(ICON)
Global
Utility
Fund, Inc.
ANNUAL
REPORT
Sept. 30, 1997
(LOGO)
<PAGE>
Global Utility Fund, Inc.
Performance At A Glance.
The Global Utility Fund's Class A shares gained
26.90% for the
12 months ended September 30, 1997, as compared
with a 26.00% advance
in the benchmark Financial Times World Utilities
Index. As shown
below, the Fund's longer term record also compares
favorably with
relevant indices.
<TABLE>
<CAPTION>
One
Five Since
Year
Years Inception2
<C> <S> <C>
<C> <C>
Class A 26.90%
90.38% 168.01%
Cumulative Class B 25.96
83.27 120.99
Total Returns1 Class C 25.96
N/A 51.98
As of 9/30/97 Class Z N/A
N/A 19.70
FT World Utilities3 26.00
81.04 *
Lipper Utility Avg4 22.76
74.14 **
</TABLE>
<TABLE>
<CAPTION>
One
Five Since
Year
Years Inception2
<C> <S> <C>
<C> <C>
Average Annual Class A 20.57%
12.58% 12.83%
Total Returns1 Class B 20.96
12.76 12.89
As of 9/30/97 Class C 24.96
N/A 14.14
</TABLE>
Past performance is not indicative of future
results. Investment return
and principal value will fluctuate so that an
investor's shares, when
redeemed, may be worth more or less than their
original cost.
1Source: Prudential Investments Fund Management,
Lipper Analytical
Services and Wellington Management. The cumulative
total returns do
not take into account sales charges. The average
annual total
returns do take into account applicable sales
charges. The Fund
charges a maximum front-end sales charge of 5% for
Class A shares.
Class B shares are subject to a declining
contingent deferred
sales charge (CDSC) of 5%, 4%, 3%, 2%, 1% and 1%
for six years.
Class C shares have a 1% CDSC for one year. Class
B shares will
automatically convert to Class A shares on a
quarterly basis
after approximately seven years. Since Class Z
shares have
been in existence less than one year, no average
annual
total returns are shown.
2Inception dates: 1/2/90 Class A; 3/18/91 Class B;
8/1/94
Class C; 12/16/96 Class Z. The Fund operated as a
closed-end
fund from its inception until February 1, 1991.
3The Financial Times World Utilities Index
(FT World Utilities) is currently comprised of
approximately 172 world utility stocks
representing
approximately 24 countries.
*FT World Utilities Since Inception returns are:
Class A,
93.39%; Class B, 109.28%; Class C, 45.89% and
Class Z
14.74% for all funds in each share class.
4These are the average returns of all funds in
each share
class as determined by Lipper Analytical Services.
**Lipper Since Inception returns are: Class A,
120.97%;
Class B, 116.84%, Class C, 52.57% and
Class Z 15.73% for all funds in each share class.
How Investments Compared.
(As of 9/30/97)
(GRAPH)
Source: Lipper Analytical Services. Financial
markets change,
so a mutual fund's past performance should never
be used to
predict future results. The risks to each of the
investments
listed above are different we provide 12-month
total returns
for several Lipper mutual fund categories to show
you that
reaching for higher returns means tolerating more
risk. The
greater the risk, the larger the potential reward
or loss.
In addition, we've included historical 20-year
average annual
returns. These returns assume the reinvestment of
dividends.
U.S. Growth Funds will fluctuate a great deal.
Investors have
received higher historical total returns from
stocks than from
most other investments. Smaller capitalization
stocks offer
greater potential for long-term growth but may be
more volatile than
larger capitalization stocks.
General Bond Funds provide more income than stock
funds, which
can help smooth out their total returns year by
year. But their
prices still fluctuate (sometimes significantly)
and their returns
have been historically lower than those of stock
funds.
General Municipal Debt Funds invest in bonds
issued by state
governments, state agencies and/or municipalities.
This
investment provides income that is usually exempt
from
federal and state income taxes.
Money Market Funds attempt to preserve a constant
share value;
they don't fluctuate much in price but,
historically, their
returns have been generally among the lowest of
the major
investment categories.
<PAGE>
William C. S. Hicks, Fund Manager
(PICTURE)
Portfolio
Manager's Report
The Global Utility Fund invests primarily in the
stocks and
bonds of utility companies from around the world.
The Fund
seeks to provide total return, without incurring
undue risk,
by investing primarily in income-producing
securities. There
is no assurance that the Fund will be able to
achieve its
investment objective. Investors should also keep
in mind
that there are special risks associated with
foreign investing
(such as currency fluctuations and social,
political and
economic developments), and with investing in
utility securities.
Telecom Update.
The recent bidding for MCI Communications is
indicative of
future consolidation and alliances within the
dynamic international
telecommunica-tions industry. Significant
investment
opportunities will be found as cellular,
networking and
long distance strategies emerge on a global basis.
Strategy Session.
The international component of the Global Utility
Fund continues to
account for more than 50% of the Fund's equity
investments because
of our belief in the inherent growth dynamics of
the foreign sector.
During the past year, we added to the Fund's
holdings in electric
companies with the purchase of Korea Electric
Power and COPEL
(Brazil), among others. Also notable, during the
year the Fund
invested in a telecommunication company in India
(Videsh
Sanchar Nigam).
There are some signs that the domestic electric
utilities are
working through their negotiations with state
commissions
regarding standard cost structures and rates of
return.
Progress has been made with the California
Commission and
in Illinois, Texas and New England. Mergers and
consolidation
are likely to continue for some time, with the
survivors having
the lowest costs and most capable managements.
Growth prospects
are only moderate domestically, however, and
therefore, we have
been finding more investor dynamics abroad and in
the
telecommunications sector.
We continue to pursue a three-part strategy in the
fixed income
portfolio of the Global Utility Fund. The first
theme is the
close scrutiny of emerging markets for investment
opportunities.
The emerging market theme seeks utility issuers in
countries
with pent-up demand and with infrastructure needs
who are
potential upgrade candidates. Our second theme is
the pursuit
of companies with respectable operating histories
in developed
markets. Over the next year, we expect to pursue a
third theme,
where the Fund invests in companies which are
privatizing in
both developed and emerging countries.
Improvements in costs
and in operations by these companies may result in
higher
credit quality.
Portfolio Composition
Expressed as a percentage of
net assets as of 9/30/97.
(PIE CHART)
<PAGE>
What Went Well.
International
Telephone & Cellular.
The growing demand for international cellular (non-
wire) companies
continued well above most projections, benefiting
the Fund's
holdings in AirTouch Communications, Telecom
Italia Mobile
S.p.A., and Vodafone Group PLC. Also, the Fund's
Canadian
telephone companies performed quite well, as did
the Fund's
holdings in Mexico, Spain, Argentina and Portugal.
International Electric.
The Fund's electric utility holding in Spain
(Empresa Nacional
de Electricidad S.A.) showed a sharp price gain as
the
government planned to broaden privatizations
throughout
the country. Also, the value of the Fund's
holding in
well-managed Scottish Power PLC advanced sharply,
reflecting a sound merger strategy and good cost
controls. The Fund's investment in Finland's
Epsoon
Sahko OY also showed good returns, as did the
recovery
of the Fund's Chinese holding, Huaneng Power
International.
Five Largest
Holdings.
4.1% SBC Communications
Telecommunications
3.3% Scottish Power PLC
Electrics
3.2% Westcoast Energy
Natural Gas
3.0% Telecom Italia
Telecommunications
2.6% BCE
Telecommunications
Expressed as a percentage of net assets as of
9/30/97.
And Not So Well.
The restructuring of AT&T has proven much more
painful than
earlier anticipated, but near-term results are
improving, and
we are hopeful of a positive long-term resolution
of the
company's problems with the appointment of new
management.
Korea Electric Power has been hurt by a slowing
economy
and a difficult internal stock market, and
Philippine Long
Distance has been hurt by currency disruptions
within the
country. Despite some financial chaos in parts of
Asia,
we are still optimistic about long-term growth in
the region.
Looking Ahead.
With the demand for international telephone
services growing
as global companies expand their territories, we
are
optimistic about opportunities within the
continuously
changing telecommunications sector.
There are a large number of new foreign issues and
privatizations
expected to come to market over the next several
months.
Specifically, France is planning to sell 38% of
France
Telecom in a very major offering. The Portuguese
government
is also selling more shares in Portugal Telecom,
and the
Italians are selling the government's stake in
Telecom Italia.
There are also expected offerings from MTNL
(India) and China
Telecom, making the privatization calendar quite
active.
The growth of worldwide communications provides a
favorable
backdrop for new sales of telecommunication
equipment, and
we believe the growth of data transport over wire
lines will
be a particularly strong area.
WorldCom's recent bid for MCI Communications has
sent shock
waves throughout the telephone industry and
threatens the
previously announced alliance between MCI
Communications and
British Telecom. WorldCom's merger-based strategy
calls for a
combination of long distance calling, cellular,
local telephone
networks, and dynamic internet services to provide
creative
solutions for both corporate and consumer
requirements. Whatever
the future outcome of this bold merger bid, we
believe this
proposed consolidation is indicative of the future
consolidation
and alliances of international telecommunication
providers.
1
<PAGE>
Portfolio of Investments as of September 30, 1997
GLOBAL UTILITY FUND, INC.
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
US$ Value
Shares Description
(Note 1)
<C> <S>
<C>
----------------------------------------------
- --------------
LONG-TERM INVESTMENTS--97.2%
COMMON STOCKS--74.0%
----------------------------------------------
- --------------
Electrical Utilities--22.8%
175,000 CMS Energy Corp.
$ 6,475,000
150,000 COPEL (ADR-Preferred B Shares)
(Brazil)
2,587,500
200,000 DPL, Inc.
4,900,000
162,500 DQE, Inc.
5,484,375
100,000 DTE Energy Co.
3,043,750
200,000 Empresa Nacional de Electricidad,
S.A. (ADR) (Spain)
4,300,000
190,000 Espoon Sahko (ADR) (Finland)
5,141,400
150,000 Huaneng Power International, Inc.*
(ADR) (China)
3,637,500
120,000 Korea Electric Power Corp. (ADR)
(South Korea)
1,650,000
80,000 New Century Energies, Inc.
3,325,000
100,000 Pinnacle West Capital Corp.
3,362,500
1,300,000 Scottish Power PLC (United Kingdom)
10,069,253
277,300 Shandong Huaneng Power Co. Ltd.
(ADR) (China)
2,721,006
150,000 Texas Utilities Co.
5,400,000
110,000 VEBA AG (Germany)
6,432,293
- -------------
68,529,577
- --------------------------------------------------
- --------------
Gas Utilities--8.9%
500,000 Australian Gas Light Co. (Australia)
3,398,140
120,000 Equitable Resources, Inc.
3,780,000
330,000 TransCanada Pipelines Ltd. (Canada)
6,387,713
470,000 Westcoast Energy, Inc. (Canada)
9,760,845
90,000 YPF Sociedad Anonima (ADR-Class D
Shares) (Argentina)
3,318,750
- -------------
26,645,448
- --------------------------------------------------
- --------------
Telecommunications--35.6%
106,300 AirTouch Communications, Inc.*
3,767,006
150,000 AT&T Corp.
6,646,875
153,200 BC Telecom, Inc. (Canada)
3,957,625
260,000 BCE, Inc. (Canada)
7,767,500
96,000 Bell Atlantic Corp.
$ 7,722,000
75,000 Comsat Corp.
1,785,938
43,000 Empresas Telex-Chile S.A. (ADR)
(Chile)
198,875
50,000 GTE Corp.
2,268,750
100,000 Hellenic Telecom Org. (Greece)
2,505,107
110,000 MCI Communications Corp.
3,227,812
87,600 Portugal Telecom, S.A. (ADS)
(Portugal)
3,805,125
60,000 Koninklijke PTT Nederland NV
(Netherlands)
2,359,390
200,000 SBC Communications Inc.
12,275,000
70,000 Sprint Corp.
3,500,000
40,000 Telecom Corp. of New Zealand Ltd.
(ADR) (New Zealand)
1,620,000
900,000 Telecom Italia Mobile S.p.A. (Italy)
3,571,842
500,000 Telecom Italia S.p.A. (Italy)
3,331,402
2,300,000 Telecom Italia S.p.A. Risp
(Nonconvertible) (Italy)
8,948,146
40,000 Telefonica de Argentina S.A.
(ADR-Class B Shares) (Argentina)
1,465,000
50,000 Telefonica de Espana, S.A. (ADR)
(Spain)
4,706,250
130,000 Telefonos de Mexico, S.A. (ADR-Class
L Shares) (Mexico)
6,727,500
200,000 US West Communications Group
7,700,000
200,000 Videsh Sanchar Nigam Ltd. (GDR)
(India)
3,375,000
75,000 Vodafone Group PLC (ADR) (United
Kingdom)
4,031,250
- -------------
107,263,393
- --------------------------------------------------
- --------------
Water Utilities & Other--6.7%
30,968 Alcatel Alsthom (France)
4,120,293
167,800 American Water Works Co., Inc.
3,712,575
400,000 Anglian Water PLC (United Kingdom)
5,284,233
41,000 ENI S.p.A. (ADR) (Italy)
2,575,313
35,000 Lucent Technologies, Inc.
2,848,125
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 2
<PAGE>
Portfolio of Investments as of September 30, 1997
GLOBAL UTILITY FUND, INC.
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
US$ Value
Shares Description
(Note 1)
<C> <S>
<C>
- --------------------------------------------------
- ---------------
Water Utilities & Other (cont'd.)
2,300,000 Seat S.p.A. Risp (Italy)*
$ 562,341
10,000 Suez Lyonnaise Eaux S.A. (France)
1,116,339
- -------------
20,219,219
Total common stocks
(cost $143,712,011)
222,657,637
- -------------
- --------------------------------------------------
- --------------
PREFERRED STOCKS--1.6%
Philippine Long Distance Telephone
Co., (The Philippines)
43,700 $3.50 Conv. Ser. III (GDS)
2,283,325
80,000 5.75% Conv. Ser. II (GDS)
2,500,000
- -------------
Total preferred stocks
(cost $4,185,000)
4,783,325
- -------------
- --------------------------------------------------
- --------------
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000)
<C> <C> <S>
<C>
DEBT OBLIGATIONS--21.6%
CORPORATE BONDS--20.1%
- --------------------------------------------------
- -----------------
Electrical Utilities--13.4%
Ba1 $ 1,000 AES Corp.,
8.375%, 8/15/07
1,005,000
Ba2 1,500 CalEnergy Co., Inc.,
9.50%, 9/15/06
1,620,000
Aa2 1,750 Central Illinois Light
Co.,
8.20%, 1/15/22
1,867,932
Baa1 1,000D CEZ Finance,
7.125%, 7/15/07
(Czech Republic)
986,000
Baa1 1,000D Chilgener, S.A.,
6.50%, 1/15/06
(Chile) 974,620
Aaa 2,000D Chubu Electric Power
Co.
Inc., (Japan)
6.25%, 8/5/03
(Eurobonds)
1,995,000
Ba3 1,000 CMS Energy Corp.,
8.125%, 5/15/02
1,024,940
A1 1,000 Consolidated Edison Co.
of NY, Inc.,
7.625%, 3/1/04
1,051,520
Aa3 $ 1,000 Duke Energy Corp.,
5.875%, 6/1/01
$ 983,790
Baa1 1,000D Eastern Energy Limited,
6.75%, 12/1/06
(Australia)
993,610
Ba3 1,000 El Paso Electric Co.,
8.25%, 2/1/03, Ser. C
1,047,680
Baa1 1,000D Empresa Electric
Pehuenche S.A.,
7.30%, 5/1/03 (Chile)
1,020,760
Baa3 1,000D Empresa Electrica del
Norte Grande S.A.,
7.75%, 3/15/06
(Chile) 1,002,320
Baa1 1,000D Enersis S.A.,
7.40%, 12/1/16
(Chile) 1,004,650
Aa3 500 Florida Power Corp.,
6.00%, 7/1/03
489,775
Baa3 1,000 Gulf States Utilities
Co.,
8.25%, 4/1/04
1,068,960
Ba1** 1,000D Inversora Electrica
Buenos Aires S.A.,
9.00%, 9/16/04
(Argentina)
995,000
Baa2 1,000 Louisiana Power & Light
Co.,
6.00%, 3/1/00
989,530
A1 1,500 Monongahela Power Co.,
7.375%, 7/1/02
1,556,385
Aa3 1,000 Northern States Power
Co.,
5.75%, 12/1/00
983,840
Baa3 1,000 NRG Energy, Inc.,
7.50%, 6/15/07
1,025,000
A1 2,000 Potomac Edison Co.,
8.875%, 8/1/21
2,116,400
A2 1,000D Quebec Hydro,
7.50%, 4/1/16
(Canada) 1,042,240
Aa3 2,000 Southwestern Elec.
Power
Co.,
5.25%, 4/1/00
1,955,300
Aa2 1,000 Southwestern Public
Serv. Co.,
7.25%, 7/15/04
1,034,100
Baa3 1,000 System Energy
Resources,
Inc.,
7.71%, 8/1/01
1,031,090
Baa2 1,000D CSW Investments,
7.45%, 8/1/06
(United Kingdom)
1,036,370
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as of September 30, 1997
GLOBAL UTILITY FUND, INC.
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
US$ Value
(Unaudited) (000) Description
(Note 1)
<C> <C> <S>
<C>
- --------------------------------------------------
- ----------
Electrical Utilities (cont'd.)
Baa1 $ 1,000D Southern Investments UK
PLC,
6.80%, 12/1/06
(United Kingdom)
$ 996,300
Aa2 1,000 Tampa Electric Co.,
7.75%, 11/1/22
1,028,500
Ba3 1,000 Texas-New Mexico Power
Co.,
10.75%, 9/15/03
1,077,500
Baa1 2,000 Texas Utilities
Electric
Co.,
9.27%, 1/14/00
2,127,640
A2 2,000 Virginia Electric &
Power Co.,
6.625%, 4/1/03
2,017,720
Baa3 1,000 W3A Funding Corp.,
8.09%, 1/2/17
1,030,010
- -------------
40,179,482
- --------------------------------------------------
- -----------------
Gas Distribution & Other Related Industries--2.7%
Baa2 1,000 El Paso Natural Gas
Co.,
7.50%, 11/15/26
1,034,230
Baa2 1,000 Enron Corp.,
7.00%, 8/15/23
953,520
B1 1,000D Metrogas, S.A.,
10.875%, 5/15/01,
Ser.
B (Argentina)
1,101,250
A2 1,600 Michigan Consolidated
Gas Co.,
8.25%, 5/1/14
1,804,464
Northern Illinois Gas
Co.,
Aa1 500 5.875%, 5/1/00
495,295
Aa1 1,000 7.26%, 10/15/25
997,910
Southern California Gas
Co.,
A1 2,000 6.875%, 11/1/25
1,862,680
- -------------
8,249,349
- --------------------------------------------------
- -----------------
Telecommunications, Media & Related Industries--
4.0%
Aaa 2,000 BellSouth
Telecommunications,
6.125%, 9/23/08
(Eurobonds)
1,947,500
NR $ 1,000D Comtel Brasileira Ltd.,
10.75%, 9/26/04
(Brazil)
$ 1,060,000
A3 1,000 GTE Corp.,
8.75%, 11/1/21
1,186,250
A2 1,000 GTE Florida, Inc.,
7.25%, 10/15/25
984,060
A1 1,000D Korea Telecom,
7.625%, 4/15/07
(South Korea)
1,004,100
A1 1,550 Pacific Bell,
8.70%, 6/15/01
1,670,823
Ba2 1,000D Philippine Long
Distance
Telephone Co.,
9.25%, 6/30/06
(The Philippines)
1,035,000
Aa3 1,000 Southwestern Bell
Telephone Co.,
5.875%, 6/1/03
969,980
B1 1,000D Telefonica de
Argentina,
S.A.,
11.875%, 11/1/04
(Argentina)
1,212,500
Ba1 1,000 WorldCom, Inc.,
7.75%, 4/1/07
1,048,340
- -------------
12,118,553
- -------------
Total corporate bonds
(cost $59,414,523)
60,547,384
- -------------
- --------------------------------------------------
- -----------------
CONVERTIBLE BONDS--0.8%
Baa2 500D Compania de Telefonos
de
Chile, S.A.,
4.50%, 1/15/03
(Chile) 840,625
Caa 1,500 International Cabletel,
Inc.,
7.25%, 4/15/05
1,650,000
- -------------
Total convertible bonds
(cost $2,000,000)
2,490,625
- -------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 4
<PAGE>
GLOBAL UTILITY FUND, INC.
Portfolio of Investments as of September 30, 1997
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Principal
Amount US$
Value
(000) Description
(Note 1)
<C> <S> <C>
- --------------------------------------------------
- ------
U.S. GOVERNMENT SECURITIES--0.7%
United States Treasury Notes,
$1,000 6.125%, 7/31/00 $
1,006,090
1,000 7.50%, 11/15/01
1,053,910
-----
- --------
Total U.S. Government Securities
(cost $2,128,281)
2,060,000
-----
- --------
Total debt obligations
(cost $63,542,804)
65,098,009
-----
- --------
Total long-term investments
(cost $211,439,815)
292,538,971
-----
- --------
- --------------------------------------------------
- --------
SHORT-TERM INVESTMENTS--2.4%
REPURCHASE AGREEMENT
7,135 Paribas Finance, 6.05%, due 10/1/97 in
the amount of $7,136,199 (cost
$7,135,000; value of collateral
including accrued
interest-$7,234,658)
7,135,000
- --------------------------------------------------
- --------
Total Investments--99.6%
(cost $218,574,815; Note 4)
299,673,971
Other assets in excess of
liabilities--0.4%
1,233,786
-----
- --------
Net Assets--100% $
300,907,757
-----
- --------
-----
- --------
</TABLE>
- ---------------
*--Non-income-producing security.
**--Moody's Equivalent to S&P Rating.
D--US$ Denominated Bonds.
ADR--American Depository Receipts.
ADS--American Depository Shares.
GDR--Global Depository Receipts.
GDS--Global Depository Shares.
NR--Not rated by Moody's or Standard & Poor's.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 5
<PAGE>
<TABLE>
Statement of Assets and Liabilities
GLOBAL UTILITY FUND, INC.
<CAPTION>
September 30, 1997
Assets
<S>
<C>
Investments, at value (cost
$218,574,815).....................................
......................... $299,673,971
Foreign currency, at value (cost
$89,716)..........................................
.................... 89,712
Cash..............................................
..................................................
... 1,067
Dividends and interest
receivable........................................
..............................
2,398,227
Receivable for Fund shares
sold..............................................
.......................... 41,337
Other
assets............................................
...............................................
7,809
- ------------
Total
assets............................................
............................................
302,212,123
- ------------
Liabilities
Payable for Fund shares
reacquired........................................
............................. 670,119
Accrued
expenses..........................................
.............................................
209,752
Management fee
payable...........................................
......................................
164,830
Distribution fee
payable...........................................
....................................
170,628
Withholding taxes
payable...........................................
...................................
85,239
Deferred director's
fee...............................................
............................. 3,798
- ------------
Total
liabilities.......................................
............................................
1,304,366
- ------------
Net
Assets............................................
.................................................
$300,907,757
- ------------
- ------------
Net assets were comprised of:
Common stock, at
par...............................................
................................. $
17,177
Paid-in capital in excess of
par...............................................
..................... 196,932,191
- ------------
196,949,368
Undistributed net investment
income............................................
..................... 127,164
Accumulated net realized gains on investments
and foreign currency
transactions.....................
22,731,558
Net unrealized appreciation on investments and
foreign
currencies...................................
81,099,667
- ------------
Net assets, September 30,
1997..............................................
........................... $300,907,757
- ------------
- ------------
Class A:
Net asset value and redemption price per share
($120,824,984 / 6,896,814 shares of common
stock issued and
outstanding).........................
$17.52
Maximum sales charge (5.00% of offering
price)............................................
.......... .92
Maximum offering price to
public............................................
........................ $18.44
- ------------------
- ------------------
Class B:
Net asset value, offering price and redemption
price per share
($179,269,694 / 10,233,508 shares of common
stock issued and
outstanding)........................
$17.52
- ------------------
- ------------------
Class C:
Net asset value, offering price and redemption
price per share
($759,664 / 43,367 shares of common stock
issued and
outstanding)................................
$17.52
- ------------------
- ------------------
Class Z:
Net asset value, offering price and redemption
price per share
($53,415 / 3,045 shares of common stock
issued and
outstanding)..................................
$17.54
- ------------------
- ------------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 6
<PAGE>
GLOBAL UTILITY FUND, INC.
Statement of Operations
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income
September 30, 1997
<S> <C>
Income
Dividends (net of foreign withholding
taxes of $545,062)....................
$ 7,400,211
Interest and discount earned.............
5,354,880
- ------------
Total income..........................
12,755,091
- ------------
Expenses
Management fee...........................
2,040,052
Distribution fee--Class A................
290,758
Distribution fee--Class B................
1,856,933
Distribution fee--Class C................
7,270
Transfer agent's fees and expenses...
469,000
Custodian's fees and expenses........
205,000
Registration fees........................
36,000
Reports to shareholders..................
70,000
Audit fee................................
33,000
Legal fees and expenses..................
30,000
Directors' fees and expenses.........
19,000
Insurance................................
8,000
Miscellaneous............................
7,761
- ------------
Total expenses........................
5,072,774
- ------------
Net investment income.......................
7,682,317
- ------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions
Net realized gain (loss) on:
Investment transactions..................
23,455,159
Foreign currency transactions............
(2,900)
- ------------
23,452,259
- ------------
Net change in unrealized appreciation
(depreciation) on:
Investments..............................
39,646,396
Foreign currencies.......................
(3,971)
- ------------
39,642,425
- ------------
Net gain on investments and foreign
currencies...............................
63,094,684
- ------------
Net Increase in Net Assets
Resulting from Operations...................
$ 70,777,001
- ------------
- ------------
</TABLE>
GLOBAL UTILITY FUND, INC.
Statement of Changes in Net Assets
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended
September 30,
<S> <C>
<C>
in Net Assets 1997
1996
Operations
Net investment income....... $ 7,682,317
$ 9,586,911
Net realized gain on
investment and foreign
currency transactions.... 23,452,259
18,126,265
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies............... 39,642,425
(1,176,880)
------------
- ------------
Net increase in net assets
resulting from
operations............... 70,777,001
26,536,296
------------
- ------------
Dividends and distributions
(Note 1)
Dividends from net
investment income
Class A.................. (3,467,695)
(4,066,553)
Class B.................. (4,197,429)
(5,504,314)
Class C.................. (16,595)
(16,044)
Class Z.................. (598)
- --
------------
- ------------
(7,682,317)
(9,586,911)
------------
- ------------
Distributions in excess of
net investment income
Class A.................. (156,217)
(8,056)
Class B.................. (189,092)
(10,902)
Class C.................. (748)
(32)
Class Z.................. (27)
- --
------------
- ------------
(346,084)
(18,990)
------------
- ------------
Distributions from net
realized gains
Class A.................. (6,007,763)
(3,456,002)
Class B.................. (9,775,323)
(6,126,168)
Class C.................. (37,783)
(16,333)
------------
- ------------
(15,820,869)
(9,598,503)
------------
- ------------
Fund share transactions (net of
share conversions) (Note 5)
Net proceeds from shares
sold..................... 40,299,964
28,413,113
Net asset value of shares
issued in reinvestment of
dividends and
distributions............ 19,609,298
15,648,910
Cost of shares reacquired... (106,947,379)
(102,550,920)
------------
- ------------
Net decrease in net assets from
Fund share transactions..... (47,038,117)
(58,488,897)
------------
- ------------
Total decrease................. (110,386)
(51,157,005)
Net Assets
Beginning of year.............. 301,018,143
352,175,148
------------
- ------------
End of year.................... $300,907,757
$301,018,143
------------
- ------------
------------
- ------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 7
<PAGE>
Notes to Financial Statements
GLOBAL UTILITY FUND, INC.
- --------------------------------------------------
- ------------------------------
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, LLP ("Wellington").
Investment
operations commenced on January 2, 1990. On
February 1, 1991, the Fund concluded
operations as a closed-end investment company and
subsequently 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 Policies
The following is a summary of significant
accounting policies 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 take possession of
the underlying collateral securities, the value of
which exceeds the principal
amount of the repurchase transaction including
accrued interest. If the seller
defaults and the value of the collateral declines
or if bankruptcy proceedings
are commenced with respect to the seller of the
security, realization of the
collateral by the Fund may be delayed or limited.
Foreign Currency Translation: The books and
records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are
translated into U.S. dollars on
the following basis:
(i) market value of investment securities, other
assets and liabilities--at the
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, the possibility of political
and economic instability and
the level of governmental supervision and
regulation of foreign securities
markets.
Securities 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. Dividend income is
recorded on the ex-dividend date and interest
income is recorded on the accrual
basis. The Fund amortizes discounts on purchases
of debt securities as
adjustments to interest income. Expenses are
recorded on the accrual basis which
may require the use of certain estimates by
management.
- --------------------------------------------------
- ------------------------------
8
<PAGE>
Notes to Financial Statements
GLOBAL UTILITY FUND, INC.
- --------------------------------------------------
- ------------------------------
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.
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.
Reclassification of Capital Accounts: The Fund
accounts for and reports
distributions to shareholders in accordance with
American Institute of Certified
Public Accountants (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 was to increase undistributed net
investment income and decrease
accumulated net realized gains on investments by
$125,581 relating to net
realized foreign currency gains. 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 Wellington; Wellington
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 .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,
PIFM 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, .35% of
the Fund's average daily
net assets of the next $250 million, .30% of the
Fund's average daily net
assets of the next $500 million and .25% of the
Fund's average daily net
assets in excess of $1 billion.
The Fund has a distribution agreement with
Prudential Securities Incorporated
("PSI"), which acts as the distributor of the
Class A, Class
B, Class C and Class 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,
Class B and Class C
Plans"), regardless of expenses actually incurred
by them. The
distribution fees are accrued daily and payable
monthly. No distributions 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 .25 of 1%, 1%
and 1%, of the average daily
net assets of the Class A, B and C shares,
respectively, for the fiscal year
ended September 30, 1997.
PSI has advised the Fund that it has received
approximately $43,000 in front-end
sales charges resulting from sales of Class A
shares during the fiscal year
ended September 30, 1997. From these fees, PSI
paid such sales charges to
affiliated broker-dealers which in turn paid
commissions to salespersons and
incurred other distribution costs.
PSI has advised the Fund that for the fiscal year
ended September 30, 1997, it
received approximately $368,500 and $200 in
contingent deferred sales charges
imposed upon certain redemptions by Class B and
Class C shareholders,
respectively.
PSI and PIFM are indirect, wholly-owned
subsidiaries of The Prudential Insurance
Company of America.
The Fund, along with other affiliated registered
investment companies (the
"Funds"), entered into a credit agreement (the
"Agreement") on December 31, 1996 with an
unaffiliated lender.
The maximum commitment under the Agreement is
$200,000,000. The Agreement
expires on December 30, 1997. Interest on any such
borrowings outstanding will
be
- --------------------------------------------------
- ------------------------------
9
<PAGE>
Notes to Financial Statements
GLOBAL UTILITY FUND, INC.
- --------------------------------------------------
- ------------------------------
at market rates. The purpose of the Agreement is
to serve as an alternative
source of funding for capital share redemptions.
The Fund has not borrowed any
amounts pursuant to the Agreement as of September
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.
- --------------------------------------------------
- ----------
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
fiscal year ended September 30, 1997, the Fund
incurred fees of approximately
$394,000 for the services of PMFS. As of September
30, 1997, approximately
$29,500 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.
- --------------------------------------------------
- ----------
Note 4. Portfolio Securities
Purchases and sales of investment securities,
other than short-term investments,
for the fiscal year ended September 30, 1997 were
$37,726,616 and $101,769,983,
respectively.
The United States federal income tax basis of the
Fund's investments at
September 30, 1997 was $218,601,522 and,
accordingly, net unrealized
appreciation of investments was $81,072,449 (gross
unrealized
appreciation--$84,781,928; gross unrealized
depreciation--$3,709,479).
- --------------------------------------------------
- ----------
Note 5. Capital
The Fund offers Class A, Class B, Class C and
Class Z shares. Class A shares are
sold with an initial sales charge of up to 5.00%.
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. 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
seven years after purchase. A special exchange
privilege is also available for
shareholders who qualify to purchase Class A
shares at net asset value.
Effective December 16, 1996, the Fund commenced
offering Class Z shares. Class Z
shares are not subject to any sales or redemption
charge and are offered
exclusively for sale to a limited group of
investors.
The Fund has authorized 2 billion shares of common
stock at $.001 par value per
share equally divided into Class A, B, C and Z
shares. Of the 17,176,734 shares
of common stock issued and outstanding at
September 30, 1997, 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>
Year ended September 30, 1997:
Shares sold........................ 2,086,998
$ 33,076,632
Shares issued in reinvestment of
dividends and distributions...... 435,125
6,684,084
Shares reacquired.................. (3,491,626)
(55,793,270)
----------
- ------------
Net decrease in shares outstanding
before conversion................ (969,503)
(16,032,554)
Shares issued upon conversion from
Class B.......................... 361,364
5,915,705
----------
- ------------
Net decrease in shares
outstanding...................... (608,139)
$(10,116,849)
----------
- ------------
----------
- ------------
Year ended September 30, 1996:
Shares sold........................ 1,266,739
$ 18,863,411
Shares issued in reinvestment of
dividends and distributions...... 339,649
5,017,345
Shares reacquired.................. (2,883,880)
(43,010,724)
----------
- ------------
Net decrease in shares outstanding
before conversion................ (1,277,492)
(19,129,968)
Shares issued upon conversion from
Class B.......................... 327,144
4,874,396
----------
- ------------
Net decrease in shares
outstanding...................... (950,348)
$(14,255,572)
----------
- ------------
----------
- ------------
<CAPTION>
Class B
- -----------------------------------
<S> <C>
<C>
Year ended September 30, 1997:
Shares sold........................ 420,178
$ 6,760,201
Shares issued in reinvestment of
dividends and distributions...... 841,794
12,870,440
Shares reacquired.................. (3,146,002)
(50,674,248)
----------
- ------------
Net decrease in shares outstanding
before conversion................ (1,884,030)
(31,043,607)
Shares reacquired upon conversion
into Class A..................... (361,305)
(5,915,705)
----------
- ------------
Net decrease in shares
outstanding...................... (2,245,335)
$(36,959,312)
----------
- ------------
----------
- ------------
</TABLE>
- --------------------------------------------------
- ------------------------------
10
<PAGE>
Notes to Financial Statements
GLOBAL UTILITY FUND, INC.
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class B Shares
Amount
- ----------------------------------- ----------
- ------------
<S> <C>
<C>
Year ended September 30, 1996:
Shares sold........................ 623,845
$ 9,314,099
Shares issued in reinvestment of
dividends and distributions...... 718,862
10,600,234
Shares reacquired.................. (3,977,624)
(59,359,780)
----------
- ------------
Net decrease in shares outstanding
before conversion................ (2,634,917)
(39,445,447)
Shares reacquired upon conversion
into Class A..................... (327,061)
(4,874,396)
----------
- ------------
Net decrease in shares
outstanding...................... (2,961,978)
$(44,319,843)
----------
- ------------
----------
- ------------
<CAPTION>
Class C
- -----------------------------------
<S> <C>
<C>
Year ended September 30, 1997:
Shares sold........................ 14,373
$ 229,180
Shares issued in reinvestment of
dividends and distributions...... 3,544
54,192
Shares reacquired.................. (18,532)
(297,270)
----------
- ------------
Net increase in shares
outstanding...................... (615)
$ (13,898)
----------
- ------------
----------
- ------------
<CAPTION>
Class C
- -----------------------------------
<S> <C>
<C>
Year ended September 30, 1996:
Shares sold........................ 15,751
$ 235,603
Shares issued in reinvestment of
dividends and distributions...... 2,124
31,331
Shares reacquired.................. (12,124)
(180,416)
----------
- ------------
Net increase in shares
outstanding...................... 5,751
$ 86,518
----------
- ------------
----------
- ------------
<CAPTION>
Class Z
- -----------------------------------
<S> <C>
<C>
December 16, 1996(a) through
September 30, 1997:
Shares sold........................ 13,848
$ 233,951
Shares issued in reinvestment of
dividends and distributions...... 35
582
Shares reacquired.................. (10,838)
(182,591)
----------
- ------------
Net increase in shares
outstanding...................... 3,045
$ 51,942
----------
- ------------
----------
- ------------
</TABLE>
- ---------------
(a) Commencement of offering of Class Z shares.
- --------------------------------------------------
- ------------------------------
11
<PAGE>
Financial Highlights
GLOBAL UTILITY FUND, INC.
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class A
- --------------------------------------------------
- ---------------
Year Ended September 30,
- --------------------------------------------------
- ----------
1997 1996 1995 1994
1993
- -------- -------- -------- --------
- --------
<S>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year..................... $ 15.03 $ 14.72
$ 13.66 $ 14.63 $ 12.96
- -------- -------- -------- --------
- --------
Income from investment operations
Net investment
income..................................
.49 .51 .49 .47
.44
Net realized and unrealized gain (loss) on
investment
and foreign currency
transactions................... 3.34
.73 1.35 (.82) 2.46
- -------- -------- -------- --------
- --------
Total from investment
operations.................... 3.83
1.24 1.84 (.35) 2.90
- -------- -------- -------- --------
- --------
Less distributions
Dividends from net investment
income................... (.49)
(.51) (.48) (.42) (.47)
Distributions in excess of net investment
income....... (.02) -- -
- - -- (.01)
Distributions from net realized
gains.................. (.83) (.42)
(.30) (.20) (.75)
- -------- -------- -------- --------
- --------
Total
distributions.................................
(1.34) (.93) (.78) (.62)
(1.23)
- -------- -------- -------- --------
- --------
Net asset value, end of
year........................... $ 17.52 $
15.03 $ 14.72 $ 13.66 $ 14.63
- -------- -------- -------- --------
- --------
- -------- -------- -------- --------
- --------
TOTAL
RETURN(a)........................................
26.90% 8.65% 14.23% (2.49)%
23.87%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000).......................... $120,825
$112,800 $124,423 $126,254 $138,714
Average net assets
(000)............................... $116,303
$120,122 $122,837 $139,166 $119,001
Ratios to average net assets:
Expenses, including distribution
fees............... 1.21% 1.30%
1.31% 1.25% 1.30%
Expenses, excluding distribution
fees............... .96% 1.05%
1.06% 1.02% 1.10%
Net investment
income............................... 3.00%
3.38% 3.58% 3.39% 3.37%
For Class A, B, C and Z shares:
Portfolio turnover
rate............................. 13%
13% 15% 19% 14%
Average commission rate paid per
share.............. $ 0.0529 $ 0.0542
- -- -- --
</TABLE>
- ---------------
(a) 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 year reported and includes
reinvestment of dividends and
distributions.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 12
<PAGE>
Financial Highlights
GLOBAL UTILITY FUND, INC.
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class B
- --------------------------------------------------
- ---------------
Year Ended September 30,
- --------------------------------------------------
- ----------
1997 1996 1995 1994
1993
- -------- -------- -------- --------
- --------
<S>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
year..................... $ 15.03 $ 14.71
$ 13.66 $ 14.63 $ 12.97
- -------- -------- -------- --------
- --------
Income from investment operations
Net investment
income..................................
.37 .40 .39 .37
.34
Net realized and unrealized gain (loss) on
investment
and foreign currency
transactions................... 3.34
.74 1.34 (.82) 2.45
- -------- -------- -------- --------
- --------
Total from investment
operations.................... 3.71
1.14 1.73 (.45) 2.79
- -------- -------- -------- --------
- --------
Less distributions
Dividends from net investment
income................... (.37)
(.40) (.38) (.32) (.37)
Distributions in excess of net investment
income....... (.02) -- -
- - -- (.01)
Distributions from net realized
gains.................. (.83) (.42)
(.30) (.20) (.75)
- -------- -------- -------- --------
- --------
Total
distributions.................................
(1.22) (.82) (.68) (.52)
(1.13)
- -------- -------- -------- --------
- --------
Net asset value, end of
year........................... $ 17.52 $
15.03 $ 14.71 $ 13.66 $ 14.63
- -------- -------- -------- --------
- --------
- -------- -------- -------- --------
- --------
TOTAL
RETURN(a)........................................
25.96% 7.90% 13.32% (3.22)%
22.87%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000).......................... $179,270
$187,557 $227,189 $272,673 $185,259
Average net assets
(000)............................... $185,693
$210,305 $237,983 $270,466 $ 90,254
Ratios to average net assets:
Expenses, including distribution
fees............... 1.96% 2.05%
2.06% 2.02% 2.10%
Expenses, excluding distribution
fees............... .96% 1.05%
1.06% 1.02% 1.10%
Net investment
income............................... 2.25%
2.62% 2.83% 2.68% 2.59%
</TABLE>
- ---------------
(a) 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 year reported and includes
reinvestment of dividends and
distributions.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 13
<PAGE>
Financial Highlights
GLOBAL UTILITY FUND, INC.
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class C Class Z
- --------------------------------------------------
- -- -------------
August 1, December 16,
1994(c) 1996(d)
Year Ended September 30, through
through
- ---------------------------------- September
30, September 30,
1997 1996 1995 1994
1997
<S>
<C> <C> <C> <C>
<C>
- -------- -------- -------- ---------
- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period................... $ 15.03 $ 14.71
$ 13.66 $ 13.93 $ 15.02
- -------- -------- -------- ---------
- -------
Income from investment operations
Net investment
income..................................
.37 .40 .39 .06
.34
Net realized and unrealized gain (loss) on
investment
and foreign currency
transactions................... 3.34
.74 1.34 (.24) 2.59
- -------- -------- -------- ---------
- -------
Total from investment
operations.................... 3.71
1.14 1.73 (.18) 2.93
- -------- -------- -------- ---------
- -------
Less distributions
Dividends from net investment
income................... (.37)
(.40) (.38) (.07)
(.34)
Distributions in excess of net investment
income....... (.02) -- -
- - -- (.07)
Distributions from net realized
gains.................. (.83) (.42)
(.30) (.02) --
- -------- -------- -------- ---------
- -------
Total
distributions.................................
(1.22) (.82) (.68) (.09)
(.41)
- -------- -------- -------- ---------
- -------
Net asset value, end of
period......................... $ 17.52 $
15.03 $ 14.71 $ 13.66 $
17.54
- -------- -------- -------- ---------
- -------
- -------- -------- -------- ---------
- -------
TOTAL
RETURN(a)........................................
25.96% 7.90% 13.32% (1.32)%
19.70%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)........................ $ 760 $
661 $ 563 $ 226 $ 53
Average net assets
(000)............................... $ 727
$ 608 $ 410 $ 131 $
16
Ratios to average net assets:
Expenses, including distribution
fees............... 1.96% 2.05%
2.06% 2.06%(b) .96%(b)
Expenses, excluding distribution
fees............... .96% 1.05%
1.06% 1.06%(b) .96%(b)
Net investment
income............................... 2.25%
2.66% 2.83% 2.46%(b)
3.25%(b)
</TABLE>
- ---------------
(a) 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.
(b) Annualized.
(c) Commencement of offering of Class C shares.
(d) Commencement of offering of Class Z shares.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 14
<PAGE>
Report of Independent Accountants
GLOBAL UTILITY FUND, INC.
- --------------------------------------------------
- ------------------------------
To the Shareholders and Board of Directors of
Global Utility Fund, Inc.:
In our opinion, the accompanying statement of
assets and liabilities, including
the portfolio of investments, and the related
statements of operations and of
changes in net assets and the financial highlights
present fairly, in all
material respects, the financial position of
Global Utility Fund, Inc. (the
"Fund") at September 30, 1997, and the results of
its
operations, the changes in its net assets and the
financial highlights for the
year then ended, in conformity with generally
accepted accounting principles.
These financial statements and financial
highlights (hereafter referred to as
"financial statements") are the responsibility of
the
Fund's management; our responsibility is to
express an opinion on these
financial statements based on our audit. We
conducted our audit of these
financial statements in accordance with generally
accepted auditing standards
which require that we plan and perform the audit
to obtain reasonable assurance
about whether the financial statements are free of
material misstatement. An
audit includes examining, on a test basis,
evidence supporting the amounts and
disclosures in the financial statements, assessing
the accounting principles
used and significant estimates made by management,
and evaluating the overall
financial statement presentation. We believe that
our audit, which included
confirmation of securities at September 30, 1997
by correspondence with the
custodian and broker, provides a reasonable basis
for the opinion expressed
above. The accompanying statement of changes in
net assets for the year ended
September 30, 1996 and the financial highlights
for the periods other than the
year ended September 30, 1997 were audited by
other independent accountants,
whose opinion dated November 14, 1996 was
unqualified.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
November 19, 1997
- --------------------------------------------------
- ------------------------------
15
<PAGE>
Change of Auditors
GLOBAL UTILITY FUND, INC.
- --------------------------------------------------
- ------------------------------
Effective March 1, 1997, Deloitte & Touche LLP was
terminated as the Fund's
auditors. For the years ended September 30, 1993
through September 30, 1996,
Deloitte & Touche LLP expressed an unqualified
opinion on the Fund's
financial statements. There were no disagreements
between Fund management and
Deloitte & Touche LLP prior to their termination.
The Board of Directors
approved the termination of Deloitte & Touche LLP
and at the appointment of
Price Waterhouse LLP as the Fund's independent
accountants.
Federal Income Tax Information
GLOBAL UTILITY FUND, INC.
- --------------------------------------------------
- ------------------------------
We are required by the Internal Revenue Code to
advise you within 60 days of the
Fund's fiscal year end (September 30, 1997) as to
the federal tax status of
dividends paid by the Fund during such fiscal
year. Accordingly, we are advising
you that during the fiscal year, the Fund paid
distributions for Class A shares
totaling $1.338 per share, comprised of $0.943 per
share ordinary income and
short-term capital gains which are taxable as
ordinary income and $0.395 per
share long-term capital gains which are taxable as
such. The Fund paid
distributions for Class B and Class C shares
totaling $1.215 per share,
comprised of $0.820 per share ordinary income and
short-term capital gains which
are taxable as ordinary income and $0.395 per
share long-term capital gains
which are taxable as such. The Fund paid
distributions for Class Z shares
totaling $0.4085 per share of ordinary income
which is taxable as such. Further,
we wish to advise you that 35% of the ordinary
income dividends paid in 1997
qualified for the corporate dividend received
deduction available to corporate
taxpayers.
In January 1998, you will be advised on IRS Form
1099 DIV or substitute 1099 DIV
as to the federal tax status of the distributions
received by you in calendar
year 1997.
- --------------------------------------------------
- ------------------------------
16
<PAGE>
Comparing A $10,000 Investment.
- -------------------------------------------------
Global Utility Fund, Inc. vs. the Morgan Stanley
Capital International World Index.
- -- Global Utility Fund, Inc.
// Morgan Stanley Capital
International World Index
Past performance is not indicative of future
results. Investment
return and principal value will fluctuate so an
investor's shares,
when redeemed, will be worth more or less than
their original cost.
The box on top of the graphs is designed to give
you
an idea how much the Fund's returns can fluctuate
from year to
year by measuring the best and worst calendar
years in terms
of total annual return since inception of each
share class.
These graphs are furnished to you in accordance
with SEC
regulations. They compare a $10,000 investment in
the Global
Utility Fund (Class A, Class B, Class C and Class
Z) with a
similar investment in the Morgan Stanley Capital
International
World Index (the Index) by portraying the initial
account values
at the commencement of operations of each class,
and subsequent
account values at the end of each fiscal year
(September 30),
as measured on a quarterly basis, beginning in
1990 for Class
A shares, in 1991 for Class B shares, in 1994 for
Class C
shares and in 1996 for Class Z shares. For
purposes of the
graphs, and unless otherwise indicated, in the
accompanying
tables it has been assumed (a) that the maximum
applicable
front-end sales charge was deducted from the
initial $10,000
investment in Class A shares; (b) the maximum
applicable
contingent deferred sales charge was deducted from
the
value of the investment in Class B and Class C
shares,
assuming full redemption on September 30, 1997;
(c) all
recurring fees (including management fees) were
deducted;
and (d) all dividends and distributions were
reinvested.
Class B shares will automatically convert to Class
A shares
on a quarterly basis, beginning approximately
seven years
after purchase. This conversion feature is not
reflected in the graph. Since Class Z shares have
been
in existence less than one year, no average annual
total
returns are shown.
The Index is a weighted index comprised of
approximately
1,500 companies listed on the stock exchanges of
the U.S.,
Europe, Canada, Australia, New Zealand and the Far
East.
The combined market capitalization of these
companies
represents approximately 60% of the aggregate
market
value of the stock exchanges in the countries
comprising
the Index. The Index is unmanaged and includes the
reinvestment of all dividends, but does not
reflect
the payment of transaction costs and advisory fees
associated with an investment in the Fund. The
securities in the Index may differ substantially
from the securities in the Fund. The Index is not
the only one that may be used to characterize
performance of stock funds and other indices may
portray different comparative performance.
Class A (GRAPH)
Average Annual Total
Returns - Class A
- ----------------------
With Sales Load
12.83% Since Inception
12.58% for 5 Years
20.57% for 1 Year
Without Sales Load
13.58% Since Inception
13.75% for 5 Years
26.90% for 1 Year
Class B (GRAPH)
Average Annual Total
Returns - Class B
- -------------------------
With Sales Load
12.89% Since Inception
12.76% for 5 Years
20.96% for 1 Year
Without Sales Load
12.89% Since Inception
12.88% for 5 Years
25.96% for 1 Year
Class C (GRAPH)
Average Annual Total
Returns - Class C
- ---------------------------
With Sales Load
14.14% Since Inception
24.96% for 1 Year
Without Sales Load
14.14% Since Inception
25.96% for 1 Year
Class Z (GRAPH)
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Directors
Eugene C. Dorsey
Douglas H. McCorkindale
Thomas T. Mooney
Richard A. Redeker
Officers
Richard A. Redeker, President
Thomas A. Early, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
Wellington Management Company, LLP
75 State Street
Boston, MA 02109
Distributor
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Kirkpatrick & Lockhart LLP
1800 Massachusetts Ave., N.W.
Washington, D.C. 20036
The views expressed in this report and information
about the
Fund's portfolio holdings are for the period
covered by this
report and are subject to change thereafter.
This report is not authorized for distribution to
prospective
investors unless preceded or accompanied by a
current prospectus.
37936G303 MF150E
37936G204 Cat. #444356X
37936G402
37936G501
