(ICON)
Global
Utility
Fund, Inc.
ANNUAL
REPORT
Sept. 30, 1998
<PAGE>
Global Utility Fund, Inc.
Performance At A Glance.
The Global Utility Fund's Class A shares gained 12.9% for
the 12 months ended
September 30, 1998, as compared with a 26.5% advance in the
benchmark
Financial Times World Utilities Index.
Cumulative Total Returns1 As of 9/30/98
<TABLE>
<CAPTION>
One Five
Since
Year Years
Inception2
<S> <C> <C> <C>
Class A 12.90% 73.40%
202.58%
Class B 12.06 67.03
147.63
Class C 12.06 N/A
70.30
Class Z 13.18 N/A
35.51
FT/S&P Actuaries
World Utilities Index3 26.54 78.56
**
Lipper Utility Avg4 18.13 69.02
***
</TABLE>
Average Annual Total Returns1 As of
9/30/98
<TABLE>
<CAPTION>
One Five
Since
Year Years
Inception2
<S> <C> <C> <C>
Class A 7.25% 10.50%
12.84%
Class B 7.06 10.67
12.78
Class C 11.06 N/A
13.64
Class Z 13.18 N/A
18.52
</TABLE>
Past performance is not indicative of future results.
Principal and investment
return will fluctuate so that an investor's shares, when
redeemed, may be
worth more or less than their original cost.
1 Source: Prudential Investments Fund Management and Lipper
Analytical
Services. The cumulative total returns do not take into
account sales charges.
The average annual total returns do take into account
applicable sales charges.
The Fund charges a maximum front-end sales charge of 5% for
Class A shares and
a declining contingent deferred sales charge (CDSC) of 5%,
4%, 3%, 2%, 1% and
1% for six years for Class B shares. Class B shares will
automatically convert
to Class A shares, on a quarterly basis, approximately seven
years after
purchase. Class C shares have a 1% CDSC for one year and,
beginning November 2,
1998, are sold with a front-end sales charge of 1% and a
CDSC for 18 months.
Class Z shares are not subject to a sales charge or
distribution fee.
2 Inception dates: Class A, 1/2/90; Class B, 3/18/91; Class
C, 8/1/94; and
Class Z, 12/16/96. The Fund operated as a closed-end fund
from its inception
until February 1, 1991.
3 Source: Goldman, Sachs & Co. The Financial Times (FT)/S&P
Actuaries World
Utilities Index is currently comprised of approximately 180
world utility
stocks representing approximately 30 countries. Investors
cannot invest
directly in an index.
4 Lipper average returns are for all funds in each share
class for the one- and
five-year periods in the Utility Fund category.
**The FT/S&P Actuaries World Utilities Index Since Inception
returns are
144.64% for Class A; 159.34% for Class B; 84.55% for Class
C; and 51.50% for
Class Z.
***Lipper Since Inception returns are 161.98% for Class A;
155.24% for Class B;
83.25% for Class C; and 33.56% for Class Z based on all
funds in each share
class.
How Investments Compared
(As of 9/30/98)
(CHART)
Source: Lipper Analytical Services. Financial markets
change, so a mutual
fund's past performance should never be used to predict
future results. The
risks to each of the investments listed above are different
- -- we provide
12-month total returns for several Lipper mutual fund
categories to show you
that reaching for higher returns means tolerating more risk.
The greater the
risk, the larger the potential reward or loss. In addition,
we've included
historical 20-year average annual returns. These returns
assume the
reinvestment of dividends.
U.S. Growth Funds will fluctuate a great deal. Investors
have received higher
historical total returns from stocks than from most other
investments. Smaller
capitalization stocks offer greater potential for long-term
growth but may be
more volatile than larger capitalization stocks.
General Bond Funds provide more income than stock funds,
which can help smooth
out their total returns year by year. But their prices still
fluctuate
(sometimes significantly) and their returns have been
historically lower than
those of stock funds.
General Municipal Debt Funds invest in bonds issued by state
governments,
state agencies and/or municipalities. This investment
provides income that is
usually exempt from federal and state income taxes.
U.S. Taxable Money Funds attempt to preserve a constant
share value; they
don't fluctuate much in price but, historically, their
returns have been
generally among the lowest of the major investment
categories.
<PAGE>
William C. S. Hicks, Fund Manager (PHOTO)
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 can be 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.
Brighter Prospects
Abroad.
Because of modest growth in the U.S. electric industry, many
companies are
rapidly increasing their focus abroad where opportunities
appear to be more
exciting. U.S. electric companies now have made significant
investments in
Australia and South America and own the majority of the
regional utilities
privatized in the United Kingdom.
Strategy Session.
- ------------------------------------------------------------
- -------------------
In the telecommunications industry, there are significant
growth opportunities
as well as rapid technological changes. The development of
wireless networks
has provided a window for domestic and international
expansion in the areas
of voice transmission, paging, and data communications, with
each segment
holding the prospect of double-digit growth.
Within the atmosphere of explosive investment growth, major
U.S. carriers have
formed worldwide and domestic alliances in order to meet the
growing demands of
the marketplace, hence the mergers of Worldcom and MCI, AT&T
and
Tele-Communications Inc., and Bell Atlantic and Nynex. We
anticipate future
worldwide consolidation will continue in the years ahead.
Our portfolio strategy has focused on full participation in
the international
growth sector, which now comprises about 45% of the Fund's
equity assets.
Because of the major opportunities in data and voice
transmission, we hold
about 49% of the Fund's equity assets in the
telecommunications sector. Most
recently, we have added to our gas transmission distribution
sector (14.8% of
equity assets) which offers the prospects of good unit
growth as well as
expansion by mergers and acquisitions.
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 which are potential upgrade candidates in countries
with pent-up
demand and with infrastructure needs. Our second theme is
the pursuit of
companies with respectable operating histories in developed
markets. In the
future, we may consider a third theme, where the Fund
invests in companies
which are privatizing in both developed and emerging
countries.
Portfolio Composition
Expressed as a percentage of
net assets as of 9/30/98.
(CHART)
<PAGE>
What Went Well.
- -------------------------------------------------
Telecommunications
Performed Well.
- - The Fund's investments in mobile worldwide
telecommunications performed
particularly well again in the past year, as evidenced by
sharp gains in the
leading worldwide cellular companies AirTouch
Communications, Telecom Italia
S.p.A., and Vodafone Group plc. In addition, we were
pleased with the
reorganization of AT&T and significant market gains by
telecom industry
leaders such as SBC Communications and Sprint. Also, the
leading
telecommunication equipment manufacturer, Lucent
Technologies, gave a boost
to share performance.
Water and Electric
Companies.
- - Lower interest rates helped propel the prices of some of
the Fund's domestic
electric utilities such as NIPSCO Industries, Texas
Utilities, and DTE
Energy. Also we had solid gains from American Water Works
and Enron who
benefited from successful acquisition strategies in the
growing water and
gas industries.
Five Largest
Holdings.
4.7% SBC Communications Inc.
Telecommunications
4.1% MCI Worldcom Inc.
Telecommunications
3.3% Telecom Italia S.p.A. Risp
Telecommunications
2.9% Scottish Power PLC
Electric Utility
2.7% AT&T Corp.
Telecommunications
Expressed as a percentage of net assets as of 9/30/98.
And Not So Well.
- -------------------------------------------------
Dislocations in
Emerging Markets.
The Fund's investments in selected emerging markets had
difficult sailing as
the worldwide economies suffered from dislocations that
started in Asia and
expanded to Russia and Latin America. Although the Fund's
holdings in these
areas were restricted to a relatively modest proportion of
assets, performance
was hurt by our investments in China (Huaneng Power
International), Korea
(Korea Electric Power), and Mexico (Telmex). However, we
remain optimistic
about the long-term prospects for this emerging sector.
Looking Ahead.
- -------------------------------------------------
The international and domestic utility markets hold
investment promise and
relative stability in an environment of declining worldwide
interest rates. We
believe unit growth in the telecommunications sector will be
well above
average, and we have hope that new companies such as MCI
Worldcom will take
advantage of expanded data and Internet opportunities. We
believe there will
be significant merger and acquisition opportunities in the
gas, water, electric
and telephone utilities, as well as continuing worldwide
privatization
opportunities. We believe companies such as Lucent
Technologies will be at the
vanguard of the new technologies in data telecommunications
and networking,
two of the most dynamic opportunities in the developing
markets. Our strong
and growing international research team is focused on
identifying new areas
for investment in this challenging market environment.
1
<PAGE>
Portfolio of Investments as of September 30, 1998
GLOBAL UTILITY FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
US$
Value
Shares Description (Note
1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--96.4%
COMMON STOCKS--71.7%
- ------------------------------------------------------------
Electrical Utilities--20.0%
60,000 CMS Energy Corp. $
2,613,750
150,000 COPEL (ADR-Peferred B Shares)
(Brazil)
956,250
300,000 DPL, Inc.
5,887,500
130,000 DQE, Inc.
5,021,250
100,000 DTE Energy Co.
4,518,750
200,000 Endesa S.A. (ADR) (Spain)
4,400,000
187,800 Espoon Sahko (ADR) (Finland) 144A
4,419,257
150,000 Huaneng Power International, Inc.*
(ADR) (China)
1,537,500
120,000 Korea Electric Power Inc. (ADR)
(South Korea)
1,080,000
80,000 New Century Energies, Inc.
3,895,000
100,000 NIPSCO Industries, Inc.
3,287,500
70,000 Pinnacle West Capital Corp.
3,136,875
850,000 Scottish Power PLC (United Kingdom)
8,231,173
277,300 Shandong Huaneng Power Ltd.
(ADR) (China)
1,247,850
90,000 Texas Utilities Holding Co.
4,190,625
50,000 VEBA AG (Germany)
2,596,937
---------
- ----
57,020,217
- ------------------------------------------------------------
Gas Utilities--10.8%
350,000 Australian Gas Light Co. (Australia)
2,405,427
125,000 El Paso Energy Corp.
4,054,688
100,000 Enron Corp.
5,281,250
120,000 Equitable Resources, Inc.
3,052,500
50,000 MCN Energy Group, Inc.
853,125
54,426 NTL Incorporated
2,333,515
200,000 TransCanada Pipelines Ltd. (Canada)
2,914,688
250,000 Westcoast Energy, Inc. (Canada)
4,707,712
100,000 Williams Companies, Inc.
2,875,000
90,000 YPF Sociedad Anonima (ADR-Class D
Shares) (Argentina)
2,340,000
---------
- ----
30,817,905
Telecommunications--34.3%
65,000 AirTouch Communications, Inc.* $
3,705,000
130,000 AT&T Corp.
7,596,875
100,000 BC Telecom, Inc. (Canada)
2,357,950
120,000 BCE, Inc. (Canada)
3,352,500
140,000 Bell Atlantic Corp.
6,781,250
76,096 Cia Telecom de Chile, S.A. (ADR)
(Chile)
1,455,336
43,000 Empresas Telex-Chile S.A. (ADR)
(Chile)
20,156
111,222 Hellenic Telecom Org. (Greece)
2,656,668
236,829 MCI Worldcom Inc.
11,582,418
40,000 Portugal Telecom, S.A. (ADS)
(Portugal)
1,440,000
300,000 SBC Communications Inc.
13,331,250
70,000 Sprint Corp.
5,040,000
40,000 Telecom Corp. New Zealand Ltd. (ADR)
(New Zealand)
1,205,000
700,000 Telecom Italia Mobile S.p.A. (Italy)
4,066,057
300,000 Telecom Italia S.p.A. (Italy)
2,060,502
2,000,000 Telecom Italia S.p.A. Risp
(Nonconvertible) (Italy)
9,534,160
40,000 Telefonica de Argentina S.A. (ADR-
Class B Shares) (Argentina)
1,177,500
50,000 Telefonos de Mexico, S.A. (ADR-
Class L Shares) (Mexico)
2,212,500
43,636 Telefonica, S.A. (ADR) (Spain)
4,709,961
130,000 US West Inc.
6,816,875
200,000 Videsh Sanchar Nigam Ltd. (GDR)
(India) 144A
2,195,000
40,000 Vodafone Group PLC (ADR)
(United Kingdom)
4,510,000
---------
- ----
97,806,958
- ------------------------------------------------------------
Water Utilities & Other--6.6%
28,000 Alcatel Alsthom (France)
2,482,641
167,800 American Water Works Co., Inc.
5,264,725
280,000 Anglian Water PLC (United Kingdom)
4,500,047
41,000 ENI S.p.A. (ADR) (Italy)
2,511,250
60,000 Lucent Technologies, Inc.
4,143,750
---------
- ----
18,902,413
Total common stocks
(cost $129,390,170)
204,547,493
---------
- ----
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 2
<PAGE>
Portfolio of Investments as of September 30, 1998
GLOBAL UTILITY FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
US$
Value
Shares Description (Note
1)
<C> <S> <C>
- ------------------------------------------------------------
PREFERRED STOCKS--1.3%
Philippine Long Distance Telephone
Co. (The Philippines)
43,700 $3.50 Conv. Ser. III (GDS) $
1,704,300
92,216 5.75% Conv. Ser. II (GDS)
1,939,171
---------
- ----
Total preferred stocks
(cost $4,189,000)
3,643,471
---------
- ----
--------------------------------------------------------
- ----
</TABLE>
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000)
<S> <C> <C> <C>
DEBT OBLIGATIONS--23.4%
CORPORATE BONDS--22.7%
- ------------------------------------------------------------
Electrical Utilities--14.6%
Ba1 $ 1,000 AES Corp.,
8.375%, 8/15/07
945,000
NR 1,000 Arizona Public Service
Co.,
6.25%, 1/15/05
1,027,070
Baa1 1,000D Chilgener, S.A.,
6.50%, 1/15/06 (Chile)
825,820
NR 1,000 Cleveland Elec. Illum.
Co.,
7.43%, 11/1/09
1,087,410
Ba3 1,000 CMS Energy Corp.,
8.125%, 5/15/02
1,048,510
NR 1,000D Compania De Transporte
Energia,
9.25%, 4/1/08 (Brazil)
745,000
A1 1,000 Consolidated Edison Co.
of NY, Inc.,
7.625%, 3/1/04
1,107,700
NR 1,000D CSW Investments,
7.45%, 8/1/06
(United Kingdom)
1,132,130
Aa3 1,000 Duke Energy Corp.,
5.875%, 6/1/01
1,020,460
Baa1 1,000D Eastern Energy Limited,
6.75%, 12/1/06
(Australia)
1,067,080
Ba2 1,000 El Paso Electric Co.,
8.25%, 2/1/03, Ser. C
1,080,770
Baa1 $ 1,000D Empresa Electrica del
Norte Grande S.A.,
7.75%, 3/15/06 (Chile) $
841,260
Florida Power Corp.,
Aa3 500 6.00%, 7/1/03
516,620
A1 650 6.75%, 2/1/28
673,894
Baa3 1,000 Gulf States Utilities
Co.,
8.25%, 4/1/04
1,113,960
Baa1 1,000D Hyder PLC,
6.875%, 12/15/07
(United Kingdom)
1,067,500
Ba1** 1,000D Inversora Electrica
Buenos Aires S.A.,
9.00%, 9/16/04
(Argentina)
735,000
A1 1,500 Monongahela Power Co.,
7.375%, 7/1/02
1,612,215
Northern States Power
Co.,
Aa3 1,000 5.75%, 12/1/00
1,010,800
Aa3 1,000 6.50%, 3/1/28
1,024,140
Baa3 1,000 NRG Energy, Inc.,
7.50%, 6/15/07
1,065,040
Aa3 640 Oklahoma Gas & Electric
Co.,
6.50%, 4/15/28
664,102
A1 2,000 Potomac Edison Co.,
8.875%, 8/1/21
2,106,780
Baa2 1,000 PP&L Capital Funding
Inc.,
6.79%, 11/22/04
1,079,110
Ba1 1,000 Public Service Co.
7.10%, 8/01/05
1,055,390
A2 1,000D Quebec Hydro,
7.50%, 4/1/16 (Canada)
1,118,280
Baa1 1,000D Southern Investments UK PLC,
6.80%, 12/1/06
(United Kingdom)
1,053,150
Aa3 2,000 Southwestern Electric
Power Co.,
5.25%, 4/1/00
1,999,940
Aa2 1,000 Southwestern Public Service Co.,
7.25%, 7/15/04
1,102,660
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as of September 30, 1998
GLOBAL UTILITY FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount US$
Value
(Unaudited) (000) Description (Note
1)
<S> <C> <C> <C>
- ------------------------------------------------------------
Electrical Utilities (cont'd.)
Baa3 $ 1,000 System Energy Resources,
Inc.,
7.71%, 8/1/01 $
1,051,790
Aa2 1,000 Tampa Electric Co.,
7.75%, 11/1/22
1,103,500
Ba3 1,000 Texas-New Mexico Power Co.,
10.75%, 9/15/03
1,092,610
Baa1 1,000 Texas Utilities Electric
Co.,
9.27%, 1/14/00
1,050,940
A2 1,000D United Utilities PLC,
6.45%, 4/1/08
(United Kingdom)
1,046,030
A2 2,000 Virginia Electric &
Power Co.,
6.625%, 4/1/03
2,121,900
NR 1,000 W3A Funding Corp.,
8.09%, 1/2/17
1,108,930
Aa3 1,000 Wisconsin Electric Power
Co.,
6.625%, 11/15/06
1,102,720
Baa2 1,000D Yorkshire Power Finance
Ltd.,
6.496%, 2/25/08
(United Kingdom)
1,039,157
------
- -------
41,644,368
- ---------------------------------------------------
Gas Distribution & Other Related Industries--1.7%
Baa2 1,000 El Paso Natural Gas Co.,
7.50%, 11/15/26
1,058,840
Baa2 1,000 Enron Corp.,
7.00%, 8/15/23
936,580
Ba3 1,000D Metrogas, S.A.,
10.88%, 5/15/01, Ser.
B (Argentina)
950,000
A2 1,600 Michigan Consolidated
Gas
Co., 8.25%, 5/1/14
1,939,344
------
- -------
4,884,764
- ------------------------------------------------------------
Telecommunications, Media & Related Industries--6.4%
Aa3 1,000 AT&T Corp.,
7.75%, 3/1/07
1,171,040
BellSouth
Telecommunications,
Aaa 2,000 6.125%, 9/23/08
(Eurobonds)
2,112,500
Aaa 2,000 7.00%, 10/1/25
2,259,700
NR $ 1,000 Century Telephone
Enterprises, Inc.,
6.30%, 1/15/08 $
1,049,410
NR 1,000D Comtel Brasileira Ltd.,
10.75%, 9/26/04
(Brazil)
700,000
Baa1 1,000 GTE Corp.,
7.51%, 4/1/09
1,170,070
A2 1,000 GTE Florida, Inc.,
7.25%, 10/15/25
1,055,320
Aaa 1,000 Indiana Bell Telephone
Co., Inc.,
7.30%, 8/15/26
1,164,420
Aaa 1,000 New Jersey Bell Telephone Co.,
8.00%, 6/1/22
1,217,960
A2 1,000 New York Telephone Co.,
6.00%, 4/15/08
1,052,430
A1 2,000 Pacific Bell,
6.625%, 11/1/09
2,223,580
Ba2 1,000D Philippine Long Distance
Telephone Co.,
9.25%, 6/30/06
(The Philippines)
810,000
Baa2 1,000 US West Inc.,
6.375%, 7/15/08
1,076,048
Baa2 1,000 Worldcom, Inc.,
6.40%, 8/15/05
1,055,220
------
- -------
18,117,698
Total corporate bonds
(cost $62,563,397)
64,646,830
------
- -------
- ------------------------------------------------------------
U.S. GOVERNMENT SECURITIES--0.7%
2,000 United States Treasury Notes,
5.75%, 8/15/03
(cost $2,042,188)
2,122,180
------
- -------
Total debt obligations
(cost $64,605,585)
66,769,010
------
- -------
Total long-term
investments
(cost $198,184,755)
274,959,974
------
- -------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 4
<PAGE>
GLOBAL UTILITY FUND, INC.
Portfolio of Investments as of September 30, 1998
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount US$
Value
(000) Description (Note
1)
<C> <S> <C>
- ------------------------------------------------------------
SHORT-TERM INVESTMENTS--3.2%
REPURCHASE AGREEMENTS
$9,089 PaineWebber Inc., 5.45%, due
10/01/98, in the amount of
$9,090,376; (cost $9,089,000;
collateralized by $8,975,000 U.S.
Treasury Notes, 7.125%, due
10/15/98, value including accrued
interest-$9,279,745) $
9,089,000
- ------------------------------------------------------------
Total Investments--99.6%
(cost $207,273,755; Note 4)
284,048,974
Other assets in excess of
liabilities--0.4%
1,191,740
---------
- ----
Net Assets--100% $
285,240,714
---------
- ----
---------
- ----
</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>
Statement of Assets and Liabilities
GLOBAL UTILITY FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
September 30, 1998
<S>
<C>
Assets
Investments, at value (cost
$207,273,755)...............................................
............... $284,048,974
Foreign currency, at value (cost
$53,059)....................................................
.......... 53,385
Dividends and interest
receivable..................................................
.................... 1,995,415
Receivable for Investments
sold........................................................
................ 1,324,572
Withholding taxes
receivable..................................................
......................... 107,713
Receivable for Fund shares
sold........................................................
................ 54,811
Other
assets......................................................
..................................... 7,615
- ------------------
Total
assets......................................................
.................................. 287,592,485
- ------------------
Liabilities
Bank
overdraft...................................................
...................................... 43,352
Payable for investments
purchased...................................................
................... 1,039,156
Payable for Fund shares
reacquired..................................................
................... 701,396
Accrued
expenses....................................................
................................... 232,576
Distribution fee
payable.....................................................
.......................... 151,966
Management fee
payable.....................................................
............................ 111,597
Withholding taxes
payable.....................................................
......................... 61,884
Deferred director's
fee.........................................................
....................... 9,844
- ------------------
Total
liabilities.................................................
.................................. 2,351,771
- ------------------
Net
Assets......................................................
....................................... $285,240,714
- ------------------
- ------------------
Net assets were comprised of:
Common stock, at
par.........................................................
....................... $ 16,153
Paid-in capital in excess of
par.........................................................
........... 177,031,008
- ------------------
177,047,161
Accumulated net realized gains on investments and foreign
currency transactions.....................
31,408,025
Net unrealized appreciation on investments and foreign
currencies...................................
76,785,528
- ------------------
Net assets, September 30,
1998........................................................
................. $285,240,714
- ------------------
- ------------------
Class A:
Net asset value and redemption price per share
($123,346,275 / 6,984,666 shares of common stock
issued and outstanding).........................
$17.66
Maximum sales charge (5.00% of offering
price)......................................................
.93
Maximum offering price to
public......................................................
.............. $18.59
- ------------------
- ------------------
Class B:
Net asset value, offering price and redemption price per
share
($154,872,668 / 8,771,192 shares of common stock
issued and outstanding).........................
$17.66
- ------------------
- ------------------
Class C:
Net asset value, offering price and redemption price per
share
($957,042 / 54,203 shares of common stock issued and
outstanding)................................
$17.66
- ------------------
- ------------------
Class Z:
Net asset value, offering price and redemption price per
share
($6,064,729 / 343,114 shares of common stock issued
and outstanding).............................
$17.68
- ------------------
- ------------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 6
<PAGE>
GLOBAL UTILITY FUND, INC.
Statement of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year
Ended
Net Investment Income September 30,
1998
<S> <C>
Income
Dividends (net of foreign withholding
taxes of $411,874).................... $
5,969,533
Interest.................................
5,228,170
-------------
- -----
Total income..........................
11,197,703
-------------
- -----
Expenses
Management fee...........................
2,050,958
Distribution fee--Class A................
305,959
Distribution fee--Class B................
1,773,262
Distribution fee--Class C................
9,690
Transfer agent's fees and expenses.......
410,000
Custodian's fees and expenses............
190,000
Reports to shareholders..................
62,000
Registration fees........................
35,000
Audit fee and expenses...................
33,000
Legal fees and expenses..................
29,000
Directors' fees..........................
18,000
Insurance................................
7,000
Miscellaneous............................
8,177
-------------
- -----
Total expenses........................
4,932,046
-------------
- -----
Net investment income.......................
6,265,657
-------------
- -----
Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency
Transactions
Net realized gain on:
Investment transactions..................
33,940,901
Foreign currency transactions............
4,692
-------------
- -----
33,945,593
-------------
- -----
Net change in unrealized appreciation
(depreciation) on:
Investments..............................
(4,323,937)
Foreign currencies.......................
9,798
-------------
- -----
(4,314,139)
-------------
- -----
Net gain on investments and foreign
currencies...............................
29,631,454
-------------
- -----
Net Increase in Net Assets
Resulting from Operations................... $
35,897,111
-------------
- -----
-------------
- -----
</TABLE>
GLOBAL UTILITY FUND, INC.
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended September
30,
in Net Assets 1998
1997
<S> <C> <C>
Operations
Net investment income....... $ 6,265,657 $
7,682,317
Net realized gain on
investment and foreign
currency transactions.... 33,945,593
23,452,259
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies............... (4,314,139)
39,642,425
------------------ -----
- -------
Net increase in net assets
resulting from
operations............... 35,897,111
70,777,001
------------------ -----
- -------
Dividends and distributions
(Note 1)
Dividends from net
investment income
Class A.................. (2,991,973)
(3,467,695)
Class B.................. (3,134,288)
(4,197,429)
Class C.................. (17,223)
(16,595)
Class Z.................. (122,173)
(598)
------------------ -----
- -------
(6,265,657)
(7,682,317)
------------------ -----
- -------
Distributions in excess of
net investment income
Class A.................. (180,906)
(156,217)
Class B.................. (266,336)
(189,092)
Class C.................. (1,178)
(748)
Class Z.................. (114)
(27)
------------------ -----
- -------
(448,534)
(346,084)
------------------ -----
- -------
Distributions from net
realized gains
Class A.................. (10,062,149)
(6,007,763)
Class B.................. (14,813,745)
(9,775,323)
Class C.................. (65,425)
(37,783)
Class Z.................. (6,437)
- --
------------------ -----
- -------
(24,947,756)
(15,820,869)
------------------ -----
- -------
Fund share transactions (net of
share conversions) (Note 5)
Net proceeds from shares
sold..................... 34,214,868
40,299,964
Net asset value of shares
issued in reinvestment of
dividends and
distributions............ 26,214,007
19,609,298
Cost of shares reacquired... (80,331,082)
(106,947,379)
------------------ -----
- -------
Net decrease in net assets from
Fund share transactions..... (19,902,207)
(47,038,117)
------------------ -----
- -------
Total decrease................. (15,667,043)
(110,386)
Net Assets
Beginning of year.............. 300,907,757
301,018,143
------------------ -----
- -------
End of year(a)................. $285,240,714
$300,907,757
------------------ -----
- -------
------------------ -----
- -------
- ---------------
(a) Includes undistributed net
investment income of....... $ -- $
127,164
------------------ -----
- -------
</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 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 premiums and original issue
discount paid 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.
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.
- ------------------------------------------------------------
- --------------------
8
<PAGE>
Notes to Financial Statements
GLOBAL UTILITY FUND, INC.
- ------------------------------------------------------------
- --------------------
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 $321,370
relating to net
realized foreign currency gains and a reclassification of
dividend character.
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
Management Company, LLP ('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 had a distribution agreement with Prudential
Securities Incorporated
('PSI'), which acted as the distributor of the Class A,
Class B, Class C and
Class Z shares of the Fund through May 31, 1998. Prudential
Investment
Management Services LLC ('PIMS') became the distributor of
the Fund effective
June 1, 1998 and is serving the Fund under the same terms
and conditions as
under the arrangement with PSI. The Fund compensated PSI and
PIMS 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 distribution or
service fees are paid to
PIMS as distributor of the Class Z shares of the Fund.
Pursuant to the Class A, B and C Plans, the Fund compensated
PSI and PIMS 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, 1998.
PSI and PIMS have advised the Fund that they received
approximately $33,500 in
front-end sales charges resulting from sales of Class A
shares during the fiscal
year ended September 30, 1998. From these fees, PSI and PIMS
paid such sales
charges to affiliated broker-dealers which in turn paid
commissions to
salespersons and incurred other distribution costs.
PSI and PIMS have advised the Fund that for the fiscal year
ended September 30,
1998, they received approximately $182,000 and $100 in
contingent deferred sales
charges imposed upon certain redemptions by Class B and
Class C shareholders,
respectively.
PSI, PIMS 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'), has a credit agreement (the 'Agreement') with an
unaffiliated lender.
The maximum commitment under the Agreement is $200,000,000.
Interest on any such
borrowings outstanding will be at market rates. The purpose
of the Agreement is
to serve as an alternative source of funding for capital
share redemptions. The
Fund did not borrowed any amounts pursuant to the Agreement
during the year
ended September 30, 1998. The Funds pay a commitment fee at
an annual rate of
.055 of 1% on the unused portion of the credit facility. The
commitment fee is
accrued and paid quarterly on a pro rata basis by the Funds.
- ------------------------------------------------------------
- --------------------
9
<PAGE>
Notes to Financial Statements
GLOBAL UTILITY FUND, INC.
- ------------------------------------------------------------
- --------------------
The Agreement expired on December 30, 1997 and has been
extended through
December 29, 1998 under the same terms.
- ------------------------------------------------------------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned
subsidiary of PIFM,
serves as the Fund's transfer agent and during the fiscal
year ended September
30, 1998, the Fund incurred fees of approximately $343,000
for the services of
PMFS. As of September 30, 1998, approximately $26,000 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 nonaffiliates.
- ------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than
short-term investments,
for the fiscal year ended September 30, 1998 were
$59,196,763 and $106,415,293,
respectively.
The United States federal income tax basis of the Fund's
investments at
September 30, 1998 was $207,300,462 and, accordingly, net
unrealized
appreciation of investments was $76,748,512 (gross
unrealized
appreciation--$90,266,142; gross unrealized depreciation--
$13,517,630).
- ------------------------------------------------------------
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. Prior to November 2,
1998 Class C shares
were sold with a contingent deferred sales charge of 1%
during the first year.
Effective November 2, 1998, Class C shares are sold with a
front-end sales
charge of 1% and a contingent deferred sales charge of 1%
during the first 18
months. 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. 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.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares
Amount
- ----------------------------------- ---------- --------
- ----
<S> <C> <C>
Year ended September 30, 1998:
Shares sold........................ 521,948 $
9,321,818
Shares issued in reinvestment of
dividends and distributions...... 563,544
9,496,627
Shares reacquired.................. (1,757,287)
(31,298,612)
---------- --------
- ----
Net decrease in shares outstanding
before conversion................ (671,795)
(12,480,167)
Shares issued upon conversion from
Class B.......................... 759,647
13,683,739
---------- --------
- ----
Net increase in shares
outstanding...................... 87,852 $
1,203,572
---------- --------
- ----
---------- --------
- ----
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)
---------- --------
- ----
---------- --------
- ----
<CAPTION>
Class B
- -----------------------------------
<S> <C> <C>
Year ended September 30, 1998:
Shares sold........................ 661,584 $
11,938,327
Shares issued in reinvestment of
dividends and distributions...... 982,123
16,503,067
Shares reacquired.................. (2,346,288)
(42,011,836)
---------- --------
- ----
Net decrease in shares outstanding
before conversion................ (702,581)
(13,570,442)
Shares reacquired upon conversion
into Class A..................... (759,735)
(13,683,739)
---------- --------
- ----
Net decrease in shares
outstanding...................... (1,462,316)
$(27,254,181)
---------- --------
- ----
---------- --------
- ----
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 C Shares
Amount
- ----------------------------------- ---------- --------
- ----
<S> <C> <C>
Year ended September 30, 1998:
Shares sold........................ 343,836 $
6,262,967
Shares issued in reinvestment of
dividends and distributions...... 4,668
78,586
Shares reacquired.................. (337,668)
(6,158,331)
---------- --------
- ----
Net increase in shares
outstanding...................... 10,836 $
183,222
---------- --------
- ----
---------- --------
- ----
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 decrease in shares
outstanding...................... (615) $
(13,898)
---------- --------
- ----
---------- --------
- ----
<CAPTION>
Class Z
- -----------------------------------
<S> <C> <C>
Year ended September 30, 1998:
Shares sold........................ 379,786 $
6,691,756
Shares issued in reinvestment of
dividends and distributions...... 7,648
135,727
Shares reacquired.................. (47,365)
(862,303)
---------- --------
- ----
Net increase in shares
outstanding...................... 340,069 $
5,965,180
---------- --------
- ----
---------- --------
- ----
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,
----------
- --------------------------------------------------
1998
1997 1996 1995 1994
<CAPTION>
--------
- -------- -------- -------- --------
<S> <C>
<C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year............ $ 17.52
$ 15.03 $ 14.72 $ 13.66 $ 14.63
--------
- -------- -------- -------- --------
Income from investment operations
Net investment income.........................
.46(b) .49 .51 .49 .47
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions............................... 1.67
3.34 .73 1.35 (.82)
--------
- -------- -------- -------- --------
Total from investment operations........... 2.13
3.83 1.24 1.84 (.35)
--------
- -------- -------- -------- --------
Less distributions
Dividends from net investment income.......... (.46)
(.49) (.51) (.48) (.42)
Distributions in excess of net investment
income..................................... (.02)
(.02) -- -- --
Distributions from net realized gains......... (1.51)
(.83) (.42) (.30) (.20)
--------
- -------- -------- -------- --------
Total distributions........................ (1.99)
(1.34) (.93) (.78) (.62)
--------
- -------- -------- -------- --------
Net asset value, end of year.................. $ 17.66
$ 17.52 $ 15.03 $ 14.72 $ 13.66
--------
- -------- -------- -------- --------
--------
- -------- -------- -------- --------
TOTAL RETURN(a)............................... 12.90%
26.90% 8.65% 14.23% (2.49)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)................. $123,346
$120,825 $112,800 $124,423 $126,254
Average net assets (000)...................... $122,384
$116,303 $120,122 $122,837 $139,166
Ratios to average net assets:
Expenses, including distribution fees...... 1.18%
1.21% 1.30% 1.31% 1.25%
Expenses, excluding distribution fees...... .93%
.96% 1.05% 1.06% 1.02%
Net investment income...................... 2.49%
3.00% 3.38% 3.58% 3.39%
For Class A, B, C and Z shares:
Portfolio turnover rate.................... 20%
13% 13% 15% 19%
</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.
(b) Calculated based upon weighted average shares
outstanding during the year.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 12
<PAGE>
Financial Highlights
GLOBAL UTILITY FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class B
----------
- -------------------------------------------------------
Year Ended September 30,
----------
- --------------------------------------------------
1998
1997 1996 1995 1994
--------
- -------- -------- -------- --------
<S> <C>
<C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year............ $ 17.52
$ 15.03 $ 14.71 $ 13.66 $ 14.63
--------
- -------- -------- -------- --------
Income from investment operations
Net investment income.........................
.32(b) .37 .40 .39 .37
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions............................... 1.67
3.34 .74 1.34 (.82)
--------
- -------- -------- -------- --------
Total from investment operations........... 1.99
3.71 1.14 1.73 (.45)
--------
- -------- -------- -------- --------
Less distributions
Dividends from net investment income.......... (.32)
(.37) (.40) (.38) (.32)
Distributions in excess of net investment
income..................................... (.02)
(.02) -- -- --
Distributions from net realized gains......... (1.51)
(.83) (.42) (.30) (.20)
--------
- -------- -------- -------- --------
Total distributions........................ (1.85)
(1.22) (.82) (.68) (.52)
--------
- -------- -------- -------- --------
Net asset value, end of year.................. $ 17.66
$ 17.52 $ 15.03 $ 14.71 $ 13.66
--------
- -------- -------- -------- --------
--------
- -------- -------- -------- --------
TOTAL RETURN(a)............................... 12.06%
25.96% 7.90% 13.32% (3.22)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)................. $154,873
$179,270 $187,557 $227,189 $272,673
Average net assets (000)...................... $177,326
$185,693 $210,305 $237,983 $270,466
Ratios to average net assets:
Expenses, including distribution fees...... 1.93%
1.96% 2.05% 2.06% 2.02%
Expenses, excluding distribution fees...... .93%
.96% 1.05% 1.06% 1.02%
Net investment income...................... 1.74%
2.25% 2.62% 2.83% 2.68%
</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.
(b) Calculated based upon weighted average shares
outstanding during the year.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements. 13
<PAGE>
Financial Highlights
GLOBAL UTILITY FUND, INC.
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
Class C Class Z
-----------------
- ----------------------------------------- -------------
August 1,
1994(d) Year
Year
Ended September 30, through Ended
-----------------
- ----------------------- September 30, September 30,
1998 1997
1996 1995 1994 1998
------ ------
- ------ ------- ------------- -------------
<S> <C> <C>
<C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $17.52 $15.03
$14.71 $ 13.66 $ 13.93 $ 17.54
------ ------
- ------ ------- ------------- ------
Income from investment operations
Net investment income................... .32(b) .37
.40 .39 .06 .50(b)
Net realized and unrealized gain (loss)
on investment and foreign currency
transactions......................... 1.67 3.34
.74 1.34 (.24) 1.68
------ ------
- ------ ------- ------------- ------
Total from investment operations..... 1.99 3.71
1.14 1.73 (.18) 2.18
------ ------
- ------ ------- ------------- ------
Less distributions
Dividends from net investment income.... (.32)
(.37) (.40) (.38) (.07)
(.50)
Distributions in excess of net
investment income.................... (.02)
(.02) -- -- --
(.03)
Distributions from net realized gains... (1.51)
(.83) (.42) (.30) (.02)
(1.51)
------ ------
- ------ ------- ------------- ------
Total distributions.................. (1.85)
(1.22) (.82) (.68) (.09)
(2.04)
------ ------
- ------ ------- ------------- ------
Net asset value, end of period.......... $17.66 $17.52
$15.03 $ 14.71 $ 13.66 $ 17.68
------ ------
- ------ ------- ------------- ------
------ ------
- ------ ------- ------------- ------
TOTAL RETURN(a)......................... 12.06%
25.96% 7.90% 13.32% (1.32)%
13.18%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)......... $ 957 $ 760
$ 661 $ 563 $ 226 $ 6,065
Average net assets (000)................ $ 969 $ 727
$ 608 $ 410 $ 131 $ 4,041
Ratios to average net assets:
Expenses, including distribution
fees.............................. 1.93%
1.96% 2.05% 2.06% 2.06%(c)
.93%
Expenses, excluding distribution
fees.............................. .93%
.96% 1.05% 1.06% 1.06%(c) .93%
Net investment income................ 1.74%
2.25% 2.66% 2.83% 2.46%(c)
2.74%
<CAPTION>
December 16,
1996(e)
through
September 30,
1997
-------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $ 15.02
-----
Income from investment operations
Net investment income................... .34
Net realized and unrealized gain (loss)
on investment and foreign currency
transactions......................... 2.59
-----
Total from investment operations..... 2.93
-----
Less distributions
Dividends from net investment income.... (.34)
Distributions in excess of net
investment income.................... (.07)
Distributions from net realized gains... --
-----
Total distributions.................. (.41)
-----
Net asset value, end of period.......... $ 17.54
-----
-----
TOTAL RETURN(a)......................... 19.70%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)......... $ 53
Average net assets (000)................ $ 16
Ratios to average net assets:
Expenses, including distribution
fees.............................. .96%(c)
Expenses, excluding distribution
fees.............................. .96%(c)
Net investment income................ 3.25%(c)
</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) Calculated based upon weighted average shares
outstanding during the year.
(c) Annualized.
(d) Commencement of offering of Class C shares.
(e) 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, 1998, the results of its operations
for the year then
ended, and the changes in its net assets and the financial
highlights for each
of the two years in the period 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 audits. We conducted our
audits of these
financial statements in accordance with generally accepted
auditing standards
which require that we plan and perform the audit to obtain
reasonable assurance
about whether the financial statements are free of material
misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles
used and significant estimates made by management, and
evaluating the overall
financial statement presentation. We believe that our
audits, which included
confirmation of securities at September 30, 1998 by
correspondence with the
custodian and brokers, provide a reasonable basis for the
opinion expressed
above. The accompanying financial highlights for each of the
three periods in
the period ended September 30, 1996 were audited by other
independent
accountants, whose opinion dated November 14, 1996 was
unqualified.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
November 20, 1998
- ------------------------------------------------------------
- --------------------
15
<PAGE>
Federal Income Tax Information (Unaudited)
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, 1998) 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 $1.988 per share, comprised of $0.618 per share
ordinary income and
short-term capital gains which are taxable as ordinary
income and $1.37 per
share long-term capital gains which are taxable as such. The
Fund paid
distributions for Class B and Class C shares totaling $1.853
per share,
comprised of $0.483 per share ordinary income and short-term
capital gains which
are taxable as ordinary income and $1.37 per share long-term
capital gains which
are taxable as such. The Fund paid distributions for Class Z
shares totaling
$2.035 per share, comprised of $0.665 of ordinary income and
short-term capital
gains which are taxable as ordinary income and $1.37 per
share long-term capital
gains which is taxable as such. Further, we wish to advise
you that 44% of the
ordinary income dividends paid in the fiscal year ended 1998
qualified for the
corporate dividend received deduction available to corporate
taxpayers.
In January 1999, 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 1998.
- ------------------------------------------------------------
- --------------------
16
<PAGE>
Comparing A $10,000 Investment.
- ------------------------------------------------
Global Utility Fund, Inc. vs. the Morgan Stanley
Capital International World Index.
Class A
(CHART)
Class B
(CHART)
Class C
(CHART)
Class Z
(CHART)
Past performance is not indicative of future results.
Principal and investment
return will fluctuate so an investor's shares, when
redeemed, may be worth
more or less than their original cost. The boxes on top of
the graphs are
designed to give you an idea of 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, B, C, and Z
shares) 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, 1991 for Class B
shares, 1994 for Class
C shares, and 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 charges were deducted from the value of the
investment in Class
B and Class C shares, assuming full redemption on September
30, 1998; (c) all
recu rring 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,
approximately seven years
after purchase. This conversion feature is not reflected in
the graphs. Class
Z shares are not subject to a sales charge or distribution
fee.
The Index is an unmanaged, weighted index that reflects
stock market
performance in 23 countries. Morgan Stanley national indexes
are unmanaged,
weighted indexes that reflect stock market performance in
individual countries.
The foundation of the Morgan Stanley Capital International
(MSCI) World Indexes
is the database of approximately 1,500 companies listed on
the stock exchanges
of the countries for which there are MSCI national indexes.
The Index 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 indexes may portray
different
comparative performance. Investors cannot invest directly in
an index.
<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
Brian M. Storms
Officers
Brian M. Storms, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
David F. Connor, 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 Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
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
PricewaterhouseCoopers 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
37936G402
37936G501
