LETTER TO
SHAREHOLDERS
------------------------
May 10, 1994
Dear Shareholder:
The last six months were filled with potholes for utility investors. Rising
interest rates, regulatory uncertainty and a sharp correction in both the bond
and stock markets all took their toll on utility shares. In this period, the
Global Utility Fund experienced somewhat negative returns. However, the Fund's
performance was quite good relative to the unmanaged S&P Utility Index, which
was down 13.4%. The Fund's longer term performance remains compelling. Since
inception, the Fund is ahead of both the S&P Utility Index and the broad equity
market, as represented by the S&P 500 Index.
Fund Overview
The Fund's assets are invested in a high quality, diversified list of equity
and debt securities in both foreign and domestic markets. As of March 31, 1994,
your Fund's assets were allocated as follows: 74% in equities, 22% in bonds and
4% in cash. Foreign securities represent 34.9% of the total portfolio.
During the recent market correction, the Fund's strategy of diversifying away
from the traditional utility markets significantly enhanced relative
performance, as did our above average exposure to the international sector. The
portfolio's best performing stock over the past six months was an Italian
issue, STET (approximately 1.6% of net assets as of March 31, 1994), which owns
a stake in three Italian telecom companies that will be merged with two
state-owned telecom companies over the summer. If successful, the merger will
create Italy's third largest company, tentatively called Telecom Italia. The
rapid growth in Italy's telecommunications market, in addition to optimism over
a new conservative government, helped push STET's stock price up by more than
50% since last fall. Gains in overseas holdings like STET helped offset the
substantial declines in several of the Fund's domestic utilities such as Puget
Sound Power & Light and AT&T (1.4% and 4.4% of the Fund's March 31, 1994
portfolio, respectively), each of which declined in price by more than 10%
during the correction.
Silver Lining
The silver lining to the correction is that the number of attractive
investment options offering growth prospects and above average yields has
increased, both here and abroad. In addition, two trends in the international
markets -- rapid growth in developing countries and privatization -- offer the
Fund exciting opportunities going forward. The Fund initiated a position in
Hong Kong Telecom (about 0.36% of net assets as of March 31, 1994), the
dominant provider of telecommunications in Hong Kong, on a recent dip in its
stock price. The company has been expanding aggressively to stay ahead of the
British colony's rapid growth, and its plans include a recently announced joint
venture with the Chinese government to install international underwater cables.
Also, several governments, such as Denmark's, have announced plans to privatize
utilities, which should open new avenues for investment.
-3-
<PAGE>
Going Forward
We expect that the rapid growth of developing countries and privatization
will remain important long-term themes for the Global Utility Fund. And while
no investment program can promise consistently high returns, we believe that
the Fund's well diversified holdings will continue to offer a competitive
return and should help provide protection from setbacks in any one segment of
the utility market.
As always, it is a pleasure having you as a shareholder of the Global Utility
Fund, Inc., and we remain committed to managing the Fund for your long-term
benefit.
Sincerely,
William C.S. Hicks
Portfolio Manager
-4-
<PAGE>
PORTFOLIO Q&A
(PHOTO)
William C.S. Hicks
Q. Over the last six months utility stocks have come down sharply. Is this the
start of a utility bear market or do utilities remain good investments?
A. We think that the long-term outlook for utilities remains strong, and that
they will continue to provide competitive returns versus the stock market
based on our current valuation structure. In fact, today, our projected
returns for utility stocks in many cases are well into double digits,
particularly in the dynamic telecommunications and international areas.
Also, while we are aware of the interest-rate sensitivity of the utility
sector, we believe that most of the increases in interest rates caused by
the Fed tightening are behind us.
Q. What explains the Fund's strong relative performance, even during the recent
market correction? More importantly, how do you plan to maintain the Fund's
edge?
A. We anticipated the risk to the Fund from higher interest rates, so we made
a
conscious decision to diversify away from the most interest-rate sensitive
areas. This strategy helped the Fund's relative performance in a difficult
market environment.
Going forward, many foreign governments continue to bring a large number of
privatizations to the market. Specifically, the governments of Denmark, the
Netherlands, Greece, Germany, Sweden, India, Indonesia and a number of
emerging countries plan to privatize telephone, gas and electric utilities.
Generally speaking, these privatizations have been attractively priced for
new investors, although in the recent past, careful analysis by our
experienced analytical team has been necessary to balance the key investment
variables of quality, growth and price.
Overall, the Fund continues to employ a "barbell" strategy. One side of the
bar is dedicated to yield, which we find in the slower growing electric and
gas areas. The other end of the bar emphasizes faster growth, which we find
in emerging countries in South America, Asia and portions of Europe. The
structure of the Fund is designed with a combination of capital appreciation
and yield in mind.
-5-
<PAGE>
GLOBAL UTILITY FUND, INC. Portfolio of Investments
March 31, 1994 (Unaudited)
<TABLE>
<CAPTION>
US$
Value
Shares Description (Note 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--96.2%
Common Stocks--73.8%
Electric Utilities--32.0%
528,000 China Light & Power Co., Ltd.
(China)..................... $ 2,715,926
200,000 CMS Energy Corp............... 4,500,000
160,000 Commonwealth Edison Co........ 4,020,000
120,000 Detroit Edison Co............. 3,180,000
270,000 DPL, Inc...................... 5,366,250
125,000 DQE, Inc...................... 3,906,250
130,000 Duke Power Co................. 4,696,250
15,000 Electrabel (Belgium).......... 2,691,854
1,000 Elektrowatt Ltd.
(Switzerland)............... 2,624,728
100,000 Empresa Nacional de
Electricidad S.A. (ADR)
(Spain)..................... 5,075,000
45,000 Enersis S.A. (ADR) (Chile).... 821,250
140,000 Entergy Corp.................. 4,445,000
30,000 Evn Energ Versorg (Austria)... 3,965,510
31,000 FPL Group, Inc................ 1,026,875
800,000 Iberdrola (Spain)............. 5,850,349
300,000 London Electricity (United
Kingdom).................... 2,774,762
370,000 Montana Power Co.............. 9,065,000
360,000 National Power PLC (United
Kingdom).................... 2,494,609
300,000 Pacific Gas & Electric Co..... 8,737,500
260,000 Peco Energy Co................ 7,215,000
120,000 Public Service Co. of
Colorado.................... 3,495,000
270,000 Puget Sound Power & Light
Co.......................... 6,108,750
26,000 RWE, A.G. (Germany)........... 6,834,304
60,000 SCE Corp...................... 990,000
1,400,000 Scottish Power (United
Kingdom).................... 8,618,713
650,000 Seeboard PLC (United
Kingdom).................... 3,344,287
170,000 Southern Co................... 3,251,250
200,000 Southern Electric (United
Kingdom).................... 1,942,036
100,000 Texas Utilities Co............ 3,737,500
33,500 Veba A.G. (Germany)........... 9,760,697
120,000 Western Resources Inc......... 3,420,000
------------
136,674,650
------------
Gas Utilities--6.0%
600,000 Australian Gas & Light Ltd.
(Australia)................. 1,850,372
40,000 British Gas PLC (ADR) (United
Kingdom).................... 1,795,000
70,500 Equitable Resources, Inc...... 2,449,875
151,000 NICOR, Inc.................... 3,850,500
120,000 Questar Corp.................. 3,630,000
330,000 Transcanada Pipelines Ltd.
(Canada).................... 4,417,191
470,000 Westcoast Energy Inc.
(Canada).................... $ 7,863,938
------------
25,856,876
------------
Telecommunications--26.7%
370,000 AT&T.......................... 18,962,500
205,000 BCE, Inc. (Canada)............ 7,405,625
90,000 Bell Atlantic Corp............ 4,657,500
25,000 BellSouth Corp................ 1,443,750
153,200 British Columbia Telephone Co.
(Canada).................... 2,660,300
58,400 British Telecommunications PLC
(ADR) (United Kingdom)...... 3,358,000
112,800 Comsat Corp................... 2,946,900
70,000 GTE Corp...................... 2,170,000
30,000 Hong Kong Telecommunications
(ADR) (Hong Kong)........... 1,526,250
280,000 MCI Communications Corp....... 6,562,500
230,000 NYNEX Corp.................... 7,935,000
106,300 Pacific Telesis Group......... 5,594,037
900,000 SIP (Italy)................... 2,690,498
15,000 Southern New England
Telecommunications, Inc..... 435,000
180,000 Southwestern Bell Corp........ 7,267,500
133,800 Sprint Corp................... 4,582,650
2,300,000 STET RISP Societa Funa Ciara
Telefonica P.A. (Italy)..... 7,023,352
93,500 Telecommunications of New
Zealand, Ltd. (ADR) (New
Zealand).................... 4,265,937
170,000 Telefonica de Espana S.A.
(ADR) (Spain)............... 6,120,000
120,000 Telefonos de Mexico S.A. (ADR)
(Mexico).................... 7,230,000
220,061 U.S. West, Inc................ 8,967,486
------------
113,804,785
------------
Water Utilities & Other--9.1%
47,400 Alcatel Alsthom (France)...... 5,538,316
83,900 American Water Works Co.,
Inc......................... 2,349,200
90,000 Amoco Corp.................... 4,781,250
400,000 Anglian Water (United
Kingdom).................... 3,128,670
100,000 Ericsson (L.M.) Telephone Co.,
B-free (Sweden)............. 4,322,386
55,000 Ericsson (L.M.) Telephone Co.,
B-free (ADR) (Sweden)....... 2,313,438
120,000 Exxon Corp.................... 7,545,000
200,000 Raychem Corp.................. 7,475,000
50,000 Unocal Corp................... 1,262,500
------------
38,715,760
------------
Total common stocks
(cost $285,999,460)......... 315,052,071
------------
</TABLE>
-6- See Notes to Financial Statements.
<PAGE>
<PAGE>
GLOBAL UTILITY FUND, INC.
<TABLE>
<CAPTION>
Moody's US$
Rating Value
(Unaudited) Shares Description (Note 1)
<S> <C> <C> <C>
Preferred Stock--0.7%
Telecommunications--0.7%
80,000 Philippine Long Distance
Telephone $5.75 Conv.
Ser. II (Philippines)
(cost $2,000,000)...... $ 2,880,000
------------
Debt Obligations--21.7%
Corporate Bonds--20.0%
<CAPTION>
Principal
Amount
(000) Electric Utilities--11.6%
---------
<S> <C> <C> <C>
Alabama Power Co.,
A1 $ 1,500 6.375%, 8/1/99........... 1,470,420
Central Illinois Light
Co.,
Aa2 1,750 8.20%, 1/15/22........... 1,819,615
Chubu Electric Power,
Aaa 2,000(D) 6.25%, 8/5/03 (ECU)...... 1,857,500
Commonwealth Edison Co.,
Baa3 1,500 9.05%, 10/15/99.......... 1,583,100
Baa2 1,000 7.00%, 7/1/05............ 943,500
Consolidated Edison Co.
Inc.,
Aa3 1,000 7.625%, 3/1/04........... 1,029,560
Aa3 1,000 6.375%, 4/1/23........... 949,850
Aa3 1,000 7.50%, 6/15/23........... 945,400
Consumers Power Co.,
Baa3 1,500 6.375%, 9/15/03.......... 1,357,980
Detroit Edison Co.,
A3 1,000 6.28%, 3/15/00........... 954,680
Duke Power Co.,
Aa2 2,000 5.875%, 6/1/01........... 1,882,240
Enron Corp.,
Baa2 2,000 7.00%, 8/15/23........... 1,755,940
Florida Power & Light
Co.,
Aa3 500 6.00%, 7/1/03............ 462,495
Gulf States Utilities
Co.,
Baa2 1,000 7.35%, 11/1/98........... 1,043,050
Baa2 1,000 6.41%, 8/1/01............ 941,500
Houston Lighting & Power
Co.,
A2 1,000 6.50%, 4/21/03........... 945,520
A2 1,000 7.50%, 7/1/23............ 934,270
Hydro-Quebec,
A1 1,000(D) 9.00%, 3/7/01 (Canada)... 1,080,000
A1 C$1,000 7.00%, 6/1/04 (Canada)... 638,521
Jersey Central Power &
Light Co.,
A3 $ 1,000 7.125%, 10/1/04.......... $ 970,930
Long Island Lighting Co.,
Baa3 2,000 7.05%, 3/15/03........... 1,831,240
Louisiana Power & Light
Co.,
Baa2 1,000 6.00%, 3/1/00............ 944,980
Monongahela Power Co.,
Aa3 1,500 7.375%, 7/1/02........... 1,482,900
National Power PLC,
Aa3 1,000(D) 6.25%, 12/1/03 (ECU)..... 917,700
Niagara Mohawk Power
Corp.,
Baa2 2,000 6.875%, 4/1/03........... 1,893,060
Northern States Power
Co.,
Aa2 1,000 5.75%, 12/1/00........... 940,240
Ontario Hydro,
Aa2 1,500(D) 7.45%, 3/31/13
(Canada)............... 1,447,485
Pacific Corp.,
A3 1,000 8.75%, 2/12/98........... 1,074,160
Philadelphia Electric
Co.,
Baa1 2,000 7.50%, 1/15/99........... 2,049,260
Potomac Edison Co.,
Aa3 2,000 8.875%, 8/1/21........... 2,147,500
Southwestern Electric
Power Co.,
Aa2 2,000 5.25%, 4/1/00............ 1,850,780
Southwestern Public
Service Co.,
Aa2 1,000 7.25%, 7/15/04........... 995,510
Tampa Electric Co.,
Aa1 1,000 7.75%, 11/1/22........... 973,800
Tennessee Valley
Authority,
NR 1,500 6.125%, 7/15/03.......... 1,385,625
Texas Utilities Electric
Co.,
Baa2 2,000 9.27%, 1/14/00........... 2,179,880
Tokyo Electric Power,
Aaa 2,000(D) 6.125%, 7/29/03 (ECU).... 1,840,000
Virginia Electric & Power
Co.,
A2 2,000 6.625%, 4/1/03........... 1,923,500
------------
49,443,691
------------
</TABLE>
-7- See Notes to Financial Statements.
<PAGE>
<PAGE>
GLOBAL UTILITY FUND, INC.
<TABLE>
<CAPTION>
Moody's Principal US$
Rating Amount Value
(Unaudited) (000) Description (Note 1)
<S> <C> <C> <C>
Gas & Electric Utilities--4.0%
Baltimore Gas & Electric
Co.,
A1 $ 1,000 7.25%, 7/1/02............ $ 993,090
Cincinnati Gas & Electric
Co.,
Baa1 1,500 5.80%, 2/15/99........... 1,443,225
Consolidated Natural Gas
Co.,
A1 2,000 5.75%, 8/1/03............ 1,814,160
Iowa Gas & Electric Co.,
Aa3 2,000 6.95%, 10/15/25.......... 1,759,360
Northern Illinois Gas
Co.,
Aa1 500 5.875%, 5/1/00........... 477,735
Pacific Gas & Electric
Co.,
A1 2,000 5.375%, 8/1/98........... 1,910,320
Pennsylvania Power &
Light Co.,
A2 1,000 6.75%, 10/1/23........... 861,940
Phillips Petroleum Co.,
Baa2 1,500 7.20%, 11/1/23........... 1,333,380
Powergen PLC,
Aa3 (BR PD)750 8.875%, 3/26/03 (ECU).... 1,151,504
Public Service Electric &
Gas Co.,
A2 $ 1,000 6.875%, 1/1/03........... 969,020
Southern California Gas
Co.,
Ba 2,000 6.875%, 11/1/25.......... 1,764,420
TCNZ Finance,
Aa1 (BR PD)1,000 7.50%, 7/14/03 (ECU)..... 562,000
Transport De Gas,
NR $ 750(D) 7.75%, 12/23/98
(Argentina)............ 708,750
YPF Sociedad Anonima,
B1 1,250(D) 8.00%, 2/15/04
(Argentina)............ 1,118,750
------------
16,867,654
------------
Telecommunications--4.4%
AT&T,
Aa3 1,500 6.75%, 4/1/04............ 1,457,070
BellSouth
Telecommunications,
Aaa 2,000(D) 6.125%, 9/23/08.......... 1,747,500
British
Telecommunications PLC,
Aaa $ 2,000(D) 9.375%, 11/16/98
(United Kingdom)....... $ 2,217,800
Ericsson (L.M.) Telephone
Co.,
A1 1,500(D) 7.875%, 10/21/96
(Sweden)............... 1,571,250
Illinois Bell Telephone
Co.,
Aaa 500 7.625%, 4/1/06........... 502,850
Aa1 1,450 6.625%, 2/1/25........... 1,261,645
New England Telephone &
Telegraph Co.,
Aa2 1,000 6.875%, 10/1/23.......... 893,420
Pacific Bell, Inc.,
Aa3 1,550 8.70%, 6/15/01........... 1,687,717
Rogers Cablesystems Ltd.,
Ba1 C$1,500 9.65%, 1/15/14
(Canada)............... 1,009,334
Southwestern Bell Telephone Co.,
A1 $ 500 6.125%, 3/1/00........... 481,947
A1 1,000 5.875%, 6/1/03........... 905,330
Telecom Argentina S.A.,
NR 500(D) 8.375%, 10/18/00
(Argentina)............ 467,500
Telefonica de Argentina
S.A.,
NR 1,000(D) 8.375%, 10/1/00
(Argentina)............ 941,250
Turner Broadcasting
Systems, Inc.,
Ba2 1,000 8.40%, 2/1/24............ 917,600
U. S. West
Communications, Inc.,
Aa3 1,000 7.50%, 6/15/23........... 945,880
United Telephone Co.,
Ba 2,000 6.25%, 5/15/03........... 1,887,500
------------
18,895,593
------------
Total corporate bonds
(cost $89,722,974)..... 85,206,938
------------
</TABLE>
-8- See Notes to Financial Statements.
<PAGE>
<PAGE>
GLOBAL UTILITY FUND, INC.
<TABLE>
<CAPTION>
Moody's Principal US$
Rating Amount Value
(Unaudited) (000) Description (Note 1)
<S> <C> <C> <C>
Convertible Bonds--0.1%
Compania de Telefonos de
Chile, S. A.,
Baa2 $ 500(D) 4.50%, 1/15/03 (Chile)
(cost $500,000).......... $ 626,250
------------
U. S. Government Obligations--1.6%
United States Treasury
Notes,
Aaa 6,500 7.50%, 11/15/01
(cost $6,951,104)........ 6,814,860
------------
Total debt obligations
(cost $97,174,078)..... 92,648,048
------------
Total long-term
investments
(cost $385,173,538).... 410,580,119
------------
SHORT-TERM INVESTMENTS--4.2%
Repurchase Agreement
18,136 Donaldson, Lufkin &
Jenrette Securities,
Inc., 3.55%, dated
3/31/94, due 4/4/94 in
the amount of
$18,143,156 (cost
$18,136,000;
collateralized by
$17,143,000 U.S.
Treasury Bonds, 8.125%,
due 8/15/21 approximate
value including accrued
inter-
est--$18,914,098)...... 18,136,000
------------
Total Investments--100.4%
(cost $403,309,538; Note
4)..................... 428,716,119
Liabilities in excess of
other
assets--(0.4%)......... (1,914,465)
------------
Net Assets--100%......... $426,801,654
------------
------------
</TABLE>
- - ------------------
(D)--US$ Denominated Bonds.
ADR--American Depository Receipts.
The Fund's current Statement of Additional Information contains a description
of
Moody's ratings.
NR--Not rated by Moody's or Standard & Poor's.
-9- See Notes to Financial Statements.
<PAGE>
<PAGE>
GLOBAL UTILITY FUND, INC.
Statement of Assets and Liabilities
(Unaudited)
<TABLE>
<CAPTION>
Assets
March 31, 1994
------------------
<S>
<C>
Investments, at value (cost
$403,309,538)............................................. $428,716,119
Foreign currency, at value (cost
$70,547)............................................. 71,008
Dividends and interest
receivable.....................................................
3,502,744
Receivable for investments
sold....................................................... 2,209,106
Receivable for Fund shares
sold....................................................... 698,380
Forward contracts-net amount
receivable............................................... 11,112
Deferred expenses and other
assets.................................................... 49,559
------------------
Total
assets......................................................................
435,258,028
------------------
Liabilities
Bank
overdraft....................................................................
.... 385,124
Payable for investments
purchased..................................................... 5,793,581
Payable for Fund shares
reacquired.................................................... 1,690,125
Distribution fee
payable..............................................................
278,708
Management fee
payable................................................................
258,956
Withholding taxes
payable.............................................................
49,880
------------------
Total
liabilities.................................................................
8,456,374
------------------
Net
Assets.......................................................................
..... $426,801,654
------------------
------------------
Net assets were comprised of:
Common stock, at
par.................................................................. $
30,973
Paid-in capital in excess of
par...................................................... 398,504,823
------------------
398,535,796
Undistributed net investment
income................................................... 133,783
Accumulated net realized gains on investments and foreign currency
transactions....... 2,722,363
Net unrealized appreciation on investments and foreign
currencies..................... 25,409,712
------------------
Net assets, March
31,1994.............................................................
$426,801,654
------------------
------------------
Class A:
Net asset value and redemption price per share
($139,164,179 <DIV> 10,098,352 shares of common stock issued and
outstanding).................................................................
...... $13.78
Maximum sales charge (5.25% of offering
price)...................................... .76
------------------
Maximum offering price to
public.................................................... $14.54
------------------
------------------
Class B:
Net asset value, offering price and redemption price per share
($287,637,475 <DIV> 20,874,611 shares of common stock issued and
outstanding).................................................................
...... $13.78
------------------
------------------
</TABLE>
See Notes to Financial Statements.
-10-
<PAGE>
<PAGE>
GLOBAL UTILITY FUND, INC.
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
March 31,
Net Investment Income 1994
------------
<S> <C>
Income
Dividends (net of foreign
withholding taxes of $264,099)... $ 5,379,161
Interest and discount earned (net
of foreign withholding taxes of
$5,049).......................... 3,239,570
------------
Total income..................... 8,618,731
------------
Expenses
Management fee..................... 1,401,698
Distribution fee--Class A.......... 162,286
Distribution fee--Class B.......... 1,281,012
Transfer agent's fees and
expenses........................... 265,000
Custodian's fees and expenses...... 70,000
Registration fees.................. 41,000
Reports to shareholders............ 30,000
Audit fee.......................... 20,000
Directors' fees.................... 20,000
Legal fees and expenses............ 20,000
Amortization of organization
expense............................ 10,000
Miscellaneous...................... 15,235
------------
Total expenses................... 3,336,231
------------
Net investment income.............. 5,282,500
------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions
Net realized gain (loss) on:
Investment transactions............ 4,704,721
Foreign currency transactions...... (975,299)
------------
3,729,422
------------
Net change in unrealized
appreciation/depreciation on:
Investments........................ (25,144,486)
Foreign currencies................. (76,688)
------------
(25,221,174)
------------
Net loss on investments and foreign
currencies......................... (21,491,752)
------------
Net Decrease in Net Assets Resulting
from Operations.................... $(16,209,252)
------------
------------
</TABLE>
GLOBAL UTILITY FUND, INC.
Statement of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
Six Months Year Ended
Ended September
Increase (Decrease) March 31, 30,
in Net Assets 1994 1993
------------ ------------
<S> <C> <C>
Operations
Net investment income....... $ 5,282,500 $ 6,338,317
Net realized gain on
investment and foreign
currency transactions..... 3,729,422 4,731,887
Net change in unrealized
appreciation/depreciation
on investments and foreign
currencies................ (25,221,174) 34,345,128
------------ ------------
Net increase (decrease) in
net assets resulting from
operations................ (16,209,252) 45,415,332
------------ ------------
Net equalization credits.... 107,612 244,177
------------ ------------
Dividends and distributions
(Note 1)
Dividends from net
investment income
Class A................... (2,198,148) (4,014,073)
Class B................... (3,185,782) (2,696,747)
------------ ------------
(5,383,930) (6,710,820)
------------ ------------
Distributions in excess of
net investment income
Class A................... -- (250,136)
Class B................... -- (168,046)
------------ ------------
-- (418,182)
------------ ------------
Distributions from net
realized gains on
investment and foreign
currency transactions
Class A................... (1,779,796) (6,458,000)
Class B................... (3,106,739) (3,679,371)
------------ ------------
(4,886,535) (10,137,371)
------------ ------------
Fund share transactions (Note 5)
Net proceeds from shares
subscribed................ 168,277,329 146,943,974
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions......... 8,127,510 10,607,644
Cost of shares reacquired... (47,203,778) (37,058,428)
------------ ------------
Net increase in net assets
from Fund share
transactions................ 129,201,061 120,493,190
------------ ------------
Total increase................ 102,828,956 148,886,326
Net Assets
Beginning of period........... 323,972,698 175,086,372
------------ ------------
End of period................. $426,801,654 $323,972,698
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
-11-
<PAGE>
<PAGE>
GLOBAL UTILITY FUND, INC.
Notes to Financial Statements
(Unaudited)
Global Utility Fund, Inc. (the ``Fund'') is an open-end diversified
management investment company. The Fund was organized in Maryland on November
18, 1988 as a closed-end, diversified management investment company and on
December 15, 1989, sold 9,000 shares of common stock for $100,440 to Wellington
Management Company (``Wellington''). Investment operations commenced on January
2, 1990. On February 1, 1991, the Fund concluded operations as a closed-end
investment company. Effective February 4, 1991, trading in the Fund's shares
was suspended on the New York and Pacific stock exchanges and the Fund
commenced operations as an open-end, diversified management investment company.
The Fund seeks to achieve its investment objective of obtaining a high total
return, without incurring undue risk, by investing primarily in common stocks,
debt securities and preferred stocks of domestic and foreign companies in the
utility industries. Debt securities in which the Fund invests are generally
within the four highest ratings categories by a nationally recognized
statistical rating organization or, if not rated, are of comparable quality.
The ability of the issuers of the debt securities held by the Fund to meet
their obligations may be affected by economic developments in a specific
country or industry.
Note 1. Accounting The following is a summary
Policies of significant accounting pol-
icies followed by the Fund in the preparation of
its financial statements.
Securities Valuation: In valuing the Fund's assets, quotations of foreign
securities in a foreign currency are converted to U.S. dollar equivalents at
the then current exchange rate. Any security for which the primary market is on
an exchange is valued at the last sale price on such exchange on the day of
valuation or, if there was no sale on such day, the last bid price quoted on
such day. 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. Securities for which market quotations are not readily available
are valued at fair value as determined in good faith by or under the direction
of the Board of Directors of the Fund.
Short-term securities which mature in more than 60 days are valued at
current market quotations. Short-term securities which mature in 60 days or
less are valued at amortized cost.
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian takes possession of
the underlying collateral securities. 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 closing 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 fiscal 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 fiscal 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 securities sold during the fiscal period. Accordingly, realized
foreign currency gains (losses) are included in the reported net realized gain
on investment transactions.
The Fund recognizes foreign currency gains and losses from the holding of
foreign currencies, the sales and maturities of short-term securities and
forward currency contracts, and the difference between the amounts of
dividends, interest and foreign taxes recorded on the Fund's books and the
U.S. dollar equivalent of amounts actually received or paid.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of domestic origin
as a result of, among other factors,
-12-
<PAGE>
<PAGE>
the possibility of political and economic instability and the level of
governmental supervision and regulation of foreign securities markets.
Forward Currency Contracts: The Fund enters into forward currency contracts in
order to hedge its exposure to changes in foreign currency exchange rates on
its foreign portfolio holdings. A forward contract is a commitment to purchase
or sell a foreign currency at a future date (usually the security transaction
settlement date) at a negotiated forward rate. In the event that a security
fails to settle within the normal settlement period, the forward currency
contract is renegotiated at a new rate. The gain or loss arising from the
difference between the settlement value of the original and renegotiated
forward contracts is isolated and is included in net realized gains (losses)
from foreign currency transactions. Risks may arise as a result of the
potential inability of the counterparties to meet the terms of their contract.
Securities Transactions and 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 and dividend income is recorded on the
ex-dividend date.
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.
Equalization: The Fund follows the accounting practice known as equalization by
which a portion of the proceeds from sales and costs of reacquisitions of Fund
shares, equivalent on a per share basis to the amount of distributable net
investment income on the date of the transaction, is credited or charged to
undistributed net investment income. As a result, undistributed net investment
income per share is unaffected by sales or reacquisitions of the Fund's shares.
Federal Income 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 dividends and interest are provided in
accordance with the Fund's understanding of the applicable country's tax rules
and rates.
Dividends and Distributions: Dividends from net investment income are declared
and paid quarterly. The Fund will distribute at least annually any net capital
gains in excess of loss carryforwards. 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 wash sales and foreign currency transactions.
Deferred Organization Expenses: A total of $100,000 of expenses were incurred
in connection with the organization of the Fund. These costs have been deferred
and are being amortized ratably over a period of sixty months from the date the
Fund commenced investment operations.
Note 2. Agreements The Fund has a management agreement
with Prudential Mutual Fund
Management (``PMF''). Pursuant to this agreement, PMF has responsibility for
all investment advisory services and supervises the subadviser's performance of
such services. PMF has entered into a subadvisory agreement with Wellington;
Wellington furnishes investment advisory services in connection with the
management of the Fund. PMF pays for the cost of the subadviser's services, the
compensation of officers of the Fund, occupancy and certain clerical and
bookkeeping costs of the Fund. The Fund bears all other costs and expenses.
The management fee paid PMF is computed daily and payable monthly at an
annual rate of .70% of the Fund's average daily net assets up to and including
$250 million, .55% of the Fund's average daily net assets of the next $250
million, .50% of the Fund's average daily net assets of the next $500 million
and .45% of the Fund's average daily net assets in excess of $1 billion.
Pursuant to the subadvisory agreement, PMF compensates Wellington for its
services at an annual rate of .50% of the Fund's average daily net assets up to
and including $250 million, .40% of the Fund's average daily net assets of the
next $250 million, .35% of the Fund's average daily net assets of the next $500
million and .30% of the Fund's average daily net assets in excess of $1 billion.
The Fund has distribution agreements with Prudential Mutual Fund
Distributors, Inc. (``PMFD''), which acts as the distributor of the Class A
shares of the Fund, and with Prudential Securities Incorporated (``PSI''),
which acts as distributor of the Class B shares of the Fund (collectively the
``Distributors''). To reimburse the Distributors for their expenses incurred in
distributing and servicing the Fund's Class A and B shares, the Fund, pursuant
to plans of distribution, pays the Distributors a reimbursement, accrued daily
and payable monthly.
-13-
<PAGE>
<PAGE>
Pursuant to the Class A Plan, the Fund reimburses PMFD for its expenses 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. Such expenses under the Class A Plan
were .20 of 1% of the average daily net assets of the Class A shares for the
three months ended December 31, 1993 and .25 of 1% of the average daily net
assets of the Class A shares thereafter. PMFD pays various broker-dealers,
including PSI and Pruco Securities Corporation (``Prusec''), affiliated
broker-dealers, for account servicing fees and other expenses incurred by such
broker-dealers.
Pursuant to the Class B Plan, the Fund reimburses PSI for its
distribution-related expenses with respect to Class B shares at an annual rate
of up to 1% of the average daily net assets of the Class B shares. The Class B
distribution expenses include commission credits for payment of commissions and
account servicing fees to financial advisers and an allocation for overhead and
other distribution-related expenses, interest and/or carrying charges, the cost
of printing and mailing prospectuses to potential investors and of advertising
incurred in connection with the distribution of shares.
The Distributors recover the distribution expenses and account servicing
fees incurred through the receipt of reimbursement payments from the Fund under
the plans and the receipt of initial sales charges (Class A only) and
contingent deferred sales charges (Class B only) from shareholders.
PMFD has advised the Fund that it has received approximately $714,100 in
front-end sales charges resulting from sales of Class A shares during the six
months ended March 31, 1994. From these fees, PMFD paid such sales charges to
dealers (PSI and Prusec) which in turn paid commissions to salespersons.
With respect to the Class B Plan, at any given time, the amount of expenses
incurred by PSI in distributing the Fund's shares and not recovered through the
imposition of contingent deferred sales charges in connection with certain
redemptions of shares may exceed the total payments made by the Fund pursuant
to the Class B Plan. PSI has advised the Fund that for the six months ended
March 31, 1994, it received approximately $87,100 in contingent deferred sales
charges imposed upon certain redemptions by investors. PSI, as distributor, has
also advised the Fund that at March 31, 1994, the amount of distribution
expenses incurred by PSI and not yet reimbursed by the Fund or recovered
through contingent deferred sales charges approximated $7,051,600. This amount
may be recovered through future payments under the Class B Plan or contingent
deferred sales charges.
In the event of termination or noncontinuation of the Class B Plan, the Fund
would not be contractually obligated to pay PSI, as distributor, for any
expenses not previously reimbursed or recovered through contingent deferred
sales charges.
PMFD is a wholly-owned subsidiary of PMF; PSI and PMF are indirect,
wholly-owned subsidiaries of The Prudential Insurance Company of America.
Note 3. Other Prudential Mutual Fund
Transactions Services, Inc. (``PMFS''), a
with Affiliates wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent and
during the six months ended March 31, 1994, the Fund incurred fees of
approximately $264,500 for the services of PMFS. As of March 31, 1994,
approximately $54,600 of such fees were due to PMFS. Transfer agent fees and
expenses in the Statement of Operations include certain out-of-pocket expenses
paid to non-affiliates.
For the six months ended March 31, 1994, PSI earned approximately $2,400 in
brokerage commissions from portfolio transactions executed on behalf of the
Fund.
Note 4. Portfolio Purchases and sales of
Securities investment securities, other
than short-term investments, for the six months
ended March 31, 1994 were $154,089,800 and $21,014,525, respectively.
At March 31, 1994, 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 Appreciation
Purchase Contracts Payable Value (Depreciation)
- - ---------------------- --------------- ---------- --------------
<S> <C> <C> <C>
Spanish Pesetas,
expiring 4/18/94.... $ 4,775,807 $4,620,111 $ (155,696)
--------------- ---------- --------------
--------------- ---------- --------------
</TABLE>
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- - --------------------- --------------- ---------- --------------
<S> <C> <C> <C>
French Francs,
expiring 7/12/94... $ 5,000,000 $5,213,081 $ (213,081)
Spanish Pesetas,
expiring 4/18/94... 5,000,000 4,620,111 379,889
--------------- ---------- --------------
$ 10,000,000 $9,833,192 $ 166,808
--------------- ---------- --------------
--------------- ---------- --------------
</TABLE>
The United States federal income tax basis of the Fund's investments at
March 31, 1994 was $403,372,813 and accordingly, net unrealized appreciation of
investments, for United States federal income tax purposes was $25,343,306
(gross unrealized appreciation--$41,370,957; gross unrealized
depreciation--$16,027,651).
-14-
<PAGE>
<PAGE>
Note 5. Capital The Fund has authorized 2
billion shares of common stock at $.001 par value
per share equally divided into two classes, designated Class A and Class B
common stock. Class A shares are sold with an initial sales charge of up to
5.25%. Class B shares are sold with a contingent deferred sales charge which
declines from 5% to zero depending upon the period of time the shares are held.
Both classes of shares have equal rights as to earnings, assets and voting
privileges except that each class bears different distribution expenses and has
exclusive voting rights with respect to its distribution plan. Of the
30,972,963 shares of common stock issued and outstanding at March 31, 1994,
Wellington owned 9,000 Class A shares.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
---------- ------------
<S> <C> <C>
Six months ended March 31, 1994:
Shares sold..................... 1,798,456 $ 26,180,067
Shares issued in reinvestment of
dividends and distributions... 163,750 2,331,554
Shares reacquired............... (1,344,687) (19,392,151)
---------- ------------
Net increase in shares
outstanding................... 617,519 $ 9,119,470
---------- ------------
---------- ------------
Year ended September 30, 1993:
Shares sold..................... 1,862,744 $ 25,585,453
Shares issued in reinvestment of
dividends and distributions... 374,695 4,861,664
Shares reacquired............... (1,606,170) (21,380,960)
---------- ------------
Net increase in shares
outstanding................... 631,269 $ 9,066,157
---------- ------------
---------- ------------
<CAPTION>
Class B
<S> <C> <C>
Six months ended March 31, 1994:
Shares sold..................... 9,739,080 $142,097,262
Shares issued in reinvestment of
dividends and distributions... 406,911 5,795,956
Shares reacquired............... (1,931,697) (27,811,627)
---------- ------------
Net increase in shares
outstanding................... 8,214,294 $120,081,591
---------- ------------
---------- ------------
Year ended September 30, 1993:
Shares sold..................... 8,729,213 $121,358,521
Shares issued in reinvestment of
dividends and distributions... 439,311 5,745,980
Shares reacquired............... (1,169,345) (15,677,468)
---------- ------------
Net increase in shares
outstanding................... 7,999,179 $111,427,033
---------- ------------
---------- ------------
</TABLE>
Note 6. Dividends On May 5, 1994, the Board
of Directors of the Fund declared dividends of
$.11 per Class A share and $.0825 per Class B share payable on June 30, 1994 to
shareholders of record on June 23, 1994.
-15-
<PAGE>
<PAGE>
GLOBAL UTILITY FUND, INC.
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Class A
Class B
--------------------------------------------------------------------
- - ---------------------------------------------------
PER January 2,
March 18,
SHARE Six Months 1990*
Six Months Year Ended 1991(D)
OPERATING Ended Year Ended September 30, Through
Ended September 30, Through
March 31, ------------------------------------ September 30,
March 31, ------------------- September 30,
PERFORMANCE: 1994 1993 1992 1991(D)(D) 1990(D)(D)
1994 1993 1992 1991
----------- -------- -------- ------------ -------------
- - ----------- -------- ------- -------------
<S> <C> <C> <C> <C> <C>
<C> <C> <C> <C>
Net
asset
value,
beginning
of
period... $ 14.63 $ 12.96 $ 12.62 $ 10.50 $ 11.16
$ 14.63 $ 12.97 $ 12.63 $ 11.97
----------- -------- -------- ------------ -------------
- - ----------- -------- ------- -------------
Income
from
investment
operations
Net
investment
income... .22 .44 .53 .57 .48
.17 .34 .43 .25
Net
realized
and
unrealized
gain
(loss)
on
investment
and
foreign
currency
transactions... (.67) 2.46 1.01 2.23 (.67)
(.67) 2.45 1.01 .63
----------- -------- -------- ------------ -------------
- - ----------- -------- ------- -------------
Total
from
investment
operations... (.45) 2.90 1.54 2.80 (.19)
(.50) 2.79 1.44 .88
----------- -------- -------- ------------ -------------
- - ----------- -------- ------- -------------
Less
distributions
Dividends
from
net
investment
income... (.22) (.47) (.53) (.62) (.41)
(.17) (.37) (.43) (.22)
Distributions
in excess
of
net
investment
income -- (.01) -- -- --
-- (.01) -- --
Distributions
from net
realized
capital
and
currency
gains... (.18) (.75) (.67) (.08) --
(.18) (.75) (.67) --
----------- -------- -------- ------------ -------------
- - ----------- -------- ------- -------------
Total
distributions... (.40) (1.23) (1.20) (.70) (.41)
(.35) (1.13) (1.10) (.22)
----------- -------- -------- ------------ -------------
- - ----------- -------- ------- -------------
Capital
charge
in
respect
of
issuance
of
shares... -- -- -- -- (.06)
-- -- -- --
Redemption
fee
retained
by
Fund... -- -- -- .02 --
-- -- -- --
----------- -------- -------- ------------ -------------
- - ----------- -------- ------- -------------
Net
asset
value,
end
of
period.. $ 13.78 $ 14.63 $ 12.96 $ 12.62 $ 10.50
$ 13.78 $ 14.63 $ 12.97 $ 12.63
----------- -------- -------- ------------ -------------
- - ----------- -------- ------- -------------
----------- -------- -------- ------------ -------------
- - ----------- -------- ------- -------------
TOTAL
RETURN#... (3.15)% 23.87% 13.15% 27.63% (1.98)%
(3.50)% 22.87% 12.23% 7.44%
RATIOS/SUPPLEMENTAL
DATA:
Net
assets,
end
of
period
(000)... $139,164 $138,714 $114,654 $132,804 $161,892
$287,637 $185,259 $60,432 $30,147
Average
net
assets
(000)... $144,679 $119,001 $120,708 $151,217 $166,915
$256,906 $90,254 $45,661 $18,923
Ratios to average
net assets:
Expenses,
including
distribution
fees... 1.17%** 1.30% 1.39% 1.49% 1.05%**
1.95%** 2.10% 2.19% 2.47%**
Expenses,
excluding
distribution
fees... .95%** 1.10% 1.19% 1.36% 1.05%**
.95%** 1.10% 1.19% 1.47%**
Net
investment
income... 3.12%** 3.37% 4.16% 5.06% 5.97%**
2.47%** 2.59% 3.43% 4.16%**
Portfolio
turnover
rate... 6% 14% 57% 135% 27%
6% 14% 57% 135%
</TABLE>
- - ---------------
* Commencement of investment operations.
** Annualized.
(D) Commencement of offering of Class B shares.
(D)(D) Prior to February 4, 1991, the Fund was organized as a closed-end fund.
# Total return does not consider the effects 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 return for periods of less than a
full year are not annualized.
See Notes to Financial Statements.
-16-
<PAGE>
Chart entitled Prudential Mutual Funds: Risk/Reward
Spectrum.
The chart shows a graphic representation of the spectrum of risks
of various categories of Prudential Mutual Funds including stock
funds, tax-exempt bond funds, taxable bond funds and global
taxable bond funds. The chart rates the risk of individual Prudential
Mutual Funds relative to other Prudential Mutual Funds in each
category.
Under the category of stock funds, the chart lists from low risk
to
high risk the following funds (beginning at the low end of the
spectrum):
FlexiFund (The Conservatively Managed Portfolio)
IncomeVertible Fund
FlexiFund (The Strategy Portfolio)
Equity Income Fund
Utility Fund
Global Utility Fund
Equity Fund
Growth Fund
Global Fund
Nicholas-Applegate Growth Equity Fund
Growth Opportunity Fund
Multi-Sector Fund
Global Natural Resources Fund
Global Genesis Fund
Pacific Growth Fund
Under the category of tax-exempt bond funds, the chart lists from
low risk to high risk the following funds (beginning at the low
end
of the spectrum):
Municipal Bond Fund (Modified Term Series)
Municipal Bond Fund (Insured Series)
National Municipals Fund
Municipal Series Fund (State Series Fund)
California Municipal Fund (California Income Series)
Municipal Bond Fund (High Yield Series)
Under the category of taxable bond funds, the chart lists from
low
risk to high risk the following funds (beginning at the low end
of
the spectrum):
Adjustable Rate Securities Fund
The BlackRock Government Income Fund
Structured Maturity Fund (Income Portfolio)
Government Securities Trust (Intermediate Term Series)
GNMA Fund
Government Plus Fund
U.S. Government Fund
High Yield Fund
Under the category of global taxable bond funds, the chart lists
from low risk to high risk the following funds (beginning at the
low end of the spectrum):
Short-Term Global Income Fund (Global Assets Portfolio)
Short-Term Global Income Fund (Short-Term Global Income
Portfolio)
Intermediate Global Income Fund
Performance Charts
A. Historical Investment Results
The chart shows comparative historical investment results for the six month,
one-year, and since inception periods ended March 31, 1994 for the Class A
shares of the Fund, the Class B shares of the Fund, the Lipper Utility Fund
Average and the Standard & Poor's Utility Index, without taking into account
front-end or contingent deferred sales charges.
B. Average Annual Total Returns
The chart also shows the average annual total returns for the one-year and
since inception periods ended March 31, 1994 for Class A and Class B shares
taking into account any applicable sales charges.
Mountain Charts
Two mountain charts show the growth of an assumed investment of $10,000
in The Global Utility Fund. The charts represent historical performance and
are not a guarantee of future performance of Class A shares or Class B
shares.
A. Class A shares
The chart shows the growth of a $10,000 investment in Class A shares from
inception on January 2, 1990 through March 31, 1994, and assumes a front-end
sales charge of 5.25%. The chart shows the value of the investment as of
January 2, 1990, (i) with the reinvestment of dividends and distributions in
additional shares of the Fund and (ii) with all dividends and distributions
taken in cash.
B. Class B shares
The chart shows the growth of a $10,000 investment in Class B shares from
inception on March 18, 1991 through March 31, 1994, and does not assume the
effect of a contingent deferred sales charge on redemptions. The chart shows
the value of the investment as of March 18, 1990, (i) with the reinvestment
of dividends and distributions in additional shares of the Fund and (ii) with
all dividends and distributions taken in cash.
