<PAGE>
(ICON)
Global
Utility
Fund, Inc.
ANNUAL
REPORT
Sept. 30, 1999
(LOGO)
<PAGE>
Portfolio Managers' Report
- -------------------------------------------------------------------------------
(PHOTO) (PHOTO)
Mark J. Beckwith and Earl M. McEvoy--Fund Managers
Investment Goals and Style
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.
Cumulative Total Returns1 As of 9/30/99
<TABLE>
<CAPTION>
One Five Since
Year Years Inception2
<S> <C> <C> <C>
Class A 15.36% 105.14% 249.05%
Class B 14.49 97.59 183.51
Class C 14.49 97.59 94.97
Class Z 15.62 N/A 56.66
FT/S&P Actuaries World Utilities Index3 27.35 136.54 **
Lipper Utility Fund Avg.4 14.78 110.25 ***
</TABLE>
Average Annual Total Returns1 As of 9/30/99
<TABLE>
<CAPTION>
One Five Since
Year Years Inception2
<S> <C> <C> <C>
Class A 9.59% 14.28% 13.10%
Class B 9.49 14.48 12.98
Class C 12.34 14.36 13.58
Class Z 15.62 N/A 17.48
</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 LLC and Lipper, Inc. 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 are subject to a front-end sales charge of 1% and a
CDSC of 1% for 18 months. Class C shares bought before November 2, 1998, have
a 1% CDSC if sold within one year. Class Z shares are not subject to a sales
charge or distribution and service (12b-1) fees.
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 currently comprises approximately 200 world utility stocks
representing approximately 28 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. Utility funds invest 65%
of their equity portfolios in utility shares. The Lipper average is unmanaged.
**The FT/S&P Actuaries World Utilities Index Since Inception returns are
211.54% for Class A, 230.27% for Class B, 135.03% for Class C, and 92.94% for
Class Z.
***Lipper Since Inception returns are 203.70% for Class A, 191.88% for Class
B, 108.07% for Class C, and 52.40% for Class Z, based on all funds in each
share class. The Lipper Since Inception returns begin at the closest month end
for each share class.
<PAGE>
Performance Review
- -------------------------------------------------------------------------------
Global Utility Fund's Class A shares gained 15.4% for the 12 months ended
September 30, 1999, as compared with a 14.8% increase in the Lipper Utility
Fund Average and a 27.3% advance in the all-equity benchmark Financial Times
World Utilities Index. The Fund's record since inception compares favorably
with the Index and the Lipper average.
Global consolidation across the telecommunications sector and the accelerating
importance of wireless communications were the most important factors in
performance for utility equities in the past six months. Global
Crossing/Frontier and Qwest Communications/US West were the fallout of a
bidding war between Global Crossing and Qwest, resulting in both companies
effectively getting the strategic customer base that they desired. Both Global
Crossing and Qwest have aggressive managements who used their equity currency
to acquire the balance sheet and customers of Frontier and US West,
respectively.
The explosive growth in both domestic (Sprint PCS) and international (Vodafone
AirTouch) wireless communications, including web-based Internet access, led to
the largest telecom merger ever. The value of the Sprint PCS franchise as part
of the bundle of products for business customers and high-end users led to the
takeover of Sprint by MCI Worldcom. We anticipate that similar transactions
will occur in Europe over the next 12 months as large international carriers
pursue the same concept overseas.
As AT&T continues to pursue its strategy for bundling cable
TV/telephone/Internet into one broadband media product, the strategies of
the other large competitors are falling into place. In addition to MCI
WorldCom, SBC Communications accelerated its broadband strategy by deploying
DSL (digital subscriber line) technology out closer to the local telephone
customer to compete with AT&T. We anticipate that four to five large global
competitors will emerge over the next 12 to 24 months as the final regulatory
rules for cable/Internet access and local telephone competition emerge.
Several more domestic mergers between electric utilities were announced in the
past six months, and virtually all of them were poorly received by investors.
We like the Unicom/PECO Energy combination in the United States, and the Veba
AG/Viag AG merger in Germany, as both should benefit from cost reductions and
accelerated earnings-growth potential. The best growth story in the electric
utility/energy sector has been new gas-fired generation where independent
power companies (Calpine) and natural gas pipelines (El Paso Energy) have been
gaining market share.
Five Largest Holdings
Expressed as a percentage of net assets as of 9/30/99
Vodafone AirTouch 4.3%
Telecommunications
MCI Worldcom, Inc. 4.1
Telecommunications
SBC Communications, Inc. 4.1
Telecommunications
Bell Atlantic 3.4
Telecommunications
AT&T Corp. 3.0
Telecommunications
In the fixed-income portion of the Fund, we are continuing to pursue the
three-part strategy discussed in previous letters. The first theme is the close
scrutiny of emerging markets for investment opportunities. The emerging market
theme seeks utility issuers that are potential upgrade candidates in countries
with pent-up demand and infrastructure needs. The securities purchased in the
past to implement this theme have severely hurt recent performance since risk
premiums on issuers located within emerging countries have widened during the
last two years. Our second theme is the pursuit of companies with respectable
operating histories in developed markets. We consider developed countries to be
those with investment-grade ratings. A third
<PAGE>
theme is the pursuit of investments in companies that are privatizing in both
developed and emerging countries. Improvements in costs and in operations by
these companies should result in higher credit quality.
Telecommunications and select utilities strong
The Fund continues to hold the majority of its equity assets in
telecommunications--with the best performance coming from the wireless sector,
including Sprint PCS and Vodafone AirTouch. The underlying strong demand for
new equipment and technological upgrades also led to meaningful stock
appreciation for Lucent Technologies and Alcatel. Selected energy utilities
did well over the past six months led by Equitable Resources (positive
earnings news), Enron (leading trader of electricity and gas), and El Paso
Energy.
Electric utilities and long-distance carriers not so strong
Electric utilities lagged the sector recently due to poor merger strategy and
low earnings visibility in a rising interest-rate environment. This was true
for both domestic (NiSource) and foreign (Endesa) companies. Two large
long-distance carriers--AT&T and MCI Worldcom--also hurt performance due to
overhang from merger dilution and competitive pricing pressure.
Looking Ahead
The telecom sector represents 52.5% of equity assets--down from 56.5% in June
1999, due to our sale of Telecom Italia S.p.A. after disappointing merger
developments. We will maintain the Fund's large positions in the fast-growing
telecom sector and will look for new opportunities to bring the weighting back
to prior levels. Merger and acquisition activity, especially among the large
carriers, makes stock selection very important in this period of heightened
volatility.
Natural gas utilities should have strong earnings comparisons over the next 12
to 18 months, benefiting from higher commodity prices and tighter gas storage.
Consolidation activity will continue with distribution utilities in electric,
water, and gas, and we are looking for new investment ideas. Current valuation
is very attractive in this area, but we need a better bond market and
constructive regulatory treatment of mergers to lift the entire group.
To summarize, we believe the explosive growth in telecommunications and the
ongoing battle for the broadband media platform to the consumer will be an
interesting time for investors in the near future. Our bias toward global
growth will put the Fund right in the midst of this excitement, and we
appreciate your
Portfolio Composition
Expressed as a percentage of equity assets as of 9/30/99
Telecommunications 52.5%
Electric 24.4
Gas Transmission Distribution 12.5
Water Supply & Other 10.6
Portfolio Breakdown
Breakdown of net assets by country as of 9/30/99
United States 60.88%
United Kingdom 9.21
Canada 6.32
Spain 3.70
France 2.25
Italy 2.18
Finland 1.51
The Philippines 1.36
India 1.11
China 1.10
Mexico 1.02
Germany 0.97
Greece 0.93
South Korea 0.80
Australia 0.74
Chile 0.65
Portugal 0.59
Poland 0.58
Argentina 0.54
New Zealand 0.46
Brazil 0.42
Cayman Islands 0.34
Puerto Rico 0.34
Assets in excess of
liabilities 2.00
-------
100.00%
-------
support during these volatile times for the market.
Thank you for your continuing support.
1
<PAGE>
Portfolio of Investments as
of September 30, 1999 GLOBAL UTILITY FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
US$ Value
Shares Description (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--95.1%
COMMON STOCKS--73.7%
- ------------------------------------------------------------
Electrical Utilities--17.5%
180,000 COPEL. (ADR-Preferred B Shares)
(Brazil) $ 1,181,250
300,000 DPL, Inc. 5,287,500
130,000 DQE, Inc. 5,086,250
100,000 DTE Energy Co. 3,612,500
200,000 Endesa S.A. (ADR) (Spain) 3,825,000
187,800 Espoon Sahko (ADR) (Finland) 4,240,092
150,000 Huaneng Power International, Inc.(a)
(ADR) (China) 1,865,625
140,000 Korea Electric Power Corp. (ADR)
(South Korea) 2,248,750
60,000 Montana Power Co. 1,826,250
100,000 Nisource, Inc. 2,212,500
70,000 Pinnacle West Capital Corp. 2,546,250
850,000 Scottish Power PLC (United Kingdom) 7,710,442
277,300 Shandong Huaneng Power Ltd.
(ADR) (China) 1,213,188
90,000 Texas Utilities Holding Co. 3,358,125
50,000 VEBA AG (Germany) 2,738,555
-------------
48,952,277
- ------------------------------------------------------------
Gas Utilities--9.4%
350,000 Australian Gas Light Co. (Australia) 2,069,078
125,000 El Paso Energy Corp. 4,976,562
160,000 Enron Corp. 6,600,000
20,000 Equitable Resources, Inc. 756,250
50,000 MCN Energy Group, Inc. 859,375
200,000 TransCanada Pipelines Ltd. (Canada) 2,621,009
250,000 Westcoast Energy, Inc. (Canada) 4,671,863
100,000 Williams Companies, Inc. 3,743,750
-------------
26,297,887
- ------------------------------------------------------------
Telecommunications--38.1%
195,000 AT&T Corp. 8,482,500
120,000 BCE, Inc. (Canada) 5,977,500
75,000 BCT Telus Communications, Inc.
(Canada) (Voting) $ 1,564,947
25,000 BCT Telus Communications, Inc.
(Canada) (Non-Voting) 514,841
140,000 Bell Atlantic Corp. 9,423,750
18,000 British Telecommunications PLC
(United Kingdom) 2,788,875
101,096 Cia Telecom de Chile, S.A. (ADR)
(Chile) 1,826,047
111,222 Hellenic Telecom Org. (Greece) 2,593,679
160,000 MCI WorldCom, Inc.(a) 11,500,000
60,200 Mcleodusa, Inc. 2,562,263
54,426 NTL, Inc. 5,229,998
40,000 Portugal Telecom, S.A. (ADS)
(Portugal) 1,652,500
225,000 SBC Communications, Inc. 11,489,062
140,000 Sprint Corp. 7,595,000
35,000 Sprint Corp., PCS Group 2,609,687
40,000 Telecom Corp. New Zealand Ltd. (ADR)
(New Zealand) 1,280,000
700,000 Telecom Italia S.p.A. (Italy) 3,517,273
136,194 Telefonica, S.A. (ADR) (Spain) 6,537,312
40,000 Telefonos de Mexico, S.A. (ADR -
Class L Shares) (Mexico) 2,850,000
331,100 Telekomunikacja Polska, S.A.
(GDR)(a) (Poland) 1,630,668
220,000 Videsh Sanchar Nigam Ltd. (GDR)
(India) 3,096,500
50,000 Vodafone Group PLC (ADR)
(United Kingdom) 11,887,500
-------------
106,609,902
- ------------------------------------------------------------
Water Utilities & Other--8.7%
28,000 Alcatel Alsthom (France) 3,857,078
167,800 American Water Works Co., Inc. 4,855,713
280,000 Anglian Water PLC (United Kingdom) 3,332,768
41,000 ENI S.p.A. (ADR) (Italy) 2,583,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 2
<PAGE>
<TABLE>
Portfolio of Investments as
of September 30, 1999 GLOBAL UTILITY FUND, INC.
- ------------------------------------------------------------
<CAPTION>
US$ Value
Shares Description (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Water Utilities & Other (cont'd.)
80,000 Lucent Technologies, Inc. $ 5,190,000
15,000 Suez Lyonnaise des Eaux. (France) 2,427,174
60,000 Suncor Energy, Inc. (Canada) 2,295,000
-------------
24,540,733
Total common stocks
(cost $118,895,660) 206,400,799
-------------
------------------------------------------------------------
PREFERRED STOCKS--1.4%
Philippine Long Distance Telephone
Co. (The Philippines)
43,700 $3.50 Conv. Ser. III (GDS) 1,813,550
92,216 5.75% Conv. Ser. II (GDS) 1,995,383
-------------
Total preferred stocks
(cost $4,189,000) 3,808,933
-------------
------------------------------------------------------------
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000)
<C> <C> <S> <C>
DEBT OBLIGATIONS--20.0%
CORPORATE BONDS--19.3%
- ------------------------------------------------------------
Electrical Utilities--12.7%
Ba3 $ 1,000 AES Corp.,
8.375%, 8/15/07 910,000
A2 1,000 Alabama Power Co.,
5.35%, 11/15/03 947,880
Baa1 1,000 Appalachian Power Co.,
6.60%, 5/1/09, Ser. C 936,170
Baa2 1,000 Arizona Public Service
Co.,
6.25%, 1/15/05 957,580
A2 1,000 Carolina Power & Light
Co.,
5.95%, 3/1/09 917,540
Ba1 1,000 Cleveland Elec. Illum.
Co.,
7.43%, 11/1/09 978,410
Ba3 1,000 CMS Energy Corp.,
8.125%, 5/15/02 1,002,330
NR $ 1,000(b) Compania De Transporte
Energia,
9.25%, 4/1/08 (Brazil) $ 835,000
A1 1,000 Consolidated Edison Co. of
NY, Inc.,
7.625%, 3/1/04 1,032,570
Aa3 1,000 Duke Energy Corp.,
5.875%, 6/1/01 991,980
Baa1 1,000(b) Eastern Energy Limited,
6.75%, 12/1/06
(Australia) 958,600
Ba1 1,000 El Paso Electric Co.,
8.25%, 2/1/03, Ser. C 1,035,300
Ba2 1,000(b) Empresa Electrica del
Norte Grande S.A.,
7.75%, 3/15/06 (Chile) 530,000
Aa3 500 Florida Power Corp.,
6.00%, 7/1/03 489,450
A1 650 6.75%, 2/1/28 583,791
Baa3 1,000 Gulf States Utilities Co.,
8.25%, 4/1/04 1,035,260
Baa1 1,000(b) Hyder PLC,
6.875%, 12/15/07 (United
Kingdom) 973,100
NR 1,000(b) Inversora Electrica Buenos
Aires S.A.,
9.00%, 9/16/04
(Argentina) 630,000
A1 1,500 Monongahela Power Co.,
7.375%, 7/1/02 1,528,140
Aa3 1,000 Northern States Power Co.,
6.50%, 3/1/28 870,380
Baa3 1,000 NRG Energy, Inc.,
7.50%, 6/15/07 964,140
A1 640 Oklahoma Gas & Electric
Co.,
6.50%, 4/15/28 562,925
A2 1,000 Pennsylvania Electric Co.,
Ser. B
6.125%, 4/1/09 924,320
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as
of September 30, 1999 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.)
Baa2 $ 1,000 PP&L Capital Funding Inc.,
6.79%, 11/22/04 $ 993,360
Baa3 1,000 Public Service Co.,
7.10%, 8/1/05 990,510
Baa1 1,000 Puget Sound Energy Inc.,
6.46%, 3/9/09 937,580
A2 1,000(b) Quebec Hydro.,
7.50%, 4/1/16 (Canada) 1,004,370
Baa1 1,000(b) Southern Investments PLC,
6.80%, 12/1/06
(United Kingdom) 958,990
Aa2 1,000 Southwestern Public Service Co.,
7.25%, 7/15/04 1,016,820
Baa3 1,000 System Energy Resources,
Inc.,
7.71%, 8/1/01 1,013,670
Aa2 1,000 Tampa Electric Co.,
7.75%, 11/1/22 967,110
Baa3 1,000 Texas-New Mexico Power
Co.,
10.75%, 9/15/03 1,028,490
A2 1,000(b) United Utilities PLC,
6.45%, 4/1/08
(United Kingdom) 929,770
A2 2,000 Virginia Electric & Power
Co.,
6.625%, 4/1/03 1,996,180
Baa3 918 W3A Funding Corp.,
8.09%, 1/2/17 903,555
Aa3 1,000 Wisconsin Electric Power
Co.,
6.625%, 11/15/06 979,370
Aa3 500 Wisconsin Power & Light
Co.,
5.70%, 10/15/08 460,640
Baa2 1,000(b) Yorkshire Power Finance
Ltd.,
6.496%, 2/25/08
(United Kingdom) 904,580
-------------
35,679,861
Gas Distribution & Other Industries--1.4%
Baa2 $ 1,000 El Paso Natural Gas Co.,
7.50%, 11/15/26 $ 943,020
Baa2 1,000 Enron Corp.,
7.00%, 8/15/23 866,250
A2 1,600 Michigan Consolidated Gas
Co.,
8.25%, 5/1/14 1,641,472
Aa2 535 Wisconsin Gas Co.,
5.50%, 1/15/09 487,487
-------------
3,938,229
- ------------------------------------------------------------
Telecommunications, Media & Related Industries--5.2%
A1 1,000 AT&T Corp.,
7.75%, 3/1/07 1,049,600
Aaa 2,000 BellSouth Telecommunications,
7.00%, 10/1/25 1,891,760
Baa1 1,000 Century Telephone
Enterprises, Inc.,
6.30%, 1/15/08 927,100
Baa1 1,000 GTE Corp.,
7.51%, 4/1/09 1,028,700
A2 1,000 GTE Florida, Inc.,
7.25%, 10/15/25 911,520
Aa1 1,000 Indiana Bell Telephone
Co., Inc.,
7.30%, 8/15/26 979,070
Aa2 1,000 New Jersey Bell Telephone
Co.,
8.00%, 6/1/22 1,050,340
A2 1,000 New York Telephone Co.,
6.00%, 4/15/08 936,090
A1 2,000 Pacific Bell.,
6.625%, 11/1/09 1,936,000
Ba2 1,000(b) Philippine Long Distance
Telephone Co.,
9.25%, 6/30/06
(The Philippines) 950,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 4
<PAGE>
Portfolio of Investments as
of September 30, 1999 GLOBAL UTILITY FUND, INC.
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount US$ Value
(Unaudited) (000) Description (Note 1)
<C> <C> <S> <C>
- ------------------------------------------------------------
Telecommunications, Media & Related Industries (cont'd.)
Baa1 $ 1,000 Sprint Capital Corp.,
5.70%, 11/15/03 $ 954,920
Baa2 1,000 Telecomunicaciones de
Puerto,
6.65%, 5/15/06 951,200
A3 1,000 Worldcom, Inc.,
6.40%, 8/15/05 966,230
-------------
14,532,530
Total corporate bonds
(cost $57,449,741) 54,150,620
-------------
- ------------------------------------------------------------
U.S. GOVERNMENT SECURITIES--0.7%
Aaa 2,000 United States Treasury Notes.,
5.75%, 8/15/03
(cost $2,042,188) 1,993,740
-------------
Total debt obligations
(cost $59,491,929) 56,144,360
-------------
Total long-term
investments
(cost $182,576,589) 266,354,092
-------------
SHORT-TERM INVESTMENTS--2.9%
CORPORATE BONDS--0.4%
Northern States Power Co.,
Aa3 $ 1,000 5.75%, 12/1/00
(cost $998,988) $ 993,470
- ------------------------------------------------------------
Repurchase Agreement--2.5%
7,197 Warburg Dillon Read LLC,
5.30%, due 10/01/99 in
the amount of $7,198,060
(cost $7,197,000;
collateralized by
$7,406,000 U.S. Treasury
Bonds, 6.125%, due
11/15/27, value of
collateral including
interest $7,341,198) 7,197,000
-------------
Total short-term investments
(cost $8,195,988) 8,190,470
-------------
- ------------------------------------------------------------
Total Investments--98.0%
(cost $190,772,577; Note
4) 274,544,562
Other assets in excess of
liabilities--2.0% 5,479,259
-------------
Net Assets--100% $ 280,023,821
-------------
-------------
</TABLE>
- ---------------
(a)--Non-income-producing security.
(b)--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>
Assets September 30, 1999
<S> <C>
Investments, at value (cost $190,772,577).............................................................. $274,544,562
Foreign currency, at value (cost $128,640)............................................................. 127,767
Cash................................................................................................... 1,653
Receivable for investments sold........................................................................ 4,346,127
Dividends and interest receivable...................................................................... 2,081,595
Receivable for Fund shares sold........................................................................ 895,223
Other assets........................................................................................... 7,064
------------------
Total assets........................................................................................ 282,003,991
------------------
Liabilities
Payable for investments purchased...................................................................... 729,625
Payable for Fund shares reacquired..................................................................... 696,657
Accrued expenses....................................................................................... 184,102
Management fee payable................................................................................. 158,416
Distribution fee payable............................................................................... 141,314
Withholding taxes payable.............................................................................. 54,686
Deferred director's fee................................................................................ 15,370
------------------
Total liabilities................................................................................... 1,980,170
------------------
Net Assets............................................................................................. $280,023,821
------------------
------------------
Net assets were comprised of:
Common stock, at par................................................................................ $ 15,596
Paid-in capital in excess of par.................................................................... 168,536,654
------------------
168,552,250
Undistributed net investment income................................................................. 594,864
Accumulated net realized gains on investments and foreign currency transactions..................... 27,097,239
Net unrealized appreciation on investments and foreign currencies................................... 83,779,468
------------------
Net assets, September 30, 1999......................................................................... $280,023,821
------------------
------------------
Class A:
Net asset value and redemption price per share
($139,373,794 / 7,763,014 shares of common stock issued and outstanding)......................... $17.95
Maximum sales charge (5.00% of offering price)...................................................... .94
Maximum offering price to public.................................................................... $18.89
------------------
------------------
Class B:
Net asset value, offering price and redemption price per share
($132,583,421 / 7,383,893 shares of common stock issued and outstanding)......................... $17.96
------------------
------------------
Class C:
Net asset value and redemption price per share
($1,453,904 / 80,947 shares of common stock issued and outstanding).............................. $17.96
Sales charge (1.00% of offering price).............................................................. .18
Offering price to public............................................................................ $18.14
------------------
------------------
Class Z:
Net asset value, offering price and redemption price per share
($6,612,702 / 368,006 shares of common stock issued and outstanding)............................. $17.97
------------------
------------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 6
<PAGE>
GLOBAL UTILITY FUND, INC.
Statement of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income September 30, 1999
<S> <C>
Income
Dividends (net of foreign withholding
taxes of $338,116).................... $ 5,362,862
Interest................................. 4,811,192
------------------
Total income.......................... 10,174,054
------------------
Expenses
Management fee........................... 2,021,652
Distribution fee--Class A................ 341,724
Distribution fee--Class B................ 1,546,431
Distribution fee--Class C................ 12,118
Transfer agent's fees and expenses....... 376,000
Custodian's fees and expenses............ 184,000
Reports to shareholders.................. 62,000
Registration fees........................ 34,000
Audit fee and expenses................... 33,000
Legal fees and expenses.................. 23,000
Directors' fees and expenses............. 15,000
Insurance................................ 4,000
Miscellaneous............................ 7,815
------------------
Total expenses........................ 4,660,740
------------------
Net investment income....................... 5,513,314
------------------
Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency
Transactions
Net realized gain on:
Investment transactions.................. 29,135,718
Foreign currency transactions............ 52,678
------------------
29,188,396
------------------
Net change in unrealized appreciation
(depreciation) on:
Investments.............................. 6,996,766
Foreign currencies....................... (2,826)
------------------
6,993,940
------------------
Net gain on investments and foreign
currencies............................... 36,182,336
------------------
Net Increase in Net Assets
Resulting from Operations................... $ 41,695,650
------------------
------------------
</TABLE>
GLOBAL UTILITY FUND, INC.
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended September 30,
in Net Assets 1999 1998
<S> <C> <C>
Operations
Net investment income....... $ 5,513,314 $ 6,265,657
Net realized gain on
investment and foreign
currency transactions.... 29,188,396 33,945,593
Net change in unrealized
appreciation
(depreciation) of
investments and foreign
currencies............... 6,993,940 (4,314,139)
------------------ ------------
Net increase in net assets
resulting from
operations............... 41,695,650 35,897,111
------------------ ------------
Dividends and distributions
(Note 1)
Dividends from net
investment income
Class A.................. (2,818,425) (2,991,973)
Class B.................. (1,980,640) (3,134,288)
Class C.................. (16,127) (17,223)
Class Z.................. (155,936) (122,173)
------------------ ------------
(4,971,128) (6,265,657)
------------------ ------------
Distributions in excess of
net investment income
Class A.................. -- (180,906)
Class B.................. -- (266,336)
Class C.................. -- (1,178)
Class Z.................. -- (114)
------------------ ------------
-- (448,534)
------------------ ------------
Distributions from net
realized gains
Class A.................. (13,406,633) (10,062,149)
Class B.................. (15,777,009) (14,813,745)
Class C.................. (109,977) (65,425)
Class Z.................. (641,421) (6,437)
------------------ ------------
(29,935,040) (24,947,756)
------------------ ------------
Fund share transactions (net of
share conversions) (Note 5)
Net proceeds from shares
sold..................... 37,013,685 34,214,868
Net asset value of shares
issued in reinvestment of
dividends and
distributions............ 29,276,900 26,214,007
Cost of shares reacquired... (78,296,960) (80,331,082)
------------------ ------------
Net decrease in net assets from
Fund share transactions..... (12,006,375) (19,902,207)
------------------ ------------
Total decrease................. (5,216,893) (15,667,043)
Net Assets
Beginning of year.............. 285,240,714 300,907,757
------------------ ------------
End of year(a)................. $280,023,821 $285,240,714
------------------ ------------
------------------ ------------
- ---------------
(a) Includes undistributed net
investment income of....... $ 594,864 --
------------------ ------------
</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 by $314,740,
decrease accumulated net realized gains on investments by $3,826,204 and
increase paid-in-capital by $3,511,464 relating to net realized foreign currency
gains, an overdistribution of taxable income and for redemptions utilized as
distributions for federal income tax purposes during the fiscal year ended
September 30, 1999. 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 has a distribution agreement with Prudential Investment Management
Services LLC ('PIMS') which acts as the distributor of the Class A, Class B,
Class C and Class Z shares of the Fund. The Fund compensates 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 compensates 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, 1999.
PIMS has advised the Fund that it received approximately $27,400 and $2,100 in
front-end sales charges resulting from sales of Class A and Class C shares
during the fiscal year ended September 30, 1999. From these fees PIMS paid such
sales charges to affiliated broker-dealers which in turn paid commissions to
salespersons and incurred other distribution costs.
PIMS has advised the Fund that for the fiscal year ended September 30, 1999 it
received approximately $151,000 and $26 in contingent deferred sales charges
imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
PIMS and PIFM are wholly owned subsidiaries of The Prudential Insurance Company
of America.
As of March 11, 1999, the Fund, along with other affiliated registered
investment companies (the 'Funds'), entered into a syndicated credit agreement
('SCA') with an unaffiliated lender. The maximum commitment under the SCA is $1
billion. The Funds pay a commitment fee at an annual rate of .065 of 1% on the
unused portion of the credit facility, which is accrued and paid quarterly on a
pro rata basis by the Funds. The SCA expires on March 9, 2000. Prior to March
11, 1999, the Funds had a credit agreement with a maximum commitment of
$200,000,000. The commitment fee was .055 of 1% on the unused portion of the
credit
- --------------------------------------------------------------------------------
9
<PAGE>
Notes to Financial Statements GLOBAL UTILITY FUND, INC.
- --------------------------------------------------------------------------------
facility. The Fund did not borrow any amounts pursuant to either agreement
during the fiscal period ended September 30, 1999. The purpose of the agreements
is to serve as an alternative source of funding for capital share redemptions.
- ------------------------------------------------------------
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, 1999, the Fund incurred fees of approximately $311,000 for the services of
PMFS. As of September 30, 1999, approximately $24,000 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, 1999 were $22,170,660 and $65,390,144,
respectively.
The cost basis of investments for federal income tax purposes is substantially
the same for financial reporting purposes and, accordingly, as of September 30,
1999 net unrealized appreciation for federal income tax purposes was $83,771,985
(gross unrealized appreciation--$96,839,256; gross unrealized
depreciation--$13,067,271).
- ------------------------------------------------------------
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%. 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, 1999:
Shares sold........................ 874,576 $ 16,047,074
Shares issued in reinvestment of
dividends and distributions...... 708,621 12,158,388
Shares reacquired.................. (1,520,250) (27,731,764)
---------- ------------
Net increase in shares outstanding
before conversion................ 62,947 473,698
Shares issued upon conversion from
Class B.......................... 715,401 13,239,554
---------- ------------
Net increase in shares
outstanding...................... 778,348 $ 13,713,252
---------- ------------
---------- ------------
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
---------- ------------
---------- ------------
<CAPTION>
Class B
- -----------------------------------
<S> <C> <C>
Year ended September 30, 1999:
Shares sold........................ 661,124 $ 12,049,586
Shares issued in reinvestment of
dividends and distributions...... 946,862 16,199,281
Shares reacquired.................. (2,278,722) (41,623,502)
---------- ------------
Net decrease in shares outstanding
before conversion................ (670,736) (13,374,635)
Shares reacquired upon conversion
into Class A..................... (716,563) (13,239,554)
---------- ------------
Net decrease in shares
outstanding...................... (1,387,299) $(26,614,189)
---------- ------------
---------- ------------
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)
---------- ------------
---------- ------------
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
Notes to Financial Statements GLOBAL UTILITY FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Shares Amount
- ----------------------------------- ---------- ------------
<S> <C> <C>
Year ended September 30, 1999:
Shares sold........................ 408,004 $ 7,449,727
Shares issued in reinvestment of
dividends and distributions...... 7,015 120,147
Shares reacquired.................. (388,275) (7,080,380)
---------- ------------
Net increase in shares
outstanding...................... 26,744 $ 489,494
---------- ------------
---------- ------------
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
---------- ------------
---------- ------------
<CAPTION>
Class Z
- -----------------------------------
<S> <C> <C>
Year ended September 30, 1999:
Shares sold........................ 80,233 $ 1,467,298
Shares issued in reinvestment of
dividends and distributions...... 46,480 799,084
Shares reacquired.................. (101,821) (1,861,314)
---------- ------------
Net increase in shares
outstanding...................... 24,892 $ 405,068
---------- ------------
---------- ------------
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
---------- ------------
---------- ------------
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
Financial Highlights GLOBAL UTILITY FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
------------------------------------------------------------
Year Ended September 30,
------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year........................... $ 17.66 $ 17.52 $ 15.03 $ 14.72 $ 13.66
-------- -------- -------- -------- --------
Income from investment operations
Net investment income........................................ .41(b) .46(b) .49 .51 .49
Net realized and unrealized gain (loss) on investment and
foreign currency transactions............................. 2.15 1.67 3.34 .73 1.35
-------- -------- -------- -------- --------
Total from investment operations.......................... 2.56 2.13 3.83 1.24 1.84
-------- -------- -------- -------- --------
Less distributions
Dividends from net investment income......................... (.38) (.46) (.49) (.51) (.48)
Distributions in excess of net investment income............. -- (.02) (.02) -- --
Distributions from net realized gains........................ (1.89) (1.51) (.83) (.42) (.30)
-------- -------- -------- -------- --------
Total distributions....................................... (2.27) (1.99) (1.34) (.93) (.78)
-------- -------- -------- -------- --------
Net asset value, end of year................................. $ 17.95 $ 17.66 $ 17.52 $ 15.03 $ 14.72
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL RETURN(a).............................................. 15.36% 12.90% 26.90% 8.65% 14.23%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)................................ $139,374 $123,346 $120,825 $112,800 $124,423
Average net assets (000)..................................... $136,690 $122,384 $116,303 $120,122 $122,837
Ratios to average net assets:
Expenses, including distribution fees..................... 1.17% 1.18% 1.21% 1.30% 1.31%
Expenses, excluding distribution fees..................... .92% .93% .96% 1.05% 1.06%
Net investment income..................................... 2.23% 2.49% 3.00% 3.38% 3.58%
For Class A, B, C and Z shares:
Portfolio turnover rate................................... 8% 20% 13% 13% 15%
</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,
------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year........................... $ 17.66 $ 17.52 $ 15.03 $ 14.71 $ 13.66
-------- -------- -------- -------- --------
Income from investment operations
Net investment income........................................ .27(b) .32(b) .37 .40 .39
Net realized and unrealized gain (loss) on investment and
foreign currency transactions............................. 2.16 1.67 3.34 .74 1.34
-------- -------- -------- -------- --------
Total from investment operations.......................... 2.43 1.99 3.71 1.14 1.73
-------- -------- -------- -------- --------
Less distributions
Dividends from net investment income......................... (.24) (.32) (.37) (.40) (.38)
Distributions in excess of net investment income............. -- (.02) (.02) -- --
Distributions from net realized gains........................ (1.89) (1.51) (.83) (.42) (.30)
-------- -------- -------- -------- --------
Total distributions....................................... (2.13) (1.85) (1.22) (.82) (.68)
-------- -------- -------- -------- --------
Net asset value, end of year................................. $ 17.96 $ 17.66 $ 17.52 $ 15.03 $ 14.71
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL RETURN(a).............................................. 14.49% 12.06% 25.96% 7.90% 13.32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)................................ $132,583 $154,873 $179,270 $187,557 $227,189
Average net assets (000)..................................... $154,643 $177,326 $185,693 $210,305 $237,983
Ratios to average net assets:
Expenses, including distribution fees..................... 1.92% 1.93% 1.96% 2.05% 2.06%
Expenses, excluding distribution fees..................... .92% .93% .96% 1.05% 1.06%
Net investment income..................................... 1.48% 1.74% 2.25% 2.62% 2.83%
</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
---------------------------------------------------
Year Ended September 30,
---------------------------------------------------
1999 1998 1997 1996 1995
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year........................... $ 17.66 $17.52 $15.03 $14.71 $13.66
------- ------ ------ ------ ------
Income from investment operations
Net investment income........................................ .27(b) .32(b) .37 .40 .39
Net realized and unrealized gain (loss) on investment and
foreign currency transactions............................. 2.16 1.67 3.34 .74 1.34
------- ------ ------ ------ ------
Total from investment operations.......................... 2.43 1.99 3.71 1.14 1.73
------- ------ ------ ------ ------
Less distributions
Dividends from net investment income......................... (.24) (.32) (.37) (.40) (.38)
Distributions in excess of net investment income............. (.02) (.02) -- --
Distributions from net realized gains........................ (1.89) (1.51) (.83) (.42) (.30)
------- ------ ------ ------ ------
Total distributions....................................... (2.13) (1.85) (1.22) (.82) (.68)
------- ------ ------ ------ ------
Net asset value, end of year................................. $ 17.96 $17.66 $17.52 $15.03 $14.71
------- ------ ------ ------ ------
------- ------ ------ ------ ------
TOTAL RETURN(a).............................................. 14.49% 12.06% 25.96% 7.90% 13.32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)................................ $ 1,454 $ 957 $ 760 $ 661 $ 563
Average net assets (000)..................................... $ 1,212 $ 969 $ 727 $ 608 $ 410
Ratios to average net assets:
Expenses, including distribution fees..................... 1.92% 1.93% 1.96% 2.05% 2.06%
Expenses, excluding distribution fees..................... .92% .93% .96% 1.05% 1.06%
Net investment income..................................... 1.50% 1.74% 2.25% 2.66% 2.83%
</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.
(b) Calculated based upon weighted average shares outstanding during the year.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 14
<PAGE>
Financial Highlights GLOBAL UTILITY FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class Z
---------------------------------------
December 16,
Year Ended September 1996(d)
30, through
--------------------- September 30,
1999 1998 1997
-------- -------- -------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year........................... $ 17.68 $ 17.54 $ 15.02
-------- -------- ------
Income from investment operations
Net investment income........................................ .45(b) .50(b) .34
Net realized and unrealized gain (loss) on investment and
foreign currency transactions............................. 2.16 1.68 2.59
-------- -------- ------
Total from investment operations.......................... 2.61 2.18 2.93
-------- -------- ------
Less distributions
Dividends from net investment income......................... (.43) (.50) (.34)
Distributions in excess of net investment income............. -- (.03) (.07)
Distributions from net realized gains........................ (1.89) (1.51) --
-------- -------- ------
Total distributions....................................... (2.32) (2.04) (.41)
-------- -------- ------
Net asset value, end of year................................. $ 17.97 $ 17.68 $ 17.54
-------- -------- ------
-------- -------- ------
TOTAL RETURN(a).............................................. 15.62% 13.18% 19.70%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)................................ $ 6,613 $ 6,065 $ 53
Average net assets (000)..................................... $ 6,847 $ 4,041 $ 16
Ratios to average net assets:
Expenses, including distribution fees..................... .92% .93% .96%(c)
Expenses, excluding distribution fees..................... .92% .93% .96%(c)
Net investment income..................................... 2.47% 2.74% 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 Z shares.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 15
<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, 1999, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the three 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, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above. The accompanying financial
highlights for each of the two years 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 19, 1999
- --------------------------------------------------------------------------------
16
<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, 1999) 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 $2.27 per share, comprised of $.38 per share ordinary income and
short-term capital gains which are taxable as ordinary income and $1.89 per
share long-term capital gains which are taxable as such. The Fund paid
distributions for Class B and Class C shares totaling $2.13 per share, comprised
of $.24 per share ordinary income and short-term capital gains which are taxable
as ordinary income and $1.89 per share long-term capital gains which are taxable
as such. The Fund paid distributions for Class Z shares totaling $2.32 per
share, comprised of $.43 of ordinary income and short-term capital gains which
are taxable as ordinary income and $1.89 per share long-term capital gains which
is taxable as such. Further, we wish to advise you that 67% of the ordinary
income dividends paid in the fiscal year ended 1999 qualified for the corporate
dividend received deduction available to corporate taxpayers. The Fund utilized
redemptions as distributions in the amount of $.033 and $.187 of, short-term
capital gains and long-term capital gains, respectively, for each class of
shares.
In January 2000, 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 1999.
IMPORTANT NOTICE FOR CERTAIN SHAREHOLDERS
We are required by Massachusetts, Missouri and Oregon to inform you that
dividends which have been derived from interest on federal obligations are not
taxable to shareholders providing the mutual fund meets certain requirements
mandated by the respective state's taxing authorities. We are pleased to report
that 1% of the dividends paid by the Global Utility Fund, Inc. qualify for such
deduction.
For more detailed information regarding your state and local taxes, you should
contact your tax advisor or the state/local taxing authorities.
- --------------------------------------------------------------------------------
17
<PAGE>
Comparing a $10,000 Investment
- -------------------------------------------------------------------------------
Global Utility Fund, Inc. vs. the Morgan Stanley Capital
International World Index
Class A
(GRAPH)
Average Annual Total Returns
With Sales Load
Since Inception 13.10%
Five Years 14.28%
One Year 9.59%
Without Sales Load
Since Inception 13.69%
Five Years 15.45%
One Year 15.36%
Class B
(GRAPH)
Average Annual Total Returns
With Sales Load
Since Inception 12.98%
Five Years 14.48%
One Year 9.49%
Without Sales Load
Since Inception 12.98%
Five Years 14.59%
One Year 14.49%
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. The information beneath the graphs is
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 compare a $10,000 investment in the Global Utility Fund, Inc.
(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 Class A, B, C, and Z shares, and at
the end of the fiscal year (September 30), as measured on a quarterly basis,
beginning in 1990 for Class A, 1991 for Class B, 1994 for Class C, and 1996 for
Class Z shares. For purposes of the graphs, and unless otherwise indicated, it
has been assumed that (a) the maximum applicable front-end sales charge was
deducted from the initial $10,000 investment in Class A and Class C shares; (b)
the maximum applicable contingent deferred sales charges were deduced from the
value of the investment in Class B and Class C shares, assuming full redemption
on September 30, 1999; (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,
approxi-
<PAGE>
Class C
(GRAPH)
Average Annual Total Returns
With Sales Load
Since Inception 13.58%
Five Years 14.36%
One Year 12.34%
Without Sales Load
Since Inception 13.80%
Five Years 14.59%
One Year 14.49%
Class Z
(GRAPH)
Average Annual Total Returns
Since Inception 17.48%
One Year 15.62%
mately 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
and service (12b-1) fees.
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 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 equity funds, and other indexes may portray
different comparative performance. Investors cannot invest directly in an
index.
These graphs are furnished to you in accordance with SEC regulations.
<PAGE>
Getting the Most from Your Prudential Mutual Fund
Some mutual fund shareholders won't ever read this--they don't read annual and
semiannual reports. It's quite understandable. These annual and semi-annual
reports are prepared to comply with federal regulations, and are often written
in language that is difficult to understand. So, when most people run into
those particularly daunting sections of these reports, they don't read them.
We think that's a mistake.
At Prudential Mutual Funds, we've made some changes to our report to make it
easier to understand and more pleasant to read. We hope you'll find it
profitable to spend a few minutes familiarizing yourself with your investment.
Here's what you'll find in the report:
Performance at a Glance
Since an investment's performance is often a shareholder's primary concern, we
present performance information in two different formats. You'll find it first
on the "Performance at a Glance" page where we compare the Fund and the
comparable average calculated by Lipper, Inc., a nationally recognized mutual
fund rating agency. We report both the cumulative total returns and the average
annual total returns. The cumulative total return is the total amount of income
and appreciation the Fund has achieved in various time periods. The average
annual total return is an annualized representation of the Fund's performance.
It gives you an idea of how much the Fund has earned in an average year for a
given time period. Under the performance box, you'll see legends that explain
the performance information, whether fees and sales charges have been included
in returns, and the inception dates for the Fund's share classes.
See the performance comparison charts at the back of the report for more
performance information. Please keep in mind that past performance is not
indicative of future results.
Portfolio Manager's Report
The portfolio manager, who invests your money for you, reports on successful--
and not-so-successful--strategies in this section of your report. Look for
recent purchases and sales here, as well as information about the sectors the
portfolio manager favors, and any changes that are on the drawing board.
Portfolio of Investments
This is where the report begins to appear technical, but it's really just a
listing of each security held at the end of the reporting period, along with
valuations and other information. Please note that sometimes we discuss a
security in the Portfolio Manager's Report that doesn't appear in this listing
because it was sold before the close of the reporting period.
<PAGE>
Statement of Assets and Liabilities
The balance sheet shows the assets (the value of the Fund's holdings),
liabilities (how much the Fund owes), and net assets (the Fund's equity, or
holdings after the Fund pays its debts) as of the end of the reporting period.
It also shows how we calculate the net asset value per share for each class of
shares. The net asset value is reduced by payment of your dividend, capital
gain, or other distribution, but remember that the money or new shares are
being paid or issued to you. The net asset value fluctuates daily, along with
the value of every security in the portfolio.
Statement of Operations
This is the income statement, which details income (mostly interest and
dividends earned) and expenses (including what you pay us to manage your
money). You'll also see capital gains here--both realized and unrealized.
Statement of Changes in Net Assets
This schedule shows how income and expenses translate into changes in net
assets. The Fund is required to pay out the bulk of its income to shareholders
every year, and this statement shows you how we do it--through dividends and
distributions--and how that affects the net assets. This statement also shows
how money from investors flowed into and out of the Fund.
Notes to Financial Statements
This is the kind of technical material that can intimidate readers, but it does
contain useful information. The Notes provide a brief history and explanation
of your Fund's objectives. In addition, they outline how Prudential Mutual
Funds prices securities. The Notes also explain who manages and distributes the
Fund's shares and, more importantly, how much they are paid for doing so.
Finally, the Notes explain how many shares are outstanding and the number
issued and redeemed over the period.
Financial Highlights
This information contains many elements from prior pages, but on a per-share
basis. It is designed to help you understand how the Fund performed, and to
compare this year's performance and expenses to those of prior years.
Independent Auditor's Report
Once a year, an outside auditor looks over our books and certifies that the
information is fairly presented and complies with generally accepted
accounting principles.
Tax Information
This is information which we report annually about how much of your total
return is taxable. Should you have any questions, you may want to consult a
tax adviser.
Performance Comparison
These charts are included in the annual report and are required by the
Securities Exchange Commission. Performance is presented here as a hypothetical
$10,000 investment in the Fund since its inception or for 10 years (whichever
is shorter). To help you put that return in context, we are required to include
the performance of an unmanaged, broad-based securities index as well. The
index does not reflect the cost of buying the securities it contains or the
cost of managing a mutual fund. Of course, the index holdings do not mirror
those of the Fund--the index is a broad-based reference point commonly used by
investors to measure how well they are doing. A definition of the selected
index is also provided. Investors cannot invest directly in an index.
