(LOGO)
Prudential
Intermediate
Global
Income
Fund, Inc.
ANNUAL
REPORT
Dec. 31, 1995
(LOGO)
<PAGE>
Prudential Intermediate Global
Income Fund, Inc.
Performance At A Glance.
1995 was a good year for global bond investors and the Prudential Intermediate
Global Income Fund. We took advantage of changes in the strength of the U.S.
dollar and falling worldwide interest rates by buying foreign bonds that
produced attractive returns. The Fund finished 1995 significantly ahead of the
average world income fund tracked by Lipper Analytical Services.
<TABLE>
<CAPTION>
Cumulative Total Returns1 As of 12/31/95
One Five Since
Year Years Inception2
<S> <C> <C> <C>
Class A 24.0% 48.0% 80.8%
Class B 23.3 N/A 35.5
Class C 23.3 N/A 20.2
Lipper Gen. World Inc. Avg3 18.1 47.9 80.8
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns1 As of 12/31/95
One Five Since
Year Years Inception2
<S> <C> <C> <C>
Class A 20.3% 7.5% 7.7%
Class B 20.3 N/A 7.8
Class C 22.3 N/A 14.0
</TABLE>
<TABLE>
<CAPTION>
Dividends Total Dividends 30-Day
& Yields Paid for 12 Mos. SEC Yield
As of
12/31/95
<S> <C> <C>
Class A $0.74 6.36%
Class B $0.69 5.95
Class C $0.69 5.95
</TABLE>
Past performance is not indicative of future results. Investment return and
principal value will fluctuate so that an investors shares, when redeemed, may
be worth more or less than their original cost.
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 3% for Class A shares. Class B
shares are subject to a contingent declining sales charge (CDSC) of 3%, 2%, 1%
and 1% for four 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 five years. The Fund commenced operations on May 26, 1988 as a
closed-end investment company. Effective October 7, 1991, the Fund commenced
operations as an open-end investment company.
2Inception dates: 5/26/88 Class A; 1/15/92 Class B; 8/1/94 Class C.
3These are the average returns of 135 funds in the Lipper General World Income
Fund category for one year; 29 funds for five years; and 18 funds since
inception of Class A shares on 5/26/88, as determined by Lipper Analytical
Services.
How Investments Compared.
(As of 12/31/95)
(CHART)
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 return averages 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
added historical 20-year average annual returns to show that some of 1995's
returns in the U.S. market were higher than normal. These returns assume the
reinvestment of dividends.
U.S. Growth Funds will fluctuate, sometimes substantially. Smaller
capitalization stocks offer greater potential for long-term growth but may be
more volatile than larger capitalization stocks. Investors have received higher
historical total returns from stocks than from most other investments.
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 a great deal) and their returns have been historically lower than
those of stock funds. Unlike bond funds, bonds, if held to maturity, generally
offer a fixed rate of return and fixed principal value.
Global Bond Funds provide more income than global stock funds, which can help
smooth out their total returns year by year. But their prices still fluctuate
(sometimes a great deal) and their returns have been historically lower than
those of global stock funds. In addition, these are foreign investments and are
subject to special risks including political, social, and currency risks that
may affect performance.
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.
*14 years for Global Bond Funds.
<PAGE>
Gabriel Irwin and Simon Wells, Fund Managers
Portfolio (PHOTO)
Managers' Report Gabriel Irwin
(PHOTO)
Simon Wells
Prudential Intermediate Global Income Fund seeks to maximize total return (the
components of which are current income and capital appreciation). The Fund
invests primarily in intermediate-term government bonds issued throughout the
world. There is no guarantee that the Fund's investment objective will be met.
Strategy Session.
We follow a "top down" investment philosophy. This means that we emphasize
country and currency allocations rather than a specific type of bond from a
specific market. We like to invest in countries with well-managed economies and
may use currency hedges depending upon the strength and stability of the local
currency.
1995 was a good year for most foreign bond markets, especially in Europe. Slow
economic growth and falling short-term interest rates in Germany and the U.S.
created an environment for bonds to do well -- and well they have done. During
1995, non-U.S. bonds returned more than 21% and U.S. bonds more than 17%,
according to the J.P. Morgan Government Bond Index. Our emphasis on the U.S.
dollar and currencies that correlate or "track" the U.S. dollar, such as
Australia, Canada and New Zealand, (44.1% of net assets as of December 31,
1995) helped the Fund to capitalize on owning bonds in a strong currency --
this time in the U.S. dollar. We are modestly bullish on the dollar's prospects
into 1996.
At the same time that the U.S. dollar strengthened, Australian, Canadian, New
Zealand and European bonds increased in value. We maintained our core holdings
in Germany, the Netherlands, the United Kingdom and Denmark (33.9% of total net
assets as of December 31, 1995). These countries featured well-established
economies, steady (if slowing) growth and low levels of inflation. Later in the
year, we added bonds from Spain and Italy.
We also invested in some high yielding bonds from emerging market countries,
such as the Czech Republic, Hungary, Poland and other countries. We liked these
countries because they had embraced reforms to modernize their economies and
offered attractive investment opportunities. Emerging markets may be subject to
a greater degree of political and economic risk than other non-U.S. markets.
We later trimmed positions in New Zealand and Australia because these bonds
appeared to us to have become overvalued. These assets were shifted to European
markets where we saw better opportunities.
Overview.
The Fund generally invests in investment grade bonds -- those rated in one of
the four highest categories by Moody's, Standard & Poor's or other recognized
rating services. 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
bonds of comparable quality in our view.
<PAGE>
What Went Well.
A Yen For Dollars.
Our best move of the year was correctly anticipating a strengthening of the
U.S. dollar compared to most currencies. Starting in May, we began selling our
Japanese bonds and used the proceeds to purchase more European bonds. We also
hedged back into the U.S. dollar. We did this for two reasons: First, the
dollar had already fallen to historically low levels compared to other
currencies and it was unlikely that it would weaken further. Second, we
believed that the yen had become overvalued and could not be sustained given
low Japanese interest rates and problems within the Japanese economy.
We were right on both counts. By early summer, the dollar had begun to
strengthen compared to other currencies and the yen began to slide. This trend
continued for the remainder of the year.
We Sold Sweden And Japan.
We sold the last of our Swedish bonds in November after a bond rally there
approached its peak. We likewise eliminated our remaining holdings in Japan in
the third quarter of 1995 because of consistently low yields, a weakening yen
and an economy which had apparently "bottomed out."
And Not So Well.
As we stated earlier, 1995 was a very good year for most bond markets and for
the Prudential Intermediate Global Income Fund. Looking back, we perhaps could
have further enhanced return by lengthening the duration of the Fund's
portfolio more than we did during the year. Duration is a statistical measure
of a fund's interest rate sensitivity. The longer a fund's duration, the more
likely it is to perform well when interest rates fall, as they did in 1995.
Geographical Breakdown.
Prudential Intermediate Global Income Fund
as of 12/31/95. Holdings are subject to change.
(CHART)
Looking Ahead.
Our outlook for world bond markets is positive although there are concerns that
cannot be ignored.
The European and U.S. economies are growing slowly and inflation appears under
control. For the time being, the leading central banks, such as the U.S.
Federal Reserve and German Bundesbank, are generally lowering short-term
interest rates to help deflect the possibility of recession. This is a positive
environment for bonds. Japan, however, remains a concern. Japan has severe
economic and fiscal problems as well as rock-bottom bond yields. Until this
changes, we shall be biased towards investments in European and U.S.
dollar-denominated markets -- including the United States.
- -------------------------------------------------------------------------------
1
<PAGE>
President's Letter February 5, 1996
(PHOTO)
Dear Shareholder:
For many investors, 1995 was a profitable year -- most stock and bond funds
enjoyed healthy returns from the U.S. markets. While climbing returns can tempt
even the most skittish investors to start buying again, it is important to
remember that the stock and bond markets go down just as they go up. At times
like these, remember the importance of working with your Financial Advisor or
Registered Representative to help you find investments that are consistent with
your risk tolerance and time horizon. Your Financial Advisor or Registered
Representative can help you maintain realistic expectations about both the
potential performance and risks associated with your investments.
Shareholder Legislative Action Program.
From time to time we've been informing you about significant legislation before
Congress, such as the American Dream Savings Account, that may potentially
impact mutual fund investors. We want to make it easier for you to share your
views with your Congressional member. So, beginning in 1996, whenever Congress
is considering legislation that would affect you, we'll send you postage-paid
message cards that you simply drop in the mail if you want to let your senator
or representative know how you want him or her to vote.
Fund Profiles.
Over the past year, we've worked to make your shareholder reports more
interesting, informative and easy to read. This year, we'll be considering
"fund profiles." Some mutual fund companies now offer one to shareholders along
with a full prospectus. The purpose of a fund profile is to provide a very
brief, reader-friendly summary of a fund's objective, investments, risks and
expenses. Would you like to see fund profiles from us? Please call your
Financial Advisor or Registered Representative to share your views.
As always, thank you for your confidence in Prudential Mutual Funds.
Sincerely,
Richard A. Redeker
President
- ---------------------------------------------------------------------------
2
<PAGE>
Portfolio of Investments as of PRUDENTIAL INTERMEDIATE GLOBAL
December 31, 1995 INCOME FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS(a)--90.4%
- ------------------------------------------------------------
Australia--2.2%
A$ 2,900 New South Wales Treasury
Corporation,
6.50%, 5/1/06 $ 1,867,647
4,000 Queensland Treasury
Corporation,
6.50%, 6/14/05 2,608,806
-------------
4,476,453
- ------------------------------------------------------------
Canada--6.2%
C$ 3,000 British Columbia Provincial
Bond,
7.75%, 6/16/03 2,277,159
Canadian Government Bonds,
9,500 9.00%, 12/1/04 7,844,707
2,700 9.00%, 6/1/25 2,305,747
-------------
12,427,613
- ------------------------------------------------------------
Czech Republic--0.3%
CZK 15,000 Skoda Finance,
11.625%, 2/9/98 569,090
- ------------------------------------------------------------
Denmark--7.7%
Danish Government Bonds,
DKr 30,400 8.00%, 5/15/03 5,836,656
35,000 7.00%, 12/15/04 6,270,499
16,500 8.00%, 3/15/06 3,135,791
-------------
15,242,946
- ------------------------------------------------------------
France--1.1%
FF 10,500 National Bank of Hungary,
8.00%, 11/12/99 2,089,280
- ------------------------------------------------------------
Germany--12.4%
DM 4,035 DSL Finance BV,
7.375%, 2/15/00 3,049,349
German Government Bonds,
DM 2,910 5.375%, 2/22/99 $ 2,094,534
2,500 5.75%, 8/22/00 1,812,659
6,630 6.75%, 4/22/03 4,897,054
10,000 7.375%, 1/3/05 7,627,059
8,000 6.25%, 1/4/24 5,205,250
-------------
24,685,905
- ------------------------------------------------------------
Ireland--3.3%
Irish Government Bonds,
IEP 2,700 9.25%, 7/11/03 4,799,147
1,100 8.00%, 8/18/06 1,817,132
-------------
6,616,279
- ------------------------------------------------------------
Italy--5.4%
Lira 1,500,000 Bayerische Landesanstalt Bank,
10.625%, 5/12/00 956,037
Italian Government Bonds,
12,750,000 8.50%, 8/1/99 7,629,323
3,500,000 10.00%, 8/1/03 2,148,851
-------------
10,734,211
- ------------------------------------------------------------
Netherlands--6.6%
Dutch Government Bonds,
NLG 5,000 7.50%, 6/15/99 3,398,316
3,100 9.00%, 7/1/00 2,236,525
8,500 7.00%, 6/15/05 5,671,085
2,600 7.50%, 1/15/23 1,777,667
-------------
13,083,593
- ------------------------------------------------------------
New Zealand--0.8%
NZ$ 2,500 New Zealand Government Bond,
10.00%, 7/15/97 1,678,165
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
3
<PAGE>
<PAGE>
Portfolio of Investments as of PRUDENTIAL INTERMEDIATE GLOBAL
December 31, 1995 INCOME FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Spain--4.0%
Pts 300,000 Republic of Argentina,
12.80%, 12/9/97 $ 2,424,689
Spanish Government Bonds,
400,000 10.30%, 6/15/02 3,404,461
300,000 8.20%, 2/28/09 2,190,138
-------------
8,019,288
- ------------------------------------------------------------
United Kingdom--7.2%
United Kingdom Treasury Bonds,
BP 2,600 9.00%, 3/3/00 4,347,790
4,000 8.00%, 9/25/09 6,398,476
2,000 6.25%, 11/25/10 2,704,612
600 Guaranteed Export Finance
Corporation,
7.25%, 12/15/98 937,181
-------------
14,388,059
- ------------------------------------------------------------
United States--33.2%
Corporate Bonds--2.6%
US$ 750 Banco Nacional de Commercial
Exterior (Mexico),
7.50%, 7/1/00 647,813
1,250 Bancomer SA (Mexico),
8.00%, 7/7/98 1,156,250
1,850 Cemex SA (Mexico),
8.875%, 6/10/98 1,776,000
1,450 Financiera Energetica Nacional
(Columbia),
9.00%, 11/8/99 1,513,437
-------------
5,093,500
-------------
Sovereign Bonds--3.1%
Republic of Brazil,
1,140 6.6875%, 1/1/01, FRB/IDU 981,825
1,500 6.00%, 9/15/13 832,500
1,250 Republic of Colombia,
8.75%, 10/6/99 1,314,455
US$ 1,600 Republic of Ecuador
6.8125%, 2/28/25, FRB $ 808,000
3,100 Republic of Poland
6.875%, 10/27/24, FRB 2,340,500
-------------
6,277,280
-------------
Supranational Bond--0.6%
1,200 Corporacion Andina de Fomento,
7.375%, 7/21/00 1,203,000
-------------
U.S. Government Obligations--26.9%
4,500 United States Treasury Bond,
7.50%, 11/15/24 5,409,135
United States Treasury Notes,
15,000 6.75%, 6/30/99 15,684,300
6,500 6.125%, 9/30/00 6,695,000
16,500 5.75%, 8/15/03 16,698,495
7,800 7.875%, 11/15/04 9,028,500
-------------
53,515,430
-------------
66,089,210
-------------
Total long-term investments
(cost US$169,640,902) 180,100,092
-------------
SHORT-TERM INVESTMENTS--7.5%
- ------------------------------------------------------------
Australia--1.1%
A$ 2,900 Barclays Bank Time Deposit,
7.125%, 1/5/96 2,157,883
- ------------------------------------------------------------
Czech Republic--0.5%
CZK 25,000 Unilever, Euro Commercial Paper
10.25%, 2/19/96 (b) 925,880
- ------------------------------------------------------------
Italy--0.3%
Lira 900,000 Mellon Bank Time Deposit,
10.25%, 1/5/96 567,661
</TABLE>
- -------------------------------------------------------------------------------
4 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
INCOME FUND, INC.
Portfolio of Investments as of December 31, 1995
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
New Zealand--2.1%
NZ$ 5,000 New Zealand Government Bond,
9.00%, 11/15/96 $ 3,285,812
1,500 Mellon Bank Time Deposit,
8.25%, 1/5/96 979,950
-------------
4,265,762
- ------------------------------------------------------------
Spain--0.7%
Pts 180,000 Barclays Bank Time Deposit,
9.0625%, 1/5/96 1,484,504
- ------------------------------------------------------------
United Kingdom--0.7%
BP 850 Mellon Bank Time Deposit,
6.375%, 1/5/96 1,316,482
- ------------------------------------------------------------
United States--2.1%
US$ 4,263 Joint Repurchase Agreement
Account,
5.85%, 1/2/96, (Note 5) 4,263,000
-------------
Total short-term investments
(cost US$14,954,126) 14,981,172
-------------
- ------------------------------------------------------------
Total Investments--97.9%
(cost $184,595,028; Note 4) 195,081,264
Other assets in excess of
liabilities--2.1% 4,233,396
-------------
Net Assets--100% $ 199,314,660
-------------
-------------
</TABLE>
- ---------------
Portfolio securities are classified according to the securities currency
denomination.
(a) Principal amount segregated as collateral for forward currency contracts.
(b) Percentages quoted represent yield-to-maturity as of purchase date.
FRB-Floating Rate Bond.
IDU-Interest Due and Unpaid Bonds.
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
5
<PAGE>
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Statement of Assets and Liabilities INCOME FUND, INC.
- -------------------------------------------------------------------------------
<TABLE>
<S>
<C>
Assets
December 31, 1995
Investments, at value (cost
$184,595,028)...............................................................
$ 195,081,264
Foreign currency (cost
$286,047)....................................................................
.... 287,917
Interest
receivable...................................................................
.................. 5,410,531
Receivable for investments
sold.........................................................................
1,362,883
Forward currency contracts-net amount receivable from
counterparties.................................... 53,310
Receivable for Fund shares
sold.........................................................................
11,501
Other
assets.......................................................................
..................... 44,534
-----------------
Total
assets.......................................................................
.................. 202,251,940
-----------------
Liabilities
Bank
overdraft....................................................................
...................... 34,254
Payable for investments
purchased.......................................................................
1,316,482
Payable for Fund shares
reacquired......................................................................
520,496
Forward currency contracts--net amount payable to
counterparties........................................ 501,989
Accrued
expenses.....................................................................
................... 299,275
Management fee
payable......................................................................
............ 129,214
Dividends
payable......................................................................
................. 99,913
Distribution fee
payable......................................................................
.......... 34,693
Withholding taxes
payable......................................................................
......... 964
-----------------
Total
liabilities..................................................................
.................. 2,937,280
-----------------
Net
Assets.......................................................................
....................... $ 199,314,660
-----------------
-----------------
Net assets were comprised of:
Common stock, at
par..........................................................................
....... $ 24,007
Paid-in capital in excess of
par.....................................................................
271,494,889
-----------------
271,518,896
Undistributed net investment
income..................................................................
1,651,431
Accumulated net realized loss on
investments.........................................................
(83,880,683)
Net unrealized appreciation on investments and foreign
currencies.................................... 10,025,016
-----------------
Net assets, December 31,
1995...........................................................................
$ 199,314,660
-----------------
-----------------
Class A:
Net asset value and redemption price per share
($181,984,629 / 21,921,450 shares of common stock issued and
outstanding)......................... $8.30
Maximum sales charge (3.00% of offering
price).......................................................
.26
Maximum offering price to
public.....................................................................
$8.56
Class B:
Net asset value, offering price and redemption price per share
($17,316,889 / 2,083,751 shares of common stock issued and
outstanding)........................... $8.31
Class C:
Net asset value, offering price and redemption price per share
($13,142 / 1,581 shares of common stock issued and
outstanding)................................... $8.31
</TABLE>
- -------------------------------------------------------------------------------
6 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
INCOME FUND, INC.
Statement of Operations
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income December 31, 1995
-----------------
<S> <C>
Income
Interest and discount earned............. $16,491,112
Income from securities loaned............ 4,913
-----------------
16,496,025
-----------------
Expenses
Management fee........................... 1,650,798
Distribution fee--Class A................ 301,139
Distribution fee--Class B................ 145,025
Distribution fee--Class C................ 81
Transfer agent's fees and expenses....... 468,000
Custodian's fees and expenses............ 298,000
Reports to shareholders.................. 133,000
Audit fees and expenses.................. 72,000
Registration fees........................ 54,000
Legal fees and expenses.................. 34,000
Directors' fees and expenses............. 33,000
Insurance expense........................ 6,000
Miscellaneous............................ 12,361
-----------------
Total expenses........................ 3,207,404
-----------------
Net investment income....................... 13,288,621
-----------------
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign
Currency Transactions
Net realized gain (loss) on:
Investment transactions.................. 18,146,832
Foreign currency transactions............ 2,401,415
Written option transactions.............. (1,839,478)
-----------------
18,708,769
-----------------
Net change in net unrealized appreciation/depreciation of:
Investments.............................. 14,025,407
Foreign currencies....................... 1,627,689
Written options.......................... 84,821
-----------------
15,737,917
-----------------
Net gain on investments and foreign
currencies............................... 34,446,686
-----------------
Net Increase in Net Assets
Resulting from Operations................... $47,735,307
-----------------
-----------------
</TABLE>
PRUDENTIAL INTERMEDIATE GLOBAL
INCOME FUND, INC.
Statement of Changes in Net Assets
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended December 31,
in Net Assets 1995 1994
------------- -------------
<S> <C> <C>
Operations
Net investment income.......... $ 13,288,621 $ 17,615,129
Net realized gain (loss) on
investment and foreign
currency transactions....... 18,708,769 (33,774,304)
Net change in net unrealized
appreciation/depreciation on
investments and foreign
currencies.................. 15,737,917 (6,472,524)
------------- -------------
Net increase (decrease) in net
assets resulting from
operations.................. 47,735,307 (22,631,699)
------------- -------------
Net equalization debits........... (68,241) (298,272)
------------- -------------
Dividends and distributions (Note 1)
Dividends from net investment
income
Class A..................... (12,197,948) (9,720,977)
Class B..................... (1,089,996) (1,068,617)
Class C..................... (677) --
------------- -------------
(13,288,621) (10,789,594)
------------- -------------
Distributions in excess of net
investment income
Class A..................... (5,263,793) --
Class B..................... (470,367) --
Class C..................... (293) --
------------- -------------
(5,734,453) --
------------- -------------
Distributions from net realized
gains
Class A..................... -- (451,238)
Class B..................... -- (57,559)
------------- -------------
-- (508,797)
------------- -------------
Tax return of capital
distributions
Class A..................... -- (7,599,757)
Class B..................... -- (836,616)
------------- -------------
-- (8,436,373)
------------- -------------
Fund share transactions (net of
share conversions) (Note 6)
Net proceeds from shares
sold........................ 16,586,187 12,598,805
Net asset value of shares
issued in reinvestment of
dividends and
distributions............... 5,341,402 4,734,600
Cost of shares reacquired...... (81,316,129) (104,455,068)
------------- -------------
Net decrease in net assets from
Fund share transactions..... (59,388,540) (87,121,663)
------------- -------------
Total decrease.................... (30,744,548) (129,786,398)
Net Assets
Beginning of year................. 230,059,208 359,845,606
------------- -------------
End of year....................... $ 199,314,660 $ 230,059,208
------------- -------------
------------- -------------
</TABLE>
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
7
<PAGE>
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Notes to Financial Statements INCOME FUND, INC.
- -------------------------------------------------------------------------------
Prudential Intermediate Global Income Fund, Inc., (the ``Fund'') was organized
in Maryland as a closed-end, non-diversified management investment company and
commenced investment operations on May 26, 1988. On October 4, 1991 the Fund
concluded operations as a closed-end investment company and effective October
7,
1991, commenced operations as an open-end, non-diversified investment company.
The Fund's investment objective is to maximize total return, the components of
which are current income and capital appreciation, by investing in a portfolio
consisting primarily of U.S. and foreign government securities. The Fund will
also engage in certain hedging strategies to meet its investment objective. 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.
Security 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 rate. Portfolio securities (including options) are valued
at their current market value as determined by an independent pricing service,
principal market maker or by reference to the applicable exchange price. Forward
currency exchange contracts are valued at the current cost of covering or
offsetting the contract on the day of valuation. Securities and assets for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of Directors of
the Fund.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost which approximates market value.
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, take
possession of the underlying collateral securities, the value of which exceeds
the principal amount of the repurchase transaction including accrued interest.
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 U.S. dollars. Foreign currency amounts are translated into U.S. 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, such realized foreign currency gains and losses are included
in the reported net realized gains/losses on investment transactions.
Net realized gains on foreign currency transactions represent net foreign
exchange gains and losses from sales and maturities of short-term securities and
forward currency contracts, holding 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 and foreign
taxes recorded on the Fund's books and the U.S. dollar equivalent amounts
actually received or paid. Net currency gains and losses from valuing foreign
currency denominated assets (excluding investments) and liabilities at period
end exchange rates are reflected as a component of net unrealized
appreciation/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
- -------------------------------------------------------------------------------
8
<PAGE>
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Notes to Financial Statements INCOME FUND, INC.
- -------------------------------------------------------------------------------
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.
Securities Lending: The Fund may lend its U.S. Government securities to
broker-dealers or government securities dealers. The loans are secured by
collateral at least equal at all times to the market value of the securities
loaned. The Fund may bear the risk of delay in recovery of, or even loss of
rights in, the securities loaned should the borrower of the securities fail
financially. The Fund receives compensation for lending its securities in the
form of fees or it retains a portion of interest on the investment of any cash
received as collateral. The Fund also continues to receive interest on the
securities loaned and any gain or loss in the market price of the securities
loaned that may occur during the term of the loan will be for the account of the
Fund. As of December 31, 1995, the Fund had no securities on loan.
Security Transactions and Net Investment Income: Security transactions are
recorded on the trade date. Realized gains and losses from security and currency
transactions are calculated on the identified cost basis. Interest income is
recorded on the accrual basis. Expenses are recorded on the accrual basis which
may require the use of certain estimates by management.
Net investment income (other than distribution fees), and unrealized gains or
losses are allocated daily to each class of shares based upon the relative
proportion of net assets of each class at the beginning of the day.
Taxes: It is the Fund's policy to continue to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders. Therefore, no federal
income 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.
Equalization: The Fund follows the accounting practice known as equalization by
which a portion of the proceeds from sales and costs of reacquisitions of Fund
shares, equivalent on a per share basis to the amount of distributable net
investment income on the date of the transaction, is credited or charged to
undistributed net investment income. As a result, undistributed net investment
income per share is unaffected by sales or reacquisitions of the Fund's shares.
Dividends and Distributions: The Fund declares daily and pays dividends of net
investment income monthly and makes distributions at least annually of any net
capital gains. Dividends and distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
foreign currency transactions.
Reclassification of Capital Accounts: The Fund accounts for and reports
distributions to shareholders in accordance with AICPA 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 of Position was to reclassify $12,161,312 of
foreign currency gains to undistributed net investment
- -------------------------------------------------------------------------------
9
<PAGE>
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Notes to Financial Statements INCOME FUND, INC.
- -------------------------------------------------------------------------------
income from accumulated net realized loss on investments. Net investment income,
net realized gains and net assets were not affected by this change.
- ------------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement with Prudential 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 daily and payable monthly at an annual
rate of .75% of the Fund's average daily net assets.
The Fund had a distribution agreement with Prudential Mutual Fund Distributors,
Inc. (``PMFD''), which acted as the distributor of the Class A shares of the
Fund through January 1, 1996. Prudential Securities Incorporated (``PSI'') is
the distributor of the Class B and Class C shares of the Fund. The Fund
compensated PMFD and PSI for distributing and servicing the Fund's Class A,
Class B and Class C shares, pursuant to plans of distribution (the ``Class A,
B
and C Plans''), regardless of expenses actually incurred by them. The
distribution fees are accrued daily and payable monthly. Effective January 2,
1996, PSI became the distributor of the Class A shares of the Fund and is
serving the Fund under the same terms and conditions as under the arrangement
with PMFD.
Pursuant to the Class A, B and C Plans, the Fund compensates PSI, and PMFD for
the year ended December 31, 1995 with respect to Class A shares, for
distribution-related activities at an annual rate of up to .30 of 1%, .75 of 1%
and 1%, of the average daily net assets of the Class A, B and C shares,
respectively. Such expenses under the Plans were .15% of 1%, .75% of 1% and .75
of 1% of the average daily net assets of the Class A, B and C shares,
respectively, for the fiscal year ended December 31, 1995.
PMFD has advised the Fund that it has received approximately $8,900 in front-end
sales charges resulting from sales of Class A shares during the fiscal year
ended December 31, 1995. From these fees, PMFD paid such sales charges to
dealers (PSI and Prusec) which in turn paid commissions to salespersons.
PSI has advised the Fund that for the fiscal year ended December 31, 1995, it
received approximately $59,900 in contingent deferred sales charges imposed upon
certain redemptions by Class B shareholders.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are indirect,
wholly-owned subsidiaries of The Prudential Insurance Company of America.
- ------------------------------------------------------------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services, Inc. (``PMFS''), a wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent and during the fiscal year ended
December 31, 1995, the Fund incurred fees of approximately $387,500 for the
services of PMFS. As of December 31, 1995, fees of approximately $28,500 were
due to PMFS. Transfer agent fees and expenses in the Statement of Operations
include certain out-of-pocket expenses paid to non-affiliates.
- ------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments
and written options, for the fiscal year ended December 31, 1995, aggregated
$435,065,739 and $469,492,179, respectively.
- -------------------------------------------------------------------------------
10
<PAGE>
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Notes to Financial Statements INCOME FUND, INC.
- -------------------------------------------------------------------------------
At December 31, 1995, 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 (Depreciaton)
- ------------------------------- --------------- ----------- --------------
<S> <C> <C> <C>
British Pounds,
expiring 1/24/96.............. $ 7,869,987 $ 7,915,886 $ (45,899)
Deutschemarks,
expiring 1/24/96.............. 36,887,477 37,013,510 (126,033)
French Francs,
expiring 1/24-9/16/96......... 6,130,703 6,379,372 (248,669)
Irish Punts,
expiring 1/24/96.............. 1,604,483 1,611,271 (6,788)
Italian Lira,
expiring 1/5/96............... 614,233 617,045 (2,812)
Japanese Yen,
expiring 1/24/96.............. 3,111,496 3,058,186 53,310
New Zealand Dollars,
expiring 1/24/96.............. 13,752,542 13,798,276 (45,734)
Swiss Francs,
expiring 1/24/96.............. 8,401,149 8,427,203 (26,054)
--------------- ----------- --------------
$78,372,070 $78,820,749 $ (448,679)
--------------- ----------- --------------
--------------- ----------- --------------
</TABLE>
Transactions in options written during the fiscal year ended December 31, 1995,
were as follows:
<TABLE>
<CAPTION>
Number of
Units Premiums
(000) Received
---------- ---------
<S> <C> <C>
Options outstanding at
December 31, 1994.............................. 40,658 $ 466,627
Options written................................. 72,075 436,677
Options terminated in closing purchase
transactions................................... (96,258) (647,069)
Options exercised............................... (16,475) (256,235)
---------- ---------
Options outstanding at
December 31, 1995.............................. -- --
---------- ---------
---------- ---------
</TABLE>
The federal income tax basis of the Portfolio's investments at December 31, 1995
was $184,726,853 and, accordingly, net unrealized appreciation for federal
income tax purposes was $10,354,411 (gross unrealized appreciation--$10,475,201
gross unrealized depreciation--$120,790).
For federal income tax purposes, the Fund has a capital loss carryforward as of
December 31, 1995, of approximately $83,764,100 of which $41,890,000 expires in
1997, $23,240,000 expires in 1998 and $18,634,100 expires in 2002. Such
carryforward is after utilization of approximately $3,875,500 of net taxable
gains realized and recognized during the year ended December 31, 1995.
Accordingly, no capital gains distribution is expected to be paid to
shareholders until net gains have been realized in excess of the aggregate of
such amounts.
- ------------------------------------------------------------
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 December 31, 1995, the
Fund has a 0.4% undivided interest in the joint account. The undivided interest
for the Fund represents $4,263,000 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., 5.80%, in the principal amount of $262,000,000,
repurchase price $262,168,844, due 1/2/96. The value of the collateral including
accrued interest is $267,947,172.
BT Securities Corp., 5.75%, in the principal amount of $61,765,000, repurchase
price $61,804,461, due 1/2/96. The value of the collateral including accrued
interest is $63,059,883.
Goldman, Sachs & Co., 5.90%, in the principal amount of $365,000,000, repurchase
price $365,239,278, due 1/2/96. The value of the collateral including accrued
interest is $372,300,053.
Morgan Stanley & Co. Inc., 5.89%, in the principal amount of $103,000,000,
repurchase price $103,067,408, due 1/2/96. The value of the collateral including
accrued interest is $105,192,608.
Smith Barney, Inc., 5.83%, in the principal amount of $365,000,000, repurchase
price $365,236,439, due 1/2/96. The value of the collateral including accrued
interest is $372,300,416.
- ------------------------------------------------------------
Note 6. Capital
The Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge of up to 3.0%. Class B shares are sold with a
contingent deferred sales charge which declines from 3% to zero depending on the
period of time the shares are held. Class C shares are sold with a contingent
deferred sales charge of 1% during the first year. Class B shares will
automatically convert to Class A shares on a quarterly basis approximately five
years after purchase. A special exchange privilege is also available for
shareholders who qualify to purchase Class A shares at net asset value.
- -------------------------------------------------------------------------------
11
<PAGE>
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Notes to Financial Statements INCOME FUND, INC.
- -------------------------------------------------------------------------------
There are 2 billion authorized shares of $.001 par value common stock divided
equally into Class A, B and C shares. Of the 24,006,782 shares of common stock
issued and outstanding at December 31, 1995, PMF owned 12,717 Class A shares.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ---------------------------------- ----------- ------------
<S> <C> <C>
Year ended December 31, 1995:
Shares sold....................... 1,850,612 $15,008,482
Shares issued in reinvestment of
dividends....................... 550,526 4,466,762
Shares reacquired................. (8,945,391) (72,011,740)
----------- ------------
Net decrease in shares outstanding
before conversion............... (6,544,253) (52,536,496)
Shares issued upon conversion from
Class B......................... 169,839 1,290,841
----------- ------------
Net decrease in shares
outstanding..................... (6,374,414) $(51,245,655)
----------- ------------
----------- ------------
Year ended December 31, 1994:
Shares sold....................... 818,956 $ 6,611,489
Shares issued in reinvestment of
dividends and distributions..... 477,735 3,708,750
Shares reacquired................. (11,028,813) (85,609,639)
----------- ------------
Net decrease in shares
outstanding..................... (9,732,122) $(75,289,400)
----------- ------------
----------- ------------
Class B
- ----------------------------------
Year ended December 31, 1995:
Shares sold....................... 195,759 $ 1,567,104
Shares issued in reinvestment of
dividends....................... 107,743 873,686
Shares reacquired................. (1,173,472) (9,304,389)
----------- ------------
Net decrease in shares outstanding
before conversion............... (869,970) (6,863,599)
Shares reacquired upon conversion
into Class A.................... (169,615) (1,290,841)
----------- ------------
Net decrease in shares
outstanding..................... (1,039,585) $(8,154,440)
----------- ------------
----------- ------------
Year ended December 31, 1994:
Shares sold....................... 741,502 $ 5,987,116
Shares issued in reinvestment of
dividends and distributions..... 131,446 1,025,848
Shares reacquired................. (2,424,396) (18,845,429)
----------- ------------
Net decrease in shares
outstanding..................... (1,551,448) $(11,832,465)
----------- ------------
----------- ------------
Class C Shares Amount
- ---------------------------------- ----------- ------------
Year ended December 31, 1995:
Shares sold....................... 1,439 $ 10,601
Shares issued in reinvestment of
dividends....................... 116 954
----------- ------------
Increase in shares outstanding.... 1,555 $ 11,555
----------- ------------
----------- ------------
August 1, 1994* through December 31, 1994:
Shares sold....................... 26 $ 200
Shares issued in reinvestment of
dividends....................... -- 2
----------- ------------
Increase in shares outstanding.... 26 $ 202
----------- ------------
----------- ------------
</TABLE>
- ---------------
* Commencement of offering of Class C shares.
- -------------------------------------------------------------------------------
12
<PAGE>
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Financial Highlights INCOME FUND, INC.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A(e)
- --------------------------------------------------------------------
<S> <C> <C> <C>
<C> <C>
Ten Months
Year Ended December 31,
Ended Year Ended
- ---------------------------------- December 31, February 29,
1995 1994
1993 1992(b) 1992
-------- --------
- -------- ------------ ------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 7.32 $ 8.43 $
7.77 $ 8.39 $ 8.79
-------- --------
- -------- ------------ ------------
Income from investment operations
Net investment income......................... .52(d) .50
.59 .61 .71
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions............................... 1.20(d) (1.09)
.63 (.36) (.36)
-------- --------
- -------- ------------ ------------
Total from investment operations........... 1.72 (.59)
1.22 .25 .35
-------- --------
- -------- ------------ ------------
Less distributions
Dividends from net investment income.......... (.52)(d) (.29)
(.48) (.59) (.71)
Distributions in excess of net investment
income..................................... (.22)(d) --
- -- -- --
Distributions from capital gains.............. -- (.01)
(.08) (.28) --
Tax return of capital distributions........... -- (.22)
- -- -- (.04)
-------- --------
- -------- ------------ ------------
Total distributions........................ (.74) (.52)
(.56) (.87) (.75)
-------- --------
- -------- ------------ ------------
Net asset value, end of period................ $ 8.30 $ 7.32 $
8.43 $ 7.77 $ 8.39
-------- --------
- -------- ------------ ------------
-------- --------
- -------- ------------ ------------
TOTAL RETURN(c):.............................. 24.01% (7.02)%
16.12% 3.09% 4.24%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $181,985 $207,153
$320,406 $378,865 $271,714
Average net assets (000)...................... $200,759 $262,882
$355,018 $331,339 $399,714
Ratios to average net assets:
Expenses, including distribution fees...... 1.40% 1.46%
1.41% 1.30%(a) 1.20%
Expenses, excluding distribution fees...... 1.25% 1.31%
1.26% 1.15%(a) 1.15%
Net investment income...................... 6.09% 6.04%
7.42% 9.08%(a) 8.43%
Portfolio turnover rate....................... 220% 554%
361% 201% 170%
Total debt outstanding at end of period
(000)...................................... -- --
- -- -- --
Asset coverage(f)............................. -- --
- -- -- --
<CAPTION>
Year Ended
February 28,
1991
------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 8.56
------------
Income from investment operations
Net investment income......................... .74
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions............................... .35
------------
Total from investment operations........... 1.09
------------
Less distributions
Dividends from net investment income.......... (.74)
Distributions in excess of net investment
income..................................... --
Distributions from capital gains.............. --
Tax return of capital distributions........... (.12)
------------
Total distributions........................ (.86)
------------
Net asset value, end of period................ $ 8.79
------------
------------
TOTAL RETURN(c):.............................. 13.49%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $449,178
Average net assets (000)...................... $437,752
Ratios to average net assets:
Expenses, including distribution fees...... 1.04%
Expenses, excluding distribution fees...... 1.04%
Net investment income...................... 8.61%
Portfolio turnover rate....................... 250%
Total debt outstanding at end of period
(000)...................................... $20,240
Asset coverage(f)............................. $23,193
</TABLE>
- ---------------
(a) Annualized.
(b) The Fund changed its fiscal year end to December 31.
(c) Total return does not consider the effect of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(d) Calculated based upon average shares outstanding during the fiscal year.
(e) Prior to October 7, 1991, the Fund was organized as a closed-end fund.
(f) Per $1,000 of debt outstanding.
- -------------------------------------------------------------------------------
See Notes to Financial Statements. 13
<PAGE>
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Financial Highlights INCOME FUND, INC.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B Class C
- -----------------------------------------------------------------
- -----------
January 15,
Ten Months 1992(f)
Year Ended December 31,
Ended Through Year Ended
-------------------------------
December 31, February 29, December 31,
1995 1994 1993
1992(b) 1992 1995
------- ------- -------
------------ ------------ -----------
<S> <C> <C> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 7.33 $ 8.44 $ 7.79
$ 8.40 $ 8.43 $ 7.33
----- -----
------- ------- -------
------------
Income from investment operations
Net investment income......................... .47(d) .45 .54
.57 .08 .47(d)
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions............................... 1.20(d) (1.09) .63
(.35) (.03) 1.20(d)
----- -----
------- ------- -------
------------
Total from investment operations........... 1.67 (.64) 1.17
.22 .05 1.67
----- -----
------- ------- -------
------------
Less distributions
Dividends from net investment income.......... (.47)(d) (.26)
(.44) (.55) (.08) (.47)(d)
Distributions in excess of net investment
income..................................... (.22)(d) -- --
-- -- (.22)(d)
Distributions from capital gains.............. -- (.01)
(.08) (.28) -- --
Tax return of capital distributions........... -- (.20) --
-- -- --
----- -----
------- ------- -------
------------
Total distributions........................ (.69) (.47)
(.52) (.83) (.08) (.69)
----- -----
------- ------- -------
------------
Net asset value, end of period................ $ 8.31 $ 7.33 $ 8.44
$ 7.79 $ 8.40 $ 8.31
----- -----
----- -----
------- ------- -------
------------
------- ------- -------
------------
TOTAL RETURN(c):.............................. 23.25% (7.69)%
15.29% 2.70% 0.58% 23.25%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $17,317 $22,906 $39,440
$33,500 $1,049 $13
Average net assets (000)...................... $19,336 $31,835 $36,197
$18,358 $456 $11
Ratios to average net assets:
Expenses, including distribution fees...... 2.00% 2.07%
2.01% 1.90%(a) 1.03%(a) 2.00%
Expenses, excluding distribution fees...... 1.25% 1.31%
1.26% 1.15%(a) .28%(a) 1.25%
Net investment income...................... 5.49% 5.44%
6.67% 8.54%(a) 9.43%(a) 5.49%
Portfolio turnover rate....................... 220% 554%
361% 201% 170% 220%
<CAPTION>
August 1,
1994(g)
Through
December 31,
1994
------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 7.69
-----
Income from investment operations
Net investment income......................... .14
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions............................... (.32)
-----
Total from investment operations........... (.18)
-----
Less distributions
Dividends from net investment income.......... (.10)
Distributions in excess of net investment
income..................................... --
Distributions from capital gains.............. --
Tax return of capital distributions........... (.08)
-----
Total distributions........................ (.18)
-----
Net asset value, end of period................ $ 7.33
-----
-----
TOTAL RETURN(c):.............................. (2.44)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $193(e)
Average net assets (000)...................... $197(e)
Ratios to average net assets:
Expenses, including distribution fees...... 1.05%(a)
Expenses, excluding distribution fees...... .30%(a)
Net investment income...................... 3.30%(a)
Portfolio turnover rate....................... 554%
</TABLE>
- ---------------
(a) Annualized.
(b) The Fund changed its fiscal year end to December 31.
(c) Total return does not consider the effect of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(d) Calculated based upon average shares outstanding during the fiscal year.
(e) Figures are actual and not rounded to the nearest thousand.
(f) Commencement of offering of Class B shares.
(g) Commencement of offering of Class C shares.
- -------------------------------------------------------------------------------
14 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Report of Independent Accountants INCOME FUND, INC.
- -------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
Prudential Intermediate Global Income 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 Prudential Intermediate Global
Income Fund, Inc. (the ``Fund'') at December 31, 1995, 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 the
three years ended December 31, 1995, for the ten month period ended December 31,
1992 and for each of the two years in the period ended February 29, 1992 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, 1995 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 20, 1996
- -------------------------------------------------------------------------------
15
<PAGE>
Getting The Most From Your Prudential Mutual Fund
How many times have you read these letters -- or other financial materials --
and stumbled across a word that you don't understand?
Many shareholders have run into the same problem. We'd like to help. So we'll
use this space from time to time to explain some of the words you might have
read, but not understood. And if you have a favorite word that no one can
explain to your satisfaction, please write to us.
Basis Point: One 1/100th of 1%. For example, one half of one percentage point
is 50 basis points.
Call Option: A contract giving the holder a right to buy stocks or bonds at a
predetermined price (called the strike price) before a predetermined expiration
date. A buyer of a call option generally expects to benefit from a rise in the
price of the stock or bond.
Capital Gain/Capital Loss: The difference between the cost of a capital asset
(for example, a stock, bond or mutual fund share) and its selling price. Under
current law the federal income tax rate for individuals on a long-term gain is
28%.
Collateralized Mortgage Obligations (CMOs): Pools of mortgage-backed securities
sliced in maturity ranges that bear differing interest rates. These instruments
are sensitive to changes in interest rates and homeowner refinancing activity.
They are subject to prepayment and maturity extension risk.
Derivatives: Securities that derive their value from another security. The rate
of return of these financial products rise and fall -- sometimes very suddenly
- -- in response to changes in some specific interest rate, currency, stock or
other variable.
Discount Rate: The interest rate charged by the Federal Reserve on loans to
banks and other depository institutions.
Federal Funds Rate: The interest rate charged by one bank to another on
overnight loans.
Futures Contract: An agreement to deliver a specific amount of a commodity or
financial instruments at a set price at a stipulated time in the future.
Leverage: The use of borrowed assets to enhance return on equity. The
expectation is that the interest rate charged will be lower than the return on
the investment. While leverage can increase profits, it can also magnify
losses.
Liquidity: The ease with which a financial instrument (or mutual fund) can be
bought or sold (converted into cash) in the financial markets.
Option: An agreement to buy something, such as shares of stock, by a certain
time for a specified price. An option need not be exercised. In fact, most
expire unexercised.
Price/Earnings Ratio: The price of a share of stock divided by the earnings per
share for a 12-month period.
Spread: The difference between two values; most often used to describe the
difference between prices bid and asked for a security.
Yankee Bond: A bond denominated in U.S. dollars but sold by a foreign company
or government in the U.S. market.
<PAGE>
Prudential Intermediate Global Income Fund, Inc.
J.P. Morgan Traded Gov't Bond Index
The Prudential Intermediate Global Income Fund, Inc. and the
J.P. Morgan Traded Gov't Bond Index: Comparing a $10,000 Investment.
Class A
Average Annual
Total Returns
(CHART)
With Sales Load
7.7% Since Inception
7.5% for 5 Years
20.3 for 1 Year
Without Sales Load
8.1% Since Inception
8.2% for 5 Years
24.0% for 1 Year
Class B
Average Annual
Total Returns
(CHART)
With Sales Load
7.8% Since Inception
20.3 for 1 Year
Without Sales Load
8.0% Since Inception
23.3% for 1 Year
Class C
Average Annual
Total Returns
(CHART)
With Sales Load
14.0% Since Inception
22.3% for 1 Year
Without Sales Load
14.0% Since Inception
23.3 for 1 Year
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so an investor's returns, when redeemed, will be
worth more or less than their original cost. The charts on the right are
designed to give you an idea how much the Fund's returns can fluctuate from
year to year by measuring the best and worst years in terms of total annual
return since inception of each share class.
These graphs are furnished to you in accordance with SEC regulations. They
compare a $10,000 investment in the Prudential Intermediate Global Income Fund
(Class A, Class B and Class C) with a similar investment in the J.P. Morgan
Traded Government Bond Index by portraying the initial account values at the
commencement of operations of each share class, and subsequent account values
at the end of this reporting period (December 31, 1995) as measured on a
quarterly basis, beginning in 1988 for Class A shares, in 1992 for Class B
shares and in 1994 for Class C shares. For purposes of the graphs, and unless
otherwise indicated, in the accompanying tables it has been assumed (a) that
the maximum applicable front-end sales charge was deducted from the initial
$10,000 investment in Class A shares; (b) the maximum applicable contingent
deferred sales charge was deducted from the value of the investment in Class B
and Class C shares, assuming full redemption on December 31, 1995; (c) all
recurring fees (including management fees) were deducted; and (d) all dividends
and distributions were reinvested. Class B shares will automatically convert to
Class A shares, on a quarterly basis, beginning approximately five years after
purchase. This conversion is not reflected in the graph.
The Index is a weighted index of the total return of government bonds from 13
countries, including Australia, Belgium, Canada, Denmark, France, Germany,
Italy, Japan, the Netherlands, Spain, Sweden, United Kingdom and the United
States. It provides a broad measure of market performance. It is an unmanaged
Index and includes the reinvestment of all dividends, but does not reflect the
payment of transaction costs and advisory fees associated with an investment in
the Fund. The securities in the Index may differ substantially from the
securities in the Fund. The Index is not the only one that may be used to
characterize performance of global bond funds and other indexes may portray
different comparative performance.
<PAGE>
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852
Internet Address:
http:\\www.prudential.com
(LOGO)
Directors
Thomas A. Owens, Jr.
Richard A. Redeker
Gerald A. Stahl
Stephen Stoneburn
Robert H. Wellington
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Deborah A. Docs, 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
Shereff, Friedman, Hoffman & Goodman LLP
919 Third Avenue
New York, NY 10022
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
74435G203 MF155E
74435G302 Cat. #444582Y
74435G401
