(ICON)
Prudential
Intermediate
Global
Income
Fund, Inc.
ANNUAL
REPORT
Dec. 31, 1997
(LOGO)
<PAGE>
Prudential Intermediate Global
Income Fund, Inc.
Performance At A Glance.
Global bonds generated modest returns as an Asian economic
crisis pushed bond prices lower (and yields higher) in many
developing countries. But your Prudential Intermediate
Global
Income Fund rode out this market volatility and beat the
average
comparable fund because of its investments in major
European bond markets and U.S. Treasury securities,
which rallied as investors sought refuge from Asian
turmoil.
<TABLE>
<CAPTION>
Cumulative Total Returns1 As of
12/31/97
One Five
Since
Year Years
Inception2
<S> <C> <C>
<C>
Class A 4.42% 55.18%
109.78%
Class B 3.80 50.24
55.19
Class C 3.80 N/A
37.73
Class Z 4.57 N/A
10.02
Lipper Global Income Fund Avg3 3.00 39.72
***
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns1 As of
12/31/97
One Five
Since
Year Years
Inception2
<S> <C> <C>
<C>
Class A 1.29% 8.52%
7.68%
Class B 0.80 8.48
7.65
Class C 2.80 N/A
9.82
Class Z 4.57 N/A
7.68
</TABLE>
<TABLE>
<CAPTION>
Dividends & Yields As of
12/31/97
Total Dividends 30-Day
Paid for 12 Mos. SEC
Yield
<S> <C> <C>
Class A $0.79 4.23%
Class B $0.74 3.75
Class C $0.74 3.75
Class Z $0.80 4.51
</TABLE>
Past performance is not indicative of future results.
Principal
and investment return will fluctuate so that an investor's
shares,
when redeemed, may be worth more or less than their original
cost.
1 Source: Prudential Investments Fund Management and Lipper
Analytical Services. The cumulative total returns do not
take
into account sales charges. The average annual 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
automatically
convert to Class A shares on a quarterly basis, after
approximately five years. Class Z shares are not subject
to a sales charge or a distribution fee.
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.
2 Inception dates: Class A, 5/26/88; Class B, 1/15/92; Class
C, 8/1/94; and Class Z, 9/13/96.
3 These are the average cumulative total returns for all
funds
in each share class from the Lipper Global Income Fund
category.
*** Lipper Since Inception returns are: Class A, 98.20%;
Class
B, 44.82%; Class C, 32.88%; and Class Z, 9.08% for all funds
in
each Lipper share class.
How Investments Compared.
(As of 12/31/97)
(GRAPH)
Source: Lipper Analytical Services. Financial markets
change,
so a mutual fund's past performance should never be used to
predict future results. The risks to each of the investments
listed
above are different -- we provide 12-month total returns for
several Lipper mutual fund categories to show you that
reaching
for higher returns 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.
U.S. Taxable Money Funds attempt to preserve a constant
share value; they don't fluctuate much in price but,
historically,
their returns have been generally among the lowest of the
major investment categories.
<PAGE>
Gabriel Irwin and Simon Wells, Fund Managers (PICTURE)
(PICTURE)
Portfolio
Managers'
Report
Your Fund seeks to maximize total return, which is current
income
plus any capital appreciation of its underlying bonds. The
Fund
invests primarily in intermediate-term, investment grade
debt
securities issued throughout the world. We may also invest
up
to 10% of total net assets in bonds rated below investment
grade, with
a minimum rating of OBO 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 as well as potential illiquidity. There can be no
assurance that the Fund will achieve its investment
objective.
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.
Asian Tigers Whimper.
Economic problems had been brewing in Asia for some time
when the crisis erupted in October, igniting a sharp sell-
off
in global stocks and emerging market bonds. By contrast,
U.S.
Treasuries and major European bond markets gained as
investors
fled embattled Asian markets. Treasuries also rallied
because
investors realized the Federal Reserve would leave monetary
policy unchanged in November and December since increasing
the federal funds rate (what banks charge each other for
overnight loans) would attract even more cash to the U.S.
from Asia. During this time, we enhanced your Fund's
returns by lengthening duration (a measure
of sensitivity
to interest rate fluctuations) by purchasing attractively
priced long-term Treasuries along with government bonds
of the United Kingdom, Germany and Canada.
U.S. Economy Roars.
While Asia occupied center stage late in the year,
investors focused on the U.S. early in the reporting
period. The U.S. economy expanded in 1997 at its fastest
pace in nine years, powered by increased consumer spending,
growth in exports, and corporate efforts to rebuild
inventories. Because a strong economy can lead to higher
inflation, investors expected the Federal Reserve to
increase the federal funds rate to rein in robust
economic growth. They did not have to wait long,
because U.S. central bankers voted in March to raise the
federal funds rate by a quarter percentage point, to 5.50%.
Some investors thought another increase in interest
rates was imminent, so they continued pushing bond
yields higher until the yield on the 30-year U.S.
Treasury bond peaked at 7.16% in
April -- its high point for the year. To protect
the value of your Fund during this period, we
shortened duration. We lengthened duration later
in the year, however, as it became clear that
surprisingly subdued inflation and Asian economic turmoil
would prevent the Federal Reserve from moving again.
<PAGE>
What Went Well.
A Flight To Quality.
Your Fund was well-positioned in currencies and bonds that
appreciated in value as investors fled to safer shores from
chaotic Asian economic conditions.
For example, the U.S. dollar strengthened during the
reporting period, hitting a five-and-a-half-year high
against the Japanese yen in December. Your Fund did not
own Japanese yen, and we used forward contracts to remove
its Indonesian rupiah exposure. On the other hand, a hefty
80% exposure as of December 31, 1997 to dollar-bloc
currencies (U.S., Australia, New Zealand and Canada)
enhanced your Fund's performance.
Among the debt securities that gained from flight-to-quality
buying
were government bonds of the United Kingdom and Germany,
which respectively comprised 8.7% and 13.6% of your Fund's
total investments at the end of the year. We extended
duration in the fourth quarter to 5.1 years from 4.3
years. The longer duration helped your Fund take
better advantage of the rally in these key bond
markets.
And Not So Well.
Trek Through
Fjord Country.
Initially, the outlook for the Norwegian krone looked very
promising in 1997. Norway's economy was expected to grow at
a
healthy clip and the krone also stood to benefit from
Norway's
decision to steer clear of plans for a European common
currency. So we were not surprised when the krone got
off to a good start early in the year, strengthening to
about 3.9 per German mark in late January. As it turned
out, however, that level was the peak for the year. The
krone sank to a low for the year of about 4.22 per German
mark in June. Disappointment over the Norwegian currency's
lackluster performance led us to sell the
position shortly after the reporting period ended.
Portfolio Composition.
Sectors expressed as a percentage of
total investments as of 12/31/97.
(PIE)
Five Largest Issuers.
20.1% U.S. Treasury Notes
9.2% German Gov't. Bonds
8.4% United Kingdom
Treasury Bonds
6.5% Danish Gov't Bonds
5.3% Canadian Gov't Bonds
Expressed as a percentage of net assets
as of 12/31/97.
Looking Ahead.
We expect the U.S. dollar to remain strong, provided there
is no serious deterioration in the U.S. balance of trade.
This could happen if consumers in struggling Asian countries
purchase fewer U.S. imports, while American shoppers snap
up cheaply priced Asian exports. At any rate, global
economic
growth will likely slow and inflationary
pressures subside, so we believe the rally in Treasuries and
major European bonds has not run out of steam. Emerging
market
bonds in Asia, and to a lesser extent in Latin America and
Eastern Europe, will probably remain under pressure over the
next
several months as investors wait to see if real progress is
made toward resolving Asia's problems.
1
<PAGE>
President's Letter February 2, 1998
Investing Smart.
Dear Shareholder:
This is the season when many investors receive income tax
refunds or have a CD or two maturing. What will you do with
these assets? Investing smart can be a challenge especially
given today's new investment choices.
The Federal Taxpayer Relief Act of 1997 is changing the way
Americans invest and accumulate wealth, save
for college or build a nest egg for retirement. While the
law offers opportunity, it is also complex. You may need
help to put things in perspective.
Now may be an excellent time for you and your Prudential
Financial Professional to update your
investment strategy and retirement plan. A wise investor
does so periodically. You could find the tax law opening
doors that may benefit you now or over the long term, such
as --
- -- Revised Capital Gains Tax Rates & Exclusions. Long-
term rates
are down. Is your portfolio positioned to benefit? Also, new
rules
allow you to keep more of the profit from the sale of your
home
(perhaps up to $500,000 more).
- -- New Roth IRAs. The Roth IRA features tax-free
distributions
and does not require mandatory withdrawals, which should be
of
particular interest to retirees seeking to shelter assets in
a
tax-free account.
- -- New Education IRAs. Similar to a traditional IRA, but
specifically designed for higher education. The new law also
creates credits and deductions to help defray college costs.
- -- Expanded IRAs. Rules governing traditional IRAs have
been extensively revised. Deductibility and contribution
limits have been broadened as has the list for penalty-free
early
withdrawals, including first-time home buyers.
As you can see, what you don't know may cost you! That's
why I recommend you call your Prudential Financial
Professional
and get a free investment plan checkup. Let us give you the
information and tools to invest smart.
Sincerely,
Brian M. Storms
President, Prudential Mutual Funds & Annuities
2
<PAGE>
Portfolio of Investments PRUDENTIAL INTERMEDIATE
GLOBAL
as of December 31, 1997 INCOME FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--91.0%
- ------------------------------------------------------------
Australia--6.2%
A$ 2,250 Federal National Mortgage
Association,
6.375%, 8/15/07 $
1,477,830
2,900 New South Wales Treasury
Corporation,
6.50%, 5/1/06
1,913,700
8,500 Queensland Treasury
Corporation,
8.00%, 8/14/01
5,935,975
----------
- --
9,327,505
- ------------------------------------------------------------
Canada--8.7%
C$ 3,000 British Columbia Provincial
Bonds,
7.75%, 6/16/03
2,304,793
9,500 Canadian Government Bonds,
9.00%, 12/1/04
7,929,212
3,800 Province of Quebec,
6.50%, 10/1/07
2,741,666
----------
- --
12,975,671
- ------------------------------------------------------------
Denmark--6.5%
Danish Government Bonds,
DKr 32,500 7.00%, 12/15/04
5,182,991
26,500 8.00%, 3/15/06
4,486,075
----------
- --
9,669,066
- ------------------------------------------------------------
Germany--13.1%
German Government Bonds,
DM 10,500 7.375%, 1/3/05
6,579,856
5,300 6.00%, 1/5/06
3,082,236
7,000 6.25%, 1/4/24
4,057,237
4,000 Republic of Colombia,
7.25%, 12/21/00
2,297,264
4,000 Tokyo Gas Co. Ltd.,
7.00%, 7/27/05
2,377,439
DM 2,000 United Mexican States,
8.125%, 9/10/04
Zero coupon (until 9/10/01) $
1,172,016
----------
- --
19,566,048
- ------------------------------------------------------------
Greece--1.2%
GRD 545,000 Hellenic Republic, FRN,
12.60%, 12/31/03
1,855,115
- ------------------------------------------------------------
Hungary--0.4%
HUF 120,000 Hungarian Government Bonds,
16.50%, 4/12/99, Ser 99-F
575,304
- ------------------------------------------------------------
Netherlands--3.6%
Dutch Government Bonds,
NLG 7,000 7.00%, 6/15/05
3,829,813
2,600 7.50%, 1/15/23
1,556,725
----------
- --
5,386,538
- ------------------------------------------------------------
Spain--4.0%
Spanish Government Bonds,
Pts 250,000 10.30%, 6/15/02
1,985,008
500,000 8.20%, 2/28/09
3,954,201
----------
- --
5,939,209
- ------------------------------------------------------------
Sweden--2.0%
SEK 24,000 Swedish Government Bonds,
6.00%, 2/9/05
3,048,974
- ------------------------------------------------------------
United Kingdom--8.4%
BP 1,300 Powergen PLC,
8.875%, 3/26/03
2,283,600
300 Republic of Argentina,
11.50%, 8/14/01
498,872
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments PRUDENTIAL INTERMEDIATE
GLOBAL
as of December 31, 1997 INCOME FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
United Kingdom (cont'd.)
United Kingdom Treasury Bonds,
BP 2,900 7.75%, 9/8/06 $
5,193,709
2,200 8.75%, 8/25/17
4,608,033
----------
- --
12,584,214
- ------------------------------------------------------------
United States--36.9%
Corporate Bonds--0.5%
US$ 750 Romanian Commercial Bank,
9.125%, 3/10/00
746,250
----------
- --
Sovereign Bonds--10.5%
350 Banco Ganadero S.A.,
9.75%, 8/26/99
359,625
1,100 Financiera Energetica Nacional,
(Colombia),
9.00%, 11/8/99
1,144,000
1,500 Ministry Of Finance (Russia),
10.00%, 6/26/07
1,392,750
750 Municipality of Rio De Janeiro,
10.375%, 7/12/99
751,875
750 National Bank of Romania,
9.75%, 6/25/99
756,563
2,000 Petroleas Mexicano, FRN,
6.71875%, 3/8/99
1,970,000
960 Republic of Argentina, FRB,
6.6875%, 3/31/05
858,048
942 Republic of Brazil, IDU,
6.8125%, 1/1/01
897,255
1,500 Republic of Colombia,
7.25%, 2/23/04
1,442,250
1,416 Republic of Croatia, FRN,
6.625%, 7/31/06
1,288,720
500 Republic of Lithuania,
7.125%, 7/22/02
473,750
2,000 Republic of Poland, FRN,
6.6875%, 10/27/24
1,942,600
750 Sultan of Oman,
7.125%, 3/20/02
759,375
US$ 500 Trinidad & Tobago Republic,
9.75%, 11/3/00 $
525,000
1,000 United Mexican States,
9.75%, 2/6/01
1,040,000
----------
- --
15,601,811
- ------------------------------------------------------------
Supranational Bonds--0.9%
1,350 Corporacion Andina de Formento,
7.375%, 7/21/00
1,373,625
- ------------------------------------------------------------
U.S. Government Obligations--25.0%
6,700 United States Treasury Bonds,
6.625%, 2/15/27
7,267,691
United States Treasury Notes,
9,600 6.75%, 6/30/99
9,748,512
8,100 6.125%, 9/30/00
8,184,807
6,000 5.75%, 8/15/03
6,003,720
3,100 7.875%, 11/15/04
3,465,707
2,600 6.25%, 2/15/07
2,682,862
----------
- --
37,353,299
----------
- --
55,074,985
----------
- --
Total long-term investments
(cost US$137,718,656)
136,002,629
----------
- --
SHORT-TERM INVESTMENTS--5.5%
- ------------------------------------------------------------
Hungary--0.6%
HUF 180,000 Hungarian Government Bonds,
23.50%, 5/17/98, Ser. 98-I
892,045
- ------------------------------------------------------------
Indonesia--0.4%
IDR 2,000,000 Asia Pulp And Paper, NCD,
14.45%(a), 1/27/98
356,059
2,000,000 Bakrie And Brothers, NCD,
17.50%(a), 2/19/98
163,643
----------
- --
519,702
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 4
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
INCOME FUND, INC.
Portfolio of Investments as of December 31, 1997
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
United States--4.5%
Repurchase Agreement--3.0%
US$ 4,556 Joint Repurchase Agreement
Account,
6.63%,1/2/98, (Note 5) $
4,556,000
- ------------------------------------------------------------
Sovereign Bonds--1.5%
2,185 Republic of Colombia,
7.125%, 5/11/98
2,185,000
----------
- --
6,741,000
----------
- --
Total short-term investments
(cost US$9,563,445)
8,152,747
----------
- --
- ------------------------------------------------------------
Total Investments--96.5%
(cost US$147,282,101; Note 4)
144,155,376
Other assets in excess of
liabilities--3.5%
5,256,262
----------
- --
Net Assets--100%
$149,411,638
----------
- --
----------
- --
</TABLE>
- ---------------
Portfolio securities are classified according to the
securities
currency denomination.
(a) Percentages quoted represent yield-to-maturity as of
purchase date.
FRB-Floating Rate Bond.
FRN-Floating Rate Note.
IDU-Interest Due and Unpaid Bonds.
NCD-Negotiable Certificates of Deposit
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 5
<PAGE>
PRUDENTIAL
INTERMEDIATE GLOBAL
Statement of Assets and Liabilities INCOME
FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
Assets
December 31, 1997
<S>
<C>
Investments, at value (cost
$147,282,101)...............................................
............... $144,155,376
Foreign currency, at value (cost
$659,871)...................................................
.......... 831,313
Interest
receivable..................................................
.................................. 3,906,233
Forward currency contracts - net amount receivable from
counterparties.................................
1,441,702
Receivable for Fund shares
sold........................................................
................ 38,035
Other
assets......................................................
..................................... 4,113
- ------------------
Total
assets......................................................
.................................. 150,376,772
- ------------------
Liabilities
Bank
overdraft...................................................
...................................... 5,664
Accrued
expenses....................................................
................................... 285,642
Payable for Fund shares
reacquired..................................................
................... 279,550
Forward currency contracts - net amount payable to
counterparties......................................
245,510
Management fee
payable.....................................................
............................ 98,207
Dividends
payable.....................................................
................................. 26,320
Distribution fee
payable.....................................................
.......................... 24,241
- ------------------
Total
liabilities.................................................
.................................. 965,134
- ------------------
Net
Assets......................................................
....................................... $149,411,638
- ------------------
- ------------------
Net assets were comprised of:
Common stock, at
par.........................................................
....................... $ 18,882
Paid-in capital in excess of
par.........................................................
........... 228,898,024
- ------------------
228,916,906
Undistributed net investment
income......................................................
........... 1,577,820
Accumulated net realized loss on
investments.................................................
....... (79,251,139)
Net unrealized depreciation on investments and foreign
currencies...................................
(1,831,949)
- ------------------
Net assets, December 31,
1997........................................................
.................. $149,411,638
- ------------------
- ------------------
Class A:
Net asset value and redemption price per share
($137,799,207 / 17,415,322 shares of common stock
issued and outstanding)........................
$7.91
Maximum sales charge (3.00% of offering
price)......................................................
.24
- ------------------
Maximum offering price to
public......................................................
.............. $8.15
- ------------------
- ------------------
Class B:
Net asset value, offering price and redemption price per
share
($8,896,288 / 1,123,441 shares of common stock issued
and outstanding)...........................
$7.92
- ------------------
- ------------------
Class C:
Net asset value, offering price and redemption price per
share
($198,460 / 25,063 shares of common stock issued and
outstanding)................................
$7.92
- ------------------
- ------------------
Class Z:
Net asset value, offering price and redemption price per
share
($2,517,683 / 318,248 shares of common stock issued
and outstanding).............................
$7.91
- ------------------
- ------------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 6
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
INCOME FUND, INC.
Statement of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income December 31,
1997
<S> <C>
Income
Interest and discount earned.......... $ 13,367,597
----------------
- -
Expenses
Management fee........................ 1,248,195
Distribution fee--Class A............. 229,752
Distribution fee--Class B............. 85,326
Distribution fee--Class C............. 1,600
Transfer agent's fees and expenses.... 399,000
Custodian's fees and expenses......... 188,000
Reports to shareholders............... 115,000
Registration fees..................... 39,000
Audit fee............................. 36,000
Directors' fees and expenses.......... 28,000
Legal fees and expenses............... 26,000
Insurance............................. 3,000
Miscellaneous......................... 10,738
----------------
- -
Total expenses..................... 2,409,611
----------------
- -
Net investment income.................... 10,957,986
----------------
- -
Net Realized and Unrealized Gain
(Loss) on Investments and Foreign
Currency Transactions
Net realized gain on:
Investment transactions............... 231,860
Foreign currency transactions......... 6,242,901
----------------
- -
6,474,761
----------------
- -
Net change in unrealized
appreciation/depreciation of:
Investments........................... (11,427,189)
Foreign currencies.................... 1,200,969
----------------
- -
(10,226,220)
----------------
- -
Net loss on investments and foreign
currencies............................ (3,751,459)
----------------
- -
Net Increase in Net Assets
Resulting from Operations................ $ 7,206,527
----------------
- -
----------------
- -
</TABLE>
PRUDENTIAL INTERMEDIATE GLOBAL
INCOME FUND, INC.
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended December
31,
in Net Assets 1997 1996
<S> <C> <C>
Operations
Net investment income.......... $ 10,957,986 $
12,015,379
Net realized gain on investment
and foreign currency
transactions................ 6,474,761
8,525,984
Net change in unrealized
appreciation/
depreciation on investments
and foreign currencies...... (10,226,220)
(1,630,745)
------------ --------
- ----
Net increase in net assets
resulting from operations... 7,206,527
18,910,618
------------ --------
- ----
Dividends and distributions (Note
1):
Dividends from net investment
income
Class A..................... (10,144,701)
(11,085,209)
Class B..................... (687,169)
(920,752)
Class C..................... (13,331)
(6,619)
Class Z..................... (112,785)
(2,799)
------------ --------
- ----
(10,957,986)
(12,015,379)
------------ --------
- ----
Distributions in excess of net
investment income
Class A..................... (4,226,324)
(5,793,623)
Class B..................... (259,200)
(474,939)
Class C..................... (6,585)
(4,101)
Class Z..................... (77,678)
(4,774)
------------ --------
- ----
(4,569,787)
(6,277,437)
------------ --------
- ----
Fund share transactions (net of
share conversions) (Note 6)
Net proceeds from shares
sold........................ 9,602,565
16,398,099
Net asset value of shares
issued in reinvestment of
dividends and
distributions............... 6,097,113
6,011,409
Cost of shares reacquired...... (37,313,110)
(42,995,654)
------------ --------
- ----
Net decrease in net assets from
Fund share transactions..... (21,613,432)
(20,586,146)
------------ --------
- ----
Total decrease.................... (29,934,678)
(19,968,344)
Net Assets
Beginning of year................. 179,346,316
199,314,660
------------ --------
- ----
End of year....................... $149,411,638
$179,346,316
------------ --------
- ----
------------ --------
- ----
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 7
<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, nondiversified 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, nondiversified
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 that are
actively traded in the
over-the-counter market, including listed securities for
which the primary
market is believed to be over-the-counter, are valued at the
mean between the
most recently quoted bid and asked prices provided by an
independent pricing
service or by principal market makers. 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.
To the extent that any repurchase transaction exceeds one
business day, the
value of the collateral is marked-to-market on a daily basis
to ensure the
adequacy of the collateral. If the seller defaults and the
value of the
collateral declines or if bankruptcy proceedings are
commenced with respect to
the seller of the security, realization of the collateral by
the Fund may be
delayed or limited.
Foreign Currency Translation: The books and records of the
Fund are maintained
in 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 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. The Fund amortizes discounts
on purchases of debt
securities as adjustments to income. 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.
Dividends and Distributions: The Fund declares dividends of
net investment
income daily and pays 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 $4,471,527 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
Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has
responsibility for all
investment advisory services and supervises the subadviser's
performance of such
services. PIFM has entered into a subadvisory agreement with
The Prudential
Investment Corporation ('PIC'): PIC, through an agreement
with PRICOA Asset
Management Ltd. ('PRICOA'), furnishes investment advisory
services in connection
with the management of the Fund. PIFM 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 PIFM 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
PSI. 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 for
distribution-related activities at an annual rate of up to
.30 of 1%, 1% and 1%,
of the average daily net assets of the Class A, B and C
shares, 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, 1997.
PSI has advised the Fund that it has received approximately
$28,800 in front-end
sales charges resulting from sales of Class A shares during
the year ended
December 31, 1997. 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, 1997, it received
approximately $13,300 and $500 in contingent deferred sales
- ------------------------------------------------------------
- --------------------
9
<PAGE>
PRUDENTIAL
INTERMEDIATE GLOBAL
Notes to Financial Statements INCOME FUND,
INC.
- ------------------------------------------------------------
- --------------------
charges imposed upon certain redemptions by Class B and C
shareholders,
respectively.
PSI, PIFM, PIC and PRICOA are indirect, wholly owned
subsidiaries of The
Prudential Insurance Company of America.
The Fund, along with other affiliated registered investment
companies (the
'Funds'), has a credit agreement (the 'Agreement') with an
unaffiliated lender.
The maximum commitment under the Agreement is $200,000,000.
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
during the year
ended December 31, 1997. 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.
The Agreement
expired on December 30, 1997 and has been extended through
December 29, 1998
under the same terms.
- ------------------------------------------------------------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned
subsidiary of PIFM,
serves as the Fund's transfer agent and during the year
ended December 31, 1997,
the Fund incurred fees of approximately $320,000 for the
services of PMFS. As of
December 31, 1997, fees of approximately $27,000 were due to
PMFS. Transfer
agent fees and expenses in the Statement of Operations
include certain
out-of-pocket expenses paid to nonaffiliates.
- ------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than
short-term investments
for the year ended December 31, 1997, aggregated $58,632,258
and $69,053,824,
respectively.
At December 31, 1997, the Fund had outstanding forward
currency contracts both
to purchase and sell foreign currencies as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current
Purchase Contracts Receivable Value
Depreciation
- ------------------------------ --------------- ----------
- - ---------------
<S> <C> <C>
<C>
Deutschemarks,
expiring 4/30/98............. $ 3,218,913 $
3,100,748 $ (118,165)
Greek Drachma,
expiring 4/30/98............. 1,460,094
1,418,617 (41,477)
Norwegian Krone,
expiring 1/29/98............. 4,743,173
4,660,521 (82,652)
--------------- ----------
- - ---------------
$ 9,422,180 $
9,179,886 $ (242,294)
--------------- ----------
- - ---------------
--------------- ----------
- - ---------------
<CAPTION>
Value at
Foreign Currency Settlement Date Current
Appreciation
Sale Contracts Payable Value
(Depreciation)
- ------------------------------ --------------- ----------
- - ---------------
<S> <C> <C>
<C>
Australian Dollars,
expiring 1/29/98............. $ 9,473,017 $
9,353,905 $ 119,112
French Francs,
expiring 1/29/98............. 6,185,370
6,117,198 68,172
Greek Drachma,
expiring 4/30/98............. 3,218,913
3,220,633 (1,720)
Indonesian Rupiah,
expiring 1/27/98 - 2/19/98... 1,525,464
719,855 805,609
Netherlands Guilders,
expiring 1/29/98............. 23,955,098
23,671,362 283,736
Swiss Francs,
expiring 1/29/98............. 8,771,930
8,608,353 163,577
--------------- ----------
- - ---------------
$53,129,792
$51,691,306 $ 1,438,486
--------------- ----------
- - ---------------
--------------- ----------
- - ---------------
</TABLE>
The cost basis of investments for federal income tax
purposes is substantially
the same as for financial reporting purposes and,
accordingly, as of December
31, 1997 net unrealized depreciation for federal income tax
purposes was
$3,126,725 (gross unrealized appreciation--$3,860,513 gross
unrealized
depreciation--$6,987,238).
For federal income tax purposes, the Fund has a capital loss
carryforward as of
December 31, 1997, of approximately $79,251,100 of which
$37,377,300 expires in
1999, $23,239,700 expires in 2000 and $18,634,100 expires in
2002. Such
carryforward is after utilization of approximately
$1,981,200 of net taxable
gains realized and recognized during the year ended December
31, 1997.
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, 1997, the
Fund has a 0.39% undivided interest in the joint account.
The undivided interest
for the Fund represents $4,556,000 in the principal amount.
As of such date,
each repurchase agreement in the joint account and the
collateral therefor were
as follows:
Credit Suisse First Boston Corp., 6.75%, in the principal
amount of
$342,000,000, repurchase price $342,128,250, due 1/2/98. The
value of the
collateral including accrued interest is $353,486,750.
- ------------------------------------------------------------
- --------------------
10
<PAGE>
PRUDENTIAL
INTERMEDIATE GLOBAL
Notes to Financial Statements INCOME FUND,
INC.
- ------------------------------------------------------------
- --------------------
Deutsche Morgan Grenfell, Inc., 6.80%, in the principal
amount of $200,000,000,
repurchase price $200,075,555, due 1/2/98. The value of the
collateral including
accrued interest is $204,000,314.
SBC Warburg Dillon Read, Inc., 6.55%, in the principal
amount of $142,000,000,
repurchase price $142,051,672, due 1/2/98. The value of the
collateral including
accrued interest is $144,862,841.
Morgan Stanley, Dean Witter, Discover & Co., 5.95%, in the
principal amount of
$151,553,000, repurchase price $151,603,097, due 1/2/98. The
value of the
collateral including accrued interest is $154,584,932.
Salomon Smith Barney Inc., 6.75%, in the principal amount of
$342,000,000,
repurchase price $342,128,250, due 1/2/98. The value of the
collateral including
accrued interest is $350,295,372.
- ------------------------------------------------------------
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. 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 18,882,074
shares of common
stock issued and outstanding at December 31, 1997, PIFM
owned 784, 64, 30 and 26
shares of Class A,B, C and Z, respectively.
Transactions in shares of common stock for the fiscal years
ended December 31,
1997 and 1996 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ---------------------------------- ----------- ----------
- --
<S> <C> <C>
Year ended December 31, 1997:
Shares sold....................... 542,213 $
4,459,760
Shares issued in reinvestment of
dividends and distributions..... 653,586
5,300,167
Shares reacquired................. (4,062,149)
(33,299,580)
----------- ----------
- --
Net decrease in shares outstanding
before conversion............... (2,866,350)
(23,539,653)
Shares issued upon conversion from
Class B......................... 389,219
3,195,679
----------- ----------
- --
Net decrease in shares
outstanding..................... (2,477,131
$(20,343,974)
----------- ----------
- --
----------- ----------
- --
<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 and distributions..... 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)
----------- ----------
- --
----------- ----------
- --
<CAPTION>
Class B
- ----------------------------------
Year ended December 31, 1997:
Shares sold....................... 279,325 $
2,295,924
Shares issued in reinvestment of
dividends and distributions..... 73,534
596,963
Shares reacquired................. (397,198)
(3,261,753)
----------- ----------
- --
Net decrease in shares outstanding
before conversion............... (44,339)
(368,866)
Shares reacquired upon conversion
into
Class A......................... (388,827)
(3,195,679)
----------- ----------
- --
Net decrease in shares
outstanding..................... (433,166)
$(3,564,545)
----------- ----------
- --
----------- ----------
- --
Year ended December 31, 1996:
Shares sold....................... 221,716 $
1,860,253
Shares issued in reinvestment of
dividends and distributions..... 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)
----------- ----------
- --
----------- ----------
- --
Class C
- ----------------------------------
Year ended December 31, 1997:
Shares sold....................... 19,602 $
161,438
Shares issued in reinvestment of
dividends and distributions..... 2,366
19,170
Shares reacquired................. (19,641)
(160,753)
----------- ----------
- --
Net increase in shares
outstanding..................... 2,327 $
19,855
----------- ----------
- --
----------- ----------
- --
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
----------- ----------
- --
----------- ----------
- --
</TABLE>
- ------------------------------------------------------------
- --------------------
11
<PAGE>
PRUDENTIAL
INTERMEDIATE GLOBAL
Notes to Financial Statements INCOME FUND,
INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
Class Z Shares
Amount
- ---------------------------------- ----------- ----------
- --
<S> <C> <C>
Year ended December 31, 1997:
Shares sold....................... 327,070 $
2,685,443
Shares issued in reinvestment of
dividends and distributions..... 22,388
180,813
Shares reacquired................. (72,134)
(591,024)
----------- ----------
- --
Net increase in shares
outstanding..................... 277,324 $
2,275,232
----------- ----------
- --
----------- ----------
- --
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>
PRUDENTIAL
INTERMEDIATE GLOBAL
Financial Highlights INCOME FUND,
INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class A
- ------------------------------------------------------------
Year Ended December 31,
- ------------------------------------------------------------
1997(b) 1996 1995(b) 1994 1993
- -------- -------- -------- -------- --------
<S>
<C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year........................... $ 8.34 $ 8.30
$ 7.32 $ 8.43 $ 7.77
- -------- -------- -------- -------- --------
Income from investment operations
Net investment
income........................................ .54
.56 .52 .50 .59
Net realized and unrealized gain (loss) on investment and
foreign currency
transactions............................. (.18)
.33 1.20 (1.09) .63
- -------- -------- -------- -------- --------
Total from investment
operations.......................... .36 .89
1.72 (.59) 1.22
- -------- -------- -------- -------- --------
Less distributions
Dividends from net investment
income......................... (.54) (.56)
(.52) (.29) (.48)
Distributions in excess of net investment
income............. (.25) (.29) (.22)
- -- --
Distributions from capital
gains............................. -- --
- -- (.01) (.08)
Tax return of capital
distributions.......................... --
- -- -- (.22) --
- -------- -------- -------- -------- --------
Total
distributions.......................................
(.79) (.85) (.74) (.52) (.56)
- -------- -------- -------- -------- --------
Net asset value, end of
year................................. $ 7.91 $
8.34 $ 8.30 $ 7.32 $ 8.43
- -------- -------- -------- -------- --------
- -------- -------- -------- -------- --------
TOTAL
RETURN(a):.............................................
4.42% 11.13% 24.01% (7.02)% 16.12%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)................................ $137,799
$165,829 $181,985 $207,153 $320,406
Average net assets
(000)..................................... $153,168
$169,219 $200,759 $262,882 $355,018
Ratios to average net assets:
Expenses, including distribution
fees..................... 1.41% 1.40%
1.40% 1.46% 1.41%
Expenses, excluding distribution
fees..................... 1.26% 1.25%
1.25% 1.31% 1.26%
Net investment
income..................................... 6.62%
6.55% 6.09% 6.04% 7.42%
For Class A, B, C and Z shares:
Portfolio turnover
rate................................... 40%
45% 220% 554% 361%
</TABLE>
- ---------------
(a) 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 year reported and includes reinvestment
of dividends and
distributions.
(b) Calculated based upon average shares outstanding during
the fiscal year.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 13
<PAGE>
PRUDENTIAL
INTERMEDIATE GLOBAL
Financial Highlights INCOME FUND,
INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class B
- -------------------------------------------------------
Year Ended December 31,
- -------------------------------------------------------
1997(b) 1996 1995(b) 1994 1993
- ------- ------- ------- ------- -------
<S>
<C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year........................... $ 8.34 $ 8.31 $
7.33 $ 8.44 $ 7.79
- ------- ------- ------- ------- -------
Income from investment operations
Net investment
income........................................ .50
.53 .47 .45 .54
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions.............. (.18) .30 1.20
(1.09) .63
- ------- ------- ------- ------- -------
Total from investment
operations.......................... .32 .83
1.67 (.64) 1.17
- ------- ------- ------- ------- -------
Less distributions
Dividends from net investment
income......................... (.50) (.53)
(.47) (.26) (.44)
Distributions in excess of net investment
income............. (.24) (.27) (.22)
- -- --
Distributions from capital
gains............................. -- --
- -- (.01) (.08)
Tax return of capital
distributions.......................... -- -
- - -- (.20) --
- ------- ------- ------- ------- -------
Total
distributions.......................................
(.74) (.80) (.69) (.47) (.52)
- ------- ------- ------- ------- -------
Net asset value, end of
year................................. $ 7.92 $ 8.34
$ 8.31 $ 7.33 $ 8.44
- ------- ------- ------- ------- -------
- ------- ------- ------- ------- -------
TOTAL
RETURN(a):.............................................
3.80% 10.36% 23.25% (7.69)% 15.29%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000)................................ $ 8,896 $12,987
$17,317 $22,906 $39,440
Average net assets
(000)..................................... $11,377
$15,491 $19,336 $31,835 $36,197
Ratios to average net assets:
Expenses, including distribution
fees..................... 2.01% 2.00% 2.00%
2.07% 2.01%
Expenses, excluding distribution
fees..................... 1.26% 1.25% 1.25%
1.31% 1.26%
Net investment
income..................................... 6.04%
5.94% 5.49% 5.44% 6.67%
</TABLE>
- ---------------
(a) 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 year reported and includes reinvestment
of dividends and
distributions.
(b) Calculated based upon average shares outstanding during
the fiscal year.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 14
<PAGE>
PRUDENTIAL
INTERMEDIATE GLOBAL
Financial Highlights INCOME FUND,
INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class C
- ----------------------------------------------------
August 1,
1994(e)
Year Ended December 31, Through
- ----------------------------------- December 31,
1997(b) 1996 1995(b) 1994
- ------- --------- --------- ------------
<S>
<C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period......................... $ 8.34 $ 8.31
$ 7.33 $ 7.69
- ------- --------- --------- -----
Income from investment operations
Net investment
income........................................ .50
.53 .47 .14
Net realized and unrealized gain (loss) on investment and
foreign currency
transactions............................. (.18 )
.30 1.20 (.32)
- ------- --------- --------- -----
Total from investment
operations.......................... .32 .83
1.67 (.18)
- ------- --------- --------- -----
Less distributions
Dividends from net investment
income......................... (.50 ) (.53)
(.47) (.10)
Distributions in excess of net investment
income............. (.24 ) (.27) (.22)
- --
Tax return of capital
distributions.......................... --
- -- -- (.08)
- ------- --------- --------- -----
Total
distributions.......................................
(.74 ) (.80) (.69) (.18)
- ------- --------- --------- -----
Net asset value, end of
period............................... $ 7.92 $ 8.34
$ 8.31 $ 7.33
- ------- --------- --------- -----
- ------- --------- --------- -----
TOTAL
RETURN(a):.............................................
3.80 % 10.36% 23.25% (2.44)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000).............................. $ 198 $ 190
$ 13 $ 193(d)
Average net assets
(000)..................................... $ 213 $
110 $ 11 $ 197(d)
Ratios to average net assets:
Expenses, including distribution
fees..................... 2.01 % 2.00%
2.00% 1.05%(c)
Expenses, excluding distribution
fees..................... 1.26 % 1.25%
1.25% .30%(c)
Net investment
income..................................... 6.25 %
6.02% 5.49% 3.30%(c)
<CAPTION>
Class Z
- ------------------------------
September 13,
1996(f)
Year Ended Through
December 31, December 31,
1997(b) 1996
- ------------ -------------
<S>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period......................... $ 8.34 $ 8.39
- ------------ -----
Income from investment operations
Net investment
income........................................ .55
.32
Net realized and unrealized gain (loss) on investment and
foreign currency
transactions............................. (.18)
.12
- ------------ -----
Total from investment
operations.......................... .37
.44
- ------------ -----
Less distributions
Dividends from net investment
income......................... (.55)
(.32)
Distributions in excess of net investment
income............. (.25) (.17)
Tax return of capital
distributions.......................... --
- --
- ------------ -----
Total
distributions.......................................
(.80) (.49)
- ------------ -----
Net asset value, end of
period............................... $ 7.91 $
8.34
- ------------ -----
- ------------ -----
TOTAL
RETURN(a):.............................................
4.57% 5.21%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000).............................. $ 2,518 $
341
Average net assets
(000)..................................... $ 1,668
$ 142
Ratios to average net assets:
Expenses, including distribution
fees..................... 1.26% 1.11%(c)
Expenses, excluding distribution
fees..................... 1.26% 1.11%(c)
Net investment
income..................................... 6.76%
6.94%(c)
</TABLE>
- ---------------
(a) 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.
(b) Calculated based upon average shares outstanding during
the fiscal year.
(c) Annualized.
(d) Figures are actual and not rounded to the nearest
thousand.
(e) Commencement of offering of Class C shares.
(f) Commencement of offering of Class Z shares.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 15
<PAGE>
PRUDENTIAL
INTERMEDIATE GLOBAL
Report of Independent Accountants INCOME FUND,
INC.
- ------------------------------------------------------------
- --------------------
To the Shareholders and the Board of Directors 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, 1997, 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, 1997 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 13, 1998
- ------------------------------------------------------------
- --------------------
16
<PAGE>
Comparing A $10,000 Investment.
- --------------------------------------------------
Prudential Intermediate Global Income Fund, Inc.
vs. the J.P. Morgan Government Bond Index.
- --Prudential Intermediate
Global Income Fund, Inc.
//J.P. Morgan Government
Bond Index
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 boxes on top of the charts 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 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, 1997), 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, 1997; (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 feature is not reflected
in the graph. Class Z shares do not carry a sales charge
or a distribution fee.
This global index is traded, unhedged, and measured in U.S.
dollars. The Index is market weighted and represents the
total return
of government bonds from 13 countries, including Australia,
Belgium, Canada, Denmark, France, Germany, Italy, Japan,
the Netherlands, Spain, Sweden, the 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.
Average Annual
Total Returns - Class A
- ---------------------------
With Sales Load
7.68% Since Inception
8.52% for 5 Years
1.29% for 1 Year
Class A (GRAPH)
Without Sales Load
8.02% Since Inception
9.19% for 5 Years
4.42% for 1 Year
Average Annual
Total Returns - Class B
- --------------------------
With Sales Load
7.65% Since Inception
8.48% for 5 Years
0.80% for 1 Year
Class B (GRAPH)
Without Sales Load
7.65% Since Inception
8.48% for 5 Years
3.80% for 1 Year
Average Annual
Total Returns - Class C
- -------------------------
With Sales Load
9.82% Since Inception
2.80% for 1 Year
Class C (GRAPH)
Without Sales Load
9.82% Since Inception
3.80% for 1 Year
Average Annual
Total Returns - Class Z
- ---------------------------
Without Sales Load Class Z (GRAPH)
7.68% Since Inception
4.57% for 1 Year
<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
Douglas H. McCorkindale
Mendel A. Melzer, CFA
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
Marguerite E.H. Morrison, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
PRICOA Asset Management Ltd.
100 Piccadilly
London W1V9FN England
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 Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
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
