(ICON)
Prudential
Intermediate
Global
Income
Fund, Inc.
ANNUAL
REPORT
Dec. 31, 1996
(LOGO)
<PAGE>
Prudential Intermediate Global
Income Fund, Inc.
Performance At A Glance.
It was a good year for your Prudential Intermediate Global Income Fund.
Powered by a strong U.S. dollar and prudent asset selection, your Fund
produced competitive returns throughout 1996, when compared to similar bond
funds tracked by Lipper Analytical Services.
<TABLE>
<CAPTION>
Cumulative Total Returns1 As of 12/31/96
One Five Since
Year Years Inception2
<S> <C> <C> <C>
Class A 11.1% 53.9% 100.9%
Class B 10.4 N/A 49.5
Class C 10.4 N/A 32.7
Class Z N/A N/A 5.2
Lipper Global Income Fund Avg3 10.4 39.0 **
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns1 As of 12/31/96
One Five Since
Year Years Inception2
<S> <C> <C> <C>
Class A 7.8% 8.4% 8.1%
Class B 7.4 N/A 8.4
Class C 9.4 N/A 12.4
</TABLE>
<TABLE>
<CAPTION>
Total Dividends 30-Day
Paid for 12 Mos. SEC Yield
<S> <C> <C> <C>
Dividends
& Yields Class A $0.85 5.56%
As of Class B $0.80 5.13
12/31/96 Class C $0.80 5.13
Class Z $0.49 5.89
</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 the 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 declining contingent deferred 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. Since Class Z shares have been in
existence less than one year, no average annual total returns are shown. 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; 9/13/96
Class Z.
3These are the average cumulative total returns of 131 funds in the Lipper
Global Income Fund category for one year, and 38 funds for five years.
**Lipper since inception returns were Class A: 93.1% for 18 funds; Class B:
40.9% for 40 funds; and Class C: 28.0% for 90 funds. Class Z returns were not
available. Lipper provides data on a monthly basis, so for comparative
purposes, these returns reflect the Fund's first full calendar month of
performance.
How Investments Compared.
(As of 12/31/96)
(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 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
(PHOTOS)
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 bonds issued throughout the world. The
Fund may also invest up to 10% of total net assets in bonds rated below
investment grade with a minimum rating of "B" by Standard & Poor's or Moody's
or of comparable quality in our view. Lower rated securities carry a greater
risk of loss of principal and interest than higher rated securities. There are
special risks associated with foreign investing, including social, political
and currency risks, and potential illiquidity. There can be no assurance that
the Fund's investment objective will be achieved.
How We Invest.
We look to invest in countries with well-managed economies and currencies.
These are critical factors in determining a bond's value and its prospects for
appreciation. Once we have identified our preferred countries, we look at
specific types of bonds and issuers. It's a top-down investment philosophy
that governs our broad country and currency allocation.
Strategy Session.
[kl]||||||||||||||||||||||||||||||||
What Went Well.
Countries Yield Success.
Several of our country selections yielded success over the year, including:
- - In Eastern Europe, our emerging market investments performed very well. As we
related in our previous letter to you, Poland, the Czech Republic and Hungary
have taken great strides in reforming their economies and encouraging foreign
investment. Ratings by Moody's and Standard & Poor's of government bonds issued
in these countries improved, all now having investment grade status. Bond
yields were also quite attractive. Eastern European markets comprised 3% of
total investments on December 31, 1996.
- - In Western Europe, we were impressed by the performances of the Spanish and
Italian bond markets, which returned 14% and 27%, respectively in local
currency terms, according to Salomon Bros. At year-end, 5.6% of total fund
investments were in Spanish bonds, and 4.5% of total Fund investments were
allocated to Italian bonds.
- - Among dollar-bloc countries (U.S., Australia, Canada and New Zealand),
Australia and Canada also had solid returns of about 11% for the year. We
modestly increased our holdings to 5% from 2% in Australia, and to 7% from 6%
in Canada as the year progressed.
Five Largest
Issuers.
20.1% U.S. Treasury Notes
6.7% Netherlands Bonds
6.4% German Bonds
6.0% Canadian Bonds
6.0% Danish Bonds
Expressed as a percentage of total net assets as of 12/31/96.
Portfolio Breakdown.
Expressed as a percentage of
total investments as of 12/31/96.
(PIE CHART)
And Not So Well.
In Retrospect...
Looking back, we would have been more successful if we invested additional
assets in emerging markets or purchased additional currency contracts tied to
the dollar. (It was our U.S. dollar strategy and emerging market returns which
helped propel us ahead of the average international bond fund at mid-year.)
Looking Ahead.
Six months ago we said that the world's bond markets would probably remain
sluggish for the second half of 1996. We were pleasantly surprised by how the
U.S. bond market recovered, and its positive effects on global bond markets.
Going forward, we are cautiously optimistic. The U.S. is entering its sixth
year of moderate economic growth with low levels of inflation. Around the
world, economic growth remains slow and inflation remains well-behaved. Your
Fund will seek additional return by pursuing its current investment policies
and by adjusting its hedging strategy to meet changing market conditions.
- -------------------------------------------------------------------------------
1
<PAGE>
President's Letter February 3, 1997
(PHOTO)
Dear Shareholder:
For many investors, 1996 was the second year of back-to-back, double-digit
stock market returns. In late November, the Dow Jones Industrial Average
passed 6500 -- only weeks after breaking the 6000 mark in mid-October -- and
another record high was reached in January 1997. America's economic expansion
is entering its sixth year and there seems little evidence of an end to the
continued modest growth and low inflation we've enjoyed for the last several
years.
This is good news. For most investors it's meant an increase in their share
values for college funds, retirement nest eggs or other long-term financial
goals. However, as you read your year-end account statements and make plans
for 1997, it's important to remember that there never is a "sure thing" when
it comes to investment returns. Stock and bond markets go down just as they go
up. (Did you notice the brief period of decline this past summer?) No one
likes to see the value of their investments fall but such periods remind us we
must keep our expectations realistic.
Regardless of the market's direction, a wise investor plans for tomorrow's
needs today. Your Financial Advisor or Registered Representative can help you:
- - Review your portfolio and suggest strategies for 1997, such as diversifying
across different types of investments. Financial markets seldom move in
lockstep. By investing in a mix of stock and bond funds (foreign & domestic)
and money market funds you may be in a better position to achieve your long-
term goals and to weather periods of uncertainty.
- - See why annuities have become popular retirement planning tools. The choices
are broader than ever. Our new Discovery SelectSM Variable Annuity offers
you many of the keys to successful retirement planning, including a
personalized asset allocation program and a choice of 21 variable- or fixed-
rate investment options offering a broad array of investment objectives and
styles.
- - Explain new retirement savings developments. For example, Congress has
expanded the contribution limit on spousal IRAs. And don't forget, it's not
too late for you to make a contribution to your IRA or open one for 1996.
The IRS deadline is April 15, 1997, but it's best to act sooner.
Why not contact your Financial Advisor or Registered Representative today? If
you are interested in Discovery SelectSM call for a prospectus, which contains
more complete information. Read it carefully before you invest.
Sincerely,
Brian M. Storms
President, Prudential Mutual Funds & Annuities
P.S. Your 1997 Prudential IRA contribution may qualify you for a waiver of the
annual custodial fee. Ask your financial representative for details.
- -------------------------------------------------------------------------------
2
<PAGE>
Portfolio of Investments as of PRUDENTIAL INTERMEDIATE GLOBAL
December 31, 1996 INCOME FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
------------------------------------------------------------
LONG-TERM INVESTMENTS--87.4%
- --------------------------------------------------------------
Australia--5.1%
A$ 2,900 New South Wales Treasury
Corporation,
6.50%, 5/1/06 $ 2,125,407
9,500 Queensland Treasury
Corporation,
6.50%, 6/14/05 7,045,563
------------
9,170,970
- ------------------------------------------------------------
Canada--7.3%
C$ 3,000 British Columbia Provincial
Bonds,
7.75%, 6/16/03 2,374,754
Canadian Government Bonds,
10,000 9.00%, 12/1/04 8,556,115(a)
2,500 9.00%, 6/1/25, Ser. A-76 2,244,767(a)
------------
13,175,636
- ------------------------------------------------------------
Czech Republic--0.5%
CZK 10,000 International Finance
Corporation,
10.50%, 11/30/98 364,968
15,000 Skoda Finance,
11.625%, 2/9/98 549,378
------------
914,346
- ------------------------------------------------------------
Denmark--6.0%
Danish Government Bonds,
DKr 15,000 8.00%, 5/15/03 2,817,076
27,500 7.00%, 12/15/04 4,859,849(a)
16,500 8.00%, 3/15/06 3,070,821(a)
------------
10,747,746
- ------------------------------------------------------------
France--1.2%
FF 10,500 National Bank of Hungary,
8.00%, 11/12/99 2,198,237
Germany--10.2%
German Government Bonds,
DM 3,500 6.75%, 4/22/03 $ 2,441,491(a)
10,500 7.375%, 1/3/05 7,542,302(a)
2,500 6.25%, 1/4/24 1,534,846(a)
4,000 Republic of Columbia,
7.25%, 12/21/00 2,725,446
4,000 Tokyo Gas Co.,
7.00%, 7/27/05 2,752,674
2,000 United Mexican States,
8.125%, 9/10/04, FRN 1,312,805
------------
18,309,564
- ------------------------------------------------------------
Hungarian--0.6%
HUF 180,000 Hungary Government Bonds,
23.50%, 5/17/98 1,147,479
- ------------------------------------------------------------
Italy--4.5%
Lira 1,500,000 Bayerische Landesanstalt Bank,
10.625%, 5/12/00 1,097,501
9,000,000 Italian Government Bonds,
8.50%, 8/1/99 6,186,057
1,000,000 Republic of Italy,
8.50%, 1/1/04 702,598
------------
7,986,156
- ------------------------------------------------------------
Netherlands--6.7%
Dutch Government Bonds,
NLG 5,000 7.50%, 6/15/99 3,140,166
11,500 7.00%, 6/15/05 7,248,960(a)
2,600 7.50%, 1/15/23 1,694,477(a)
------------
12,083,603
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3 -----
<PAGE>
Portfolio of Investments as of PRUDENTIAL INTERMEDIATE GLOBAL
December 31, 1996 INCOME FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
------------------------------------------------------------
New Zealand--2.0%
NZ$ 4,800 New Zealand Government Bonds,
8.00%, 2/15/01 $ 3,506,686
- ------------------------------------------------------------
Poland--0.5%
PLZ 1,250 Poland Government Bonds,
16.00%, 10/12/98 409,981
1,250 General Electric Capital
Corporation,
18.25%, 2/27/98 427,329
------------
837,310
- ------------------------------------------------------------
Spain--4.1%
Spanish Government Bonds,
Pts 450,000 10.30%, 6/15/02 4,103,856(a)
375,000 8.20%, 2/28/09 3,156,303
------------
7,260,159
- ------------------------------------------------------------
United Kingdom--6.6%
BP 1,500 Guaranteed Export Finance
Corporation,
7.25%, 12/15/98 2,572,712
United Kingdom Treasury Bonds,
2,900 7.75%, 9/8/06 5,034,390
2,200 8.75%, 8/25/17 4,175,596
------------
11,782,698
- ------------------------------------------------------------
United States--32.1%
Corporate Bonds--3.4%
US$ 750 Banco Nacional de Commercio
Exterior SNC, (Mexico),
7.50%, 7/1/00 729,750
1,250 Bancomer S.A., SNC, (Mexico),
8.00%, 7/7/98 1,246,250
US$ 600 Empresas La Moderna S.A.,
(Mexico),
11.375%, 1/25/99 $ 630,000
1,450 Financiera Energetica Nacional,
(Colombia),
9.00%, 11/8/99 1,513,075
2,000 Petroleas Mexicano, (Mexico),
6.50%, 3/8/99, FRN 1,956,248
------------
6,075,323
Sovereign Bonds--7.8%
750 National Bank of Romania,
9.75%, 6/25/99 759,375
980 Republic of Argentina,
6.625%, 3/31/05, Ser. L, FRN 852,600
1,092 Republic of Brazil,
6.6875%, 1/1/01, IDU, FRN 1,057,875
Republic of Colombia,
2,185 7.125%, 5/11/98 2,192,647
1,500 7.25%, 2/23/04 1,435,500
3,500 Republic of Poland,
Disc. Note,
6.50%, 10/27/24, FRN 3,399,375
750 Rio De Janeiro Municipality,
10.375%, 7/12/99 774,375
500 Trinidad & Tobago Republic,
9.75%, 11/3/00 536,250
United Mexican States,
1,000 9.75%, 2/6/01 1,040,500
2,000 7.5625%, 8/6/01, FRN 2,004,800
------------
14,053,297
Supranational Bonds--0.8%
1,350 Corporacion Andina de Formento,
7.375%, 7/21/00 1,373,625
U.S. Government Obligations--20.1%
United States Treasury Notes,
15,000 6.75%, 6/30/99 15,264,900
6,500 6.125%, 9/30/00 6,495,905(a)
</TABLE>
- --------------------------------------------------------------------------------
4 See Notes to Financial Statements.
<PAGE>
Portfolio of Investments as of PRUDENTIAL INTERMEDIATE GLOBAL
December 31, 1996 INCOME FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
------------------------------------------------------------
U.S. Government Obligations (cont'd.)
United States Treasury Notes,
US$ 6,000 5.75%, 8/15/03 $ 5,820,000(a)
7,800 7.875%, 11/15/04 8,511,750(a)
------------
36,092,555
------------
57,594,800
------------
Total long-term investments
(cost US$148,296,553) 156,715,390
------------
- ------------------------------------------------------------
SHORT-TERM INVESTMENTS--10.4%
- ------------------------------------------------------------
Czech Republic--0.6%
CZK 30,000 ING Bank, Euro Commercial
Paper,
12.25%(b), 2/20/97 1,080,811
- ------------------------------------------------------------
Hungarian--0.3%
HUF 100,000 Hungarian Treasury Bills,
25.00%(b), 5/27/97 618,688
- ------------------------------------------------------------
Indonesia--0.2%
INR 1,000,000 Bank Tabungan Negara,
13.45%(b), 11/7/97 379,310
- ------------------------------------------------------------
Poland--0.8%
Polish Treasury Bills,
PLZ 1,000 19.00%(b), 1/22/97 345,753
1,000 19.00%(b), 2/5/97 343,282
2,340 19.00%(b), 2/12/97 799,206
------------
1,488,241
Spain--1.3%
Pts 300,000 Republic of Argentina,
12.80%, 12/9/97 $ 2,385,159
- ------------------------------------------------------------
United Kingdom--1.1%
BP 1,100 Mellon Bank Time Deposit,
5.75%, 1/6/97 1,881,950
- ------------------------------------------------------------
United States--6.1%
US$ 10,933 Joint Repurchase Agreement
Account,
6.61%, 1/2/97; (Note 5) 10,933,000
------------
Total short-term investments
(cost US$18,885,532) 18,767,159
------------
- ------------------------------------------------------------
Total Investments--97.8%
(cost US$167,182,085; Note 4) 175,482,549
Other assets in excess of
liabilities--2.2% 3,863,767
------------
Net Assets--100% $179,346,316
------------
------------
</TABLE>
- ---------------
Portfolio securities are classified according to the securities
currency denomination.
(a) Principal amount segregated as collateral for forward currency contracts.
Aggregate value of segregated securities-US$64,125,139.
(b) Percentages quoted represent yield-to-maturity as of purchase date.
FRB-Floating Rate Bond.
FRN-Floating Rate Note.
IDU-Interest Due and Unpaid Bonds.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5 -----
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Statement of Assets and Liabilities INCOME FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets December 31, 1996
Investments, at value (cost $167,182,085)............................................................... $ 175,482,549
Foreign currency, at value (cost $768,063).............................................................. 763,000
Cash.................................................................................................... 67,346
Interest receivable..................................................................................... 3,863,312
Forward currency contracts-net amount receivable from counterparties.................................... 247,726
Receivable for Fund shares sold......................................................................... 29,728
Other assets............................................................................................ 4,867
-----------------
Total assets......................................................................................... 180,458,528
-----------------
Liabilities
Payable for Fund shares reacquired...................................................................... 455,218
Accrued expenses........................................................................................ 372,392
Management fee payable.................................................................................. 113,616
Forward currency contracts-net amount payable to counterparties......................................... 110,550
Dividends payable....................................................................................... 30,719
Distribution fee payable................................................................................ 29,717
-----------------
Total liabilities.................................................................................... 1,112,212
-----------------
Net Assets.............................................................................................. $ 179,346,316
-----------------
-----------------
Net assets were comprised of:
Common stock, at par................................................................................. $ 21,513
Paid-in capital in excess of par..................................................................... 250,508,825
-----------------
250,530,338
Undistributed net investment income.................................................................. 1,676,080
Accumulated net realized loss on investments......................................................... (81,254,373)
Net unrealized appreciation on investments and foreign currencies.................................... 8,394,271
-----------------
Net assets, December 31, 1996........................................................................... $ 179,346,316
-----------------
-----------------
Class A:
Net asset value and redemption price per share
($165,828,616 / 19,892,453 shares of common stock issued and outstanding)......................... $8.34
Maximum sales charge (3.00% of offering price)....................................................... .26
-----------------
Maximum offering price to public..................................................................... $8.60
-----------------
-----------------
Class B:
Net asset value, offering price and redemption price per share
($12,986,899 / 1,556,607 shares of common stock issued and outstanding)........................... $8.34
-----------------
-----------------
Class C:
Net asset value, offering price and redemption price per share
($189,666 / 22,736 shares of common stock issued and outstanding)................................. $8.34
-----------------
-----------------
Class Z:
Net asset value, offering price and redemption price per share
($341,135 / 40,924 shares of common stock issued and outstanding)................................. $8.34
-----------------
-----------------
</TABLE>
- --------------------------------------------------------------------------------
6 See Notes to Financial Statements.
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
INCOME FUND, INC.
Statement of Operations
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Year Ended
Net Investment Income December 31, 1996
Income
Interest and discount earned (net of
foreign withholding taxes of
$12,892)........................... $14,703,425
-----------------
Expenses
Management fee........................ 1,386,451
Distribution fee--Class A............. 253,828
Distribution fee --Class B............ 116,182
Distribution fee--Class C............. 824
Transfer agent's fees and expenses.... 386,000
Custodian's fees and expenses......... 180,000
Reports to shareholders............... 153,000
Registration fees..................... 74,000
Audit fees and expenses............... 65,000
Directors' fees and expenses.......... 34,000
Legal fees and expenses............... 24,000
Insurance expense..................... 4,000
Miscellaneous......................... 10,761
-----------------
Total expenses..................... 2,688,046
-----------------
Net investment income.................... 12,015,379
-----------------
Net Realized and Unrealized Gain
(Loss) on Investments and Foreign
Currency Transactions
Net realized gain on:
Investment transactions............... 2,873,006
Foreign currency transactions......... 5,652,978
-----------------
8,525,984
-----------------
Net change in unrealized
appreciation/depreciation of:
Investments........................... (2,185,772)
Foreign currencies.................... 555,027
-----------------
(1,630,745)
-----------------
Net gain on investments and foreign
currencies............................ 6,895,239
-----------------
Net Increase in Net Assets
Resulting from Operations................ $18,910,618
-----------------
-----------------
</TABLE>
PRUDENTIAL INTERMEDIATE GLOBAL
INCOME FUND, INC.
Statement of Changes in Net Assets
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended December 31,
in Net Assets 1996 1995
<S> <C> <C>
Operations
Net investment income.......... $ 12,015,379 $ 13,288,621
Net realized gain on investment
and foreign currency
transactions................ 8,525,984 18,708,769
Net change in net unrealized
appreciation/depreciation on
investments and foreign
currencies.................. (1,630,745) 15,737,917
------------ ------------
Net increase in net assets
resulting from operations... 18,910,618 47,735,307
------------ ------------
Net equalization debits........... -- (68,241)
------------ ------------
Dividends and distributions (Note
1)
Dividends from net investment
income
Class A..................... (11,085,209) (12,197,948)
Class B..................... (920,752) (1,089,996)
Class C..................... (6,619) (677)
Class Z..................... (2,799) --
------------ ------------
(12,015,379) (13,288,621)
------------ ------------
Distributions in excess of net
investment income
Class A..................... (5,793,623) (5,263,793)
Class B..................... (474,939) (470,367)
Class C..................... (4,101) (293)
Class Z..................... (4,774) --
------------ ------------
(6,277,437) (5,734,453)
------------ ------------
Fund share transactions (net of
share conversions) (Note 6)
Net proceeds from shares
sold........................ 16,398,099 16,586,187
Net asset value of shares
issued in reinvestment of
dividends and
distributions............... 6,011,409 5,341,402
Cost of shares reacquired...... (42,995,654) (81,316,129)
------------ ------------
Net decrease in net assets from
Fund share transactions..... (20,586,146) (59,388,540)
------------ ------------
Total decrease.................... (19,968,344) (30,744,548)
Net Assets
Beginning of year................. 199,314,660 230,059,208
------------ ------------
End of year....................... $179,346,316 $199,314,660
------------ ------------
------------ ------------
</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 under triparty repurchase agreements, as the case may be take
possession of the underlying collateral securities, the value of which exceeds
the principal amount of the repurchase transaction including accrued interest.
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 year 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
- --------------------------------------------------------------------------------
8
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Notes to Financial Statements INCOME FUND, INC.
- --------------------------------------------------------------------------------
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 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 and
realized gains or losses are allocated daily to each class of shares based upon
the relative proportion of net assets of each class at the beginning of the day.
Taxes: It is the Fund's policy to continue to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders. Therefore, no federal
income 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: Effective January 1, 1996, the Fund discontinued the accounting
practice of equalization. Equalization is a practice whereby a portion of the
proceeds from sales and costs of repurchases of capital 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. A portion ($402,412) of undistributed net investment income at December
31, 1995, resulting from equalization, was transferred to paid-in capital in
excess of par. Such reclassification has no effect on net assets, results from
operations, or net asset value per share.
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 $5,899,674 of
foreign currency gains from accumulated net realized loss on investments to
undistributed net investment income. 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 LLC
(``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 has a distribution agreement with Prudential Securities Incorporated
(``PSI''), which acts as the distributor of the Class A, B, C and Z 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 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. No distribution or
service fees are paid to PSI as distributor of the Class Z shares of the Fund.
Pursuant to the Class A, B and C Plans, the Fund compensates PSI with respect to
Class A, B and C shares, for distribution-related activities at an
- --------------------------------------------------------------------------------
9 -----
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Notes to Financial Statements INCOME FUND, INC.
- --------------------------------------------------------------------------------
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 year ended December 31,
1996.
PSI has advised the Fund that it has received approximately $22,100 in front-end
sales charges resulting from sales of Class A shares during the year ended
December 31, 1996. From these fees, PSI paid such sales charges to Pruco
Securities Corporation, an affiliated broker-dealer, which in turn paid
commissions to salespersons and incurred other distribution costs.
PSI has advised the Fund that for the year ended December 31, 1996, it received
approximately $34,900 and $500 in contingent deferred sales charges imposed upon
certain redemptions by Class B and C shareholders, respectively.
PSI, PMF and PIC are indirect, wholly-owned subsidiaries of The Prudential
Insurance Company of America.
The Fund, along with other affiliated registered investment companies (the
``Funds''), entered into a credit agreement (the ``Agreement'') on December 31,
1996 with an unaffiliated lender. The maximum commitment under the Agreement is
$200,000,000. The Agreement expires on December 30, 1997. Interest on any such
borrowings outstanding will be at market rates. The purposes of the Agreement is
to serve as an alternative source of funding for capital share redemptions. The
Fund has not borrowed any amounts pursuant to the Agreement as of December 31,
1996. The Funds pay a commitment fee at an annual rate of .055 of 1% on the
unused portion of the credit facility. The commitment fee is accrued and paid
quarterly on a pro-rata basis by the Funds.
- ------------------------------------------------------------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (``PMFS''), a wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent and during the year ended December 31,
1996, the Fund incurred fees of approximately $317,000 for the services of PMFS.
As of December 31, 1996, fees of approximately $25,000 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 year ended December 31, 1996, aggregated $73,338,409 and $95,925,619,
respectively.
At December 31, 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 Payable Value (Depreciaton)
- ------------------------------- --------------- ----------- --------------
<S> <C> <C> <C>
Australian Dollars,
expiring 1/29/97.............. $ 1,714,535 $ 1,716,995 $ (2,460)
Deutschemarks,
expiring 1/29/97.............. 16,465,320 16,545,662 (80,342)
French Francs,
expiring 3/17/97.............. 6,849,047 6,759,979 89,068
Japanese Yen,
expiring 1/29/97.............. 4,428,698 4,335,068 93,630
Netherland Guilders,
expiring 1/29/97.............. 18,379,040 18,406,788 (27,748)
Swiss Francs,
expiring 1/29/97.............. 7,002,935 6,937,907 65,028
--------------- ----------- --------------
$54,839,575 $54,702,399 $ 137,176
--------------- ----------- --------------
--------------- ----------- --------------
</TABLE>
The federal income tax basis of the Fund's investments at December 31, 1996 was
$167,204,178 and, accordingly, net unrealized appreciation for federal income
tax purposes was $8,278,371 (gross unrealized appreciation--$9,615,041 gross
unrealized depreciation--$1,336,670).
For federal income tax purposes, the Fund has a capital loss carryforward as of
December 31, 1996, of approximately $81,232,300 of which $39,358,200 expires in
1997, $23,240,000 expires in 1998 and $18,634,100 expires in 2002. Such
carryforward is after utilization of approximately $2,531,800 of net taxable
gains realized and recognized during the year ended December 31, 1996.
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
- --------------------------------------------------------------------------------
10
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Notes to Financial Statements INCOME FUND, INC.
- --------------------------------------------------------------------------------
December 31, 1996, the Fund has a 1.0% undivided interest in the joint account.
The undivided interest for the Fund represents $10,933,000 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., 6.75%, in the principal amount of $341,000,000, repurchase
price $341,127,875, due 1/2/97. The value of the collateral including accrued
interest is $349,151,276.
Goldman, Sachs & Co. Inc., 6.60%, in the principal amount of $341,000,000,
repurchase price $341,125,033, due 1/2/97. The value of the collateral including
accrued interest is $347,820,889.
J.P. Morgan Securities, 6.60%, in the principal amount of $341,000,000,
repurchase price $341,125,033, due 1/2/97. The value of the collateral including
accrued interest is $347,822,540.
Sanwa Securities USA, 6.00%, in the principal amount of $68,014,000, repurchase
price $68,036,671, due 1/2/97. The value of the collateral including accrued
interest is $69,375,117.
- ------------------------------------------------------------
Note 6. Capital
The Fund offers Class A, Class B, Class C and Class Z shares. Class A shares are
sold with a front-end sales charge of up to 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.
Effective September 13, 1996, the Fund commenced offering Class Z shares. Class
Z shares are not subject to any sales or redemption charge and are offered
exclusively for sale to a limited group of investors.
There are 2 billion authorized shares of $.001 par value common stock divided
equally into Class A, B, C and Z shares. Of the 21,512,720 shares of common
stock issued and outstanding at December 31, 1996, 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, 1996:
Shares sold....................... 1,627,906 $13,874,864
Shares issued in reinvestment of
dividends....................... 623,439 5,190,056
Shares reacquired................. (4,456,896) (37,256,995)
----------- ------------
Net decrease in shares outstanding
before conversion............... (2,205,551) (18,192,075)
Shares issued upon conversion from
Class B......................... 176,554 1,485,956
----------- ------------
Net decrease in shares
outstanding..................... (2,028,997) $(16,706,119)
----------- ------------
----------- ------------
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)
----------- ------------
----------- ------------
<CAPTION>
Class B
- ----------------------------------
<S> <C> <C>
Year ended December 31, 1996:
Shares sold....................... 221,716 $ 1,860,253
Shares issued in reinvestment of
dividends....................... 95,574 795,836
Shares reacquired................. (667,933) (5,574,736)
----------- ------------
Net decrease in shares outstanding
before conversion............... (350,643) (2,918,647)
Shares reacquired upon conversion
into Class A.................... (176,501) (1,485,956)
----------- ------------
Net decrease in shares
outstanding..................... (527,144 ) $(4,404,603)
----------- ------------
----------- ------------
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)
----------- ------------
----------- ------------
</TABLE>
- --------------------------------------------------------------------------------
11 -----
<PAGE>
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Notes to Financial Statements INCOME FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Class C Shares Amount
- ---------------------------------- ----------- ------------
Year ended December 31, 1996:
Shares sold....................... 33,617 $ 278,856
Shares issued in reinvestment of
dividends....................... 1,399 11,666
Shares reacquired................. (13,861) (116,335)
----------- ------------
Net increase in shares
outstanding..................... 21,155 $ 174,187
----------- ------------
----------- ------------
Year ended December 31, 1995:
Shares sold....................... 1,439 $ 10,601
Shares issued in reinvestment of
dividends....................... 116 954
----------- ------------
Net increase in shares
outstanding..................... 1,555 $ 11,555
----------- ------------
----------- ------------
Class Z
- ----------------------------------
September 13, 1996(a) through
December 31, 1996:
Shares sold....................... 44,728 $ 384,126
Shares issued in reinvestment of
dividends and distributions..... 1,667 13,851
Shares reacquired................. (5,471) (47,588)
----------- ------------
Net increase in shares
outstanding..................... 40,924 $ 350,389
----------- ------------
----------- ------------
</TABLE>
- ---------------
(a) Commencement of offering of Class Z shares.
- --------------------------------------------------------------------------------
12
<PAGE>
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Financial Highlights INCOME FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A(e)
----------------------------------------------------------------
Ten Months
Year Ended December 31, Ended
----------------------------------------------- December 31,
1996 1995 1994 1993 1992(b)
-------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period......................... $ 8.30 $ 7.32 $ 8.43 $ 7.77 $ 8.39
-------- -------- -------- -------- ------------
Income from investment operations
Net investment income........................................ .56 .52(d) .50 .59 .61
Net realized and unrealized gain (loss) on
investment and foreign currency transactions.............. .33 1.20(d) (1.09) .63 (.36)
-------- -------- -------- -------- ------------
Total from investment operations.......................... .89 1.72 (.59) 1.22 .25
-------- -------- -------- -------- ------------
Less distributions
Dividends from net investment income......................... (.56) (.52)(d) (.29) (.48) (.59)
Distributions in excess of net investment income............. (.29) (.22)(d) -- -- --
Distributions from capital gains............................. -- -- (.01) (.08) (.28)
Tax return of capital distributions.......................... -- -- (.22) -- --
-------- -------- -------- -------- ------------
Total distributions....................................... (.85) (.74) (.52) (.56) (.87)
-------- -------- -------- -------- ------------
Net asset value, end of period............................... $ 8.34 $ 8.30 $ 7.32 $ 8.43 $ 7.77
-------- -------- -------- -------- ------------
-------- -------- -------- -------- ------------
TOTAL RETURN(c):............................................. 11.13% 24.01% (7.02)% 16.12% 3.09%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).............................. $165,829 $181,985 $207,153 $320,406 $378,865
Average net assets (000)..................................... $169,219 $200,759 $262,882 $355,018 $331,339
Ratios to average net assets:
Expenses, including distribution fees..................... 1.40% 1.40% 1.46% 1.41% 1.30%(a)
Expenses, excluding distribution fees..................... 1.25% 1.25% 1.31% 1.26% 1.15%(a)
Net investment income..................................... 6.55% 6.09% 6.04% 7.42% 9.08%(a)
For Class A, B, C and Z shares:
Portfolio turnover rate...................................... 45% 220% 554% 361% 201%
<CAPTION>
Year Ended
February 29,
1992
------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period......................... $ 8.79
------------
Income from investment operations
Net investment income........................................ .71
Net realized and unrealized gain (loss) on
investment and foreign currency transactions.............. (.36)
------------
Total from investment operations.......................... .35
------------
Less distributions
Dividends from net investment income......................... (.71)
Distributions in excess of net investment income............. --
Distributions from capital gains............................. --
Tax return of capital distributions.......................... (.04)
------------
Total distributions....................................... (.75)
------------
Net asset value, end of period............................... $ 8.39
------------
------------
TOTAL RETURN(c):............................................. 4.24%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).............................. $271,714
Average net assets (000)..................................... $399,714
Ratios to average net assets:
Expenses, including distribution fees..................... 1.20%
Expenses, excluding distribution fees..................... 1.15%
Net investment income..................................... 8.43%
For Class A, B, C and Z shares:
Portfolio turnover rate...................................... 170%
</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.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 13 -----
<PAGE>
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Financial Highlights INCOME FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
-------------------------------------------------------------
Ten Months
Year Ended December 31, Ended
-------------------------------------------- December 31,
1996 1995 1994 1993 1992(b)
-------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period......................... $ 8.31 $ 7.33 $ 8.44 $ 7.79 $ 8.40
-------- ------- ------- ------- ------------
Income from investment operations
Net investment income........................................ .53 .47(d) .45 .54 .57
Net realized and unrealized gain (loss) on
investment and foreign currency transactions.............. .30 1.20(d) (1.09) .63 (.35)
-------- ------- ------- ------- ------------
Total from investment operations.......................... .83 1.67 (.64) 1.17 .22
-------- ------- ------- ------- ------------
Less distributions
Dividends from net investment income......................... (.53 ) (.47)(d) (.26) (.44) (.55)
Distributions in excess of net investment income............. (.27 ) (.22)(d) -- -- --
Distributions from capital gains............................. -- -- (.01) (.08) (.28)
Tax return of capital distributions.......................... -- -- (.20) -- --
-------- ------- ------- ------- ------------
Total distributions....................................... (.80 ) (.69) (.47) (.52) (.83)
-------- ------- ------- ------- ------------
Net asset value, end of period............................... $ 8.34 $ 8.31 $ 7.33 $ 8.44 $ 7.79
-------- ------- ------- ------- ------------
-------- ------- ------- ------- ------------
TOTAL RETURN(c):............................................. 10.36 % 23.25% (7.69)% 15.29% 2.70%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).............................. $12,987 $17,317 $22,906 $39,440 $ 33,500
Average net assets (000)..................................... $15,491 $19,336 $31,835 $36,197 $ 18,358
Ratios to average net assets:
Expenses, including distribution fees..................... 2.00 % 2.00% 2.07% 2.01% 1.90%(a)
Expenses, excluding distribution fees..................... 1.25 % 1.25% 1.31% 1.26% 1.15%(a)
Net investment income..................................... 5.94 % 5.49% 5.44% 6.67% 8.54%(a)
<CAPTION>
January 15,
1992(e)
Through
February 29,
1992
------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period......................... $ 8.43
-----
Income from investment operations
Net investment income........................................ .08
Net realized and unrealized gain (loss) on
investment and foreign currency transactions.............. (.03)
-----
Total from investment operations.......................... .05
-----
Less distributions
Dividends from net investment income......................... (.08)
Distributions in excess of net investment income............. --
Distributions from capital gains............................. --
Tax return of capital distributions.......................... --
-----
Total distributions....................................... (.08)
-----
Net asset value, end of period............................... $ 8.40
-----
-----
TOTAL RETURN(c):............................................. .58%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).............................. $1,049
Average net assets (000)..................................... $ 456
Ratios to average net assets:
Expenses, including distribution fees..................... 1.03%(a)
Expenses, excluding distribution fees..................... .28%(a)
Net investment income..................................... 9.43%(a)
</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.
- --------------------------------------------------------------------------------
14 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Financial Highlights INCOME FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Class Z
-------------------------------------- -------------
August 1, September 13,
Year Ended December 1994(e) 1996(f)
31, Through Through
--------------------- December 31, December 31,
1996 1995 1994 1996
-------- -------- ------------ -------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period......................... $ 8.31 $ 7.33 $ 7.69 $ 8.39
-------- -------- ----- -----
Income from investment operations
Net investment income........................................ .53 .47(d) .14 .32
Net realized and unrealized gain (loss) on investment and
foreign currency transactions............................. .30 1.20(d) (.32) .12
-------- -------- ----- -----
Total from investment operations.......................... .83 1.67 (.18) .44
-------- -------- ----- -----
Less distributions
Dividends from net investment income......................... (.53) (.47)(d) (.10) (.32)
Distributions in excess of net investment income............. (.27) (.22)(d) -- (.17)
Tax return of capital distributions.......................... -- -- (.08) --
-------- -------- ----- -----
Total distributions....................................... (.80) (.69) (.18) (.49)
-------- -------- ----- -----
Net asset value, end of period............................... $ 8.34 $ 8.31 $ 7.33 $ 8.34
-------- -------- ----- -----
-------- -------- ----- -----
TOTAL RETURN(c):............................................. 10.36% 23.25% (2.44)% 5.21%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).............................. $ 190 $ 13 $ 193(b) $ 341
Average net assets (000)..................................... $ 110 $ 11 $ 197(b) $ 142
Ratios to average net assets:
Expenses, including distribution fees..................... 2.00% 2.00% 1.05%(a) 1.11%(a)
Expenses, excluding distribution fees..................... 1.25% 1.25% .30%(a) 1.11%(a)
Net investment income..................................... 6.02% 5.49% 3.30%(a) 6.94%(a)
</TABLE>
- ---------------
(a) Annualized.
(b) Figures are actual and not rounded to the nearest thousand.
(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) Commencement of offering of Class C shares.
(f) Commencement of offering of Class Z shares.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 15 -----
<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, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the periods presented 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, 1996 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 25, 1997
- --------------------------------------------------------------------------------
16
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Supplemental Proxy Information INCOME FUND, INC.
- --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of the Prudential Intermediate Global
Income Fund, Inc. (the ``Fund'') was held on Wednesday, October 30, 1996 at the
offices of Prudential Securities Incorporated, One Seaport Plaza, New York, New
York. The meeting was held for the following purposes:
(1) To elect Directors as follows: Edward D. Beach, Delayne Dedrick Gold, Robert
F. Gunia, Donald D. Lennox, Douglas H. McCorkindale, Mendel A. Melzer,
Thomas T. Mooney, Stephen P. Munn, Richard A. Redeker, Robin B. Smith, Louis
A. Weil, III and Clay T. Whitehead.
(2) To approve the proposed elimination of the Fund's fundamental investment
restriction relating to investment in securities of unseasoned issuers.
(3) To ratify the selection of Price Waterhouse LLP as independent public
accountants for the Fund for the fiscal year ending December 31, 1996.
The results of the proxy solicitation on the above matters were as follows:
<TABLE>
<CAPTION>
Director/Matter Votes for Votes against Abstentions
---------------- ------------- -----------
<S> <C> <C> <C>
(1) Edward D. Beach 10,426,172 0 392,655
Delayne Dedrick Gold 10,461,164 0 357,663
Robert F. Gunia 10,465,020 0 353,807
Donald D. Lennox 10,433,948 0 384,879
Douglas H. McCorkindale 10,475,905 0 342,922
Mendel A. Melzer 10,443,729 0 375,098
Thomas T. Mooney 10,471,721 0 347,106
Stephen P. Munn 10,475,228 0 343,599
Richard A. Redeker 10,472,956 0 345,871
Robin B. Smith 10,475,583 0 343,244
Louis A. Weil, III 10,477,963 0 340,864
Clay T. Whitehead 10,456,010 0 362,817
(2) Elimination of Investment Restriction 8,463,482 1,190,734 640,098
(3) Price Waterhouse 10,233,234 204,327 381,266
</TABLE>
- --------------------------------------------------------------------------------
17 -----
<PAGE>
Getting The Most
From Your Prudential
Mutual Fund.
Some mutual fund shareholders won't ever read this -- they don't read annual
and semi-annual reports. It's quite understandable. These annual and semi-
annual reports are prepared to comply with Federal regulations. They are often
written in language that is difficult to understand. So when most people run
into those particularly daunting sections of these reports, they don't read
them.
We think that's a mistake.
At Prudential Mutual Funds, we've made some changes to our report to make it
easier to understand and more pleasant to read, in hopes you'll find it
profitable to spend a few minutes familiarizing yourself with your investment.
Here's what you'll find in the report:
At A Glance
Since an investment's performance is often a shareholder's primary concern, we
present performance information in two different formats. You'll find it first
on the "At A Glance" page where we compare the Fund and the comparable average
calculated by Lipper Analytical Services, a nationally recognized mutual fund
rating agency. We report both the cumulative total returns and the average
annual total returns. The cumulative total return is the total amount of
income and appreciation the Fund has achieved in various time periods. The
average annual total return is an annualized representation of the Fund's
performance -- it generally smoothes out returns and gives you an idea how
much the Fund has earned in an average year, for a given time period. Under
the performance box, you'll see legends that explain the performance
information, whether fees and sales charges have been included in returns, and
the inception dates for the Fund's share classes.
See the performance comparison charts at the back of the report for more
performance information. And keep in mind that past perfor-mance is not
indicative of future results.
Portfolio
Manager's Report
The portfolio manager who invests your money for you reports on successful --
and not-so-successful -- strategies in this section of your report. Look for
recent purchases and sales here, as well as information about the sectors the
portfolio manager favors and any changes that are on the drawing board.
Portfolio Of Investments
This is where the report begins to look technical, but it's really just a
listing of each security held at the end of the reporting period, along with
valuations and other information. Please note that sometimes we discuss a
security in the Portfolio Manager's Report that doesn't appear in this listing
because it was sold before the close of the reporting period.
Statement Of Assets And Liabilities
The balance sheet shows the assets (the value of the Fund's holdings),
liabilities (how much the Fund owes) and net assets (the Fund's equity, or
holdings after the Fund pays its debts) as of the end of the reporting period.
It also shows how we calculate the net asset value per share for each class of
shares. The net asset value is reduced by payment of your dividend, capital
gain, or other distribution, but remember that the money or new shares are
being paid or issued to you. The net asset value fluctuates daily along with
the value of every security in the portfolio.
Statement Of Operations
This is the income statement, which details income (mostly interest and
dividends earned) and expenses (including what you pay us to manage your
money). You'll also see capital gains here -- both realized and unrealized.
Statement Of Changes In Net Assets
This schedule shows how income and expenses translate into changes in net
assets. The Fund is required to pay out the bulk of its income to shareholders
every year, and this statement shows you how we do it -- through dividends and
distributions -- and how that affects the net assets. This statement also shows
how money from investors flowed into and out of the Fund.
Notes To Financial Statements
This is the kind of technical material that can intimidate readers, but it
does contain useful information. The Notes provide a brief history and
explanation of your Fund's objectives. In addition, they also outline how
Prudential Mutual Funds prices securities. The Notes also explain who manages
and distributes the Fund's shares, and more importantly, how much they are
paid for doing so. Finally, the Notes explain how many shares are outstanding
and the number issued and redeemed over the period.
Financial Highlights
This information contains many elements from prior pages, but on a per share
basis. It is designed to help you understand how the Fund performed and to
compare this year's performance and expenses to those of prior years.
Independent Auditor's Report
Once a year, an outside auditor looks over our books and certifies that the
information is fairly presented and complies with generally accepted
accounting principles.
Tax Information
This is information which we report annually about how much of your total
return is taxable. Should you have any questions, you may want to consult a
tax advisor.
Performance Comparison
These charts are included in the annual report and are required by the
Securities Exchange Commission. Performance is presented here as a
hypothetical $10,000 investment in the Fund since its inception or for 10
years (whichever is shorter). To help you put that return in context, we are
required to include the performance of an unmanaged, broad based securities
index, as well. The index does not reflect the cost of buying the securities
it contains or the cost of managing a mutual fund. Of course, the index
holdings do not mirror those of the fund -- the index is a broadly based
reference point commonly used by investors to measure how well they are doing.
A definition of the selected index is also provided. Investors generally cannot
invest directly in an index.
<PAGE>
Getting The Most
From Your Prudential
Mutual Fund.
Change Your Mind.
You can exchange your shares in most Prudential Mutual Funds for shares in
most other Prudential Mutual Funds, without charges. This may be most helpful
if your investment needs change.
Reinvest Dividends Free Of Charge.
Reinvest your dividends and/or capital gains distributions automatically --
without charge.
Invest For Retirement.
There is no minimum investment for an IRA. Plus, you defer taxes on your
investment earnings by investing in an IRA.
If you'd like, you can contribute up to $2,000 a year in an IRA. If you are
married, you and your spouse (if not working outside the home) can contribute
up to $2,250 a year. (Withdrawals are taxed as ordinary income and may be
subject to a 10% penalty prior to age 59 1/2.)
Change Your Job.
You can take your pension with you. Use a rollover IRA to manage your company-
sponsored retirement plan while retaining the special tax-deferred advantages.
Invest In Your Children.
There's no fee to open a custodial account for a child's education or other
needs.
Take Income.
Would you like to receive monthly or quarterly checks in any amount from
your fund account? Just let us know. We'll take care of it. Of course, there
are minimum amounts. And shares redeemed may be subject to tax, and Class B
and C shares may be subject to contingent deferred sales charges. We'll gladly
answer your questions.
Keep Informed.
We want to keep you up-to-date. Of course, you receive account activity
statements every quarter. But you also receive annual and semi-annual fund
reports, as well as other important updates on events that affect your
investments, including tax information.
This material is only authorized for distribution when preceded or accompanied
by a current prospectus. Read the prospectus carefully before you invest or
send money.
<PAGE>
Comparing A $10,000 Investment.
Prudential Intermediate Global Income Fund, Inc.
vs. the J.P. Morgan Traded Gov't Bond Index.
// Prudential Intermediate
Global Income Fund, Inc.
- -- J.P. Morgan Traded Gov't
Bond Index
Average Annual
Class A Total Returns
(CHART) With Sales Load
8.1% Since Inception
8.4% for 5 Years
7.8% for 1 Year
Without Sales Load
8.5% Since Inception
9.0% for 5 Years
11.1% for 1 Year
Class B Average Annual
(CHART) Total Returns
With Sales Load
8.4% Since Inception
7.4% for 1 Year
Without Sales Load
8.4% Since Inception
10.4% for 1 Year
Class C Average Annual
(CHART) Total Returns
With Sales Load
12.4% Since Inception
9.4% for 1 Year
Without Sales Load
12.4% Since Inception
10.4% for 1 Year
Class Z
(CHART)
Past performance is not indicative of future results. Investment return and
principal value will fluctuate so an investor's shares, when redeemed, may be
worth more or less than their original cost. The charts on top of the graphs
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 calendar 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, Inc. (Class A, Class B, Class C and Class Z) with a similar investment
in the J.P. Morgan Traded Gov't 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, 1996), as
measured on a quarterly basis, beginning in 1988 for Class A shares, in 1992
for Class B shares, in 1994 for Class C shares and in 1996 for Class Z 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, 1996; (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 seven years after purchase. This conversion feature is
not reflected in the graph. Since Class Z shares have been in existence less
than a year, no average annual returns are shown.
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
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Directors
Edward D. Beach
Delayne Dedrick Gold
Robert F. Gunia
Donald D. Lennox
Douglas H. McCorkindale
Mendel A. Melzer
Thomas T. Mooney
Stephen P. Munn
Richard A. Redeker
Robin B. Smith
Louis A. Weil, III
Clay T. Whitehead
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Deborah A. Docs, Assistant Secretary
Manager
Prudential Mutual Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
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 LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Auditors
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
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.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
74435G203 MF155E
74435G302 Cat. #444582Y
74435G401
74435G500
