation: The books and records of the Fund are maintained
in United States dollars. Foreign currency amounts are translated into United
States dollars on the following basis:
(i) market value of investment securities, other assets and liabilities--at the
current rates of exchange.
(ii) purchases and sales of investment securities, income and expenses--at the
rates of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates
and market values at the close of the period, the Fund does not isolate that
portion of the results of operations arising as a result of changes in the
foreign exchange rates from the fluctuations arising from changes in the market
prices of the securities held at period end. Similarly, the Fund does not
isolate the effect of changes in foreign exchange rates from the fluctuations
arising from changes in the market prices of long-term debt securities sold
during the period. Accordingly, realized foreign currency gains (losses) are
included in the reported net realized gains on investment transactions.
Net realized gains on foreign currency transactions represent net foreign
exchange gains from sales and maturities of short-term securities and forward
currency contracts, disposition of foreign currencies, currency gains or losses
realized between the trade and settlement dates on securities transactions, and
the difference between the amounts of interest, 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 period end exchange rates are
reflected as a
- - --------------------------------------------------------------------------------
8
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) THE GLOBAL GOVERNMENT PLUS FUND, INC.
- - --------------------------------------------------------------------------------
component of net unrealized appreciation 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.
Security Transactions and Net Investment Income: Security transactions are
recorded on the trade date. Realized and unrealized gains and losses from
security and currency transactions are calculated on the identified cost basis.
Interest income, which is comprised of three elements: stated coupon, original
issue discount and market discount, is recorded on the accrual basis. Expenses
are recorded on the accrual basis which may require the use of certain estimates
by management.
Dividends and Distributions: Dividends are declared quarterly. Distributions of
long-term capital gains, if any, will be declared annually. Dividends and
distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
foreign currencies and loss deferrals.
Reclassification of Capital Accounts: The Fund accounts for and reports
distributions to shareholders in accordance with the American Institute of
Certified Public Accountants' Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. The effect of applying
this statement was to increase undistributed net investment income and increase
accumulated net realized losses on investments by $7,675,306 for foreign
currency gains realized or recognized during the six months ended June 30, 1996.
Net investment income, net realized gains and net assets were not affected by
this change.
Taxes: It is the Fund's policy to continue to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders. Therefore, no federal
income or excise tax provision is required.
Withholding taxes on foreign interest have been provided for in accordance with
the Fund's understanding of the applicable country's tax rules and rates.
- - ------------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement with Prudential Mutual Fund Management, Inc.
(``PMF''). Pursuant to this agreement PMF has responsibility for all investment
advisory services and supervises the subadviser's performance of such services.
PMF has entered into a subadvisory agreement with The Prudential Investment
Corporation (``PIC''); PIC furnishes investment advisory services in connection
with the management of the Fund. PMF pays for the cost of the subadviser's
services, compensation of officers of the Fund, occupancy and certain clerical
and bookkeeping costs of the Fund. The Fund bears all other costs and expenses.
Effective January 15, 1996, the management fee paid PMF is computed daily and
payable monthly at an annual rate of .75 of 1% of the Fund's average daily net
assets. Prior thereto, the management fee was computed on the Fund's average
weekly net assets. Amendments to the management and subadvisory agreements to
reflect the provision by PMF and PIC of certain services necessary for the
operation of the Fund as an open-end investment company were approved by
shareholders of the Fund on December 6, 1995.
Effective January 15, 1996, the Fund began operations as an open-end fund and
entered into a distribution agreement with Prudential Securities Incorporated
(``PSI''), which acts as distributor of the Class A, Class B and Class C shares
of the Fund. The Fund compensates PSI for distributing and servicing the Fund's
Class A, Class B, and Class C shares, pursuant to a plan of distribution, (the
``Class A, B and C Plan'') regardless of expenses actually incurred by them. The
distribution fees are accrued daily payable monthly.
Pursuant to the Class A, B and C Plan, the Fund compensates PSI for
distribution-related activities at an annual rate of up to .30 of 1%, 1% and 1%
of the average daily net assets of the Class A, B, and C shares
- - --------------------------------------------------------------------------------
9
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) THE GLOBAL GOVERNMENT PLUS FUND, INC.
- - --------------------------------------------------------------------------------
respectively. Such expenses under the Plans were .15 of 1%, .75 of 1% and .75
of
1% of the average daily net assets of the Class A, B and C shares, respectively,
for the period January 15, 1996 through June 30, 1996.
PSI has advised the Fund that it has received approximately $8,000 in front-end
sales charges resulting from sales of Class A shares during the period January
15, 1996 through June 30, 1996. From these fees, PSI paid such sales charges to
Pruco Securities Corporation, an affiliated broker-dealer, which in turn paid
commissions to sales-persons and incurred other distribution costs.
A redemption fee, paid to the Fund, of 2% was imposed on redemptions of shares
acquired prior to the conversion during the first six months after the
conversion (through July 12, 1996).
PSI, PMF, and PIC are indirect, wholly-owned subsidiaries of The Prudential
Insurance Company of America (``Prudential'').
- - ------------------------------------------------------------
Note 3. Other Transactions with Affiliates
Effective January 15, 1996, Prudential Mutual Fund Services, Inc. (``PMFS''),
a
wholly-owned subsidiary of PMF, began serving as the Fund's transfer agent.
During the period January 15, 1996 through June 30, 1996, the Fund incurred fees
of approximately $93,000 for the services of PMFS. As of June 30, 1996
approximately $16,000 of such fees were due to PMFS. Transfer agent fees and
expenses in the Statement of Operations include certain out-of-pocket expenses
paid to non-affiliates.
- - ------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the six months ended June 30, 1996 aggregated $33,875,119 and $171,733,428,
respectively.
At June 30, 1996, the Fund had outstanding forward currency contracts to sell
foreign currencies, as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- - ------------------- --------------- ----------- ---------------
<S> <C> <C> <C>
Canadian Dollars,
expiring 7/29/96. $ 4,863,903 $ 4,850,340 $ 13,563
French Francs,
expiring
7/29/96-9/16/96... 7,756,502 7,773,677 (17,175)
German
Deutschemarks,
expiring 7/29/96. 35,952,342 36,147,919 (195,577)
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- - ------------------- --------------- ----------- ---------------
<S> <C> <C> <C>
Japanese Yen,
expiring 7/29/96.. $ 2,626,728 $ 2,605,216 $ 21,512
Netherlands
Guilders,
expiring 7/29/96.. 27,094,326 27,240,807 (146,481)
Swiss Francs,
expiring 7/29/96.. 7,930,214 8,003,886 (73,672)
--------------- ----------- ---------------
$86,224,015 $86,621,845 $(397,830)
--------------- ----------- ---------------
--------------- ----------- ---------------
</TABLE>
The United States federal income tax basis of the Fund's investments at June 30,
1996 was $185,712,116 and, accordingly, net unrealized appreciation for United
States federal income tax purposes was $4,055,715 (gross unrealized
appreciation--$6,382,665; gross unrealized depreciation--$2,326,950).
For federal income tax purposes, the Fund had a capital loss carryforward as of
December 31, 1995 of approximately $12,631,300 which will expire in 2002.
Accordingly, no capital gains distribution is expected to be paid to
shareholders until net gains have been realized in excess of such amount.
- - ------------------------------------------------------------
Note 5. Joint Repurchase Agreement Account
The Fund, along with other affiliated registered investment companies, transfers
uninvested cash balances into a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements collateralized
by U.S. Treasury or federal agency obligations. As of June 30, 1996, the Fund
had a 1.4% undivided interest in the joint account. The undivided interest for
the Fund represented $15,076,000 in the principal amount. As of such date, each
repurchase agreement in the joint account and the collateral therefor were as
follows:
Bear, Stearns & Co., Inc., 5.40%, in the principal amount of $369,000,000,
repurchase price $369,055,350, due 7/1/96. The value of the collateral including
accrued interest was $377,194,429.
Goldman, Sachs & Co., 5.47%, in the principal amount of $369,000,000, repurchase
price $369,056,068, due 7/1/96. The value of the collateral including accrued
interest was $376,380,556.
Smith Barney, Inc., 5.50%, in the principal amount of $369,000,000, repurchase
price $369,056,375, due 7/1/96. The value of the collateral including accrued
interest was $376,380,118.
- - --------------------------------------------------------------------------------
10
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) THE GLOBAL GOVERNMENT PLUS FUND, INC.
- - --------------------------------------------------------------------------------
Note 6. Capital
On December 6, 1995, the existing shareholders approved the conversion of the
Fund to an open-end investment company which offers three classes of shares.
Offering of Class A (the existing shares prior to open-ending), Class B and
Class C shares commenced on January 15, 1996. Class A shares are sold with a
front-end sales charge of up to 4%. Class B shares are sold with a contingent
deferred sales charge which declines from 5% to zero depending on the period of
time the shares are held. Class C shares are sold with a contingent deferred
sales charge of 1% during the first year. Class B shares automatically convert
to Class A shares on a quarterly basis approximately seven years after purchase.
A special exchange privilege is also available for shareholders who qualified
to
purchase Class A shares at net asset value.
There are 2 billion shares of common stock, $.01 par value per share, authorized
divided into three classes, designated Class A, Class B and Class C common
stock, consisting of 1 billion Class A shares, 500 million Class B shares and
500 million Class C shares. As of June 30, 1996 Prudential owned 11,000 Class
A
shares.
Transactions in shares of common stock for the period January 15, 1996 through
June 30, 1996 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- - --------------------------------- ----------- -------------
<S> <C> <C>
Shares sold...................... 123,407 $ 957,559
Shares issued in reinvestment of
dividends and distributions.... 90,427 689,052
Shares reacquired................ (21,105,551) (160,838,423)(a)
----------- -------------
Net decrease in shares
outstanding.................... (20,891,717) $(159,191,812)
----------- -------------
----------- -------------
<CAPTION>
Class B
- - ---------------------------------
<S> <C> <C>
Shares sold...................... 1,435 $ 11,209
Shares issued in reinvestment of
dividends and distributions.... 14 108
Shares reacquired................ -- (3)
----------- -------------
Net increase in shares
outstanding.................... 1,449 $ 11,314
----------- -------------
----------- -------------
<CAPTION>
Class C
- - ---------------------------------
<S> <C> <C>
Shares sold...................... 1,497 $ 11,450
Shares issued in reinvestment of
dividends and distributions.... 1 3
----------- -------------
Net increase in shares
outstanding.................... 1,498 $ 11,453
----------- -------------
----------- -------------
</TABLE>
- - ---------------
(a) Net of $3,272,994 redemption fee retained by the Fund.
Note 7. Dividends
Subsequent to June 30, 1996, the Board of Directors of the Fund declared
dividends from undistributed net investment income of $.12, $.11 and $.11 per
Class A, B and C share, respectively, payable July 15, 1996 to shareholders of
record on July 10, 1996.
- - --------------------------------------------------------------------------------
11
<PAGE>
<PAGE>
Financial Highlights (Unaudited) THE GLOBAL GOVERNMENT PLUS FUND, INC.
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A(d)
- - ---------------------------------------------------------------------------
Six Months
Ended
Year Ended December 31,
June 30,
- - ------------------------------------------------------------
1996(e) 1995
1994 1993 1992 1991
<S> <C> <C> <C>
<C> <C> <C>
---------- --------
- - -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....... $ 7.68 $ 6.76 $
7.84 $ 7.38 $ 8.28 $ 8.25
---------- --------
- - -------- -------- -------- --------
Net investment income...................... .25 .48
.45 .55 .67 .66
Net realized and unrealized gain (loss) on
investments and foreign currencies...... .02 1.13
(.97) .74 (.70) .09
---------- --------
- - -------- -------- -------- --------
Total from investment operations........ .27 1.61
(.52) 1.29 (.03) .75
---------- --------
- - -------- -------- -------- --------
Dividends from net investment income....... (.15) (.48)
(.23) (.23) (.67) (.66)
Distributions from net realized capital
gains................................... -- --
(.10) (.54) (.20) --
Distributions in excess of net investment
income.................................. (.11) (.21)
- - -- -- -- --
Distributions in excess of net capital
gains................................... -- --
- - -- (.06) -- --
Tax return of capital distributions........ -- --
(.23) -- -- (.06)
---------- --------
- - -------- -------- -------- --------
Total dividends and distributions....... (.26) (.69)
(.56) (.83) (.87) (.72)
---------- --------
- - -------- -------- -------- --------
Redemption fee retained by Fund............ .11 --
- - -- -- -- --
---------- --------
- - -------- -------- -------- --------
Net asset value, end of period............. $ 7.80 $ 7.68 $
6.76 $ 7.84 $ 7.38 $ 8.28
---------- --------
- - -------- -------- -------- --------
---------- --------
- - -------- -------- -------- --------
Per share market price, end of year........ N/A $ 7.375 $
5.625 $ 7.00 $ 7.00 $ 7.75
--------
- - -------- -------- -------- --------
--------
- - -------- -------- -------- --------
TOTAL INVESTMENT RETURN BASED ON(a):
Market price............................ N/A 44.39%
(12.04)% 11.57% 1.25% 17.44%
Net asset value......................... 5.02% 25.14%
(5.62)% 18.38% (0.08)% 10.45%
RATIOS/SUPPLEMENTAL DATA(f):
Net assets, end of period (000)............ $193,071 $350,339
$308,703 $357,783 $336,780 $377,911
Average net assets (000)................... $217,138 $342,741
$331,421 $361,374 $364,037 $364,072
Ratios to average net assets:
Expenses, including distribution fees... 1.37%(b) 1.05%
1.11% 1.07% 1.15% 1.29%
Expenses, excluding distribution fees... 1.23%(b) 1.05%
1.11% 1.07% 1.15% 1.29%
Net investment income................... 6.50%(b) 6.37%
6.21% 6.93% 8.36% 8.30%
Portfolio turnover rate.................... 18% 203%
526% 441% 346% 267%
<CAPTION>
Class B(d) Class C(d)
January 15, January 15,
1996(c) 1996(c)
Through Through
June 30, June 30,
1996(e) 1996(e)
<S> <C> <C>
----------- -----------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....... $ 7.72 $ 7.72
----------- -----------
Net investment income...................... .20 .20
Net realized and unrealized gain (loss) on
investments and foreign currencies...... .02 .02
----------- -----------
Total from investment operations........ .22 .22
----------- -----------
Dividends from net investment income....... (.14) (.14)
Distributions from net realized capital
gains................................... -- --
Distributions in excess of net investment
income.................................. (.11) (.11)
Distributions in excess of net capital
gains................................... -- --
Tax return of capital distributions........ -- --
----------- -----------
Total dividends and distributions....... (.25) (.25)
----------- -----------
Redemption fee retained by Fund............ .11 .11
----------- -----------
Net asset value, end of period............. $ 7.80 $ 7.80
----------- -----------
----------- -----------
Per share market price, end of year........ N/A N/A
TOTAL INVESTMENT RETURN BASED ON(a):
Market price............................ N/A N/A
Net asset value......................... 4.34% 4.34%
RATIOS/SUPPLEMENTAL DATA(f):
Net assets, end of period (000)............ $11 $12
Average net assets (000)................... $2 $4
Ratios to average net assets:
Expenses, including distribution fees... 1.95%(b) 1.95%(b)
Expenses, excluding distribution fees... 1.23%(b) 1.23%(b)
Net investment income................... 5.92%(b) 5.92%(b)
Portfolio turnover rate.................... 18% 18%
</TABLE>
- - ---------------
(a) Total investment return based on net asset value is calculated assuming a
purchase of common stock at the current net asset value on the first day and
a sale at the current net asset value on the last day of each period
reported. Prior to January 15, 1996 the Fund operated as a closed-end
investment company and total investment return was calculated based on
market value assuming a purchase of common stock at the current market value
on the first day and a sale at the current market value on the last day of
each period reported. Dividends and distributions are assumed for purposes
of this calculation to be reinvested at prices obtained under the dividend
reinvestment plan. This calculation does not reflect brokerage commissions.
Total return for periods of less than one full year are not annualized.
(b) Annualized.
(c) Commencement of offering of Class B and Class C shares.
(d) Prior to January 15, 1996 the Fund operated as a closed-end, non-diversified
management investment company.
(e) Calculated based upon weighted average shares outstanding during the period.
(f) Because of the event referred to in (d) and the timing of such, the ratios
for the Class A shares are not necessarily comparable to those of prior
periods.
- - --------------------------------------------------------------------------------
12 See Notes to Financial Statements.
<PAGE>
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
(800) 225-1852
http:\\www.prudential.com
Directors
Edward D. Beach
Donald D. Lennox
Douglas H. McCorkindale
Thomas T. Mooney
Richard A. Redeker
Louis A. Weil, III
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Susan C. Cote, Treasurer
Stephen M. Ungerman, Assistant 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
Distributor
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
Independent 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
The views expressed in this report and information about the Fund's portfolio
holdings are for the period covered by this report and are subject to change
thereafter.
The accompanying financial statements as of June 30, 1996 were not audited and,
accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
<PAGE>
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One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852
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