As filed with the Securities and Exchange Commission on January 15, 1999
Securities Act File No. 33-42093
Investment Company Act File No. 811-5510
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
PRE-EFFECTIVE AMENDMENT NO. |_|
POST-EFFECTIVE AMENDMENT NO. 12 |X|
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 |_|
AMENDMENT NO. 16 |X|
(Check appropriate box or boxes)
--------------------
PRUDENTIAL INTERMEDIATE GLOBAL INCOME FUND, INC.
(Exact name of registrant as specified in charter)
GATEWAY CENTER THREE, 100 MULBERRY STREET, NEWARK, NEW JERSEY 07102-4077
(Address of Principal Executive Offices) (Zip Code)
--------------------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (973) 367-7525
MARGUERITE E. H. MORRISON, ESQ.
GATEWAY CENTER THREE, 100 MULBERRY STREET, NEWARK, NEW JERSEY 07102-4077
(Name and Address of Agent for Service of Process)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION
STATEMENT.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE
(CHECK APPROPRIATE BOX):
|_| immediately upon filing pursuant to paragraph (b)
|_| on (date) pursuant to paragraph (b)
|X| 60 days after filing pursuant to paragraph (a)(i)
|_| on (date) pursuant to paragraph (a)(i)
|_| 75 days after filing pursuant to paragraph (a)(ii)
|_| on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
--------------------
Title of Securities Being Registered ............ Shares of Common Stock, $.001
par value per share.
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<PAGE>
FUND TYPE:
- ----------------------------------------
Global Debt
INVESTMENT OBJECTIVE:
- ----------------------------------------
Total return, made up of
current income and capital
appreciation.
[GRAPHIC OMITTED]
Prudential
Intermediate Global
Income Fund, Inc.
- ----------------------------------------
PROSPECTUS: MARCH __, 1999
As with all mutual funds, the
Securities and Exchange
Commission has not approved the
Fund's shares, nor has the SEC
determined that this prospectus is
complete or accurate. It is a [LOGO] Prudential
criminal offense to state otherwise. Investments
<PAGE>
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Table of Contents
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1 Risk/Return Summary
1 Investment Objective and Principal Strategies
1 Principal Risks
2 Evaluating Performance
4 Fees and Expenses
6 How the Fund Invests
6 Investment Objective and Policies
8 Other Investments
9 Derivative Strategies
10 Additional Strategies
11 Investment Risks
14 How the Fund is Managed
14 Manager
14 Investment Adviser
14 Portfolio Managers
15 Distributor
15 Year 2000 Readiness Disclosure
17 Fund Distributions and Tax Issues
17 Distributions
18 Tax Issues
19 If You Sell or Exchange Your Shares
21 How to Buy, Sell and Exchange Shares of the Fund
21 How to Buy Shares
29 How to Sell Your Shares
33 How to Exchange Your Shares
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Prudential Intermeditate Global Fund, Inc. [GRAPHIC] (800) 225-1852
<PAGE>
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36 Financial Highlights
36 Class A Shares
37 Class B Shares
38 Class C Shares
39 Class Z Shares
40 The Prudential Mutual Fund Family
For More Information (Back Cover)
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<PAGE>
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Risk/Return Summary
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This section highlights key information about PRUDENTIAL INTERMEDIATE GLOBAL
INCOME FUND, INC., which we refer to as "the Fund." Additional information
follows this summary.
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
Our investment objective is to seek to maximize TOTAL RETURN, made up of CURRENT
INCOME and CAPITAL APPRECIATION. We normally invest at least 65% of the Fund's
total assets in income-producing securities of the U.S. and foreign governments,
supranational organizations, semi-governmental entities or governmental agencies
or any of their political subdivisions or instrumentalities. We can also invest
up to 35% of total assets in other kinds of income-producing securities. To
achieve our income objective, we look for investment-grade securities (BBB/Baa
or above) denominated in U.S. dollars and foreign currencies. While we make
every effort to achieve our objective, we can't guarantee success.
The Fund may use a variety of hedging strategies to protect the value of
the Funds investments including derivatives and cross-currency hedges.
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A SUPRANATIONAL ORGANIZATION is formed by the governments of different countries
to promote economic development. The World Bank, the European Investment Bank
and the Asian Development Bank are supranational entities. Securities of
SEMI-GOVERNMENTAL ENTITIES are issued by organizations owned by a national or
state government or are debts of a political unit that are not backed by the
national government's credit and taxing power. The Province of Ontario and the
City of Stockholm are examples of semi-governmental entities.
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PRINCIPAL RISKS
Although we try to invest wisely, all investments involve risk. Since we invest
primarily in bonds, there is the risk that interest rates will go up
significantly, which generally causes bond prices to go down. Bonds with longer
maturity dates typically produce higher yields and are subject to greater price
shifts as a result of changes in interest rates than bonds with shorter maturity
dates.
Bond prices and the Fund's net asset value generally move in opposite
directions--if interest rates go up, the prices of the bonds in the Fund's
portfolio may fall because the bonds the Fund holds won't, as a rule, pay as
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1
<PAGE>
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Risk/Return Summary
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well as the newer bonds issued. Bonds that are issued when interest rates are
high generally increase in value when interest rates fall. There is also the
risk that the borrower will not repay the debt.
Since we invest in foreign securities, there are more risks than if we
invested only in obligations of the U.S. government. The amount of income
available for distribution may be affected by our foreign currency gains or
losses and certain hedging activities. Foreign markets, especially those in
developing countries, tend to be more volatile than U.S. markets and changes in
currency exchange rates can reduce or increase market performance.
The Fund is non-diversified, meaning we can invest more than 5% of our
assets in the securities of any one issuer. Investing in a non-diversified
mutual fund involves greater risk than investing in a diversified fund.
The Fund may use risk management techniques to try to preserve assets or
enhance return. These strategies may present above average risks. Derivatives
may not fully offset the underlying positions and this could result in losses to
the Fund that would not otherwise have occurred.
Some of our investment strategies involve risk. Like any mutual fund, an
investment in the Fund could lose value, and you could lose money. For more
detailed information about the risks associated with the Fund, see "Investment
Risks". The Fund does not represent a complete investment program.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
EVALUATING PERFORMANCE
A number of factors--including risk--affect how the Fund performs. The following
bar chart and table show the Fund's performance for each full calendar year of
operation since 1989. They demonstrate the risk of investing in the Fund and how
returns can change from year to year. Past performance does not mean that the
Fund will achieve similar results in the future.
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2 Prudential Intermediate Global Income Fund, Inc. [GRAPHIC] (800) 225-1852
<PAGE>
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Risk/Return Summary
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<TABLE>
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ANNUAL RETURNS (CLASS A SHARES)(1) (AS PERCENT)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ----------------------------------------------------------------------------------------------------
BEST QUARTER: ______% (__ quarter of 19__) WORST QUARTER: ______% (__ quarter of 19__)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) These annual returns do not include sales charges. If sales charges were
included, the annual returns would be lower than those shown.
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AVERAGE ANNUAL RETURNS (AS OF 12/31/98)(1)
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1 YEAR 5 YEARS 10 YEARS(4) SINCE INCEPTION
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Class A shares __% __% __%(4) __% (since 5-26-88)
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Class B shares __% __% __% __% (since 1-15-92)
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Class C shares __% __% __% __% (since 8-1-94)
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Class Z shares __% __% __% __% (since 9-13-96)
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Morgan GBI(2) __% __% __% N/A
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Lipper Average(3) __% __% __% N/A
(1) The Fund's returns are after deduction of sales charges and expenses.
(2) The J. P. Morgan Government Bond Index (GBI) is a market weighted index of
the total return of government bonds of the following nations: Australia,
Belgium, Canada, Denmark, France, Germany, Italy, Japan, the Netherlands,
Spain, Sweden, the United Kingdom and the United States. The GBI is an
unmanaged index and is traded, unhedged and measured in U.S. dollars.
These returns do not include the effect of any sales charges. The
securities in GBI may be very different than those in the Fund. These
returns would be lower if they included the effect of sales charges. GBI
returns since inception of each class are _% for Class A, _% for Class B,
_% for Class C and _% for Class Z shares. Source: Lipper, Inc.
(3) The Lipper General World Income Average is based on the average return of
all mutual funds in the Lipper General World Income category and does not
include the effect of any sales charges. Again, these returns would be
lower if they included the effect of sales charges. Lipper returns since
inception of each class are _% for Class A, _% for Class B, _% for Class C
and _% for Class Z shares. The Series' returns are after deduction of
sales charges and expenses. Source: Lipper, Inc.
(4) Prior to October 7, 1991 the Fund operated as a closed-end investment
company.
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3
<PAGE>
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Risk/Return Summary
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FEES AND EXPENSES
This table shows the sales charges, fees and expenses for each share class of
the Fund--Class A, B, C and Z. Each share class has different sales
charges--known as loads--a expenses, but represents an investment in the same
fund. Class Z shares are available only to a limited group of investors. For
more information about which share class may be right for you, see "How to Buy,
Sell and Exchange Shares of the Fund."
<TABLE>
- --------------------------------------------------------
SHAREHOLDER FEES(1) (PAID DIRECTLY FROM YOUR INVESTMENT)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS Z
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<S> <C> <C> <C> <C>
Maximum sales charge (load) imposed on 3% None 1% None
purchases (as a percentage of offering
price)
- --------------------------------------------------------------------------------
Maximum deferred sales charge (load) None 3%(2) 1%(3) None
(as a percentage of the lower of
original purchase price or sale
proceeds)
- --------------------------------------------------------------------------------
Maximum sales charge (load) None None None None
imposed on reinvested dividends
and other distributions
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Redemption fees None None None None
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Exchange fee None None None None
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- ----------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS Z
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Management fees .75% .75% .75% .75%
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+ Distribution and service (12b-1) fees .30%(4) .75% 1.00%(4) None
- --------------------------------------------------------------------------------
+ Other expenses __% __% __% __%
- --------------------------------------------------------------------------------
= TOTAL ANNUAL FUND OPERATING EXPENSES __% __% __% __%
</TABLE>
(1) Your broker may charge you a separate or additional fee for purchases and
sales of shares.
(2) The Contingent Deferred Sales Charge (CDSC) for Class B shares decreases
by 1% annually to 1% in the third and fourth years and 0% in the fifth
year. Class B shares convert to Class A shares approximately seven years
after purchase.
(3) The CDSC for Class C shares is 1% for shares redeemed within 18 months of
purchase.
(4) The Distributor of the Fund has voluntarily reduced its distribution and
service fees for Class A shares to .15 of 1% of the average daily net
assets of the Class A shares and .75 of 1% of the Class C shares. These
voluntary reductions may be terminated at any time without notice. With
these reductions, Total annual Fund operating expenses are __% for Class A
shares and ____% for Class C shares.
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4 Prudential Intermediate Global Income Fund, Inc. [GRAPHIC] (800) 225-1852
<PAGE>
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Risk/Return Summary
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EXAMPLE
This example will help you compare the fees and expenses of the Fund's different
share classes and compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then sell all of your shares at the end of those periods.
The example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
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1 YR 3 YRS 5 YRS 10 YRS
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<S> <C> <C> <C> <C>
Class A shares $__ $__ $__ $__
- --------------------------------------------------------------------------------
Class B shares $__ $__ $__ $__
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Class C shares $__ $__ $__ $__
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Class Z shares $__ $__ $__ $__
You would pay the following expenses on the same investment if you did not sell
your shares:
- --------------------------------------------------------------------------------
1 YR 3 YRS 5 YRS 10 YRS
- --------------------------------------------------------------------------------
Class A shares $__ $__ $__ $__
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Class B shares $__ $__ $__ $__
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Class C shares $__ $__ $__ $__
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Class Z shares $__ $__ $__ $__
</TABLE>
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5
<PAGE>
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How the Fund Invests
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INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to maximize TOTAL RETURN, made up of CURRENT
INCOME and CAPITAL APPRECIATION. This means we seek investments that will
increase in value, as well as pay the Fund interest and other income. While we
make every effort to achieve our objective, we can't guarantee success.
In pursuing our objective, we normally invest primarily in income-producing
securities of the U.S. and foreign governments, supranational organizations,
semi-governmental entities or government agencies or any of their political
subdivisions or instrumentalities. We can invest in securities in U.S. dollars
and securities in foreign countries based on U.S. dollars or foreign currencies.
We will generally limit investments in particular currencies to 30% of the
Fund's total assets although we can go higher if we think a particular currency
might significantly increase in value compared to the U.S. dollar. Also, the
Fund may invest up to 65% of its total assets in securities denominated in the
euro currency. The Fund may invest up to 50% of its total assets in securities
denominated in Canadian, Japanese or British currencies. [We also won't invest
more than 25% of total assets in securities of government entities from any one
foreign country which are considered industries, but, government entities of
national and local governments are considered separate industries.] As a
"global" fund, we usually invest in issuers from at least three different
countries, including the U.S. We may invest in securities of developing
countries, which may be subject to more abrupt or erratic market movements than
those of developed countries.
- --------------------------------------------------------------------------------
On January 1, 1999, 11 of the 15 member states of the European Union introduced
the "euro" as a common currency. During a three-year transitional period, the
euro will coexist with each participating states's currency. Beginning July 1,
2002, the euro is anticipated to become the sole currency of the participating
states. During the transition period, the Fund will treat the euro as a separate
currency from that of any participating state. The conversion may adversely
affect the Fund if the euro does not take effect as planned; if a participating
state withdraws from the European Monetary Union; or if the computing,
accounting and trading systems used by the Funds' service providers, or by
entities with which the Fund or its service providers do business, are not
capable of recognizing the euro as a distinct currency at the time of, and
following, euro conversion. In addition, the conversion could cause markets to
become more volatile.
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6 Prudential Intermediate Global Income Fund, Inc. [GRAPHIC] (800) 225-1852
<PAGE>
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How the Fund Invests
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The Fund can also invest
o up to 20% of total assets in investment grade U.S. corporate debt
securities
o up to 10% of total assets in convertible securities
o up to 10% of total assets in common stock and warrants to buy common
stocks when they are accompanied by debt securities
o up to 20% of total assets in obligations of foreign banks and
foreign branches of U.S. banks
o less than 10% in collateralized mortgage obligations
The Fund can invest up to 10% of its total assets in "stripped securities"
(securities where the principal or a scheduled interest payment is sold
separately) of U.S. and foreign government debt securities.
Most of the Fund's debt securities are "investment grade." This means
major rating services, like Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("Moody's"), have rated the securities within one of
their four highest quality grades. Up to 10% of the Fund's total assets may be
invested in lower rated securities, which are riskier and considered
"speculative." These high-yield or "junk" bonds, will have a minimum rating of B
by Moody's or S&P or another major rating service at the time they are
purchased. The Fund may continue to hold such a security if it is subsequently
downgraded below B or is no longer rated by a major rating service. We may also
invest in obligations that are not rated, but that we believe are of comparable
quality to the obligations described above.
The Fund has a weighted average maturity of not more than 10 years and we
normally don't buy securities with a remaining maturity of more then 10 years.
The maturity of a bond is simply the number of years until the principal is due
and payable. Weighted average maturity is calculated by adding the maturities of
all of the bonds in a portfolio and dividing by the number of bonds on a
weighted basis.
To increase return, we will sell options on U.S. and foreign government
securities. The Fund may also use a variety of "hedging" strategies intended to
protect the value of the Fund's securities rather than to make a profit. These
may include derivative transactions and cross-currency hedges which are
described in more detail in the Fund's Statement of Additional Information.
For more information about this Fund and its investments, see "Investment
Risks" below and the Statement of Additional Information, "Description of the
Fund, Its Investments and Risks." The Statement of Additional Information--
- --------------------------------------------------------------------------------
7
<PAGE>
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How the Fund Invests
- --------------------------------------------------------------------------------
which we refer to as the SAI--contains additional information about the Fund. To
obtain a copy, see the back cover page of this prospectus.
The Fund's investment objective is a fundamental policy that cannot be
changed without shareholder approval. The Board of the Fund can change
investment policies that are not fundamental.
OTHER INVESTMENTS
We may also use the following investment strategies to increase the Fund's
returns or protect its assets if market conditions warrant.
TEMPORARY DEFENSIVE INVESTMENTS AND CASH MANAGEMENT
In response to adverse market, economic or political conditions or for cash
management, we may temporarily invest up to 100% of the Fund's assets in high
quality money market instruments, including commercial paper of domestic and
foreign corporations, certificates of deposit, bankers' acceptances and other
obligations of domestic and foreign banks and short-term obligations issued or
guaranteed by the U.S. Government and its agencies. Investing heavily in these
securities limits our ability to achieve capital appreciation but can help to
preserve the Fund's assets when the bond markets are volatile.
ADJUSTABLE/FLOATING RATE SECURITIES
The Fund can invest in adjustable or floating rate securities whose interest
rate is calculated by reference to a specific index and is reset periodically.
The value of adjustable or floating rate securities does not respond as quickly
to changing interest rates as do fixed rate securities.
REPURCHASE AGREEMENTS
The Fund may also use REPURCHASE AGREEMENTS, where a party agrees to sell a
security to the Fund and then repurchase it at an agreed-upon price at a stated
time. This creates a fixed return for the Fund.
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8 Prudential Intermediate Global Income Fund, Inc. [GRAPHIC] (800) 225-1852
<PAGE>
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How the Fund Invests
- --------------------------------------------------------------------------------
DERIVATIVE STRATEGIES
We may use alternative investment strategies--including DERIVATIVES--to try to
improve the Fund's returns or protect its assets, although we cannot guarantee
these strategies will work, that the instruments necessary to implement these
strategies will be available or that the Fund will not lose money.
Derivatives--such as futures, options, foreign currency forward contracts
and options on futures--involve costs and can be volatile. With derivatives, the
investment adviser tries to predict whether the underlying investment--a
security, market index, currency, interest rate or some other investment--will
go up or down at some future date. We may use derivatives to try to reduce risk
or to increase return consistent with the Fund's overall investment objective.
The investment adviser will consider other factors (such as cost) in deciding
whether to employ any particular strategy or use any particular instrument. Any
derivatives we may use may not match the Fund's underlying holdings.
Because we are a global fund and invest in securities denominated in
different foreign currencies, we may use "currency hedges". Currency hedges can
help protect the Fund's NAV from declining if a particular foreign currency were
to decrease in value compared to the U.S. dollar.
The Fund may invest without limit in commercial paper and other
instruments that are "indexed" to certain specific foreign currency exchange
rates. This means that the instrument's principal amount is adjusted upwards or
downwards (but not below zero) to reflect changes in the exchange rate between
two currencies from the time the instrument is outstanding until it matures.
When the Fund purchases one of these instruments, it pays with the currency in
which the instrument is denominated and, at maturity, it receives interest and
principal payments in the same currency. These instruments offer the potential
for realizing gains as a result of changes in foreign currency exchange rates
that can be used to hedge (or cross-hedge) against a decline in the U.S. dollar
value of the investments while providing an attractive money market rate of
return.
For more information about these strategies, see the SAI, "Description of
the Fund, Its Investments and Risks--Risk Management and Return Enhancement
Strategies."
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9
<PAGE>
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How the Fund Invests
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ADDITIONAL STRATEGIES
The Fund also follows certain policies when it: BORROWS MONEY (the Fund can
borrow up to 20% of the value of its total assets); LENDS ITS SECURITIES to
others (the Fund can lend up to 30% of the value of its total assets, including
collateral received in the transaction; and holds ILLIQUID SECURITIES (the Fund
may hold up to 15% of its net assets in illiquid securities, including
securities with legal or contractual restrictions, those without a readily
available market and repurchase agreements with maturities longer than seven
days). The Fund is "NON-DIVERSIFIED," meaning it can invest more than 5% of its
assets in the securities of any one issuer. The Fund is subject to certain
investment restrictions that are fundamental policies, which means they cannot
be changed without shareholder approval. For more information about these
restrictions, see the SAI.
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10 Prudential Intermediate Global Income Fund, Inc. [GRAPHIC] (800) 225-1852
<PAGE>
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How the Fund Invests
- --------------------------------------------------------------------------------
INVESTMENT RISKS
As noted, all investments involve risk, and investing in the Fund is no
exception. This chart outlines the key risks and potential rewards of the Fund's
principal investments. See, too, "Description of the Fund, it's Investments and
Risks" in the SAI.
<TABLE>
- -----------------------------
INVESTMENT TYPE
---------------------------------------------------
% OF FUND'S ASSETS RISKS POTENTIAL REWARDS
- --------------------------------------------------------------------------------
<S> <C> <C>
INCOME-PRODUCING o The Fund's share o Bonds have generally
SECURITIES price, yield and outperformed money
total return will market instruments
At least 65% of fluctuate in over the long term
total assets response to bond with less risks than
market movements. stocks.
o Credit risk--the o Most bonds will rise
default of an issuer in value when
would leave the Fund interest rates fall.
with unpaid interest
or principal o Regular interest
income
o Market risk--the
risk that the market o Generally more
value of an secure than stock
investment may move since companies must
up or down, pay their debts
sometimes rapidly or before paying
unpredictably. stockholders
Market risk may
affect an industry, o Investment grade
a sector or the bonds have a lower
market as a whole. risk of default
o Interest rate o Principal and
risk--the value of interest on
most bonds will fall government
when interest rates securities may be
rise, the longer a guaranteed by the
bond's maturity and issuing government
the lower its credit
quality, the more o Junk bonds offer
its value typically higher yields and
falls. It can lead higher potential
to price volatility, gains.
particularly for
junk bonds and
stripped securities
o As a non-diversified
fund, we will have
greater exposure to
loss from a single
issuer
o Not all government
securities are
insured or
guaranteed by the
government but only
by the issuing
agency
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- --------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------
How the Fund Invests
- --------------------------------------------------------------------------------
- -----------------------------
INVESTMENT TYPE
---------------------------------------------------
% OF FUND'S ASSETS RISKS POTENTIAL REWARDS
- --------------------------------------------------------------------------------
<S> <C> <C>
o Junk bonds (rated
BB/Ba or lower) have
a higher risk of
default, tend to be
less liquid and may
be more difficult to
value.
- --------------------------------------------------------------------------------
FOREIGN SECURITIES o Foreign markets, o Investors can
economies and participate in the
Percentage varies political systems growth of foreign
may not be as stable markets and
as in the U.S., companies operating
particularly those in those markets
in developing
countries o Changing value of
foreign currencies
o Currency
risk--changing o Opportunities for
values of foreign diversification
currencies
o Debt securities
issued by
supranational
organizations or
semi-governmental
issuers may be
backed by limited
assets in the event
of default
o May be less liquid
than U.S. stocks and
bonds
o Differences in
foreign laws,
accounting
standards, public
information, custody
and settlement
practices
o [Year 2000 conversion
may be more of a
problem for some
foreign issuers]
- --------------------------------------------------------------------------------
DERIVATIVES o Derivatives such as o The Fund could make
futures, options and money and protect
Percentage Varies foreign currency against losses if
forward contracts the investment
may not fully offset analysis proves
the underlying correct
positions and this
could result in o Derivatives that
losses to the Fund involve leverage
that would not have could generate
otherwise occurred* substantial gains at
low cost
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- --------------------------------------------------------------------------------
</TABLE>
12 Prudential Intermediate Global Income Fund, Inc. [GRAPHIC] (800) 225-1852
<PAGE>
- --------------------------------------------------------------------------------
How the Fund Invests
- --------------------------------------------------------------------------------
<TABLE>
- -----------------------------
INVESTMENT TYPE
---------------------------------------------------
% OF FUND'S ASSETS RISKS POTENTIAL REWARDS
- --------------------------------------------------------------------------------
<S> <C> <C>
o Derivatives used for o One way to manage
risk management may the Fund's
not have the risk/return balance
intended effects and is by locking in the
may result in losses value of an
or missed investment ahead of
opportunities time
o The other party to a o May be used to hedge
derivatives contract against changes in
could default currency exchange
rates
o Derivatives that
involve leverage
could magnify losses
o Certain types of
derivatives involve
costs to the Fund
that can reduce
returns
- --------------------------------------------------------------------------------
ILLIQUID SECURITIES o May be difficult o May offer a more
to value precisely attractive yield or
Up to 15% of net assets potential for growth
o May be difficult to than more widely
sell at the time or traded securities
price desired
- --------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS o Limits potential for o May preserve the
capital appreciation Fund's assets
Up to 100% on a temporary
basis o See Credit risk and
Market risk
- --------------------------------------------------------------------------------
ADJUSTABLE/FLOATING RATE o Value lags value of o Can take advantage of
SECURITIES fixed rate securities rising interest rates
when interest rates
change
Percentage varies
- --------------------------------------------------------------------------------
* An option is the right to buy or sell securities in exchange for a
premium. A futures contract is an agreement to buy or sell a set quantity
of an underlying product at a future date, or to make or receive a cash
payment based on the value of a securities index. A foreign currency
forward contract is an obligation to buy or sell a given currency on a
future date and at a set price.
- --------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
- --------------------------------------------------------------------------------
How the Fund is Managed
- --------------------------------------------------------------------------------
MANAGER
PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC (PIFM)
GATEWAY CENTER THREE, 100 MULBERRY STREET
NEWARK, NJ 07102-4077
Under a management agreement with the Fund, PIFM manages the Fund's
investment operations and administers its business affairs. For the fiscal year
ended December 31, 1998, the Fund paid PIFM management fees of .75% of the
Fund's average net assets.
As of January 31, 1999, PIFM served as the Manager to all __ of the
Prudential Mutual Funds, and as Manager or administrator to __ closed-end
investment companies, with aggregate assets of approximately $__ billion.
INVESTMENT ADVISER
The Prudential Investment Corporation, called Prudential Investments, is the
Fund's investment adviser. Its address is Prudential Plaza, 751 Broad Street,
Newark, NJ 07102. Prudential Investments has entered into a service agreement
with PRICOA Asset Management Ltd. (PRICOA), a subsidiary of The Prudential
Insurance Company of America, for the provision of investment advisory services
to the Fund and compensates PRICOA for its reasonable costs and expenses in
providing such services. PIFM has responsibility for all investment advisory
services, supervises Prudential Investments and PRICOA and reimburses Prudential
Investments for its reasonable costs and expenses.
PRICOA, an indirect wholly-owned subsidiary of Prudential, is located at
Cutlers Court, 100 Piccadilly, London W1V9FN England. It was incorporated under
U.K. law in January 1997 and as of December 31, 1998 had approximately $__
billion under management.
PORTFOLIO MANAGERS
The Fund is co-managed by J. GABRIEL IRWIN and SIMON WELLS.
Gabriel Irwin and Simon Wells both joined Prudential Investments in April
1995 to lead the Global Fixed Income Group and have been co-managing the Fund
since then. Before joining Prudential they were Senior Vice Presidents at Smith
Barney Global Capital Management in London.
- --------------------------------------------------------------------------------
14 Prudential Intermediate Global Income Fund, Inc. [GRAPHIC] (800) 225-1852
<PAGE>
- --------------------------------------------------------------------------------
How the Fund is Managed
- --------------------------------------------------------------------------------
Simon and Gabriel use a fundamental approach to international bond
investing. They analyze worldwide macro-economic, political and social events
and trends searching for opportunities they believe will offer attractive
yields, as well as the potential for price appreciation.
DISTRIBUTOR
Prudential Investment Management Services LLC (PIMS) distributes the Fund's
shares under a Distribution Agreement with the Fund. The Fund has Distribution
and Service Plans under Rule 12b-1 of the Investment Company Act. Under the
Plans and the Distribution Agreement, PIMS pays the expenses of distributing the
Fund's Class A, B, C and Z shares and provides certain shareholder support
services. The Fund pays distribution and other fees to PIMS as compensation for
its services for each class of shares other than Class Z. These fees--known as
12b-1 fees--are shown in the "Fees and Expenses" table.
YEAR 2000 READINESS DISCLOSURE
The services provided to the Fund and the shareholders by the Manager, the
Distributor, the Transfer Agent and the Custodian depend on the smooth
functioning of their computer systems and those of outside service providers.
Many computer software systems in use today cannot distinguish the year 2000
from the year 1900 because of the way dates are encoded and calculated. Such
event could have a negative impact on handling securities trades, payments of
interest and dividends, pricing and account services. The Manager, the
Distributor, the Transfer Agent and the Custodian have advised the Fund that
they have been actively working on necessary changes to their computer systems
to prepare for the year 2000. The Fund and its Directors receive and have
received since early 1998 satisfactory quarterly reports from the principal
service providers as to their preparations for year 2000 readiness, although
there can be no assurance that the service providers (or other securities market
participants) will successfully complete the necessary changes in a timely
manner or that there will be no adverse impact on the Fund. Moreover, the Fund
at this time has not considered retaining alternative service providers or
directly undertaken efforts to achieve year 2000 readiness, the latter of which
would involve substantial expenses without an assurance of success.
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
Risk/Return Summary
- --------------------------------------------------------------------------------
Additionally, issuers of securities generally, as well as those purchased
by the Fund, may confront Year 2000 compliance issues which, if material and not
resolved, could have an adverse impact on securities markets and/or a specific
issuer's performance and result in a decline in the value of the securities held
by the Fund.
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16 Prudential Intermediate Global Income Fund, Inc. [GRAPHIC] (800) 225-1852
<PAGE>
- --------------------------------------------------------------------------------
How the Fund is Managed
- --------------------------------------------------------------------------------
Investors who buy shares of the Fund should be aware of some important tax
issues. For example, the Fund distributes DIVIDENDS of ordinary income and any
realized net CAPITAL GAINS to shareholders. These distributions are subject to
taxes, unless you hold your shares in a 401(k) plan, an Individual Retirement
Account (IRA) or some other qualified tax-deferred plan or account.
Also, if you sell shares of the Fund for a profit, you may have to pay
capital gains taxes on the amount of your profit, again unless you hold your
shares in a qualified tax-deferred plan or account.
The following briefly discusses some of the important federal tax issues
you should be aware of, but is not meant to be tax advice. For tax advice,
please speak with your tax adviser.
DISTRIBUTIONS
The Fund declares daily and distributes DIVIDENDS of any net investment income
to shareholders, typically every month. For example, if the Fund owns Utopia
Government bonds and the bond pays income, the Fund will pay out a portion of
this income to its shareholders, assuming the Fund's income is more than its
costs and expenses. The dividends you receive from the Fund will be taxed as
ordinary income, whether or not they are reinvested in the Fund.
The amount of income available for distribution to shareholders will be
affected by any foreign currency gains or losses generated by the Fund and
cannot be predicted. This fact, coupled with the different tax and accounting
treatment of certain currency gains and losses, increases the possibility that
distributions, in whole or in part, may be a return of capital to shareholders.
The Fund also distributes realized NET CAPITAL GAINS to
shareholders--typically once a year--which are generated when the Fund sells its
assets for a profit. For example, if the Fund bought 100 shares of ACME Corp.
stock for a total of $1,000 and more than one year later sold the shares for a
total of $1,500, the Fund has net long-term capital gains of $500, which it will
pass on to shareholders (assuming the Fund's total gains are greater than any
losses it may have). Capital gains are taxed differently depending on how long
the Fund holds the security--if a security is held more than one year before it
is sold, LONG-TERM capital gains are taxed at the rate of 20%, but if the
security is held one year or less, SHORT-TERM capital gains are taxed at rates
up to 39.6%. Different rates apply to corporate shareholders.
- --------------------------------------------------------------------------------
17
<PAGE>
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Fund Distributions and Tax Issues
- --------------------------------------------------------------------------------
For your convenience, Fund distributions of dividends and capital gains
are AUTOMATICALLY REINVESTED in the Fund without any sales charge. If you ask us
to pay the distributions in cash, we will send you a check if your account is
with the Transfer Agent. Otherwise, if your account is with a broker you will
receive a credit to your account. Either way, the distributions may be subject
to taxes, unless your shares are held in a qualified tax-deferred plan or
account. For more information about automatic reinvestment and other shareholder
services, see "Step 4: Additional Shareholder Services" in the next section.
TAX ISSUES
FORM 1099
Every year, you will receive a Form 1099, which reports the amount of dividends
and capital gains we distributed to you during the prior year. If you own shares
of the Fund as part of a qualified tax-deferred plan or account, your taxes are
deferred, so you will not receive a Form 1099. However, you will receive a Form
1099 when you take any distributions from your qualified tax-deferred plan or
account.
Fund distributions are generally taxable to you in the year they are
received, except when we declare certain dividends in the fourth quarter and
actually pay them in January of the following year. In such cases, the dividends
are treated as if they were paid on December 31 of the prior year. Corporate
shareholders are eligible for the 70% dividends-received deduction for certain
dividends.
WITHHOLDING TAXES
If you are subject to backup withholding, we will withhold and pay to the U.S.
Treasury 31% of your distributions, or, if federal tax law requires you to
provide the Fund with your tax identification number and certifications as to
your tax status, and you fail to do this, we will withhold and pay to the U.S.
Treasury 31% of your distributions and sale proceeds. Dividends of net
investment income and short-term capital gains paid to a nonresident foreign
shareholder generally will be subject to a U.S. withholding tax of 30%. This
rate may be lower, depending on any tax treaty the U.S. may have with the
shareholder's country.
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18 Prudential Intermediate Global Income Fund, Inc. [GRAPHIC] (800) 225-1852
<PAGE>
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Fund Distributions and Tax Issues
- --------------------------------------------------------------------------------
IF YOU PURCHASE JUST BEFORE RECORD DATE
If you buy shares of the Fund just before the record date (the date that
determines who receives the distribution), that distribution will be paid to
you. As explained above, the distribution may be subject to income or capital
gains taxes. You may think you've done well, since you bought shares one day,
and soon after received a distribution. That is not so because when dividends
are paid out, the value of each share of the Fund decreases by the amount of the
dividend and the market changes (if any) to reflect the payout. The distribution
you receive makes up for the decrease in share value. However, the timing of
your purchase does mean that part of your investment came back to you as taxable
income.
QUALIFIED RETIREMENT PLANS
Retirement plans and accounts allow you to defer paying taxes on investment
income and capital gains. Contributions to these plans may also be tax
deductible, although distributions from these plans generally are taxable. In
the case of Roth IRA accounts, contributions are not tax deductible, but
distributions from the plan may be tax-free. Please contact your financial
adviser for information on a variety of Prudential Mutual Funds that are
suitable for retirement plans offered by Prudential.
IF YOU SELL OR EXCHANGE YOUR SHARES
If you sell any shares of the Fund for a profit, you have REALIZED A CAPITAL
GAIN, which is subject to tax, unless you hold shares in a qualified
tax-deferred plan or account. The amount of tax you pay depends on how long you
owned your shares. If you sell shares of the Fund for a loss, you may have a
capital loss, which you may use to offset certain capital gains you have.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
+$ CAPITAL GAIN
(taxes owed)
RECEIPTS
FROM SALE OR
-$ CAPITAL LOSS
(offset against gain)
- --------------------------------------------------------------------------------
Exchanging your shares of the Fund for the shares of another Prudential
Mutual Fund is considered a sale for tax purposes. In other words, it's a
"taxable event." Therefore, if the shares you exchanged have increased in value
since you purchased them, you have capital gains, which are subject to the taxes
described above.
- --------------------------------------------------------------------------------
19
<PAGE>
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Fund Distributions and Tax Issues
- --------------------------------------------------------------------------------
Any gain or loss you may have from selling or exchanging Fund shares will
not be reported on the Form 1099. Therefore, unless you hold your shares in a
qualified tax-deferred plan or account, you or your financial adviser should
keep track of the dates on which you buy and sell--or exchange--Fund shares, as
well as the amount of any gain or loss on each transaction. For tax advice,
please see your tax adviser.
AUTOMATIC CONVERSION OF CLASS B SHARES
We have obtained a legal opinion that the conversion of Class B shares into
Class A shares--which happens automatically approximately seven years after
purchase--is not a "taxable event" because it does not involve an actual sale of
your Class B shares. This opinion, however, is not binding on the IRS. For more
information about the automatic conversion of Class B shares, see "Class B
Shares Convert to Class A Shares After Approximately Seven Years" in the next
section.
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20 Prudential Intermediate Global Income Fund, Inc. [GRAPHIC] (800) 225-1852
<PAGE>
- --------------------------------------------------------------------------------
How to Buy, Sell and
Exchange Shares of the Fund
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
STEP 1: OPEN AN ACCOUNT
If you don't have an account with us or a securities firm that is permitted to
buy or sell shares of the Fund for you, call Prudential Mutual Fund Services LLC
(PMFS) at (800) 225-1852 or contact:
PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: INVESTMENT SERVICES
P.O. BOX 15020
NEW BRUNSWICK, NJ 08906-5020
To purchase by wire, call the number above to obtain an application. After
PMFS receives your completed application, you will receive an account number.
For additional information about purchasing shares of the Fund, see the back
cover page of this prospectus. We have the right to reject any purchase order
(including an exchange into the Fund) or suspend or modify the Fund's sale of
its shares.
STEP 2: CHOOSE A SHARE CLASS
Individual investors can choose among Class A, Class B, Class C, and Class Z
shares of the Fund, although Class Z shares are available only to a limited
group of investors.
Multiple share classes let you choose a cost structure that better meets
your needs. With Class A shares, you pay the sales charge at the time of
purchase, but the operating expenses each year are lower than the expenses of
Class B and Class C shares. With Class B shares, you only pay a sales charge if
you sell your shares within certain time periods (that is why it is called a
Contingent Deferred Sales Charge, or CDSC), but the operating expenses each year
are higher than the Class A share expenses. With Class C shares, you pay a low
front-end sales charge and low CDSC, but the operating expenses are also higher
than the expenses for Class A shares.
When choosing a share class, you should consider the following:
o The amount of your investment
o The length of time you expect to hold the shares and the impact of
the varying distribution fees
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21
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How to Buy, Sell and
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o The different sales charges that apply to each share class--Class
A's front-end sales charge vs. Class B's CDSC vs. Class C's low
front-end sales charge and low CDSC
o Whether you qualify for any reduction or waiver of sales charges
o The fact that Class B shares automatically convert to Class A shares
approximately seven years after purchase
o Whether you qualify to purchase Class Z shares
Share Class Comparison. Use this chart to help you compare the Fund's different
share classes. The discussion following this chart will tell you whether you are
entitled to a reduction or waiver of any sales charges.
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS Z
- --------------------------------------------------------------------------------
Minimum purchase $1,000 $1,000 $2,500 None
amount(1)
- --------------------------------------------------------------------------------
Minimum amount $100 $100 $100 None
for subsequent
purchases(1)
- --------------------------------------------------------------------------------
Maximum initial 3% of the public None 1% of the public None
sales charge offering price offering price
- --------------------------------------------------------------------------------
Contingent None If Sold During: 1% on sales None
Deferred Year 1, 3% made within
Sales Charge Year 2, 2% 18 months
(CDSC)(2) Year 3, 1% of purchase(2)
Year 4, 1%
Year 5, 0%
- --------------------------------------------------------------------------------
Annual .30 of 1% .75 of 1% 1% (.75 of 1% None
distribution (.15 of 1% currently)
and service currently)
(12b-1) fees
shown as a
percentage of
average net
assets(3)
- --------------------------------------------------------------------------------
(1) The minimum investment requirements do not apply to certain retirement and
employee savings plans and custodial accounts for minors. The minimum
initial and subsequent investment for purchases made through the Automatic
Investment Plan is $50. For more information, see "Additional Shareholder
Services--Automatic Investment Plan."
(2) For more information about the CDSC and how it is calculated, see
"Contingent Deferred Sales Charges (CDSC)." Class C shares bought before
November 2, 1998 have a 1% CDSC if sold within one year.
(3) These distribution fees are paid from the Fund's assets on a continuous
basis. Over time, the fees will increase the cost of your investment and
may cost you more than paying other types of sales charges. The service
fee for Class A shares is .15 of 1% and for B and C shares is .25 of 1%.
The distribution fee for Class A shares is limited to .30 of 1% (including
the .15 of 1% service fee), for Class B shares is limited to .75 of 1%
(including the .25 of 1% service fee) and is .75 of 1% for Class C shares.
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22 Prudential Intermediate Global Income Fund, Inc. [GRAPHIC] (800) 225-1852
<PAGE>
- --------------------------------------------------------------------------------
How to Buy, Sell and
Exchange Shares of the Fund
- --------------------------------------------------------------------------------
REDUCING OR WAIVING CLASS A'S INITIAL SALES CHARGE
The following describes the different ways investors can reduce or avoid paying
Class A's initial sales charge.
Increase the Amount of Your Investment. You can reduce Class A's sales charge by
increasing the amount of your investment. This table shows you how the sales
charge decreases as the amount of your investment increases.
<TABLE>
- --------------------------------------------------------------------------------
SALES CHARGE AS % SALES CHARGE AS % DEALER
AMOUNT OF PURCHASE OF OFFERING PRICE OF AMOUNT INVESTED REALLOWANCE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 3.00% 3.09% 2.75%
- --------------------------------------------------------------------------------
$100,000 but less than 2.50% 2.56% 2.25%
$500,000
- --------------------------------------------------------------------------------
$500,000 but less than 2.00% 2.04% 1.75%
$1,000,000
- --------------------------------------------------------------------------------
$1,000,000 and above(1) None None None
</TABLE>
(1) If you invest $1 million or more, you can buy only Class A shares, unless
you qualify to buy Class Z shares.
To satisfy the purchase amounts above, you can:
o Invest with an eligible group of related investors;
o Buy the Class A shares of two or more Prudential Mutual Funds at the
same time;
o Use your RIGHTS OF ACCUMULATION, which allow you to combine the
value of Prudential Mutual Fund shares you already own with the
value of the shares you are purchasing for purposes of determining
the applicable sales charge (note: you must notify the Transfer
Agent if you qualify for Rights of Accumulation); or
o Sign a LETTER OF INTENT, stating in writing that you or a group of
related investors will purchase a certain amount of shares in the
Fund and other Prudential Mutual Funds within 13 months.
Benefit Plans. Benefit Plans can avoid Class A's initial sales charge if the
Benefit Plan has existing assets of at least $1 million invested in shares of
Prudential Mutual Funds (excluding money market funds other than those acquired
under the exchange privilege) or 250 eligible employees or participants. For
these purposes, a Benefit Plan is a pension, profit-sharing or other employee
benefit plan qualified under Section 401 of the Internal Revenue Code, a
deferred compensation or annuity plan under Sections 403(b) and 457 of the
Internal Revenue Code, a "rabbi" trust or a non-
- --------------------------------------------------------------------------------
23
<PAGE>
- --------------------------------------------------------------------------------
How to Buy, Sell and
Exchange Shares of the Fund
- --------------------------------------------------------------------------------
qualified deferred compensation plan sponsored by an employer that has a
tax-qualified benefit plan with Prudential. Class A shares may also be purchased
without a sales charge by participants who are repaying loans from Benefit Plans
where Prudential (or its affiliates) provides administrative or recordkeeping
services, sponsors the product or provides account services.
Certain Prudential retirement programs--such as PruArray Association
Benefit Plans and PruArray Savings Programs--may also be exempt from Class A's
sales charge. For more information, see the SAI or contact your financial
adviser. In addition, waivers are available to investors in certain programs
sponsored by brokers, investment advisers and financial planners who have
agreements with Prudential Investments Advisory Group relating to:
o Mutual fund "wrap" or asset allocation programs where the sponsor
places Fund trades and charges its clients a management, consulting
or other fee for its services; and
o Mutual Fund "supermarket" programs where the sponsor links its
customers' accounts to a master account in the sponsor's name and
the sponsor charges a fee for its services.
Other Types of Investors. Other investors pay no sales charges, including
certain officers, employees or agents of Prudential and its affiliates,
Prudential Mutual Funds, the subadvisers of the Prudential Mutual Funds and
clients of brokers that have entered into a selected dealer agreement with the
Distributor. To qualify for a reduction or waiver of the sales charge, you must
notify the Transfer Agent or your broker at the time of purchase. For more
information see the SAI, "Purchase, Redemption and Pricing of Fund
Shares--Reduction and Waiver of Initial Sales Charge--Class A Shares."
WAIVING CLASS C'S INITIAL SALES CHARGE
Benefit Plans.
Benefit Plans (as defined above) may purchase Class C shares without paying an
initial sales charge. Class C shares may also be purchased without an initial
sales charge by participants who are repaying loans from Benefit Plans where
Prudential (or its affiliates) provides administrative or recordkeeping
services, sponsors the product or provides account services.
Prudential Retirement Plans. The initial sales charge will be waived for
purchases of Class C shares by both qualified and non-qualified retirement and
deferred compensation plans participating in the PruArray Plan and other plans
if Prudential also provides administrative or recordkeeping services.
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24 Prudential Intermediate Global Income Fund, Inc. [GRAPHIC] (800) 225-1852
<PAGE>
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How to Buy, Sell and
Exchange Shares of the Fund
- --------------------------------------------------------------------------------
Investment of Redemption Proceeds from Other Investment Companies. The initial
sales charge will be waived for purchases of Class C shares if the purchase is
made with money from the redemption of shares of any unaffiliated investment
company, as long as the shares were not held in an account at Prudential
Securities Incorporated or one of its affiliates. These purchases must be made
within 60 days of the redemption. To qualify for this waiver, you must:
o purchase your shares through an account at Prudential Securities
o purchase your shares through an ADVANTAGE Account or an Investor
Account with Pruco Securities Corporation
o purchase your shares through another broker
This waiver is not available to investors who purchase shares directly
from the Transfer Agent. If you are entitled to the waiver, you must notify
either the Transfer Agent or your broker. The Transfer Agent may require any
supporting documents it considers appropriate.
QUALIFYING FOR CLASS Z SHARES
Class Z shares of the Fund can be purchased by any of the following:
o Any Benefit Plan as defined above, and certain non-qualified plans,
provided the Benefit Plan--in combination with other plans sponsored
by the same employer or group of related employers--has at least $50
million in defined contribution assets
o Participants in any fee-based program or trust program sponsored by
Prudential or an affiliate which includes mutual funds as investment
options and the Fund as an available option
o Certain participants in the MEDLEY Program (group variable annuity
contracts) sponsored by Prudential for whom Class Z shares of the
Prudential Mutual Funds are an available option
o Benefit Plans for which an affiliate of the Distributor provides
administrative or recordkeeping services and as of September 20,
1996 were either Class Z shareholders of the Prudential Mutual Funds
or executed a letter of intent to purchase Class Z shares of the
Prudential Mutual Funds
o Current and former Directors/Trustees of the Prudential Mutual Funds
(including the Fund)
- --------------------------------------------------------------------------------
25
<PAGE>
- --------------------------------------------------------------------------------
How to Buy, Sell and
Exchange Shares of the Fund
- --------------------------------------------------------------------------------
o Employees of Prudential and/or Prudential Securities who participate
in a Prudential-sponsored employee savings plan
o Prudential with an investment of $10 million or more
In connection with the sale of shares, the Manager, the Distributor or one
of their affiliates may pay brokers, financial advisers and other persons a
commission of up to 3% of the purchase price for Class B shares, up to 2% of the
purchase price for Class C shares and a finder's fee for Class Z shares from
their own resources based on a percentage of the net asset value of shares sold
or otherwise.
CLASS B SHARES CONVERT TO CLASS A SHARES AFTER APPROXIMATELY FIVE YEARS
If you buy Class B shares and hold them for approximately five years, we will
automatically convert them into Class A shares without charge. At that time, we
will also convert any Class B shares that you received with reinvested dividends
and other distributions. Since the 12b-1 fees for Class A shares are lower than
for Class B shares, converting to Class A shares lowers your Fund expenses.
When we do the conversion, you will get fewer Class A shares than the
number of Class B shares converted if the price of the Class A shares is higher
than the price of Class B shares. The total dollar value will be the same, so
you will not have lost any money by getting fewer Class A shares. We do the
conversions quarterly, not on the anniversary date of your purchase. For more
information, see the SAI, "Purchase, Redemption and Pricing of Fund
Shares--Conversion Feature--Class B Shares."
STEP 3: UNDERSTANDING THE PRICE YOU'LL PAY
The price you pay for each share of the Fund is based on the share value. The
share value of a mutual fund--known as the NET ASSET VALUE or NAV--is determined
by a simple calculation--it's the total value of the Fund (assets minus
liabilities) divided by the total number of shares outstanding. For example, if
the value of the investments held by Fund XYZ (minus its liabilities) is $1,000
and there are 100 shares of Fund XYZ owned by shareholders, the price of one
share of the fund--or the NAV--is $10 ($1,000 divided by 100). Portfolio
securities are valued based upon market quotations or, if not readily available,
at fair value as determined in good faith under procedures established by the
Fund's Board. Most national newspapers report the NAVs of
- --------------------------------------------------------------------------------
26 Prudential Intermediate Global Income Fund, Inc. [GRAPHIC] (800) 225-1852
<PAGE>
- --------------------------------------------------------------------------------
Risk/Return Summary
How to Buy, Sell and
Exchange Shares of the Fund
- --------------------------------------------------------------------------------
most mutual funds, which allows investors to check the price of mutual funds
daily.
We determine the NAV of our shares once each business day at 4:15 p.m. New
York Time on days that the New York Stock Exchange is open for trading. Because
we are a global fund, the NAV can change on days when you cannot buy or sell
shares. We do not determine NAV on days when we have not received any orders to
purchase, sell or exchange Fund shares, or when changes in the value of the
Fund's portfolio do not materially affect the NAV.
- --------------------------------------------------------------------------------
MUTUAL FUND SHARES
The NAV of mutual fund shares changes every day because the value of a fund's
portfolio changes constantly. For example, if Fund XYZ holds Utopia government
bonds in its portfolio and the price of Utopia government bonds goes up, while
the value of the fund's other holdings remains the same and expenses don't
change, the NAV of Fund XYZ will increase.
- --------------------------------------------------------------------------------
WHAT PRICE WILL YOU PAY FOR SHARES OF THE FUND?
For Class A and Class C shares, you'll pay the public offering price, which is
NAV next determined after we receive your order to purchase, plus an initial
sales charge (unless you're entitled to a waiver). For Class B and Class Z
shares, you will pay the NAV next determined after we receive your order to
purchase (remember, there are no up-front sales charges for these share
classes). Your broker may charge a separate or additional fee for purchases of
shares.
STEP 4: ADDITIONAL SHAREHOLDER SERVICES
As a Fund shareholder, you can take advantage of the following services and
privileges:
Automatic Reinvestment. As we explained in the "Fund Distributions and Tax
Issues" section, the Fund pays out--or distributes--its net investment income
and capital gains to all shareholders. For your convenience, we will
automatically reinvest your distributions in the Fund at NAV, without any sales
charge. If you want your distributions paid in cash, you can indicate this
preference on your application, notify your broker, or notify the Transfer Agent
- --------------------------------------------------------------------------------
27
<PAGE>
- --------------------------------------------------------------------------------
How to Buy, Sell and
Exchange Shares of the Fund
- --------------------------------------------------------------------------------
in writing (at the address below) at least five business days before the date we
determine who receives dividends:
PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: ACCOUNT MAINTENANCE
P.O. BOX 15015
NEW BRUNSWICK, NJ 08906-5015
Automatic Investment Plan. You can make regular purchases of the Fund for as
little as $50 by having the funds automatically withdrawn from your bank or
brokerage account at specified intervals.
Retirement Plan Services. Prudential offers a wide variety of retirement plans
for individuals and institutions, including large and small businesses. For
information on IRAs, including Roth IRAs, or SEP-IRAs for a one-person business,
please contact your financial adviser. If you are interested in opening a 401(k)
or other company-sponsored retirement plan (SIMPLES, SEP plans, Keoghs, 403(b)
plans, pension and profit-sharing plans), your financial adviser will help you
determine which retirement plan best meets your needs. Complete instructions
about how to establish and maintain your plan and how to open accounts for you
and your employees will be included in the retirement plan kit you receive in
the mail.
The PruTector Program. Optional group term life insurance--which protects the
value of your Prudential Mutual Fund investment for your beneficiaries against
market declines--is available to investors who purchase their shares through
Prudential. This insurance is subject to various restrictions and charges and is
not available in all states.
Systematic Withdrawal Plan. A systematic withdrawal plan is available that will
provide you with monthly or quarterly checks. Remember, the sale of Class B and
Class C shares may be subject to a CDSC.
- --------------------------------------------------------------------------------
28 Prudential Intermediate Global Income Fund, Inc. [GRAPHIC] (800) 225-1852
<PAGE>
- --------------------------------------------------------------------------------
How to Buy, Sell and
Exchange Shares of the Fund
- --------------------------------------------------------------------------------
Reports to Shareholders. Every year we will send you an annual report (along
with an updated prospectus) and a semi-annual report, which contain important
financial information about the Fund. To reduce Fund expenses, we will send one
annual shareholder report, one semi-annual shareholder report and one annual
prospectus per household, unless you instruct us or your broker otherwise.
HOW TO SELL YOUR SHARES
You can sell your shares of the Fund for cash (in the form of a check) at any
time, subject to certain restrictions.
When you sell shares of the Fund--also known as redeeming your shares--the
price you will receive will be the NAV next determined after the Transfer Agent,
the Distributor or your broker receives your order to sell. If your broker holds
your shares, he must receive your order to sell by 4:15 p.m. New York Time to
process the sale on that day. Otherwise, contact:
PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: REDEMPTION SERVICES
P.O. BOX 15010
NEW BRUNSWICK, NJ 08906-5010
Generally, we will pay you for the shares that you sell within seven days
after the Transfer Agent, the Distributor or your broker receives your sell
order. If you hold shares through a broker, payment will be credited to your
account. If you are selling shares you recently purchased with a check, we may
delay sending you the sales proceeds until your check clears, which can take up
to 10 days from your purchase date. You can avoid delay if you purchase by wire,
certified check or cashier's check. Your broker may charge you a separate or
additional fee for sales of shares.
RESTRICTIONS ON SALES
There are certain times when you may not be able to sell shares of the Fund, or
when we may delay paying you the proceeds from a sale. This may happen during
unusual market conditions or emergencies when the Fund can't determine the value
of its assets or sell its holdings. For more information, see the SAI,
"Purchase, Redemption and Pricing of Fund Shares--Sale of Shares."
- --------------------------------------------------------------------------------
29
<PAGE>
- --------------------------------------------------------------------------------
How to Buy, Sell and
Exchange Shares of the Fund
- --------------------------------------------------------------------------------
If you are selling more than $50,000 of shares, you want the check sent to
someone or some place that is not in our records or you are a business or a
trust, or if you hold your shares directly with the Transfer Agent, you may have
to have the signature on your sell order guaranteed by a financial institution.
For more information, see the SAI, "Purchase, Redemption and Pricing of Fund
Shares--Sale of Shares--Signature Guarantee."
CONTINGENT DEFERRED SALES CHARGES (CDSC)
If you sell Class B shares within four years of purchase or Class C shares
within 18 months of purchase (one year for Class C shares purchased before
November 2, 1998), you will have to pay a CDSC. To keep the CDSC as low as
possible, we will sell amounts representing shares in the following order:
o Amounts representing shares you purchased with reinvested dividends
and distributions
o Amounts representing the increase in NAV above the total amount of
payments for shares made during the past four years for Class B
shares (five years for Class B shares purchased before January 22,
1990) and 18 months for Class C shares (one year for Class C shares
purchased before November 2, 1998)
o Amounts representing the cost of shares held beyond the CDSC period
(four years for Class B shares and 18 months for Class C shares)
Since shares that fall into any of the categories listed above are not
subject to the CDSC, selling them first helps you to avoid--or at least
minimize--the CDSC.
Having sold the exempt shares first, if there are any remaining shares
that are subject to the CDSC, we will apply the CDSC to amounts representing the
cost of shares held for the longest period of time within the applicable CDSC
period.
As we noted before in the "Share Class Comparison" chart, the CDSC for
Class B shares is 3% in the first year, 2% in the second, 1% in the third, 1% in
the fourth and 0% in the fifth year. The rate decreases on the first day of the
month following the anniversary date of your purchase, not on the anniversary
date itself. The CDSC is 1% for Class C shares--which is applied to shares sold
within 18 months of purchase (or one year if purchased before November 2, 1998).
For both Class B and C shares, the CDSC is the lesser of the original purchase
price or the redemption proceeds. For purposes of determining how
- --------------------------------------------------------------------------------
30 Prudential Intermediate Global Income Fund, Inc. [GRAPHIC] (800) 225-1852
<PAGE>
- --------------------------------------------------------------------------------
How to Buy, Sell and
Exchange Shares of the Fund
- --------------------------------------------------------------------------------
long you've held your shares, all purchases during the month are grouped
together and considered to have been made on the last day of the month.
The holding period for purposes of determining the applicable CDSC will be
calculated from the first day of the month after initial purchase, excluding any
time shares were held in a money market fund.
WAIVER OF THE CDSC--CLASS B SHARES
The CDSC will be waived if the Class B shares are sold:
o After a shareholder is deceased or disabled (or, in the case of a
trust account, the death or disability of the grantor). This waiver
applies to individual shareholders, as well as shares owned in joint
tenancy (with rights of survivorship), provided the shares were
purchased before the death or disability
o To provide for certain distributions--made without IRS penalty--from
a tax-deferred retirement plan, IRA, or Section 403(b) custodial
account
o On certain sales from a Systematic Withdrawal Plan
For more information on the above and other waivers, see the SAI,
"Purchase, Redemption and Pricing of Fund Shares--Waiver of Contingent Deferred
Sales Charges--Class B Shares."
WAIVER OF THE CDSC--CLASS C SHARES
Prudential Retirement Plans. The CDSC will be waived for purchases of Class C
shares by both qualified and non-qualified retirement and deferred compensation
plans participating in the PruArray Plan and other plans if Prudential also
provides administrative or recordkeeping services. The CDSC will also be waived
on redemptions from Benefit Plans sponsored by Prudential and its affiliates to
the extent that the redemption proceeds are invested in The Guaranteed
Investment Account (a group annuity insurance product sponsored by Prudential),
the Guaranteed Insulated Separate Account (a separate account offered by
Prudential) and shares of The Stable Value Fund (an unaffiliated bank collective
fund).
- --------------------------------------------------------------------------------
31
<PAGE>
- --------------------------------------------------------------------------------
How to Buy, Sell and
Exchange Shares of the Fund
- --------------------------------------------------------------------------------
Other Benefit Plans. The CDSC will be waived on redemptions from Benefit Plans
holding shares through a broker not affiliated with Prudential and for which the
broker provides administrative or recordkeeping services.
REDEMPTION IN KIND
If the sales of Fund shares you make during any 90-day period reach the lesser
of $250,000 or 1% of the value of the Fund's net assets, we can then give you
securities from the Fund's portfolio instead of cash. If you want to sell the
securities for cash, you would have to pay the costs charged by a broker.
SMALL ACCOUNTS
If you make a sale that reduces your account value to less than $500, we may
sell the rest of your shares (without charging any CDSC) and close your account.
We would do this to minimize the Fund's expenses paid by other shareholders. We
will give you 60 days' notice, during which time you can purchase additional
shares to avoid this action. This involuntary sale does not apply to
shareholders who own their shares as part of a 401(k) plan, an IRA or some other
tax-deferred plan or account.
90-DAY REPURCHASE PRIVILEGE
After you redeem your shares, you have a 90-day period during which you may
reinvest any of the redemption proceeds in shares of the same Fund without
paying an initial sales charge. Also, if you paid a CDSC when you redeemed your
shares, we will credit your new account with the appropriate number of shares to
reflect the amount of the CDSC you paid. In order to take advantage of this
one-time privilege, you must notify the Transfer Agent or your broker at the
time of the repurchase. See the SAI, "Purchase, Redemption and Pricing of Fund
Shares--Sale of Shares."
RETIREMENT PLANS
To sell shares and receive a distribution from your retirement account, call
your broker or the Transfer Agent for a distribution request form. There are
special distribution and income tax withholding requirements for distributions
from retirement plans and you must submit a withholding form with your request
to
- --------------------------------------------------------------------------------
32 Prudential Intermediate Global Income Fund, Inc. [GRAPHIC] (800) 225-1852
<PAGE>
- --------------------------------------------------------------------------------
How to Buy, Sell and
Exchange Shares of the Fund
- --------------------------------------------------------------------------------
avoid delay. If your retirement plan account is held for you by your employer or
plan trustee, you must arrange for the distribution request to be signed and
sent by the plan administrator or trustee. For additional information, see the
SAI.
HOW TO EXCHANGE YOUR SHARES
You can exchange your shares of the Fund for shares of the same class in certain
other Prudential Mutual Funds--including certain money market funds--if you
satisfy the minimum investment requirements. For example, you can exchange Class
A shares of the Fund for Class A shares of another Prudential Mutual Fund, but
you can't exchange Class A shares for Class B, Class C or Class Z shares. Class
B and Class C shares may not be exchanged into money market funds other than
Prudential Special Money Market Fund, Inc. After an exchange, at redemption the
CDSC will be calculated from the first day of the month after initial purchase,
excluding any time shares were held in a money market fund. We may change the
terms of the exchange privilege after giving you 60 days' notice.
If you hold shares through a broker, you must exchange shares through your
broker. Otherwise contact:
PRUDENTIAL MUTUAL FUND SERVICES LLC
ATTN: EXCHANGE PROCESSING
P.O. BOX 15010
NEW BRUNSWICK, NJ 08906-5010
There is no sales charge for such exchanges. However, if you exchange--and
then sell--Class B shares within approximately four years of your original
purchase or Class C shares within 18 months of your original purchase, you must
still pay the applicable CDSC. If you have exchanged Class B or Class C shares
into a money market fund, the time you hold the shares in the money market
account will not be counted in calculating the required holding periods for CDSC
liability.
Remember, as we explained in the section entitled "Fund Distributions and
Tax Issues--If You Sell or Exchange Your Shares," exchanging shares is
considered a sale for tax purposes. Therefore, if the shares you exchange are
worth more than you paid for them, you may have to pay capital gains tax. For
- --------------------------------------------------------------------------------
33
<PAGE>
- --------------------------------------------------------------------------------
How to Buy, Sell and
Exchange Shares of the Fund
- --------------------------------------------------------------------------------
additional information about exchanging shares, see the SAI, "Shareholder
Investment Account--Exchange Privilege."
If you own Class B or Class C shares and qualify to purchase Class A
shares without paying an initial sales charge, we will automatically exchange
your Class B or Class C shares which are not subject to a CDSC for Class A
shares. We make such exchanges on a quarterly basis if you qualify for this
exchange privilege. We have obtained a legal opinion that this exchange is not a
"taxable event" for federal income tax purposes. This opinion is not binding on
the IRS.
FREQUENT TRADING
Frequent trading of Fund shares in response to short-term fluctuations in the
market--also known as "market timing"--may make it very difficult to manage the
Fund's investments. When market timing occurs, the Fund may have to sell
portfolio securities to have the cash necessary to redeem the market timer's
shares. This can happen at a time when it is not advantageous to sell any
securities, so the Fund's performance may be hurt. When large dollar amounts are
involved, market timing can also make it difficult to use long-term investment
strategies because we cannot predict how much cash the Fund will have to invest.
When in our opinion such activity would have a disruptive effect on portfolio
management, the Fund reserves the right to refuse purchase orders and exchanges
into the Fund by any person, group or commonly controlled accounts. The Fund may
notify a market timer of rejection of an exchange or purchase order after the
day the order is placed. If the Fund allows a market timer to trade Fund shares,
it may require the market timer to enter into a written agreement to follow
certain procedures and limitations.
- --------------------------------------------------------------------------------
34 Prudential Intermediate Global Income Fund, Inc. [GRAPHIC] (800) 225-1852
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The financial highlights will help you evaluate the Fund's financial
performance. The TOTAL RETURN in each chart represents the rate that a
shareholder earned on an investment in that share class of the Fund, assuming
reinvestment of all dividends and other distributions. The information is for
each share class for the periods indicated.
Review each chart with the financial statements and report of independent
accountants, which appear in the annual report and the SAI and are available
upon request. Additional performance information for each share class is
contained in the annual report, which you can receive at no charge.
- --------------------------------------------------------------------------------
35
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
CLASS A SHARES
The financial highlights were audited by ______________, independent
accountants, whose report was unqualified.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
Class A Shares (fiscal years ended 12-31)
Per Share Operating Performance 1998 1997(1) 1996 1995(2) 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $-- $ 8.34 $ 8.30 $ 7.32 $ 8.43
INCOME FROM INVESTMENT OPERATIONS:
Net investment income -- .54 .56 .52 .50
Net realized and unrealized gain -- (.18) .33 1.20 (1.09)
(loss) on investments and
foreign currency transactions
TOTAL FROM INVESTMENT OPERATIONS -- .36 .89 1.72 (.59)
- -------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income -- (.54) (.56) (.52) (.29)
Distributions in excess of net -- (.25) (.29) (.22) --
investment income
Distributions from capital gains -- -- -- -- (.01)
Tax return of capital distributions -- -- -- -- (.22)
TOTAL DISTRIBUTIONS (--) (.79) (.85) (.74) (.52)
NET ASSET VALUE, END OF PERIOD $-- $ 7.91 $ 8.34 $ 8.30 $ 7.32
TOTAL RETURN(2) --% 4.42% 11.13% 24.01% (7.02)%
<CAPTION>
- -------------------------------------------------------------------------------------------------
Ratios/Supplemental Data 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSETS, END OF YEAR (000) $-- $137,799 $165,829 $181,985 $207,153
Average net assets (000) $-- $153,168 $169,219 $200,759 $262,882
RATIOS TO AVERAGE NET ASSETS:
Expenses, including distribution fees --% 1.41% 1.40% 1.40% 1.46%
Expenses, excluding distribution fees --% 1.26% 1.25% 1.25% 1.31%
Net investment income --% 6.62% 6.55% 6.09% 6.04%
Portfolio turnover --% 40% 45% 220% 554%
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated based upon average shares outstanding during the year.
(2) Total return assumes reinvestment of dividends and any other
distributions, but does not include the effect of sales charges. It is
calculated assuming shares are purchased on the first day and sold on the
last day of each period reported.
- --------------------------------------------------------------------------------
36 Prudential Intermediate Global Income Fund, Inc. [GRAPHIC] (800) 225-1852
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
CLASS B SHARES
The financial highlights were audited by ______________, independent
accountants, whose report was unqualified.
<TABLE>
<CAPTION>
- -------------------------------------------
Class B Shares (fiscal periods ended 12-31)
Per Share Operating Performance 1998 1997(1) 1996 1995(2) 1994
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $-- $ 8.34 $ 8.31 $ 7.33 $ 8.44
INCOME FROM INVESTMENT OPERATIONS:
Net investment income -- .50 .53 .47 .45
Net realized and unrealized gain -- (.18) .30 1.20 (1.09)
(loss) on investments and
foreign currency transactions
TOTAL FROM INVESTMENT OPERATIONS -- .32 .83 1.67 (.64)
- ----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment -- (.50) (.53) (.47) (.26)
Distributions in excess of net -- (.24) (.27) (.22) --
investment income
Distributions in excess of net -- (.24) (.27) (.22) --
investment income
Distributions from capital gains -- -- -- -- (.01)
Tax return of capital -- -- -- -- (.20)
distributions
TOTAL DISTRIBUTIONS (--) (.74) (.80) (.69) (.47)
NET ASSET VALUE, END OF PERIOD $-- $ 7.92 $ 8.34 $ 8.31 $ 7.33
TOTAL RETURN(2) --% 3.80% 10.36% 23.25% (7.69)%
- ----------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSETS, END OF PERIOD (000) $-- $ 8,896 $12,987 $17,317 $22,906
Average net assets (000) $-- $11,377 $15,491 $19,336 $31,835
RATIOS TO AVERAGE NET ASSETS:
Expenses, including distribution fees --% 2.01% 2.00% 2.00% 2.07%
Expenses, excluding distribution fees --% 1.26% 1.25% 1.25% 1.31%
Net investment income --% 6.04% 5.94% 5.49% 5.44%
Portfolio turnover --% 40% 45% 220% 554%
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated based upon average shares outstanding during the year.
(2) Total return assumes reinvestment of dividends and any other
distributions, but does not include the effect of sales charges. It is
calculated assuming shares are purchased on the first day and sold on the
last day of each period reported.
- --------------------------------------------------------------------------------
37
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
CLASS C SHARES
The financial highlights were audited by ______________, independent
accountants, whose reports were unqualified.
<TABLE>
<CAPTION>
- -------------------------------------------
Class C Shares (fiscal periods ended 12-31)
Per Share Operating Performance 1998 1997(1) 1996 1995 1994(2)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 investments and foreign -- (.18) .30 1.20 (.32)
currency transactions
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 -- (.24) (.27) (.22) --
investment income
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(3) --% 3.80% 10.36% 23.25% (2.44)%
- -----------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSETS, END OF PERIOD (000) $-- $ 198 $ 190 $ 13 $ 193(4)
Average net assets (000) $-- $ 213 $ 110 $ 11 $ 197(4)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including distribution fees --% 2.01% 2.00% 2.00% 1.05%(5)
Expenses, excluding distribution fees --% 1.26% 1.25% 1.25% .30%(5)
Net investment income --% 6.25% 6.02% 5.49% 3.30%(5)
Portfolio turnover --% 40% 45% 220% 554%
- -----------------------------------------------------------------------------------------
</TABLE>
(1) Calculated based upon average shares outstanding during the period.
(2) For the period from 8-1-94 (when Class C shares were first offered)
through 12-31-94.
(3) Total return assumes reinvestment of dividends and any other
distributions, but does not include the effect of sales charges. It is
calculated assuming shares are purchased on the first day and sold on the
last day of each period reported. Total return for periods of less than a
full year is not annualized.
(4) Figures are actual and not rounded to the nearest thousand.
(5) Annualized.
- --------------------------------------------------------------------------------
38 Prudential Intermediate Global Income Fund, Inc. [GRAPHIC] (800) 225-1852
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
CLASS Z SHARES
The financial highlights were audited by ______________, independent
accountants, whose report was unqualified.
<TABLE>
<CAPTION>
- -------------------------------------------
Class Z Shares (fiscal periods ended 12-31)
Per Share Operating Performance 1998 1997 1996(1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
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)
TOTAL DISTRIBUTIONS (--) (.80) (.49)
Redemption fee retained by Fund -- -- --
NET ASSET VALUE, END OF PERIOD $-- $ 7.91 $8.34
TOTAL RETURN(2) --% 4.57% 5.21%
- --------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
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%(3)
Expenses, excluding distribution fees --% 1.26% 1.11%(3)
Net investment income --% 6.76% 6.94%(3)
Portfolio turnover --% 40% 45%
- --------------------------------------------------------------------------------
</TABLE>
(1) For the period from 9-13-96 (when Class Z shares were first offered)
through 12-31-96.
(2) Total return assumes reinvestment of dividends and any other
distributions. It is calculated assuming shares are purchased on the first
day and sold on the last day of each period reported. Total return for
periods of less than a full year is not annualized.
(3) Annualized.
- --------------------------------------------------------------------------------
39
<PAGE>
- --------------------------------------------------------------------------------
The Prudential Mutual Fund Family
- --------------------------------------------------------------------------------
Prudential offers a broad range of mutual funds designed to meet your individual
needs. For more information about these funds, contact your financial adviser or
Prudential professional or call (800) 225-1852. Read the prospectus carefully
before you invest or send money.
STOCK FUNDS
PRUDENTIAL DISTRESSED SECURITIES FUND, INC.
PRUDENTIAL EMERGING GROWTH FUND, INC.
PRUDENTIAL EQUITY FUND, INC.
PRUDENTIAL EQUITY INCOME FUND
PRUDENTIAL INDEX SERIES FUND
Prudential Small-Cap Index Fund
Prudential Stock Index Fund
THE PRUDENTIAL INVESTMENT PORTFOLIOS, INC.
Prudential Jennison Growth Fund
Prudential Jennison Growth & Income Fund
PRUDENTIAL MID-CAP VALUE FUND
PRUDENTIAL REAL ESTATE SECURITIES FUND
PRUDENTIAL SMALL-CAP QUANTUM FUND, INC.
PRUDENTIAL SMALL COMPANY VALUE FUND, INC.
PRUDENTIAL TAX-MANAGED EQUITY FUND
PRUDENTIAL 20/20 FOCUS FUND
PRUDENTIAL UTILITY FUND, INC.
NICHOLAS-APPLEGATE FUND, INC.
Nicholas-Applegate Growth Equity Fund
ASSET ALLOCATION/BALANCED FUNDS
PRUDENTIAL BALANCED FUND
PRUDENTIAL DIVERSIFIED FUNDS
Conservative Growth Fund
Moderate Growth Fund
High Growth Fund
THE PRUDENTIAL INVESTMENT PORTFOLIOS, INC.
Prudential Active Balanced Fund
GLOBAL FUNDS
GLOBAL STOCK FUNDS
PRUDENTIAL DEVELOPING MARKETS FUND
Prudential Developing Markets
Equity Fund
Prudential Latin America Equity Fund
PRUDENTIAL EUROPE GROWTH FUND, INC.
PRUDENTIAL GLOBAL GENESIS FUND, INC.
PRUDENTIAL INDEX SERIES FUND
Prudential Europe Index Fund
Prudential Pacific Index Fund
PRUDENTIAL NATURAL RESOURCES FUND, INC.
PRUDENTIAL PACIFIC GROWTH FUND, INC.
PRUDENTIAL WORLD FUND, INC.
Global Series
International Stock Series
GLOBAL UTILITY FUND, INC.
GLOBAL BOND FUNDS
PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
Limited Maturity Portfolio
PRUDENTIAL INTERMEDIATE GLOBAL INCOME FUND, INC.
PRUDENTIAL INTERNATIONAL BOND FUND, INC.
THE GLOBAL TOTAL RETURN FUND, INC.
- --------------------------------------------------------------------------------
40 Prudential Intermediate Global Income Fund, Inc. [GRAPHIC] (800) 225-1852
<PAGE>
BOND FUNDS
TAXABLE BOND FUNDS
PRUDENTIAL DIVERSIFIED BOND FUND, INC.
PRUDENTIAL GOVERNMENT INCOME FUND, INC.
PRUDENTIAL GOVERNMENT SECURITIES TRUST
Short-Intermediate Term Series
PRUDENTIAL HIGH YIELD FUND, INC.
PRUDENTIAL HIGH YIELD TOTAL RETURN FUND, INC.
PRUDENTIAL INDEX SERIES FUND
Prudential Bond Market Index Fund
PRUDENTIAL STRUCTURED MATURITY FUND, INC.
Income Portfolio
TAX-EXEMPT BOND FUNDS
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
California Series
California Income Series
PRUDENTIAL MUNICIPAL BOND FUND
High Income Series
Insured Series
PRUDENTIAL MUNICIPAL SERIES FUND
Florida Series
Massachusetts Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
PRUDENTIAL NATIONAL MUNICIPALS
Fund, Inc.
MONEY MARKET FUNDS
TAXABLE MONEY MARKET FUNDS
CASH ACCUMULATION TRUST
Liquid Assets Fund
National Money Market Fund
PRUDENTIAL GOVERNMENT SECURITIES TRUST
Money Market Series
U.S. Treasury Money Market Series
PRUDENTIAL SPECIAL MONEY MARKET FUND, INC.
Money Market Series
PRUDENTIAL MONEYMART ASSETS, INC.
TAX-FREE MONEY MARKET FUNDS
PRUDENTIAL TAX-FREE MONEY FUND, INC.
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
California Money Market Series
PRUDENTIAL MUNICIPAL SERIES FUND
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
COMMAND FUNDS
COMMAND MONEY FUND
COMMAND GOVERNMENT FUND
COMMAND TAX-FREE FUND
INSTITUTIONAL MONEY MARKET FUNDS
PRUDENTIAL INSTITUTIONAL LIQUIDITY PORTFOLIO, INC.
Institutional Money Market Series
- --------------------------------------------------------------------------------
41
<PAGE>
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
Please read this prospectus before you invest in the Fund and keep it for future
reference. For information or shareholder questions contact:
PRUDENTIAL MUTUAL FUND SERVICES LLC
P.O. BOX 15005
NEW BRUNSWICK, NJ 08906-5005
(800) 225-1852
(732) 417-7555
(if calling from outside the U.S.)
- --------------------------------------------------------------------------------
Outside Brokers Should Contact:
PRUDENTIAL INVESTMENT MANAGEMENT
SERVICES LLC
P.O. BOX 15035
NEW BRUNSWICK, NJ 08906-5035
(800) 778-8769
- --------------------------------------------------------------------------------
Visit Prudential's Web Site At:
HTTP://WWW.PRUDENTIAL.COM
- --------------------------------------------------------------------------------
Additional information about the Fund can be obtained without charge and can be
found in the following documents:
STATEMENT OF ADDITIONAL
INFORMATION (SAI)
(incorporated by reference into
this prospectus)
ANNUAL REPORT
(contains a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance)
SEMI-ANNUAL REPORT
You can also obtain copies of Fund documents from the Securities and Exchange
Commission as follows:
By Mail:
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-6009
(The SEC charges a fee to copy documents.)
In Person:
Public Reference Room in
Washington, DC
(For hours of operation, call
1(800) SEC-0330)
Via the Internet:
http://www.sec.gov
- --------------------------------------------------------------------------------
CUSIP Numbers:
Class A Shares--74435G-20-3
Class B Shares--74435G-30-2
Class C Shares--74435G-40-1
Class Z Shares--74435G-50-0
Investment Company Act File No: 811-5510
MF155A [RECYCLE LOGO] Printed on Recycled Paper
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL INCOME FUND, INC.
Statement of Additional Information
dated March , 1999
Prudential Intermediate Global Income Fund, Inc. (the Fund) is an
open-end, non-diversified, management investment company, or a mutual fund,
whose investment objective is to seek to maximize total return, made up of
current income and capital appreciation. There can be no assurance that the
Fund's investment objective will be achieved. Investing in Foreign Government
securities, options and futures contracts involves considerations and possible
risks which are different from those ordinarily associated with investing in
U.S. Government securities.
The Fund's address is Gateway Center Three, 100 Mulberry Street, Newark,
New Jersey 07102-4077, and its telephone number is (800) 225-1852.
This Statement of Additional Information is not a prospectus and should
only be read in conjunction with the Fund's Prospectus, dated March , 1999, a
copy of which may be obtained from the Fund at the address noted above.
TABLE OF CONTENTS
<TABLE>
PAGE
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<S> <C>
Fund History ............................................................ B-2
Description of the Fund, Its Investments and Risks ...................... B-4
Investment Restrictions ................................................. B-14
Management of the Fund .................................................. B-15
Control Persons and Principal Holders of Securities ..................... B-19
Investment Advisory and Other Services .................................. B-20
Brokerage Allocation and Other Practices ................................ B-22
Capital Shares, Other Securities and Organization ....................... B-22
Purchase, Redemption and Pricing of Fund Shares ......................... B-23
Shareholder Investment Account .......................................... B-26
Net Asset Value ......................................................... B-30
Taxes, Dividends and Distributions ...................................... B-32
Performance Information ................................................. B-31
Organization and Capitalization ......................................... B-35
Financial Statements .................................................... B-36
Report of Independent Accountants ....................................... B-49
Appendix I--General Investment Information .............................. I-1
Appendix II--Historical Performance Data ................................ II-1
Appendix III--Information Relating to Prudential ........................ III-1
</TABLE>
<PAGE>
FUND HISTORY
Prudential Intermediate Global Income Fund, Inc. was incorporated under
the laws of Maryland on March 15, 1988 under the name "The Prudential
Intermediate Income Fund, Inc." as a closed-end, non-diversified, management
investment company. The Fund operated as a closed-end fund prior to October 7,
1991. On August 8, 1991, shareholders approved open-ending the Fund and changing
the Fund's name to "Prudential Intermediate Global Income Fund, Inc." and, since
October 7, 1991, the Fund has operated as an open-end fund.
DESCRIPTION OF THE FUND, ITS INVESTMENTS AND RISKS
(A) CLASSIFICATION.
The Fund is a "non-diversified" investment company and may invest more
than 5% of its total assets in the securities of one or more issuers. Investment
in a non-diversified investment company involves greater risk than investment in
a diversified investment company because a loss resulting from the default of a
single issuer may represent a greater portion of the total assets of a
non-diversified portfolio.
(B) AND (C) INVESTMENT STRATEGIES, POLICIES AND RISKS
The Fund's investment objective is to maximize total return, made up of
current income and capital appreciation. While the principal investment policies
and strategies for seeking to achieve this objective are described in the Fund's
prospectus, the Fund may from time to time also use the securities, instruments,
policies and strategies described below in seeking to achieve its objective. The
Fund may not be successful in achieving its objective and you could lose money.
FOREIGN SECURITIES
As a global fund, the Fund will invest a substantial portion of its total
assets in foreign money market instruments and debt and equity securities.
American Depositary Receipts (ADRs) and American Depositary Shares (ADSs) are
not considered foreign securities within this limitation.) In many instances,
foreign securities may provide higher yields but may be subject to greater
fluctuations in price than securities of domestic issuers which have similar
maturities and quality. Under certain market conditions these investments may be
less liquid than the securities of U.S. corporations and are certainly less
liquid than securities issued or guaranteed by the U.S. Government, its
instrumentalities or agencies.
Foreign securities involve certain risks, which should be considered
carefully by an investor in the Fund. These risks include political or economic
instability in the country of the issuer, the difficulty of predicting
international trade patterns, the possibility of imposition of exchange controls
and the risk of currency fluctuations. Such securities may be subject to greater
fluctuations in price than securities issued by U.S. corporations or issued or
guaranteed by the U.S. Government, its instrumentalities or agencies. in
addition, there may be less publicly available information about a foreign
company than about a domestic company. Foreign companies generally are not
subject to uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic companies. There is generally less
government regulation of securities exchanges, brokers and listed companies
abroad than in the United States, and, for certain foreign countries, there is a
possibility of expropriation, confiscatory taxation or diplomatic developments
which could affect investment in those countries. Finally, in the event of a
default of any such foreign debt obligations, it may be more difficult for the
Fund to obtain, or to enforce a judgment against, the issuers of such
securities.
The costs attributable to foreign investing are higher than the costs of
domestic investing. For example, the cost of maintaining custody of foreign
securities generally exceeds custodian costs for domestic securities, and
transaction and settlement costs of foreign investing are frequently higher than
those attributable to domestic investing. Foreign investment income may be
subject to foreign withholding or other government taxes that could reduce the
return to the Fund on those securities. Tax treaties between the United States
and certain foreign countries may, however, reduce or eliminate the amount of
foreign tax to which the Fund would be subject.
The Fund invests in debt securities denominated in the currencies of
countries whose governments are considered stable by the Fund's Subadviser. In
addition to the U.S. Dollar, such currencies include, among others, the
Australian dollar, British pound sterling, Canadian dollar, Japanese yen, New
Zealand dollar, Mexican peso, Danish kroner, Norwegian kroner, Swedish krona,
Swiss franc and the euro. An issuer of debt securities purchased by the Fund may
be domiciled in a country other than the country in whose currency the
instrument is denominated.
B-2
<PAGE>
On January 1, 1999, 11 of the 15 member states of the European Monetary
Union introduced the "euro" as a common currency. During a three-year
transitional period, the euro will coexist with each participating state's
currency and, on July 1, 2002, the euro is expected to become the sole currency
of the participating states. During the transition period, the Fund will treat
the euro as a separate currency from that of any participating state.
The conversion may adversely affect the Fund if the euro does not take
effect as planned; if a participating state withdraws from the European Monetary
Union, or if the computing, accounting and trading systems used by the Funds'
service providers, or by entities with which the Fund or its service providers
do business, are not capable of recognizing the euro as a distinct currency at
the time of, and following, euro conversion. In addition, the conversion could
cause markets to become more volatile.
The overall effect of the transition of member states' currencies to the
euro is not known at this time. It is likely that more general short- and
long-term ramifications can be expected, such as changes in the economic
environment and change in the behavior of investors, which would affect the
Fund's investments and its net asset value. In addition, although U.S. Treasury
regulations generally provide that the euro conversion will not, in itself,
cause a U.S. taxpayer to realize gain or loss, other changes that may occur at
the time of the conversion, such as accrual periods, holiday conventions,
indices, and other features may require the realization of a gain or loss by the
Fund as determined under existing tax law.
The Fund's Manager has taken steps: (1) that it believes will reasonably
address euro-related changes to enable the Fund and its service providers to
process transactions accurately and completely with minimal disruption to
business activities and (2) to obtain reasonable assurances that appropriate
steps have been taken by the Fund's other service providers to address the
conversion. The Fund has not borne any expense relating to these actions.
The Fund may also invest in debt securities denominated in the currencies
of certain "emerging market" nations, such as, but not limited to, the Czech
Republic, Hungary, South Korea, Hong Kong, Malaysia, Indonesia, Thailand, China,
Israel, Chile, Colombia, Venezuela, Estonia, Turkey and Argentina. Companies in
these markets in which the Fund may invest may have limited product lines,
markets or financial resources and may lack management depth. The securities of
these companies may have limited marketability and may be subject to more abrupt
or erratic market movements than securities of larger, more established
companies or the market averages in general. Investing in the fixed-income
markets of emerging market countries involves exposure to economies that are
generally less diverse and mature, and to political systems which can be
expected to have less stability than those of developed countries. Historical
experience indicates that the markets of developing countries have been more
volatile than the markets of developed countries. The risks associated with
investments in foreign securities, described above, may be greater with respect
to investments in developing countries.
A change in the value of a foreign currency against the U.S. dollar will
result in a corresponding change in the U.S. dollar value of the Fund's assets
denominated in that currency. These currency fluctuations can result in gains or
losses for the Fund. For example, if a foreign security increases in value as
measured in its currency, an increase in value of the U.S. dollar, relative to
the currency in which the foreign security is denominated can offset some or all
of such gains. These currency changes will also affect the Fund's return, income
and distributions to shareholders. In addition, although the Fund will receive
income in such currencies, the Fund will be required to compute and distribute
its income in U.S. dollars. Therefore, if the exchange rate for any such
currency decreases after the Fund's income has been accrued and translated into
U.S. dollars, the Fund could be required to liquidate portfolio securities to
make such distributions. Similarly, if an exchange rate for any such currency
decreases between the time the Fund incurs expenses in U.S. dollars and the time
such expenses are paid, the amount of such currency required to be converted
into U.S. dollars in order pay such expenses in U.S. dollars will be greater
than the equivalent amount of such currency at the time such expenses were
incurred. Under the Internal Revenue Code of 1986, as amended (the Internal
Revenue Code), changes in an exchange rate which occur between the time the Fund
accrues interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables or pays such liabilities will result in foreign exchange gains or
losses that increase or decrease distributable net investment income. Similarly,
dispositions of certain debt securities (by sale, at maturity or otherwise) at a
U.S. dollar amount that is higher or lower than the Fund's original U.S. dollar
cost may result in foreign exchange gains or losses, which will increase or
decrease distributable net investment income. Gains and losses on security and
currency transactions cannot be predicted. This fact coupled with the different
tax and accounting treatment of certain currency gains and losses increases the
likelihood of distributions in whole or in part constituting a return of capital
to shareholders.
The Fund's interest income from foreign government securities issued in
local markets may, in some cases, be subject to applicable withholding taxes
imposed by governments in such markets. The Fund may sell a foreign security it
owns prior to maturity in order to avoid foreign withholding taxes on dividend
and interest income and buy back the same security for a future settlement date.
Interest on foreign government securities is not generally subject to foreign
withholding taxes. See "Taxes, Dividends and Distributions."
B-3
<PAGE>
The Fund may invest in debt securities issued by supranational
organizations such as the World Bank, the European Investment Bank, the European
Coal and Steel Community, and the Asian Development Bank.
The Fund may invest in debt securities issued by "semi-governmental
entities" such as entities owned by a national, state or equivalent government
or are obligations of a political unit that are not backed by the natural
government's "full faith and credit" and general taxing powers. Examples of
semi-governmental issues include, among others, the Province of Ontario and the
City of Stockholm.
Returns available from foreign currency denominated debt instruments can
be adversely affected by changes in exchange rates. The Fund's investment
adviser believes that the use of foreign currency hedging techniques, including
"cross-currency hedges" may assist, under certain conditions, in helping to
protect against declines in the U.S. dollar value of income available for
distribution to shareholders and declines in the net asset value of the Fund's
shares resulting from adverse changes in currency exchange rates. For example,
the return available from securities denominated in a particular foreign
currency would diminish in the event the value of the U.S. dollar increased
against such currency. Such a decline could be partially or completely offset by
an increase in value of a cross-currency hedge involving a forward exchange
contract to sell a different foreign currency, where such contract is available
on terms more advantageous to the Fund than a contract to sell the currency in
which the position being hedged is denominated. Cross-currency hedges can,
therefore, under certain conditions, provide protection of net asset value in
the event of a general rise in the U.S. dollar against foreign currencies.
However, there can be no assurance that the Fund will be able to engage in
cross-currency hedging or that foreign exchange rate relationships will be
sufficiently predictable to enable the investment adviser to employ
cross-currency hedging techniques successfully. A cross-currency hedge cannot
protect against exchange rate risks perfectly, and if the investment adviser is
incorrect in its judgment of future exchange rate relationships, the Fund could
be in a less advantageous position than if such a hedge had not been
established.
The Fund may invest in component parts of debt securities of foreign
governments or semi-governmental entities, namely either the corpus (principal)
of such obligations or one or more of the interest payments scheduled to be paid
on such obligations. These securities may take the form of (1) obligations from
which the interest coupons have been stripped (principal only); (2) the interest
coupons that are stripped (interest only); (3) book-entries at a bank
representing ownership of obligation components; or (4) receipts evidencing the
component parts (corpus or coupons) of obligations that have not actually been
stripped. Such receipts evidence ownership of component parts of obligations
(corpus or coupons) purchased by a third party (typically an investment banking
firm) and held on behalf of the third party in physical or book-entry form by a
major commercial bank or trust company pursuant to a custody agreement with the
third party. The Fund may also invest in custodial receipts held by a third
party. Stripped securities are, in general, more sensitive to interest rate
changes than securities that have not been stripped. Combined with investments
in similar U.S. Government securities, the Fund will not invest more than 10% of
its total assets in such securities.
If the security is denominated in a foreign currency, it may be affected
by changes in currency rates and in exchange control regulations, and costs may
be incurred in connection with conversions between currencies. The Fund may
enter into foreign currency forward contracts for the purchase or sale of
foreign currency for hedging purposes. See "Hedging and Return Enhancement
Strategies--Special Risks Related to Foreign Currency Forward Contracts" below.
MEDIUM AND LOWER-RATED SECURITIES
[The Fund may invest in medium grade securities (i.e., rated Baa by
Moody's, BBB by S&P's or comparably rated by another NRSRO) and up to 10% of its
total assets in lower-rated securities (i.e., rated lower than Baa by Moody's,
lower than BBB by S&P's or comparably rated by another NRSRO) or, in either case
if unrated, deemed to be of equivalent quality by the investment adviser.
However, the Fund will not purchase a security rated lower than B by Moody's as
S&P's. Securities rated Baa by Moody's, although considered investment grade,
possess speculative characteristics and changes in economic or other conditions
are more likely to impair the ability of issuers of these securities to make
interest and principal payments than is the case with respect to issuers of
higher-grade bonds. [See "Appendix A--Description of Security Ratings."]
Generally, lower-rated securities and unrated securities of comparable
quality, commonly referred to as junk bonds (i.e., securities rated lower than
Baa by Moody's or BBB by S&P's or comparably rated by another NRSRO), offer a
higher current yield than is offered by higher-rated securities, but also (i)
will likely have some quality and protective characteristics that, in the
judgment of the rating organizations, are outweighed by large uncertainties of
major risk exposures to adverse conditions and (ii) are predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation. The market values of
certain of these securities also tend to be more sensitive to individual issuer
developments and changes in economic conditions than higher-quality bonds. In
addition, medium and lower-rated securities and comparable unrated securities
generally present a higher degree of credit risk. The risk of loss due to
default by these issuers
B-4
<PAGE>
is significantly greater because medium and lower-rated securities and unrated
securities of comparable quality generally are unsecured and frequently are
subordinated to the prior payment of senior indebtedness. The investment
adviser, under the supervision of the Manager and the Directors, in evaluating
the creditworthiness of an issuer whether rated or unrated, takes various
factors into consideration, which may include, as applicable, the issuer's
financial resources, its sensitivity to economic conditions and trends and
regulatory matters.
In addition, the market value of securities in lower-rated categories is
more volatile than than of higher-quality securities, and the markets in which
medium and lower-rated or unrated securities are traded are more limited than
those in which higher-rated securities are traded. The existence of limited
markets may make it more difficult for the Fund to obtain accurate market
quotations for purposes of valuing its portfolio and calculating its net asset
value. Moreover, the lack of liquid trading market may restrict the availability
of securities for the Fund to purchase and may also have the effect of limiting
the ability of the Fund to sell securities at their fair value either to meet
redemption requests or to respond to changes in the economy of the financial
markets.
During the year ended December 31, 1998, the monthly dollar-weighted
average ratings of the debt obligations held by the Fund, expressed as a
percentage of the Fund's total investments, were as follows:
PERCENTAGE OF
RATING TOTAL INVESTMENTS
------ -----------------
AAA/Aaa = %
AA/Aa =
A/A =
BBB/Baa =
BB/Ba =
B/B =
CCC/Caa =
CC/Ca =
Unrated =
Subsequent to its purchase by the Fund, an issue of securities may cease
to be rated or its rating may be reduced below the minimum required for purchase
by the Fund. Neither event will require sales of these securities by the Fund,
but the Subadviser will consider this event in its determination of whether the
Fund should continue to hold the securities.
U.S. GOVERNMENT SECURITIES
U.S. TREASURY SECURITIES. The Fund may invest in U.S. Treasury Securities,
including Bills, Notes, Bonds and other debt securities issued by the U.S.
Treasury. These instruments are direct obligations of the U.S. Government and,
as such, are backed by the "full faith and credit" of the United States. They
differ primarily in their interest rates, the lengths of their maturities and
the dates of their issuances.
SECURITIES ISSUED OR GUARANTEED BY U.S. GOVERNMENT AGENCIES AND
INSTRUMENTALITIES. The Fund may invest in debt securities issued or guaranteed
by agencies or instrumentalities of the U.S. Government, including, but not
limited to, Government National Mortgage Association (GNMA), Federal National
Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC)
securities. Obligations of GNMA, the Farmers Home Administration and the
Export-Import Bank are backed by the "full faith and credit" of the United
States. In the case of securities not backed by the "full faith and credit" of
the United States, the Fund must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment. Such securities include
obligations issued by the Student Loan Marketing Association (SLMA), FNMA and
FHLMC, each of which may borrow from the U.S. Treasury to meet its obligations,
although the U.S. Treasury is under no obligation to lend to such entities.
The Fund may invest in component parts of U.S. Government debt securities,
namely either the corpus (principal) of such obligations or one or more of the
interest payments scheduled to be paid on such obligations. These obligations
may take the form of (i) obligations from which the interest coupons have been
stripped; (ii) the interest coupons that are stripped; (iii) book-entries at a
Federal Reserve member bank representing ownership of obligation components; or
(iv) receipts evidencing the component parts (corpus or coupons) of U.S.
Government obligations that have not actually been stripped. Such receipts
evidence ownership of component parts of U.S. Government obligations (corpus or
coupons) purchased by a third party (typically an investment banking firm) and
held on behalf of the third party in physical or book-entry form by a major
commercial bank or trust company pursuant to a custody agreement with the third
party. The Fund may also invest in custodial receipts held by a third party that
are not U.S. Government securities. Combined with investments in similar foreign
government and semi-government entity securities, the Fund will not invest more
than 10% of its total assets in such securities.
B-5
<PAGE>
SPECIAL CONSIDERATIONS. U.S. Government securities are considered among
the most creditworthy of fixed-income investments. The yields available from
U.S. Government securities are generally lower than the yields available from
corporate debt securities. The values of U.S. Government securities (like those
of fixed-income securities generally) will change as interest rates fluctuate.
During periods of falling U.S. interest rates, the values of outstanding
long-term U.S. Government securities generally rise. Conversely, during periods
of rising interest rates,the values of such securities generally decline. The
magnitude of those fluctuations will generally be greater for securities with
longer maturities. Although changes in the value of U.S. Government securities
will not affect investment income from those securities, they will affect the
net asset value (NAV) of the Fund.
At a time when the Fund has written call options on a portion of its U.S.
Government securities, its ability to profit from declining interest rates will
be limited. Any appreciation in the value of the securities held in the
portfolio above the strike price would likely be partially or wholly offset by
unrealized losses on call options written by the Fund. The termination of option
positions under these conditions would generally result in the realization of
capital losses, which would reduce the Fund's capital gains distributions.
Accordingly, the Fund would generally seek to realize capital gains to offset
realized losses by selling portfolio securities. In such circumstances, however,
it is likely that the proceeds of such sales would be reinvested in lower
yielding securities. See "Special Considerations Applicable to Options."
MORTGAGE-RELATED SECURITIES ISSUED OR GUARANTEED BY U.S. GOVERNMENT
AGENCIES AND INSTRUMENTALITIES. The Fund may invest in mortgage-backed
securities and other derivative mortgage products, including those representing
an undivided ownership interest in a pool of mortgages, e.g., GNMA, FNMA and
FHLMC Certificates where the U.S. Government or its agencies or
instrumentalities guarantees the payment of interest and principal of these
securities. However, these guarantees do not extend to the securities' yield or
value, which are likely to vary inversely with fluctuations in interest rates,
nor do these guarantees extend to the yield or value of the Fund's shares. These
certificates are in most cases "pass-through" instruments, through which the
holder receives a share of all interest and principal payments from the
mortgages underlying the certificate, net of certain fees.
In addition to GNMA, FNMA or FHLMC certificates through which the holder
receives a share of all interest and principal payments from the mortgages
underlying the certificate, the Fund may also invest in certain mortgage
pass-through securities issued by the U.S. Government or its agencies and
instrumentalities commonly referred to as mortgage-backed security strips or MBS
strips. MBS strips are usually structured with two classes that receive
different proportions of the interest and principal distributions on a pool of
mortgage assets. A common type of stripped mortgage security will have one class
receiving some of the interest and most of the principal from the mortgage
assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest (the interest-only "IO" class), while the other class will
receive all of the principal (the principal-only or "PO" class). The yields to
maturity on IOs and POs are sensitive to the rate of principal payments
(including prepayments) on the related underlying mortgage assets, and principal
payments may have a material effect on yield to maturity. If the underlying
mortgage assets experience greater than anticipated prepayments of principal,
the Fund may not fully recoup its initial investment in IOs. Conversely, if the
underlying mortgage assets experience less than anticipated prepayments of
principal, the yield on POs could be materially adversely affected.
The Fund will invest in both Adjustable Rate Mortgage Securities, which
are pass-through mortgage securities collateralized by adjustable rate
mortgages, and Fixed-Rate Mortgage Securities, which are collateralized by
fixed-rate mortgages. For purposes of the Fund's maturity limitation, the
maturity of a mortgage-backed security will be deemed to be equal to its
remaining maturity (i.e., the average maturity of the mortgages underlying such
security determined by the investment adviser on the basis of assumed prepayment
rates with respect to such mortgages).
FHLMC SECURITIES. The FHLMC presently issues two types of mortgage
pass-through securities, mortgage participation certificates (PCs) and
guaranteed mortgage certificates (GMCs). The Fund does not intend to invest in
GMCs. PCs resemble GNMA Certificates in that each PC represents a pro rata share
of all interest and principal payments made and owed on the underlying pool. The
FHLMC guarantees timely monthly payment of interest on PCs and the stated
principal amount. GMCs also represent a pro rata interest in a pool of
mortgages. However, these instruments pay interest semi-annually and return
principal once a year in guaranteed minimum payments. The expected average life
of these securities is approximately ten years.
ADJUSTABLE RATE MORTGAGE SECURITIES. Generally, Adjustable Rate Mortgage
securities (ARMs) have a specified maturity date and amortize principal over
their life. In periods of declining interest rates, there is a reasonable
likelihood that ARMs will experience increased rates of prepayment of principal.
However, the major difference between ARMs and Fixed Rate Mortgage Securities
(FRMs) is that the interest rate and the rate of amortization of principal of
ARMs can and do change in accordance with movements in a particular,
pre-specified, published interest rate index. Because the interest rate on ARMs
generally moves in the same direction as market interest rates, the market value
of ARMs tends to be more stable than that of long-term fixed-rate securities.
B-6
<PAGE>
FIXED-RATE MORTGAGE SECURITIES. The Fund anticipates investing in
high-coupon fixed-rate mortgage securities. Such securities are collateralized
by fixed-rate mortgages and tend to have high prepayment rates when the level of
prevailing interest rates declines significantly below the interest rates on the
mortgages. Thus, under those circumstances, the securities are generally less
sensitive to interest rate movements than lower coupon FRMs.
CHARACTERISTICS OF MORTGAGE-BACKED SECURITIES. The underlying mortgages
which collateralize the arms, collateralized mortgage obligations and real
estate mortgage investment conduits in which the fund invests will frequently
have caps and floors which limit the maximum amount by which the loan rate to
the residential borrower may change up or down (1) per reset or adjustment
interval and (2) over the life of the loan. some residential mortgage loans
restrict periodic adjustments by limiting changes in the borrower's monthly
principal and interest payments rather than limiting interest rate changes.
These payment caps may result in negative amortization.
The market value of mortgage securities, like other U.S. Government
securities, will generally vary inversely with changes in market interest rates,
declining when interest rates rise and rising when interest rates decline.
However, mortgage securities, while having comparable risk of decline during
periods of rising rates, usually have less potential for capital appreciation
than other investments of comparable maturities due to the likelihood of
increased prepayments of mortgages as interest rates decline. In addition, to
the extent such mortgage securities are purchased at a premium, mortgage
foreclosures and unscheduled principal prepayments generally will result in some
loss of the holders' principal to the extent of the premium paid. On the other
hand, if such mortgage securities are purchased at a discount, an unscheduled
prepayment of principal will increase current and total returns and will
accelerate the recognition of income which when distributed to shareholders will
be taxable as ordinary income.
During periods of declining interest rates, prepayments of mortgages
underlying mortgage-backed securities can be expected to accelerate. When
mortgage obligations are prepaid, the Fund reinvests the prepaid amounts in
securities, the yields of which reflect interest rates prevailing at that time.
Therefore, the Fund's ability to maintain a portfolio of high-yielding
mortgage-backed securities will be adversely affected to the extent that
prepayments of mortgages must be reinvested in securities which have lower
yields than the prepaid mortgages. Moreover, prepayments of mortgages which
underlie securities purchased at a premium generally will result in capital
losses.
CORPORATE & OTHER NON GOVERNMENT DEBT OBLIGATIONS
ZERO COUPON BONDS. The Fund may invest up to 5% of its total assets in
zero coupon securities. Zero coupon bonds are purchased at a discount from the
face amount because the buyer receives only the right to receive a fixed payment
on a certain date in the future and does not receive any periodic interest
payments. The effect of owning instruments which do not make current interest
payments is that a fixed yield is earned not only on the original investment but
also, in effect, on all discount accretion during the life of the obligations.
This implicit investment of earnings at the same rate eliminates the risk of
being unable to reinvest distributions at a rate as high as the implicit yield
on the zero coupon bond, but at the same time eliminates the holder's ability to
reinvest at higher rates in the future. For this reason, zero coupon bonds are
subject to substantially greater price fluctuations during periods of changing
market interest rates than are comparable securities which pay interest
currently, which fluctuation increases the longer the period to maturity.
Although zero coupon securities pay no interest to holders prior to maturity,
interest on these securities is reported as income to the Fund and distributed
to its shareholders. These distributions must be made from the Fund's cash
assets or, if necessary, from the proceeds of sales of portfolio securities. The
Fund will not be able to purchase additional income-producing securities with
cash used to make such distributions and consequently its current income may be
reduced.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The Fund may purchase or sell securities on a when-issued or delayed
delivery basis. When-issued or delayed delivery transactions arise when
securities are purchased or sold by the Fund with payment and delivery taking
place in the future in order to secure what is considered to be an advantageous
price and yield to the Fund at the time of entering into the transaction. The
Fund's Custodian will maintain, in a segregated account of the Fund, cash or
other liquid assets having a value equal to or greater than the Fund's purchase
commitments. The Securities so purchased are subject to market fluctuation and
no interest accrues to the purchaser during the period between purchase and
settlement. At the time of delivery of the securities, the value may be more or
less than the purchase price and an increase in the percentage of the Fund's
assets committed to the purchase of securities on a when-issued or delayed
delivery basis may increase the volatility of the Fund's net asset value.
RISK MANAGEMENT AND RETURN ENHANCEMENT STRATEGIES
The Fund also may engage in various portfolio strategies, including using
derivatives, to reduce certain risks of its investments and to attempt to
enhance return. The Fund, and thus its investors, may lose money through any
unsuccessful use of
B-7
<PAGE>
these strategies. These strategies currently include the use of options, foreign
currency forward contracts and futures contracts and options on such contracts.
The Fund's ability to use these strategies may be limited by various factors
such as market conditions, regulatory limits and tax considerations, and there
can be no assurance that any of these strategies will succeed. See "Taxes,
Dividends and Distributions" below. If new financial products and risk
management techniques are developed, the Fund may use them to the extent
consistent with its investment objective and policies.
OPTIONS ON SECURITIES
The Fund may purchase and write (that is sell) put and call options on
debt securities, aggregates of debt securities or indices of prices thereof,
other financial indices and U.S. and foreign government debt securities. These
may include options traded on U.S. or foreign exchanges and options traded on
U.S. or foreign over-the-counter markets (OTC Options).
The Fund may write covered put and call options to generate additional
income through the receipt of premiums, purchase put options in an effort to
protect the value of a security that it owns against a decline in market value
and purchase call options in an effort to protect against an increase in the
price of securities it intends to purchase. The Fund may also purchase put and
call options to offset previously written put and call options of the same
series.
A call option gives the purchaser, in exchange for a premium paid, the
right for a specified period of time to purchase the securities subject to the
option at a specified price (the exercise price or strick price). The writer of
a call option, in return for the premium, has the obligation, upon exercise of
the option, to deliver, depending upon the terms of the option contract, the
underlying securities or a specified amount of cash to the purchaser upon
receipt of the exercise price. When the Fund writes a call option, the Fund
gives up the potential for gain on the underlying securities in excess of the
exercise price of the option during the period that the option is open.
A put option gives the purchaser, in return for a premium, the right for a
specified period of time to sell the securities subject to the option to the
writer of the put at the specified exercise price. The writer of the put option,
in return for the premium, has the obligation, upon exercise of the option, to
acquire the securities underlying the option at the exercise price. The Fund, as
the writer of a put option, might, therefore, be obligated to purchase the
underlying securities for more than their current-market price.
The Fund may wish to protect certain portfolio securities against a
decline in market value through purchase of put options on other carefully
selected securities which The Prudential Investment Corporation, doing business
as Prudential Investments (Prudential Investments), and PRICOA Asset Management
Ltd. (PRICOA, and collectively with Prudential Investments, the Subadviser)
believes may move in the same direction as those portfolio securities. If the
Subadviser's judgment is correct, changes in the value of the put options should
generally offset changes in the value of the portfolio securities being hedged.
If the Subadviser's judgment is not correct, the value of the securities
underlying the put option may decrease less than the value of the Fund's
investments and therefore the put option may not provide complete protection
against a decline in the value of the Fund's investments below the level sought
to be protected by the put option.
The Fund may similarly wish to hedge against appreciation in the value of
debt securities that it intends to acquire through purchase of call options on
other carefully selected debt securities which the Subadviser believes may move
in the same direction as those portfolio securities. In such circumstances the
Fund will be subject to to risks analogous to those summarized above in the
event that the correlation between the value of call options so purchased and
the value of the securities intended to be acquired by the Fund is not as close
as anticipated and the value of the securities underlying the call options
increases less than the value of the securities to be acquired by the Fund.
The Fund may write options on securities in connection with buy-and-write
transactions; that is, it may purchase a security and concurrently write a call
option against that security. If the call option is exercised, the Fund's
maximum gain will be the premium it received from writing the option, adjusted
upwards or downwards by the difference between the Fund's purchase price of the
security and the exercise price of the option. If the option is not exercised
and the price of the underlying security declines, the amount of the decline
will be offset in part, or entirely, by the premium received.
The exercise price of a call option may be below (in-the-money), equal to
(at-the-money) or above (out-of-the-money) the current value of the underlying
security at the time the option is written. Buy-and-write transactions using
in-the-money call options may be used when it is expected that the price of the
underlying security will remain flat or decline moderately during the option
period. Buy-and-write transactions using at-the-money call options may be used
when it is expected that the price of the underlying security will remain fixed
or advance moderately during the option period. A buy-and-write transaction
using an out-of-the-money call option may be used when it is expected that the
premium received from writing the call option plus the appreciation in the
market price of the underlying security up to the exercise price will be greater
than the appreciation in the price of the underlying security alone. If the call
option is exercised in such a transaction, the Fund's maximum gain will be the
premium
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received by it for writing the option, adjusted upwards or downwards by the
difference between the Fund's purchase price of the security and the exercise
price of the option. If the option is not exercised and the price of the
underlying security declines, the amount of the decline will be offset in part,
or entirely, by the premium received.
The Fund may write both American style options and European style options.
An American style option is an option which may be exercised by the holder at
any time prior to its expiration. A European style option may only be exercised
as of the expiration of the option.
Prior to being notified of exercise of the option, the writer of an
exchange-traded option that wishes to terminate its obligation may effect a
"closing purchase transaction" by buying an option of the same series as the
option previously written. (Options of the same series are options with respect
to the same underlying security, having the same expiration date and the same
strike price.) The effect of the purchase is that the writer's position will be
cancelled by the exchange's affiliated clearing organization. Likewise, an
investor who is the holder of an option may liquidate a position by effecting a
"closing sale transaction" by selling an option of the same series as the option
previously purchased. There is no guarantee that either a closing purchase or a
closing sale transaction can be effected.
Exchange-traded options in the U.S. are issued by a clearing organization
affiliated with the Exchange on which the option is listed which, in effect,
gives its guarantee to every exchange-traded option transaction. In contrast,
OTC options are contracts between the Fund and its counterparty with no clearing
organization guarantee. Thus, when the Fund purchases an OTC option, it relies
on the dealer from which it has purchased the OTC option to make or take
delivery of the securities underlying the option. Failure by the dealer to do so
would result in the loss of the premium paid by the Fund as well as the loss of
the expected benefit of the transaction. The Board of Directors of the Fund has
approved a list of dealers with which the Fund may engage in OTC options.
When the Fund writes an OTC option, it generally will be able to close out
the OTC option prior to its expiration only by entering into a closing purchase
transaction with the dealer to which the Fund originally wrote the OTC option.
While the Fund will enter into OTC options only with dealers which agree to, and
which are expected to be capable of, entering into closing transactions with the
Fund, there can be no assurance that the Fund will be able to liquidate an OTC
option at a favorable price at any time prior to expiration. Until the Fund is
able to effect a closing purchase transaction in a covered OTC call option the
Fund has written, it will not be able to liquidate securities used as cover
until the option expires or is exercised or different cover is substituted. In
the event of insolvency of the contra-party, the Fund may be unable to liquidate
an OTC option.
OTC options purchased by the Fund will be treated as illiquid securities
subject to any applicable limitation on such securities. Similarly, the assets
used to "cover" OTC options written by the Fund will be treated as illiquid
unless the OTC options are sold to qualified dealers who agree that the Fund may
repurchase any OTC options it writes for a maximum price to be calculated by a
formula set forth in the option agreement. The "cover" for an OTC option written
subject to this procedure would be considered illiquid only to the extent that
the maximum repurchase price under the formula exceeds the intrinsic value of
the option.
The Fund will write only "covered" options. An option is covered if, as
long as the Fund is obligated under the option, it (i) owns an offsetting
position in the underlying security or (ii) segregates cash or other illiquid
assets in an amount equal to or greater than its obligation under the option.
Under the first circumstance, the Fund's losses are limited because it owns the
underlying security; under the second circumstance, in the case of a written
call option, the Fund's losses are potentially unlimited.
There is no limitation on the amount of call options the Fund may write.
The Fund may only write covered put options to the extent that cover for such
options does not exceed 25% of the Fund's net assets. The Fund will not purchase
an option if, as a result of such purchase, more than 20% of its total assets
would be invested in premiums for options and options on futures.
SPECIAL CONSIDERATIONS APPLICABLE TO OPTIONS
ON TREASURY BONDS AND NOTES. Because trading interest in Treasury Bonds
and Notes tends to center on the most recently auctioned issues, the Exchanges
will not indefinitely continue to introduce new series of options with
expirations to replace expiring options on particular issues. Instead, the
expirations introduced at the commencement of options trading on a particular
issue will be allowed to run their course, with the possible addition of a
limited number of new expirations as the original ones expire. Options trading
on each series of Bonds or Notes will thus be phased out as new options are
listed on the more recent issues, and a full range of expiration dates will not
ordinarily be available for every series on which options are traded.
ON TREASURY BILLS. Because the deliverable Treasury Bill changes from week
to week, writers of Treasury Bill call options cannot provide in advance for
their potential exercise settlement obligations by acquiring and holding the
underlying security.
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<PAGE>
However, if the Fund holds a long position in Treasury Bills with a principal
amount corresponding to the option contract size, the Fund may be hedged from a
risk standpoint. In addition, the Fund will maintain in a segregated account
with its Custodian Treasury Bills maturing no later than those which would be
deliverable in the event of an assignment of an exercise notice to ensure that
it can meet its open option obligations.
ON GNMA CERTIFICATES. The Fund may purchase and write options on GNMA
Certificates in the over-the-counter market and, to the extent available, on any
Exchange.
Since the remaining principal balance of GNMA Certificates declines each
month as a result of mortgage payments, the Fund, as a writer of a covered GNMA
call option holding GNMA Certificates as "cover" to satisfy its delivery
obligation in the event of assignment of an exercise notice, may find that its
GNMA Certificates no longer have sufficient remaining principal balance for this
purpose. Should this occur, the Fund will enter into a closing purchase
transaction or will purchase additional GNMA Certificates from the same pool (if
obtainable) or replacement GNMA Certificates in the cash market in order to
remain covered or substitute cover.
A GNMA Certificate held by the Fund to cover a call option the Fund has
written in any but the nearest expiration month may cease to represent cover for
the option in the event of a decline in the GNMA coupon rate at which new pools
are originated under the FHA/VA loan ceiling in effect at any given time. Should
this occur, the Fund will no longer be covered, and the Fund will either enter
into a closing purchase transaction or replace the Certificate with a
Certificate which represents cover. When the Fund closes its option position or
replaces the Certificate, it may realize an unanticipated loss and incur
transaction costs.
OPTIONS ON CURRENCIES
Instead of purchasing or selling futures or foreign currency forward
contracts, the Fund may attempt to accomplish similar objectives by purchasing
put or call options on currencies either on exchanges or in the over-the-counter
markets or by writing put options or covered call options on currencies. A put
option gives the Fund the right to sell a currency at the exercise price until
the option expires. A call option gives the Fund the right to purchase a
currency at the exercise price until the option expires. Both options serve to
insure against adverse currency price movements in the underlying portfolio
assets designated in a given currency.
FOREIGN CURRENCY FORWARD CONTRACTS
The Fund's transactions in foreign currency forward contracts will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is the forward purchase or sale of currency with
respect to specific receivables or payables of the Fund generally arising in
connection with the purchase or sale of its portfolio securities and accruals of
interest receivable and Fund expenses. Position hedging is the forward sale of
currency with respect to portfolio security positions denominated or quoted in
that currency or in a currency bearing a high degree of positive correlation to
the value of that currency.
[The Fund may not position hedge (including cross hedges) with respect to
a particular currency for an amount greater than the aggregate market value
(determined at the time of making any sale of forward currency) of the
securities being hedged. If the Fund enters into a position hedging transaction,
the transaction will be "covered" by the position being hedged or the Fund's
Custodian will segregate cash or other liquid assets of the Fund (less the value
of the "covering" positions, if any) in an amount equal to the value of the
Fund's total assets committed to the consummation of the given forward contract.
If the value of the securities segregated declines, additional cash or
securities will be segregated so that the value of the account will, at all
times, equal the amount of the Fund's net commitment with respect to the forward
contract.
At or before the maturity of a forward sale contract, the Fund may either
sell a portfolio security and make delivery of the currency, or retain the
security and offset its contractual obligations to deliver the currency by
purchasing a second contract pursuant to which the Fund will obtain, on the same
maturity date, the same amount of the currency which it is obligated to deliver.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund, at the time of execution of the offsetting transaction,
will incur a gain or a loss to the extent that movement has occurred in forward
contract prices. Should forward prices decline during the period between the
Fund's entering into a forward contract for the sale of a currency and the date
it enters into an offsetting contract for the purchase of the currency, the Fund
will realize a gain to the extent the price of the currency it has agreed to
purchase is less than the price of the currency it has agreed to sell. Should
forward prices increase, the Fund will suffer a loss to the extent the price of
the currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell. Closing out forward purchase contracts involves similar
offsetting transactions.
The use of foreign currency contracts does not eliminate fluctuations in
the underlying prices of the securities, but it does establish a rate of
exchange that can be achieved in the future. In addition, although forward
currency contracts limit the risk of
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loss due to a decline in the value of the hedged currency, they also limit any
potential gain that might result if the value of the currency increases.]
FUTURES CONTRACTS AND OPTIONS THEREON
The Fund may purchase and sell interest rate and financial futures
contracts to take advantage of or to protect the Fund against fluctuations in
interest rates affecting the value of debt securities which the Fund holds or
intends to acquire and may also purchase or sell currency futures contracts and
options thereon to manage currency risks. The Fund, and thus its investors, may
lose money through any unsuccessful use of these strategies.
Under regulations of the Commodity Exchange Act, investment companies
registered under the Investment Company Act are exempt from the definition of
"commodity pool operator," subject to compliance with certain conditions. The
exemption is conditioned upon the Fund's purchasing and selling futures
contracts and options thereon for bona fide hedging transactions, except that
the Fund may purchase and sell futures contracts and options thereon for any
other purpose to the extent that the aggregate initial margin and option
premiums do not exceed 5% of the market value of the Fund's total assets.
Although there are no other limits applicable to futures contracts, the value of
all futures contracts sold will not exceed the total market values of the Fund's
portfolio.
The Fund may only write "covered" put and call options on futures
contracts. The Fund will be considered "covered" with respect to a call option
it writes on a futures contract if the Fund owns the assets which are
deliverable under the futures contract or an option to purchase that futures
contract having a strike price equal to or less than the strike price of the
"covered" option and having an expiration date not earlier than the expiration
date of the "covered" option, or if it segregates and maintains with the Fund's
Custodian for the term of the option cash or other liquid assets equal to the
fluctuating value of the optioned future. The Fund will be considered "covered"
with respect to a put option it writes on a futures contract if it owns an
option to sell that futures contract having a strike price equal to or greater
than the strike price of the "covered" option or if it segregates with the
Custodian for the term of the option cash or other liquid assets at all times
equal in value to the exercise price of the put (less any initial margin
deposited by the Fund with the Custodian with respect to such put option). There
is no limitation on the amount of the Fund's assets which can be placed in the
segregated account.
The Fund's successful use of futures contracts and options thereon depends
upon the investment adviser's ability to predict the direction of the market and
interest rates and requires skills and techniques different from those used in
selecting portfolio securities. The correlation between movements in the price
of a futures contract and movements in the price of the securities being hedged
is imperfect and the risk from imperfect correlation increases as the
composition of the Fund's portfolio diverges from the composition of the
relevant index. There is also a risk that the value of the securities being
hedged may increase or decrease at a greater rate than the related futures
contracts, resulting in losses to the Fund. Certain futures exchanges or boards
of trade have established daily limits on the amount that the price of futures
contracts or options thereon may vary, either up or down, from the previous
day's settlement price. These daily limits may restrict the Fund's ability to
purchase or sell certain futures contracts or options thereon on any particular
day.
Certain of the futures and options on futures sold or purchased in the
Fund may be traded on foreign exchanges. Such transactions may not be regulated
as effectively as similar transactions in the United States, may not involve a
clearing mechanism and related guarantees, and are subject to the risk of
governmental action affecting trading in, or the prices of, foreign securities.
The value of such positions also could be adversely affected by (1) other
complex foreign political, legal and economic factors, (2) lesser availability
than in the United States of data on which to make trading decisions, (3) delays
in the Fund's ability to act upon economic events occurring in the foreign
markets during non-business hours in the United States, (4) the imposition of
different exercise and settlement terms and procedures and margin requirements
than in the United States and (5) lesser trading volume.
RISKS OF RISK MANAGEMENT AND RETURN ENHANCEMENT STRATEGIES
Participation in the options or futures markets and in currency exchange
transactions involves investment risks and transaction costs to which the Fund
would not be subject absent the use of these strategies. The Fund, and thus
investors, may lose money through any unsuccessful use of these strategies. If
the Subadviser's predictions of movements in the direction of the securities,
foreign currency or interest rate markets are inaccurate, the adverse
consequences to the Fund may leave the Fund in a worse position than if such
strategies were not used. Risks inherent in the use of options, foreign currency
and futures contracts and options on futures contracts include: (1) dependence
on the Subadviser's ability to predict correctly movements in the direction of
interest rates, securities prices and currency markets; (2) imperfect
correlation between the price of options and
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futures contracts and options thereon and movements in the prices of the
securities being hedged; (3) the fact that the skills needed to use these
strategies are different from those needed to select portfolio securities; (4)
the possible absence of a liquid secondary market for any particular instrument
at any time; (5) the risk that the counterparty may be unable to complete the
transaction; and (6) the possible inability of the Fund to purchase or sell a
portfolio security at a time that otherwise would be favorable for it to do so,
or the possible need for the Fund to sell a portfolio security at a
disadvantageous time, due to the need for the Fund to maintain "cover" or to
segregate securities in connection with hedging transactions.
The Fund will generally purchase options and futures on an exchange only
if there appears to be a liquid secondary market for such options or futures;
the Fund will generally purchase OTC options only if the investment adviser
believes that the other party to the opinions will continue to make a market for
such options.
INTEREST RATE FUTURES CONTRACTS AND OPTIONS THEREON
The Fund will purchase or sell interest rate futures contracts to take
advantage of or to protect the Fund against fluctuations in interest rates
affecting the value of debt securities which the Fund holds or intends to
acquire. For example, if interest rates are expected to increase, the Fund might
sell futures contracts on debt securities, the values of which historically have
a high degree of positive correlation to the values of the Fund's portfolio
securities. Such a sale would have an effect similar to selling an equivalent
value of the Fund's portfolio securities. If interest rates increase, the value
of the Fund's portfolio securities will decline, but the value of the futures
contracts to the Fund will increase at approximately an equivalent rate thereby
keeping the net asset value of the Fund from declining as much as it otherwise
would have. The Fund could accomplish similar results by selling debt securities
with longer maturities and investing in debt securities with shorter maturities
when interest rates are expected to increase. However, since the futures market
may be more liquid than the cash market, the use of futures contracts as a risk
management technique allows the Fund to maintain a defensive position without
having to sell its portfolio securities.
Similarly, the Fund may purchase interest rate futures contracts when it
is expected that interest rates may decline. The purchase of futures contracts
for this purpose constitutes a hedge against increases in the price of debt
securities (caused by declining interest rates) which the Fund intends to
acquire. Since fluctuations in the value of appropriately selected futures
contracts should approximate that of the debt securities that will be purchased,
the Fund can take advantage of the anticipated rise in the cost of the debt
securities without actually buying them. Subsequently, the Fund can make the
intended purchase of the debt securities in the cash market and currently
liquidate its futures position. To the extent the Fund enters into futures
contracts for this purpose, it will segregate with the Fund's Custodian cash or
other liquid assets in an amount equal to the difference between the fluctuating
market value of such futures contracts and the aggregate value of the initial
margin deposited by the Fund with its Custodian with respect to such futures
contracts sufficient to cover the Fund's obligations with respect to such
futures contracts.
The purchase of a call option on a futures contract is similar in some
respects to the purchase of a call option on an individual security. Depending
on the pricing of the option compared to either the price of the futures
contract upon which it is based or the price of the underlying debt securities,
it may or may not be less risky than ownership of the futures contract or
underlying debt securities. As with the purchase of futures contracts, when the
Fund is not fully invested it may purchase a call option on a futures contract
to hedge against a market advance due to declining interest rates.
The purchase of a put option on a futures contract is similar to the
purchase of protective put options on portfolio securities. The Fund will
purchase a put option on a futures contract to hedge the Fund's portfolio
against the risk of rising interest rates and consequent reduction in the value
of portfolio securities.
The amount of risk the Fund assumes when it purchases an option on a
futures contract is the premium paid for the option plus related transaction
costs. In addition to the correlation risks discussed above, the purchase of an
option also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the option purchased.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the securities which are deliverable upon
exercise of the futures contract. If the futures price at expiration of the
option is below the exercise price, the Fund will retain the full amount of the
option premium which provides a partial hedge against any decline that may have
occurred in the Fund's portfolio holdings. The writing of a put option on a
futures contract constitutes a partial hedge against increasing prices of the
securities which are deliverable upon exercise of the futures contract. If the
futures price at expiration of the option is higher than the exercise price, the
Fund will retain the full amount of the option premium which provides a partial
hedge against any increase in the price of debt securities which the Fund
intends to purchase. If a put or call option the Fund has written is exercised,
the Fund will incur a loss which will be reduced by the amount of the premium it
received. Depending on the degree of correlation between changes in the value of
its portfolio securities and changes in the value of its futures positions, the
Fund's losses from options on futures it has written may to some extent be
reduced or increased by changes in the value of its portfolio securities.
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<PAGE>
CURRENCY FUTURES AND OPTIONS THEREON
Generally, foreign currency futures contracts and options thereon are
similar to the interest rate futures contracts and options thereon discussed
previously. By entering into currency futures and options thereon on U.S. and
foreign exchanges, the Fund will seek to establish the rate at which it will be
entitled to exchange U.S. dollars for another currency at a future time. By
selling currency futures, the Fund will seek to establish the number of dollars
it will receive at delivery for a certain amount of a foreign currency. In this
way, whenever the Fund anticipates a decline in the value of a foreign currency
against the U.S. dollar, the Fund can attempt to "lock in" the U.S. dollar value
of some or all of the securities held in its portfolio that are denominated in
that currency. By purchasing currency futures, the Fund can establish the number
of dollars it will be required to pay for a specified amount of a foreign
currency in a future month. Thus if the Fund intends to buy securities in the
future and expects the U.S. dollar to decline against the relevant foreign
currency during the period before the purchase is effected, the Fund can attempt
to "lock in" the price in U.S. dollars of the securities it intends to acquire.
The purchase of options on currency futures will allow the Fund, for the
price of the premium and related transaction costs it must pay for the option,
to decide whether or not to buy (in the case of a call option) or to sell (in
the case of a put option) a futures contract at a specified price at any time
during the period before the option expires. If the investment adviser, in
purchasing an option, has been correct in its judgment concerning the direction
in which the price of a foreign currency would move as against the U.S. dollar,
the Fund may exercise the option and thereby take a futures position to hedge
against the risk it had correctly anticipated or close out the option position
at a gain that will offset, to some extent, currency exchange losses otherwise
suffered by the Fund. If exchange rates move in a way the investment adviser did
not anticipate, however, the Fund will have incurred the expense of the option
without obtaining the expected benefit; any such movement in exchange rates may
also thereby reduce rather than enhance the Fund's profits on its underlying
securities transactions.
ADDITIONAL RISKS OF OPTIONS, FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
Options, futures contracts and options thereon may be traded on foreign
exchanges. Such transactions may not be regulated as effectively as similar
transactions in the U.S., may not involve a clearing mechanism and related
guarantees, and are subject to the risk of governmental actions affecting
trading in, or the prices of, foreign securities. The value of such positions
also could be adversely affected by (i) other complex foreign political, legal
and economic factors, (ii) lesser availability than in the U.S. of data on which
to make trading decisions, (iii) delays in the Fund's ability to act upon
economic events occurring in the foreign markets during non-business hours in
the U.S., (iv) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the U.S. and (v) lesser trading
volume.
Exchanges on which options, futures and options on futures are traded may
impose limits on the positions that the Fund may take in certain circumstances.
SPECIAL RISK CONSIDERATIONS RELATING TO FUTURES AND OPTIONS THEREON
The Fund's ability to establish and close out positions in futures
contracts and options on futures contracts will be subject to the development
and maintenance of liquid markets. Although the Fund generally will purchase or
sell only those futures contracts and options thereon for which there appears to
be a liquid market, there is no assurance that a liquid market on an exchange
will exist for any particular futures contract or option thereon at any
particular time. In the event no liquid market exists for a particular futures
contract or option thereon in which the Fund maintains a position, it will not
be possible to effect a closing transaction in that contract or to do so at a
satisfactory price and the Fund would have to either make or take delivery under
the futures contract or, in the case of a written option, wait to sell the
underlying securities until the option expires or is exercised or, in the case
of a purchased option, exercise the option. In the case of a futures contract or
an option on a futures contract which the Fund has written and which the Fund is
unable to close, the Fund would be required to maintain margin deposits on the
futures contract or option and to make variation margin payments until the
contract is closed.
Successful use of futures contracts and options thereon and forward
contracts by the Fund is subject to the ability of the investment adviser to
predict correctly movements in the direction of interest and foreign currency
rates. If the investment adviser's expectations are not met, the Fund would be
in a worse position than if a hedging strategy had not been pursued. For
example, if the Fund has hedged against the possibility of an increase in
interest rates which would adversely affect the price of securities in its
portfolio and the price of such securities increases instead, the Fund will lose
part or all of the benefit of the increased value of its securities because it
will have offsetting losses in its futures positions. In addition, in such
situations, if the Fund has insufficient cash to meet daily variation margin
requirements, it may have to sell securities to meet the requirements. These
sales may, but will not necessarily, be at increased prices which reflect the
rising market. The Fund may have to sell securities at a time when it is
disadvantageous to do so.
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LIMITATIONS ON THE PURCHASE AND SALE OF FUTURES CONTRACTS AND OPTIONS ON FUTURES
CONTRACTS
The Fund will engage in transactions in futures contracts and options
thereon only for bona fide hedging, return enhancement and risk management
purposes, in each case in accordance with the rules and regulations of the CFTC,
and not for speculation.
In accordance with CFTC regulations, the Fund may not purchase or sell
futures contracts or options thereon if the initial margin and premiums for
options on futures would exceed 5% of the market value of the Fund's total
assets after taking into account unrealized profits and unrealized losses on
such contracts; provided, however, that in the case of an option that is
in-the-money at the time of the purchase, the in-the-money amount may be
excluded in calculating the 5% limitation. The above restriction does not apply
to the purchase and sale of futures contracts and options thereon for bona fide
hedging purposes within the meaning of the CFTC regulations. In instances
involving the purchase of futures contracts or call options thereon or the
writing of put options thereon by the Fund, an amount of cash or other liquid
assets equal to the market value of the futures contracts and options thereon
(less any related margin deposits), will be deposited in a segregated account
with the Fund's Custodian to cover the position, or alternative cover will be
employed, thereby insuring that the use of such instruments is unleveraged.
The Fund's purchase and sale of futures contracts and purchase and writing
of options on futures contracts will be for the purpose of protecting its
portfolio against anticipated future changes in interest rates or foreign
currency exchange which might otherwise either adversely affect the value of the
Fund's portfolio securities or adversely affect the prices of securities that
the Fund intends to purchase at a later date, to change the effective duration
of the Fund's portfolio and to enhance the Fund's return.
In addition, CFTC regulations may impose limitations on the Fund's ability
to engage in certain return enhancement and risk management strategies. There
are no limitations on the Fund's use of futures contracts and options on futures
contracts beyond the restrictions set forth above.
Although the Fund intends to purchase or sell futures and options on
futures only on exchanges where there appears to be an active market, there is
no guarantee that an active market will exist for any particular contract or at
any particular time. If there is not a liquid market at a particular time, it
may not be possible to close a futures position at such time, and, in the event
of adverse price movements, the Fund would continue to be required to make daily
cash payments of variation margin. However, if a futures contract has been used
to hedge portfolio securities, such securities will not be sold until the
futures contract can be terminated. In such circumstances, an increase in the
price of securities, if any, may partially or completely offset losses on the
futures contract. However, there is no guarantee that the price movements of the
securities will, in fact, correlate with the price movements in the futures
contracts and thus provide an offset to losses on a futures contract.
ILLIQUID SECURITIES
The Fund may hold up to 15% of its net assets in illiquid securities,
including repurchase agreements which have a maturity of longer than seven days,
securities with legal or contractual restrictions on resale (restricted
securities) and securities that are not readily marketable in securities markets
either within or outside of the United States. Repurchase agreements subject to
demand are deemed to have a maturity equal to the applicable notice period.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Mutual funds do not typically hold a significant amount of
these restricted or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a mutual fund
might be unable to dispose of restricted or other illiquid securities promptly
or at reasonable prices and might thereby experience difficulty satisfying
redemptions within seven days. A mutual fund might also have to register such
restricted securities in order to dispose of them resulting in additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act including
repurchase agreements, commercial paper, foreign securities, municipal
securities, convertible securities and corporate bonds and notes. Institutional
investors depend on an efficient institutional market in which the unregistered
security can be readily resold or on an issuer's ability to honor a demand for
repayment. The fact that there are contractual or legal restrictions on resale
to the general public or to certain institutions may not be indicative of the
liquidity of such investments.
Rule 144A under the Securities Act allows for a broader institutional
trading market for securities otherwise subject to restriction on resale to the
general public. Rule 144A establishes a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers. The investment adviser anticipates that the
market
B-14
<PAGE>
for certain restricted securities such as institutional commercial paper and
foreign securities will expand further as a result of this regulation and the
development of automated systems for the trading, clearance and settlement of
unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc.
Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act and commercial paper for which there is a readily available
market are treated as liquid only when deemed liquid under procedures
established by the Directors. The Fund's investment in Rule 144A securities
could have the effect of increasing illiquidity to the extent that qualified
institutional buyers become, for a limited time, uninterested in purchasing Rule
144A securities. The investment adviser will monitor the liquidity of such
restricted securities subject to the supervision of the Board of Directors. In
reaching liquidity decisions, the investment adviser will consider, among
others, the following factors: (1) the frequency of trades and quotes for the
security; (2) the number of dealers wishing to purchase or sell the security and
the number of other potential purchasers; (3) dealer undertakings to make a
market in the security; and (4) the nature of the security and the nature of the
marketplace trades (that is, the time needed to dispose of the security, the
method of soliciting offers and the mechanics of the transfer). In addition, in
order for commercial paper that is issued in reliance on Section 4(2) of the
Securities Act to be considered liquid, (a) it must be rated in one of the two
highest rating categories by at least two nationally recognized statistical
rating organizations (NRSRO), or if only one NRSRO rates the securities, by that
NRSRO, or, if unrated, be of comparable quality in the view of the investment
adviser; and (b) it must not be "traded flat" (that is, without accrued
interest) or in default as to principal or interest. Repurchase agreements
subject to demand are deemed to have a maturity equal to the notice period.
The staff of the Securities and Exchange Commission (SEC) has taken the
position that purchased over-the-counter options and the assets used as "cover"
for written over-the-counter options are illiquid securities unless the Fund and
the counterparty have provided for the Fund, at the Fund's election, to unwind
the over-the-counter option. The exercise of such an option ordinarily would
involve the payment by the Fund of an amount designed to reflect the
counterparty's economic loss from an early termination, but does allow the Fund
to treat the assets used as "cover" as "liquid." The Fund will also treat
non-U.S. Government interest-only and principal-only mortgage-backed security
strips as illiquid so long as the staff of the Commission maintains its position
that such securities are illiquid.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements, whereby the seller of a
security agrees to repurchase that security from the Fund at a mutually
agreed-upon time and price. The period of maturity is usually quite short,
possibly overnight or a few days, although it may extend over a number of
months. The resale price is in excess of the purchase price, reflecting an
agreed-upon rate of return effective for the period of time the Fund's money is
invested in the repurchase agreement. The Fund's repurchase agreements will at
all times be fully collateralized by U.S. Government obligations in an amount at
least equal to the resale prices. The instruments held as collateral are valued
daily, and if the value of instruments declines, the Fund will require
additional collateral. If the seller defaults and the value of the collateral
securing the repurchase agreement declines, the Fund may incur a loss.
The Fund will enter into repurchase transactions only with parties meeting
creditworthiness standards approved by the Fund's Directors. The Fund's
investment adviser will monitor the creditworthiness of such parties under the
general supervision of the Directors. In the event of a default or bankruptcy by
a seller, the Fund will promptly seek to liquidate the collateral.
The Fund participates in a joint repurchase account with other investment
companies managed by Prudential Investments Fund Management LLC (the Manager)
pursuant to an order of the SEC. On a daily basis, any uninvested cash balances
of the Fund may be aggregated with those of such investment companies and
invested in one or more repurchase agreements. Each fund participates in the
income earned or accrued in the joint account based on the percentage of its
investment.
BORROWING
The Fund may borrow up to 20% of the value of its total assets (calculated
when the loan is made) for temporary, extraordinary or emergency purposes or for
the clearance of transactions. The Fund may pledge up to 20% of its total assets
to secure these borrowings. If the Fund borrows to invest in securities, any
investment gains made on the securities in excess of interest paid on the
borrowing will cause the net asset value of the shares to rise faster than would
otherwise be the case. On the other hand, if the investment performance of the
the additional securities purchased fails to cover their cost (including any
interest paid on the money borrowed) to the Fund, the net asset value of the
Fund's shares will decrease faster than would otherwise be the case. This is the
speculative factor known as "leverage." If the Fund's asset coverage of
borrowings falls below 300%, the Fund will take prompt action (within 3 days) to
reduce its borrowings. If the 300% asset coverage should decline as a result of
market fluctuations or other reasons, the Fund may be required to sell portfolio
securities to reduce the debt and restore the 300% asset coverage, even though
it may be disadvantageous from an investment standpoint to sell securities at
that time. The Fund will not purchase portfolio securities when borrowings
exceed 5% of the value of its total assets.
B-15
<PAGE>
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS
The Fund may enter into reverse repurchase agreements and dollar rolls.
The proceeds from such transactions will be used for the clearance of
transactions or to take advantage of investment opportunities.
Reverse repurchase agreements involve sales by the Fund of securities
concurrently with an agreement by the Fund to repurchase the same assets at a
later date at a fixed price. During the reverse repurchase agreement period, the
Fund continues to receive principal and interest payments on these securities.
Dollar rolls involve sales by the Fund of securities for delivery in the
current month and a simultaneous contract to repurchase substantially similar
(same type and coupon) securities on a specified future date from the same
party. During the roll period, the Fund forgoes principal and interest paid on
the securities. The Fund is compensated by the difference between the current
sales price and the forward price for the future purchase (often referred to as
the "drop") as well as by the interest earned on the cash proceeds of the
initial sale. A "covered roll" is a specific type of dollar roll for which there
is an offsetting cash position or a cash equivalent security position which
matures on or before the forward settlement date of the dollar roll transaction.
The Fund will establish a segregated account with its custodian in which
it will maintain cash or other liquid assets equal in value to its obligations
in respect of reverse repurchase agreements and dollar rolls. Reverse repurchase
agreements and dollar rolls involve the risk that the market value of the
securities retained by the Fund may decline below the price of the securities
the Fund has sold but is obligated to repurchase under the agreement. In the
event the buyer of securities under a reverse repurchase agreement or dollar
roll files for bankruptcy or becomes insolvent, the Fund's use of the proceeds
of the agreement may be restricted pending a determination by the other party,
or its trustee or receiver, whether to enforce the Fund's obligation to
repurchase the securities.
Reverse repurchase agreements and dollar rolls, including covered dollar
rolls, are speculative techniques involving leverage and are considered
borrowings by the Fund for purposes of the percentage limitations applicable to
borrowings. See "Borrowings" above. The Fund does not presently intend to enter
into reverse repurchase agreements or dollar rolls.
INTEREST RATE SWAP TRANSACTIONS
The Fund may enter into interest rate swaps. Interest rate swaps involve
the exchange by the Fund with another party of their respective commitments to
pay or receive interest, for example, an exchange of floating rate payments for
fixed-rate payments. The Fund expects to enter into these transactions primarily
to preserve a return or spread on a particular investment or portion of its
portfolio or to protect against any increase in the price of securities the Fund
anticipates purchasing at a later date. The Fund intends to use these
transactions as a hedge and not as a speculative investment. The risk of loss
with respect to interest rate swaps is limited to the net amount of interest
payments that the Fund is contractually obligated to make and will not exceed 5%
of the Fund's net assets. The use of interest rate swaps may involve investment
techniques and risks different from those associated with ordinary portfolio
transactions. If the investment adviser is incorrect in its forecast of market
values, interest rates and other applicable factors, the investment performance
of the Fund would diminish compared to what it would have been if this
investment technique was never used. The Fund does not presently intend to enter
into interest rate swap transactions.
SEGREGATED ASSETS
The Fund will segregate with its Custodian, State Street Bank and Trust
Company (State Street), cash, U.S. Government securities, equity securities
(including foreign securities), debt securities or other liquid, unencumbered
assets, equal in value to its obligations in respect of potentially leveraged
transactions. These include forward contracts, when-issued and delayed delivery
securities, futures contracts, written options and options on futures contracts
(unless otherwise covered). If collateralized or otherwise covered, in
accordance with Commission guidelines, these will not be deemed to be senior
securities. The assets segregated will be marked-to-market daily.
(D) DEFENSIVE STRATEGY AND SHORT-TERM INVESTMENTS
When conditions dictate a defensive strategy, the Fund may temporarily
invest without limit in high quality money market instruments, including
commercial paper of domestic and foreign corporations, certificates of deposit,
bankers' acceptances and other obligations of domestic and foreign banks, and
short-term obligations issued or guaranteed by the U.S. Government and its
agencies. Such investments may be subject to certain risks, including future
political and economic developments, the possible imposition of withholding
taxes on interest income, the seizure or nationalization of foreign deposits and
foreign exchange controls or other restrictions.
(E) PORTFOLIO TURNOVER
As a result of the investment policies described above, the Fund may
engage in a substantial number of portfolio transactions, and the Funds
portfolio turnover rate may exceed 100%, but is not expected to exceed 300%. The
portfolioturnover rates for the Fund were 40% and % for the fiscal years ended
December 31, 1998 and 1997, respectively. The portfolio turnover rate is
generally the percentage computed by dividing the lesser of portfolio purchases
or sales (excluding all securities,
B-16
<PAGE>
including options, whose maturities or expiration date at acquisition were one
year or less) by the monthly average value of the long-term portfolio. High
portfolio turnover (100% or more) involves correspondingly greater brokerage
commissions and other transaction costs, which are borne directly by the Fund.
In addition, high portfolio turnover may also mean that a proportionately
greater amount of distributions to shareholders will be taxed as ordinary income
rather than long-term capital gain as compared to investment companies with
lower portfolio turnover. See "Brokerage Allocation and Other Practices" and
"Taxes, Dividends and Distributions."
INVESTMENT RESTRICTIONS
The following restrictions are fundamental policies. Fundamental policies
are those which cannot be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities. A "majority of the Fund's
outstanding voting securities," when used in this Statement of Additional
Information, means the lesser of (1) 67% of the voting shares represented at a
meeting at which more than 50% of the outstanding voting shares are present in
person or represented by proxy or (2) more than 50% of the outstanding voting
shares.
The Fund may not:
1. Invest 25% or more of its total assets in any one industry. For this
purpose "industry" does not include the U.S. Government and agencies and
instrumentalities of the U.S. Government.
2. Purchase securities on margin, except such short-term credits as may be
necessary for the clearance of transactions and except that the Fund may make
deposits on margin in connection with futures contracts and options.
3. Purchase securities of other investment companies, except in accordance
with applicable limits under the Investment Company Act.
4. Make short sales of securities or maintain a short position, with the
exception of "short sales against the box," provided that not more than 10% of
the Fund's net assets (taken at market value) is held as collateral for such
sales at any one time.
5. Issue senior securities, borrow money or pledge its assets, except that
the Fund may borrow up to 20% of the value of its total assets (calculated when
the loan is made) for temporary or extraordinary or emergency purposes or for
the clearance of transactions. The Fund may pledge up to 20% of the value of its
total assets to secure such borrowings. For purposes of this restriction, the
purchase or sale of securities on a when-issued or delayed delivery basis,
collateral arrangements with respect to interest rate swaps, reverse repurchase
agreements or dollar roll transactions, options, futures contracts and options
on futures contracts and collateral arrangements with respect to initial and
variation margins are not deemed to be a pledge of assets or the issuance of a
senior security; and neither such arrangements, the purchase or sale of interest
rate futures contracts or other financial futures contracts or the purchase or
sale of related options nor obligations of the Fund to the Directors pursuant to
deferred compensation arrangements are deemed to be the issuance of a senior
security.
6. Buy or sell commodities, commodity contracts, real estate or interests
in real estate (including mineral leases or rights), except that the Fund may
purchase and sell futures contracts, options on futures contracts and securities
secured by real estate or interests therein or issued by companies that invest
therein. Transactions in foreign currencies and forward contracts and options in
foreign currencies are not considered by the Fund to be transactions in
commodities or commodity contracts.
7. Make loans (except that purchases of debt securities in accordance with
the Fund's investment objective and policies and loans of portfolio securities
and repurchase agreements are not considered by the Fund to be "loans").
8. Make investments for the purpose of exercising control or management
over the issuers of any security.
9. Act as an underwriter (except to the extent the Fund may be deemed to
be an underwriter in connection with the sale of securities in the Fund's
investment portfolio).
Whenever any fundamental investment policy or investment restriction
states a maximum percentage of the Fund's assets, it is intended that if the
percentage limitation is met at the time the investment is made, a later change
in percentage resulting from changing total or net asset values will not be
considered a violation of such policy. However, in the event that the Fund's
asset coverage for borrowings falls below 300%, the Fund will take prompt action
to reduce its borrowings, as required by applicable law.
B-17
<PAGE>
MANAGEMENT OF THE FUND
POSITION PRINCIPAL OCCUPATIONS
NAME AND ADDRESS** WITH FUND DURING PAST 5 YEARS
- ------------------- --------- ---------------------
Edward D. Beach (73) Director President and Director of BMC
Fund, Inc., a closed-end
investment company; formerly
Vice Chairman of Broyhill
Furniture Industries, Inc.;
Certified Public Accountant;
Secretary and Treasurer of
Broyhill Family Foundation,
Inc.; Member of the Board of
Trustees of Mars Hill College
and Director or Trustee of
funds within the Prudential
Mutual Funds.
Delayne Dedrick Gold (59) Director Marketing and Management
Consultant and Director or
Trustee of funds within the
Prudential Mutual Funds.
*Robert F. Gunia (51) Vice President Vice President, Prudential
and Director Investments (since September
1997); Executive Vice President
and Treasurer (since December
1996), Prudential Investments
Fund Management LLC (PIFM);
Senior Vice President (since
March 1987) of Prudential
Securities Incorporated
(Prudential Securities);
formerly Chief Administrative
Officer (July 1990-September
1996), Director (January
1989-September 1996) and
Executive Vice President,
Treasurer and Chief Financial
Officer (June 1987-September
1996) of Prudential Mutual Fund
Management, Inc. (PMF); Vice
President and Director of The
Asia Pacific Fund, Inc. (since
May 1989) and Director or
Trustee of funds within the
Prudential Mutual Funds.
Douglas H. McCorkindale (58) Director Vice Chairman (since March 1984)
and President (since September
1997) of Gannett Co. Inc.
(publishing and media); Director
of Continental Airlines, Inc.,
Gannett Co. Inc. and Frontier
Corporation and Director or
Trustee of funds within the
Prudential Mutual Funds.
*Mendel A. Melzer, CFA (38) Director Chief Investment Officer (since
October 1996) of Prudential
Mutual Funds; formerly Chief 100
Mulberry Street Financial
Officer (November 1995-September
Gateway Two 1996) of Prudential
Investments, Senior Vice Newark,
NJ 07102 President and Chief
Financial Officer (April
1993-November 1995) of
Prudential Preferred Financial
Services, Managing Director
(April 1991-April 1993) of
Prudential Investment Advisors
and Senior Vice President (July
1989-April 1991) of Prudential
Capital Corporation; Chairman
and Director of Prudential
Series Fund, Inc. and Director
or Trustee of funds within
the Prudential Mutual Funds.
Thomas T. Mooney (56) Director President of the Greater Rochester
Metro Chamber of Commerce;
former Rochester City Manager;
Trustee of Center for
Governmental Research, Inc.;
Director of Blue Cross of
Rochester, Monroe County Water
Authority, Rochester Jobs, Inc.,
Executive Service Corps of
Rochester, Monroe County
Industrial Development
Corporation and Northeast
Midwest Institute, The Business
Council of New York State;
President, Director and
Treasurer of First Financial
Fund, Inc. and The High Yield
Plus Fund, Inc. and Director or
Trustee of funds within the
Prudential Mutual Funds.
Stephen P. Munn (55) Director Chairman (since January 1994),
Director and President (since
1988) and Chief Executive
Officer (1988-December 1993) of
Carlisle Companies Incorporated
(manufacturer of industrial
products) and Director or
Trustee of funds within the
Prudential Mutual Funds.
B-18
<PAGE>
POSITION PRINCIPAL OCCUPATIONS
NAME AND ADDRESS**AGE WITH FUND DURING PAST 5 YEARS
- --------------------- --------- ---------------------
*Richard A. Redeker (54) Director Employee of Prudential
Investments; formerly President,
Chief Executive Officer and
Director (October 1993-September
1996), Prudential Mutual Fund
Management, Inc., Executive Vice
President, Director and Member
of the Operating Committee
(October 1993-September 1996),
Prudential Securities, Director
(October 1993-September 1996) of
Prudential Securities Group,
Inc., Executive Vice President,
The Prudential Investment
Corporation (PIC) (January
1994-September 1996), Director
(January 1994-September 1996) of
Prudential Mutual Fund
Distributors, Inc. and
Prudential Mutual Fund Services,
Inc. and Senior Executive Vice
President and Director of Kemper
Financial Services, Inc.
(September 1978-September 1993)
and Director or Trustee of
funds within the Prudential
Mutual Funds.
Robin B. Smith (58) Director Chairman and Chief Executive
Officer (since August 1996) of
Publishers Clearing House;
formerly President and Chief
Executive Officer (January
1989-August 1996) and President
and Chief Operating Officer
(September 1981-December 1988)
of Publishers Clearing House;
Director of BellSouth
Corporation, Texaco Inc.,
Springs Industries Inc. and
Kmart Corporation and Director
or Trustee of funds within
the Prudential Mutual Funds.
Brian M. Storms (44) President and President (since October 1998) of
Director Prudential Investments;
President (September 1996-
October 1998) of Prudential
Mutual Funds, Annuities and
Investment Management Services;
Managing Director (July 1991-
September 1996) of Fidelity
Investment[s] Institutional
Services Company, Inc.;
President (October 1989-
September 1991) of J.K.
Schofield; Senior Vice President
(September 1982-October 1989) of
INVEST Financial Corporation and
Director or Trustee of
and President of funds with
the Prudential Mutual Funds.
Louis A. Weil, III (57) Director Publisher and Chief Executive
Officer (since January 1996) and
Director (since September 1991)
of Central Newspapers, Inc.;
Chairman of the Board (since
January 1996), Publisher and
Chief Executive Officer (August
1991-December 1995) of Phoenix
Newspapers, Inc.; formerly
Publisher of Time Magazine (May
1989-March 1991), President,
Publisher & CEO of The Detroit
News (February 1986-August 1989)
and member of the Advisory
Board, Chase Manhattan
Bank-Westchester; Director of
The High Yield Income Fund, Inc.
and Director or Trustee of
funds within the Prudential
Mutual Funds.
Clay T. Whitehead (59) Director President of National Exchange
Inc. (new business development
firm) and Director or Trustee of
funds within the Prudential
Mutual Funds.
Grace C. Torres (39) Treasurer and First Vice President (since
Principal December 1996) of PIFM; First
Financial and Vice President of Prudential
Accounting Securities (since March 19934);
Officer formerly First Vice President
(March 1994-September 1996) PM
and Vice President (July
1989-March 1994) of Bankers
Trust Corporation.
Marguerite E.H. Morrison Secretary Vice President (since December
(42) 1996) of PIFM; Vice President
and Associate General Counsel of
Prudential Securities; formerly
Vice President and Associate
General Counsel (June
1991-September 1996) of PMF.
B-19
<PAGE>
<TABLE>
POSITION PRINCIPAL OCCUPATIONS
NAME AND ADDRESS**AGE WITH FUND DURING PAST 5 YEARS
- --------------------- --------- ---------------------
<S> <C> <C>
Stephen M. Ungerman (44) Assistant Tax Director (since March 1996)
Treasurer of Prudential Investments;
formerly First Vice President
(February 1993-September 1996)
of PMF.
</TABLE>
- ----------
* "Interested" Director, as defined in the Investment Company Act, by reason
of his affiliation with Prudential Securities, The Prudential Insurance
Company of America or the Manager.
** Unless otherwise stated, the address is c/o Prudential Investments Fund
Management LLC, Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102-4077.
The Fund has Directors who, in addition to overseeing the actions of the
Fund's Manager, Subadviser and Distributor, decide upon matters of general
policy. The Directors also review the actions of the Fund's officers, who
conduct and supervise the daily business operations of the Fund.
Directors and officers of the Fund are also trustees, directors and
officers of some or all of the other investment companies distributed by
Prudential Investment Management Services LLC.
The Directors have adopted a retirement policy which calls for the
retirement of Directors on December 31 of the year in which they reach the age
of 72, except that retirement is being phased in for Directors who were age 68
or older as of December 31, 1993. Under this phase-in provision, Mr. Beach is
scheduled to retire on December 31, 1999.
Pursuant to the Management Agreement with the Fund, the Manager pays all
compensation of officers and employees of the Fund as well as the fees and
expenses of all Directors of the Fund who are affiliated persons of the Manager.
The Fund currently pays each of its Directors who is not an affiliated person of
PIFM or the Subadviser annual compensation of [ ], in addition to certain
out-of-pocket expenses. The amount of annual compensation paid to each Director
may change as a result of the introduction of additional funds on the Boards of
which the Director will be asked to serve.
Directors may receive their Directors' fees pursuant to a deferred fee
agreement with the Fund. Under the terms of the agreement, the Fund accrues
daily the amount of such Directors' fees which accrue interest at a rate
equivalent to the prevailing rate applicable to 90-day U.S. Treasury bills at
the beginning of each calendar quarter or, pursuant to a Commission exemptive
order, at the daily rate of return of the Fund. Payment of the interest so
accrued is also deferred and accruals become payable at the option of the
Director. The Fund's obligation to make payments of deferred Directors' fees,
together with interest thereon, is a general obligation of the Fund.
The following table sets forth the aggregate compensation paid by the Fund
to the Directors who are not affiliated with the Manager for the fiscal year
ended December 31, 1998 and the aggregate compensation paid to such Directors
for service on the Fund's Board and the Boards of all other investment companies
managed by PIFM (Fund Complex) for the calendar year ended December 31, 1998.
<TABLE>
PENSION OR TOTAL 1998
RETIREMENT ESTIMATED COMPENSATION
BENEFITS ANNUAL FROM FUND
AGGREGATE ACCRUED AS BENEFITS AND FUND
COMPENSATION PART OF UPON COMPLEX PAID
NAME OF DIRECTOR FROM FUND FUND EXPENSES RETIREMENT TO DIRECTORS
---------------- --------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Edward D. Beach ............ -- None N/A $ ( )*
Delayne D. Gold ............ -- None N/A $ ( )*
Robert F. Gunia+ ........... -- None N/A None
Douglas H. McCorkindale* ... -- None N/A $ ( )*
Mendel A. Melzer+ .......... -- None N/A None
Thomas T. Mooney ........... -- None N/A $ ( )*
Stephen P. Munn ............ -- None N/A $ ( )*
Richard A. Redeker+ ........ -- None N/A None
Robin B. Smith** ........... -- None N/A $ ( )*
Brian M. Storms+ ........... -- None N/A None
Louis A. Weil III .......... -- None N/A $ ( )*
Clay T. Whitehead .......... -- None N/A $ ( )*
</TABLE>
* Indicates number of funds/portfolios in Fund Complex (including the Fund)
to which aggregate compensation relates.
** Total compensation from all of the funds in the Fund Complex for the
calendar year ended December 31, 1998, includes amounts deferred at the
election of Directors under the Funds' deferred compensation plans.
Including accrued interest, total compensation amounted to $ , $
and $ for Douglas H. McCorkindale, Thomas T. Mooney and Robin B. Smith,
respectively.
+ Directors who are interested do not receive compensation from the Fund or
any other fund in the Fund Complex.
B-20
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Directors of the Fund are eligible to purchase Class Z shares of the Fund
which are sold without either an initial sales charge or contingent deferred
sales charge to a limited group of investors. As of December 14, 1998, the
Directors and officers of the Fund as a group owned less than 1% of the
outstanding common stock of the Fund.
As of December 14, 1998, Prudential Securities was record holder of
7,130,437 Class A shares (or 45.5% of the outstanding Class A shares), 651,123
Class B shares (or 88.5% of the outstanding Class B shares), 18,329 Class C
shares (or 48.1% of the outstanding Class C shares) and 511,728 Class Z shares
(or 99.3% of the outstanding Class Z shares) of the Fund. In the event of any
meetings of shareholders, Prudential Securities will forward, or cause the
forwarding of, proxy materials to the beneficial owners for which it is the
record holder.
As of December 14, 1998, the beneficial owners, directly or indirectly, of
more than 5% of the outstanding shares of any class of common stock were:
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME ADDRESS CLASS OF SHARES (% OF CLASS)
- ---- ------- --------------- ------------
<S> <C> <C> <C>
Smith Barney, Inc 338 Greenwich St. B 55,614 (7.5%)
00162104035 New York, NY 10013
Mrs. Pamela B. Thayer 2938 Cherry Lane C 4,522 (11.8%)
TTEE Pamela B. Thayer Trust UA Northbrook, IL 60062-4312
DTD 01/13/97
Prudential Securities 7642 Candlewood Dr. SE C 3,053 (8.0%)
C/F Mr. James A. Wojczynski Ada, MI 49301-9348
IRA Rollover
DTD 08/27/97
David G. Black 10556 Barrywood Dr., C 3,171 (8.3%)
Dallas, TX 75230-4243
</TABLE>
B-21
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
(A) MANAGEMENT INVESTMENT ADVISER
The manager of the Fund is Prudential Investments Fund Management LLC (the
Manager) (formerly, Prudential Mutual Fund Management LLC), Gateway Center
Three, 100 Mulberry Street, Newark, New Jersey 07102-4077. The Manager serves as
manager to all of the other investment companies that, together with the Fund,
comprise the "Prudential Mutual Funds." See "How the Fund Is Managed--Manager"
in the Prospectus. As of January 31, 1999, the Manager managed and/or
administered open-end and closed-end management investment companies with assets
of approximately $ billion. According to the Investment Company Institute,
as of December 31, 1998, the Prudential Mutual Funds were the th largest
family of mutual funds in the United States.
The Manager is a subsidiary of Prudential Securities and The Prudential
Insurance Company of America (Prudential). Prudential Mutual Fund Services LLC
(the Transfer Agent), a wholly-owned subsidiary of the Manager, serves as the
transfer agent for the Prudential Mutual Funds and, in addition, provides
customer service, recordkeeping and management and administration services to
qualified plans.
Pursuant to the Management Agreement with the Fund (the Management
Agreement), the Manager, subject to the supervision of the Fund's Directors and
in conformity with the stated policies of the Fund, manages both the investment
operations of the Fund and the composition of the Fund's portfolio, including
the purchase, retention, disposition and loan of securities. In connection
therewith, the Manager is obligated to keep certain books and records of the
Fund. The Manager also administers the Fund's corporate affairs and, in
connection therewith, furnishes the Fund with office facilities, together with
those ordinary clerical and bookkeeping services which are not being furnished
by State Street Bank and Trust Company, the Fund's custodian (the Custodian),
and the Fund's Transfer and Agent. The management services of the Manager for
the Fund are not exclusive under the terms of the Management Agreement and the
Manager is free to, and does, render management services to others.
For its services, the Manager receives, pursuant to the Management
Agreement, a fee at an annual rate of .75 of 1% of the Fund's average daily net
assets. The fee is computed daily and payable monthly. The Management Agreement
also provides that, in the event the expenses of the Fund (including the fees of
the Manager, but excluding interest, taxes, brokerage commissions, distribution
fees and litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Fund's business) for any
fiscal year exceed the lowest applicable annual expense limitation established
and enforced pursuant to the statutes or regulations of any jurisdiction in
which the Fund's shares are qualified for offer and sale, the compensation due
to the Manager will be reduced by the amount of such excess. No jurisdiction
currently limits the Fund's expenses.
In connection with its management of the business affairs of the Fund, the
Manager bears the following expenses:
(a) the salaries and expenses of all of its and the Fund's personnel
except the fees and expenses of members of the Board of Directors who are not
affiliated persons of the Manager or the Fund's investment adviser;
(b) all expenses incurred by the Manager or by the Fund in connection with
managing the ordinary course of the Fund's business, other than those assumed by
the Fund as described below; and
(c) the costs and expenses payable to The Prudential Investment
Corporation, doing business as Prudential Investments (the Subadviser), pursuant
to the subadvisory agreement between the Manager and the Subadviser (the
Subadvisory Agreement).
Under the terms of the Management Agreement, the Fund is responsible for
the payment of the following expenses: (a) the fees payable to the Manager, (b)
the fees and expenses of Directors who are not affiliated persons of the Manager
or the Fund's investment adviser, (c) the fees and certain expenses of the
Custodian and Transfer Agent, including the cost of providing records to the
Manager in connection with its obligation of maintaining required records of the
Fund and of pricing the Fund's shares, (d) the charges and expenses of legal
counsel and independent accountants for the Fund, (e) brokerage commissions and
any issue or transfer taxes chargeable to the Fund in connection with its
securities transactions, (f) all taxes and corporate fees payable by the Fund to
governmental agencies, (g) the fees of any trade associations of which the Fund
may be a member, (h) the cost of stock certificates representing shares of the
Fund, (i) the cost of fidelity and liability insurance, (j) certain organization
expenses of the Fund and the fees and expenses involved in registering and
maintaining registration of the Fund and of its shares with the Commission and
the states, including the preparation and printing of the Fund's registration
statements and prospectuses for such purposes, (k) allocable communications
expenses with respect to investor services and all expenses of shareholders' and
B-22
<PAGE>
Directors' meetings and of preparing, printing and mailing reports, proxy
statements and prospectuses to shareholders in the amount necessary for
distribution to the shareholders, (l) litigation and indemnification expenses
and other extraordinary expenses not incurred in the ordinary course of the
Fund's business and (m) distribution fees.
The Management Agreement provides that the Manager will not be liable for
any error of judgment or for any loss suffered by the Fund in connection with
the matters to which the Management Agreement relates, except a loss resulting
from willful misfeasance, bad faith, gross negligence or reckless disregard of
duty. The Management Agreement provides that it will terminate automatically if
assigned, and that it may be terminated without penalty by either party upon not
more than 60 days' nor less than 30 days' written notice. The Management
Agreement will continue in effect for a period of more than two years from the
date of execution only so long as such continuance is specifically approved at
least annually in conformity with the Investment Company Act.
For the fiscal years ended December 31, 1998, 1997 and 1996, the Manager
received management fees of $ , $1,248,195 and $1,386,451, respectively,
from the Fund.
The Manager has entered into a Subadvisory Agreement with the Subadviser,
a wholly-owned subsidiary of Prudential. The PI Subadvisory Agreement provides
that the Subadviser will furnish investment advisory services in connection with
the management of the Fund. In connection therewith, the Subadviser is obligated
to keep certain books and records of the Fund. The Subadviser has entered into
an agreement with PRICOA Asset Management Ltd. (PRICOA) under which PRICOA
provides investment advisory services to the Fund. The Manager continues to have
responsibility for all investment advisory services pursuant to the Management
Agreement and supervises the Subadviser's performance of such services. The
Subadviser is reimbursed by the Manager for the reasonable costs and expenses
incurred by the Subadviser in furnishing these services. [PRICOA is reimbursed
by PI for its reasonable costs and expenses incurred in furnishing advisory
services. Between October 1 and December 31, 1997, PRICOA was paid by the
Subadviser a fee at an annual rate of .30 of 1% of the Fund's average daily net
assets for furnishing these services.]
The PI Subadvisory Agreement provides that it will terminate in the event
of its assignment (as defined in the Investment Company Act) or upon the
termination of the Management Agreement. The PI Subadvisory Agreement may be
terminated by the Fund, the Manager or the Subadviser upon not more than 60
days', nor less than 30 days', written notice. The PI Subadvisory Agreement
provides that it will continue in effect for a period of more than two years
from its execution only so long as such continuance is specifically approved at
least annually in accordance with the requirements of the Investment Company
Act. The PRICOA Subadvisory Agreement provides that PRICOA can terminate it on
60 days' written notice and that PI can terminate it at any time and the
termination would take effect immediately. The PRICOA Subadvisory Agreement also
provides that it will terminate automatically in the event of its assignment (as
defined in the Investment Company Act).
(B) PRINCIPAL UNDERWRITER, DISTRIBUTOR AND RULE 12B-1 PLANS
Prudential Investment Management Services LLC (the Distributor), Gateway
Center Tree, 100 Mulberry Street, Newark, New Jersey 07102-4077 acts as the
distributor of the shares of the Fund. Prior to June 1, 1998 Prudential
Securities Incorporated (Prudential Securities) was the Fund's Distributor. The
Distributor and Prudential Securities are subsidiaries of Prudential.
Pursuant to separate Distribution and Service Plans (the Class A Plan, the
Class B Plan and the Class C Plan, collectively the Plans) adopted by the Fund
under Rule 12b-1 under the Investment Company Act and a distribution agreement
(the Distribution Agreement), the Distributor incurs the expenses of
distributing the Fund's Class A, Class B and Class C shares, respectively. The
Distributor also incurs the expenses of distributing the Fund's Class Z shares
under a Distribution Agreement, none of which are reimbursed by or paid for by
the Fund. See "How the Fund is Managed--Distributor" in the Prospectus.
The expenses incurred under the Plans include commissions and account
servicing fees paid to, or on account of brokers or financial institutions which
have entered into agreements with the Distributor, advertising expenses, the
cost of printing and mailing prospectuses to potential investors and indirect
and overhead costs of the Distributor associated with the sale of Fund shares,
including lease, utility, communications and sales promotion expenses. The
distribution and/or service fees may also be used by the Distributor to
compensate on a continuing basis brokers in consideration for the distribution,
marketing and administrative and other services and activities provided by
brokers with respect to the promotion of the sale of the Fund's shares and the
maintenance of related shareholder accounts.
Under the Plans, the Fund is obligated to pay distribution and/or service
fees to the Distributor as compensation for its distribution and service
activities, not as reimbursement for specific expenses incurred. If the
Distributor's expenses exceed its distribution and service fees, the Fund will
not be obligated to pay any additional expenses. If the Distributor's expenses
are less than such distribution and service fees, it will retain its full fees
and realize a profit.
B-23
<PAGE>
The distribution and/or service fees may also be used by the Distributor
to compensate on a continuing basis brokers in consideration for the
distribution, marketing, administrative and other services and activities
provided by brokers with respect to the promotion of the sale of the Fund's
shares and the maintenance of related shareholder accounts.
CLASS A PLAN. Under the Class A Plan, the Fund may pay the Distributor for
its distribution-related activities with respect to Class A shares at an annual
rate of up to .30 of 1% of the average daily net assets of the Class A shares.
The Class A Plan provides that (1) up to .25 of 1% of the average daily net
assets of the Class A shares may be used to pay for personal service and/or the
maintenance of shareholder accounts (service fee) and (2) total distribution
fees (including the service fee of .25 of 1%) may not exceed .30 of 1%. The
Distributor has voluntarily limited its distribution related fees payable under
the Class A Plan to .15 of 1% of the average daily net assets of the Class A
shares. This voluntary waiver may be terminated at any time without notice.
For the fiscal year ended December 31, 1998, the Distributor and
Prudential Securities received payments of approximately $ under the Class A
Plan and spent approximately $ in distributing the Class A Shares. This
amount was primarily expended for payment of account servicing fees to financial
advisers and other persons who sell Class A shares. In addition, for the fiscal
year ended December 31, 1998, the Distributor and Prudential Securities received
approximately $ in initial sales charges.
CLASS B AND CLASS C PLANS. Under the Class B and Class C Plans, the Fund
may pay the Distributor for its distribution-related activities with respect to
Class B shares up to .75 of 1% of average daily net assets and for Class C
shares at an annual rate of up to 1% of the average daily net assets of the
Class shares. The Class B Plan provides that (1) up to .25 of 1% of the average
daily net assets of the Class B shares may be paid as a service fee and (2) up
to .75% of 1% (including the service fee of .25 of 1%) of the average daily net
assets of the Class B shares (asset based sales charge) may be paid for
distribution-related expenses with respect to the Class B shares. The Class C
Plan provides that (1) up to .25 of 1% of the average daily net assets of the
Class C shares may be paid as a service fee for providing personal service
and/or maintaining shareholder accounts and (2) up to .75% of 1% of the average
daily net assets of the Class C shares may be paid for distribution-related
expenses with respect to the Class C shares. The service fee (.25 of 1% of
average daily net assets) is used to pay for personal service and/or the
maintenance of shareholder accounts. The Distributor has voluntarily limited its
distribution relation fees payable under the Class C Plan to .75 of 1% of the
average daily net assets of the Class C shares. This voluntary waiver may be
terminated at any time. The Distributor also receives contingent deferred sales
charges from certain redeeming shareholders.
CLASS B PLAN. For the fiscal year ended December 31, 1998, the Distributor
and Prudential Securities received $ from the Fund under the Class B Plan.
It is estimated that the Distributor spent approximately $ on behalf of the
Class B shares of the Fund during such year. It is estimated that of the latter
total amount, approximately % ($ ) was spent on printing and mailing of
prospectuses to other than current shareholders; % ($ ) on compensation
to brokers-dealers, for commissions to its representatives and other expenses,
including an allocation on account of overhead and other branch office
distribution-related expenses, incurred for its distribution of Fund shares; and
% ($ ) on the aggregate of (1) payments of commissions to financial
advisers ( % or $ ) and (2) an allocation of overhead and other branch
office distribution-related expenses ( % or $ ). The term "overhead and
other branch office distribution-related expenses" represents (a) the expenses
of operating Prudential Securities' and Pruco Securities Corporation's
(Prusec's) branch offices in connection with the sale of Fund shares, including
lease costs, the salaries and employee benefits of operations and sales support
personnel, utility costs, communications costs and the costs of stationery and
supplies, (b) the costs of client sales seminars, (c) expenses of mutual fund
sales coordinators to promote the sale of Fund shares and (d) other incidental
expenses relating to branch promotion of Fund sales.
The Distributor (and Prudential Securities as its predecessor) also
receives the proceeds of contingent deferred sales charges paid by holders of
Class B shares upon certain redemptions of Class B shares. For the fiscal year
ended December 31, 1998, the Distributor and Prudential Securities received
approximately $ in contingent deferred sales charges attributable to Class
B shares.
CLASS C PLAN. For the fiscal year ended December 31, 1998, the Distributor
and Prudential Securities received $ and $ , respectively, under the
Class C Plan and spent approximately $ in distributing Class C shares. It
is estimated that of the latter total amount, approximately % ($ ) was
spent on printing and mailing of prospectuses to other than current
shareholders; % ($ ) on compensation to broker-dealers for commissions
to representatives and other expenses, including an allocation of overhead and
other branch office distribution related expenses incurred for distribution of
Fund shares and % ($ ) in the aggregate of (1) payments of commissions
and account servicing fees to financial advisers ( % or $ ) and (2) an
allocation of overhead and other branch office distribution-related expenses
( % or $ ).
The Distributor (and Prudential Securities as its predecessor) also
receives the proceeds of contingent deferred sales charges paid by investors
upon certain redemptions of Class C shares. For the fiscal year ended December
31, 1998, the
B-24
<PAGE>
Distributor and Prudential Securities received approximately $ and
$ , respectively, in contingent deferred sales charges attributable to
Class C shares.
Distribution expenses attributable to the sale of Class A, Class B and
Class C shares of the Fund are allocated to each such class based upon the ratio
of sales of each such class to the sales of Class A, Class B and Class C shares
of the Fund other than expenses allocable to a particular class. The
distribution fee and sales charge of one class will not be used to subsidize the
sale of another class.
The Class A, Class B and Class C Plans continue in effect from year to
year, provided that each such continuance is approved at least annually by a
vote of the Directors, including a vote of the Directors who are not interested
persons of the Fund and who have no direct or indirect financial interest in the
Class A, Class B or Class C Plan or any agreement related to the Plans (Rule
12b-1 Directors), cast in person at a meeting called for the purpose of voting
on such continuance. A Plan may be terminated at any time, without penalty, by
the vote of a majority of the Rule 12b-1 Directors or by the vote of the holders
of a majority of the outstanding shares of the applicable class of the Fund on
not more than 30 days' written notice to any other party to the Plan. The Plans
may not be amended to increase materially the amounts to be spent for the
services described therein without approval by the shareholders of the
applicable class (by both Class A and Class B shareholders, voting separately,
in the case of material amendments to the Class A Plan), and all material
amendments are required to be approved by the Directors in the manner described
above. Each Plan will automatically terminate in the event of its assignment.
The Fund will not be contractually obligated to pay expenses incurred under any
Plan if it is terminated or not continued.
Pursuant to each Plan, the Directors will review at least quarterly a
written report of the distribution expenses incurred on behalf of each class of
shares of the Fund by the Distributor. The report will include an itemization of
the distribution expenses and the purposes of such expenditures. In addition, as
long as the Plans remain in effect, the selection and nomination of Rule 12b-1
Directors shall be committed to the Rule 12b-1 Directors.
Pursuant to the Distribution Agreement, the Fund has agreed to indemnify
the Distributor to the extent permitted by applicable law against certain
liabilities under federal securities laws.
In addition to distribution and service fees paid by the Fund under the
Class A, Class B and Class C Plans, the Manager (or one of its affiliates) may
make payments to dealers (including Prudential Securities) and other persons
which distribute shares of the Fund (including Class Z shares). Such payments
may be calculated by reference to the net asset value of shares sold by such
persons or otherwise.
FEE WAIVERS/SUBSIDIES
PIFM may from time to time waive all or a portion of its management fee
and subsidize all or a portion of the operating expenses of the Fund. In
addition, the Distributor has waived a portion of its distribution fees for the
Class A and Class C shares as described above. These voluntary waivers may be
terminated at any time without notice. Fee waivers and subsidies will increase
the Fund's total return.
(C) OTHER SERVICE PROVIDERS
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Fund's portfolio securities and
cash, and in that capacity maintains certain financial and accounting books and
records pursuant to an agreement with the Fund. Subcustodians provide custodial
services for the Fund's foreign assets held outside the United States.
Prudential Mutual Fund Services LLC (The Transfer Agent), Raritan Plaza
One, Edison, New Jersey 08837, serves as the transfer and dividend disbursing
agent of the Fund. The Transfer Agent is a wholly-owned subsidiary of the
Manager. The Transfer Agent provides customary transfer agency services to the
Fund, including the handling of shareholder communications, the processing of
shareholder transactions, the maintenance of shareholder account records, the
payment of dividends and distributions, and related functions. For these
services, the Transfer Agent receives an annual fee per shareholder account
($13.00), a new account set-up fee ($2.00) for each manually-established account
and a monthly inactive zero balance account fee ($.20) per shareholder account.
The Transfer Agent is also reimbursed for its out-of-pocket expenses, including
but not limited to postage, stationery, printing, allocable communications
expenses and other costs.
LLP, 1177 Avenue of the Americas, New York, New York 10036, serves
as the Fund's independent accountants and in that capacity audits the Fund's
annual financial statements.
B-25
<PAGE>
BROKERAGE ALLOCATION AND OTHER PRACTICES
The Manager is responsible for decisions to buy and sell securities,
futures contracts and options on such securities and futures for the Fund, the
selection of brokers, dealers and futures commission merchants to effect the
transactions and the negotiation of brokerage commissions, if any. (For purposes
of this section, the term "Manager" includes the Subadviser.) On a national
securities exchange, broker-dealers may receive negotiated brokerage commissions
on Fund portfolio transactions, including options, futures, and options on
futures transactions and the purchase and sale of underlying securities upon the
exercise of options. On a foreign securities exchange, commissions may be fixed.
Orders may be directed to any broker or futures commission merchant including,
to the extent and in the manner permitted by applicable law, Prudential
Securities and its affiliates.
In the over-the-counter market, securities are generally traded on a "net"
basis with dealers acting as principal for their own accounts without a stated
commission, although the price of the security usually includes a profit to the
dealer. In underwritten offerings, securities are purchased at a fixed price
which includes an amount of compensation to the underwriter, generally referred
to as the underwriter's concession or discount. On occasion, certain money
market instruments and U.S. Government agency securities may be purchased
directly from the issuer, in which case no commissions or discounts are paid.
The Fund will not deal with Prudential Securities or any affiliate in any
transaction in which Prudential Securities or any affiliate acts as principal
except in accordance with the rules of the Commission. Thus, it will not deal in
the over-the-counter market with Prudential Securities acting as market maker,
and it will not execute a negotiated trade with Prudential Securities if
execution involves Prudential Securities' acting as principal with respect to
any part of the Fund's order.
In placing orders for portfolio securities of the Fund, the Manager's
overriding objective is to obtain the best possible combination of price and
execution. The Manager seeks to effect each transaction at a price and
commission that provides the most favorable total cost of proceeds reasonably
attainable in the circumstances.
The factors that the Manager may consider in selecting a particular
broker, dealer or futures commission merchant (firms) are the Manager's
knowledge of negotiated commission rates currently available and other current
transaction costs; the nature of the portfolio transaction; the size of the
transaction; the desired timing of the trade; the activity existing and expected
in the market for the particular transaction; confidentiality; the execution,
clearance and settlement capabilities of the firms; the availability of research
and research related services provided through such firms; the Manager's
knowledge of the financial stability of the firms; the Manager's knowledge of
actual or apparent operational problems of firms; and the amount of capital, if
any, that would be contributed by firms executing the transaction. Given these
factors, the Fund may pay transaction costs in excess of that which another firm
might have charged for effecting the same transaction.
When the Manager selects a firm that executes orders or is a party to
portfolio transactions, relevant factors taken into consideration are whether
that firm has furnished research and research related products and/or services,
such as research reports, research compilations, statistical and economic data,
computer data bases, quotation equipment and services, research oriented
computer software, hardware and services, reports concerning the performance of
accounts, valuations of securities, investment related periodicals, investment
seminars and other economic services and consultants. Such services are used in
connection with some or all of the Manager's investment activities; some of such
services, obtained in connection with the execution of transactions for one
investment account, may be used in managing other accounts, and not all of these
services may be used in connection with the Fund.
The Manager maintains an internal allocation procedure to identify those
firms who have provided it with research and research related products and /or
services, and the amount that was provided, and to endeavor to direct sufficient
commissions to them to ensure the continued receipt of those services that the
Manager believes provides a benefit to the Fund and its other clients. The
Manager makes a good faith determination that the research and/or service is
reasonable in light of the type of service provided and the price and execution
of the related portfolio transactions.
When the Manager deems the purchase or sale of equities to be in the best
interest of the Fund or its other clients, including Prudential, the Manager
may, but is under no obligation to, aggregate the transactions in order to
obtain the most favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the transactions, as well as the
expenses incurred in the transaction, will be made by the Manager in the manner
it considers to be most equitable and consistent with its fiduciary obligations
to its clients. The allocation of orders among firms and the commission rates
paid are received periodically by the Fund's Directors. Portfolio securities may
not be purchased from any underwriting or selling syndicate of which Prudential
Securities or any affiliate, during the existence of the syndicate, is a
principal underwriter (as defined in the Investment Company Act), expect in
accordance with rules of the Commission. This limitation, in the opinion of the
Fund, will not significantly affect the Fund's ability to pursue its present
investment objective. However, in the future in other circumstances, the Fund
may be at a disadvantage because of this limitation in comparison to other funds
with similar objectives but not subject to such limitations.
B-26
<PAGE>
Subject to the above considerations, Prudential Securities may act as a
broker or futures commission merchant for the Fund. In order for Prudential
Securities or any affiliate to effect any portfolio transactions for the Fund,
the commissions, fees or other remuneration received by Prudential Securities or
any affiliate must be reasonable and fair compared to the commissions, fees or
other remuneration paid to other firms in connection with comparable
transactions involving similar securities or futures being purchased or sold on
an exchange or board of trade during a comparable period of time. This standard
would allow Prudential Securities or any affiliate to receive no more than the
remuneration which would be expected to be received by an unaffiliated firm in a
commensurate arm's-length transaction. Furthermore, the Directors of the Fund,
including a majority of the non-interested Directors, have adopted procedures
which are reasonably designed to provide that any commissions, fees or other
remuneration paid to Prudential Securities or any affiliate are consistent with
the foregoing standard. In accordance with Section 11(a) of the Securities
Exchange Act of 1934, Prudential Securities may not retain compensation for
effecting transactions on a national securities exchange for the Fund unless the
Fund has expressly authorized the retention of such compensation. Prudential
Securities must furnish to the Fund at least annually a statement setting forth
the total amount of all compensation retained by Prudential Securities from
transactions effected for the Fund during the applicable period. Brokerage
transactions with Prudential Securities or any affiliate are also subject to
such fiduciary standards as may be imposed upon Prudential Securities or such
affiliates by applicable law.
The Fund paid no brokerage commissions, including none to Prudential
Securities or any affiliate, for the fiscal years ended December 31, [1998,]
1997and 1996.
The Fund is required to disclose its holdings of securities of its regular
brokers and dealers (as defined under Rule 106-1 of the Investment Company Act)
and their parents at December 31, 1998. As of December 31, 1998, the Fund held
securities of in the amount of $ .
CAPITAL SHARES, OTHER SECURITIES AND ORGANIZATION
The Fund is authorized to issue an unlimited number of shares of common
stock, $.001 per share divided into four classes, designated Class A, Class B,
Class C and Class Z shares, initially all of one series. Each class of common
stock represents an interest in the same assets of the Fund and is identical in
all respects except that (1) each class is subject to different sales charges
and distribution and/or service fees (except for Class Z shares, which are not
subject to any sales charges and distribution and/or service fees), which may
affect performance, (2) each class has exclusive voting rights on any matter
submitted to shareholders that relates solely to its arrangement and has
separate voting rights on any matter submitted to shareholders in which the
interests of one class differ from the interests of any other class, (3) each
class has a different exchange privilege, (4) only Class B shares have a
conversion feature and (5) Class Z shares are offered exclusively for sale to a
limited group of investors. In accordance with the Fund's Articles of
Incorporation, the Directors may authorize the creation of additional series and
classes within such series, with such preferences, privileges, limitations and
voting and dividend rights as the Directors may determine. The voting rights of
the shareholders of a series or class can be modified on by the majority vote of
shareholders of that series or class.
Shares of the Fund, when issued, are fully paid, nonaccessable, fully
transferable and redeemable at the option of the holder. Shares are also
redeemable at the option of the Fund under certain circumstances. Each share of
each class is equal as to earnings, assets and voting privileges, except as
noted above, and each class of shares (with the exception of Class Z shares,
which are not subject to any distribution or service fees) bears the expenses
related to the distribution of its shares. Except for the conversion feature
applicable to the Class B shares, there are no conversion, preemptive or other
subscription rights. In the event of liquidation, each share of the Fund is
entitled to its portion of all of the Fund's assets after all debt and expenses
of the Fund have been paid. Since Class B and Class C shares generally bear
higher distribution expenses than Class A shares, the liquidation proceeds to
shareholders of those classes are likely to be lower than to Class A
shareholders and to Class Z shareholders, whose shares are not subject to any
distribution and/or service fees.
The Fund does not intend to hold annual meetings of shareholders unless
otherwise required by law. The Fund will not be required to hold meetings of
shareholders unless, for example, the election of Directors is required to be
acted on by shareholders under the Investment Company Act. Shareholders have
certain rights, including the right to call a meeting upon the vote of 10% of
the Fund's outstanding shares for the purpose of voting on the removal of one or
more Directors or to transact any other business.
Under the Articles of Incorporation, the Directors may authorized the
creation of additional series of shares (the proceeds of which would be invested
in separate, independently managed portfolios with distinct investment
objectives and policies and share purchase, redemption and net asset value
procedures) with such preferences, privileges, limitations and voting and
dividend rights as the Directors may determine. All consideration received by
the Fund for shares of any additional series, and all
B-27
<PAGE>
assets in which such consideration is invested, would belong to that series
(subject only to the rights of creditors of that series) and would be subject to
the liabilities related thereto. Under the Investment Company Act, shareholders
of any additional series of shares would normally have to approve the adoption
of any advisory contract relating to such series and of any changes in the
investment policies related thereto. The Directors do not intend to authorized
additional series at the present time.
The Directors have the power to alter the number and the terms of office
of the Directors and they may at any time lengthen their own terms or make their
terms of unlimited duration and appoint their own successors, provided that
always at least a majority of the Directors have been elected by the
shareholders of the Fund. The voting rights of shareholders are not cumulative,
so that holders of more than 50 percent of the shares voting can, if they
choose, elect all Directors being selected, while the holders of the remaining
shares would be unable to elect any Directors.
PURCHASE, REDEMPTION AND PRICING OF FUND SHARES
Shares of the Fund may be purchased at a price equal to the next
determined net asset value (NAV) per share plus a sales charge which, at the
election of the investor, may be imposed either (1) at the time of purchase
(Class A or Class C shares) and/or (2) on a deferred basis (Class B or Class C
shares). Class Z shares of the Fund are offered to a limited group of investors
at NAV without any sales charges. See "Shareholder Guide--How to Buy, Sell and
Exchange Shares of the Fund" in the Prospectus.
Each class of shares represents an interest in the same portfolio of
investments of the Fund and has the same rights, except that (1) each class
bears the separate expenses of its Rule 12b-1 distribution and service plan
(except for Class Z shares, which are not subject to any sales charges and
distribution and/or service fees), (2) each class has exclusive voting rights on
any matter submitted to shareholders that relates solely to its arrangement and
has separate voting rights on any matter submitted to shareholders in which the
interest of one class differ from the interest of any other class, (3) each
class has a different exchange privilege, (4) only Class B shares have a
conversion feature and (5) Class Z shares are offered exclusively for sale to a
limited group of investors. See "Distributor" and "Shareholder Investment
Account--Exchange Privilege."
PURCHASE BY WIRE. For an initial purchase of shares of the Fund by wire,
an investor must complete an application and telephone the Transfer Agent at
(800) 225-1852 (toll-free) to receive an account number. The following
information will be requested: the investor's name, address, tax identification
number, class election, dividend distribution election, amount being wired and
wiring bank. Instructions should then be given by the investor to his/her bank
to transfer funds by wire to the Fund's Custodian, State Street Bank and Trust
Company, Boston, Massachusetts, Custody and Shareholder Services Division,
Attention: Prudential Intermediate Global Income Fund, Inc., specifying on the
wire the account number assigned by the Transfer Agent and the investor's name
and identifying the class in which the investor is eligible to invest (Class A,
Class B, Class C or Class Z shares).
If an investor arranges for receipt by the Custodian of Federal Funds
prior to the calculation of NAV (4:15 P.M., New York time), on a business day,
the investor may purchase shares of the Fund as of that day.
In making a subsequent purchase order by wire, an investor should wire the
Custodian directly and should be sure that the wire specifies Prudential
Intermediate Global Income Fund, Inc., Class A, Class B, Class C or Class Z
shares and the investor's name and individual account number. It is not
necessary to call the Transfer Agent to make subsequent purchase orders
utilizing Federal Funds. The minimum amount which may be invested by wire is
$1,000.
ISSUANCE OF FUND SHARES FOR SECURITIES
Transactions involving the issuance of Fund shares for securities (rather
than cash) will be limited to: (1) reorganizations,(2) statutory mergers, or (3)
other acquisitions of portfolio securities that: (a) meet the investment
objective and policies of the Fund, (b) are liquid and not subject to
restrictions on resale, (c) have a value that is readily ascertainable via
listing on or trading in a recognized United States or international exchange or
market, and (d) are approved by the Fund's investment adviser.
SPECIMEN PRICE MAKE-UP
Under the current distribution arrangements between the Fund and the
Distributor, Class A shares of the Fund are sold at a maximum sales charge of
3%, Class C* Shares are sold with a 1% sales charge and Class B* and Class Z
shares are sold at NAV. Using the Fund's NAV at December 31, 1998, the maximum
offering price of the Fund's shares is as follows:
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<PAGE>
CLASS A
Net asset value and redemption price per Class A share ..... $
--------
Maximum sales charge (3.0% of offering price) ..............
--------
Offering price to public ................................... $
========
CLASS B
Net asset value, offering price and redemption price
per Class B share* ....................................... $
========
CLASS C
Net asset value per Class C share* ......................... $
--------
Sales charge (1%) of offering price) .......................
--------
Offering price to public ................................... $
========
CLASS Z
Net asset value, offering price and redemption price per
Class Z share ............................................ $
========
----------
* Class B and Class C shares are subject to a contingent deferred sales
charge on certain redemptions.
SELECTING A PURCHASE ALTERNATIVE
The following is provided to assist investors in determining which method
of purchase best suits their individual circumstances and is based on current
fees and expenses being charged to the Fund:
If you intend to hold your investment in the Fund for less than 2 years
and do not qualify for a reduced sales charge on Class A shares, since Class A
shares are subject to a maximum initial sales charge of 3% and Class B shares
are subject to a CDSC of 3% which declines to zero over a 4 year period, you
should consider purchasing Class C shares over either Class A or Class B shares.
If you intend to hold your investment for more than 2 years, but less than
3 years, you may consider purchasing Class B or Class C shares because: (1) the
contingent-deferred sales load plus the cumulative annual distribution-related
fee on Class B shares; and (2) the maximum 1% initial sales charge plus the
cumulative annual distribution-related fee on Class C shares would be lower than
the maximum 3% initial sales charge plus the cumulative annual
distribution-related fee on Class A shares, In addition, more of your money
would be invested initially in the case of Class C shares, because of the
relatively low initial sales charge, and all of your money would be invested
initially in the case of Class B shares, which are sold at NAV.
If you intend to hold your investment for more than 3 years, but less than
4 years, you may consider purchasing Class A shares because the maximum 3%
initial sales charge plus the cumulative annual distribution-related fee on
Class A shares would be lower than: (1) the contingent-deferred sales charge
plus the cumulative annual distribution-related fee on Class B shares; and (2)
the maximum 1% initial sales charge plus the cumulative annual
distribution-related fee on Class C shares.
If you intend to hold your investment for more than 4 years, but less than
5 years, you may consider purchasing Class A or Class B shares because the
maximum 3% initial sales charge plus the cumulative annual distribution-related
fee on Class A shares and the cumulative annual distribution-related fee on
Class B shares would be less than the maximum 1% initial sales charge plus the
cumulative annual distribution-related fee on Class C shares.
If you intend to hold your investment for longer than 5 years, you should
consider purchasing Class A shares over either Class B or Class C shares. This
is because the maximum sales charge plus the cumulative annual
distribution-related fee on Class A shares would be less than the cumulative
annual distribution-related fee on Class B shares and less than the initial
sales charge plus the cumulative annual distribution-related fee on Class C
shares.
If you qualify for a reduced sales charge on Class A shares, it may be
more advantageous for you to purchase Class A shares over either Class B or
Class C shares regardless of how long you intend to hold your investment.
However, unlike Class B shares, you would not have all of your money invested
initially because the sales charge on Class A shares is deducted at the time of
purchase.
If you do not qualify for a reduced sales charge on Class A shares and you
purchase Class C shares, you would have to hold your investment for more than 3
years for the higher cumulative annual distribution-related fee on the Class C
shares plus the 1% initial sales charge to exceed the initial sales charge plus
cumulative annual distribution-related fee on Class A shares. This does not take
into account the time value of money, which further reduces the impact of the
higher Class C distribution-related fee on the investment, fluctuations, in NAV,
the effect of the return on the investment over this period of time or
redemptions when the CDSC is applicable.
B-29
<PAGE>
REDUCTION AND WAIVER OF INITIAL SALES CHARGES--CLASS A SHARES
Benefit Plan. Class A shares may be purchased at NAV, without payment of
an initial sales charge, by pension, profit-sharing or other employee benefit
plans qualified under Section 401 of the Internal Revenue Code, deferred
compensation and annuity plans under Sections 401(a), 457 and 403(b)(7) of the
Internal Revenue Code, "rabbi" trusts and non-qualified deferred compensation
plans that are sponsored by an employer that has a tax-qualified plan with
Prudential (collectively, Benefit Plans), provided that the Benefit Plan has
existing assets of at least $1 million invested in shares of Prudential Mutual
Funds (excluding money market funds other than those acquired pursuant to the
exchange privilege) or 250 eligible employees or participants. In the case of
Benefit Plans whose accounts are held directly with the Transfer Agent or
Prudential Securities and for which the Transfer Agent or Prudential Securities
does individual account recordkeeping (Direct Account Benefit Plans) and Benefit
Plans sponsored by Prudential Securities or its subsidiaries (Prudential
Securities or subsidiary Prototype Benefit Plans), Class A shares may be
purchased at NAV by participants who are repaying loans made from such plans to
the participant.
Prudential Retirement Programs. Class A shares may be purchased at NAV by
certain savings, retirement and deferred compensation plans, qualified or
non-qualified under the Internal Revenue Code, for which Prudential provides
administrative or recordkeeping services, provided that (1) the plan has at
least $1 million in existing assets or 250 eligible employees and (2) the Fund
is an available investment option. These plans include pension, profit-sharing,
stock-bonus or other employee benefit plans under Section 401 of the Internal
Revenue Code, deferred compensation and annuity plans under Sections 457 and
403(b)(7) of the Internal Revenue Code and plans that participate in the
PruArray Program (benefit plan recordkeeping service) (hereafter referred to as
a PruArray Plan). All Benefit Plans of a company (or affiliated companies under
common control) for which Prudential serves as plan administrator or
recordkeeper are aggregated in meeting the $1 million threshold, provided that
Prudential has been notified in advance of the entitlement to the waiver of the
sales charge based on the agregated assets. The term "existing assets" includes
stock issued by a plan sponsor, shares of Prudential Mutual Funds and shares of
certain unaffiliated mutual funds that participate in the PruArray Plan
Participating Funds). "Existing assets" also include monies invested in The
Guaranteed Investment Account (GIA), a group annuity insurance product issued by
Prudential, the Guaranteed Insulated Separate Account, a separate account
operated by Prudential and units of The Stable Value Fund (SVF), and
unaffiliated bank collective fund. Class A shares may also be purchased at NAV
by plans that have monies invested in GIA and SVF, provided (1) the purchase is
made with the proceeds of a redemption from either GIA or SVF and (2) Class A
shares are an investment option of the plan.
PruArray Association Benefit Plans. Class A shares are also offered at NAV
to Benefit Plans or non-qualified plans sponsored by employers which are members
of a common trade, professional or membership association (Association) that
participate in the PruArray Plan provided that the Association enters into a
written agreement with Prudential. Such Benefit Plans or non-qualified plans may
purchase Class A shares at NAV without regard to the assets or number of
participants in the individual employer's qualified Plan(s) or non-qualified
plans so long as the employers in the Association (1) have retirement plan
assets in the aggregate of at least $1 million or 250 participants in the
aggregate and (2) maintain their accounts with the Transfer Agent.
PruArray Savings Program. Class A shares are also offered at NAV to
employees of companies that enter into a written agreement with Prudential
Retirement Services to participate in the PruArray Savings Program. Under this
Program, a limited number of Prudential Mutual Funds are available for purchase
at NAV by Individual Retirement Accounts and Savings Accumulation Plans of the
company's employees. The Program is available only to (1) employees who open an
IRA or Savings Accumulation Plan account with the Transfer Agent and (2) spouses
of employees who open an IRA account with the Transfer Agent. The program is
offered to companies that have at least 250 eligible employees.
Special Rules Applicable to Retirement Plans. After a Benefit Plan or
PruArray Plan qualifies to purchase Class A shares at NAV, all subsequent
purchases will be made at NAV.
Other Waivers. In addition, Class A shares may be purchased at NAV,
through the Distributor or the Transfer Agent, by:
o officers of the Prudential Mutual Funds (including the Fund),
o employees of the Distributor, Prudential Securities, the Manager and
their subsidiaries and members of the families of such persons who
maintain an "employee related" account at Prudential Securities or
the Transfer Agent,
o employees of subadvisers of the Prudential Mutual Funds provided
that purchases at NAV are permitted by such person's employer,
o Prudential, employees and special agents of Prudential and its
subsidiaries and all persons who have retired directly from active
service with Prudential or one of its subsidiaries,
B-30
<PAGE>
o registered representatives and employees of brokers who have entered
into a selected dealer agreement with the Distributor provided that
purchases at NAV are permitted by such person's employer,
o investors who have a business relationship with a financial adviser
who joined Prudential Securities from another investment firm,
provided that (i) the purchase is made within 180 days of the
commencement of the financial adviser's employment at Prudential
Securities, or within one year in the case of Benefit Plans, (ii)
the purchase is made with proceeds of a redemption of shares of any
open-end non-money market fund sponsored by the financial adviser's
previous employer (other than a fund which imposes a distribution or
service fee of .25 of 1% or less) and (iii) the financial adviser
served as the client's broker on the previous purchase,
o investors in Individual Retirement Accounts, provided the purchase
is made with the proceeds of a tax-free rollover of assets from a
Benefit Plan for which Prudential Investments provides
administrative or recordkeeping services andfurther provided that
such purchase is made within 60 days of receipt of the Benefit Plan
distribution,
o orders placed by broker-dealers, investment advisers or financial
planners who have entered into a agreement with the Distributor, who
place trades for their own accounts or the accounts of their clients
and who charge a management, consulting or other fee for their
services (e.g., mutual fund "wrap" or asset allocation programs),
and
o orders placed by clients of broker-dealers, investment advisers or
financial planners who place trades for customer accounts if the
accounts are linked to the master account of such broker-dealer,
investment adviser or financial planner and the broker-dealer,
investment adviser or financial planner charges its clients a
separate fee for its services (e.g., mutual fund "supermarket
programs").
For an investor to obtain any reduction or waiver of the initial sales
charges, at the time of the sale either the Transfer Agent must be notified
directly by the investor or the Distributor must be notified by the broker
facilitating the transaction that the sale qualifies for the reduced or waived
sales charge. The reduction or waiver will be granted subject to confirmation of
your entitlement. No initial sales charges are imposed upon Class A shares
acquired upon the reinvestment of dividends and distributions.
COMBINED PURCHASE AND CUMULATIVE PURCHASE PRIVILEGE. If an investor or
eligible group of related investors purchases Class A shares of the Fund
concurrently with Class A shares of other Prudential Mutual Funds, the purchases
may be combined to take advantage of the reduced sales charges applicable to
larger purchases. See "How to Buy, Sell and Exchange Shares of the
Fund--Reducing or Waiving Class A's Initial Sales Charge".
An eligible group of related Fund investors includes any combination of
the following:
o an individual,
o the individual's spouse, their children and their parents,
o (the individual's and spouse's Individual Retirement Account (IRA),
o any company controlled by the individual (a person, entity or group
that holds 25% or more of the outstanding voting securities of a
company will be deemed to control the company, and a partnership
will be deemed to be controlled by each of its general partners),
o a trust created by the individual, the beneficiaries of which are
the individual, his or her spouse, parents or children,
o a Uniform Gifts to Minors Act/Uniform Transfers to Minors Act
account created by the individual or the individual's spouse, and
o one or more employee benefit plans of a company controlled by an
individual.
In addition, an eligible group of related Fund investors may include an
employer (or group of related employers) and one or more qualified retirement
plans of such employer or employers (an employer controlling, controlled by or
under common control with another employer is deemed related to that employer).
The Transfer Agent, the Distributor or your broker must be notified at the
time of purchase that the investor is entitled to a reduced sales charge. The
reduced sales charges will be granted subject to confirmation of the investor's
holdings. The Combined Purchase and Cumulative Purchase Privilege does not apply
to individual participants in any retirement or group plans.
RIGHTS OF ACCUMULATION. Reduced sales charges are also available through
Rights of Accumulation, under which an investor or an eligible group of related
investors, as described above under "Combined Purchase and Cumulative Purchase
B-31
<PAGE>
Privilege," may aggregate the value of their existing holdings of shares of the
Fund and shares of other Prudential Mutual Funds (excluding money market funds
other than those acquired pursuant to the exchange privilege) to determine the
reduced sales charge. However, the value of shares held directly with the
Transfer Agent and through your broker will not be aggregated to determine the
reduced sales charge. The value of existing holdings for purposes of determining
the reduced sales charge is calculated using the maximum offering price (NAV
plus maximum sales charge) as of the previous business day. The reduced sales
charges will be granted subject to confirmation of the investor's holdings.
Rights of accumulation are not available to individual participants in any
retirement or group plans.
LETTERS OF INTENT. Reduced sales charges are available to investors (or an
eligible group of related investors), including retirement and group plans, who
enter into a written Letter of Intent providing for the purchase, within a
thirteen-month period, of shares of the Fund and shares of other Prudential
Mutual Funds (Investment Letter of Intent). Retirement and group plans may also
qualify to purchase Class A shares at NAV by entering into a Letter of Intent
whereby they agree to enroll, within a thirteen-month period, a specified number
of eligible employees or participants (Participant Letter of Intent).
For purposes of the Investment Letter of Intent, all shares of the Fund
and shares of other Prudential Mutual Funds (excluding money market funds other
than those acquired pursuant to the exchange privilege) which were previously
purchased and are still owned are also included in determining the applicable
reduction. However, the value of shares held directly with the Transfer Agent,
Prudential or its affiliates, and through your broker will not be aggregated to
determine the reduced sales charge.
A Letter of Intent permits a purchaser, in the case of an Investment
Letter of Intent, to establish a total investment goal to be achieved by any
number of investments over a thirteen-month period and, in the case of a
Participant Letter of Intent, to establish a minimum eligible employee or
participant enrollment goal over a thirteen-month period. Each investment made
during the period, in the case of an Investment Letter of Intent, will receive
the reduced sales charge applicable to the amount represented by the goal, as if
it were a single investment. In the case of a Participant Letter of Intent, each
investment made during the period will be made at net asset value. Escrowed
Class A shares totaling 5% of the dollar amount of the Letter of Intent will be
held by the Transfer Agent in the name of the purchaser, except in the case of
retirement and group plans where the employer or plan sponsor will be
responsible for paying any applicable sales charge. The effective date of an
Investment Letter of Intent (except in the case of retirement and group plans)
may be back-dated up to 90 days, in order that any investments made during this
90-day period, valued at the purchaser's cost, can be applied to the fulfillment
of the Letter of Intent goal.
The Investment Letter of Intent does not obligate the investor to
purchase, nor the Fund to sell, the indicated amount. Similarly, the Participant
Letter of Intent does not obligate the retirement or group plan to enroll the
indicated number of eligible employees or participants. In the event the Letter
of Intent goal is not achieved within the thirteen-month period, the purchaser
(or the employer or plan sponsor in the case of any retirement or group plan) is
required to pay the difference between the sales charge otherwise applicable to
the purchases made during this period and sales charge actually paid. Such
payment may be made directly to the Distributor or, if not paid, the Distributor
will liquidate sufficient escrowed shares to obtain such difference. If the goal
is exceeded in an amount which qualifies for a lower sales charge, a price
adjustment is made by refunding to the purchaser the amount of excess sales
charge, if any, paid during the thirteen-month period. Investors electing to
purchase Class A shares of the Fund pursuant to a Letter of Intent should
carefully read such Letter of Intent.
The Distributor must be notified at the time of purchase that the investor
is entitled to a reduced sales charge. The reduced sales charge will, in the
case of an Investment Letter of Intent, be granted subject to confirmation of
the investor's holdings or in the case of a Participant Letter of Intent,
subject to confirmation of the number of eligible employees or participants in
the retirement or group plan. Letters of Intent are not available to individual
participants in any retirement or group plans.
CLASS B SHARES
The offering price of Class B shares for investors choosing one of the
deferred sales charge alternatives is the NAV next determined following receipt
of an order in proper form by the Transfer Agent, a broker or the Distributor.
Although there is no sales charge imposed at the time of purchase, redemptions
of Class B shares may be subject to a CDSC. See "Sale of Shares--Contingent
Deferred Sales Charges", below.
The Distributor will pay, from its own resources, sales commissions of up
to 3% of the purchase price of Class B shares to brokers, financial advisers and
other persons who sell Class B shares at the time of sale. This facilitates the
ability of the Fund to sell the Class B shares without an initial sales charge
being deducted at the time of purchase. The Distributor anticipates that it will
recoup its advancement of sales commissions from the combination of the CDSC and
the distribution fee.
B-32
<PAGE>
CLASS C SHARES
The offering price of Class C shares is the next determined NAV plus a 1%
sales charge. In connection with the sale of Class C shares, the Distributor
will pay, from its own resources, brokers, financial advisers and other persons
which distribute Class C shares a sales commission of up to 2% of the purchase
price at the time of the sale.
WAIVER OF INITIAL SALES CHARGE--CLASS C SHARES
Benefit Plans. Class C shares may be purchased at NAV, without payment of
an initial sales charge, by Benefit Plans (as defined above). In the case of
Benefit Plans whose accounts are held directly with the Transfer Agent of
Prudential Securities and for which the Transfer Agent or Prudential Securities
does individual account recordkeeping (Direct Account Benefit Plans) and Benefit
Plans sponsored by Prudential, Prudential Securities or its subsidiaries
(Prudential Securities or subsidiary Prototype Benefit Plans). Class C shares
may be purchased at NAV by participants who are repaying the loans made from
such plans to the participant.
Prudential Retirement Plans. The initial sales charge will be waived with
respect to purchases of Class C shares by qualified and non-qualified retirement
and deferred compensation plans participating in the PruArray Plan and other
plans for which Prudential provides administrative or recordkeeping services.
Investment of Redemption Proceeds from Other Investment Companies.
Investors may purchases Class C shares at NAV, without the initial sales charge,
with the proceeds from the redemption of shares of any unaffiliated registered
investment company which were not held through an account with any Prudential
affiliate. Such purchases must be made within 60 days of the redemption.
Investors eligible for this waiver include: (1) investors purchasing shares
through an account at Prudential Securities; (2) investors purchasing shares
through an ADVANTAGE Account or an Investor Account with Prusec; and(3)
investors purchasing shares through other brokers. This waiver is not available
to investors who purchase shares directly from the Transfer Agent. You must
notify the Transfer Agent directly or through your broker if you are entitled to
this waiver and provide the Transfer Agent with such supporting documents as it
may deem appropriate.
CLASS Z SHARES
Class Z shares of the Fund currently are available for purchase by the
following categories of investors:
o pension, profit-sharing or other employee benefit plans qualified
under Section 401 of the Internal Revenue Code, deferred
compensation and annuity plans under Sections 457 and 403(b)(7) of
the Internal Revenue Code and non-qualified plans for which the Fund
is an available option (collectively, Benefit Plans), provided such
Benefit Plans (in combination with other plans sponsored by the same
employer or group of related employers) have at least $50 million in
defined contribution assets;
o participants in any fee-based program or trust program sponsored by
an affiliate of the Distributor which includes mutual funds as
investment options and for which the Fund is an available investment
option,
o certain participants in the MEDLEY Program (group variable annuity
contracts) sponsored by Prudential for whom Class Z shares of the
Prudential Mutual Funds are an available investment option:
o Benefit Plans for which an affiliate of the Distributor provides
administrative or recordkeeping services and as ofSeptember 20,
1996, (1) were Class Z shareholders of the Prudential Mutual Funds
or (2) executed a letter of intent to purchase Class Z shares of the
Prudential Mutual Funds;
o current and former Directors/Trustees of the Prudential Mutual Funds
(including the Fund);
o employees of Prudential and/or Prudential Securities who participate
in a Prudential-sponsored employee savings plan and
o Prudential with an investment of $10 million or more.
After a Benefit Plan qualifies to purchase Class Z shares, all subsequent
purchases will be for Class Z shares.
In connection with the sale of Class Z shares, the Manager, the
Distributor or one of their affiliates may pay brokers, financial advisers and
other persons which distribute shares a finder's fee from its own resources,
based on a percentage of the net asset value of shares sold by such persons.
B-33
<PAGE>
Class Z shares of the Fund may also be purchased by certain savings,
retirement and deferred compensation plans, qualified or non-qualified under the
Internal Revenue Code of 1986, as amended (the Internal Revenue Code), provided
that (1) the plan purchases shares of the Fund pursuant to an investment
management agreement with The Prudential Insurance Company of America or its
affiliates, (2) the Fund is an available investment option under the agreement
and (3) the plan will participate in the PruArray Plan (benefit plan
recordkeeping services) sponsored by Prudential Mutual Fund Services LLC. [These
plans include pension, profit-sharing, stock-bonus or other employee benefit
plans under Section 401 of the Internal Revenue Code and deferred compensation
and annuity plans under Sections 457 or 403(b)(7) of the Internal Revenue Code.]
SALE OF SHARES
An investor can redeem shares at any time for cash at the NAV next
determined after the redemption request is received in proper form (in
accordance with procedures established by the Transfer Agent in connection with
investors' accounts) by the Transfer Agent, the Distributor or the investor's
broker. In certain cases, however, redemption proceeds will be reduced by the
amount of any applicable CDSC, as described below. See "Contingent Deferred
Sales Charges" below. If an investor is redeeming shares through a broker, the
broker must receive the sell order before the Fund computes its NAV for that day
(that is, 4:15 P.M., New York time) in order to receive that day's NAV. The
investor's broker will be responsible for furnishing all necessary documentation
to the Distributor and may charge the investor for its services in connection
with redeeming shares of the Fund.
If an investor hold shares of the Fund through Prudential Securities, he
or she must redeem the shares through Prudential Securities. Please contact your
Prudential Securities financial adviser.
If an investor holds shares in non-certificate form, a written request for
redemption signed by the investor exactly as the account is registered is
required. If an investor holds certificates, the certificates, signed in the
name(s) shown on the face of the certificates, must be received by the Transfer
Agent, the Distributor or the investor's broker in order for the redemption
request to be processed. If redemption is requested by a corporation,
partnership, trust or fiduciary, written evidence of authority acceptable to the
Transfer Agent must be submitted before such request will be accepted. All
correspondence and documents concerning redemptions should be sent to the Fund
in care of its Transfer Agent, Prudential Mutual Fund Services LLC, Attention:
Redemption Services, P.O. Box 15010, New Brunswick, New Jersey 08906-5010, the
Distributor or to the investor's broker.
SIGNATURE GUARANTEE. If the proceeds of the redemption (1) exceed $50,000,
(2) are to be paid to a person other than the record owner, (3) are to be sent
to an address other than the address on the Transfer Agent's records, or (4) are
to be paid to a corporation, partnership, trust or fiduciary, the signature(s)
on the redemption request and on the certificates, if any, or stock power must
be guaranteed by an "eligible guarantor institution." An "eligible guarantor
institution" includes any bank, broker, dealer or credit union. The Transfer
Agent reserves the right to request additional information from, and make
reasonable inquiries of, any eligible guarantor institution. For clients of
Prusec, a signature guarantee may be obtained from the agency or office manager
of most Prudential Insurance and Financial Services or Preferred Services
offices. In the case of redemptions from a PruArray Plan, if the proceeds of the
redemption are invested in another investment option of the plan in the name of
the record holder and at the same address as reflected in the Transfer Agent's
records, a signature guarantee is not required.
Payment for shares presented for redemption will be made by check within
seven days after receipt by the Transfer Agent, the Distributor or the broker of
the certificate and/or written request, except as indicated below. If an
investor holds shares through Prudential Securities, payment for shares
presented for redemption will be credited to the investor's account at his or
her broker, unless the investor indicates otherwise. Such payment may be
postponed or the right of redemption suspended at times (1) when the New York
Stock Exchange is closed for other than customary weekends and holidays, (2)
when trading on such Exchange is restricted, (3) when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, or (4) during any other period when the Commission,
by order, so permits; provided that applicable rules and regulations of the
Commission shall govern as to whether the conditions prescribed in (2), (3) or
(4) exist.
Payment for redemption of recently purchased shares will be delayed until
the Fund or its Transfer Agent has been advised that the purchase check has been
honored, which may take up to 10 calendar days from the time of receipt of the
purchase check by the Transfer Agent. Such delay may be avoided by purchasing
shares by wire or by certified or cashier's check.
REDEMPTION IN KIND. If the Directors determine that it would be
detrimental to the best interests of the remaining shareholders of the Fund to
make payment wholly or partly in cash, the Fund may pay the redemption price in
whole or in part by a distribution in kind of securities from the investment
portfolio of the Fund, in lieu of cash, in conformity with applicable rules of
the Commission. Securities will be readily marketable and will be valued in the
same manner as in a regular redemption. If your shares are redeemed in kind, you
would incur transaction costs in covering the assets into cash. The Fund,
however, has elected to be
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<PAGE>
governed by Rule 18f-1 under the Investment Company Act, under which the Fund is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of
the NAV of the Fund during any 90-day period for any one shareholder.
INVOLUNTARY REDEMPTION. In order to reduce expenses of the Fund, the
Directors may redeem all of the shares of any shareholder, other than a
shareholder which is an IRA or other tax-deferred retirement plan, whose account
has a net asset value of less than $500 due to a redemption. The Fund will give
such shareholders 60 days' prior written notice in which to purchase sufficient
additional shares to avoid such redemption. No CDSC will be imposed on any such
involuntary redemption.
90-DAY REPURCHASE PRIVILEGE. If a shareholder redeems his or her shares
and has not previously exercised the repurchase privilege, the shareholder may
reinvest any portion or all of the proceeds of such redemption in shares of the
Fund at the NAV next determined after the order is received, which must be
within 90 days after the date of the redemption. Any CDSC paid in connection
with such redemption will be credited (in shares) to the shareholder's account.
(If less than a full repurchase is made, the credit will be on a pro rata
basis.) The shareholder must notify the Transfer Agent, either directly or
through the Distributor or the shareholder's broker, at the time the repurchase
privilege is exercised to adjust your account for the CDSC you previously paid.
Thereafter, any redemptions will be subject to the CDSC applicable at the time
of the redemption. See "Contingent Deferred Sales Charges" below. Exercise of
the repurchase privilege will generally not affect federal tax treatment of any
gain realized upon redemption. However, if the redemption was made within a 30
day period of the repurchase and if the redemption resulted in a loss, some or
all of the loss, depending on the amount reinvested, may not be allowed to
federal income tax purposes.
CONTINGENT DEFERRED SALES CHARGES
Redemptions of Class B shares will be subject to a contingent deferred
sales charge or CDSC declining from 3% to zero over a four-year period. Class C
shares redeemed within 18 months of purchase (one year for Class C shares
purchased before November 2, 1998) will be subject to a 1% CDSC. The CDSC will
be deducted from the redemption proceeds and reduce the amount paid to the
shareholder. The CDSC will be imposed on any redemption by a shareholder which
reduces the correct value of your Class B or Class C shares to an amount which
is lower than the amount of all payments by the shareholders for shares during
the preceding four years, in the case of Class B shares, and 18 months, in the
case of Class C shares (one year for Class C shares purchased before November 2,
1998). A CDSC will be applied on the lesser of the original purchase price or
the current value of the shares being redeemed. Increases in the value of shares
or shares acquired through reinvestment of dividends or distributions are not
subject to a CDSC. The amount of any CDSC will be paid to and retained by the
Distributor.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of shares until the time of redemption
of such shares. Solely for purposes of determining the number of years from the
time of any payment for the purchase of shares, all payments during a month will
be aggregated and deemed to have been made on the last day of the month. The
CDSC will be calculated from the first day of the month after the initial
purchase, excluding the time shares were held in a money market fund. See
"Shareholder Investment Account--Exchange Privilege."
The following table sets forth the rates of the CDSC applicable to
redemptions of Class B shares:
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE
YEARS SINCE PURCHASE OF DOLLARS INVESTED
PAYMENTS MADE OR REDEMPTION PROCEEDS
-------------------- -------------------------
First 3.0%
Second 2.0%
Third 1.0%
Fourth 1.0%
Fifth None
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible rate.
It will be assumed that the redemption is made first of amounts representing
shares acquired pursuant to the reinvestment of dividends and distributions;
then of amounts representing the increase in NAV above the total amount of
payment for the purchase of Fund shares made during the preceding four years for
Class B shares and 18 months for Class C shares (one year for Class C shares
purchased before November 2, 1998); then of amounts representing the cost of
shares held beyond the applicable CDSC period; and finally, of amounts
representing the cost of shares held for the longest period of time within the
applicable CDSC period.
For example, assume you purchased 100 Class B shares at $10 per share for
a cost of $1,000. Subsequently, you acquired 5 additional Class B shares through
dividend reinvestment. During the second year after the purchase you decided to
redeem $500
B-35
<PAGE>
of your investment. Assuming at the time of the redemption the NAV had
appreciated to $12 per share, the value of your Class B shares would be $1,260
(105 shares at $12 per share). The CDSC would not be applied to the value of the
reinvested dividend shares and the amount which represents appreciation ($260).
Therefore, $240 of the $500 redemption proceeds ($500 minus $260) would be
charged at a rate of 2% (the applicable rate in the second year after purchase)
for a total CDSC of $4.80.
For federal income tax purposes, the amount of the CDSC will reduce the
gain or increase the loss, as the case may be, on the amount recognized on the
redemption of shares.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES. The CDSC will
be waived in the case of a redemption following the death or disability of a
shareholder or, in the case of a trust account, following the death or
disability of the grantor. The waiver is available for total or partial
redemptions of shares owned by a person, either individually or in joint tenancy
(with rights of survivorship), at the time of death or initial determination of
disability, provided that the shares were purchased prior to death or
disability.
The CDSC will also be waived in the case of a total or partial redemption
in connection with certain distributions made without penalty under the Internal
Revenue Code from a tax-deferred retirement plan, an IRA or Section 403(b)
custodial account. These distributions are:
(1) in the case of a tax-deferred retirement plan, a lump-sum or other
distribution after retirement;
(2) in the case of an IRA (including a Roth IRA), a lump-sum or other
distribution after attaining age 59 1/2 or a periodic distribution based on life
expectancy;
(3) in the case of a Section 403(b) custodial account, a lump sum or other
distribution after attaining age 59 1/2; and
(4) a tax-free return of an excess contribution or plan distributions
following the death or disability of the shareholder, provided that the shares
were purchased prior to death or disability.
The waiver does not apply in the case of a tax-free rollover or transfer
of assets, other than one following a separation from service (that is,
following voluntary or involuntary termination of employment or following
retirement). Under no circumstances will the CDSC be waived on redemptions
resulting from the termination of a tax-deferred retirement plan, unless such
redemptions otherwise qualify for a waiver as described above. In the case of
Direct Account and Prudential Securities or Subsidiary Prototype Benefit Plans,
the CDSC will be waived on redemptions which represent borrowings from such
plans. Shares purchased with amounts used to repay a loan from such plans on
which a CDSC was not previously deducted will thereafter be subject to a CDSC
without regard to the time such amounts were previously invested. In the case of
a 401(k) plan, the CDSC will also be waived upon the redemption of shares
purchased with amounts used to repay loans made from the account to the
participant and from which a CDSC was previously deducted.
Finally, the CDSC will be waived to the extent that the proceeds from
shares redeemed are invested in Prudential Mutual Funds, The Guaranteed
Investment Account, the Guaranteed Insulated Separate Account or units of The
Stable Value Fund.
SYSTEMATIC WITHDRAWAL PLAN. The CDSC will be waived (or reduced) on
certain redemptions from a Systematic Withdrawal Plan. On an annual basis, up to
12% of the total dollar amount subject to the CDSC may be redeemed without
charge. The Transfer Agent will calculate the total amount available for this
waiver annually on the anniversary date of your purchase or, for shares
purchased prior to March 1, 1997, on March 1 of the current year. The CDSC will
be waived (or reduced) on redemptions until this threshold 12% is reached.
In addition, the CDSC will be waived on redemptions of shares held by
Directors of the Fund.
Shareholders must notify the Fund's Transfer Agent either directly or
through the brokers, at the time of redemption, that they are entitled to waiver
of the CDSC and provide the Transfer Agent with such supporting documentation as
it may deem appropriate. The waiver will be granted subject to confirmation of
your entitlement.
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<PAGE>
In connection with these waivers, the Transfer Agent will require you to
submit the supporting documentation set forth below.
<TABLE>
CATEGORY OF WAIVER REQUIRED DOCUMENTATION
<S> <C>
Death A copy of the shareholder's death
certificate or, in the case of a trust,
a copy of the grantor's death
certificate, plus a copy of the trust
agreement identifying the grantor.
Disability--An individual will be A copy of the Social Security
considered disabled if he or she is Administration award letter or a letter
unable to engage in any substantial from a physician on the physician's
gainful activity by reason of any letterhead stating that the shareholder
medically determinable physical or (or, in the case of a trust, the
mental impairment which can be grantor) is permanently disabled. The
expected to result in death or to be letter must also indicate the date of
of long-continued and indefinite disability.
duration.
Distribution from an IRA or 403(b) A copy of the distribution form from the
Custodial Account custodial firm indicating (i) the date
of birth of the shareholder and (ii)
that the shareholder is over age 59 1/2
and is taking a normal distribution--
signed by the shareholder.
Distribution from Retirement Plan A letter signed by the plan
administrator/trustee indicating the
reason for the distribution.
Excess Contributions A letter from the shareholder (for an
IRA) or the plan administrator/trustee
on company letterhead indicating the
amount of the excess and whether or not
taxes have been paid.
</TABLE>
The Transfer Agent reserves the right to request such additional documents
as it may deem appropriate.
QUANTITY DISCOUNT--CLASS B SHARES PURCHASED PRIOR TO AUGUST 1, 1994
The CDSC is reduced on redemptions of Class B shares of the Fund purchased
prior to August 1, 1994 if immediately after a purchase of such shares, the
aggregate cost of all Class B shares of the Fund owned by you in a single
account exceeded $500,000. For example, if you purchased $100,000 of Class B
shares of the Fund and the following year purchase an additional $450,000 of
Class B shares with the result that the aggregate cost of your Class B shares of
the Fund following the second purchase was $550,000, the quantity discount would
be available for the second purchase of $450,000 but not for the first purchase
of $100,000. The quantity discount will be imposed at the following rates
depending on whether the aggregate value exceeded $500,000 or $1 million:
<TABLE>
CONTINGENT DEFERRED SALES CHARGE
AS A PERCENTAGE OF DOLLARS INVESTED
OR REDEMPTION PROCEEDS
YEAR SINCE PURCHASE ----------------------------------------
PAYMENT MADE $500,001 TO $1 MILLION OVER $1 MILLION
------------------ ---------------------- ---------------
<S> <C> <C>
First ..................... 3.0% 2.0%
Second .................... 2.0% 1.0%
Third ..................... 1.0% 0%
Fourth and thereafter ..... 0% 0%
</TABLE>
You must notify the Transfer Agent either directly or through Prudential
Securities or Prusec, at the time of redemption, that you are entitled to the
reduced CDSC. The reduced CDSC will be granted subject to confirmation of your
holdings.
WAIVER OF CONTINGENT DEFERRED SALES CHARGES--CLASS C SHARES
Prudential Retirement Plans. The CDSC will be waived on redemptions from
qualified and non-qualified retirement and deferred compensation plans that
participate in the PruArray Plan and other plans for which Prudential provides
administrative or recordkeeping services. The CDSC will also be waived on
redemptions from Benefit Plans sponsored by Prudential and its
B-37
<PAGE>
affiliates to the extent that the redemption proceeds are invested in The
Guaranteed Investment Account, the Guaranteed Insulated Separate Account and
units of The Stable Value Fund.
Other Benefit Plans. The CDSC will be waived on redemptions from Benefit
Plans holding shares through a broker not affiliated with Prudential and for
which the broker provides administrative recordkeeping services.
CONVERSION FEATURE--CLASS B SHARE
Class B shares will automatically convert to Class A shares on a quarterly
basis approximately five years after purchase. Conversion will be effected at
relative net asset value without the imposition of any additional sales chare.
Since the Fund tracks amounts paid rather than the number of shares bought
on each purchase of Class B shares, the number of Class B shares eligible to
convert to Class A shares (excluding shares acquired through the automatic
reinvestment of dividends and other distributions) (the Eligible Shares) will be
determined on each conversion date in accordance with the following formula: (1)
the ratio of (a) the amounts paid for Class B shares purchased at least five
years prior to the conversion date to (b) the total amount paid for all Class B
shares purchased and then held in your account (2) multiplied by the total
number of Class B shares purchased and then held in your account. Each time any
Eligible Shares in your account convert to Class A shares, all shares or amounts
representing Class B shares then in your account that were acquired through the
automatic reinvestment of dividends and other distributions will convert to
Class A shares.
For purposes of determining the number of Eligible Shares, if the Class B
shares in your account on any conversion date are the result of multiple
purchases at different net asset values per share, the number of Eligible Shares
calculated as described above will generally be either more or less than the
number of shares actually purchased approximately five years before such
conversion date. For example, if 100 shares were initially purchased at $10 per
share (for a total of $1,000) and a second purchase of 100 shares was
subsequently made at $11 per share (for a total of $1,100), 95.24 shares would
convert approximately five years from the initial purchase (i.e., $1,000
dividend by $2,100 (47.60%), multiplied by 200 shares equals 95.24 shares). the
Manager reserves the right to modify the formula for determining the number of
Eligible Shares in the future as it deems appropriate on notice to shareholders.
Since annual distribution-related fees are lower for Class A shares than
Class B shares, the per share NAV of the Class A shares may be higher than that
of the Class B shares at the time of conversion. Thus, although the aggregate
dollar value will be the same, you may receive fewer Class A shares than Class B
shares converted.
For the purposes of calculating the applicable holding period for
conversions, all payments for Class B shares during a month will be deemed to
have been made on the last day of the month, or for Class B shares acquired
through exchange, or a series of exchanges, on the last day of the month in
which the original payment for purchases of such Class B shares was made. For
Class B shares previously exchanged for shares of a money market fund, the time
period during which such shares were held in the money market fund will be
excluded. For example, Class B shares held in a money market fund for one year
would not convert to Class A shares until approximately six years from purchase.
For purposes of measuring the time period during which shares are held in a
money market fund, exchanges will be deemed to have been made on the last day of
the month. Class B shares acquired through exchange will convert to Class A
shares after expiration of the conversion period applicable to the original
purchase of such shares.
The conversion feature may be subject to the continuing availability of
opinions of counsel or rulings of the Internal Revenue Service (1) that the
dividends and other distributions paid on Class A, Class B, Class C and Class Z
shares will not constitute "preferential dividends" under the Internal Revenue
Code and (2) that the conversion of shares does not constitute a taxable event.
The conversion of Class B shares into Class A shares may be suspended if such
opinions or ruling s are no longer available. If conversions are suspended,
Class B shares of the Fund will continue to be subject, possibly indefinitely,
to their higher annual distribution and service fee.
SHAREHOLDER INVESTMENT ACCOUNT
Upon the initial purchase of Fund shares, a Shareholder Investment Account
is established for each investor under which the shares are held for the
investor by the Transfer Agent. If a stock certificate is desired, it must be
requested in writing for each transaction. Certificates are issued only for full
shares and may be redeposited in the Account at any time. There is no charge to
the investor for issuance of a certificate. The Fund makes available to the
shareholders the following privileges and plans.
AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR DISTRIBUTIONS
For the convenience of investors, all dividends and distributions are
automatically reinvested in full and fractional shares of the Fund at net asset
value on the record date. An investor may direct the Transfer Agent in writing
not less than five (5) full
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<PAGE>
business days prior to the record date to have subsequent dividends and/or
distributions sent in cash rather than reinvested. In the case of recently
purchased shares for which registration instructions have not been received on
the record date, cash payment will be made directly to the dealer. Any
shareholder who receives a cash payment representing a dividend or distribution
may reinvest such distribution at NAV by returning the check or the proceeds to
the Transfer Agent within 30 days after the payment date. Such investment will
be made at the NAV per share next determined after receipt of the check or
proceeds by the Transfer Agent. Such shareholder will receive credit for any
CDSC paid in connection with the amount of proceeds being reinvested.
EXCHANGE PRIVILEGE
The Fund makes available to its shareholders the privilege of exchanging
their shares of the Fund for shares of certain other Prudential Mutual Funds,
including one or more specified money market funds, subject in each case to the
minimum investment requirements of such funds. Shares of such other Prudential
Mutual Funds may also be exchanged for shares of the Fund. All exchanges are
made on the basis of the relative NAV next determined after receipt of an order
in proper form. An exchange will be treated as a redemption and purchase for tax
purposes. For retirement and group plans having a limited menu of Prudential
Mutual Funds, the exchange privilege is available for those funds eligible for
investment in the particular program.
It is contemplated that the exchange privilege may be applicable to new
mutual funds whose shares may be distributed by the Distributor.
In order to exchange shares by telephone, an investor must authorize
telephone exchanges on his or her initial application form or by written notice
to the Transfer Agent and hold shares in non-certificate form. Thereafter, the
investor may call the Fund at (800) 225-1852 to execute a telephone exchange of
shares, on weekdays, except holidays, between the hours of 8:00 A.M. and 6:00
P.M., New York time. For the investor's protection and to prevent fraudulent
exchanges, telephone calls will be recorded and the investor will be asked to
provide his or her personal identification number. A written confirmation of the
exchange transaction will be sent to the investor. Neither the Fund nor its
agents will be liable for any loss, liability or cost which results from acting
upon instructions reasonably believed to be genuine under the foregoing
procedures. All exchanges will be made on the basis of the relative NAV of the
two funds next determined after the request is received in good order.
If an investor holds shares through Prudential Securities, the shares must
be exchanged by contacting the investor's Prudential Securities financial
adviser.
If an investor holds certificates, the certificates, signed in the name(s)
shown on the face of the certificates, must be returned in order for the shares
to be exchanged.
An investor may also exchange shares by mail by writing to the Fund's
Transfer Agent, Prudential Mutual Fund Services LLC, Attention: Exchange
Processing, P.O. Box 15010, New Brunswick, New Jersey 08906-5010.
In periods of severe market or economic conditions the telephone exchange
of shares may be difficult to implement and investors should make exchanges by
mail by writing to the Transfer Agent, at the address noted above.
CLASS A. Shareholders of the Fund will be able to exchange their Class A
shares for Class A shares of certain other Prudential Mutual Funds and shares of
the money market funds specified below. No fee or sales load will be imposed
upon the exchange. Shareholders of money market funds who acquired such shares
upon exchange of Class A shares may use the exchange privilege only to acquire
Class A shares, of the Prudential Mutual Funds participating in the Class A
exchange privilege.
The following money market funds participate in the Class A exchange
privilege:
Prudential California Municipal Fund
(California Money Market Series)
Prudential Government Securities Trust
(Money Market Series)
(U.S. Treasury Money Market Series)
Prudential Municipal Series Fund
(Connecticut Money Market Series)
(Massachusetts Money Market Series)
(New Jersey Money Market Series)
(New York Money Market Series)
Prudential MoneyMart Assets, Inc. (Class A shares)
Prudential Tax-Free Money Fund, Inc.
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<PAGE>
CLASS B AND CLASS C. Shareholders of the Fund may exchange their Class B
and Class C shares for Class B and Class C shares, respectively, of certain
other Prudential Mutual Funds and shares of the money market funds specified
above. No CDSC may be payable upon such exchange, but a CDSC may be payable upon
the redemption of Class B and Class C shares acquired as a result of the
exchange. The applicable sales charge will be that imposed by the Fund in which
shares were initially purchased and the purchase date will be deemed to be the
first day of the month after the initial purchase, rather than the date of the
exchange.
Class B and Class C shares of the Fund may also be exchanged for shares of
an eligible money market fund without imposition of any CDSC at the time of
exchange. Upon subsequent redemption from such money market fund or after
re-exchange into the Fund, such shares will be subject to the CDSC calculated by
excluding the time such shares were held in the money market fund. In order to
minimize the period of time in which shares are subject to a CDSC, shares
exchanged out of the money market fund will be exchanged on the basis of their
remaining holding periods, with the longest remaining holding periods being
transferred first. In measuring the time period shares are held in a money
market fund and "tolled" for purposes of calculating the CDSC holding period,
exchanges are deemed to have been made on the last day of the month. Thus, if
shares are exchanged into the Fund from a money market fund during the month
(and are held in the Fund at the end of the month), the entire month will be
included in the CDSC holding period. Conversely, if shares are exchanged into a
money market fund prior to the last day of the month (and are held in the money
market fund on the last day of the month), the entire month will be excluded
from the CDSC holding period. For purposes of calculating the five year holding
period applicable to the Class B conversion feature, the time period during
which Class B shares were held in a money market fund will be excluded.
At any time after acquiring shares of other funds participating in the
Class B or Class C exchange privilege, a shareholder may again exchange those
shares (and any reinvested dividends and distributions) for Class B or Class C
shares of the Fund, respectively without subjecting such shares to any CDSC.
Shares of any fund participating in the Class B or Class C exchange privilege
that were acquired through reinvestment of dividends or distributions may be
exchanged for Class B or Class C shares, respectively, of other funds without
being subject to any CDSC.
CLASS Z. Class Z shares may be exchanged for Class Z shares of other
Prudential Mutual Funds.
SPECIAL EXCHANGE PRIVILEGES. A special exchange privilege is available for
shareholders who qualify to purchase Class A shares at NAV and for shareholders
who qualify to purchase Class Z shares. Under this exchange privilege, amounts
representing any Class B and Class C shares which are not subject to a CDSC held
in such a shareholder's account will be automatically exchanged for Class A
shares for shareholders who qualify to purchase Class A shares at NAV on a
quarterly basis, unless the shareholder elects otherwise. Similarly,
shareholders who qualify to purchase Class Z shares will have their Class B and
Class C shares which are not subject to a CDSC and their Class A shares
exchanged for Class Z shares on a quarterly basis. Eligibility for this exchange
privilege will be calculated on the business day prior to the date of the
exchange. Amounts representing Class B or Class C shares which are not subject
to a CDSC include the following: (1) amounts representing Class B or Class C
shares acquired pursuant to the automatic reinvestment of dividends and
distributions, (2) amounts representing the increase in the net asset value
above the total amount of payments for the purchase of Class B or Class C shares
and (3) amounts representing Class B or Class shares held beyond the applicable
CDSC period. Class B and Class C shareholders must notify the Transfer Agent
either directly or through Prudential Securities, Prusec or another broker that
they are eligible for this special exchange privilege.
Participants in any fee-based program for which the Fund is an available
option will have their Class A shares, if any, exchanged for Class Z shares when
they elect to have those assets become a part of the fee-based program. Upon
leaving the program (whether voluntarily or not), such Class Z shares (and, to
the extent provided for the program, Class Z shares acquired through
participation in the program) will be exchanged for Class A shares at net asset
value.
Additional details about the exchange privilege and prospectuses for each
of Prudential Mutual Funds are available from the Transfer Agent, the
Distributor or the investor's broker. The exchange privilege may be modified,
terminated or suspended on 60 days' notice, and any fund, including the Fund, or
the Distributor, has the right to reject any exchange application relating to
such fund's shares.
DOLLAR COST AVERAGING
Dollar cost averaging is a method of accumulating shares by investing a
fixed amount of dollars in shares at set intervals. An investor buys more shares
when the price is low and fewer shares when the price is high. The average cost
per share is lower than it would be if a constant number of shares were bought
at set intervals.
Dollar cost averaging may be used, for example, to plan for retirement, to
save for a major expenditure, such as the purchase of a home, or to finance a
college education. The cost of a year's education at a four-year college today
averages around $14,000 at a private college and around $6,000 at a public
university. Assuming these costs increase at a rate of 7% a year, as has been
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<PAGE>
projected, for the freshman class beginning in 2011, the cost of four years at a
private college could reach $210,000 and over $90,000 at a public university.(1)
The following chart shows how much you would need in monthly investments
to achieve specified lump sums to finance your investment goals.(2)
PERIOD OF
MONTHLY INVESTMENTS: $100,000 $150,000 $200,000 $250,000
-------------------- -------- -------- -------- --------
25 Years ................... $ 110 $ 165 $ 220 $ 275
20 Years ................... 176 264 352 440
15 Years ................... 296 444 592 740
10 Years ................... 555 833 1,110 1,388
5 Years ................... 1,371 2,057 2,742 3,428
See "Automatic Investment Plan."
- ----------
(1) Source information concerning the costs of education at public and
private universities is available from The College Board Annual Survey of
Colleges, 1993. Average costs for private institutions include tuition, fees,
room and board for the 1993-1994 academic year.
(2) The chart assumes an effective rate of return of 8% (assuming monthly
compounding). This example is for illustrative purposes only and is not intended
to reflect the performance of an investment in shares of the Fund. The
investment return and principal value of an investment will fluctuate so that an
investor's shares when redeemed may be worth more or less than their original
cost.
AUTOMATIC INVESTMENT PLAN (AIP)
Under AIP, an investor may arrange to have a fixed amount automatically
invested in shares of the Fund monthly by authorizing his or her bank account or
brokerage account (including a Prudential Securities Command Account) to be
debited to invest specified dollar amounts in shares of the Fund. The investor's
bank must be a member of the Automatic Clearing House System. Share certificates
are not issued to AIP participants.
Further information about this program and an application form can be
obtained from the Transfer Agent, the Distributor or the investor's broker.
SYSTEMATIC WITHDRAWAL PLAN
A systematic withdrawal plan is available to shareholders through the
Transfer Agent, the Distributor or the investor's broker. Such withdrawal plan
provides for monthly or quarterly checks in any amount, except as provided
below, up to the value of the shares in the shareholder's account. Withdrawals
of Class B or Class C shares may be subject to a CDSC.
In the case of shares held through the Transfer Agent (1) a $10,000
minimum account value applies, (2) withdrawals may not be for less than $100 and
(3) the shareholder must elect to have all dividends and/or distributions
automatically reinvested in additional full and fractional shares at NAV on
shares held under this plan.
The Transfer Agent, the Distributor or an investor's broker acts as an
agent for the shareholder in redeeming sufficient full and fractional shares to
provide the amount of the periodic withdrawal payment. The systematic withdrawal
plan may be terminated at any time, and the Distributor reserves the right to
initiate a fee of up to $5 per withdrawal, upon 30 days' written notice to the
shareholder.
Withdrawal payments should not be considered as dividends, yield or
income. If periodic withdrawals continuously exceed reinvested dividends and
distributions, the shareholder's original investment will be correspondingly
reduced and ultimately exhausted.
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<PAGE>
Furthermore, each withdrawal constitutes a redemption of shares, and any
gain or loss realized must be recognized for federal income tax purposes. In
addition, withdrawals made concurrently with purchases of additional shares are
inadvisable because of the applicable sales charges to (1) the purchase of Class
A and Class C shares and (2) the redemption of Class B and Class C shares. Each
shareholder should consult his or her own tax adviser with regard to the tax
consequences of the plan, particularly used in connection with a retirement
plan.
TAX-DEFERRED RETIREMENT PLANS
Various qualified retirement plans, including a 401(k) plan, self-directed
individual retirement accounts and "tax-deferred accounts" under Section
403(b)(7) of the Internal Revenue Code are available through the Distributor.
These plans are for use by both self-employed individuals and corporate
employers. These plans permit either self-direction of accounts by participants,
or a pooled account arrangement. Information regarding the establishment of
these plans, the administration, custodial fees and other details are available
from Prudential Securities or the Transfer Agent.
Investors who are considering the adoption of such a plan should consult
with their own legal counsel or tax adviser with respect to the establishment
and maintenance of any such plan.
TAX-DEFERRED RETIREMENT ACCOUNTS
INDIVIDUAL RETIREMENT ACCOUNTS. An individual retirement account (IRA)
permits the deferral of federal income tax on income earned in the account until
the earnings are withdrawn. The following chart represents a comparison of the
earnings in a personal savings account with those in an IRA, assuming a $2,000
annual contribution, and 8% rate of return and a 39.6% federal income tax
bracket and shows how much more retirement income can accumulate within an IRA
as opposed to a taxable individual savings account.
TAX-DEFERRED COMPOUNDING(1)
CONTRIBUTIONS PERSONAL
MADE OVER: SAVINGS IRA
----------- -------- --------
10 years $ 26,165 $ 31,291
15 years 44,675 58,649
20 years 68,109 98,846
25 years 97,780 157,909
30 years 135,346 244,692
- ----------
(1) The chart is for illustrative purposes only and does not represent the
performance of the Fund or any specific investment. It shows taxable versus
tax-deferred compounding for the periods and on the terms indicated. Earnings in
a traditional IRA account will be subject to tax when withdrawn from the
account. Distributions from a Roth IRA which meet the conditions required under
the Internal Revenue Code will not be subject to tax upon withdrawal from the
account.
MUTUAL FUND PROGRAMS
From time to time, the Fund may be included in a mutual fund program with
other Prudential Mutual Funds. Under such a program, a group of portfolios will
be selected and thereafter marketed collectively. Typically, these programs are
created with an investment theme, such as, to seek greater diversification,
protection from interest rate movements or access to different management
styles. In the event such a program is instituted, there may be a minimum
investment requirement for the program as a whole. The Fund may waive or reduce
the minimum initial investment requirements in connection with such a program.
The mutual funds in the program may be purchased individually or as part
of a program. Since the allocation of portfolios included in the program may not
be appropriate for all investors, investors should consult their Prudential
Securities Financial Advisor or Prudential/Pruco Securities Representative
concerning the appropriate blend of portfolios for them. If investors elect to
purchase the individual mutual funds that constitute the program in an
investment ratio different from that offered by the program, the standard
minimum investment requirements for the individual mutual funds will apply.
The Fund's net asset value per share or NAV is determined by subtracting
its liabilities from the value of its assets and dividing the remainder by the
number of outstanding shares. NAV is calculated separately for each class. The
Directors have fixed the specific time of day for the computation of the Fund's
NAV to be as of 4:15 P.M., New York time.
B-42
<PAGE>
The Fund will compute its NAV at 4:15 P.M., New York time, on each day the
New York Stock Exchange is open for trading except on days on which no orders to
purchase, sell or redeem Fund shares have been received or days on which changes
in the value of the Fund's portfolio securities do not affect NAV. In the event
the New York Stock Exchange closes early on any business day, the NAV of the
Fund's shares shall be determined at the time between such closing and 4:15
P.M., New York time. The New York Stock Exchange is closed on the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
NET ASSET VALUE
Under the Investment Company Act, the Directors are responsible for
determining in good faith the fair value of securities of the Fund. In
accordance with procedures adopted by the Directors, the value of investments
listed on a securities exchange and NASDAQ National Market System securities
(other than options on stock and stock indices) are valued at the last sale
price of such exchange system on the day of valuation or, if there was no sale
on such day, the mean between the last bid and asked prices on such day, or at
the bid price on such day in the absence of an asked price. Corporate bonds
(other than convertible debt securities) and U.S. Government securities that are
actively traded in the over-the-counter market, including listed securities for
which the primary market is believed by the Manager in consultation with the
Subadviser to be over-the-counter, are valued on the basis of valuations
provided by an independent pricing agent or principal market maker which uses
information with respect to transactions in bonds, quotations from bond dealers,
agency ratings, market transactions in comparable securities and various
relationships between securities in determining value. Convertible debt
securities that are actively traded in the over-the-counter market, including
listed securities for which the primary market is believed by the Manager in
consultation with the Subadviser to be over-the-counter, are valued at the mean
between the last reported bid and asked prices provided by principal market
makers. Options on stock and stock indices traded on an exchange are valued at
the mean between the most recently quoted bid and asked prices on the respective
exchange and futures contracts and options thereon are valued at their last sale
prices as of the close of trading on the applicable commodities exchange or
board of trade or, if there was no sale on the applicable commodities exchange
or board of trade on such day, at the mean between the most recently quoted bid
and asked prices on such exchange or board of trade. Quotations of foreign
securities in a foreign currency are converted to U.S. dollar equivalents at the
current rate obtained from a recognized bank or dealer and foreign currency
forward contracts are valued at the current cost of covering or offsetting such
contracts. Should an extraordinary event, which is likely to affect the value of
the security, occur after the close of an exchange on which a portfolio security
is traded, such security will be valued at fair value considering factors
determined in good faith by the investment adviser under procedures established
by and under the general supervision of the Fund's Board of Directors.
Securities or other assets for which reliable market quotations are not
readily available, or for which the pricing agent or principal market maker does
not provide a valuation or methodology or provides a valuation or methodology
that, in the judgment of the Manager or Subadviser (or Valuation Committee or
Board of Directors) does not represent fair value, are valued by the Valuation
Committee or Board of Directors in consultation with the Manager or Subadviser,
including its portfolio manager, traders, and its research and credit analysts,
on the basis of the following factors: cost of the security, transactions in
comparable securities, relationships among various securities and such other
factors as may be determined by the Manager, Subadviser, Board of Directors or
Valuation Committee to materially affect the value of the security. Short-term
debt securities are valued at cost, with interest accrued or discount amortized
to the date of maturity, if their original maturity was 60 days or less, unless
this is determined by the Directors not to represent fair value. Short-term
securities with remaining maturities of more than 60 days, for which market
quotations are readily available, are valued at their current market quotations
as supplied by an independent pricing agent or principal market maker.
NAV is calculated separately for each class. As long as the Fund declares
dividends daily, the NAV of Class A, Class B, Class C and Class Z shares will
generally be the same. It is expected, however, that the dividends, if any, will
differ by approximately the amount of the distribution and/or service fee
expense accrual differential among the classes.
TAXES, DIVIDENDS AND DISTRIBUTIONS
The Fund has elected to qualify and intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code.
This relieves the Fund (but not its shareholders) from paying federal income tax
on income and capital gains which are distributed to shareholders, and permits
net capital gains of the Fund (i.e., the excess of the net long-term capital
gains over net short-term capital losses) to be treated as long-term capital
gains of the shareholders, regardless of how long shareholders have held their
shares in the Fund. Net capital gains of the Fund which are available for
distribution to shareholders will be computed by taking into account any capital
loss carryforward of the Fund. The Fund had a capital loss carryforward for
federal income tax purposes at December 31, 1998 of approximately $
of which $ expires in 20 .
B-43
<PAGE>
Qualification of the Fund as a regulated investment company requires,
among other things, that (a) the Fund derive at least 90% of its annual gross
income (without reduction for losses from the sale or other disposition of
securities or foreign currencies) from dividends, interest, payments with
respect to securities loans and gains from the sale or other disposition of
securities or options thereon or foreign currencies, or other income (including
but not limited to, gains from options, futures or forward contracts) derived
with respect to its business of investing in such securities or currencies; (b)
the Fund diversify its holdings so that, at the end of each quarter of the
taxable year, (i) at least 50% of the value of the Fund's assets is represented
by cash, U.S. Government securities and other securities limited in respect of
any one issuer to an amount not greater than 5% of the value of the Fund's
assets and 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its assets is invested in the securities of any
one issuer (other than U.S. Government securities); and (c) the Fund distribute
to its shareholders at least 90% of its net investment income and net short-term
gains (i.e., the excess of net short-term capital gains over net long-term
capital losses) in each year.
Gains or losses on sales of securities by the Fund will be treated as
long-term capital gains or losses if the securities have been held by it for
more than one year, except in certain cases where the Fund acquires a put or
writes a call thereon or otherwise holds an offsetting position with respect to
the securities. Other gains or losses on the sale of securities will be
short-term capital gains or losses. Gains and losses on the sale, lapse or other
termination of options on securities will be treated as gains and losses from
the sale of securities. If an option written by the Fund on securities lapses or
is terminated through a closing transaction, such as a repurchase by the Fund of
the option from its holder, the Fund will generally realize short-term capital
gain or loss. If securities are sold by the Fund pursuant to the exercise of a
call option written by it, the Fund will include the premium received in the
sale proceeds of the securities delivered in determining the amount of gain or
loss on the sale. Certain of the Fund's transactions may be subject to wash
sale, short sale, constructive sale, anti-conversion and straddle provisions of
the Internal Revenue Code which may, among other things, require the Fund to
defer recognition of losses. In addition, debt securities acquired by the Fund
may be subject to original issue discount and market discount rules which,
respectively, may cause the Fund to accrue income in advance of the receipt of
cash with respect to interest or cause gains to be treated as ordinary income.
Special rules apply to most options on stock indices, futures contracts
and options thereon, and foreign currency forward contracts in which the Fund
may invest. See "Description of the Fund, Its Investments and Risks." These
investments will generally constitute Section 1256 contracts and will be
required to be "marked to market" for federal income tax purposes at the end of
the Fund's taxable year; that is, treated has having been sold at market value.
Except with respect to certain foreign currency forward contracts, 60% of any
gain or loss recognized on such deemed sales and on actual dispositions will be
treated as long-term capital gain or loss, and the remainder will be treated as
short-term capital gain or loss.
Gain or loss on the sale, lapse or other termination of options on stock
and on narrowly-based stock indices will be capital gain or loss and will be
long-term or short-term depending on the holding period of the option. In
addition, positions which are part of a "straddle" will be subject to certain
wash sale, short sale and constructive sale provisions of the Internal Revenue
Code. In the case of a straddle, the Fund may be required to defer the
recognition of losses on positions it holds to the extent of any unrecognized
gain on offsetting positions held by the Fund.
Gains or losses attributable to fluctuations in exchange rates which occur
between the time the Fund accrues interest or other receivables or accrues
expenses or other liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities are treated as
ordinary income or ordinary loss. Similarly, gains or losses on foreign currency
forward contracts or dispositions of debt securities denominated in a foreign
currency attributable to fluctuations in the value of the foreign currency
between the date of acquisition of the security and the date of disposition also
are treated as ordinary gain or loss. These gains, referred to under the
Internal Revenue Code as "Section 988" gains or losses, increase or decrease the
amount of the Fund's investment company taxable income available to be
distributed to its shareholders as ordinary income, rather than increasing or
decreasing the amount of the Fund's net capital gain. If Section 988 losses
exceed other investment company taxable income during a taxable year, the Fund
would not be able to make any ordinary dividend distributions, or distributions
made before the losses were realized would be recharacterized as a return of
capital to shareholders, rather than as an ordinary dividend, reducing each
shareholder's basis in his or her Fund shares. Shareholders electing to receive
dividends and distributions in the form of additional shares will have a cost
basis for federal income tax purposes in each share so received equal to the net
asset value of a share of the Fund on the reinvestment date.
Any dividends or distributions paid shortly after a purchase by an
investor may have the effect of reducing the per share net asset value of the
investor's shares by the per share amount of the dividends or distributions.
Furthermore, such dividends or distributions, although in effect a return of
capital, are subject to federal income taxes. Therefore, prior to purchasing
shares of the Fund, the investor should carefully consider the impact of
dividends or capital gains distributions which are expected to be or have been
announced.
B-44
<PAGE>
Any loss realized on a sale, redemption or exchange of shares of the Fund
by a shareholder will be disallowed to the extent the shares are replaced within
a 61-day period (beginning 30 days before the disposition of shares). Shares
purchased pursuant to the reinvestment of a dividend will constitute a
replacement of shares.
A shareholder who acquires shares of the Fund and sells or otherwise
disposes of such shares within 90 days of acquisition may not be allowed to
include certain sales charges incurred in acquiring such shares for purposes of
calculating gain or loss realized upon a sale or exchange of shares of the Fund.
Dividends of net investment income and distributions of net short-term
capital gains paid to a shareholder (including a shareholder acting as a nominee
or fiduciary) who is a nonresident alien individual, a foreign corporation or a
foreign partnership (foreign shareholder) are subject to a 30% (or lower treaty
rate) withholding tax upon the gross amount of the dividends unless the
dividends are effectively connected with a U.S. trade or business conducted by
the foreign shareholder. Net capital gain distributions paid to a foreign
shareholder are generally not subject to withholding tax. A foreign shareholder
will, however, be required to pay U.S. income tax on any dividends and capital
gain distributions which are effectively connected with a U.S. trade or business
of the foreign shareholder.
Dividends received by corporate shareholders are eligible for a
dividends-received deduction of 70% to the extent the Fund's income is derived
from qualified dividends received by the Fund from domestic corporations.
Dividends attributable to foreign corporations, interest income, capital and
currency gain, gain or loss from Section 1256 contracts (described above)
andincome from certain other sources will not constitute qualified dividends.
Individual shareholders are not eligible for the dividends-received deduction.
The per share dividends on Class B and Class C shares will be lower than
the per share dividends on Class A or Class Z shares as a result of the higher
distribution-related fee applicable to the Class B and Class C shares and lower
on Class A shares in relation to Class Z shares. The per share distributions of
net capital gains, if any, will be paid in the same amount for Class A, Class B,
Class C and Class Z shares. See "Net Asset Value."
The Fund is required to distribute 98% of its ordinary income in the same
calendar year in which it is earned. The Fund is also required to distribute
during the calendar year 98% of the capital gain net income it earned during the
twelve months ending on October 31 of such calendar year. In addition, the Fund
must distribute during the calendar year all undistributed ordinary income and
undistributed capital gain net income from the prior year or the twelve-month
period ending on October 31 of such prior calendar year, respectively. To the
extent it does not meet these distribution requirements, the Fund will be
subject to a non-deductible 4% excise tax on the undistributed amount. For
purposes of this excise tax, income on which the Fund pays income tax is treated
as distributed.
The Fund, may from time to time, invest in Passive Foreign Investment
Companies (PFIC). PFICs are foreign corporations that, in general, meet either
of the following tests (a) at least 75% of its gross income is passive or (b) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. If the Fund acquires and holds stock in a PFIC beyond the
end of the year of its acquisition, the Fund will be subject to federal income
tax on a portion of any "excess distribution" received on the stock or of any
gain from disposition of the stock (collectively, PFIC income), plus interest
thereon, even if the Fund distributes the PFIC income as a taxable dividend to
its shareholders. The balance of the PFIC income will be included in the Fund's
investment company taxable income and, accordingly, will not be taxable to it to
the extent that income is distributed to its shareholders. The Fund may make a
"mark-to-mark" election with respect to any marketable stock it holds of a PFIC.
If the election is in effect, at the end of the Fund's taxable year, the Fund
will-recognize the amount of gains, if any, as ordinary income with respect to
PFIC stock. No loss will be recognized on PFIC stock except to the extent of
gains recognized in prior years. Alternatively, the Fund, if it meets certain
requirements, may elect to treat any PFIC in which it invests as a "qualified
electing fund," in which case, in lieu of the foregoing tax and interest
obligation, the Fund will be required to include in income each year its pro
rata share of the qualified electing fund's annual ordinary earnings and net
capital gain, even if they are not distributed to the Fund; those amounts would
be subject to the distribution requirements applicable to the Fund described
above.
Income received by the Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Income tax
treaties between certain countries and the United States may reduce or eliminate
such taxes. It is impossible to determine in advance the effective rate of
foreign tax to which the Fund will be subject, since the amount of the Fund's
assets to be invested in various countries will vary. The Fund does not expect
to meet the requirements of the Internal Revenue Code for "passing-through" to
its shareholders any foreign income taxes paid.
Foreign shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the Fund.
B-45
<PAGE>
PERFORMANCE INFORMATION
AVERAGE ANNUAL TOTAL RETURN. The Fund may from time to time advertise its
average annual total return. Average annual total return is determined
separately for Class A, Class B, Class C and Class Z shares.
Average annual total return is computed according to the following
formula:
P(1+T)^n = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment made
at the beginning of the 1, 5 or 10 year periods at the end of
the 1, 5 or 10 year periods (or fractional portion thereof).
Average annual total return takes into account any applicable initial or
contingent deferred sales charge but does not take into account any federal or
state income taxes that may be payable upon redemption.
Below are the average total returns for the Fund's share classes for the
periods ended December 31, 1998.
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION
------ ------- -------- ---------
Class A N/A (5-26-88)
Class B N/A (1-15-92)
Class C N/A N/A (8-1-94)
Class Z N/A N/A (9-13-96)
AGGREGATE TOTAL RETURN. The Fund may also advertise its aggregate total
return. Aggregate total return is determined separately for Class A, Class B,
Class C and Class Z shares.
Aggregate total return represents the cumulative change in the value of an
investment in the Fund and is computed according to the following formula:
ERV-P
--------------
P
Where: P = a hypothetical initial payment of $1,000.
ERV = ending redeemable value at the end of the 1, 5 or 10 year
periods (or fractional portion thereof) of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10 year periods.
Aggregate total return does not take into account any federal or state
income taxes that may be payable upon redemption or any applicable initial or
contingent deferred sales charges.
Below are the aggregate total returns for the Fund's share classes for the
periods ended December 31, 1998.
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION
------ ------- -------- ---------
Class A N/A (5-26-88)
Class B N/A (1-15-92)
Class C N/A N/A (8-1-94)
Class Z N/A N/A (9-13-96)
YIELD. The Fund may from time to time advertise its yield as calculated
over a 30-day period. Yield is calculated separately for Class A, Class B, Class
C and Class Z shares. The yield will be computed by dividing the Fund's net
investment income per share earned during this 30-day period by the maximum
offering price per share on the last day of this period. Yield is calculated
according to the following formula:
YIELD = 2[((a - b)/cd + 1)^6-1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
B-46
<PAGE>
Yield fluctuates and an annualized yield quotation is not a representation
by the Fund as to what an investment in the Fund will actually yield for any
given period.
The Fund's 30-day yields for the 30 days ended December 31, 1998, were
%, %, % and % for Class A, Class B, Class C and Class Z shares,
respectively.
The Fund may also include comparative performance information in
advertising or marketing the Fund's shares. Such performance information may
include data from Lipper, Inc., Morningstar Publications, Inc., other industry
publications, business periodicals and market indices. Set forth below is a
chart which compares the performance of different types of investments over the
long term and the rate of inflation.(1)
---------------------------------------
PERFORMANCE
COMPARISON OF DIFFERENT
TYPES OF INVESTMENTS
OVER THE LONG TERM
(1/1926 - 9/1998)
[The following table was depicted as a bar chart in the printed material.]
Commission Long-Term
Stocks Govt. Bonds Inflation
---------- ----------- ---------
11.0% 5.1% 3.1%
---------------------------------------
(1) Source: Ibbotson Associates, "Stocks, Bonds, Bills and Inflation--1998
Yearbook" (annually updates the work of Roger G. Ibbotson and Rex A.
Sinquefield). Used with permission. All rights reserved. Common stock returns
are based on the Standard & Poor's 500 Stock Index, a market-weighted, unmanaged
index of 500 common stocks in a variety of industry sectors. It is a commonly
used indicator of broad stock price movements. This chart is for illustrative
purposes only, and is not intended to represent the performance of any
particular investment or fund. Investors cannot invest directly in an index.
Past performance is not a guarantee of future results.
B-47
<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.
B-48
<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$137,718,656) 136,002,629
------------
SHORT-TERM INVESTMENTS--5.5%
- ------------------------------------------------------------
Hungary--0.6%
HUF 180,000 Hungarian Government Bonds,
23.50%, 5/17/98, Ser. 98-I 892,045
- ------------------------------------------------------------
Indonesia--0.4%
IDR 2,000,000 Asia Pulp And Paper, NCD,
14.45%(a), 1/27/98 356,059
2,000,000 Bakrie And Brothers, NCD,
17.50%(a), 2/19/98 163,643
------------
519,702
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-49
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
INCOME FUND, INC.
Portfolio of Investments as of December 31, 1997
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal US$
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.
B-50
<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.
B-51
<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.
B-52
<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
- --------------------------------------------------------------------------------
B-53
<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
- --------------------------------------------------------------------------------
B-54
<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.
- --------------------------------------------------------------------------------
B-55
<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>
- --------------------------------------------------------------------------------
B-56
<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.
- --------------------------------------------------------------------------------
B-57
<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.
B-58
<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.
B-59
<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.
B-60
<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.
LLP
1177 Avenue of the Americas
New York, New York
February 13, 1998
- --------------------------------------------------------------------------------
B-61
<PAGE>
Portfolio of Investments as of PRUDENTIAL INTERMEDIATE GLOBAL
June 30, 1998 (Unaudited) INCOME FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--82.2%
- ------------------------------------------------------------
Australia--6.0%
A$ 2,250 Federal National Mortgage
Association,
6.375%, 8/15/07 $ 1,436,708
10,900 New South Wales Treasury
Corporation,
6.50%, 5/1/06 7,031,541
------------
8,468,249
- ------------------------------------------------------------
Canada--4.1%
C$ 1,750 British Columbia Provincial
Bond,
6.00%, 6/9/08 1,230,329
2,300 Canadian Government Bond,
9.00%, 12/1/04 1,874,283
3,800 Province of Quebec,
6.50%, 10/1/07 2,734,996
------------
5,839,608
- ------------------------------------------------------------
Denmark--7.0%
Danish Government Bonds,
DKr 32,500 7.00%, 12/15/04 5,288,064
26,500 8.00%, 3/15/06 4,601,183
------------
9,889,247
- ------------------------------------------------------------
Germany--14.2%
German Government Bonds,
DM 10,500 7.375%, 1/3/05 6,690,450
5,300 6.00%, 1/5/06 3,168,948
7,000 6.25%, 1/4/24 4,363,506
4,000 Republic of Colombia,
7.25%, 12/21/00 2,276,612
4,000 Tokyo Gas Co. Ltd.,
7.00%, 7/27/05 2,470,201
2,000 United Mexican States,
8.125%, 9/10/04 1,194,170
------------
20,163,887
Greece--1.9%
Hellenic Republic,
GRD 545,000 12.70%, 12/31/03 $ 1,821,976
285,000 9.20%, 3/21/02, FRN, 926,103
------------
2,748,079
- ------------------------------------------------------------
Hungary--1.1%
Hungarian Government Bonds,
HUF 200,000 16.50%, 7/24/99 914,046
130,000 16.00%, 4/12/00 586,501
------------
1,500,547
- ------------------------------------------------------------
Netherlands--3.9%
Dutch Government Bonds,
NLG 7,000 7.00%, 6/15/05 3,907,784
2,600 7.50%, 1/15/23 1,653,582
------------
5,561,366
- ------------------------------------------------------------
New Zealand--3.9%
NZ$ 5,400 Federal National Mortgage
Association,
7.25%, 6/20/02 2,763,568
2,700 International Bank of
Reconstruction Development
7.25%, 5/27/03 1,403,473
2,500 New Zealand Government Bonds,
8.00%, 4/15/04 1,375,306
------------
5,542,347
- ------------------------------------------------------------
Russia--0.4%
European Bank of Reconstruction
Development
RUB 4,100 31.00%, 5/5/00 414,341
3,500 Zero Coupon, 5/28/02 112,287
------------
526,628
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-62
<PAGE>
Portfolio of Investments as of PRUDENTIAL INTERMEDIATE GLOBAL
June 30, 1998 (Unaudited) INCOME FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Spain--4.3%
Spanish Government Bonds,
Pts 250,000 10.30%, 6/15/02 $ 1,963,721
500,000 8.20%, 2/28/09 4,082,131
------------
6,045,852
- ------------------------------------------------------------
Sweden--2.3%
SEK 24,000 Swedish Government Bonds,
6.00%, 2/9/05 3,201,901
- ------------------------------------------------------------
United Kingdom--4.8%
BP 300 Republic of Argentina,
11.50%, 8/14/01 514,791
6,100 UK Treasury Principal Strip
Series 1997 36 Class D,
Zero Coupon, 12/7/15 3,943,081
1,300 Powergen PLC,
8.875%, 3/26/03 2,308,768
------------
6,766,640
- ------------------------------------------------------------
United States--28.3%
Corporate Bonds--0.5%
US$ 750 Romanian Commercial Bank,
9.125%, 3/10/00 721,875
- ------------------------------------------------------------
Sovereign Bonds--8.8%
350 Banco Ganadero S.A.,
9.75%, 8/26/99 358,750
1,100 Financiera Energetica Nacional
(Colombia),
9.00%, 11/8/99 1,105,500
1,500 Ministry Of Finance, (Russia),
10.00%, 6/26/07 1,140,000
750 Municipality of Rio De Janeiro,
10.375%, 7/12/99 750,000
$950 Republic of Argentina, FRB,
6.625%, 3/31/05 $ 838,375
1,200 Republic of Brazil, IDU,
6.875%, 1/1/01 798,000
1,500 Republic of Colombia,
7.25%, 2/23/04 1,417,500
1,500 Republic of Croatia, FRN,
6.50%, 7/31/06 1,234,139
500 Republic of Lithuania,
7.125%, 7/22/02 483,750
2,000 Republic of Poland, FRN,
6.6875%, 10/27/24 1,965,000
750 Sultan of Oman,
7.125%, 3/20/02 765,000
500 Trinidad & Tobago Republic,
9.75%, 11/3/00 522,500
1,000 United Mexican States,
9.75%, 2/6/01 1,040,000
------------
12,418,514
- ------------------------------------------------------------
Supranational Bonds--1.0%
1,350 Corporacion Andina de Fomento,
7.375%, 7/21/00 1,383,075
- ------------------------------------------------------------
U.S. Government Securities--18.0%
United States Treasury Bonds,
7,000 6.125%, 9/30/00 7,086,380
3,100 7.875%, 11/15/04 3,481,672
2,600 6.25%, 2/15/07 2,722,694
5,500 6.625%, 2/15/27 6,204,550
6,000 United States Treasury Notes,
5.75%, 8/15/03 6,063,720
------------
25,559,016
------------
40,082,480
------------
Total long-term investments
(cost US$119,126,734) 116,336,831
------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-63
<PAGE>
Portfolio of Investments as of PRUDENTIAL INTERMEDIATE GLOBAL
June 30, 1998 (Unaudited) INCOME FUND, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
SHORT-TERM INVESTMENTS--17.7%
- ------------------------------------------------------------
Germany--2.3%
DM 3,000 Deutsche Mark Time Deposit
Zero Coupon, 7/2/98 $ 3,318,675
- ------------------------------------------------------------
Hungary--0.4%
Hungarian Government Bond,
HUF 120,000 16.50%, 4/12/99 546,400
- ------------------------------------------------------------
Mexico--0.5%
MXN 6,500 Mexican Cetes,
Zero Coupon, 9/17/98 644,323
- ------------------------------------------------------------
Poland--1.4%
Polish Treasury Bills,
PLZ 2,000 Zero Coupon, 8/12/98 560,062
3,000 Zero Coupon, 2/17/99 750,624
1,000 Zero Coupon, 3/3/99 247,607
1,600 Zero Coupon, 4/28/99 382,809
------------
1,941,102
- ------------------------------------------------------------
United States--13.1%
Repurchase Agreement--6.5%
US$ 9,183 Joint Repurchase Agreement
Account,
5.722%, 7/01/98, (Note 5) $ 9,183,000
Sovereign Bonds--1.9%
$750 National Bank of Romania,
9.75%, 6/25/99 $ 752,813
2,000 Petroleas Mexicano, FRN,
6.6875%, 3/8/99 1,970,000
------------
2,722,813
- ------------------------------------------------------------
U.S. Government Securities--4.7%
United States Treasury Bonds,
6,600 6.75%, 6/30/99 6,679,398
------------
18,585,211
------------
Total short-term investments
(cost US$24,410,967) 25,035,711
------------
- ------------------------------------------------------------
Total Investments--99.9%
(cost $143,537,701; Note 4) 141,372,542
Other assets in excess of
liabilities--0.1% 207,025
------------
Net Assets--100% $141,579,567
------------
------------
</TABLE>
- ---------------
Portfolio securities are classified according to the securities
currency denomination.
FRB-Floating Rate Bond.
FRN-Floating Rate Note.
IDU-Interest Due and Unpaid Bonds.
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-64
<PAGE>
Statement of Assets and Liabilities PRUDENTIAL INTERMEDIATE GLOBAL
(Unaudited) INCOME FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
Assets June 30, 1998
<S> <C>
Investments, at value (cost $143,537,701)................................................................... $141,372,542
Foreign currency, at value (cost $149,160).................................................................. 139,251
Cash........................................................................................................ 60,117
Interest receivable......................................................................................... 2,624,120
Forward currency contracts - net amount receivable from counterparties...................................... 152,176
Receivable for investments sold............................................................................. 136,055
Receivable for Fund shares sold............................................................................. 80,899
Other assets................................................................................................ 2,702
-------------
Total assets............................................................................................. 144,567,862
-------------
Liabilities
Payable for investments purchased........................................................................... 1,659,338
Payable for Fund shares reacquired.......................................................................... 389,955
Forward currency contracts - net amount payable to counterparties........................................... 316,458
Accrued expenses............................................................................................ 292,116
Dividends payable........................................................................................... 220,765
Management fee payable...................................................................................... 88,312
Distribution fee payable.................................................................................... 21,351
-------------
Total liabilities........................................................................................ 2,988,295
-------------
Net Assets.................................................................................................. $141,579,567
-------------
-------------
Net assets were comprised of:
Common stock, at par..................................................................................... $ 17,724
Paid-in capital in excess of par......................................................................... 219,625,154
-------------
219,642,878
Undistributed net investment income...................................................................... 1,698,181
Accumulated net realized loss on investments............................................................. (77,319,015)
Net unrealized depreciation on investments and foreign currencies........................................ (2,442,477)
-------------
Net assets, June 30, 1998................................................................................... $141,579,567
-------------
-------------
Class A:
Net asset value and redemption price per share
($130,018,276 / 16,277,351 shares of common stock issued and outstanding)............................. $7.99
Maximum sales charge (3.00% of offering price)........................................................... .25
-------------
Maximum offering price to public......................................................................... $8.24
-------------
-------------
Class B:
Net asset value, offering price and redemption price per share
($7,785,819 / 973,918 shares of common stock issued and outstanding).................................. $7.99
-------------
-------------
Class C:
Net asset value, offering price and redemption price per share
($237,490 / 29,707 shares of common stock issued and outstanding)..................................... $7.99
-------------
-------------
Class Z:
Net asset value, offering price and redemption price per share
($3,537,982 / 442,916 shares of common stock issued and outstanding).................................. $7.99
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-65
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBALINCOME FUND, INC.
Statement of Operations (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income June 30, 1998
<S> <C>
Income
Interest and discount earned............... $ 5,574,781
-------------
Expenses
Management fee............................. 544,120
Distribution fee--Class A.................. 100,221
Distribution fee--Class B.................. 31,166
Distribution fee--Class C.................. 810
Transfer agent's fees and expenses......... 208,000
Custodian's fees and expenses.............. 105,000
Reports to shareholders.................... 53,000
Registration fees.......................... 34,000
Legal fees and expenses.................... 28,000
Audit fee.................................. 18,000
Directors' fees and expenses............... 10,000
Insurance.................................. 1,000
Miscellaneous.............................. 7,416
-------------
Total expenses.......................... 1,140,733
-------------
Net investment income......................... 4,434,048
-------------
Net Realized and Unrealized Gain
(Loss) on Investments and Foreign
Currency Transactions
Net realized gain (loss) on:
Investment transactions.................... (831,958)
Foreign currency transactions.............. 3,084,988
-------------
2,253,030
-------------
Net change in unrealized
appreciation/depreciation of:
Investments................................ 961,566
Foreign currencies......................... (1,572,094)
-------------
(610,528)
-------------
Net gain on investments and foreign
currencies................................. 1,642,502
-------------
Net Increase in Net Assets
Resulting from Operations..................... $ 6,076,550
-------------
-------------
</TABLE>
PRUDENTIAL INTERMEDIATE GLOBAL INCOME FUND, INC.
Statement of Changes in Net Assets (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) June 30, December 31,
in Net Assets 1998 1997
<S> <C> <C>
Operations
Net investment income........ $ 4,434,048 $ 10,957,986
Net realized gain on
investment and foreign
currency transactions..... 2,253,030 6,474,761
Net change in unrealized
depreciation on
investments and foreign
currencies................ (610,528) (10,226,220)
------------ --------------
Net increase in net assets
resulting from
operations................ 6,076,550 7,206,527
------------ --------------
Dividends and distributions
(Note 1):
Dividends from net investment
income
Class A................... (4,104,642) (10,144,701)
Class B................... (230,267) (687,169)
Class C................... (6,001) (13,331)
Class Z................... (93,138) (112,785)
------------ --------------
(4,434,048) (10,957,986)
------------ --------------
Distributions in excess of
net investment income
Class A................... (185,269) (4,226,324)
Class B................... (11,114) (259,200)
Class C................... (287) (6,585)
Class Z................... (3,875) (77,678)
------------ --------------
(200,545) (4,569,787)
------------ --------------
Fund share transactions (net of
share conversions) (Note 6)
Net proceeds from shares
sold...................... 4,706,014 9,602,565
Net asset value of shares
issued in reinvestment of
dividends and
distributions............. 1,841,451 6,097,113
Cost of shares reacquired.... (15,821,493) (37,313,110)
------------ --------------
Net decrease in net assets
from Fund share
transactions.............. (9,274,028) (21,613,432)
------------ --------------
Total decrease.................. (7,832,071) (29,934,678)
Net Assets
Beginning of period............. 149,411,638 179,346,316
------------ --------------
End of period(a)................ $141,579,567 $ 149,411,638
------------ --------------
------------ --------------
- ---------------
(a) Includes undistributed net
investment income of......... $ 1,698,181 $ 1,577,820
------------ --------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-66
<PAGE>
Notes to Financial Statements PRUDENTIAL INTERMEDIATE GLOBAL
(Unaudited) 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 period, the Fund does not isolate that
portion of the results of operations arising as a result of changes in the
foreign exchange rates from the fluctuations arising from changes in the market
prices of the securities held at period-end. Similarly, the Fund does not
isolate the effect of changes in foreign exchange rates from the fluctuations
arising from changes in the market prices of long-term debt securities sold
during the period. Accordingly, such realized foreign currency gains and losses
are included in the reported net realized gains/losses on investment
transactions.
Net realized gains on foreign currency transactions represent net foreign
exchange gains and losses from sales and maturities of short-term securities and
forward currency contracts, holding of foreign currencies, currency gains or
losses realized between the trade and settlement dates on securities
transactions, and the difference between the amounts of interest and foreign
taxes recorded on the Fund's books and the U.S. dollar equivalent amounts
actually received or paid. Net currency gains and losses from valuing foreign
currency denominated assets (excluding investments) and liabilities at
period-end exchange rates are reflected as a component of net unrealized
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
- --------------------------------------------------------------------------------
B-67
<PAGE>
Notes to Financial Statements PRUDENTIAL INTERMEDIATE GLOBAL
(Unaudited) 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 $320,906 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 services of PIC (which in
turn pays PRICOA), the cost of 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.
Effective July 1, 1998, Prudential Investment Management Services LLC ('PIMS')
will become the distributor of the Fund and will serve the Fund under the same
terms and conditions as under the arrangement with PSI.
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
six months ended June 30, 1998.
PSI has advised the Fund that it has received approximately $13,100 in front-end
sales charges resulting from sales of Class A shares during the six months ended
June 30, 1998. 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.
- --------------------------------------------------------------------------------
B-68
<PAGE>
Notes to Financial Statements PRUDENTIAL INTERMEDIATE GLOBAL
(Unaudited) INCOME FUND, INC.
- -------------------------------------------------------------------------------
PSI has advised the Fund that for the six months ended June 30, 1998, it
received approximately $4,700 and $600 in contingent deferred sales charges
imposed upon certain redemptions by Class B and C shareholders, respectively.
PSI, PIFM, PIC, PIMS 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 period
ended June 30, 1998. 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 expires on
December 29, 1998.
- ------------------------------------------------------------
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 six months ended June 30,
1998, the Fund incurred fees of approximately $158,000 for the services of PMFS.
As of June 30, 1998, fees of approximately $26,000 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 six months ended June 30, 1998, aggregated $27,247,649 and $40,249,647,
respectively.
At June 30, 1998, 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>
New Zealand Dollars,
expiring 7/30/98............. $ 1,317,181 $ 1,332,733 $ 15,552
--------------- ----------- ---------------
--------------- ----------- ---------------
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Payable Value (Depreciation)
- ------------------------------ --------------- ----------- ---------------
<S> <C> <C> <C>
Australian Dollars,
expiring 7/30/98............. $13,222,963 $13,511,853 $(288,890)
Czech Koruna,
expiring 7/30/98............. 8,843,085 8,789,408 53,677
French Francs,
expiring 7/30/98............. 6,097,184 6,066,890 30,294
Japanese Yen,
expiring 7/30/98............. 1,317,181 1,344,749 (27,568)
Netherlands Guilders,
expiring 7/30/98............. 9,961,200 9,908,547 52,653
--------------- ----------- ---------------
$39,441,613 $39,621,447 $(179,834)
--------------- ----------- ---------------
--------------- ----------- ---------------
</TABLE>
The cost basis of investments for federal income tax purposes is substantially
the same as for financial reporting purposes and, accordingly, as of June 30,
1998 net unrealized depreciation for federal income tax purposes was $2,165,159
(gross unrealized appreciation--$2,960,022 gross unrealized
depreciation--$5,125,181).
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. 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 June 30, 1998, the Fund
has a 0.74% undivided interest in the joint account. The undivided interest for
the Fund represents $9,183,000 in the principal amount. As of such date, each
repurchase agreement in the joint account and the collateral therefor were as
follows:
Bear Stearns & Co. Inc., 5.85%, in the principal amount of $345,000,000,
repurchase price $345,056,063, due 7/1/98. The value of the collateral including
accrued interest is $353,215,323.
Goldman Sachs & Co., 5.20%, in the principal amount of $206,264,000, repurchase
price $206,293,794, due 7/1/98. The value of the collateral including accrued
interest is $210,389,609.
- --------------------------------------------------------------------------------
B-69
<PAGE>
Notes to Financial Statements PRUDENTIAL INTERMEDIATE GLOBAL
(Unaudited) INCOME FUND, INC.
- -------------------------------------------------------------------------------
Warburg Dillon Read, Inc., 5.93%, in the principal amount of $345,000,000,
repurchase price $345,056,829, due 7/1/98. The value of the collateral including
accrued interest is $352,174,874.
Salomon Smith Barney Inc., 5.70%, in the principal amount of $345,000,000,
repurchase price $345,054,625, due 7/1/98. The value of the collateral including
accrued interest is $352,383,850.
- ------------------------------------------------------------
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. Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ---------------------------------- ---------- ------------
<S> <C> <C>
Six months ended June 30, 1998:
Shares sold....................... 267,653 $ 2,146,153
Shares issued in reinvestment of
dividends and distributions..... 199,579 1,600,830
Shares reacquired................. (1,698,729) (13,610,116)
---------- ------------
Net decrease in shares outstanding
before conversion............... (1,231,497) (9,863,133)
Shares issued upon conversion fro
Class B......................... 93,526 749,855
---------- ------------
Net decrease in shares
outstanding..................... (1,137,971) $(9,113,278)
---------- ------------
---------- ------------
<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 B
- ----------------------------------
<S> <C> <C>
Six months ended June 30, 1998:
Shares sold....................... 108,508 $ 869,885
Shares issued in reinvestment of
dividends and distributions..... 18,475 148,266
Shares reacquired................. (183,024) (1,466,231)
---------- ------------
Net decrease in shares outstanding
before conversion............... (56,041) (448,080)
Shares reacquired upon conversion
into
Class A......................... (93,482) (749,855)
---------- ------------
Net decrease in shares
outstanding..................... (149,523) $(1,197,935)
---------- ------------
---------- ------------
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)
---------- ------------
---------- ------------
Class C
- ----------------------------------
Six months ended June 30, 1998:
Shares sold....................... 12,879 $ 103,266
Shares issued in reinvestment of
dividends and distributions..... 628 5,040
Shares reacquired................. (8,863) (71,129)
---------- ------------
Net increase in shares
outstanding..................... 4,644 $ 37,177
---------- ------------
---------- ------------
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
---------- ------------
---------- ------------
</TABLE>
- --------------------------------------------------------------------------------
B-70
<PAGE>
Notes to Financial Statements PRUDENTIAL INTERMEDIATE GLOBAL
(Unaudited) INCOME FUND, INC.
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Class Z Shares Amount
- ---------------------------------- ---------- ------------
Six months ended June 30, 1998:
Shares sold....................... 197,934 $ 1,586,710
Shares issued in reinvestment of
dividends and distributions..... 10,883 87,315
Shares reacquired................. (84,149) (674,017)
---------- ------------
Net increase in shares
outstanding..................... 124,668 $ 1,000,008
---------- ------------
---------- ------------
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
---------- ------------
---------- ------------
</TABLE>
- --------------------------------------------------------------------------------
B-71
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Financial Highlights (Unaudited) INCOME FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------------------
Six Months
Ended Year Ended December 31,
June 30, ------------------------------------------------------------
1998(b) 1997(b) 1996 1995(b) 1994 1993
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period........................ $ 7.91 $ 8.34 $ 8.30 $ 7.32 $ 8.43 $ 7.77
---------- -------- -------- -------- -------- --------
Income from investment operations
Net investment income............ .24 .54 .56 .52 .50 .59
Net realized and unrealized gain
(loss) on investment and
foreign currency
transactions.................. .10 (.18) .33 1.20 (1.09) .63
---------- -------- -------- -------- -------- --------
Total from investment
operations................. .34 .36 .89 1.72 (.59) 1.22
---------- -------- -------- -------- -------- --------
Less distributions
Dividends from net investment
income........................ (.24) (.54) (.56) (.52) (.29) (.48)
Distributions in excess of net
investment income............. (.02) (.25) (.29) (.22) -- --
Distributions from capital
gains......................... -- -- -- -- (.01) (.08)
Tax return of capital
distributions................. -- -- -- -- (.22) --
---------- -------- -------- -------- -------- --------
Total distributions........... (.26) (.79) (.85) (.74) (.52) (.56)
---------- -------- -------- -------- -------- --------
Net asset value, end of period... $ 7.99 $ 7.91 $ 8.34 $ 8.30 $ 7.32 $ 8.43
---------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- --------
TOTAL RETURN(a):................. 4.12% 4.42% 11.13% 24.01% (7.02)% 16.12%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)......................... $130,018 $137,799 $165,829 $181,985 $207,153 $320,406
Average net assets (000)......... $134,735 $153,168 $169,219 $200,759 $262,882 $355,018
Ratios to average net assets:
Expenses, including
distribution fees.......... 1.54%(c) 1.41% 1.40% 1.40% 1.46% 1.41%
Expenses, excluding
distribution fees.......... 1.39%(c) 1.26% 1.25% 1.25% 1.31% 1.26%
Net investment income......... 6.14%(c) 6.62% 6.55% 6.09% 6.04% 7.42%
For Class A, B, C and Z shares:
Portfolio turnover rate....... 20% 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 period reported and includes reinvestment of dividends and
distributions. Total returns for periods less than a full year are
annualized.
(b) Calculated based upon average shares outstanding during the period.
(c) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-72
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Financial Highlights (Unaudited) INCOME FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
----------------------------------------------------------------------
Six Months
Ended Year Ended December 31,
June 30, -------------------------------------------------------
1998(b) 1997 1996 1995(b) 1994 1993
---------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period........................ $ 7.92 $ 8.34 $ 8.31 $ 7.33 $ 8.44 $ 7.79
----- ------- ------- ------- ------- -------
Income from investment operations
Net investment income............ .22 .50 .53 .47 .45 .54
Net realized and unrealized gain
(loss) on investment and
foreign currency
transactions.................. .08 (.18) .30 1.20 (1.09) .63
----- ------- ------- ------- ------- -------
Total from investment
operations................. .30 .32 .83 1.67 (.64) 1.17
----- ------- ------- ------- ------- -------
Less distributions
Dividends from net investment
income........................ (.22) (.50) (.53) (.47) (.26) (.44)
Distributions in excess of net
investment income............. (.01) (.24) (.27) (.22) -- --
Distributions from capital
gains......................... -- -- -- -- (.01) (.08)
Tax return of capital
distributions................. -- -- -- -- (.20) --
----- ------- ------- ------- ------- -------
Total distributions........... (.23) (.74) (.80) (.69) (.47) (.52)
----- ------- ------- ------- ------- -------
Net asset value, end of period... $ 7.99 $ 7.92 $ 8.34 $ 8.31 $ 7.33 $ 8.44
----- ------- ------- ------- ------- -------
----- ------- ------- ------- ------- -------
TOTAL RETURN(a):................. 3.83% 3.80% 10.36% 23.25% (7.69)% 15.29%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)......................... $7,786 $ 8,896 $12,987 $17,317 $22,906 $39,440
Average net assets (000)......... $8,380 $11,377 $15,491 $19,336 $31,835 $36,197
Ratios to average net assets:
Expenses, including
distribution fees.......... 2.14%(c) 2.01% 2.00% 2.00% 2.07% 2.01%
Expenses, excluding
distribution fees.......... 1.39%(c) 1.26% 1.25% 1.25% 1.31% 1.26%
Net investment income......... 5.54%(c) 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 period reported and includes reinvestment of dividends and
distributions. Total returns for periods less than a full year are not
annualized.
(b) Calculated based upon average shares outstanding during the period.
(c) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-73
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Financial Highlights (Unaudited) INCOME FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Class Z
------------------------------------------------------------------- ----------
August 1,
Six Months 1994(e) Six Months
Ended Year Ended December 31, Through Ended
June 30, ----------------------------------- December 31, June 30,
1998(b) 1997(b) 1996 1995(b) 1994 1998(b)
---------- ------- --------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period........................ $ 7.92 $ 8.34 $ 8.31 $ 7.33 $ 7.69 $ 7.92
----- ------- --------- --------- ----- -----
Income from investment operations
Net investment income............ .22 .50 .53 .47 .14 .25
Net realized and unrealized gain
(loss) on investment and
foreign currency
transactions.................. .08 (.18) .30 1.20 (.32) .08
----- ------- --------- --------- ----- -----
Total from investment
operations................. .30 .32 .83 1.67 (.18) .33
----- ------- --------- --------- ----- -----
Less distributions
Dividends from net investment
income........................ (.22) (.50) (.53) (.47) (.10) (.25)
Distributions in excess of net
investment income............. (.01) (.24) (.27) (.22) -- (.01)
Tax return of capital
distributions................. -- -- -- -- (.08) --
----- ------- --------- --------- ----- -----
Total distributions........... (.23) (.74) (.80) (.69) (.18) (.26)
----- ------- --------- --------- ----- -----
Net asset value, end of period... $ 7.99 $ 7.92 $ 8.34 $ 8.31 $ 7.33 $ 7.99
----- ------- --------- --------- ----- -----
----- ------- --------- --------- ----- -----
TOTAL RETURN(a):................. 3.83% 3.80% 10.36% 23.25% (2.44)% 4.20%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)......................... $ 237 $ 198 $ 190 $ 13 $ 193(d) $3,538
Average net assets (000)......... $ 218 $ 213 $ 110 $ 11 $ 197(d) $2,968
Ratios to average net assets:
Expenses, including
distribution fees.......... 2.14%(c) 2.01 % 2.00% 2.00% 1.05%(c) 1.39%(c)
Expenses, excluding
distribution fees.......... 1.39%(c) 1.26 % 1.25% 1.25% .30%(c) 1.39%(c)
Net investment income......... 5.56%(c) 6.25 % 6.02% 5.49% 3.30%(c) 6.33%(c)
<CAPTION>
<S> <C> <C>
September 16,
1996(f)
Year Ended Through
December 31, December 31,
1997(b) 1996
------------ -------------
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 period.
(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.
B-74
<PAGE>
APPENDIX I--GENERAL INVESTMENT INFORMATION
The following terms are used in mutual fund investing.
ASSET ALLOCATION
Asset allocation is a technique for reducing risk, providing balance.
Asset allocation among different types of securities within an overall
investment portfolio helps to reduce risk and to potentially provide stable
returns, while enabling investors to work toward their financial goal(s). Asset
allocation is also a strategy to gain exposure to better performing asset
classes while maintaining investment in other asset classes.
DIVERSIFICATION
Diversification is a time-honored technique for reducing risk, providing
"balance" to an overall portfolio and potentially achieving more stable returns.
Owning a portfolio of securities mitigates the individual risks (and returns) of
any one security. Additionally, diversification among types of securities
reduces the risks (and general returns) of any one type of security.
DURATION
Debt securities have varying levels of sensitivity to interest rates. As
interest rates fluctuate, the value of a bond (or a bond portfolio) will
increase or decrease. Longer term bonds are generally more sensitive to changes
in interest rates. When interest rates fall, bond prices generally rise.
Conversely, when interest rates rise, bond prices generally fall.
Duration is an approximation of the price sensitivity of a bond (or a bond
portfolio) to interest rate changes. It measures the weighted average maturity
of a bond's (or a bond portfolio's) cash flows, i.e., principal and interest
rate payments. Duration is expressed as a measure of time in years--the longer
the duration of a bond (or a bond portfolio), the greater the impact of interest
rate changes on the bond's (or the bond portfolio's) price. Duration differs
from effective maturity in that duration takes into account call provisions,
coupon rates and other factors. Duration measures interest rate risk only and
not other risks, such as credit risk and, in the case of non-U.S. dollar
denominated securities, currency risk. Effective maturity measures the final
maturity dates of a bond (or a bond portfolio).
MARKET TIMING
Market timing--buying securities when prices are low and selling them when
prices are relatively higher--may not work for many investors because it is
impossible to predict with certainty how the price of a security will fluctuate.
However, owning a security for a long period of time may help investors offset
short-term price volatility and realize positive returns.
POWER OF COMPOUNDING
Over time, the compounding of returns can significantly impact investment
returns. Compounding is the effect of continuous investment on long-term
investment results, by which the proceeds of capital appreciation (and income
distributions, if elected) are reinvested to contribute to the overall growth of
assets. The long-term investment results of compounding may be greater than that
of an equivalent initial investment in which the proceeds of capital
appreciation and income distributions are taken in cash.
STANDARD DEVIATION
Standard deviation is an absolute (non-relative) measure of volatility
which, for a mutual fund, depicts how widely the returns varied over a certain
period of time. When a fund has a high standard deviation, its range of
performance has been very wide, implying greater volatility potential. Standard
deviation is only one of several measures of a fund's volatility.
I-1
<PAGE>
APPENDIX II--HISTORICAL PERFORMANCE DATA
The historical performance data contained in this Appendix relies on data
obtained from statistical services, reports and other services believed by the
Manager to be reliable. The information has not been independently verified by
the Manager.
This chart shows the long-term performance of various asset classes and the rate
of inflation.
EACH INVESTMENT PROVIDES A DIFFERENT OPPORTUNITY
- --------------------------------------------------------------------------------
CAMERA READY GRAPH
- --------------------------------------------------------------------------------
- ----------
Source: Stocks, Bonds, Bills, and Inflation 1998 Yearbook, Ibbotson Associates,
Chicago (annually updates work by Roger G. Ibbotson and Rex A. Sinquefield).
Used with permission. All rights reserved. This chart is for illustrative
purposes only and is not indicative of the past, present, or future performance
of any asset class or any Prudential Mutual Fund.
Generally, stock returns are due to capital appreciation and the reinvestment of
any gains. Bond returns are due to reinvesting interest. Also, stock prices
usually are more volatile than bond prices over the long-term. Small stock
returns for 1926-1980 are those of stocks comprising the 5th quintile of the New
York Stock Exchange. Thereafter, returns are those of the Dimensional Fund
Advisors (DFA) Small Company Fund. Common stock returns are based on the S&P
Composite Index, a market-weighted, unmanaged index of 500 stocks (currently) in
a variety of industries. It is often used as a broad measure of stock market
performance.
Long-term government bond returns are measured using a constant one-bond
portfolio with a maturity of roughly 20 years. Treasury bill returns are for a
one-month bill. Treasuries are guaranteed by the government as to the timely
payment of principal and interest; equities are not. Inflation is measured by
the consumer price index (CPI).
II-1
<PAGE>
Set forth below is historical performance data relating to various sectors
of the fixed-income securities markets. The chart shows the historical total
returns of U.S. Treasury bonds, U.S. mortgage securities, U.S. corporate bonds,
U.S. high yield bonds and world government bonds on an annual basis from 1988
through 1998. The total returns of the indices include accrued interest, plus
the price changes (gains or losses) of the underlying securities during the
period mentioned. The data is provided to illustrate the varying historical
total returns and investors should not consider this performance data as an
indication of the future performance of the Fund or of any sector in which the
Fund invests.
All information relies on data obtained from statistical services, reports
and other services believed by the Manager to be reliable. Such information has
not been verified. The figures do not reflect the operating expenses and fees of
a mutual fund. See "Risk/Return Summary--Fees and Expenses" in the prospectus.
The net effect of the deduction of the operating expenses of a mutual fund on
these historical total returns, including the compounded effect over time, could
be substantial.
Historical Total Returns of Different Bond Market Sectors
<TABLE>
<CAPTION>
'88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT
TREASURY BONDS(1) .... 7.0% 14.4% 8.5% 15.3% 7.2% 10.7% (3.4)% 18.4% 2.7% 9.6%
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
U.S. GOVERNMENT
MORTGAGE SECURITIES(2) 8.7% 15.4% 10.7% 15.7% 7.0% 6.8% (1.6)% 16.8% 5.4% 9.5%
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
U.S. INVESTMENT GRADE
CORPORATE BONDS(3) ... 9.2% 14.1% 7.1% 18.5% 8.7% 12.2% (3.9)% 22.3% 3.3% 10.2%
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
U.S. HIGH YIELD
CORPORATE BONDS(4) ... 12.5% 0.8% (9.6)% 46.2% 15.8% 17.1% (1.0)% 19.2% 11.4% 12.8%
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
WORLD GOVERNMENT
BONDS(5) ............. 2.3% (3.4)% 15.3% 16.2% 4.8% 15.1% 6.0% 19.6% 4.1% (4.3)%
==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ====
DIFFERENCE BETWEEN
HIGHEST AND LOWEST
RETURN PERCENT ....... 10.2 18.8 24.9 30.9 11.0 10.3 9.9 5.5 8.7 17.1
</TABLE>
- ----------
(1) LEHMAN BROTHERS TREASURY BOND INDEX is an unmanaged index made up of over
150 public issues of the U.S. Treasury having maturities of at least one year.
(2) LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX is an unmanaged index that
includes over 600 15- and 30-year fixed-rate mortgage-backed securities of the
Government National Mortgage Association (GNMA), Federal National Mortgage
Association (FNMA), and the Federal Home Loan Mortgage Corporation (FHLMC).
(3) LEHMAN BROTHERS CORPORATE BOND INDEX includes over 3,000 public fixed-rate,
nonconvertible investment-grade bonds. All bonds are U.S. dollar-denominated
issues and include debt issued or guaranteed by foreign sovereign governments,
municipalities, governmental agencies or international agencies. AlI bonds in
the index have maturities of at least one year.
(4) LEHMAN BROTHERS HIGH YIELD BOND INDEX is an unmanaged index comprising over
750 public, fixed-rate, nonconvertible bonds that are rated Ba1 or lower by
Moody's Investors Service (or rated BB+ or lower by Standard & Poor's or Fitch
Investors Service). All bonds in the index have maturities of at least one year.
(5) SALOMON BROTHERS WORLD GOVERNMENT INDEX (NON U.S.) includes over 800 bonds
issued by various foreign governments or agencies, excluding those in the U.S.,
but including those in Japan, Germany, France, the U.K., Canada, Italy,
Australia, Belgium, Denmark, the Netherlands, Spain, Sweden, and Austria. All
bonds in the index have maturities of at least one year.
II-2
<PAGE>
This chart below shows the historical volatility of general interest rates as
measured by the long U.S. Treasury Bond.
LONG U.S. TREASURY BOND YIELD IN PERCENT (1926-1997)
- --------------------------------------------------------------------------------
CAMERA READY GRAPH
- --------------------------------------------------------------------------------
- ----------
Source: Stocks, Bonds, Bills, and Inflation 1998 Yearbook, Ibbotson Associates,
Chicago (annually updates work by Roger G. Ibbotson and Rex A. Sinquefield).
Used with permission. All rights reserved. The chart illustrates the historical
yield of the long-term U.S. Treasury Bond from 1926-1997. Yields represent that
of an annually renewed one-bond portfolio with a remaining maturity of
approximately 20 years. This chart is for illustrative purposes and should not
be construed to represent the yields of any Prudential Mutual Fund.
II-3
<PAGE>
APPENDIX III--INFORMATION RELATING TO PRUDENTIAL
Set forth below is information relating to The Prudential Insurance
Company of America (Prudential) and its subsidiaries as well as information
relating to the Prudential Mutual Funds. See "How the Fund is Managed--Manager"
in the Prospectus. The data will be used in sales materials relating to the
Prudential Mutual Funds. Unless otherwise indicated, the information is as of
December 31, 1997 and is subject to change thereafter. All information relies on
data provided by The Prudential Investment Corporation (PIC) or from other
sources believed by the Manager to be reliable. Such information has not been
verified by the Fund.
INFORMATION ABOUT PRUDENTIAL
The Manager and PIC(1) are subsidiaries of Prudential, which is one of the
largest diversified financial services institutions in the world and, based on
total assets, the largest insurance company in North America as of December 31,
1997. Principal products and services include life and health insurance, other
healthcare products, property and casualty insurance, securities brokerage,
asset management, investment advisory services and real estate brokerage.
Prudential (together with its subsidiaries) employs almost 79,000 persons
worldwide, and maintains a sales force of approximately 10,100 agents and 6,500
domestic and international financial advisors. Prudential is a major issuer of
annuities, including variable annuities. Prudential seeks to develop innovative
products and services to meet consumer needs in each of its business areas.
Prudential uses the rock of Gibraltar as its symbol. The Prudential rock is a
recognized brand name throughout the world.
Insurance. Prudential has been engaged in the insurance business since
1875. It ensures or provides financial services to nearly 40 million people
worldwide. Long one of the largest issuers of individual life insurance, the
Prudential has 25 million life insurance policies in force today with a face
value of $1 trillion. Prudential has the largest capital base ($12.1 billion) of
any life insurance company in the United States. Prudential provides auto
insurance for approximately 1.5 million cars and insures more than 1.2 million
homes.
Money Management. Prudential is one of the largest pension fund managers
in the country, providing pension services to 1 in 3 Fortune 500 firms. It
manages $36 billion of individual retirement plan assets, such as 401(k) plans.
As of December 31, 1997, Prudential had more than $370 billion in assets under
management. Prudential Investments, a business group of Prudential (of which
Prudential Mutual Funds is a key part), manages over $211 billion in assets of
institutions and individuals. In Pensions and Investments, May 12, 1996,
Prudential was ranked third in terms of total assets under management.
Real Estate. The Prudential Real Estate Affiliates, the fourth largest
real estate brokerage network in the United States, has more than 37,000 brokers
and agents and more than 1,100 offices throughout the United States.(2)
Healthcare. Over two decades ago, Prudential introduced the first
federally-funded, for-profit HMO in the country. Today, approximately 4.9
million Americans receive healthcare from a Prudential managed care membership.
Financial Services. The Prudential Savings Bank FSB, a wholly-owned
subsidiary of the Prudential, has over $1 billion in assets and serves nearly
1.5 million customers across 50 states.
INFORMATION ABOUT THE PRUDENTIAL MUTUAL FUNDS
As of October 31, 1997, Prudential Investments Fund Management was the
18th largest mutual fund company in the country, with over 2.5 million
shareholders invested in more than 50 mutual fund portfolios and variable
annuities with more than 3.7 million shareholder accounts.
The Prudential Mutual Funds have over 30 portfolio managers who manage
over $55 billion in mutual fund and variable annuity assets. Some of
Prudential's portfolio managers have over 20 years of experience managing
investment portfolios.
- ----------
(1) PIC serves as the Subadviser to substantially all of the Prudential Mutual
Funds. Wellington Management Company serves as the subadviser to Global
Utility Fund, Inc., Nicholas-Applegate Capital Management as the
subadviser to Nicholas-Applegate Fund, Inc., Jennison Associates Capital
Corp. as one of the subadvisers to The Prudential Investment Portfolios,
Inc. and Mercator Asset Management LP as the subadviser to International
Stock Series, a portfolio of Prudential World Fund, Inc. There are
multiple subadvisers for The Target Portfolio Trust.
(2) As of December 31, 1996.
III-1
<PAGE>
From time to time, there may be media coverage of portfolio managers and
other investment professionals associated with the Manager and the Subadviser in
national and regional publications, on television and in other media.
Additionally, individual mutual fund portfolios are frequently cited in surveys
conducted by national and regional publications and media organizations such as
The Wall Street Journal, The New York times, Barron's and USA Today.
Equity Funds. Forbes magazine listed Prudential Equity Fund among twenty
mutual funds on its Honor Roll in its mutual fund issue of August 28, 1995.
Honorees are chosen annually among mutual funds (excluding sector funds) which
are open to new investors and have had the same management for at least five
years. Forbes considers, among other criteria, the total return of a mutual fund
in both bull and bear markets as well as a fund's risk profile. Prudential
Equity Fund is managed with a "value" investment style by PIC. In 1995,
Prudential Securities introduced Prudential Jennison Fund, a growth-style equity
fund managed by Jennison Associates LLC, a premier institutional equity manager
and a subsidiary of Prudential.
High Yield Funds. Investing in high yield bonds is a complex and research
intensive pursuit. A separate team of high yield bond analysts monitor
approximately 200 issues held in the Prudential High Yield Fund (currently the
largest fund of its kind in the country) along with 100 or so other high yield
bonds, which may be considered for purchase.(3) Non-investment grade bonds, also
known as junk bonds or high yield bonds, are subject to a greater risk of loss
of principal and interest including default risk than higher-rated bonds.
Prudential high yield portfolio managers and analysts meet face-to-face with
almost every bond issuer in the High Yield Fund's portfolio annually, and have
additional telephone contact throughout the year.
Prudential's portfolio managers are supported by a large and sophisticated
research organization. Fourteen investment grade bond analysts monitor the
financial viability of approximately 1,750 different bond issuers in the
investment grade corporate and municipal bond markets--from IBM to small
municipalities, such as Rockaway Township, New Jersey. These analysts consider
among other things sinking fund provisions and interest coverage ratios.
Prudential's portfolio managers and analysts receive research services
from almost 200 brokers and market service vendors. They also receive nearly 100
trade publications and newspapers--from Pulp and Paper Forecaster to Women's
Wear Daily--to keep them informed of the industries they follow.
Prudential Mutual Funds' traders scan over 100 computer monitors to
collect detailed information on which to trade. From natural gas prices in the
Rocky Mountains to the results of local municipal elections, a Prudential
portfolio manager or trader is able to monitor it if it's important to a
Prudential Mutual Fund.
Prudential Mutual Funds trade approximately $31 billion in U.S. and
foreign government securities a year. PIC seeks information from government
policy makers. In 1995, Prudential's portfolio managers met with several senior
U.S. and foreign government officials, on issues ranging from economic
conditions in foreign countries to the viability of index-linked securities in
the United States.
Prudential Mutual Funds' portfolio managers and analysts met with over
1,200 companies in 1995, often with the Chief Executive Officer (CEO) or Chief
Financial Officer (CFO). They also attended over 250 industry conferences.
Prudential Mutual Fund global equity managers conducted many of their
visits overseas, often holding private meetings with a company in a foreign
language (our global equity managers speak 7 different languages, including
Mandarin Chinese).
Trading Data.(4) On an average day, Prudential Mutual Funds' U.S. and
foreign equity trading desks traded $77 million in securities representing over
3.8 million shares with nearly 200 different firms. Prudential Mutual Funds'
bond trading desks traded $157 million in government and corporate bonds on an
average day. That represents more in daily trading than most bond funds tracked
by Lipper even have in assets.(5) Prudential Mutual Funds' money market desk
traded $3.2 billion in money market securities on an average day, or over $800
billion a year. They made a trade every 3 minutes of every trading day. In 1994,
the Prudential Mutual Funds effected more than 40,000 trades in money market
securities and held on average $20 billion of money market securities.(6)
Based on complex-wire data, on an average day, over 7,250 shareholders
telephoned Prudential Mutual Fund Services, LLC, the Transfer Agent of the
Prudential Mutual Funds, on the Prudential Mutual Funds' toll-free number. On an
annual basis, that represents approximately 1.8 million telephone calls
answered.
- ----------
(3) As of December 31, 1995. The number of bonds and the size of the Fund are
subject to change.
(4) Trading data represents average daily transactions for portfolios of the
Prudential Mutual Funds for which PIC serves as the subadviser, portfolios
of the Prudential Series Fund and institutional and non-US accounts
managed by Prudential Mutual Fund Investments, a division of PIC, for the
year ended December 31, 1995.
(5) Based on 669 funds in Lipper Analytical Services categories of Short U.S.
Treasury, Short U.S. Government, Intermediate U.S. Treasury, Intermediate
U.S. Government, Short Investment Grade Debt, Intermediate Investment
Grade Debt, General U.S. Treasury, General US. Government and Mortgage
Funds.
(6) As of December 31, 1994.
III-2
<PAGE>
INFORMATION ABOUT PRUDENTIAL SECURITIES
Prudential Securities is the fifth largest retail brokerage firm in the
United States with approximately 6,000 financial advisors. It offers to its
clients a wide range of products, including Prudential Mutual Funds and
Annuities. As of December 31, 1997, assets held by Prudential Securities for its
clients approximated $235 billion. During 1997, over 29,000 new customer
accounts were opened each month at Prudential Securities.(7)
Prudential Securities has a two-year Financial Advisor training program
plus advanced education programs, including Prudential Securities "university,"
which provides advanced education in a wide array of investment areas.
Prudential Securities is the only Wall Street firm to have its own in-house
Certified Financial Planner (CFP) program. In the December 1995 issue of
Registered Rep, an industry publication, Prudential Securities' Financial
Advisor training programs receive a grade of A- (compared to an industry average
of B+).
In 1995, Prudential Securities' equity research team ranked 8th in
Institutional Investor magazine's 1995 "All America Research Team" survey. Five
Prudential Securities' analysts were ranked as first-team finishers.(8)
In addition to training, Prudential Securities provides its financial
advisors with access to firm economists and market analysts. It has also
developed proprietary tools for use by financial advisors, including the
Financial ArchitectsSM, a state-of-the-art asset allocation software program
which helps Financial Advisors to evaluate a client's objectives and overall
financial plan, and a comprehensive mutual fund information and analysis system
that compares different mutual funds.
For more complete information about any of the Prudential Mutual Funds,
including charges and expenses, call your Prudential Securities financial
adviser or Pruco/Prudential representative for a free prospectus. Read it
carefully before you invest or send money.
- ----------
(7) As of December 31, 1997.
(8) On an annual basis, Institutional Investor magazine surveys more than 700
institutional money managers, chief investment officers and research
directors, asking them to evaluate analysts in 76 industry sectors. Scores
are produced by taking the number of votes awarded to an individual
analyst and weighing them based on the size of the voting institution. In
total, the magazine sends its survey to approximately 2,000 institutions
and a group of European and Asian institutions.
III-3
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
a. (1) Restated Articles of Incorporation.(2)
(2) Articles Supplementary.(3)
(3) Articles Supplementary.*
b. Amended By-Laws.(4)
c. Instruments Defining Rights of Shareholders.(1)
d. (1) Management Agreement between Registrant and Prudential Mutual
Fund Management, Inc.(4)
(2) Subadvisory Agreement between Prudential Mutual Fund
Management, Inc. and The Prudential Investment Corporation.(4)
(3) Form of Sub-Investment Management Agreement between The
Prudential Investment Corporation and PRICOA Assset Management
Limited.*
e. (1) Distribution Agreement between the Registrant and Prudential
Investment Management Services LLC.*
(2) Form of Selected Dealer Agreement.*
g. Custodian Contract between the Registrant and State Street Bank and
Trust Company.(4)
h. Transfer Agency and Service Agreement between the Registrant and
Prudential Mutual Fund Services, Inc.(4)
m. (1) Amended and Restated Distribution and Service Plan for Class A
shares.*
(2) Amended and Restated Distribution and Service Plan for Class B
shares.*
(3) Amended and Restated Distribution and Service Plan for Class C
shares.*
n. Financial Data Schedules filed as Exhibit 27 for electronic
purposes.*
o. Amended Rule 18f-3 Plan.*
----------
1. Incorporated herein by reference to Post-Effective Amendment No.
4 to the Registration Statement on Form N-1A filed on March 2, 1994
(File No. 33-42093).
2. Incorporated herein by reference to Post-Effective Amendment No.
7 to the Registration Statement on Form N-1A filed on March 1, 1995
(File No. 33-42093).
3. Incorporated herein by reference to Post-Effective Amendment No.
9 to the Registration Statement on Form N-1A filed on August 15,
1996 (File No. 33-42093).
4. Incorporated herein by reference to Post-Effective Amendment No.
10 to the Registration Statement on Form N-1A filed on February 28,
1997 (File No. 33-42093).
* Filed herewith.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 25. INDEMNIFICATION
As permitted by Sections 17(h) and (i) of the Investment Company Act of
1940, as amended (the 1940 Act) and pursuant to Article VII of the Fund's
By-Laws (Exhibit (b) to the Registration Statement), officers, directors,
employees and agents of the Registrant will not be liable to the Registrant, any
stockholder, officer, director, employee, agent or other person for any action
or failure to act, except for bad faith, willful misfeasance, gross negligence
or reckless disregard of duties, and those individuals may be indemnified
against liabilities in connection with the Registrant, subject to the same
exceptions. Section 2-418 of Maryland General Corporation Law permits
indemnification of directors who acted in good faith and reasonably believed
that the conduct was in the best interests of the Registrant. As permitted by
Section 17(i) of the 1940 Act, pursuant to Section 10 of the Distribution
Agreement (Exhibit (e)(1) to the Registration Statement), each Distributor of
the Registrant may be indemnified against liabilities which it may incur, except
liabilities arising from bad faith, gross negligence, willful misfeasance or
reckless disregard of duties.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (Securities Act) may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing provisions
or otherwise, the
C-1
<PAGE>
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
1940 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant by such director,
officer or controlling person in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the 1940 Act and will be governed by the final adjudication of such
issue.
The Registrant has purchased an insurance policy insuring its officers and
directors against liabilities, and certain costs of defending claims against
such officers and directors, to the extent such officers and directors are not
found to have committed conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of their duties. The
insurance policy also insures the Registrant against the cost of indemnification
payments to officers and directors under certain circumstances.
Section 9 of the Management Agreement (Exhibit (d)(1) to the Registration
Statement) and Section 4 of the Subadvisory Agreement (Exhibit (d)(2) to the
Registration Statement) limit the liability of Prudential Investments Fund
Management LLC (PIFM) and The Prudential Investment Corporation (PIC),
respectively, to liabilities arising from willful misfeasance, bad faith or
gross negligence in the performance of their respective duties or from reckless
disregard by them of their respective obligations and duties under the
agreements.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its By-Laws and the Distribution Agreement in a manner consistent
with Release No. 11330 of the Securities and Exchange Commission under the 1940
Act so long as the interpretation of Sections 17(h) and 17(i) of such Act remain
in effect and are consistently applied.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) Prudential Investments Fund Management LLC
See "How the Fund is Managed--Manager" in the Prospectus constituting Part
A of this Registration Statement and "Investment Advisory and Other Services" in
the Statement of Additional Information constituting Part B of this Registration
Statement.
The business and other connections of the officers of PIFM are listed in
Schedules A and D of Form ADV of PIFM as currently on file with the Securities
and Exchange Commission, the text of which is hereby incorporated by reference
(File No. 801-31104). The business and other connections of PIFM's directors and
principal executive officers are set forth below. Except as otherwise indicated,
the address of each person is Gateway Center Three, 100 Mulberry Street, Newark,
NJ 07102-4077.
<TABLE>
NAME AND ADDRESS POSITION WITH PIFM PRINCIPAL OCCUPATIONS
- ---------------- ------------------ ---------------------
<S> <C> <C>
Brian M. Storms Officer-In-Charge, President, Prudential
President, Chief Investments; Officer-In-Charge,
Executive Officer and President, Chief Executive
Chief Operating Officer Officer and Chief Operating
Officer, PIFM
Robert F. Gunia Executive Vice President Vice President, Prudential
and Treasurer Investments; Executive Vice
President and Treasurer, PIFM;
Senior Vice President of
Prudential Securities
Neil A. McGuinness Executive Vice President Executive Vice President and
Director of Marketing,
Prudential Mutual Funds &
Annuities (PMF & A); Executive
Vice President, PIFM
Robert J. Sullivan Executive Vice President Executive Vice President, PMF &
A; Executive Vice President,
PIFM
</TABLE>
(b) The Prudential Investment Corporation (PIC)
See "How the Fund is Managed--Investment Adviser" in the Prospectus
constituting Part A of this Registration Statement and "Investment Advisory and
Other Services" in the Statement of Additional Information constituting Part B
of this Registration Statement.
C-2
<PAGE>
The business and other connections of PIC's directors and executive
officers are as set forth below. Except as otherwise indicated the address of
each person is Prudential Plaza, Newark, NJ 07102.
NAME AND ADDRESS POSITION WITH PIC PRINCIPAL OCCUPATIONS
- ---------------- ----------------- ---------------------
John R. Strangfeld, Jr. Chairman of the Board, Senior Vice President,
President and Chief Prudential; Chief Executive
Executive Officer and Officer, Prudential Global
Director Asset Management; Chairman of
the Board, President, Chief
Executive Officer and
Director, PIC
Mendel A. Melzer, CFA Senior Vice President Chief Investment Officer,
Gateway Center Two and Director Prudential Investments
100 Mulberry Street
Newark, NJ 07102
Bernard B. Winograd Senior Vice President Chief Executive Officer,
and Director Prudential Real Estate
Investors (PREI); Senior Vice
President and Director, PIC
(c) PRICOA Asset Management Ltd. (PRICOA)
See "How the Fund is Managed--Investment Adviser" in the Prospectus
constituting Part A of this Registration Statement and "Investment Advisory and
Other Services" in the Statement of Additional Information constituting Part B
of this Registration Statement.
The business and other connections of PRICOA's directors and officers are
as set forth below. The address of each person is Cutlers Court, 115
Houndstitch, London EC3A 7BR, England.
NAME POSITION WITH PRICOA PRINCIPAL OCCUPATIONS
- ---- -------------------- ---------------------
Simon J. Wells CEO and Director CEO and Director, PRICOA; Employee
of PIC and Prudential-Bache
Securities (U.K.) Inc.
J. Gabriel Irwin Chairman and Director Chairman and Director, PRICOA;
Employee of PIC and
Prudential-Bache Securities (U.K.)
Inc.
Peter G. Spencer Financial Compliance Financial Compliance Officer and
Officer and Director Director, PRICOA
Stephen Auth Director Director, PRICOA
Jean-Yves Chereau Director Director, PRICOA
William N. Jones Secretary Secretary, PRICOA
Paul Lowenstein Director Director, PRICOA
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Prudential Investment Management Services LLC (PIMS)
PIMS is distributor for Cash Accumulation Trust, Command Government Fund,
Command Money Fund, Command Tax-Free Fund, The Global Total Return Fund, Inc.,
Global Utility Fund, Inc., Nicholas-Applegate Fund, Inc. (Nicholas-Applegate
Growth Equity Fund), Prudential Balanced Fund, Prudential California Municipal
Fund, Prudential Distressed Securities Fund, Inc., Prudential Diversified Bond
Fund, Inc., Prudential Emerging Growth Fund, Inc., Prudential Equity Fund, Inc.,
Prudential Equity Income Fund, Prudential Europe Growth Fund, Inc., Prudential
Global Genesis Fund, Inc., Prudential Global Limited Maturity Fund, Inc.,
Prudential Government Income Fund, Inc., Prudential Government Securities Trust,
Prudential High Yield Fund, Inc., Prudential High Yield Total Return Fund, Inc.,
Prudential Index Series Fund, Prudential Institutional Liquidity Portfolio,
Inc., Prudential Intermediate Global Income Fund, Inc., Prudential International
Bond Fund, Inc., Prudential Mid-Cap Value Fund, Prudential MoneyMart Assets,
Inc., Prudential Mortgage Income Fund, Inc., Prudential Municipal Bond Fund,
Prudential Municipal Series Fund, Prudential National Municipals Fund, Inc.,
Prudential Natural Resources Fund, Inc., Prudential Pacific Growth Fund, Inc.,
Prudential Real Estate Securities Fund, Prudential Small-Cap Quantum Fund, Inc.,
Prudential Small Company Value Fund, Inc., Prudential Special Money Market Fund,
Inc., Prudential Structured Maturity Fund, Inc., Prudential 20/20 Focus Fund,
Prudential Tax-Free Money Fund, Inc., Prudential Utility Fund, Inc., Prudential
World Fund, Inc. and The Target Portfolio Trust.
C-3
<PAGE>
(b) Information concerning the officers and directors of PIMS is set forth
below. Except as otherwise indicated, the address of each person named is 751
Broad Street, Newark, NJ 07102.
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME UNDERWRITER REGISTRANT
- ---- ------------- -------------
Mark R. Fetting ................. Executive Vice President None
Gateway Center Three
100 Mulberry Street
Newark, New Jersey 07102
Mendel A. Melzer, CFA ........... Executive Vice President Director
Gateway Center Two
100 Mulberry Street
Newark, New Jersey 07102
Jean D. Hamilton ................ Executive Vice President None
Ronald P. Joelson ............... Executive Vice President None
Brian M. Storms ................. President President
and
Director
Gateway Center Three
100 Mulberry Street
Newark, New Jersey 07102
John R. Strangfeld, Jr. ......... Executive Vice President None
Brain Henderson.................. Senior Vice President and None
Gateway Center Three Chief Operating Officer
100 Mulberry Street
Newark, New Jersey 07102
William V. Healey ............... Senior Vice President,Secretary None
and Chief Legal Officer
Margaret M. Deverell ............ Vice President, Comptroller None
Gateway Center Three and Chief Financial Officer
100 Mulberry Street
Newark, New Jersey 07102
C. Edward Chaplin ............... Treasurer None
Kevin B. Frawley ................ Senior Vice President and Chief None
213 Washington St. Compliance Officer
Newark, New Jersey 07102
(c) Registrant has no principal underwriter who is not an affiliated
person of the Registrant.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the Rules thereunder are maintained at the
offices of State Street Bank and Trust Company, One Heritage Drive, North
Quincy, Massachusetts 02171, The Prudential Investment Corporation, Prudential
Plaza, 751 Broad Street, Newark, New Jersey 07102, the Registrant, Gateway
Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, PRICOA Asset
Management Ltd, 115 Houndsditch, London EC3A 7BU, England, and Prudential Mutual
Fund Services LLC, Raritan Plaza One, Edison, New Jersey 08837. Documents
required by Rules 31a-1(b)(5), (6), (7), (9), (10) and (11), 31a-1(f),
31a-1(b)(4) and (11) and 31a-1(d) will be kept at Gateway Center Three, and the
remaining accounts, books and other documents required by such other pertinent
provisions of Section 31(a) and the Rules promulgated thereunder will be kept by
State Street Bank and Trust Company and Prudential Mutual Fund Services LLC.
ITEM 29. MANAGEMENT SERVICES
Other than as set forth under the caption "How the Fund is Managed" in the
Prospectus and the caption "Investment Advisory and Other Services" in the
Statement of Additional Information, constituting Parts A and B, respectively,
of this Post-Effective Amendment to the Registration Statement, Registrant is
not a party to any management-related service contract.
ITEM 30. UNDERTAKING
Not Applicable.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment
Company Act, the Fund has duly caused this Post-Effective Amendment to the
Registration Statement to be signed on its behalf by the undersigned, duly
authorized, in the City of Newark, and State of New Jersey, on the 13th day of
January, 1999.
PRUDENTIAL INTERMEDIATE GLOBAL INCOME
FUND, INC.
/s/ Brian M. Storms
---------------------------------------
BRIAN M. STORMS, PRESIDENT
Pursuant to the requirements of the Securities Act, this Post-Effective
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Brian M. Storms President and Director January 13, 1999
- --------------------------
BRIAN M. STORMS
/s/ Edward D. Beach Director January 13, 1999
- --------------------------
EDWARD D. BEACH
/s/ Delayne D. Gold Director January 13, 1999
- --------------------------
DELAYNE D. GOLD
/s/ Robert F. Gunia Director January 13, 1999
- --------------------------
ROBERT F. GUNIA
/s/ Douglas H. McCorkindale Director January 13, 1999
- --------------------------
DOUGLAS H. MCCORKINDALE
/s/ Mendel A. Melzer Director January 13, 1999
- --------------------------
MENDEL A. MELZER
/s/ Thomas T. Mooney Director January 13, 1999
- --------------------------
THOMAS T. MOONEY
/s/ Stephen P. Munn Director January 13, 1999
- --------------------------
STEPHEN P. MUNN
/s/ Richard A. Redeker Director January 13, 1999
- --------------------------
RICHARD A. REDEKER
/s/ Robin B. Smith Director January 13, 1999
- --------------------------
ROBIN B. SMITH
/s/ Louis A. Weil, III Director January 13, 1999
- --------------------------
LOUIS A. WEIL, III
/s/ Clay T. Whitehead Director January 13, 1999
- --------------------------
CLAY T. WHITEHEAD
/s/ Grace C. Torres Principal Financial January 13, 1999
- -------------------------- and Accounting Officer
GRACE C. TORRES
</TABLE>
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
a. (1) Restated Articles of Incorporation.(2)
(2) Articles Supplementary.(3)
(3) Articles Supplementary.*
b. Amended By-Laws.(4)
c. Instruments Defining Rights of Shareholders.(1)
d. (1) Management Agreement between Registrant and Prudential Mutual
Fund Management, Inc.(4)
(2) Subadvisory Agreement between Prudential Mutual Fund
Management, Inc. and The Prudential Investment Corporation.(4)
(3) Form of Sub-Investment Management Agreement between The
Prudential Investment Corporation and PRICOA Assset Management
Limited.*
e. (1) Distribution Agreement between the Registrant and Prudential
Investment Management Services LLC.*
(2) Form of Selected Dealer Agreement.*
g. Custodian Contract between the Registrant and State Street Bank and
Trust Company.(4)
h. Transfer Agency and Service Agreement between the Registrant and
Prudential Mutual Fund Services, Inc.(4)
m. (1) Amended and Restated Distribution and Service Plan for Class A
shares.*
(2) Amended and Restated Distribution and Service Plan for Class B
shares.*
(3) Amended and Restated Distribution and Service Plan for Class C
shares.*
n. Financial Data Schedules filed as Exhibit 27 for electronic
purposes.*
o. Amended Rule 18f-3 Plan.*
----------
1. Incorporated herein by reference to Post-Effective Amendment No.
4 to the Registration Statement on Form N-1A filed on March 2, 1994
(File No. 33-42093).
2. Incorporated herein by reference to Post-Effective Amendment No.
7 to the Registration Statement on Form N-1A filed on March 1, 1995
(File No. 33-42093).
3. Incorporated herein by reference to Post-Effective Amendment No.
9 to the Registration Statement on Form N-1A filed on August 15,
1996 (File No. 33-42093).
4. Incorporated herein by reference to Post-Effective Amendment No.
10 to the Registration Statement on Form N-1A filed on February 28,
1997 (File No. 33-42093).
* Filed herewith.
ARTICLES SUPPLEMENTARY
of
PRUDENTIAL INTERMEDIATE GLOBAL INCOME FUND, INC.
Prudential Intermediate Global Income Fund, Inc., a Maryland corporation
having its principal office in Baltimore, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: In accordance with Article IV of the Charter of the Corporation and
the Maryland General Corporation Law, the Board of Directors has reclassified
the unissued shares of its Class C Common Stock (par value $.001 per share) by
changing certain terms and conditions as follows:
Effective November 2, 1998, all newly-issued Class C Shares of Common
Stock shall be subject to a front-end sales charge, a contingent deferred sales
charge, and a Rule 12b-1 distribution fee as determined by the Board of
Directors from time to time in accordance with the Investment Company Act of
1940, as amended, and as disclosed in the current prospectus for such shares.
IN WITNESS WHEREOF, Prudential Intermediate Global Income Fund, Inc. has
caused these presents to be signed in its name and on its behalf by its Vice
President and witnessed by its Assistant Secretary on October 30, 1998.
WITNESS: PRUDENTIAL INTERMEDIATE
GLOBAL INCOME FUND, INC.
/s/ Marguerite E.H. Morrison By: /s/ Robert F. Gunia
- --------------------------------- ---------------------------------
Marguerite E.H. Morrison, Robert F. Gunia, Vice President
Assistant Secretary
THE UNDERSIGNED, Vice President of Prudential Intermediate Global Income
Fund, Inc., who executed on behalf of the Corporation Articles Supplementary of
which this Certificate is made a part, hereby acknowledges in the name and on
behalf of said Corporation the foregoing Articles Supplementary to be in the
corporate act of said Corporation and hereby certifies that the matters and
facts set forth herein with respect to the authorization and approval thereof
are true in all material respects under the penalties of perjury.
/s/ Robert F. Gunia
------------------------------------
Robert F. Gunia, Vice President
A M E N D M E N T
TO SUB-INVESTMENT MANAGEMENT AGREEMENT ("AGREEMENT")
BETWEEN THE PRUDENTIAL INVESTMENT CORPORATION
("INVESTMENT MANAGER")
AND
PRICOA ASSET MANAGEMENT LIMITED ("SUB-INVESTMENT MANAGER")
This Amendment to the Agreement dated September 30, 1997, is dated February
11, 1998, and effective as of January 1, 1998.
WHEREAS, the parties have agreed that the Sub-Investment Manager will
provide investment advisory services to the registered investment companies
established under the Investment Company Act of 1940, the investment companies
organized under the laws of the Grand Duchy of Luxembourg and the insurance
company general accounts, listed on Schedule A ;
NOW THEREFORE, it is agreed as follows:
1. Section 12 of the Agreement is hereby amended to read as follows:
Termination. Sub-Investment Manager may terminate this Agreement on
60 days' written notice to Investment Manager, with respect to
managed accounts and investment companies. Investment Manager may
terminate Sub-Investment Manager's appointment as an investment
manager at any time upon written notice which will take effect
immediately upon receipt. With respect to the registered investment
companies, the agreement also (i) may be terminated without the
payment of any penalty, by the board of directors of such registered
investment company or by a vote of majority of the outstanding voting
securities on note more than 60 days' written notice to the
Sub-Investment Manager; (ii) shall continue in effect for a period
more than two years from the date of execution, only so long as such
continuance is specifically approved at least annually in conformity
with the requirements of the Investment Company Act of 1940; and
(iii) shall terminate automatically for a particular registered
investment company upon the termination of Investment Manager's
Sub-Advisory Agreement for such registered investment company.
Termination of this Agreement will be without prejudice to the
completion of transactions already initiated and accordingly, despite
termination of this Agreement, Sub-Investment Manager shall be
entitled to:
a. settle or close out all transactions entered into or for which
the order was placed with a broker or which was otherwise
initiated or agreed by Sub-Investment Manager on Investment
Manager's behalf hereunder, in good faith before Sub-Investment
Manager received notice of termination (or, if later, the
expiration of such notice); and
b. require Investment Manager to pay all outstanding fees and
expenses including those incurred pursuant to paragraph (a)
above.
2. Section 13 of the Agreement is hereby amended to read as follows:
No Assignment Sub-Investment Manager may not make on assignment
(as that term is defined in the Investment Advisers Act of 1940) of
this Agreement without the prior written consent of Investment
Manager. This Agreement, with respect to registered investment
companies, shall not be assigned by either party hereto and shall
automatically terminate forthwith in the event of such assignment (as
that term is defined in the Investment Company Act of 1940).
3. Schedules A and B to the Agreement are hereby amended and
substituted by the attached Schedules A and B, respectively:
IN WITNESS WHEREOF, the parties have caused this Amendment to be signed as
of the date indicated above.
THE PRUDENTIAL INVESTMENT CORPORATION
BY:_________________________________________
NAME: Jonathan M. Greene
------------------
TITLE: Senior Vice President
--------------------
PRICOA ASSET MANAGMENT LIMITED
BY:_________________________________________
NAME:______________________________________
TITLE:______________________________________
BY:_________________________________________
NAME:______________________________________
TITLE:_______________________________________
<PAGE>
SCHEDULE A (amended)
TO THE SUB-INVESTMENT MANAGEMENT AGREEMENT BETWEEN
THE PRUDENTIAL INVESTMENT CORPORATION AND
PRICOA ASSET MANAGEMENT LIMITED
SCHEDULE OF REMUNERATION
<TABLE>
<CAPTION>
List of Funds Annual Fee
-------------- ----------
<C> <S> <C>
Bond Funds Prudential International Bond Fund, Inc.
- ----------
(formerly The Global Government Plus Fund, Inc.) Cost + 5% of cost
The Global Total Return Fund, Inc. Cost + 5% of cost
Prudential Intermediate Global Income Fund, Inc. Cost + 5% of cost
Prudential Global Limited Maturity Fund, Inc. Cost + 5% of cost
Money Market Funds PRICOA World Wide Investors Portfolio, Global Bond Fund 30 basis points
- ------------------
PRICOA Money Market Portfolio, Deutsche Mark Series 30 basis points
PRICOA Money Market Portfolio, Pound Sterling Series 0 basis points
Equity Funds Prudential General Account:
- ------------
-European Portion of the Small Cap Account Cost + 5% of cost
-European Small Cap Account Cost + 5% of cost
-European Large Cap Account Cost + 5% of cost
-European Portion of the Global Small Cap Account Cost + 5% of cost
Prudential Group Trust Account (Pru Plan)
-European Portion of International Large Cap Account Cost + 5% of cost
-European Portion of International Small Cap Account Cost + 5% of cost
TOLI GLOBAL-Roche Retiree Welfare Investment Trust Cost + 5% of cost
Prudential Global Genesis Fund, Inc. Cost + 5% of cost
Prudential Europe Growth Fund, Inc. Cost + 5% of cost
PRICOA World Wide Investors Portfolio, European Growth Fund 55 basis points
</TABLE>
1. The fee payable for each quarter is calculated at the above rates on the
average funds under management during the quarter.
2. Sub-Investment Manager will invoice Investment Manager at the end of
each quarter for actual fees due as calculated in accordance with 1 above
and invoices will be payable within 30 days of invoice date.
<PAGE>
3. Investment Manager will undertake to use best endeavors to prepay each
quarter's estimated fees at the beginning of the relevant quarter (1
January, 1 April, 1 July, 1 October)
4. Fees are calculated pro-rata where funds are not managed for the full
term of a calendar quarter.
This amended schedule is deemed to be effective from the commencement of
this agreement.
For The Prudential Investment Corporation
By:_______________________________
Date:
For PRICOA Asset Management Limited
Director: ____________________ Director: _________________________
Date: ________________________ Date:______________________
<PAGE>
SCHEDULE B
TO THE SUB-INVESTMENT MANAGEMENT AGREEMENT BETWEEN
THE PRUDENTIAL INVESTMENT CORPORATION AND
PRICOA ASSET MANAGEMENT LTD
INVESTMENT GUIDELINES FOR CLIENT ACCOUNTS
The investment guidelines for the following Prudential Mutual Funds are as set
out in each fund's statutory documentation:
PRUDENTIAL INTERNATIONAL BOND FUND, INC. (formerly, The Global Government Plus
Fund, Inc.)
The Fund's investment objective is to seek total return, the components of which
are current income and capital appreciation. The Fund attempts to achieve its
objective by investing primarily in debt securities issued or guaranteed by
governments, semi-government entities, governmental agencies, supranational
entities and other governmental entities in the United States and in other
countries and denominated in the currencies of such countries.
The Fund's detailed investment polices and investment restrictions are set out
in the Fund's Prospectus dated August 8, 1997 and the Fund's Statement of
Additional Information dated August 8, 1997.
THE GLOBAL TOTAL RETURN FUND, INC.
The Fund's investment objective is to seek total return, the components of which
are current income and capital appreciation. The Fund attempts to achieve its
objective by investing, under normal circumstances, at least 65% of its total
assets in governmental (including supranational), semi-governmental or
government agency debt securities or in short-term bank debt securities or
deposits in the United States and in foreign countries denominated in US dollars
or in foreign currencies, including debt securities issued or guaranteed by the
US Government and foreign governments, their agencies, authorities or
instrumentalities. The remainder is generally invested in corporate debt
securities or longer term bank debt securities.
The Fund will invest primarily in investment grade securities or in non-rated
securities determined by the Fund's investment adviser to be of equivalent
quality. The Fund may invest up to 10% of its total assets in debt securities
rated below investment grade, with a minimum rating of B, by either S&P or
Moody's or by another NRSRO, or, if unrated, are deemed to be of equivalent
quality by the investment adviser.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus dated March 4, 1998.
PRUDENTIAL INTERMEDIATE GLOBAL INCOME FUND, INC.
The Fund's objective is to seek to maximize total return, the components of
which are current income and capital appreciation. The Fund will attempt to
achieve its objective by investing primarily in obligations issued or guaranteed
by the US Government, its agencies, authorities or instrumentalities and in
obligations issued or guaranteed by certain foreign governments,
quasi-governmental entities, governmental agencies, supranational entities or
any of their political subdivisions or instrumentalities. The Fund will invest
primarily in investment grade securities or in non-rated securities determined
by the Fund's investment adviser to be of equivalent quality. The Fund may
invest up to 10% of its total assets in debt securities rated below investment
grade, with a minimum rating of B, by either S&P or Moody's or by another NRSRO,
or if unrated, are deemed to be of equivalent quality by the investment adviser.
<PAGE>
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus dated March 4, 1998 and the Fund's Statement of
Additional Information dated
March 4, 1998.
PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
The Fund's investment objective is to maximize total return, the components of
which are current income and capital appreciation. The Fund seeks to achieve its
objective by investing primarily in a portfolio of debt securities denominated
in the US dollar and a range of foreign currencies. The Fund will maintain a
weighted average maturity of more than 2, but less than 5, years with the
maturity for any individual security generally not exceeding 10 years. The Fund
may also invest up to 20% of its total assets in debt securities rated below
investment grade, with a minimum rating of B, by either S&P or Moody's or by
another NRSRO, or, if unrated, are deemed to be of equivalent quality by the
investment adviser.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus dated December 30, 1997and the Fund's Statement of
Additional Information dated December 30, 1997; both supplemented as of March
17, 1998.
PRICOA WORLDWIDE INVESTORS PORTFOLIO, GLOBAL BOND FUND
The Fund's investment objective is to seek total return, the components of which
are current income and capital appreciation. The Fund seeks to achieve its
investment objective by investing primarily in investment grade bonds issued by
governments and corporations with varying maturities. It may also have limited
exposure to non-investment grade issues from emerging markets.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus dated October 28, 1996.
PRICOA WORLDWIDE INVESTORS PORTFOLIO, EUROPEAN GROWTH FUND
The Fund's investment objective is long-term growth of capital through
investment in a portfolio of transferable equity and debt securities of
companies domiciled in Europe.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus dated October 28, 1996.
PRICOA MONEY MARKET PORTFOLIO
The Fund's investment objective is to provide the highest level of current
income in each designated currency consistent with safety of principal. Each
Series seeks to achieve this objective by investing in a portfolio of high
quality money market instruments and short-term debt obligations having a
maturity of one year or less denominated (1) in the designated currency of the
Series or (2) in US dollars (or other currencies) in combination with forward
currency exchange contracts to purchase matching amounts of the designated
currency.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus dated June 12, 1991.
PRUDENTIAL GLOBAL GENESIS FUND, INC.
The Fund's investment objective is long-term growth of capital. The Fund seeks
to achieve its investment objective by investing primarily in common stocks,
common stock equivalents (such as
<PAGE>
warrants and convertible debt securities) and other equity securities (including
preferred stocks) of smaller foreign and domestic companies. Under normal
circumstances, the Fund will invest 65% of its total assets in such securities.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus dated July 30, 1997 and the Fund's Statement of
Additional Information dated July 30,1997.
PRUDENTIAL EUROPE GROWTH FUND, INC.
The Fund's investment objective is to seek long-term growth of capital. The Fund
attempts to achieve this objective by investing primarily in equity securities
(common stock, securities convertible into common stock and preferred stock) of
companies domiciled in Europe.
The Fund's detailed investment policies and investment restrictions are set out
in the Fund's Prospectus dated July 1, 1997, and the Fund's Statement of
Additional Information dated July 1, 1997.
The investment guidelines for the remaining funds are as follows:
PRUDENTIAL GENERAL ACCOUNT
EUROPEAN PORTION OF THE SMALL CAP ACCOUNT
1. Investments will be composed primarily of securities publicly traded in
Europe.
2. Investments will be targeted in securities of small capitalization
companies. (Stocks which primarily make up the lowest 20 percent of the
total market capitalization of $30 million to $1.5 billion. The majority of
investments to be in the stocks with market capitalization less than $750
million.)
3. No more than 10% of the portfolio will be invested in stocks larger than
$1.5 billion and not represented in the Salomon Brothers Extended Market
Index ("EMI").
4. No more than 10% of the portfolio will be invested in any one company at
the time of purchase.
5. The portfolio will not purchase more than 10% of the issued capital of any
one company.
6. Investments in cash and related instruments will not exceed 25% of the
portfolio, except during initial portfolio building.
7. Currency hedging of underlying stock positions only (requires approval of
Global Equities CIO). Foreign currency futures and options contracts can
only be employed to hedge underlying currency exposure (i.e., up to but not
more than 100% of underlying exposure to a foreign currency as measured by
the value of cash plus securities held in that foreign currency).
EUROPEAN SMALL CAP ACCOUNT
1. Investments will be composed primarily of securities publicly traded in
Europe.
2. Investments will be targeted in securities of small capitalization
companies. (Stocks which primarily make up the lowest 20 percent of the
total market capitalization of $30 million to $1.5 billion. The majority of
investments to be in the stocks with market capitalization less than $750
million.)
<PAGE>
3. No more than 10% of the portfolio will be invested in stocks larger than
$1.5 billion and not represented in the Salomon Brothers Extended Market
Index ("EMI").
4. No more than 10% of the portfolio will be invested in any one company at
the time of purchase.
5. The portfolio will not purchase more than 10% of the issued capital of any
one company.
6. Investments in cash and related instruments will not exceed 25% of the
portfolio, except during portfolio building.
7. Currency hedging of underlying stock positions only (requires approval of
Global Equities CIO). Foreign currency futures and options contracts can
only be employed to hedge underlying currency exposure (i.e., up to but not
more than 100% of underlying exposure to a foreign currency as measured by
the value of cash plus securities held in that foreign currency).
EUROPEAN LARGE CAP ACCOUNT
1. Investments will be composed primarily of publicly traded securities of
companies headquartered in European countries, the majority of which would
also be included in the MSCI European Index.
2. The portfolio will consist of no fewer than 25 securities, and no single
security will represent more than 10% of the portfolio at the time of
purchase.
3. The portfolio will not purchase more than 10% of the issued capital of any
one company.
4. Investments in cash and related instruments, except during the initial
portfolio building period, will not exceed 15% of the portfolio.
5. The portfolio may use futures contracts, forward contracts, options and
derivatives related to the underlying stock or foreign exchange markets of
the countries in which they are invested, provided such instruments are
used in bona fide hedging transactions.
6. Additional policies and guidelines will be established by the Portfolio
Management Group.
EUROPEAN PORTION OF THE GLOBAL SMALL CAP ACCOUNT
1. Investments will be composed primarily of securities publicly traded in
Europe.
2. Investments will be targeted in securities of small capitalization
companies. (Stocks which primarily make up the lowest 20 percent of the
total market capitalization of $30 million to $1.5 billion. The majority of
investments to be in the stocks with market capitalization less than $750
million.)
3. No more than 10% of the portfolio will be invested in stocks larger than
$1.5 billion and not represented in the Salomon Brothers Extended Market
Index ("EMI").
4. No more than 10% of the portfolio will be invested in any one company at
the time of purchase.
5. The portfolio will not purchase more than 10% of the issued capital of any
one company.
6. Investments in cash and related instruments will not exceed 25% of the
portfolio, except during initial portfolio building.
<PAGE>
7. Currency hedging of underlying stock positions only (requires approval of
Global Equities CIO). Foreign currency futures and options contracts can
only be employed to hedge underlying currency exposure (i.e., up to but not
more than 100% of underlying exposure to a foreign currency as measured by
the value of cash plus securities held in that foreign currency).
PRUDENTIAL GROUP TRUST ACCOUNT (PRU PLAN)
EUROPEAN PORTION OF THE INTERNATIONAL LARGE CAP ACCOUNT
1. The investment objective will be long term capital appreciation through
investment in a broadly diversified portfolio from outside the United
States. The portfolio will be measured against the Morgan Stanley
International "EAFE" Index.
2. Investments will be composed primarily of securities publicly traded in
Europe.
3. Portfolio will be invested primarily (75%) in securities of large
capitalization companies (greater than $1.5 billion).
4. No more than 10% of the portfolio will be invested in any one company at
the time of purchase.
5. The portfolio will not purchase more than 10% of the issued capital of any
one company.
6. Investments in cash and related instruments will not exceed 15% of the
portfolio, except during initial portfolio building.
7. Currency hedging of underlying stock positions only (requires approval of
Global Equities CIO).
EUROPEAN PORTION OF THE INTERNATIONAL SMALL CAP ACCOUNT
1. Investments will be composed primarily of securities publicly traded in
Europe.
2. Portfolio will be primarily (70%) in securities of small capitalization
companies.(Stocks which primarily make up the lowest 20 percent of the
total market capitalization of $30 million to$1.5 billion. The majority of
investments to be in the stocks with market capitalization less than $750
million.)
3. No more than 10% of the portfolio will be invested in stocks larger than
$1.5 billion and not represented in the Salomon Brothers Extended Market
Index ("EMI").
4. No more than 10% of the portfolio will be invested in any one company at
the time of purchase.
5. The portfolio will not purchase more than 10% of the issued capital of any
one company.
6. Investments in cash and related instruments will not exceed 15% of the
portfolio, except during initial portfolio building.
7. Currency hedging of underlying stock positions only (requires approval of
Global Equities CIO).
TOLI GLOBAL- ROCHE RETIREE WELFARE INVESTMENT TRUST
(EUROPEAN PORTION OF THE GLOBAL ACCOUNT)
1. Investment will be composed primarily of securities publicly traded
represented in the EMI as well as the stock exchanges of Mexico, Thailand,
Indonesia, Philippines, Taiwan, and South
<PAGE>
Korea, as well as options and futures contracts related to those securities
and convertible bonds of small capitalization companies. No options,
futures, or other derivatives will add any leverage to the portfolio.
Investment may also be made in cash or in the equivalents of cash or in any
commingled money market account maintained by Prudential.
2. Investments will be targeted primarily (i.e. a minimum of 70% of the
invested portion of the portfolio) in securities of companies which meet
Global Equities definition of small capitalization companies. Throughout
the world, Global Equities uses the largest market cap of the stocks in
lowest 20% of the market capitalization, within the U. S. markets as its
upper capitalization limit (currently $1.5 billion), except in Japan where
Global Equities applies the 20% test separately due to currency
fluctuations. (In Japan, the upper limit is currently $1.5 billion). The
majority of investments to be in the stocks with market capitalization less
than $750 million. Stocks which are included in the portfolio not meeting
the cap size definition should normally be ones which are constituents of
the EMI, except for Southeast Asia where larger traded stocks may be used.
3. No more than 7% of any regional sub-portfolio will be invested in any one
company at the time of purchase; no more than 3% of the total global
portfolio will be so invested.
4. The portfolio will not purchase more than 10% of the issued capital of any
one company. The regional portfolios are generally kept diversified in 30
to 60 names. Industry weights are determined on a bottom up basis but
monitored at the portfolio level and may cut back to limit potential sector
risk.
5. Investments in cash and related instruments will not exceed 17% of the
portfolio, except during initial building.
6. Currency hedging will be allowed, although it is not anticipated that
Global Equities will employ an active currency overlay program. Any
currency hedging must be covered by an underlying cash/stock position.
7. Within the global portfolio, none of the four regions (Japan, Southeast
Asia, Europe, or North America) will be weighted at time of purchase (or
allocation shift) by more than 12% of the benchmark weight or less than 12%
of the benchmark weight. This 12% guideline will also apply to country
weights within each regional sub-portfolio.
GENERAL
Subject to the investment guidelines for the Client Accounts described herein or
as subsequently notified to Sub-Investment Manager in writing:
1. The Client Accounts may contain securities which are or were the subject of
a relevant offer or issue, whether at the time Sub-Investment Manager
acquires them on behalf of Investment Manager, within a period of 12 months
preceding that or otherwise. For the purpose of this paragraph, a "relevant
offer or issue" is an offer or issue of any securities (whether or not
those securities are to be listed on the London Stock Exchange or any other
recognized or designated investment exchange) which is or was sponsored,
underwritten, managed or arranged, or in connection with which other
services were provided, by Sub-Investment Manager or a connected person.
2. Sub-Investment Manager may not commit Investment Manager to any obligation
to underwrite any issue or offer for sale of securities.
3. Sub-Investment Manager may, on behalf of Investment Manager, acquire or
dispose of units in a
<PAGE>
regulated collective investment scheme, whether or
not operated, managed or advised by Sub-Investment Manager or a connected
person.
4. Sub-Investment Manager may enter into repo or reverse repo transactions but
may not otherwise lend or borrow securities for any purpose.
5. Sub-Investment Manager is authorized by Investment Manager to deal in
warrants, options (including traded options) futures or contracts for
differences on behalf of Investment Manager (provided they are investments
as defined herein). The limits on margins will vary as between the Client
Accounts as set out in Schedule B above and the Prospectuses and Statements
of Additional Information mentioned therein.
6. Where the requisite currency of settlement is not the Client Accounts
Currency Sub-Investment Manager shall be entitled to use spot or forward
foreign exchange contracts (and accordingly enter into them on Investment
Manager's behalf) to fund the acquisition of spot or forward investments or
dispose of sale proceeds in a foreign currency. Notwithstanding
Sub-Investment Manager's right to do this, Investment Manager accepts that
if a liability in one currency is matched by an asset in a different
currency, or if any investment acquired or sold hereunder is denominated or
paid for in a currency other than the Client Accounts Currency, a movement
of exchange rates may be unfavorable rather than favorable, on the gain or
loss otherwise experienced on the investment.
PRUDENTIAL INTERMEDIATE GLOBAL INCOME FUND, INC.
Distribution Agreement
Agreement made as of June 1, 1998, between Prudential Intermediate
Global Income Fund, Inc. (the Fund), and Prudential Investment Management
Services LLC, a Delaware limited liability company (the Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the Investment Company Act), as a non-diversified, open-end,
management investment company and it is in the interest of the Fund to offer its
shares for sale continuously;
WHEREAS, the shares of the Fund may be divided into classes and/or
series (all such shares being referred to herein as Shares) and the Fund
currently is authorized to offer Class A, Class B, Class C and Class Z Shares;
WHEREAS, the Distributor is a broker-dealer registered under the
Securities Exchange Act of 1934, as amended, and is engaged in the business of
selling shares of registered investment companies either directly or through
other broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into an
agreement with each other, with respect to the continuous offering of the Fund's
Shares from and after the date hereof in order to promote the growth of the Fund
and facilitate the distribution of its Shares; and
WHEREAS, the Fund has adopted a plan (or plans) of distribution
pursuant to Rule 12b-1 under the Investment Company Act with respect to certain
of its classes and/or series of Shares (the Plans) authorizing payments by the
Fund to the Distributor with respect to the distribution of such classes and/or
series of Shares and the maintenance of related shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor
The Fund hereby appoints the Distributor as the principal
underwriter and distributor of the Shares of the Fund to sell Shares to the
public on behalf of the Fund and the Distributor hereby accepts such appointment
and agrees to act hereunder. The Fund hereby agrees during the term of this
Agreement to sell Shares of the Fund through the Distributor on the terms and
conditions set forth below.
<PAGE>
Section 2. Exclusive Nature of Duties
The Distributor shall be the exclusive representative of the Fund to
act as principal underwriter and distributor of the Fund's Shares, except that:
2.1 The exclusive rights granted to the Distributor to sell Shares
of the Fund shall not apply to Shares of the Fund issued in connection with the
merger or consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding shares of any such company by
the Fund.
2.2 Such exclusive rights shall not apply to Shares issued by the
Fund pursuant to reinvestment of dividends or capital gains distributions or
through the exercise of any conversion feature or exchange privilege.
2.3 Such exclusive rights shall not apply to Shares issued by the
Fund pursuant to the reinstatement privilege afforded redeeming shareholders.
2.4 Such exclusive rights shall not apply to purchases made through
the Fund's transfer and dividend disbursing agent in the manner set forth in the
currently effective Prospectus of the Fund. The term "Prospectus" shall mean the
Prospectus and Statement of Additional Information included as part of the
Fund's Registration Statement, as such Prospectus and Statement of Additional
Information may be amended or supplemented from time to time, and the term
"Registration Statement" shall mean the Registration Statement filed by the Fund
with the Securities and Exchange Commission and effective under the Securities
Act of 1933, as amended (Securities Act), and the Investment Company Act, as
such Registration Statement is amended from time to time.
Section 3. Purchase of Shares from the Fund
3.1 The Distributor shall have the right to buy from the Fund on
behalf of investors the Shares needed, but not more than the Shares needed
(except for clerical errors in transmission) to fill unconditional orders for
Shares placed with the Distributor by investors or registered and qualified
securities dealers and other financial institutions (selected dealers).
3.2 The Shares shall be sold by the Distributor on behalf of the
Fund and delivered by the Distributor or selected dealers, as described in
Section 6.4 hereof, to investors at the offering price as set forth in the
Prospectus.
3.3 The Fund shall have the right to suspend the sale of any or all
classes and/or series of its Shares at times when redemption is suspended
pursuant to
2
<PAGE>
the conditions in Section 4.3 hereof or at such other times as may be determined
by the Board. The Fund shall also have the right to suspend the sale of any or
all classes and/or series of its Shares if a banking moratorium shall have been
declared by federal or New Jersey authorities.
3.4 The Fund, or any agent of the Fund designated in writing by the
Fund, shall be promptly advised of all purchase orders for Shares received by
the Distributor. Any order may be rejected by the Fund; provided, however, that
the Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Shares. The Fund (or its agent) will confirm
orders upon their receipt, will make appropriate book entries and upon receipt
by the Fund (or its agent) of payment therefor, will deliver deposit receipts
for such Shares pursuant to the instructions of the Distributor. Payment shall
be made to the Fund in New York Clearing House funds or federal funds. The
Distributor agrees to cause such payment and such instructions to be delivered
promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Shares by the Fund
4.1 Any of the outstanding Shares may be tendered for redemption at
any time, and the Fund agrees to repurchase or redeem the Shares so tendered in
accordance with its Declaration of Trust as amended from time to time, and in
accordance with the applicable provisions of the Prospectus. The price to be
paid to redeem or repurchase the Shares shall be equal to the net asset value
determined as set forth in the Prospectus. All payments by the Fund hereunder
shall be made in the manner set forth in Section 4.2 below.
4.2 The Fund shall pay the total amount of the redemption price as
defined in the above paragraph pursuant to the instructions of the Distributor
on or before the seventh day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of Shares shall be
paid by the Fund as follows: (i) in the case of Shares subject to a contingent
deferred sales charge, any applicable contingent deferred sales charge shall be
paid to the Distributor, and the balance shall be paid to or for the account of
the redeeming shareholder, in each case in accordance with applicable provisions
of the Prospectus; and (ii) in the case of all other Shares, proceeds shall be
paid to or for the account of the redeeming shareholder, in each case in
accordance with applicable provisions of the Prospectus.
4.3 Redemption of any class and/or series of Shares or payment may
be suspended at times when the New York Stock Exchange is closed for other than
customary weekends and holidays, when trading on said Exchange is restricted,
when an emergency exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or during any
other period when the Securities and Exchange Commission, by order, so permits.
3
<PAGE>
Section 5. Duties of the Fund
5.1 Subject to the possible suspension of the sale of Shares as
provided herein, the Fund agrees to sell its Shares so long as it has Shares of
the respective class and/or series available.
5.2 The Fund shall furnish the Distributor copies of all
information, financial statements and other papers which the Distributor may
reasonably request for use in connection with the distribution of Shares, and
this shall include one certified copy, upon request by the Distributor, of all
financial statements prepared for the Fund by independent public accountants.
The Fund shall make available to the Distributor such number of copies of its
Prospectus and annual and interim reports as the Distributor shall reasonably
request.
5.3 The Fund shall take, from time to time, but subject to the
necessary approval of the Board and the shareholders, all necessary action to
fix the number of authorized Shares and such steps as may be necessary to
register the same under the Securities Act, to the end that there will be
available for sale such number of Shares as the Distributor reasonably may
expect to sell. The Fund agrees to file from time to time such amendments,
reports and other documents as may be necessary in order that there will be no
untrue statement of a material fact in the Registration Statement, or necessary
in order that there will be no omission to state a material fact in the
Registration Statement which omission would make the statements therein
misleading.
5.4 The Fund shall use its best efforts to notify such states as the
Distributor and the Fund may approve of its intention to sell any appropriate
number of its Shares; provided that the Fund shall not be required to amend its
Articles of Incorporation or By-Laws to comply with the laws of any state, to
maintain an office in any state, to change the terms of the offering of its
Shares in any state from the terms set forth in its Registration Statement, to
qualify as a foreign corporation in any state or to consent to service of
process in any state other than with respect to claims arising out of the
offering of its Shares. Any such notification may be withheld, terminated or
withdrawn by the Fund at any time in its discretion. As provided in Section 9
hereof, the expense of notification and maintenance of notification shall be
borne by the Fund. The Distributor shall furnish such information and other
material relating to its affairs and activities as may be required by the Fund
in connection with such notifications.
4
<PAGE>
Section 6. Duties of the Distributor
6.1 The Distributor shall devote reasonable time and effort to
effect sales of Shares, but shall not be obligated to sell any specific number
of Shares. Sales of the Shares shall be on the terms described in the
Prospectus. The Distributor may enter into like arrangements with other
investment companies. The Distributor shall compensate the selected dealers as
set forth in the Prospectus.
6.2 In selling the Shares, the Distributor shall use its best
efforts in all respects duly to conform with the requirements of all federal and
state laws relating to the sale of such securities. Neither the Distributor nor
any selected dealer nor any other person is authorized by the Fund to give any
information or to make any representations, other than those contained in the
Registration Statement or Prospectus and any sales literature approved by
appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures for the
confirmation of sales to investors and selected dealers, the collection of
amounts payable by investors and selected dealers on such sales and the
cancellation of unsettled transactions, as may be necessary to comply with the
requirements of Securities Exchange Act Rule 10b-10 and the rules of the
National Association of Securities Dealers, Inc. (NASD).
6.4 The Distributor shall have the right to enter into selected
dealer agreements with registered and qualified securities dealers and other
financial institutions of its choice for the sale of Shares, provided that the
Fund shall approve the forms of such agreements. Within the United States, the
Distributor shall offer and sell Shares only to such selected dealers as are
members in good standing of the NASD or are institutions exempt from
registration under applicable federal securities laws. Shares sold to selected
dealers shall be for resale by such dealers only at the offering price
determined as set forth in the Prospectus.
Section 7. Payments to the Distributor
7.1 With respect to classes and/or series of Shares which impose a
front-end sales charge, the Distributor shall receive and may retain any portion
of any front-end sales charge which is imposed on such sales and not reallocated
to selected dealers as set forth in the Prospectus, subject to the limitations
of Rule 2830 of the Conduct Rules of the NASD. Payment of these amounts to the
Distributor is not contingent upon the adoption or continuation of any
applicable Plans.
7.2 With respect to classes and/or series of Shares which impose a
contingent deferred sales charge, the Distributor shall receive and may retain
any contingent deferred sales charge which is imposed on such sales as set forth
in the Prospectus, subject to the limitations of Rule 2830 of the Conduct Rules
of the NASD.
5
<PAGE>
Payment of these amounts to the Distributor is not contingent upon the adoption
or continuation of any Plan.
Section 8. Payment of the Distributor under the Plan
8.1 The Fund shall pay to the Distributor as compensation for
services under any Plans adopted by the Fund and this Agreement a distribution
and service fee with respect to the Fund's classes and/or series of Shares as
described in each of the Fund's respective Plans and this Agreement.
8.2 So long as a Plan or any amendment thereto is in effect, the
Distributor shall inform the Board of the commissions and account servicing fees
with respect to the relevant class and/or series of Shares to be paid by the
Distributor to account executives of the Distributor and to broker-dealers,
financial institutions and investment advisers which have dealer agreements with
the Distributor. So long as a Plan (or any amendment thereto) is in effect, at
the request of the Board or any agent or representative of the Fund, the
Distributor shall provide such additional information as may reasonably be
requested concerning the activities of the Distributor hereunder and the costs
incurred in performing such activities with respect to the relevant class and/or
series of Shares.
Section 9. Allocation of Expenses
The Fund shall bear all costs and expenses of the continuous
offering of its Shares (except for those costs and expenses borne by the
Distributor pursuant to a Plan and subject to the requirements of Rule 12b-1
under the Investment Company Act), including fees and disbursements of its
counsel and auditors, in connection with the preparation and filing of any
required Registration Statements and/or Prospectuses under the Investment
Company Act or the Securities Act, and all amendments and supplements thereto,
and preparing and mailing annual and periodic reports and proxy materials to
shareholders (including but not limited to the expense of setting in type any
such Registration Statements, Prospectuses, annual or periodic reports or proxy
materials). The Fund shall also bear the cost of expenses of making notice
filings for the Shares for sale, and, if necessary or advisable in connection
therewith, of qualifying the Fund as a broker or dealer, in such states of the
United States or other jurisdictions as shall be selected by the Fund and the
Distributor pursuant to Section 5.4 hereof and the cost and expense payable to
each such state for continuing notification therein until the Fund decides to
discontinue such notification pursuant to Section 5.4 hereof. As set forth in
Section 8 above, the Fund shall also bear the expenses it assumes pursuant to
any Plan, so long as such Plan is in effect.
6
<PAGE>
Section 10. Indemnification
10.1 The Fund agrees to indemnify, defend and hold the Distributor,
its officers and directors and any person who controls the Distributor within
the meaning of Section 15 of the Securities Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
reasonable counsel fees incurred in connection therewith) which the Distributor,
its officers, members or any such controlling person may incur under the
Securities Act, or under common law or otherwise, arising out of or based upon
any untrue statement of a material fact contained in the Registration Statement
or Prospectus or arising out of or based upon any alleged omission to state a
material fact required to be stated in either thereof or necessary to make the
statements in either thereof not misleading, except insofar as such claims,
demands, liabilities or expenses arise out of or are based upon any such untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with information furnished by the Distributor to the Fund
for use in the Registration Statement or Prospectus; provided, however, that
this indemnity agreement shall not inure to the benefit of any such officer,
member or controlling person unless a court of competent jurisdiction shall
determine in a final decision on the merits, that the person to be indemnified
was not liable by reason of willful misfeasance, bad faith or gross negligence
in the performance of its duties, or by reason of its reckless disregard of its
obligations under this Agreement (disabling conduct), or, in the absence of such
a decision, a reasonable determination, based upon a review of the facts, that
the indemnified person was not liable by reason of disabling conduct, by (a) a
vote of a majority of a quorum of Directors or Directors who are neither
"interested persons" of the Fund as defined in Section 2(a)(19) of the
Investment Company Act nor parties to the proceeding, or (b) an independent
legal counsel in a written opinion. The Fund's agreement to indemnify the
Distributor, its officers and members and any such controlling person as
aforesaid is expressly conditioned upon the Fund's being promptly notified of
any action brought against the Distributor, its officers or members, or any such
controlling person, such notification to be given by letter or telegram
addressed to the Fund at its principal business office. The Fund agrees promptly
to notify the Distributor of the commencement of any litigation or proceedings
against it or any of its officers or directors in connection with the issue and
sale of any Shares.
10.2 The Distributor agrees to indemnify, defend and hold the Fund,
its officers and Directors and any person who controls the Fund, if any, within
the meaning of Section 15 of the Securities Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending against such claims, demands or liabilities
and any reasonable counsel fees incurred in connection therewith) which the
Fund, its officers and Directors or any such controlling person may incur under
the Securities Act or under common law or otherwise, but only to the extent that
such liability or expense incurred by the Fund, its
7
<PAGE>
Directors or officers or such controlling person resulting from such claims or
demands shall arise out of or be based upon any alleged untrue statement of a
material fact contained in information furnished by the Distributor to the Fund
for use in the Registration Statement or Prospectus or shall arise out of or be
based upon any alleged omission to state a material fact in connection with such
information required to be stated in the Registration Statement or Prospectus or
necessary to make such information not misleading. The Distributor's agreement
to indemnify the Fund, its officers and directors and any such controlling
person as aforesaid, is expressly conditioned upon the Distributor's being
promptly notified of any action brought against the Fund, its officers and
Directors or any such controlling person, such notification being given to the
Distributor at its principal business office.
Section 11. Duration and Termination of this Agreement
11.1 This Agreement shall become effective as of the date first
above written and shall remain in force for two years from the date hereof and
thereafter, but only so long as such continuance is specifically approved at
least annually by (a) the Board of the Fund, or by the vote of a majority of the
outstanding voting securities of the applicable class and/or series of the Fund,
and (b) by the vote of a majority of those Directors who are not parties to this
Agreement or interested persons of any such parties and who have no direct or
indirect financial interest in this Agreement or in the operation of any of the
Fund's Plans or in any agreement related thereto (Independent Directors), cast
in person at a meeting called for the purpose of voting upon such approval.
11.2 This Agreement may be terminated at any time, without the
payment of any penalty, by a majority of the independent Directors or by vote of
a majority of the outstanding voting securities of the applicable class and/or
series of the Fund, or by the Distributor, on sixty (60) days' written notice to
the other party. This Agreement shall automatically terminate in the event of
its assignment.
11.3 The terms "affiliated person," "assignment," "interested
person" and "vote of a majority of the outstanding voting securities", when used
in this Agreement, shall have the respective meanings specified in the
Investment Company Act.
Section 12. Amendments to this Agreement
This Agreement may be amended by the parties only if such amendment
is specifically approved by (a) the Board of the Fund, or by the vote of a
majority of the outstanding voting securities of the applicable class and/or
series of the Fund, and (b) by the vote of a majority of the independent
Directors cast in person at a meeting called for the purpose of voting on such
amendment.
8
<PAGE>
Section 13. Separate Agreement as to Classes and/or Series
The amendment or termination of this Agreement with respect to any
class and/or series shall not result in the amendment or termination of this
Agreement with respect to any other class and/or series unless explicitly so
provided.
Section 14. Governing Law
The provisions of this Agreement shall be construed and interpreted
in accordance with the laws of the State of New Jersey as at the time in effect
and the applicable provisions of the Investment Company Act. To the extent that
the applicable law of the State of New Jersey, or any of the provisions herein,
conflict with the applicable provisions of the Investment Company Act, the
latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year above written.
Prudential Investment Management Services LLC
By: /s/ BRIAN M. STORMS
--------------------------------------
Brian M. Storms
Executive Vice President
Prudential Intermediate Global Income Fund, Inc.
By: /s/ ROBERT F. GUNIA
--------------------------------------
Robert F. Gunia
Vice President
9
DEALER AGREEMENT
PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC
Prudential Investment Management Services LLC ("Distributor") and
_________________ ("Dealer") have agreed that Dealer will participate in the
distribution of shares ("Shares") of all the funds and series thereof (as they
may exist from time to time) comprising the Prudential Mutual Fund Family (each
a "Fund" and collectively the "Funds") and any classes thereof for which
Distributor now or in the future serves as principal underwriter and
distributor, subject to the terms of this Dealer Agreement ("Agreement"). Any
such additional Funds will be included in this Agreement upon Distributor's
written notification to Dealer.
1. LICENSING
a. Dealer represents and warrants that it is: (i) a broker-dealer
registered with the Securities and Exchange Commission ("SEC"); (ii) a member in
good standing of the National Association of Securities Dealers, Inc. ("NASD");
and (iii) licensed by the appropriate regulatory agency of each state or other
jurisdiction in which Dealer will offer and sell Shares of the Funds, to the
extent necessary to perform the duties and activities contemplated by this
Agreement.
b. Dealer represents and warrants that each of its partners,
directors, officers, employees, and agents who will be utilized by Dealer with
respect to its duties and activities under this Agreement is either
appropriately licensed or exempt from such licensing requirements by the
appropriate regulatory agency of each state or other jurisdiction in which
Dealer will offer and sell Shares of the Funds.
c. Dealer agrees that: (i) termination or suspension of its
registration with the SEC; (ii) termination or suspension of its membership with
the NASD; or (iii) termination or suspension of its license to do business by
any state or other jurisdiction or federal regulatory agency shall immediately
cause the termination of this Agreement. Dealer further agrees to immediately
notify Distributor in writing of any such action or event.
d. Dealer agrees that this Agreement is in all respects subject to
the Conduct Rules of the NASD and such Conduct Rules shall control any provision
to the contrary in this Agreement.
e. Dealer agrees to be bound by and to comply with all applicable
state and federal laws and all rules and regulations promulgated thereunder
generally affecting the sale or distribution of mutual fund shares.
2. ORDERS
a. Dealer agrees to offer and sell Shares of the Funds (including
those of each of its classes) only at the regular public offering price
applicable to such Shares and in effect at the time of each transaction. The
procedures relating to all orders and the handling of each order (including the
manner of computing the net asset value of Shares and the effective time of
orders received from Dealer) are subject to: (i) the terms of the then current
prospectus and statement of
A-1
<PAGE>
additional information (including any supplements, stickers or amendments
thereto) relating to each Fund, as filed with the SEC ("Prospectus"); (ii) the
new account application for each Fund, as supplemented or amended from time to
time; and (iii) Distributor's written instructions and multiple class pricing
procedures and guidelines, as provided to Dealer from time to time. To the
extent that the Prospectus contains provisions that are inconsistent with this
Agreement or any other document, the terms of the Prospectus shall be
controlling.
b. Distributor reserves the right at any time, and without notice to
Dealer, to suspend the sale of Shares or to withdraw or limit the offering of
Shares. Distributor reserves the unqualified right not to accept any specific
order for the purchase or sale of Shares.
c. In all offers and sales of the Shares to the public, Dealer is
not authorized to act as broker or agent for, or employee of, Distributor, any
Fund or any other dealer, and Dealer shall not in any manner represent to any
third party that Dealer has such authority or is acting in such capacity.
Rather, Dealer agrees that it is acting as principal for Dealer's own account or
as agent on behalf of Dealer's customers in all transactions in Shares, except
as provided in Section 3.i. hereof. Dealer acknowledges that it is solely
responsible for all suitability determinations with respect to sales of Shares
of the Funds to Dealer's customers and that Distributor has no responsibility
for the manner of Dealer's performance of, or for Dealer's acts or omissions in
connection with, the duties and activities Dealer provides under this Agreement.
d. All orders are subject to acceptance by Distributor in its sole
discretion and become effective only upon confirmation by Distributor.
e. Distributor agrees that it will accept from Dealer orders placed
through a remote terminal or otherwise electronically transmitted via the
National Securities Clearing Corporation ("NSCC") Fund/Serv Networking program,
provided, however, that appropriate documentation thereof and agreements
relating thereto are executed by both parties to this Agreement, including in
particular the standard NSCC Networking Agreement and any other related
agreements between Distributor and Dealer deemed appropriate by Distributor, and
that all accounts opened or maintained pursuant to that program will be governed
by applicable NSCC rules and procedures. Both parties further agree that, if the
NSCC Fund/Serv Networking program is used to place orders, the standard NSCC
Networking Agreement will control insofar as there is any conflict between any
provision of the Dealer Agreement and the standard NSCC Networking Agreement.
3. DUTIES OF DEALER
a. Dealer agrees to purchase Shares only from Distributor or from
Dealer's customers.
b. Dealer agrees to enter orders for the purchase of Shares only
from Distributor and only for the purpose of covering purchase orders Dealer has
already received from its customers or for Dealer's own bona fide investment.
c. Dealer agrees to date and time stamp all orders received by
Dealer and promptly, upon receipt of any and all orders, to transmit to
Distributor all orders received prior to
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<PAGE>
the time described in the Prospectus for the calculation of each Fund's net
asset value so as to permit Distributor to process all orders at the price next
determined after receipt by Dealer, in accordance with the Prospectus. Dealer
agrees not to withhold placing orders for Shares with Distributor so as to
profit itself as a result of such inaction.
d. Dealer agrees to maintain records of all purchases and sales of
Shares made through Dealer and to furnish Distributor or regulatory authorities
with copies of such records upon request. In that regard, Dealer agrees that,
unless Dealer holds Shares as nominee for its customers or participates in the
NSCC Fund/Serv Networking program, at certain matrix levels, it will provide
Distributor with all necessary information to comply properly with all federal,
state and local reporting requirements and backup and nonresident alien
withholding requirements for its customer accounts including, without
limitation, those requirements that apply by treating Shares issued by the Funds
as readily tradable instruments. Dealer represents and agrees that all Taxpayer
Identification Numbers ("TINs") provided are certified, and that no account that
requires a certified TIN will be established without such certified TIN. With
respect to all other accounts, including Shares held by Dealer in omnibus
accounts and Shares purchased or sold through the NSCC Fund/Serv Networking
program, at certain matrix levels, Dealer agrees to perform all federal, state
and local tax reporting with respect to such accounts, including without
limitation redemptions and exchanges.
e. Dealer agrees to distribute or cause to be delivered to its
customers Prospectuses, proxy solicitation materials and related information and
proxy cards, semi-annual and annual shareholder reports and any other materials
in compliance with applicable legal requirements, except to the extent that
Distributor expressly undertakes to do so in writing.
f. Dealer agrees that if any Share is repurchased by any Fund or is
tendered for redemption within seven (7) business days after confirmation by
Distributor of the original purchase order from Dealer, Dealer shall forfeit its
right to any concession or commission received by Dealer with respect to such
Share and shall forthwith refund to Distributor the full concession allowed to
Dealer or commission paid to Dealer on the original sale. Distributor agrees to
notify Dealer of such repurchase or redemption within a reasonable time after
settlement. Termination or cancellation of this Agreement shall not relieve
Dealer from its obligation under this provision.
g. Dealer agrees that payment for Shares ordered from Distributor
shall be in Fed Funds, New York clearinghouse or other immediately available
funds and that such funds shall be received by Distributor by the earlier of:
(i) the end of the third (3rd) business day following Dealer's receipt of the
customer's order to purchase such Shares; or (ii) the settlement date
established in accordance with Rule 15c6-1 under the Securities Exchange Act of
1934, as amended. If such payment is not received by Distributor by such date,
Dealer shall forfeit its right to any concession or commission with respect to
such order, and Distributor reserves the right, without notice, forthwith to
cancel the sale, or, at its option, to sell the Shares ordered back to the Fund,
in which case Distributor may hold Dealer responsible for any loss, including
loss of profit, suffered by Distributor resulting from Dealer's failure to make
payment as aforesaid. If a purchase is made by check, the purchase is deemed
made upon conversion of the purchase instrument into Fed Funds, New York
clearinghouse or other immediately available funds.
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h. Dealer agrees that it: (i) shall assume responsibility for any
loss to the Fund caused by a correction to any order placed by Dealer that is
made subsequent to the trade date for the order, provided such order correction
was not based on any negligence on Distributor's part; and (ii) will immediately
pay such loss to the Fund upon notification.
i. Dealer agrees that in connection with orders for the purchase of
Shares on behalf of any IRAs, 401(k) plans or other retirement plan accounts, by
mail, telephone, or wire, Dealer shall act as agent for the custodian or trustee
of such plans (solely with respect to the time of receipt of the application and
payments), and Dealer shall not place such an order with Distributor until it
has received from its customer payment for such purchase and, if such purchase
represents the first contribution to such a retirement plan account, the
completed documents necessary to establish the retirement plan. Dealer agrees to
indemnify Distributor and its affiliates for any claim, loss, or liability
resulting from incorrect investment instructions received by Distributor from
Dealer.
j. Dealer agrees that it will not make any conditional orders for
the purchase or redemption of Shares and acknowledges that Distributor will not
accept conditional orders for Shares.
k. Dealer agrees that all out-of-pocket expenses incurred by it in
connection with its activities under this Agreement will be borne by Dealer.
l. Dealer agrees that it will keep in force appropriate broker's
blanket bond insurance policies covering any and all acts of Dealer's partners,
directors, officers, employees, and agents adequate to reasonably protect and
indemnify the Distributor and the Funds against any loss which any party may
suffer or incur, directly or indirectly, as a result of any action by Dealer or
Dealer's partners, directors, officers, employees, and agents.
m. Dealer agrees that it will maintain the required net capital as
specified by the rules and regulations of the SEC, NASD and other regulatory
authorities.
4. DEALER COMPENSATION
a. On each purchase of Shares by Dealer from Distributor, the total
sales charges and dealer concessions or commissions, if any, payable to Dealer
shall be as stated on Schedule A to this Agreement, which may be amended by
Distributor from time to time. Distributor reserves the right, without prior
notice, to suspend or eliminate such dealer concession or commissions by
amendment, sticker or supplement to the then current Prospectus for each Fund.
Such sales charges and dealer concessions or commissions, are subject to
reduction under a variety of circumstances as described in each Fund's then
current Prospectus. For an investor to obtain any reduction, Distributor must be
notified at the time of the sale that the sale qualifies for the reduced sales
charge. If Dealer fails to notify Distributor of the applicability of a
reduction in the sales charge at the time the trade is placed, neither
Distributor nor any Fund will be liable for amounts necessary to reimburse any
investor for the reduction that should have been effected. Dealer acknowledges
that no sales charge or concession or commission will be paid to Dealer on the
reinvestment of dividends or capital gains reinvestment or on Shares acquired in
exchange for Shares of another Fund, or class thereof, having the same sales
charge structure as the Fund, or class thereof, from which the exchange was
made, in accordance with the Prospectus.
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b. In accordance with the Funds' Prospectuses, Distributor or any
affiliate may, but is not obligated to, make payments to dealers from
Distributor's own resources as compensation for certain sales that are made at
net asset value ("Qualifying Sales"). If Dealer notifies Distributor of a
Qualifying Sale, Distributor may make a contingent advance payment up to the
maximum amount available for payment on the sale. If any of the Shares purchased
in a Qualifying Sale are redeemed within twelve (12) months of the end of the
month of purchase, Distributor shall be entitled to recover any advance payment
attributable to the redeemed Shares by reducing any account payable or other
monetary obligation Distributor may owe to Dealer or by making demand upon
Dealer for repayment in cash. Distributor reserves the right to withhold
advances to Dealer, if for any reason Distributor believes that it may not be
able to recover unearned advances from Dealer.
c. With respect to any Fund that offers Shares for which
distribution plans have been adopted under Rule 12b-1 under the Investment
Company Act of 1940, as amended ("Rule 12b-1 Plans"), Distributor also is
authorized to pay the Dealer continuing distribution and/or service fees, as
specified in Schedule A and the relevant Fund Prospectus, with respect to Shares
of any such Fund, to the extent that Dealer provides distribution, marketing,
administrative and other services and activities regarding the promotion of such
Shares and the maintenance of related shareholder accounts.
d. In connection with the receipt of distribution fees and/or
service fees under Rule 12b-1 Plans applicable to Shares purchased by Dealer's
customers, Distributor directs Dealer to provide enhanced shareholder services
such as: processing purchase and redemption transactions; establishing
shareholder accounts; and providing certain information and assistance with
respect to the Funds. (Redemption levels of shareholder accounts assigned to
Dealer will be considered in evaluating Dealer's continued ability to receive
payments of distribution and/or service fees.) In addition, Dealer agrees to
support Distributor's marketing efforts by, among other things, granting
reasonable requests for visits to Dealer's office by Distributor's wholesalers
and marketing representatives, including all Funds covered by a Rule 12b-1 Plan
on Dealer's "approved," "preferred" or other similar product lists, if
applicable, and otherwise providing satisfactory product, marketing and sales
support. Further, Dealer agrees to provide Distributor with supporting
documentation concerning the shareholder services provided, as Distributor may
reasonably request from time to time.
e. All Rule 12b-1 Plan distribution and/or servicing fees shall be
based on the value of Shares attributable to Dealer's customers and eligible for
such payment, and shall be calculated on the basis of and at the rates set forth
in the compensation schedule then in effect. Without prior approval by a
majority of the outstanding shares of a Fund, the aggregate annual fees paid to
Dealer pursuant to any Rule 12b-1 Plan shall not exceed the amounts stated as
the "annual maximums" in each Fund's Prospectus, which amount shall be a
specified percent of the value of the Fund's net assets held in Dealer's
customers' accounts that are eligible for payment pursuant to the Rule 12b-1
Plans (determined in the same manner as each Fund uses to compute its net assets
as set forth in its then current Prospectus).
f. The provisions of any Rule 12b-1 Plan between the Funds and the
Distributor shall control over this Agreement in the event of any inconsistency.
Each Rule 12b-1 Plan in effect on the date of this Agreement is described in the
relevant Fund's Prospectus. Dealer
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hereby acknowledges that all payments under Rule 12b-1 Plans are subject to
limitations contained in such Rule 12b-1 Plans and may be varied or discontinued
at any time.
5. REDEMPTIONS, REPURCHASES AND EXCHANGES
a. The Prospectus for each Fund describes the provisions whereby the
Fund, under all ordinary circumstances, will redeem Shares held by shareholders
on demand. Dealer agrees that it will not make any representations to
shareholders relating to the redemption of their Shares other than the
statements contained in the Prospectus and the underlying organizational
documents of the Fund, to which it refers, and that Dealer will pay as
redemption proceeds to shareholders the net asset value, minus any applicable
deferred sales charge or redemption fee, determined after receipt of the order
as discussed in the Prospectus.
b. Dealer agrees not to repurchase any Shares from its customers at
a price below that next quoted by the Fund for redemption or repurchase, i.e.,
at the net asset value of such Shares, less any applicable deferred sales
charge, or redemption fee, in accordance with the Fund's Prospectus. Dealer
shall, however, be permitted to sell Shares for the account of the customer or
record owner to the Funds at the repurchase price then currently in effect for
such Shares and may charge the customer or record owner a fair service fee or
commission for handling the transaction, provided Dealer discloses the fee or
commission to the customer or record owner. Nevertheless, Dealer agrees that it
shall not under any circumstances maintain a secondary market in such
repurchased Shares.
c. Dealer agrees that, with respect to a redemption order it has
made, if instructions in proper form, including any outstanding certificates,
are not received by Distributor within the time customary or the time required
by law, the redemption may be canceled forthwith without any responsibility or
liability on Distributor's part or on the part of any Fund, or Distributor, at
its option, may buy the shares redeemed on behalf of the Fund, in which latter
case Distributor may hold Dealer responsible for any loss, including loss of
profit, suffered by Distributor resulting from Distributor's failure to settle
the redemption.
d. Dealer agrees that it will comply with any restrictions and
limitations on exchanges described in each Fund's Prospectus, including any
restrictions or prohibitions relating to frequent purchases and redemptions
(i.e., market timing).
6. MULTIPLE CLASSES OF SHARES
Distributor may, from time to time, provide Dealer with written
guidelines or standards relating to the sale or distribution of Funds offering
multiple classes of Shares with different sales charges and distribution-related
operating expenses.
7. FUND INFORMATION
a. Dealer agrees that neither it nor any of its partners, directors,
officers, employees, and agents is authorized to give any information or make
any representations concerning Shares of any Fund except those contained in the
Fund's then current Prospectus or in materials provided by Distributor.
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b. Distributor will supply to Dealer Prospectuses, reasonable
quantities of sales literature, sales bulletins, and additional sales
information as provided by Distributor. Dealer agrees to use only advertising or
sales material relating to the Funds that: (i) is supplied by Distributor, or
(ii) conforms to the requirements of all applicable laws or regulations of any
government or authorized agency having jurisdiction over the offering or sale of
Shares of the Funds and is approved in writing by Distributor in advance of its
use. Such approval may be withdrawn by Distributor in whole or in part upon
written notice to Dealer, and Dealer shall, upon receipt of such notice,
immediately discontinue the use of such sales literature, sales bulletins and
advertising. Dealer is not authorized to modify or translate any such materials
without Distributor's prior written consent.
8. SHARES
a. Distributor acts solely as agent for the Fund and Distributor
shall have no obligation or responsibility with respect to Dealer's right to
purchase or sell Shares in any state or jurisdiction.
b. Distributor shall periodically furnish Dealer with information
identifying the states or jurisdictions in which it is believed that all
necessary notice, registration or exemptive filings for Shares have been made
under applicable securities laws such that offers and sales of Shares may be
made in such states or jurisdictions. Distributor shall have no obligation to
make such notice, registration or exemptive filings with respect to Shares in
any state or jurisdiction.
c. Dealer agrees not to transact orders for Shares in states or
jurisdictions in which it has been informed that Shares may not be sold or in
which it and its personnel are not authorized to sell Shares.
d. Distributor shall have no responsibility, under the laws
regulating the sale of securities in the United States or any foreign
jurisdiction, with respect to the qualification or status of Dealer or Dealer's
personnel selling Fund Shares. Distributor shall not, in any event, be liable or
responsible for the issue, form, validity, enforceability and value of such
Shares or for any matter in connection therewith.
e. Dealer agrees that it will make no offers or sales of Shares in
any foreign jurisdiction, except with the express written consent of
Distributor.
9. INDEMNIFICATION
a. Dealer agrees to indemnify, defend and hold harmless Distributor
and the Funds and their predecessors, successors, and affiliates, each current
or former partner, officer, director, employee, shareholder or agent and each
person who controls or is controlled by Distributor from any and all losses,
claims, liabilities, costs, and expenses, including attorney fees, that may be
assessed against or suffered or incurred by any of them howsoever they arise,
and as they are incurred, which relate in any way to: (i) any alleged violation
of any statute or regulation (including without limitation the securities laws
and regulations of the United States or any state or foreign country) or any
alleged tort or breach of contract, related to the offer or sale by Dealer of
Shares of the Funds pursuant to this Agreement (except to the extent that
Distributor's negligence or failure to follow correct instructions received from
Dealer is the cause of such loss,
A-7
<PAGE>
claim, liability, cost or expense); (ii) any redemption or exchange pursuant to
instructions received from Dealer or its partners, affiliates, officers,
directors, employees or agents; or (iii) the breach by Dealer of any of its
representations and warranties specified herein or the Dealer's failure to
comply with the terms and conditions of this Agreement, whether or not such
action, failure, error, omission, misconduct or breach is committed by Dealer or
its predecessor, successor, or affiliate, each current or former partner,
officer, director, employee or agent and each person who controls or is
controlled by Dealer.
b. Distributor agrees to indemnify, defend and hold harmless Dealer
and its predecessors, successors and affiliates, each current or former partner,
officer, director, employee or agent, and each person who controls or is
controlled by Dealer from any and all losses, claims, liabilities, costs and
expenses, including attorney fees, that may be assessed against or suffered or
incurred by any of them which arise, and which relate to any untrue statement of
or omission to state a material fact contained in the Prospectus or any written
sales literature or other marketing materials provided by the Distributor to the
Dealer, required to be stated therein or necessary to make the statements
therein not misleading.
c. Dealer agrees to notify Distributor, within a reasonable time, of
any claim or complaint or any enforcement action or other proceeding with
respect to Shares offered hereunder against Dealer or its partners, affiliates,
officers, directors, employees or agents, or any person who controls Dealer,
within the meaning of Section 15 of the Securities Act of 1933, as amended.
d. Dealer further agrees promptly to send Distributor copies of (i)
any report filed pursuant to NASD Conduct Rule 3070, including, without
limitation quarterly reports filed pursuant to Rule 3070(c), (ii) reports filed
with any other self-regulatory organization in lieu of Rule 3070 reports
pursuant to Rule 3070(e) and (iii) amendments to Dealer's Form BD.
e. Each party's obligations under these indemnification provisions
shall survive any termination of this Agreement.
10. TERMINATION; AMENDMENT
a. In addition to the automatic termination of this Agreement
specified in Section 1.c. of this Agreement, each party to this Agreement may
unilaterally cancel its participation in this Agreement by giving thirty (30)
days prior written notice to the other party. In addition, each party to this
Agreement may terminate this Agreement immediately by giving written notice to
the other party of that other party's material breach of this Agreement. Such
notice shall be deemed to have been given and to be effective on the date on
which it was either delivered personally to the other party or any officer or
member thereof, or was mailed postpaid or delivered to a telegraph office for
transmission to the other party's designated person at the addresses shown
herein or in the most recent NASD Manual.
b. This Agreement shall terminate immediately upon the appointment
of a Trustee under the Securities Investor Protection Act or any other act of
insolvency by Dealer.
c. The termination of this Agreement by any of the foregoing means
shall have no effect upon transactions entered into prior to the effective date
of termination and shall
A-8
<PAGE>
not relieve Dealer of its obligations, duties and indemnities specified in this
Agreement. A trade placed by Dealer subsequent to its voluntary termination of
this Agreement will not serve to reinstate the Agreement. Reinstatement, except
in the case of a temporary suspension of Dealer, will only be effective upon
written notification by Distributor.
d. This Agreement is not assignable or transferable and will
terminate automatically in the event of its "assignment," as defined in the
Investment Company Act of 1940, as amended and the rules, regulations and
interpretations thereunder. The Distributor may, however, transfer any of its
duties under this Agreement to any entity that controls or is under common
control with Distributor.
e. This Agreement may be amended by Distributor at any time by
written notice to Dealer. Dealer's placing of an order or accepting payment of
any kind after the effective date and receipt of notice of such amendment shall
constitute Dealer's acceptance of such amendment.
11. DISTRIBUTOR'S REPRESENTATIONS AND WARRANTIES
Distributor represents and warrants that:
a. It is a limited liability company duly organized and existing and
in good standing under the laws of the state of Delaware and is duly registered
or exempt from registration as a broker-dealer in all states and jurisdictions
in which it provides services as principal underwriter and distributor for the
Funds.
b. It is a member in good standing of the NASD.
c. It is empowered under applicable laws and by Distributor's
charter and by-laws to enter into this Agreement and perform all activities and
services of the Distributor provided for herein and that there are no
impediments, prior or existing, regulatory, self-regulatory, administrative,
civil or criminal matters affecting Distributor's ability to perform under this
Agreement.
d. All requisite actions have been taken to authorize Distributor to
enter into and perform this Agreement.
12. ADDITIONAL DEALER REPRESENTATIONS AND WARRANTIES
In addition to the representations and warranties found elsewhere in
this Agreement, Dealer represents and warrants that:
a. It is duly organized and existing and in good standing under the
laws of the state, commonwealth or other jurisdiction in which Dealer is
organized and that Dealer will not offer Shares of any Fund for sale in any
state or jurisdiction where such Shares may not be legally sold or where Dealer
is not qualified to act as a broker-dealer.
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b. It is empowered under applicable laws and by Dealer's
organizational documents to enter into this Agreement and perform all activities
and services of the Dealer provided for herein and that there are no
impediments, prior or existing, regulatory, self-regulatory, administrative,
civil or criminal matters affecting Dealer's ability to perform under this
Agreement.
c. All requisite actions have been taken to authorize Dealer to
enter into and perform this Agreement.
d. It is not, at the time of the execution of this Agreement,
subject to any enforcement or other proceeding with respect to its activities
under state or federal securities laws, rules or regulations.
13. SETOFF; DISPUTE RESOLUTION; GOVERNING LAW
a. Should any of Dealer's concession accounts with Distributor have
a debit balance, Distributor shall be permitted to offset and recover the amount
owed from any other account Dealer has with Distributor, without notice or
demand to Dealer.
b. In the event of a dispute concerning any provision of this
Agreement, either party may require the dispute to be submitted to binding
arbitration under the commercial arbitration rules and procedures of the NASD.
The parties agree that, to the extent permitted under such arbitration rules and
procedures, the arbitrators selected shall be from the securities industry.
Judgment upon any arbitration award may be entered by any state or federal court
having jurisdiction.
c. This Agreement shall be governed and construed in accordance with
the laws of the state of New Jersey, not including any provision which would
require the general application of the law of another jurisdiction.
14. INVESTIGATIONS AND PROCEEDINGS
The parties to this Agreement agree to cooperate fully in any
securities regulatory investigation or proceeding or judicial proceeding with
respect to each's activities under this Agreement and promptly to notify the
other party of any such investigation or proceeding.
15. CAPTIONS
All captions used in this Agreement are for convenience only, are
not a party hereof, and are not to be used in construing or interpreting any
aspect hereof.
16. ENTIRE UNDERSTANDING
This Agreement contains the entire understanding of the parties
hereto with respect to the subject matter contained herein and supersedes all
previous agreements. This Agreement shall be binding upon the parties hereto
when signed by Dealer and accepted by Distributor.
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17. SEVERABILITY
Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law.
If, however, any provision of this Agreement is held under applicable law to be
invalid, illegal, or unenforceable in any respect, such provision shall be
ineffective only to the extent of such invalidity, and the validity, legality
and enforceability of the remaining provisions of this Agreement shall not be
affected or impaired in any way.
18. ENTIRE AGREEMENT
This Agreement contains the entire understanding of the parties
hereto with respect to the subject matter contained herein and supersedes all
previous agreements and/or understandings of the parties. This Agreement shall
be binding upon the parties hereto when signed by Dealer and accepted by
Distributor.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year set forth below.
PRUDENTIAL INVESTMENT MANAGEMENT
SERVICES LLC
By: ____________________________________
Name: __________________________________
Title: _________________________________
Date: __________________________________
DEALER: ________________________________
By: ____________________________________
(Signature)
Name: __________________________________
Title: _________________________________
Address: _______________________________
_______________________________
_______________________________
Telephone: _____________________________
NASD CRD # _____________________________
Prudential Dealer # ____________________
(Internal Use Only)
Date: __________________________________
A-11
PRUDENTIAL INTERMEDIATE GLOBAL INCOME FUND, INC.
Amended and Restated
Distribution and Service Plan
(Class A Shares)
Introduction
The Distribution and Service Plan (the Plan) set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the Investment Company Act) and Rule 2830 of the Conduct
Rules of the National Association of Securities Dealers, Inc. (NASD) has been
adopted by Prudential Intermediate Global Income Fund, Inc. (the Fund) and by
Prudential Investment Management Services LLC, the Fund's distributor (the
Distributor).
The Fund has entered into a distribution agreement pursuant to which the
Fund will employ the Distributor to distribute Class A shares issued by the Fund
(Class A shares). Under the Plan, the Fund intends to pay to the Distributor, as
compensation for its services, a distribution and service fee with respect to
Class A shares.
A majority of the Board of Directors of the Fund, including a majority of
those Directors who are not "interested persons" of the Fund (as defined in the
Investment Company Act) and who have no direct or indirect financial interest in
the operation of this Plan or any agreements related to it (the Rule 12b-1
Directors), have determined by votes cast in person at a meeting called for the
purpose of voting on this Plan that there is a reasonable likelihood that
adoption and continuation of this Plan will benefit the Fund and its
shareholders. Expenditures under this Plan by the Fund for Distribution
Activities (defined below) are primarily intended to result in the sale of Class
A shares
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<PAGE>
of the Fund within the meaning of paragraph (a)(2) of Rule 12b-1 promulgated
under the Investment Company Act.
The purpose of the Plan is to create incentives to the Distributor and/or
other qualified broker-dealers and their account executives to provide
distribution assistance to their customers who are investors in the Fund, to
defray the costs and expenses associated with the preparation, printing and
distribution of prospectuses and sales literature and other promotional and
distribution activities and to provide for the servicing and maintenance of
shareholder accounts.
The Plan
The material aspects of the Plan are as follows:
1. Distribution Activities
The Fund shall engage the Distributor to distribute Class A shares of the
Fund and to service shareholder accounts using all of the facilities of the
Distributor's distribution network, including sales personnel and branch office
and central support systems, and also using such other qualified broker-dealers
and financial institutions as the Distributor may select, including Prudential
Securities Incorporated (Prudential Securities) and Pruco Securities Corporation
(Prusec). Services provided and activities undertaken to distribute Class A
shares of the Fund are referred to herein as "Distribution Activities."
2. Payment of Service Fee
The Fund shall pay to the Distributor as compensation for providing
personal service and/or maintaining shareholder accounts a service fee of .15 of
1% per annum of the average daily net assets of the Class A shares (service
fee). The Fund shall
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<PAGE>
calculate and accrue daily amounts payable by the Class A shares of the Fund
hereunder and shall pay such amounts monthly or at such other intervals as the
Board of Directors may determine.
3. Payment for Distribution Activities
The Fund shall pay to the Distributor as compensation for its services a
distribution fee, together with the service fee (described in Section 2 hereof),
of .30 of 1% per annum of the average daily net assets of the Class A shares of
the Fund for the performance of Distribution Activities. The Fund shall
calculate and accrue daily amounts payable by the Class A shares of the Fund
hereunder and shall pay such amounts monthly or at such other intervals as the
Board of Directors may determine. Amounts payable under the Plan shall be
subject to the limitations of Rule 2830 of the NASD Conduct Rules.
Amounts paid to the Distributor by the Class A shares of the Fund will not
be used to pay the distribution expenses incurred with respect to any other
class of shares of the Fund except that distribution expenses attributable to
the Fund as a whole will be allocated to the Class A shares according to the
ratio of the sales of Class A shares to the total sales of the Fund's shares
over the Fund's fiscal year or such other allocation method approved by the
Board of Directors. The allocation of distribution expenses among classes will
be subject to the review of the Board of Directors.
The Distributor shall spend such amounts as it deems appropriate on
Distribution Activities which include, among others:
(a) sales commissions and trailer commissions paid to, or on account of,
account executives of the Distributor;
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<PAGE>
(b) indirect and overhead costs of the Distributor associated with
Distribution Activities, including central office and branch
expenses;
(c) amounts paid to Prudential Securities or Prusec for performing
services under a selected dealer agreement between Prudential
Securities or Prusec and the Distributor for sale of Class A shares
of the Fund, including sales commissions, trailer commissions paid
to, or on account of, agents and indirect and overhead costs
associated with Distribution Activities;
(d) advertising for the Fund in various forms through any available
medium, including the cost of printing and mailing Fund
prospectuses, statements of additional information and periodic
financial reports and sales literature to persons other than current
shareholders of the Fund; and
(e) sales commissions (including trailer commissions) paid to, or on
account of, broker-dealers and financial institutions (other than
Prudential Securities or Prusec) which have entered into selected
dealer agreements with the Distributor with respect to Class A
shares of the Fund.
4. Quarterly Reports; Additional Information
An appropriate officer of the Fund will provide to the Board of Directors
of the Fund for review, at least quarterly, a written report specifying in
reasonable detail the amounts expended for Distribution Activities (including
payment of the service fee) and the purposes for which such expenditures were
made in compliance with the requirements of Rule 12b-1. The Distributor will
provide to the Board of Directors of the Fund such additional information as the
Board shall from time to time reasonably request, including information about
Distribution Activities undertaken or to be undertaken by the Distributor.
The Distributor will inform the Board of Directors of the Fund of the
commissions and account servicing fees to be paid by the Distributor to account
executives of the
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Distributor and to broker-dealers and financial institutions which have selected
dealer agreements with the Distributor.
5. Effectiveness; Continuation
The Plan shall not take effect until it has been approved by a vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Class A shares of the Fund.
If approved by a vote of a majority of the outstanding voting securities
of the Class A shares of the Fund, the Plan shall, unless earlier terminated in
accordance with its terms, continue in full force and effect thereafter for so
long as such continuance is specifically approved at least annually by a
majority of the Board of Directors of the Fund and a majority of the Rule 12b-1
Directors by votes cast in person at a meeting called for the purpose of voting
on the continuation of the Plan.
6. Termination
This Plan may be terminated at any time, without the payment of any
penalty, by a majority of the Rule 12b-1 Directors, or by vote of a majority of
the outstanding voting securities (as defined in the Investment Company Act) of
the Class A shares of the Fund, or by the Distributor, on sixty (60) days'
written notice to the other party. This Plan shall automatically terminate in
the event of its assignment.
7. Amendments
The Plan may not be amended to change the combined service and
distribution fees to be paid as provided for in Sections 2 and 3 hereof so as to
increase materially the amounts payable under this Plan unless such amendment
shall be approved by the vote of a majority of the outstanding voting securities
(as defined in the Investment
5
<PAGE>
Company Act) of the Class A shares of the Fund. All material amendments of the
Plan shall be approved by a majority of the Board of Directors of the Fund and a
majority of the Rule 12b-1 Directors by votes cast in person at a meeting called
for the purpose of voting on the Plan.
8. Rule 12b-1 Directors
While the Plan is in effect, the selection and nomination of the Directors
shall be committed to the discretion of the Rule 12b-1 Directors.
9. Records
The Fund shall preserve copies of the Plan and any related agreements and
all reports made pursuant to Section 4 hereof, for a period of not less than six
years from the date of effectiveness of the Plan, such agreements or reports,
and for at least the first two years in an easily accessible place.
Dated: August 1, 1994 as amended
and restated on June 1, 1998
6
PRUDENTIAL INTERMEDIATE GLOBAL INCOME FUND, INC.
Amended and Restated
Distribution and Service Plan
(Class B Shares)
Introduction
The Distribution and Service Plan (the Plan) set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the Investment Company Act) and Rule 2830 of the Conduct
Rules of the National Association of Securities Dealers, Inc. (NASD) has been
adopted by Prudential Intermediate Global Income Fund, Inc. (the Fund) and by
Prudential Investment Management Services LLC, the Fund's distributor (the
Distributor).
The Fund has entered into a distribution agreement pursuant to which the
Fund will employ the Distributor to distribute Class B shares issued by the Fund
(Class B shares). Under the Plan, the Fund wishes to pay to the Distributor, as
compensation for its services, a distribution and service fee with respect to
Class B shares.
A majority of the Board of Directors of the Fund, including a majority who
are not "interested persons" of the Fund (as defined in the Investment Company
Act) and who have no direct or indirect financial interest in the operation of
this Plan or any agreements related to it (the Rule 12b-1 Directors), have
determined by votes cast in person at a meeting called for the purpose of voting
on this Plan that there is a reasonable likelihood that adoption and
continuation of this Plan will benefit the Fund and its shareholders.
Expenditures under this Plan by the Fund for Distribution Activities (defined
below) are primarily intended to result in the sale of Class B shares
1
<PAGE>
of the Fund within the meaning of paragraph (a)(2) of Rule 12b-1 promulgated
under the Investment Company Act.
The purpose of the Plan is to create incentives to the Distributor and/or
other qualified broker-dealers and their account executives to provide
distribution assistance to their customers who are investors in the Fund, to
defray the costs and expenses associated with the preparation, printing and
distribution of prospectuses and sales literature and other promotional and
distribution activities and to provide for the servicing and maintenance of
shareholder accounts.
The Plan
The material aspects of the Plan are as follows:
1. Distribution Activities
The Fund shall engage the Distributor to distribute Class B shares of the
Fund and to service shareholder accounts using all of the facilities of the
Distributor's distribution network including sales personnel and branch office
and central support systems, and also using such other qualified broker-dealers
and financial institutions as the Distributor may select, including Prudential
Securities Incorporated (Prudential Securities) and Pruco Securities Corporation
(Prusec). Services provided and activities undertaken to distribute Class B
shares of the Fund are referred to herein as "Distribution Activities."
2. Payment of Service Fee
The Fund shall pay to the Distributor as compensation for providing
personal service and/or maintaining shareholder accounts a service fee of .25 of
1% per annum of the average daily net assets of the Class B shares (service
fee). The Fund shall
2
<PAGE>
calculate and accrue daily amounts payable by the Class B shares of the Fund
hereunder and shall pay such amounts monthly or at such other intervals as the
Board of Directors may determine.
3. Payment for Distribution Activities
The Fund shall pay to the Distributor as compensation for its services a
distribution fee, together with the service fee (described in Section 2 hereof),
of .75 of 1% per annum of the average daily net assets of the Class B shares of
the Fund for the performance of Distribution Activities. The Fund shall
calculate and accrue daily amounts payable by the Class B shares of the Fund
hereunder and shall pay such amounts monthly or at such other intervals as the
Board of Directors may determine. Amounts payable under the Plan shall be
subject to the limitations of Rule 2830 of the NASD Conduct Rules.
Amounts paid to the Distributor by the Class B shares of the Fund will not
be used to pay the distribution expenses incurred with respect to any other
class of shares of the Fund except that distribution expenses attributable to
the Fund as a whole will be allocated to the Class B shares according to the
ratio of the sale of Class B shares to the total sales of the Fund's shares over
the Fund's fiscal year or such other allocation method approved by the Board of
Directors. The allocation of distribution expenses among classes will be subject
to the review of the Board of Directors. Payments hereunder will be applied to
distribution expenses in the order in which they are incurred, unless otherwise
determined by the Board of Directors.
The Distributor shall spend such amounts as it deems appropriate on
Distribution Activities which include, among others:
3
<PAGE>
(a) sales commissions (including trailer commissions) paid to, or on
account of, account executives of the Distributor;
(b) indirect and overhead costs of the Distributor associated with
performance of Distribution Activities including central office and
branch expenses;
(c) amounts paid to Prudential Securities or Prusec for performing
services under a selected dealer agreement between Prudential
Securities or Prusec and the Distributor for sale of Class B shares
of the Fund, including sales commissions and trailer commissions
paid to, or on account of, agents and indirect and overhead costs
associated with Distribution Activities;
(d) advertising for the Fund in various forms through any available
medium, including the cost of printing and mailing Fund
prospectuses, statements of additional information and periodic
financial reports and sales literature to persons other than current
shareholders of the Fund; and
(e) sales commissions (including trailer commissions) paid to, or on
account of, broker-dealers and other financial institutions (other
than Prudential Securities or Prusec) which have entered into
selected dealer agreements with the Distributor with respect to
Class B shares of the Fund.
4. Quarterly Reports; Additional Information
An appropriate officer of the Fund will provide to the Board of Directors
of the Fund for review, at least quarterly, a written report specifying in
reasonable detail the amounts expended for Distribution Activities (including
payment of the service fee) and the purposes for which such expenditures were
made in compliance with the requirements of Rule 12b-1. The Distributor will
provide to the Board of Directors of the Fund such additional information as
they shall from time to time reasonably request, including information about
Distribution Activities undertaken or to be undertaken by the Distributor.
4
<PAGE>
The Distributor will inform the Board of Directors of the Fund of the
commissions and account servicing fees to be paid by the Distributor to account
executives of the Distributor and to broker-dealers and other financial
institutions which have selected dealer agreements with the Distributor.
5. Effectiveness; Continuation
The Plan shall not take effect until it has been approved by a vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Class B shares of the Fund.
If approved by a vote of a majority of the outstanding voting securities
of the Class B shares of the Fund, the Plan shall, unless earlier terminated in
accordance with its terms, continue in full force and effect thereafter for so
long as such continuance is specifically approved at least annually by a
majority of the Board of Directors of the Fund and a majority of the Rule 12b-1
Directors by votes cast in person at a meeting called for the purpose of voting
on the continuation of the Plan.
6. Termination
This Plan may be terminated at any time, without the payment of any
penalty, by a majority of the Rule 12b-1 Directors, or by vote of a majority of
the outstanding voting securities (as defined in the Investment Company Act) of
the Class B shares of the Fund, or by the Distributor, on sixty (60) days'
written notice to the other party. This Plan shall automatically terminate in
the event of its assignment.
7. Amendments
The Plan may not be amended to change the combined service and
distribution expenses to be paid as provided for in Sections 2 and 3 hereof so
as to increase
5
<PAGE>
materially the amounts payable under this Plan unless such amendment shall be
approved by the vote of a majority of the outstanding voting securities (as
defined in the Investment Company Act) of the Class B shares of the Fund. All
material amendments of the Plan shall be approved by a majority of the Board of
Directors of the Fund and a majority of the Rule 12b-1 Directors by votes cast
in person at a meeting called for the purpose of voting on the Plan.
8. Rule 12b-1 Directors
While the Plan is in effect, the selection and nomination of the Rule 12b-1
Directors shall be committed to the discretion of the Rule 12b-1 Directors.
9. Records
The Fund shall preserve copies of the Plan and any related agreements and
all reports made pursuant to Section 4 hereof, for a period of not less than six
years from the date of effectiveness of the Plan, such agreements or reports,
and for at least the first two years in an easily accessible place.
Dated: August 1, 1994 as amended
and restated on June 1, 1998
6
PRUDENTIAL INTERMEDIATE GLOBAL INCOME FUND, INC.
Amended and Restated
Distribution and Service Plan
(Class C Shares)
Introduction
The Distribution and Service Plan (the Plan) set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the Investment Company Act) and Rule 2830 of the Conduct
Rules of the National Association of Securities Dealers, Inc. (NASD) has been
adopted by Prudential Intermediate Global Income Fund, Inc. (the Fund) and by
Prudential Investment Management Services LLC, the Fund's distributor (the
Distributor).
The Fund has entered into a distribution agreement pursuant to which the
Fund will employ the Distributor to distribute Class C shares issued by the Fund
(Class C shares). Under the Plan, the Fund wishes to pay to the Distributor, as
compensation for its services, a distribution and service fee with respect to
Class C shares.
A majority of the Board of Directors of the Fund, including a majority who
are not "interested persons" of the Fund (as defined in the Investment Company
Act) and who have no direct or indirect financial interest in the operation of
this Plan or any agreements related to it (the Rule 12b-1 Directors), have
determined by votes cast in person at a meeting called for the purpose of voting
on this Plan that there is a reasonable likelihood that adoption and
continuation of this Plan will benefit the Fund and its shareholders.
Expenditures under this Plan by the Fund for Distribution Activities (defined
below) are primarily intended to result in the sale of Class C shares
1
<PAGE>
of the Fund within the meaning of paragraph (a)(2) of Rule 12b-1 promulgated
under the Investment Company Act.
The purpose of the Plan is to create incentives to the Distributor and/or
other qualified broker-dealers and their account executives to provide
distribution assistance to their customers who are investors in the Fund, to
defray the costs and expenses associated with the preparation, printing and
distribution of prospectuses and sales literature and other promotional and
distribution activities and to provide for the servicing and maintenance of
shareholder accounts.
The Plan
The material aspects of the Plan are as follows:
1. Distribution Activities
The Fund shall engage the Distributor to distribute Class C shares of the
Fund and to service shareholder accounts using all of the facilities of the
Distributor's distribution network including sales personnel and branch office
and central support systems, and also using such other qualified broker-dealers
and financial institutions as the Distributor may select, including Prudential
Securities Incorporated (Prudential Securities) and Pruco Securities Corporation
(Prusec). Services provided and activities undertaken to distribute Class C
shares of the Fund are referred to herein as "Distribution Activities."
2. Payment of Service Fee
The Fund shall pay to the Distributor as compensation for providing
personal service and/or maintaining shareholder accounts a service fee of .25 of
1% per annum of the average daily net assets of the Class C shares (service
fee). The Fund shall
2
<PAGE>
calculate and accrue daily amounts payable by the Class C shares of the Fund
hereunder and shall pay such amounts monthly or at such other intervals as the
Board of Trustees may determine.
3. Payment for Distribution Activities
The Fund shall pay to the Distributor as compensation for its services a
distribution fee of .75 of 1% per annum of the average daily net assets of the
Class C shares of the Fund for the performance of Distribution Activities. The
Fund shall calculate and accrue daily amounts payable by the Class C shares of
the Fund hereunder and shall pay such amounts monthly or at such other intervals
as the Board of Directors may determine. Amounts payable under the Plan shall be
subject to the limitations of Rule 2830 of the NASD Conduct Rules.
Amounts paid to the Distributor by the Class C shares of the Fund will not
be used to pay the distribution expenses incurred with respect to any other
class of shares of the Fund except that distribution expenses attributable to
the Fund as a whole will be allocated to the Class C shares according to the
ratio of the sale of Class C shares to the total sales of the Fund's shares over
the Fund's fiscal year or such other allocation method approved by the Board of
Directors. The allocation of distribution expenses among classes will be subject
to the review of the Board of Directors. Payments hereunder will be applied to
distribution expenses in the order in which they are incurred, unless otherwise
determined by the Board of Directors.
The Distributor shall spend such amounts as it deems appropriate on
Distribution Activities which include, among others:
(a) sales commissions (including trailer commissions) paid to, or on
3
<PAGE>
account of, account executives of the Distributor;
(b) indirect and overhead costs of the Distributor associated with
performance of Distribution Activities including central office and
branch expenses;
(c) amounts paid to Prudential Securities or Prusec for performing
services under a selected dealer agreement between Prudential
Securities or Prusec and the Distributor for sale of Class C shares
of the Fund, including sales commissions and trailer commissions
paid to, or on account of, agents and indirect and overhead costs
associated with Distribution Activities;
(d) advertising for the Fund in various forms through any available
medium, including the cost of printing and mailing Fund
prospectuses, statements of additional information and periodic
financial reports and sales literature to persons other than current
shareholders of the Fund; and
(e) sales commissions (including trailer commissions) paid to, or on
account of, broker-dealers and other financial institutions (other
than Prudential Securities or Prusec) which have entered into
selected dealer agreements with the Distributor with respect to
Class C shares of the Fund.
4. Quarterly Reports; Additional Information
An appropriate officer of the Fund will provide to the Board of Directors
of the Fund for review, at least quarterly, a written report specifying in
reasonable detail the amounts expended for Distribution Activities (including
payment of the service fee) and the purposes for which such expenditures were
made in compliance with the requirements of Rule 12b-1. The Distributor will
provide to the Board of Directors of the Fund such additional information as
they shall from time to time reasonably request, including information about
Distribution Activities undertaken or to be undertaken by the Distributor.
The Distributor will inform the Board of Directors of the Fund of the
commissions
4
<PAGE>
and account servicing fees to be paid by the Distributor to account executives
of the Distributor and to broker-dealers and other financial institutions which
have selected dealer agreements with the Distributor.
5. Effectiveness; Continuation
The Plan shall not take effect until it has been approved by a vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Class C shares of the Fund.
If approved by a vote of a majority of the outstanding voting securities
of the Class C shares of the Fund, the Plan shall, unless earlier terminated in
accordance with its terms, continue in full force and effect thereafter for so
long as such continuance is specifically approved at least annually by a
majority of the Board of Directors of the Fund and a majority of the Rule 12b-1
Directors by votes cast in person at a meeting called for the purpose of voting
on the continuation of the Plan.
6. Termination
This Plan may be terminated at any time, without the payment of any
penalty, by a majority of the Rule 12b-1 Directors, or by vote of a majority of
the outstanding voting securities (as defined in the Investment Company Act) of
the Class C shares of the Fund, or by the Distributor, on sixty (60) days'
written notice to the other party. This Plan shall automatically terminate in
the event of its assignment.
7. Amendments
The Plan may not be amended to change the combined service and
distribution expenses to be paid as provided for in Sections 2 and 3 hereof so
as to increase materially the amounts payable under this Plan unless such
amendment shall be
5
<PAGE>
approved by the vote of a majority of the outstanding voting securities (as
defined in the Investment Company Act) of the Class C shares of the Fund. All
material amendments of the Plan shall be approved by a majority of the Board of
Directors of the Fund and a majority of the Rule 12b-1 Directors by votes cast
in person at a meeting called for the purpose of voting on the Plan.
8. Rule 12b-1 Directors
While the Plan is in effect, the selection and nomination of the Rule
12b-1 Directors shall be committed to the discretion of the Rule 12b-1
Directors.
9. Records
The Fund shall preserve copies of the Plan and any related agreements and
all reports made pursuant to Section 4 hereof, for a period of not less than six
years from the date of effectiveness of the Plan, such agreements or reports,
and for at least the first two years in an easily accessible place.
Dated: August 1, 1994 as amended
and restated on June 1, 1998
6
PRUDENTIAL INTERMEDIATE GLOBAL INCOME FUND, INC.
(the Fund)
AMENDED AND RESTATED PLAN PURSUANT TO RULE 18F-3
The Fund hereby adopts this plan pursuant to Rule 18f-3 under the
Investment Company Act of 1940 (the 1940 Act), setting forth the separate
arrangement and expense allocation of each class of shares in the Fund. Any
material amendment to this plan is subject to prior approval of the Board of
Directors, including a majority of the independent Directors.
CLASS CHARACTERISTICS
CLASS A SHARES: Class A shares are subject to a high initial sales charge and
a distribution and/or service fee pursuant to Rule 12b-1
under the 1940 Act (Rule 12b-1 fee) not to exceed .30 of
1% per annum of the average daily net assets of the
class. The initial sales charge is waived or reduced for
certain eligible investors.
CLASS B SHARES: Class B shares are not subject to an initial sales charge but
are subject to a high contingent deferred sales charge
(declining from 3% to zero over a four-year period)
which will be imposed on certain redemptions and a Rule
12b-1 fee not to exceed .75 of 1% per annum of the
average daily net assets of the class. The contingent
deferred sales charge is waived for certain eligible
investors. Class B shares automatically convert to Class
A shares approximately five years after purchase.
CLASS C SHARES: Class C shares issued before November 2, 1998 are not subject
to an initial sales charge but are subject to a 1%
contingent deferred sales charge which will be imposed
on certain redemptions within the first 12 month after
purchase and a Rule 12b-1 fee not to exceed 1% per annum
of the average daily net assets of the class. Class C
shares issued on or after November 2, 1998 are subject
to a low initial sales charge and a 1% contingent
deferred sales charge which will be imposed on certain
redemptions within the first 18 months after purchase
and a Rule 12b-1 fee not to exceed 1% per annum of the
average daily net assets of the class.
<PAGE>
Class Z SHARES: Class Z shares are not subject to either an initial or
contingent deferred sales charge, nor are they subject
to any Rule 12b-1 fee.
INCOME AND EXPENSE ALLOCATIONS
Income and expenses not allocated to a particular class, will be allocated
to each class on the basis of relative net assets (settled shares).
"Relative net assets (settled shares)" are net assets valued in accordance
with generally accepted accounting principles but excluding the value of
subscriptions receivable in relation to the net assets of the Fund. Any
realized and unrealized capital gains and losses will be allocated to each
class on the basis of the net asset value of that class in relation to the
net asset value of the Fund.
DIVIDENDS AND DISTRIBUTIONS
Dividends and other distributions paid by the Fund to each class of shares,
to the extent paid, will be paid on the same day and at the same time, and
will be determined in the same manner and will be in the same amount,
except that the amount of the dividends and other distributions declared
and paid by a particular class of the Fund may be different from that paid
by another class of the Fund because of Rule 12b-1 fees and other expenses
borne exclusively by that class.
EXCHANGE PRIVILEGE
Holders of Class A Shares, Class B Shares, Class C Shares and Class Z
Shares shall have such exchange privileges as set forth in the Fund's
current prospectus. Exchange privileges may vary among classes and among
holders of a Class.
CONVERSION FEATURES
Class B shares will automatically convert to Class A shares on a quarterly
basis approximately five years after purchase. Conversions will be effected
at relative net asset value without the imposition of any additional sales
charge.
GENERAL
A. Each class of shares shall have exclusive voting rights on any matter
submitted to shareholders that relates solely to its arrangement and shall
have separate voting rights on any matter submitted to shareholders in
which the interests of one class differ from the interests of any other
class.
B. On an ongoing basis, the Directors, pursuant to their fiduciary
responsibilities under the 1940 Act and otherwise, will monitor the Fund
for the existence of any material conflicts among the interests of its
several classes. The Directors,
2
<PAGE>
including a majority of the independent Directors, shall take such action
as is reasonably necessary to eliminate any such conflicts that may
develop. Prudential Investments Fund Management LLC, the Fund's Manager,
will be responsible for reporting any potential or existing conflicts to
the Directors.
C. For purposes of expressing an opinion on the financial statements of the
Fund, the methodology and procedures for calculating the net asset value
and dividends/distributions of the Fund's several classes and the proper
allocation of income and expenses among such classes will be examined
annually by the Fund's independent auditors who, in performing such
examination, shall consider the factors set forth in the relevant auditing
standards adopted, from time to time, by the American Institute of
Certified Public Accountants.
Date: May 9, 1996
Amended: November 2, 1998
3
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<NAME> PRUDENTIAL INTERMEDIATE GLOBAL INCOME FUND, INC.
<SERIES>
<NUMBER> 001
<NAME> INTERMEDIATE GLOBAL INCOME FUND, INC. (CLASS A)
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 143,537,701
<INVESTMENTS-AT-VALUE> 141,372,542
<RECEIVABLES> 2,993,250
<ASSETS-OTHER> 202,070
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 144,567,862
<PAYABLE-FOR-SECURITIES> 1,659,338
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,328,957
<TOTAL-LIABILITIES> 2,988,295
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 219,642,878
<SHARES-COMMON-STOCK> 17,723,892
<SHARES-COMMON-PRIOR> 18,882,074
<ACCUMULATED-NII-CURRENT> 1,698,181
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (77,319,015)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,442,477)
<NET-ASSETS> 141,579,567
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,574,781
<OTHER-INCOME> 0
<EXPENSES-NET> 1,140,733
<NET-INVESTMENT-INCOME> 4,434,048
<REALIZED-GAINS-CURRENT> 2,253,030
<APPREC-INCREASE-CURRENT> (610,528)
<NET-CHANGE-FROM-OPS> 6,076,550
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,434,048)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (200,545)
<NUMBER-OF-SHARES-SOLD> 4,706,014
<NUMBER-OF-SHARES-REDEEMED> (15,821,493)
<SHARES-REINVESTED> 1,841,451
<NET-CHANGE-IN-ASSETS> (7,832,071)
<ACCUMULATED-NII-PRIOR> 1,577,820
<ACCUMULATED-GAINS-PRIOR> (79,251,139)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 544,120
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,140,733
<AVERAGE-NET-ASSETS> 134,735,000
<PER-SHARE-NAV-BEGIN> 7.91
<PER-SHARE-NII> 0.24
<PER-SHARE-GAIN-APPREC> 0.10
<PER-SHARE-DIVIDEND> (0.24)
<PER-SHARE-DISTRIBUTIONS> (0.02)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 7.99
<EXPENSE-RATIO> 1.54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
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<CIK> 0000831015
<NAME> PRUDENTIAL INTERMEDIATE GLOBAL INCOME FUND, INC.
<SERIES>
<NUMBER> 002
<NAME> INTERMEDIATE GLOBAL INCOME FUND, INC. (CLASS B)
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 143,537,701
<INVESTMENTS-AT-VALUE> 141,372,542
<RECEIVABLES> 2,993,250
<ASSETS-OTHER> 202,070
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 144,567,862
<PAYABLE-FOR-SECURITIES> 1,659,338
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,328,957
<TOTAL-LIABILITIES> 2,988,295
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 219,642,878
<SHARES-COMMON-STOCK> 17,723,892
<SHARES-COMMON-PRIOR> 18,882,074
<ACCUMULATED-NII-CURRENT> 1,698,181
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (77,319,015)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,442,477)
<NET-ASSETS> 141,579,567
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,574,781
<OTHER-INCOME> 0
<EXPENSES-NET> 1,140,733
<NET-INVESTMENT-INCOME> 4,434,048
<REALIZED-GAINS-CURRENT> 2,253,030
<APPREC-INCREASE-CURRENT> (610,528)
<NET-CHANGE-FROM-OPS> 6,076,550
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,434,048)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (200,545)
<NUMBER-OF-SHARES-SOLD> 4,706,014
<NUMBER-OF-SHARES-REDEEMED> (15,821,493)
<SHARES-REINVESTED> 1,841,451
<NET-CHANGE-IN-ASSETS> (7,832,071)
<ACCUMULATED-NII-PRIOR> 1,577,820
<ACCUMULATED-GAINS-PRIOR> (79,251,139)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 544,120
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,140,733
<AVERAGE-NET-ASSETS> 8,380,000
<PER-SHARE-NAV-BEGIN> 7.92
<PER-SHARE-NII> 0.22
<PER-SHARE-GAIN-APPREC> 0.08
<PER-SHARE-DIVIDEND> (0.22)
<PER-SHARE-DISTRIBUTIONS> (0.01)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 7.99
<EXPENSE-RATIO> 2.14
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
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<CIK> 0000831015
<NAME> PRUDENTIAL INTERMEDIATE GLOBAL INCOME FUND, INC.
<SERIES>
<NUMBER> 003
<NAME> INTERMEDIATE GLOBAL INCOME FUND, INC. (CLASS C)
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 143,537,701
<INVESTMENTS-AT-VALUE> 141,372,542
<RECEIVABLES> 2,993,250
<ASSETS-OTHER> 202,070
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 144,567,862
<PAYABLE-FOR-SECURITIES> 1,659,338
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,328,957
<TOTAL-LIABILITIES> 2,988,295
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 219,642,878
<SHARES-COMMON-STOCK> 17,723,892
<SHARES-COMMON-PRIOR> 18,882,074
<ACCUMULATED-NII-CURRENT> 1,698,181
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (77,319,015)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,442,477)
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