As filed with the Securities and Exchange Commission
on July 7, 1994
Registration No. 33-33479
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 8 [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 10 [X]
(Check appropriate box or boxes)
PRUDENTIAL SHORT-TERM
GLOBAL INCOME FUND, INC.
(Exact name of registrant as specified in charter)
ONE SEAPORT PLAZA,
NEW YORK, NEW YORK 10292
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 214-1250
S. Jane Rose, Esq.
One Seaport Plaza
New York, New York 10292
(Name and Address of Agent for Service)
Approximate date of proposed public offering:
As soon as practicable after the effective
date of the Registration Statement.
-------------------
It is proposed that this filing will become effective
(check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)
[ ] on (date), pursuant to paragraph (a), of Rule 485
Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
Registrant has previously registered an indefinite number of shares of
beneficial interest, par value $.001 per share. The Registrant will file a
notice under such Rule for its fiscal year ended October 31, 1994 on or
before December 31, 1994.
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<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 495)
<TABLE>
<CAPTION>
N-1A Item No. Location
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Part A
<S> <C>
Item 1. Cover Page ...................................................... Cover Page
Item 2. Synopsis ........................................................ Fund Expenses; Fund Highlights
Item 3. Condensed Financial Information ................................. Fund Highlights, How the Fund Invests
Item 4. General Description of Registrant ............................... Cover Page; Fund Expenses, Financial
Highlights; How the Fund Calculates
Performance, Description of Common
Stock
Item 5. Management of the Fund .......................................... How The Fund Is Managed
Item 6. Capital Stock and Other Securities .............................. How The Fund Is Managed; Taxes,
Dividends and Distributions; Description
of Common Stock
Item 7. Purchase of Securities Being Offered ............................ Shareholder Guide; How the Fund
Values Its Shares
Item 8. Redemption or Repurchase ........................................ Shareholder Guide; How the Fund
Values Its Shares
Item 9. Pending Legal Proceedings ....................................... Not Applicable
Part B
Item 10. Cover Page ...................................................... Cover Page
Item 11. Table of Contents ............................................... Table of Contents
Item 12. General Information and History ................................. Organization and Capitalization
Item 13. Investment Objectives and Policies .............................. Investment Objectives and Policies;
Investment Restrictions; Additional
Investment Information
Item 14. Management of the Fund .......................................... Directors and Officers; Manager;
Distributor
Item 15. Control Persons and Principal Holders of Securities ............. Not Applicable
Item 16. Investment Advisory and Other Services .......................... Manager; Distributor; Custodian,
Transfer and Dividend Disbursing
Agent and Independent Accountants
Item 17. Brokerage Allocation and Other Practices ........................ Portfolio Transactions and Brokerage
Item 18. Capital Stock and Other Securities .............................. Not Applicable
Item 19. Purchase, Redemption and Pricing of Securities Being Offered .... Purchase and Redemption of Fund
Shares; Shareholder Investment
Account
Item 20. Tax Status ...................................................... Taxes
Item 21. Underwriters .................................................... Distributor
Item 22. Calculation of Performance Data ................................. Performance Information
Item 23. Financial Statements ............................................ Financial Statements
Part C
</TABLE>
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE>
Prudential Short-Term
Global Income Fund, Inc.
(Short-Term Global Income Portfolio)
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Prospectus dated , 1994
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Prudential Short-Term Global Income Fund, Inc., (the Fund)-Short-Term
Global Income Portfolio (the Portfolio) is one of two separate portfolios
of an open-end management investment company. Only shares of the Short-Term
Global Income Portfolio are offered by this means of this Prospectus. The
Short-Term Global Income Portfolio's investment objective is to maximize
total return, the components of which are current income and capital
appreciation. The Portfolio, which is not a money market fund, seeks to
achieve its objective by investing primarily in a portfolio of investment
grade debt securities having remaining maturities of not more than three
years. The Portfolio will maintain an average weighted maturity of three
years or less. The Portfolio seeks to maximize total return by investing in
debt securities denominated in the U.S. dollar and a range of foreign
currencies. The Portfolio is non-diversified and may invest more than 5% of
its total assets in the securities of one or more issuers. Investment in a
non-diversified portfolio involves greater risk than investment in a
diversified portfolio. In addition, the Portfolio may invest up to 10% of
its total assets in non-investment grade securities, which may entail
additional risks. There can be no assurance that the Portfolio's investment
objective will be achieved. See "How the Fund Invests-Investment Objective
and Policies." The Fund's address is One Seaport Plaza, New York, New York
10292, and its telephone number is (800) 225-1852.
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This Prospectus sets forth concisely the information about the Fund and
the Portfolio that a prospective investor ought to know before investing.
Additional information about the Fund and the Portfolio has been filed
with the Securities and Exchange Commission in a Statement of Additional
Information, dated , 1994, which information is incorporated
herein by reference (is legally considered a part of this Prospectus) and
is available without charge upon request to the Fund at the address or
telephone number noted above.
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Investors are advised to read this Prospectus and retain it for future
reference.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
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FUND HIGHLIGHTS
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The following summary is intended to highlight certain information
contained in this Prospectus and is qualified in its entirety by the more
detailed information appearing elsewhere herein.
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What is Prudential Short-Term Global Income Fund, Inc., Short-Term Global
Income Portfolio?
Prudential Short-Term Global Income Fund, Inc., Short-Term Global
Income Portfolio is a mutual fund. A mutual fund pools the resources of
investors by selling its shares to the public and investing the proceeds of
such sale in a portfolio of securities designed to achieve its investment
objective. Technically, the Fund is an open-end, non-diversified
management investment company.
What is the Portfolio's Investment Objective?
The Portfolio's investment objective is to maximize total return, the
components of which are current income and capital appreciation. See "How
the Fund Invests-Investment Objectives and Policies" at page 6.
What are the Portfolio's Special Characteristics and Risks?
In seeking to achieve its investment objective, the Portfolio invests
primarily in a portfolio of investment grade debt securities having
remaining maturities of not more than three years. The Portfolio, which is
not a money market fund, seeks to maximize total return by investing in
debt securities denominated in the U.S. dollar and a range of foreign
securities. See "How the Fund Invests-Investment Objectives and Policies"
at page 6. Investing in securities of foreign companies and countries
involves certain considerations and risks not typically associated with
investing in U.S. Government Securities and securities of domestic
companies. See "How the Fund Invests-Risk Factors on Foreign Investments"
at page 8. In addition, the Portfolio may invest up to 10% of its total
assets in securities rated below investment grade, but with a minimum
rating of B, as determined by Moody's Investors Services, Inc. (Moody's),
or Standard & Poor's Ratings Group (S&P) or by another nationally
recognized statistical ratings organization, or if unrated, are deemed to
be of equivalent quality by the Subadviser. Investment in non-investment
(NRSRO) grade securities may entail additional risks to the Fund. See
"Medium and Lower-Rated Securities". The Portfolio may also engage in
hedging and income enhancement strategies, including the purchase and sale
of put and call options and related short-term trading. See "How the Fund
Invests-Other Investments and Investment Techniques" at page 8.
Who Manages the Fund?
Prudential Mutual Fund Management, Inc. (PMF or the Manager) is the
Manager of the Fund and is compensated for its services at an annual rate
of .55 of 1% of the Fund's average daily net assets. As of March 31, 1994,
PMF served as manager or administrator to [66] investment companies,
including [37] mutual funds, with aggregate assets of approximately [$49]
billion. The Prudential Investment Corporation (PIC or the Subadviser)
furnishes investment advisory services in connection with the management of
the Fund under a Subadvisory Agreement with PMF. See "How the Fund is
Managed-Manager" at page 12.
Who Distributes the Portfolio's Shares?
Prudential Mutual Fund Distributors, Inc. (PMFD) acts as the
Distributor of the Portfolio's Class A shares and is currently paid for its
services at an annual rate of .15 of 1% of the average daily net assets of
the Class A shares.
Prudential Securities Incorporated (Prudential Securities or PSI), a
major securities underwriter and securities and commodities broker, acts as
the Distributor of the Portfolio's Class B and Class C shares and is paid
for its services at an annual rate of 1% of the average daily net assets of
the Class B shares and is currently paid for its services at an annual rate
of .75 of 1% of the average net assets of the Class C shares. See "How the
Fund is Managed-Distributor" at page 13.
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2
<PAGE>
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What is the Minimum Investment?
The minimum initial investment for Class A and Class B shares is $1,000
per class and $5,000 for Class C shares. The minimum subsequent investment
is $100 for all classes. There is no minimum investment requirement for
certain retirement and employee savings plans or custodial accounts for the
benefit of minors. For purchases made through the Automatic Savings
Accumulation Plan the minimum initial and subsequent investment is $50. See
"Shareholder Guide-How to Buy Shares of the Fund" at page 18 and
"Shareholder Guide-Shareholder Services" at page 24.
How Do I Purchase Shares?
You may purchase shares of the Portfolio through Prudential Securities,
Pruco Securities Corporation (Prusec) or directly from the Fund, through
its transfer agent, Prudential Mutual Fund Services, Inc. (PMFS or the
Transfer Agent), at the net asset value per share (NAV) next determined
after receipt of your purchase order by the Transfer Agent or Prudential
Securities plus a sales charge which may be imposed either (i) at the time
of purchase (Class A shares) or (ii) on a deferred basis (Class B or Class
C shares) See "How the Fund Values Its Shares" at page 15 and "Shareholder
Guide-How to Buy Shares of the Fund" at page 18.
What Are My Purchase Alternatives?
The Portfolio offers three classes of shares:
*Class A Shares: Sold with an initial sales charge of up to 3% of the
offering price.
*Class B Shares: Sold without an initial sales charge but are subject
to a contingent deferred sales charge or CDSC
(declining from 3% to zero of the lower of the amount
invested or the redemption proceeds) which will be
imposed on certain redemptions made within four years
of purchase. Although Class B shares are subject to
higher ongoing distribution-related expenses than
Class A shares, Class B shares will automatically
convert to Class A shares (which are subject to lower
ongoing expenses) approximately five years after
purchase.
*Class C Shares: Sold without an initial sales charge and for one year
after purchase, are subject to a 1% CDSC on redemptions.
Like Class B shares, Class C shares are subject to
higher ongoing distribution-related expenses than
Class A shares but do not convert to another class.
See "Shareholder Guide-Alternative Purchase Plan" at page 19.
How Do I Sell My Shares?
You may redeem your shares at any time at the NAV next determined after
Prudential Securities or the Transfer Agent receives your sell order.
However, the proceeds of redemptions of Class B and Class C shares may be
subject to a CDSC. See "Shareholder Guide-How to Sell Your Shares" at page
21.
How Are Dividends and Distributions Paid?
The Portfolio expects to pay dividends of net investment income monthly
and make distributions of any net capital gains at least annually.
Dividends and distributions will be automatically reinvested in additional
shares of the Portfolio at NAV without a sales charge unless you request
that they be paid to you in cash. See "Taxes, Dividends and Distributions"
at page 16.
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3
<PAGE>
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FUND EXPENSES-SHORT-TERM GLOBAL INCOME PORTFOLIO
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<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
-------------- -------------- --------------
Shareholder Transaction Expenses\D
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) ..... 3% None None
Maximum Sales Load or Deferred Sales Load
Imposed on Reinvested Dividends ........... None None None
Deferred Sales Load (as a percentage of
original purchase price or redemption
proceeds, whichever is lower) ............. None 3% during the first year, 1% on redemptions
decreasing by 1% annually made within one year
to 1% in the third year and of purchase
1% in the fourth year and
0% in the fifth year*
Redemption Fees ........................... None None None
Exchange Fees ............................. None None None
</TABLE>
Annual Portfolio Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares**
-------------- -------------- --------------
<S> <C> <C> <C>
Management Fees ........................... .55% .55% .55%
12b-1 Fees\D\D ............................ .15% 1.00% .75%
Other Expenses ............................ .32% .32% .32%
---- ---- ----
Total Portfolio Operating Expenses ........ 1.02% 1.87% 1.62%
==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
Example 1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
Class A ................................................................. $40 $61 $ 85 $ 151
Class B ................................................................. $49 $69 $101 $ 187
Class C** .............................................................. $26 $51 $ 88 $ 192
You would pay the following expenses on the same investment, assuming
no redemption:
Class A ................................................................. $40 $61 $ 85 $ 151
Class B ................................................................. $19 $59 $101 $ 187
Class C** .............................................................. $16 $51 $ 88 $ 192
<FN>
The above example with respect to Class A and Class B shares is based
on restated data for the Portfolio's fiscal year ended October 31, 1993.
The above example with respect to Class C shares is based on expenses
expected to have been incurred if Class C shares had been in existence
during the fiscal year ended October 31, 1993. The example should not be
considered a representation of past or future expenses. Actual expenses may
be greater or less than those shown.
The purpose of this table is to assist investors in understanding the
various costs and expenses that an investor in the Portfolio will bear,
whether directly or indirectly. For more complete descriptions of the
various costs and expenses, see "How the Fund is Managed." "Other Expenses"
includes an estimate of operating expenses of the Portfolio, such as
directors' and professional fees, registration fees, reports to
shareholders and transfer agency and custodian fees (foreign and domestic).
- --------------
*Class B shares will automatically convert to Class A shares
approximately five years after purchase. See "Shareholder
Guide--Conversion Feature--Class B Shares."
**Estimated based on expenses expected to have been incurred if Class C
shares had been in existence during the fiscal year ended October
31, 1993.
\D Pursuant to rules of the National Association of Securities Dealers,
Inc., the aggregate initial sales charges, deferred sales charges
and asset-based sales charges on shares of the Portfolio may not
exceed 6.25% of total gross sales, subject to certain exclusions.
This 6.25% limitation is imposed on the Portfolio rather than on a
per shareholder basis. Therefore, long-term Class B and Class C
shareholders of the Portfolio may pay more in total sales charges
than the economic equivalent of 6.25% of such shareholders'
investment in such shares. See "How the Fund is Managed--
Distributor."
\D\D Although the Class A and Class C Distribution and Service Plans
provide that the Portfolio may pay up to an annual rate of .30 of
1% of the average daily net assets of the Class A shares and up to
1% per annum of the average daily net assets of the Class C shares,
the Distributor has agreed to limit its distribution expenses with
respect to the Class A shares of the Portfolio to no more than .15
of 1% of the average daily net asset value of the Class A shares
and to no more than .75 of 1% of the average daily net assets of
the Class C shares for the fiscal year ending October 31, 1994. See
"How the Fund is Managed--Distributor."
</TABLE>
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4
<PAGE>
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FINANCIAL HIGHLIGHTS
(for a share of common stock outstanding throughout each of the
periods indicated)
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The following financial highlights (with the exception of the six
months ended April 30, 1994) have been audited by Deloitte & Touche,
independent accountants, whose report thereon was unqualified. This
information should be read in conjunction with the financial statements and
notes thereto, which appear in the Statement of Additional Information. The
following financial highlights contain selected data for a Class A and
Class B share of common stock outstanding, total return, ratios to average
net assets and other supplemental data for the periods indicated. The
information is based on data contained in the financial statements. No
Class C shares were outstanding during the periods indicated.
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Short-Term Global Income Portfolio
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------------- ---------------------------------------
Six Months Six Months
Ended Ended
April 30, Year ended October 31, April 30, Year ended October 31,
--------- ---------------------- --------- ----------------------
1994 1993 1992 1991 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of period.. $ 9.29 $ 9.16 $ 9.97 $ 10.00 $ 9.29 $ 9.16 $ 9.97 $ 10.00
------- ------- -------- -------- ------- -------- -------- -------
Income from investment operations
Net investment income ................ .35 .97 .96 1.03 .30 .88 .88 .95
Net realized and unrealized loss
on investment and foreign currency
transactions ......................... (.38) (.26) (.95) (.02) (.38) (.26) (.95) (.02)
------- ------- -------- -------- -------- -------- ------- -------
Total from investment operations ..... (.03) .71 .01 1.01 (.08) .62 (.07) .93
------- ------- -------- -------- -------- -------- ------- -------
Less distributions
Dividends from net investment income . (.29) (.58) (.82) (1.03) (.24) (.49) (.74) (.95)
Distributions from net capital gains . - - - (.01) - - - (.01)
------- ------- -------- -------- -------- -------- ------- -------
Total distributions .................. (.29) (.58) (.82) (1.04) (.24) (.49) (.74) (.96)
------- ------- -------- -------- -------- -------- -------- --------
Net asset value, end of period........ $ 8.97 $ 9.29 $ 9.16 $ 9.97 $ 8.97 $ 9.29 $ 9.16 $ 9.97
======= ======= ======== ======== ======== ======== ======== ========
TOTAL RETURN# ........................ (0.39)% 7.96% (0.07)% 10.41% (0.85)% 7.00% (0.86)% 9.51%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ...... $34,821 $59,458 $101,358 $105,148 $277,724 $375,013 $606,899 $669,086
Average net assets (000) ............. $44,530 $70,347 $119,171 $ 51,830 $330,498 $474,175 $814,734 $349,607
Ratios to average net assets:
Expenses, including distribution fees 1.14%* 1.02% 1.08% 1.01% 1.99%* 1.87% 1.93% 1.87%
Expenses, excluding distribution fees .99%* .87% .93% .86% .99%* .87% .93% .87%
Net investment income ................ 7.52%* 10.81% 9.93% 10.23% 6.65%* 9.42% 9.05% 9.46%
Portfolio turnover rate .............. 214% 307% 180% 66% 214% 307% 180% 66%
<FN>
*Annualized.
#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 returns for periods of less than a full year are not
annualized.
</TABLE>
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5
<PAGE>
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HOW THE FUND INVESTS
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INVESTMENT OBJECTIVES AND POLICIES
The Portfolio's investment objective is to maximize total return, the
components of which are current income and capital appreciation. The
Portfolio seeks to achieve its objective by investing primarily in a
portfolio of investment grade debt securities having remaining maturities
of not more than three years. The Portfolio may also invest up to 10% of
its total assets in debt securities rated below investment grade, with a
minimum rating of B, by either S&P or Moody's or by another NRSRO, or, if
unrated, are deemed to be of equivalent quality by the Investment Adviser.
See "Medium and Lower-Rated Securities." There is no assurance that the
Portfolio will achieve its investment objective.
The Portfolio, which is not a money market fund, will maintain an
average weighted maturity of three years or less and will invest at least
65% of its total assets in income-producing securities. The Portfolio seeks
to maximize total return by investing in debt securities denominated in
U.S. dollars and a range of foreign currencies. Under normal circumstances,
the Portfolio will invest its assets in debt securities of issuers in at
least three different countries including the United States. The Portfolio
may also purchase and sell covered call and put options on certain of these
securities, indices and currencies, as well as on futures contracts
relating to such securities, indices and currencies.
The Portfolio's investment objective is a fundamental policy and can
not be changed without the approval of the holders of a majority of the
Portfolio's outstanding voting securities as defined in the Investment
Company Act of 1940 (the Investment Company Act). Fund policies that are
not fundamental may be modified by the Board of Directors.
The Portfolio is managed in accordance with a multi-market investment
strategy, allocating the Portfolio's investments among securities
denominated in the U.S. dollar and the currencies of a number of foreign
countries and, within each such country, among different types of debt
securities. The investment adviser adjusts the Portfolio's exposure to each
currency based on its perception of the most favorable markets and issuers.
In this regard, the percentage of assets invested in securities of a
particular country or denominated in a particular currency will vary in
accordance with the investment adviser's assessment of the relative yield
of such securities and the relationship of a country's currency to the U.S.
dollar. The Portfolio may from time to time invest 25% or more of its total
assets in securities of issuers in one or more countries depending upon the
investment adviser's assessment. The investment adviser considers
fundamental economic strength, credit quality and interest rate trends in
determining whether to increase or decrease the emphasis placed upon a
particular type of security or industry sector within the Portfolio's
investment portfolio.
Returns on short-term foreign currency denominated debt instruments can
be adversely affected by changes in exchange rates. The Portfolio's
investment adviser believes that the use of foreign currency hedging
techniques, including "cross-currency hedges" may assist, under certain
conditions, in helping to protect against declines in the U.S. dollar value
of income available for distribution to shareholders and declines in the
net asset value of the Portfolio's shares resulting from adverse changes in
currency exchange rates. For example, the return available from securities
denominated in a particular foreign currency would diminish in the event
the value of the U.S. dollar increased against such currency. Such a
decline could be partially or completely offset by an increase in value of
a cross-currency hedge involving a forward exchange contract to sell a
different foreign currency, where such contract is available on terms more
advantageous to the Portfolio than a contract to sell the currency in which
the position being hedged is denominated. Cross-currency hedges can,
therefore, under certain conditions, provide protection of net asset value
in the event of a general rise in the U.S. dollar against foreign
currencies. However, there can be no assurance that the Fund will be able
to engage in cross-currency hedging or that foreign exchange rate
relationships will be sufficiently predictable to enable the investment
adviser to successfully employ cross- currency hedging techniques. A
cross-currency hedge cannot protect against exchange rates risks perfectly,
and if the investment adviser is incorrect in its judgment of future
exchange rate relationships, the Portfolio could be in a less advantageous
position than if such a hedge had not been established.
6
<PAGE>
The Portfolio invests in debt securities denominated in the currencies
of countries whose governments are considered stable by the Portfolio's
investment adviser. In addition to the U.S. Dollar, such currencies
include, among others, the Australian Dollar, Austrian Schilling, British
Pound Sterling, Canadian Dollar, Dutch Guilder, European Currency Unit
(ECU), French Franc, German Mark, Italian Lira, Japanese Yen, New Zealand
Dollar, Spanish Peseta, Finnish Marka, Mexican Peso, Danish Kroner,
Norwegian Kroner, Swedish Krona and Swiss Franc. An issuer of debt
securities purchased by the Portfolio may be domiciled in a country other
than the country in whose currency the instrument is denominated. The
Portfolio may also invest in debt securities denominated in the currencies
of certain "emerging market" nations, such as, but not limited to, the
Czech Republic, Greece, South Korea, Hong Kong, Malaysia, Indonesia,
Thailand, China, Israel, Chile, Columbia, Venezuela, Turkey and Argentina.
The Portfolio will primarily invest in investment grade debt
securities. Accordingly, the Portfolio's investments will consist of (i)
debt securities issued or guaranteed by the U.S. Government, its agencies
and instrumentalities (U.S. Government securities), (ii) obligations issued
or guaranteed by a foreign government or any of its political subdivisions,
authorities, agencies or instrumentalities, or by supranational entities,
all of which are rated at least BBB by S&P or Baa by Moody's or by any
other NRSRO, or if unrated, are determined by the Portfolio's investment
adviser to be of equivalent rating using similar rating standards
(investment grade), (iii) corporate debt securities rated at least
investment grade by S&P or Moody's or by any other NRSRO, or if unrated,
are determined by the Portfolio's investment adviser to be of equivalent
rating using similar rating standards, (iv) certificates of deposit and
bankers acceptances issued or guaranteed by, or time deposits maintained
at, banks (including foreign branches of U.S. banks or U.S. or foreign
branches of foreign banks having total assets of more than $500 million and
determined by the investment adviser to be of investment grade using
similar standards, (v) commercial paper rated A-1 by S&P, P-1 by Moody's,
or if not rated, issued by U.S. or foreign companies having outstanding
long term debt securities rated at least investment grade by S&P or Moody's
or by any other NRSRO, or if unrated, are determined by the Portfolio's
investment adviser to be of equivalent rating using similar rating
standards; and (vi) loan participations having a remaining term not
exceeding one year in loans extended by banks to such companies. The value
of long term fixed income securities will fluctuate inversly with interest
rates. See the description of securities ratings in the Appendix.
The Portfolio may also invest up to 10% of its total assets in
securities rated B or BB by S&P or B or Ba by Moody's or by any other
NRSRO, or if unrated, are determined by the Portfolio's investment adviser
to be of equivalent rating using similar rating standards. Investment in
non-investment grade securities may entail additional risks to the
Portfolio. See "Medium and Lower-Rated Securities".
The Portfolio may invest without limitation in commercial paper and
other instruments which are indexed to certain specific foreign currency
exchange rates. The terms of such instruments provide that its principal
amount is adjusted upwards or downwards (but not below zero) at maturity to
reflect changes in the exchange rate between two currencies while the
obligation is outstanding. The Portfolio will purchase such instruments
with the currency in which it is denominated and, at maturity, will receive
interest and principal payments thereon in that currency, but the amount of
principal payable by the issuer at maturity will change in proportion to
the change (if any) in the exchange rate between the two specified
currencies between the date the instrument is issued and the date the
instrument matures. The Portfolio will establish a segregated account with
respect to its investments in this type of instrument and maintain in such
account cash or liquid high quality debt securities having a value at least
equal to the aggregate principal amount of outstanding instruments of this
type. While such instruments entail the risk of loss of principal, the
potential for realizing gains as a result of changes in foreign currency
exchange rates enables the Portfolio to hedge (or cross-hedge) against a
decline in the U.S. dollar value of investments denominated in foreign
currencies while providing an attractive money market rate of return.
The Portfolio may invest in debt securities issued by supranational
organizations such as the World Bank, which was chartered to finance
development projects in developing member countries; the European
Community, which is a twelve-nation organization engaged in cooperative
economic activities; the European Coal and Steel Community, which is an
economic union of various European nations' steel and coal industries; and
the Asian Development Bank, which is an
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international development bank established to lend funds, promote
investment and provide technical assistance to member nations in the Asian
and Pacific regions.
The Portfolio may invest in debt securities denominated in the ECU,
which is a "basket" consisting of specified amounts of currencies of
certain of the twelve member states of the European Community. The specific
amounts of currencies comprising the ECU may be adjusted by the Council of
Ministers of the European Community to reflect changes in relative values
of the underlying currencies. The Portfolio's investment adviser does not
believe that such adjustments will adversely affect holders of
ECU-denominated obligations or the marketability of such securities.
European supranationals, in particular, issue ECU-denominated obligations.
The Portfolio is "non-diversified" so that the Portfolio may invest
more than 5% of its total assets in the securities of one or more issuers.
Investment in a non-diversified portfolio involves greater risk than
investment in a diversified portfolio because a loss resulting from the
default of a single issuer may represent a greater portion of the total
assets of a non-diversified portfolio.
RISK FACTORS
Risk Factors on Foreign Investments
Investing in securities issued by foreign governments and corporations
involves considerations and possible risks not typically associated with
investing in obligations issued by the U.S. government and domestic
corporations. The values of foreign investments are affected by changes in
currency rates or exchange control regulations, application of foreign tax
laws, including withholding taxes, changes in governmental administration
or economic or monetary policy (in this country or abroad) or changed
circumstances in dealings between nations. Costs are incurred in connection
with conversions between various currencies. In addition, foreign brokerage
commissions are generally higher than in the United States, and foreign
securities markets may be less liquid, more volatile and less subject to
governmental supervision than in the United States. Investments in foreign
countries could be affected by other factors not present in the United
States, including expropriation, confiscatory taxation, lack of uniform
accounting and auditing standards and potential difficulties in enforcing
contractual obligations and could be subject to extended settlement
periods.
Shareholders should be aware that investing in the fixed-income markets
of developing countries involves exposure to economies that are generally
less diverse and mature, and to political systems which can be expected to
have less stability than those of developed countries. Historical
experience indicates that the markets of developing countries have been
more volatile than the markets of developed countries. The risks associated
with investments in foreign securities, described above, may be greater
with respect to investments in developing countries.
Medium and Lower-Rated Securities. The Portfolio may invest in medium
(i.e., rated Baa by Moody's or BBB by S&P) and lower- rated securities
(i.e., rated lower than Baa by Moody's or lower than BBB by S&P). However,
the Portfolio will not purchase a security rated lower than B by Moody's or
S&P. Securities rated Baa by Moody's or BBB by S&P, although considered
investment grade, possess speculative characteristics, and changes in
economic or other conditions are more likely to impair the ability of
issuers of these securities to make interest and principal payments than is
the case with respect to issuers of higher-grade bonds.
Generally, lower-rated securities and unrated securities of comparable
quality, sometimes referred to as junk bonds (i.e., securities rated lower
than Baa by Moody's or BBB by S&P) offer a higher current yield than is
offered by higher-rated securities, but also (i) will likely have some
quality and protective characteristics that, in the judgment of the rating
organizations, are outweighed by large uncertainties or major risk
exposures to adverse conditions and (ii) are predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. The market values of certain
of these securities also tend to be more sensitive to individual corporate
developments and changes in economic conditions than higher-quality bonds.
In addition, medium and lower-rated securities and comparable unrated
securities generally present a higher degree of credit risk. The risk of
loss due to default by these issuers is significantly greater because
medium and lower-rated securities and unrated securities
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<PAGE>
of comparable quality generally are unsecured and frequently are
subordinated to the prior payment of senior indebtedness. The investment
adviser, under the supervision of the Manager and the Directors, in
evaluating the creditworthiness of an issue whether rated or unrated, take
various factors into consideration, which may include, as applicable, the
issuer's financial resources, its sensitivity to economic conditions and
trends, the operating history of and the community support for the
facility financed by the issue, the ability of the issuer's management and
regulatory matters.
In addition, the market value of securities in lower-rated categories
is more volatile than that of higher-quality securities, and the markets in
which medium and lower-rated or unrated securities are traded are more
limited than those in which higher-rated securities are traded. The
existence of limited markets may make it more difficult for the Portfolio
to obtain accurate market quotations for purposes of valuing its portfolio
and calculating its net asset value. Moreover, the lack of a liquid trading
market may restrict the availability of securities for the Portfolio to
purchase and may also have the effect of limiting the ability of the
Portfolio to sell securities at their fair value either to meet redemption
requests or to respond to changes in the economy or the financial markets.
Lower-rated debt obligations also present risks based on payment
expectations. If an issuer calls the obligation for redemption, the
Portfolio may have to replace the security with a lower-yielding security,
resulting in a decreased return for investors. Also, as the principal value
of bonds moves inversely with movements in interest rates, in the event of
rising interest rates the value of the securities held by the Portfolio may
decline proportionately more than a portfolio consisting of higher-rated
securities. If the Portfolio experiences unexpected net redemptions, it may
be forced to sell its higher-rated bonds, resulting in a decline in the
overall credit quality of the securities held by the Portfolio and
increasing the exposure of the Portfolio to the risks of lower-rated
securities. Investments in zero coupon bonds may be more speculative and
subject to greater fluctuations in value due to changes in interest rates
than bonds that pay interest currently.
Subsequent to its purchase by the Portfolio, an issue of securities may
cease to be rated or its rating may be reduced below the minimum required
for purchase by the Portfolio. Neither event will require sale of these
securities by the Portfolio, but the investment adviser will consider this
event in its determination of whether the Portfolio should continue to hold
the securities.
As of October 31, 1993, the year-end dollar weighted average ratings of
the debt obligations held by the Fund, expressed as a percentage of the
Fund's total investments, were as follows:
Percentage of Total
Ratings Investments
------- -------------------
AAA/Aaa -- %
AA/Aa --
A/A --
BBB/Baa --
BB/Ba --
B/B --
Unrated --
OTHER INVESTMENTS AND INVESTMENT TECHNIQUES
In addition, the Portfolio is permitted to make the investments and
engage in the investment techniques described below. Under normal
circumstances, these investments will represent no more than 35% of the
total assets of the Portfolio.
Hedging and Income Enhancement Strategies
The Portfolio may engage in various portfolio strategies to reduce
certain risks of its investments and to attempt to enhance income, but not
for speculation. These strategies currently include the use of options,
forward currency exchange contracts and futures contracts and options
thereon. The Portfolio's ability to use these strategies may be limited by
market conditions, regulatory limits and tax considerations and there can
be no assurance that any of these strategies will succeed. See "Additional
Investment Information-Investment Policies" in the Statement of
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<PAGE>
Additional Information. New financial products and risk management
techniques continue to be developed and the Portfolio may use these new
investments and techniques to the extent consistent with its investment
objective and policies.
Options Transactions
The Portfolio may purchase and write (i.e., sell) put and call options
on securities and currencies that are traded on national securities
exchanges or in the over-the-counter market to enhance income or to hedge
the Portfolio's investments. These options will be on debt securities,
financial indices (e.g., S&P 500), U.S. Government securities, foreign
government securities and foreign currencies. The Portfolio may write
covered put and call options to generate additional income through the
receipt of premiums, purchase put options in an effort to protect the value
of a security that it owns against a decline in market value and purchase
call options in an effort to protect against an increase in price of
securities (or currencies) it intends to purchase. The Portfolio may also
purchase put and call options to offset previously written put and call
options of the same series. See "Additional Investment Information-
Additional Risks-Options on Securities" in the Statement of Additional
Information.
A call option gives the purchaser, in exchange for a premium paid, the
right for a specified period of time to purchase the securities or currency
subject to the option at a specified price (the exercise price or strike
price). The writer of a call option, in return for the premium, has the
obligation, upon exercise of the option, to deliver, depending upon the
terms of the option contract, the underlying securities or a specified
amount of cash to the purchaser upon receipt of the exercise price. When
the Portfolio writes a call option, the Portfolio gives up the potential
for gain on the underlying securities or currency in excess of the exercise
price of the option during the period that the option is open.
A put option gives the purchaser, in return for a premium, the right,
for a specified period of time, to sell the securities or currency subject
to the option to the writer of the put at the specified exercise price. The
writer of the put option, in return for the premium, has the obligation,
upon exercise of the option, to acquire the securities or currency
underlying the option at the exercise price. The Portfolio might,
therefore, be obligated to purchase the underlying securities or currency
for more than their current market price.
The Portfolio will write only "covered" options. An option is covered
if, so long as the Portfolio is obligated under the option, it owns an
offsetting position in the underlying security or currency or maintains
cash, U.S. Government securities or other liquid high-grade debt
obligations with a value sufficient at all times to cover its obligations
in a segregated account. See "Additional Investment Information-Additional
Risks" in the Statement of Additional Information.
There is no limitation on the amount of call options the Portfolio may
write. The Portfolio may only write covered put options to the extent that
cover for such options does not exceed 25% of the Portfolio's net assets.
The Portfolio will not purchase an option if, as a result of such purchase,
more than 20% of its total assets would be invested in premiums for options
and options for futures.
Forward Currency Exchange Contracts
The Portfolio may enter into forward foreign currency exchange
contracts to protect the value of its portfolio against future changes in
the level of currency exchange rates. The Portfolio may enter into such
contracts on a spot, i.e., cash, basis at the rate then prevailing in the
currency exchange market or on a forward basis, by entering into a forward
contract to purchase or sell currency. A forward contract on foreign
currency is an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days agreed upon by the
parties from the date of the contract at a price set on the date of the
contract.
The Portfolio's dealings in forward contracts will be limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of a forward contract with
respect to specific receivables or payables of the Portfolio generally
arising in connection with the purchase or sale of its portfolio securities
and accruals of interest or dividends receivable and Portfolio expenses.
Position hedging is the sale of a foreign currency with respect to
portfolio security positions denominated or quoted in that currency or in a
different foreign currency (cross-hedge). Although there are no limits on
the number of forward contracts which the Portfolio may enter into, the
Portfolio may not position hedge with respect to a particular currency for
an amount greater than the aggregate market
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<PAGE>
value (determined at the time of making any sale of forward currency) of
the securities held in its portfolio denominated or quoted in, or
currently convertible into or bearing substantial correlation to, such
currency. See "Additional Investment Information-Forward Currency Exchange
Contracts" in the Statement of Additional Information.
Futures Contracts and Options Thereon
The Portfolio may purchase and sell financial futures contracts and
options thereon which are traded on a commodities exchange or board of
trade for certain hedging, return enhancement and risk management purposes
in accordance with regulations of the Commodity Futures Trading Commission.
These futures contracts and related options will be on debt securities,
financial indices, U.S. Government securities, foreign government
securities and foreign currencies. A financial futures contract is an
agreement to purchase or sell an agreed amount of securities or currencies
at a set price for delivery in the future.
The Portfolio may not purchase or sell futures contracts and related
options for return enhancement or risk management purposes, if immediately
thereafter the sum of the amount of initial margin deposits on the
Portfolio's existing futures and options on futures and premiums paid for
such related options would exceed 5% of the liquidation value of the
Portfolio's total assets. The Portfolio may purchase and sell futures
contracts and related options, without limitation, for bona fide hedging
purposes. Although there are no other limits applicable to futures
contracts, the value of all futures contracts sold will not exceed the
total market value of the Portfolio's portfolio.
The Portfolio's successful use of futures contracts and related options
depends upon the investment adviser's ability to predict the direction of
the market and is subject to various additional risks. The correlation
between movements in the price of a futures contract and the price of the
securities or currencies being hedged is imperfect and there is a risk that
the value of the securities or currencies being hedged may increase or
decrease at a greater rate than the related futures contracts resulting in
losses to the Portfolio. Certain futures exchanges or boards of trade have
established daily limits on the amount that the price of futures contracts
or related options may vary, either up or down, from the previous day's
settlement price. These daily limits may restrict the Portfolio's ability
to purchase or sell certain futures contracts or related options on any
particular day.
The Portfolio's ability to enter into futures contracts and options
thereon is limited by the requirements of the Internal Revenue Code of
1986, as amended (the Internal Revenue Code), for qualification as a
regulated investment company. See "Additional Investment Information-
Futures Contracts and Options Thereon" and "Taxation" in the Statement of
Additional Information.
Special Risks of Hedging and Income Enhancement Strategies
Participation in the options or futures markets and in currency
exchange transactions involves investment risks and transaction costs to
which the Portfolio would not be subject absent the use of these
strategies. If the investment adviser's prediction of movements in the
direction of the securities, foreign currency and interest rate markets are
inaccurate, the adverse consequences to the Portfolio may leave the
Portfolio in a worse position than if such strategies were not used. Risks
inherent in the use of options, foreign currency and futures contracts and
options on futures contracts include (1) dependence on the investment
adviser's ability to predict correctly movements in the direction of
interest rates, securities prices and currency markets; (2) imperfect
correlation between the price of options and futures contracts and options
thereon and movements in the prices of the securities or currencies being
hedged; (3) the fact that skills needed to use these strategies are
different from those needed to select portfolio securities; (4) the
possible absence of a liquid secondary market for any particular instrument
at any time; (5) the possible need to defer closing out certain hedged
positions to avoid adverse tax consequences; and (6) the possible inability
of the Portfolio to purchase or sell a security at a time that otherwise
would be favorable for it to do so, or the possible need for the Portfolio
to sell a security at a disadvantageous time, due to the need for the
Portfolio to maintain "cover" or to segregate securities in connection with
hedging transactions. See "Taxation" in the Statement of Additional
Information.
Short Sales Against-the-Box
The Portfolio may make short sales against-the-box for the purpose of
deferring realization of gain or loss for federal income tax purposes. A
short sale "against-the-box" is a short sale in which the Portfolio owns an
equal amount of the securities sold short or owns securities convertible
into or exchangeable, without payment of any further consideration, for
securities of the same issue as, and equal in amount to, the securities
sold short.
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<PAGE>
Repurchase Agreements
The Portfolio may enter into repurchase agreements, whereby the seller
of a security agrees to repurchase that security from the Portfolio at a
mutually agreed-upon time and price. The repurchase date is usually within
a day or two of the original purchase, although it may extend over a number
of months. The resale price is in excess of the purchase price, reflecting
an agreed-upon rate of return effective for the period of time the
Portfolio's money is invested in the security. The Portfolio's repurchase
agreements will at all times be fully collateralized in an amount at least
equal to the purchase price including accrued interest earned on the
underlying securities. The instruments held as collateral are valued daily,
and as the value of instruments declines, the Portfolio will require
additional collateral. If the seller defaults and the value of the
collateral securing the repurchase agreement declines, the Portfolio may
incur a loss. The Portfolio participates in a joint repurchase account with
other investment companies managed by Prudential Mutual Fund Management,
Inc. pursuant to an order of the Securities and Exchange Commission (SEC or
Commission). See "Additional Investment Information-Repurchase Agreements"
in the Statement of Additional Information.
Securities Lending
The Portfolio may lend its portfolio securities to brokers or dealers,
banks or other recognized institutional borrowers of securities, provided
that the borrower at all times maintains cash or equivalent collateral or
secures an irrevocable letter of credit in favor of the Portfolio in an
amount equal to at least 100% of the market value of the securities loaned.
During the time portfolio securities are on loan, the borrower will pay the
Portfolio an amount equivalent to any dividend or interest paid on such
securities and the Portfolio may invest the cash collateral and earn
additional income, or it may receive an agreed-upon amount of interest
income from the borrower. As a matter of fundamental policy, the Portfolio
cannot lend more than 30% of the value of its total assets.
When-Issued and Delayed Delivery Securities
The Portfolio may purchase or sell securities on a when- issued or
delayed delivery basis. When-issued or delayed delivery transactions arise
when securities are purchased or sold by the Portfolio with payment and
delivery taking place a month or more in the future in order to secure what
is considered to be an advantageous price and yield to the Portfolio at the
time of entering into the transaction. The Fund's Custodian will maintain,
in a segregated account of the Portfolio, cash, U.S. Government securities
or other liquid high-grade debt obligations having a value equal to or
greater than the Portfolio's purchase commitments; the Custodian will
likewise segregate securities sold on a delayed delivery basis.
Borrowing
The Portfolio may borrow an amount equal to no more than 20% of the
value of its total assets (computed at the time the loan is made) from
banks for temporary, extraordinary or emergency purposes or for the
clearance of transactions. During periods when the Portfolio has borrowed
for temporary, extraordinary or emergency purposes or for the clearance of
transactions, the Portfolio may pursue its investment objective by
purchasing additional securities which can result in increased volatility
of the Portfolio's net asset value. The Portfolio will not borrow to take
advantage of investment opportunities. See "Additional Investment
Information-Borrowing" in the Statement of Additional Information. The
Portfolio may pledge up to 20% of its total assets to secure these
borrowings.
Illiquid Securities
The Portfolio may invest up to 10% of its net assets in illiquid
securities including repurchase agreements which have a maturity of longer
than seven days, securities with legal or contractual restrictions on
resale and securities that are not readily marketable. Restricted
securities eligible for resale pursuant to Rule 144A under the Securities
Act of 1933, as amended, (the Securities Act) that have a readily available
market are not considered illiquid for purposes of this limitation. The
investment adviser will monitor the liquidity of restricted securities
under the supervision of the Board of Directors. Repurchase agreements
subject to demand are deemed to have a maturity equal to the applicable
notice period.
The staff of the SEC has also taken the position that purchased over-
the-counter options and the assets used as "cover" for written over-the-
counter options are illiquid securities unless the Fund and the
counterparty have provided for the Fund, at the Fund's election, to unwind
the over-the-counter option. The exercise of such an option ordinarily
12
<PAGE>
would involve the payment by the Fund of an amount designed to reflect the
counterparty's economic loss from an early termination, but does allow the
Fund to treat the assets used as "cover" as "liquid."
Portfolio Turnover
The Portfolio has no fixed policy with respect to portfolio turnover;
however, it is anticipated that the Portfolio's annual portfolio turnover
rate will not exceed 75%. The portfolio turnover rate is calculated by
dividing the lesser of sales or purchases of portfolio securities by the
average monthly value of the Portfolio's portfolio securities, excluding
securities having a maturity at the date of purchase of one year or less.
High portfolio turnover may involve correspondingly greater brokerage
commissions and other transaction costs which will be borne directly by the
Portfolio. For the fiscal year ended October 31, 1993, the Fund's portfolio
turnover rate was 307%. See "Portfolio Transactions and Brokerage" in the
Statement of Additional Information.
INVESTMENT RESTRICTIONS
The Portfolio is subject to certain investment restrictions
which, like its investment objectives, constitute fundamental policies.
Fundamental policies cannot be changed without the approval of the holders
of a majority of the Portfolio's outstanding voting securities, as defined
in the Investment Company Act. See "Investment Restrictions" in the
Statement of Additional Information.
- -------------------------------------------------------------------------------
HOW THE FUND IS MANAGED
- -------------------------------------------------------------------------------
The Fund has a Board of Directors which, in addition to overseeing the
actions of the Portfolio's Manager, Subadviser and Distributor, as set
forth below, decides upon matters of general policy. The Portfolio's
Manager conducts and supervises the daily business operations of the
Portfolio. The Fund's Subadviser furnishes daily investment advisory
services.
For the year ended October 31, 1993, total expenses for the Portfolio's
Class A and Class B shares as a percentage of average net assets were 1.02%
and 1.87%, respectively. See "Financial Highlights." No Class C shares were
outstanding during the fiscal year ended October 31, 1993.
MANAGER
Prudential Mutual Fund Management, Inc. (PMF or the Manager), One
Seaport Plaza, New York, New York 10292, is the manager of the Portfolio
and is compensated for its services at an annual rate of .55 of 1% of the
Portfolio's average daily net assets. It was incorporated in May 1987 under
the laws of the State of Delaware. For the fiscal year ended October 31,
1993, the Portfolio paid a management fee to PMF of .55 of 1% of the
average net assets of the Portfolio.
As of March 31, 1994, PMF served as the manager to [37] open-end
investment companies, constituting substantially all of the Prudential
Mutual Funds, and as manager or administrator to [29] closed-end investment
companies with aggregate assets of approximately [$49] billion.
Under the Management Agreement with the Portfolio, PMF manages the
investment operations of the Portfolio and also administers the Portfolio's
corporate affairs. See "Manager" in the Statement of Additional
Information.
Under the Subadvisory Agreement between PMF and The Prudential
Investment Corporation (PIC or the Subadviser), the Subadviser furnishes
investment advisory services in connection with the management of the
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<PAGE>
Portfolio and is reimbursed by PMF for its reasonable costs and expenses
incurred in providing such services. Under the Management Agreement, PMF
continues to have responsibility for all investment advisory services and
supervises PIC's performance of such services.
The Portfolio is managed by Global Advisors, a unit of The Prudential
Investment Corporation (PIC). Nicholas Sargen, as Chief Investment Officer
of Global Advisors, sets broad investment strategies which are then
implemented by a senior portfolio manager, Jeffrey Brummette, who has
responsibility for the day-to-day management of the portfolio. Mr.
Brummette performs these duties with the assistance of the mutual fund
investment team. Messrs. Sargen and Brummette are Managing Directors of
PIC. Mr. Sargen has managed the Portfolio since October 1991. Mr. Brummette
has managed the Portfolio since November 1990. Mr. Sargen has been employed
by PIC since October 1991 and was previously Director of International Bond
Market Research at Salomon Brothers where he was employed from 1984 to
1991. Mr. Brummette has been employed by PIC since 1986. Mr. Brummette also
serves as the portfolio manager of Global Assets Portfolio of the Fund, of
The Global Yield Fund, Inc. and for other institutional client portfolios.
PMF and PIC are indirect, wholly-owned subsidiaries of The Prudential
Insurance Company of America (Prudential), a major diversified insurance
and financial services company.
FEE WAIVERS AND SUBSIDY
PMF may from time to time agree to waive its management fee and
subsidize certain operating expenses with respect to the Portfolio,
although no such waiver or subsidy is currently in effect. Fee waivers and
expense subsidies will lower the overall expenses of the Portfolio and
increase its yield and total return. See "How the Fund Calculates
Performance." The fee waiver or expense subsidies may be terminated at any
time without notice after which the Portfolio's expenses will increase and
its yield and total return will be reduced.
DISTRIBUTOR
Prudential Mutual Fund Distributors, Inc. (PMFD), One Seaport Plaza,
New York, New York 10292, is a corporation organized under the laws of the
State of Delaware and serves as the distributor of the Class A shares of
the Portfolio. It is a wholly-owned subsidiary of PMF.
Prudential Securities Incorporated (Prudential Securities or PSI), One
Seaport Plaza, New York, New York 10292, is a corporation organized under
the laws of the State of Delaware and serves as the distributor of the
Class B and Class C shares of the Portfolio. It is an indirect, wholly-
owned subsidiary of Prudential.
Under separate Distribution and Service Plans (the Class A Plan, the
Class B Plan and the Class C Plan, collectively, the Plans) adopted by the
Portfolio under Rule 12b-1 under the Investment Company Act and separate
distribution agreements (the Distribution Agreements), PMFD and Prudential
Securities (collectively the Distributor) incur the expenses of
distributing the Portfolio's Class A, Class B and Class C shares. These
expenses include commissions and account servicing fees paid to, or on
account of, financial advisers of Prudential Securities and Pruco
Securities Corporation (Prusec), an affiliated broker-dealer, commissions
paid to, or on account of, other broker-dealers or financial institutions
(other than national banks) which have entered into agreements with the
Distributor, advertising expenses, the cost of printing and mailing
prospectuses to potential investors and indirect and overhead costs of
Prudential Securities and Prusec associated with the sale of Portfolio
shares, including lease, utility, communications and sales promotion
expenses. The State of Texas requires that shares of the Portfolio may be
sold in that state only by dealers or other financial institutions which
are registered there as broker-dealers.
Under the Plans, the Portfolio is obligated to pay distribution and/or
service fees to the Distributor as compensation for its distribution and
service activities, not as reimbursement for specific expenses incurred. If
the Distributor's expenses exceed its distribution and service fees, the
Portfolio will not be obligated to pay any additional expenses. If the
Distributor's expenses are less than such distribution and service fees, it
will retain its full fees and realize a profit.
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<PAGE>
Under the Class A Plan, the Portfolio may pay PMFD for its
distribution-related expenses with respect to Class A shares at an annual
rate of up to .30 of 1% of the average daily net assets of the Class A
shares. The Class A Plan provides that (i) up to .25 of 1% of the average
daily net assets of the Class A shares may be used to pay for personal
service and/or the maintenance of shareholder accounts (service fee) and
(ii) total distribution fees (including the service fee of .25 of 1%) may
not exceed .30 of 1% of the average daily net assets of the Class A shares.
PMFD has agreed to limit its distribution-related fees payable under the
Class A Plan to .15 of 1% of the average daily net assets of the Class A
shares for the fiscal year ending October 31, 1994.
For the fiscal year ended October 31, 1993, PMFD received payments of
$105,520, under the Class A Plan as reimbursement of expenses related to
the distribution of Class A shares. This amount was primarily expended for
payment of account servicing fees to financial advisers and other persons
who sell Class A shares. For the fiscal year ended October 31, 1993. PMFD
also received approximately $64,400 in initial sales charges.
Under the Class B and Class C Plans, the Fund may pay Prudential
Securities for its distribution-related expenses with respect to Class B
and Class C shares at an annual rate of up to (i) with respect to the Class
B Plan, 1% of the average daily net assets of the Class B shares, and (ii)
with respect to the Class C Plan, .75 of 1% of the average daily net assets
of the Class C shares. The Class B Plan provides for the payment to
Prudential Securities of (i) an asset-based sales charge of up to .75 of 1%
of the average daily net assets of the Class B shares, and (ii) a service
fee of up to .25 of 1% of the average daily net assets of the Class B
shares. The Class C Plan provides for the payment to Prudential Securities
of (i) an asset-based sales charge of up to .75 of 1% of the average daily
net assets of the Class C shares, and (ii) a service fee of up to .25 of 1%
of the average daily net assets of the Class C shares. The service fee is
used to pay for personal service and/or the maintenance of shareholder
accounts. Prudential Securities has agreed to limit its
distribution-related fees payable under the Class C Plan to .75 of 1% of
the average daily net assets of the Class C shares for the fiscal year
ending October 31, 1994. Prudential Securities also receives contingent
deferred sales charges from certain redeeming shareholders. See
"Shareholder Guide-How to Sell Your Shares-Contingent Deferred Sales
Charges."
For the fiscal year ended October 31, 1993, Prudential Securities
incurred distribution expenses of approximately $2,326,500 under the Class
B Plan and received $4,741,700 from the Fund under the Class B Plan and
approximately $2,203,700 in contingent deferred sales charges from
redemptions of Class B shares. No Class C shares were outstanding during
the fiscal year ended October 31, 1993.
For the fiscal year ended October 31, 1993, the Fund paid distribution
expenses of .15% and 1.00% of the average net assets of the Class A and
Class B shares of the Portfolio, respectively. The Fund records all
payments made under the Plans as expenses in the calculation of net
investment income. No Class C shares were outstanding during the fiscal
year ended October 31, 1993.
Distribution expenses attributable to the sale of shares of the
Portfolio will be allocated to each class based upon the ratio of sales of
each class to the sales of all shares of the Portfolio other than expenses
allocable to a particular class. The distribution fee and sales charge of
one class will not be used to subsidize the sale of another class.
Each Plan provides that it shall continue in effect from year to year
provided that a majority of the Board of Directors of the Fund, including a
majority of the Directors who are not "interested persons" of the Fund (as
defined in the Investment Company Act) and who have no direct or indirect
financial interest in the operation of the Plan or any agreement related to
the Plan (the Rule 12b-1 Directors), vote annually to continue the Plan.
Each Plan may be terminated at any time by vote of a majority of the Rule
12b-1 Directors or of a majority of the outstanding shares of the
applicable class of the Portfolio. The Fund will not be obligated to pay
expenses incurred under any plan if it is terminated or not continued.
In addition to distribution and service fees paid by the Portfolio
under the Class A, Class B and Class C Plans, the Manager (or one of its
affiliates) may make payments to dealers and other persons which distribute
shares of the
15
<PAGE>
Portfolio. Such payments may be calculated by reference to the net asset
value of shares sold by such persons or otherwise.
The Distributor is subject to the rules of the National Association of
Securities Dealers, Inc. governing maximum sales charges. See "Distributor"
in the Statement of Additional Information.
PORTFOLIO TRANSACTIONS
Prudential Securities may act as a broker or futures commission
merchant for the Portfolio provided that the commissions, fees or other
remuneration it receives are fair and reasonable. See "Portfolio
Transactions and Brokerage" in the Statement of Additional Information.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Portfolio's investment
securities and cash and, in that capacity, maintains certain financial and
accounting books and records pursuant to an agreement with the Fund. Its
mailing address is P.O. Box 1713, Boston, Massachusetts 02105.
Prudential Mutual Fund Services, Inc., Raritan Plaza One, Edison, New
Jersey 08837, serves as Transfer Agent and Dividend Disbursing Agent and in
those capacities maintains certain books and records for the Fund. PMFS is
a wholly-owned subsidiary of PMF. Its mailing address is P.O. Box 15005,
New Brunswick, New Jersey 08906-5005.
- -------------------------------------------------------------------------------
HOW THE FUND VALUES ITS SHARES
- -------------------------------------------------------------------------------
The Portfolio's net asset value per share or NAV is determined by
subtracting its liabilities from the value of its assets and dividing the
remainder by the number of outstanding shares. NAV is calculated separately
for each class. For valuation purposes, quotations of foreign securities in
a foreign currency are converted to U.S. dollar equivalents. The Board of
Directors has fixed the specific time of day for the computation of the
Portfolio's net asset value to be as of 4:15 P.M., New York time.
Portfolio securities are valued based on market quotations or, if not
readily available, at fair value as determined in good faith under
procedures established by the Fund's Board of Directors.
The Portfolio will compute its NAV once daily on days that the New York
Stock Exchange is open for trading except on days on which no orders to
purchase, sell or redeem shares have been received by the Portfolio or days
on which changes in the value of the Portfolio's securities do not
materially affect the NAV. The New York Stock Exchange is closed on the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. See
"Net Asset Value" in the Statement of Additional Information.
Although the legal rights of each class of shares are substantially
identical, the different expenses borne by each class may result in
different NAVs and dividends. As long as the Portfolio declares dividends
daily, the NAV of Class A, Class B and Class C shares will generally be the
same. It is expected, however, that the dividends will differ by
approximately the amount of the distribution-related expense accrual
differential among the classes.
- -------------------------------------------------------------------------------
HOW THE FUND CALCULATES PERFORMANCE
- -------------------------------------------------------------------------------
From time to time the Portfolio may advertise its total return
(including "average annual" total return and "aggregate" total return) and
yield in advertisements or sales literature. Total return and yield are
calculated
16
<PAGE>
separately for Class A, Class B and Class C shares. These figures are based
on historical earnings and are not intended to indicate future performance.
The "total return" shows how much an investment in the Portfolio would have
increased (decreased) over a specified period of time (i.e., one, five or
ten years or since inception of the Portfolio) assuming that all
distributions and dividends by the Portfolio were reinvested on the
reinvestment dates during the period and less all recurring fees. The
"aggregate" total return reflects actual performance over a stated period
of time. "Average annual" total return is a hypothetical rate of return
that, if achieved annually, would have produced the same aggregate total
return if performance had been constant over the entire period. "Average
annual" total return smooths out variations in performance and takes into
account any applicable initial or contingent deferred sales charges.
Neither "average annual" total return nor "aggregate" total return takes
into account any federal or state income taxes which may be payable upon
redemption. The "yield" refers to the income generated by an investment in
the Fund over a one-month or 30- day period. This income is then
"annualized;" that is, the amount of income generated by the investment
during that 30-day period is assumed to be generated each 30-day period for
twelve periods and is shown as a percentage of the investment. The income
earned on the investment is also assumed to be reinvested at the end of the
sixth 30-day period. The Portfolio also may include comparative performance
information in advertising or marketing the Portfolio's shares. Such
performance information may include data from Lipper Analytical Services,
Inc., other industry publications, business periodicals and market indices.
See "Performance Information" in the Statement of Additional Information.
The Portfolio will include performance data for each class of shares of the
Portfolio in any advertisement or information including performance data of
the Portfolio. Further performance information is contained in the
Portfolio's annual and semi-annual reports to shareholders, which may be
obtained without charge. See "Shareholder Guide-Shareholder Services-
Reports to Shareholders."
- -------------------------------------------------------------------------------
TAXES, DIVIDENDS AND DISTRIBUTIONS
- -------------------------------------------------------------------------------
Taxation of the Portfolio
The Portfolio has elected to qualify and intends to remain qualified as
a regulated investment company under the Internal Revenue Code.
Accordingly, the Portfolio will not be subject to federal income taxes on
its net investment income and capital gains, if any, that it distributes to
its shareholders.
Gains or losses on disposition of debt securities denominated in a
foreign currency attributable to fluctuations in the value of foreign
currency between the date of acquisition of the security and the date of
disposition also are treated as ordinary gain or loss. These gains or
losses increase or decrease the amount of the Portfolio's investment
company taxable income available to be distributed to you as ordinary
income, rather than increasing or decreasing the amount of the Portfolio's
net capital gain. If currency fluctuation losses exceed other investment
company taxable income during a taxable year, distributions made by the
Portfolio during the year would be characterized as a return of capital to
you, reducing your basis in your Portfolio shares.
In addition, under the Internal Revenue Code, special rules apply to
the treatment of certain options and futures contracts (Section 1256
contracts). At the end of each year, such investments held by the Portfolio
will be required to be "marked to market" for federal income tax purposes;
that is, treated as having been sold at market value. Sixty percent of any
gain or loss recognized on these "deemed sales" and on actual dispositions
may be treated as long-term capital gain or loss, and the remainder will be
treated as short-term capital gain or loss. See "Taxation" in the Statement
of Additional Information.
Taxation of Shareholders
All dividends out of net investment income, together with distributions
of short-term capital gains, will be taxable as ordinary income to you
whether or not reinvested. Any net long-term capital gains distributed to
you will be taxable as such to you, whether or not reinvested and
regardless of the length of time you have owned your shares. The maximum
17
<PAGE>
long-term capital gains rate for individuals is 28%. The maximum long-term
capital gains rate for corporate shareholders is currently the same as the
maximum tax rate for ordinary income.
Any gain or loss realized upon a sale or redemption of shares by a
shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held more than one year and
otherwise as short-term capital gain or loss. Any short-term capital loss,
however, will be treated as long-term capital loss to the extent of any
capital gain distributions received by the shareholder regardless of the
length of time such shares were held.
The Fund has obtained an opinion of counsel to the effect that the
conversion of Class B shares into Class A shares does not constitute a
taxable event for U.S. income tax purposes. However, such opinion is not
binding on the Internal Revenue Service.
Shareholders are advised to consult their own tax advisers regarding
specific questions as to federal, state or local taxes.
Withholding Taxes
Under U.S. Treasury Regulations, the Portfolio is required to withhold
and remit to the U.S. Treasury 31% of dividend, capital gain income and
redemption proceeds payable on your account if you fail to furnish your tax
identification numbers on IRS Form W-9 (or IRS Form W-8 in the case of
certain foreign shareholders) with the required certifications regarding
your status under the federal income tax law.
Dividends And Distributions
The Portfolio expects to declare daily and pay monthly dividends of all
or substantially all of the net investment income (if any) and make
distributions at least annually of any net capital gains. Dividends paid by
the Portfolio with respect to each class of shares, to the extent any
dividends are paid, will be calculated in the same manner, at the same
time, on the same day and will be in the same amount except that each class
will bear its own distribution charges, generally resulting in lower
dividends for Class B and Class C shares. Distribution of net capital
gains, if any, will be paid in the same amount for each class of shares.
See "How the Fund Values Its Shares."
Dividends and distributions will be paid in additional shares based on
the NAV of each class on record date, or such other date as the Board of
Directors may determine, unless the shareholder elects in writing not less
than five business days prior to the record date to receive such dividends
and distributions in cash. Such election should be submitted to Prudential
Mutual Fund Services, Inc., Account Maintenance, P.O. Box 15015, New
Brunswick, New Jersey 08906-5015. If you hold shares through Prudential
Securities, you should contact your financial adviser to elect to receive
dividends and distributions in cash. The Fund will notify each shareholder
after the close of the Fund's taxable year both of the dollar amount and
the taxable status of that year's dividends and distributions on a per
share basis.
- -------------------------------------------------------------------------------
GENERAL INFORMATION
- -------------------------------------------------------------------------------
DESCRIPTION OF COMMON STOCK
The Fund was incorporated in Maryland on February 21, 1990. The Fund is
authorized to issue 2 billion shares of common stock, $.001 par value per
share, divided with respect to the Portfolio into three classes designated
Class A, Class B and Class C common stock. Each of the Class A and Class B
common stock of the Fund consists of 750 million authorized shares, and the
Class C common stock consists of 500 million authorized shares. Each class
of common stock represents an interest in the same assets of the Portfolio
and is identical in all respects to other shares of the Portfolio except
that (i) each class bears different distribution expenses, (ii) each class
has exclusive voting rights
18
<PAGE>
with respect to its distribution and service plan (except that the Fund
has agreed with the SEC in connection with the offering of a conversion
feature on Class B shares to submit any amendment of the Class A Plan for
the Portfolio to both Class A and Class B shareholders of the Portfolio),
(iii) each class has a different exchange privilege and (iv) only Class B
shares have a conversion feature. See "How the Fund is Managed-
Distributor." The Fund has received an order from the SEC permitting the
issuance and sale of multiple classes of common stock. Currently, the
Portfolio is offering three classes, designated Class A, Class B and Class
C shares. In accordance with the Fund's Articles of Incorporation, the
Board of Directors may authorize the creation of additional series of
common stock and classes within such series, with such preferences,
privileges, limitations and voting and dividend rights as the Board may
determine.
The Board of Directors may increase or decrease the number of
authorized shares without the approval of shareholders. Shares of the
Portfolio, when issued, are fully paid, nonassessable, fully transferable
and redeemable at the option of the holder. Shares are also redeemable at
the option of the Portfolio under certain circumstances as described under
"Shareholder Guide-How to Sell Your Shares." Each share of each class of
common stock is equal as to earnings, assets and voting privileges, except
as noted above, and each class bears the expenses related to the
distribution of its shares. Except for the conversion feature applicable to
the Class B shares of the Portfolio, there are no conversion, preemptive or
other subscription rights. In the event of liquidation, each share of
common stock of the Portfolio is entitled to its portion of all of the
Portfolio's assets after all debt and expenses of the Portfolio have been
paid. Since Class B and Class C shares generally bear higher distribution
expenses than Class A shares, the liquidation proceeds to shareholders of
those classes are likely to be lower than to Class A shareholders. The
Portfolio's shares do not have cumulative voting rights for the election of
Directors.
The Fund does not intend to hold annual meetings of shareholders unless
otherwise required by law. The Fund will not be required to hold meetings
of shareholders unless, for example, the election of Directors is required
to be acted on by shareholders under the Investment Company Act.
Shareholders have certain rights, including the right to call a meeting
upon a vote of 10% of the Fund's outstanding shares for the purpose of
voting on the removal of one or more Directors or to transact any other
business.
ADDITIONAL INFORMATION
This Prospectus, including the Statement of Additional Information
which has been incorporated by reference herein, does not contain all the
information set forth in the Registration Statement filed by the Portfolio
with the SEC under the Securities Act of 1933. Copies of the Registration
Statement may be obtained at a reasonable charge from the SEC or may be
examined, without charge, at the office of the SEC in Washington, D.C.
- -------------------------------------------------------------------------------
SHAREHOLDER GUIDE
- -------------------------------------------------------------------------------
HOW TO BUY SHARES OF THE FUND
You may purchase shares of the Portfolio through Prudential Securities,
Prusec or directly from the Fund through its Transfer Agent, Prudential
Mutual Fund Services, Inc. (PMFS or the Transfer Agent), Attention:
Investment Services, P.O. Box 15020, New Brunswick, New Jersey 08906-5020.
The minimum initial investment for Class A and Class B shares is $1,000 per
class and $5,000 for Class C shares. The minimum subsequent investment is
$100 for all classes. All minimum investment requirements are waived for
certain retirement and employee savings plans or custodial accounts for the
benefit of minors. For purchases made through the Automatic Savings
Accumulation Plan the minimum initial and subsequent investment is $50. See
"Shareholder Services."
The purchase price is the NAV per share next determined following
receipt of an order by the Transfer Agent or Prudential Securities plus a
sales charge which, at your option, may be imposed either (i) at the time
of purchase (Class A shares) or (ii) on a deferred basis (Class B or Class
C shares). See "Alternative Purchase Plan" below. See also "How the Fund
Values its Shares."
19
<PAGE>
Application forms can be obtained from PMFS, Prudential Securities or
Prusec. If a stock certificate is desired, it must be requested in writing
for each transaction. Certificates are issued only for full shares.
Shareholders who hold their shares through Prudential Securities will not
receive stock certificates.
The Fund reserves the right to reject any purchase order (including an
exchange) or to suspend or modify the continuous offering of its shares.
See "How to Sell Your Shares."
Your dealer is responsible for forwarding payment promptly to the Fund.
The Distributor reserves the right to cancel any purchase order for which
payment has not been received by the fifth business day following the
investment.
Transactions in Fund shares may be subject to postage and handling
charges imposed by your dealer.
Purchase by Wire. For an initial purchase of shares of the Portfolio by
wire, you must first telephone PMFS to receive an account number at (800)
225-1852 (toll-free). The following information will be requested: your
name, address, tax identification number, class election, dividend
distribution election, amount being wired and wiring bank. Instructions
should then be given by you to your bank to transfer funds by wire to State
Street Bank and Trust Company, Boston, Massachusetts, Custody and
Shareholder Services Division, Attention: Prudential Short- Term Global
Income Fund, Inc.-Short-Term Global Income Portfolio, specifying on the
wire the account number assigned by PMFS and your name and identifying the
sales charge alternative (Class A, Class B or Class C shares).
If you arrange for receipt by State Street of Federal Funds prior to
4:15 P.M., New York time, on a business day, you may purchase shares of the
Portfolio as of that day.
In making a subsequent purchase order by wire, you should wire State
Street directly and should be sure that the wire specifies Prudential
Short-Term Global Income Fund, Inc.-Short-Term Global Income Portfolio,
Class A, Class B or Class C shares and your name and individual account
number. It is not necessary to call PMFS to make subsequent purchase orders
utilizing Federal Funds. The minimum amount which may be invested by wire
is $1,000.
ALTERNATIVE PURCHASE PLAN
The Fund offers three classes of shares (Class A, Class B and Class C
shares) which allows you to choose the most beneficial sales charge
structure for your individual circumstances given the amount of the
purchase, the length of time you expect to hold the shares and other
relevant circumstances (Alternative Purchase Plan).
<TABLE>
<CAPTION>
Annual 12b-1 Fees
(as a % of average daily
Sales Charge net assets) Other information
------------------------------------- ------------------------- --------------------------------------
<S> <C> <C> <C>
Class A Maximum initial sales charge of 3% of 0.30 of 1% (Currently Initial sales charge waived or reduced
the public offering price being charged at a for certain purchases
rate of 0.15 of 1%)
Class B Maximum contingent deferred sales 1% Shares convert to Class A shares
charge or CDSC of 3% of the lesser of approximately five years after
the amount invested or the redemption purchase
proceeds; declines to zero after four
years
Class C Maximum CDSC of 1% of the lesser of 1% (Currently being Shares do not convert to another class
the amount invested or the redemption charged at a rate of
proceeds on redemptions made .75 of 1%)
within one year of purchase
</TABLE>
20
<PAGE>
The three classes of shares represent an interest in the same portfolio
of investments of the Fund and have the same rights, except that (i) each
class bears the separate expenses of its Rule 12b-1 distribution and
service plan, (ii) each class has exclusive voting rights with respect to
its plan (except as noted under the heading "General Information-
Description of Common Stock"), and (iii) only Class B shares have a
conversion feature. The three classes also have separate exchange
privileges. See "How to Exchange Your Shares" below. The income
attributable to each class and the dividends payable on the shares of each
class will be reduced by the amount of the distribution fee of each class.
Class B and Class C shares bear the expenses of a higher distribution fee
which will generally cause them to have higher expense ratios and to pay
lower dividends than the Class A shares.
Financial advisers and other sales agents who sell shares of the
Portfolio will receive different compensation for selling Class A, Class B
and Class C shares and will generally receive more compensation initially
for selling Class A and Class B shares than for selling Class C shares.
In selecting a purchase alternative, you should consider, among other
things, (1) the length of time you expect to hold your investment, (2) the
amount of any applicable sales charge (whether imposed at the time of
purchase or redemption) and distribution-related fees, as noted above, (3)
whether you qualify for any reduction or waiver of any applicable sales
charge, (4) the various exchange privileges among the different classes of
shares (see "How to Exchange Your Shares" below) and (5) that Class B
shares automatically convert to Class A shares approximately five years
after purchase (see "Conversion Feature-Class B Shares" below).
The following is provided to assist you in determining which method of
purchase best suits your individual circumstances and is based on current
fees and expenses being charged to the Fund:
[If you intend to hold your investment in the Fund for 5 years or less
and do not qualify for a reduced sales charge on Class A shares, since
Class A shares are subject to an initial sales charge of 3% and Class B
shares are subject to a CDSC of 3% which declines to zero over a 4 year
period, you should consider purchasing Class C shares over either Class A
or Class B shares.]
[If you intend to hold your investment for more than 5 years you should
consider purchasing Class A shares over either Class B or Class C shares.]
If you qualify for a reduced charge in Class A shares, it may be more
advantageous for you to purchase Class A shares over either Class B or
Class C shares regardless of how long you intend to hold your investment.
However, unlike Class B and Class C shares, you would not have all of your
money invested initially because the sales charge on Class A shares is
deducted at the time of purchase.
[If you do not qualify for a reduced sales charge on Class A shares and
you purchase Class C shares, you would have to hold your investment for
more than 5 years for the higher cumulative annual distribution- related
fee on those shares to exceed the initial sales charge plus cumulative
annual distribution-related fee on Class A shares. This does not take into
account the time value of money, which further reduces the impact of the
higher Class C distribution-related fee on the investment, fluctuations in
net asset value, the effect of the return on the investment over this
period of time or redemptions during which the CDSC is applicable.]
All purchases of $1 million or more either as part of a single
investment, or under Rights of Accumulation or Letters of Intent, must be
for Class A shares. See "Reduction and Waiver of Initial Sales Charges"
below.
Class A Shares
The offering price of Class A shares for investors choosing the initial
sales charge alternative is the next determined NAV plus a sales charge
(expressed as a percentage of the offering price and of the amount
invested) as shown in the following table:
21
<PAGE>
<TABLE>
<CAPTION>
Sales Charge as Sales Charge as Dealer Concession
Amount of Percentage of Percentage of as Percentage of
Purchase Offering Price Amount Invested Offering Price
- ---------------- --------------- --------------- -----------------
<S> <C> <C> <C>
Less than $100,000 3.0% 3.09% 2.75%
$100,000 but less than $500,000 2.5 2.56 2.25
$500,000 but less than $1,000,000 2.0 2.04 1.75
$1,000,000 but less than $3,000,000 1.5 1.52 1.30
$3,000,000 and above* 0.0 0.00 0.00
</TABLE>
Selling dealers may be deemed to be underwriters, as that term is
defined in the Securities Act.
Reduction and Waiver of Initial Sales Charges. Reduced sales charges
are available through Rights of Accumulation and Letters of Intent. Shares
of the Fund and shares of other Prudential Mutual Funds (excluding money
market funds other than those acquired pursuant to the exchange privilege)
may be aggregated to determine the applicable reduction. See "Reduction and
Waiver of Initial Sales Charges-Class A shares" in the Statement of
Additional Information. Class A shares may be purchased at NAV, without
payment of an initial sales charge, by pension, profit-sharing or other
employee benefit plans qualified under Section 401 of the Internal Revenue
Code and deferred compensation and annuity plans under Sections 457 and
403(b)(7) of the Internal Revenue Code (Benefit Plans), provided that the
plan has existing assets of at least $1 million invested in shares of
Prudential Mutual Funds (excluding money market funds other than those
acquired pursuant to the exchange privilege) or 1,000 eligible employees or
members. In the case of Benefit Plans whose accounts are held directly with
the Transfer Agent and for which the Transfer Agent does individual account
record keeping (Direct Account Benefit Plans) and Benefit Plans sponsored
by PSI or its subsidiaries (PSI or Subsidiary Prototype Benefit Plans),
Class A shares may be purchased at NAV by participants who are repaying
loans made from such plans to the participant. Additional information
concerning the reduction and waiver of initial sales charges is set forth
in the Statement of Additional Information.
In addition, Class A shares may be purchased at NAV, through Prudential
Securities or the Transfer Agent, by the following persons: (a) Directors
and officers of the Fund and other Prudential Mutual Funds, (b) employees
of Prudential Securities and PMF and their subsidiaries and members of the
families of such persons who maintain an "employee related" account at
Prudential Securities or the Transfer Agent, (c) employees and special
agents of Prudential and its subsidiaries and all persons who have retired
directly from active service with Prudential or one of its subsidiaries,
(d) registered representatives and employees of dealers who have entered
into a selected dealer agreement with Prudential Securities provided that
purchases at NAV are permitted by such person's employer and (e) investors
who have a business relationship with a financial adviser who joined
Prudential Securities from another investment firm, provided that (i) the
purchase is made within 90 days of the commencement of the financial
adviser's employment at Prudential Securities, (ii) the purchase is made
with proceeds of a redemption of shares of any open-end, non-money market
fund sponsored by the financial adviser's previous employer (other than a
fund which imposes a distribution or service fee of .25 of 1% or less) on
which no deferred sales load, fee or other charge was imposed on redemption
and (iii) the financial adviser served as the clinet's broker on the
previous purchases.
You must notify the Transfer Agent either directly or through
Prudential Securities or Prusec that you are entitled to the reduction or
waiver of the sales charge. The reduction or waiver will be granted subject
to confirmation of your entitlement. No initial sales charges are imposed
upon Class A shares purchased upon the reinvestment of dividends and
distributions. See "Purchase and Redemption of Fund Shares-Reduction and
Waiver of Initial Sales Charges-Class A Shares" in the Statement of
Additional Information.
Class B and Class C Shares
The offering price of Class B and Class C shares for investors choosing
one of the deferred sales charge alternatives is the NAV per share next
determined following receipt of an order by the Transfer Agent or
Prudential Securities.
22
<PAGE>
Although there is no sales charge imposed at the time of purchase,
redemptions of Class B and Class C shares may be subject to a CDSC. See
"How to Sell Your Shares-Contingent Deferred Sales Charges."
HOW TO SELL YOUR SHARES
You can redeem shares of the Portfolio at any time for cash at the NAV
per share next determined after the redemption request is received in
proper form by the Transfer Agent or Prudential Securities. See "How the
Fund Values its Shares." In certain cases, however, redemption proceeds
will be reduced by the amount of any applicable contingent deferred sales
charge, as described below. See "Contingent Deferred Sales Charges" below.
If you hold shares through Prudential Securities, you must redeem your
shares by contacting your Prudential Securities Financial Adviser. If you
hold shares in non-certificate form, a written request for redemption
signed by you exactly as the account is registered is required. If you hold
certificates, the certificates signed in the name(s) shown on the face of
the certificates, must be received by the Transfer Agent in order for the
redemption request to be processed. If redemption is requested by a
corporation, partnership, trust or fiduciary, written evidence of authority
acceptable to the Transfer Agent must be submitted before such request will
be accepted. All correspondence and documents concerning redemptions should
be sent to the Portfolio in care of the Transfer Agent, Prudential Mutual
Fund Services, Inc., Attention: Redemption Services, P.O. Box 15010, New
Brunswick, New Jersey 08906- 5010.
If the proceeds of the redemption (a) exceed $50,000, (b) are to be
paid to a person other than the record owner, (c) are to be sent to an
address other than the address on the Transfer Agent's records, or (d) are
to be paid to a corporation, partnership, trust or fiduciary, the
signature(s) on the redemption request and on the certificates, if any, or
stock power must be guaranteed by an "eligible guarantor institution." An
"eligible guarantor institution" includes any bank, broker, dealer or
credit union. The Transfer Agent reserves the right to request additional
information from, and make reasonable inquiries of, any eligible guarantor
institution. For clients of Prusec, a signature guarantee may be obtained
from the agency or office manager of most Prudential Insurance and
Financial Services or Preferred Services offices.
Payment for shares presented for redemption will be made by check
within seven days after receipt by the Transfer Agent of the certificate
and/or written request except as indicated below. Such payment may be
postponed or the right of redemption suspended at times (a) when the New
York Stock Exchange is closed for other than customary weekends and
holidays, (b) when trading on such Exchange is restricted, (c) when an
emergency exists as a result of which disposal by the Portfolio of
securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Portfolio fairly to determine the value of
its net assets, or (d) during any other period when the SEC, by order, so
permits; provided that applicable rules and regulations of the SEC shall
govern as to whether the conditions prescribed in (b), (c) or (d) exist.
Payment for redemption of recently purchased shares will be delayed
until the Portfolio or the Transfer Agent has been advised that the
purchase check has been honored, up to 10 calendar days from the time of
receipt of the purchase check by the Transfer Agent. Such delay may be
avoided by purchasing shares by wire or by certified or official bank
check.
Redemption in Kind. If the Board of Directors determines that it would
be detrimental to the best interests of the remaining shareholders of the
Portfolio to make payment wholly or partly in cash, the Portfolio may pay
the redemption price in whole or in part by a distribution in kind of
securities from the investment portfolio of the Portfolio, in lieu of cash,
in conformity with applicable rules of the Commission. Securities will be
readily marketable and will be valued in the same manner as in a regular
redemption. See "How the Fund Values its Shares." If your shares are
redeemed in kind, you would incur transaction costs in converting the
assets into cash. The Portfolio, however, has elected to be governed by
Rule 18f-1 under the Investment Company Act, pursuant to which the
Portfolio is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Portfolio during any 90-day
period for any one shareholder.
Involuntary Redemption. In order to reduce expenses of the Portfolio,
the Board of Directors may redeem all of the shares of any shareholder,
other than a shareholder which is an IRA or other tax- deferred retirement
plan, whose account has a net asset value of less than $500 due to a
redemption. The Portfolio will give such shareholders 60 days' prior
written notice in which to purchase sufficient additional shares to avoid
such redemption.
23
<PAGE>
30-day Repurchase Privilege. If you redeem your shares and have not
previously exercised the repurchase privilege you may reinvest any portion
or all of the proceeds of such redemption in shares of the Portfolio at the
NAV next determined after the order is received, which must be within 30
days after the date of the redemption. No sales charge will apply to such
repurchases. You will receive pro rata credit for any contingent deferred
sales charge paid in connection with the redemption of your shares. You
must notify the Portfolio's Transfer Agent, either directly or through
Prudential Securities or Prusec, at the time the repurchase privilege is
exercised that you are entitled to credit for the contingent deferred sales
charge previously paid. Exercise of the repurchase privilege will generally
not affect federal income tax treatment of any gain realized upon
redemption. If the redemption resulted in a loss, some or all of the loss,
depending on the amount reinvested, will not be allowed for federal income
tax purposes.
Contingent Deferred Sales Charges
Redemptions of Class B shares will be subject to a contingent deferred
sales charge or CDSC declining from 3% to zero over a five-year period.
Class C shares redeemed within one year of purchase will be subject to a 1%
CDSC. The CDSC will be deducted from the redemption proceeds and reduce the
amount paid to you. The CDSC will be imposed on any redemption by you which
reduces the current value of your Class B or Class C shares to an amount
which is lower than the amount of all payments by you for shares during the
preceding four years, in the case of Class B shares, and one year, in the
case of Class C shares. A CDSC will be applied on the lesser of the
original purchase price or the current value of the shares being redeemed.
Increases in the value of your shares or shares purchased through
reinvestment of dividends or distributions are not subject to a CDSC. The
amount of any contingent deferred sales charge will be paid to and retained
by the Distributor. See "How the Fund Is Managed-Distributor" and "Waiver
of the Contingent Deferred Sales Charges" below.
The amount of the CDSC, if any, will vary depending on the number of
years from the time of payment for the purchase of shares until the time of
redemption of such shares. Solely for purposes of determining the number of
years from the time of any payment for the purchase of shares, all payments
during a month will be aggregated and deemed to have been made on the last
day of the month.
The following table sets forth the rates of the CDSC applicable to
redemptions of Class B shares:
Contingent Deferred Sales Charge
Year Since Purchase as a Percentage of Dollars Invested
Payment Made or Redemption Proceeds
------------------- -----------------------------------
First ................... 3.0%
Second .................. 2.0%
Third ................... 1.0%
Fourth .................. 1.0%
Fifth and thereafter .... None
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible
rate. It will be assumed that the redemption is made first of amounts
representing shares acquired pursuant to the reinvestment of dividends and
distributions; then of amounts representing the increase in net asset value
above the total amount of payments for the purchase of Class B shares made
during the preceding four years; then of amounts representing the cost of
shares held beyond the applicable CDSC period; and finally, of amounts
representing the cost of shares held for the longest period of time within
the applicable CDSC period.
For example, assume you purchased 100 Class B shares at $10 per share
for a cost of $1,000. Subsequently, you acquired additional Class B shares
through dividend reinvestment. During the second year after the purchase
you decided to redeem $500 of your investment. Assuming at the time of the
redemption the net asset value had appreciated to $12 per share, the value
of your Class B shares would be $1,260 (105 shares at $12 per share). The
CDSC would not be applied to the value of the reinvested dividend shares
and the amount which represents appreciation ($260). Therefore, $240 of the
$500 redemption proceeds ($500 minus $260) would be charged at a rate of 2%
(the applicable rate in the second year after purchase) for a total
contingent deferred sales charge of $4.80.
24
<PAGE>
For federal income tax purposes, the amount of the contingent deferred
sales charge will reduce the gain or increase the loss, as the case may be,
on the amount recognized on the redemption of shares.
Waiver of the Contingent Deferred Sales Charges-Class B Shares. The
CDSC will be waived in the case of a redemption following the death or
disability of a shareholder or, in the case of a trust account, following
the death or disability of the grantor. The waiver is available for total
or partial redemptions of shares owned by a person, either individually or
in joint tenancy (with rights of survivorship), or a trust, at the time of
death or initial determination of disability, provided that the shares were
purchased prior to death or disability.
The CDSC will also be waived in the case of a total or partial
redemption in connection with certain distributions made without penalty
under the Internal Revenue Code from a tax-deferred retirement plan, an IRA
or Section 403(b) custodial account. These distributions include a lump-sum
or other distribution after retirement, or for an IRA or Section 403(b)
custodial account, after attaining age 59-1/2, a tax-free return of an
excess contribution or plan distributions following the death or disability
of the shareholder (provided that the shares were purchased prior to death
or disability). The waiver does not apply in the case of a tax-free
rollover or transfer of assets, other than one following a separation from
service. In the case of Direct Account and PSI or Subsidiary Prototype
Benefit Plans, the CDSC will be waived on redemptions which represent
borrowings from such plans. Shares purchased with amounts used to repay a
loan from such plans on which a CDSC was not previously deducted will
thereafter be subject to a CDSC without regard to the time such amounts
were previously invested. In the case of a 401(k) plan, the CDSC will also
be waived upon the redemption of shares purchased with amounts used to
repay loans made from the account to the participant and from which a CDSC
was previously deducted.
In addition, the CDSC will be waived on redemptions of shares held by
Directors of the Fund.
You must notify the Transfer Agent either directly or through
Prudential Securities or Prusec, at the time of redemption, that you are
entitled to waiver of the CDSC. The waiver will be granted subject to
confirmation of your entitlement.
A quantity discount may apply to redemptions of Class B shares
purchased prior to , 1994. See "Purchase and Redemption of Fund
Shares-Quantity Discount-Class B Shares Purchased Prior to ,
1994" in the Statement of Additional Information.
CONVERSION FEATURE-CLASS B SHARES
Class B shares will automatically convert to Class A shares on a
quarterly basis approximately five years after purchase. Conversions will
occur during the month following each calendar quarter and will be effected
at relative net asset value without the imposition of any additional sales
charge. It is currently anticipated that conversions will occur on the
first Friday of the month following each calendar quarter or, if not a
business day, on the next Friday of the month.
Since the Fund tracks amounts paid rather than the number of shares
bought on each purchase of Class B shares, the number of Class B shares
eligible to convert to Class A shares (excluding shares acquired through
the automatic reinvestment of dividends and other distributions) (the
Eligible Shares) will be determined on each conversion date in accordance
with the following formula: (i) the ratio of (a) the amounts paid for Class
B shares purchased at least five years prior to the conversion date to (b)
the total amount paid for all Class B shares purchased and then held in
your account (ii) multiplied by the total number of Class B shares then in
your account. Each time any Eligible Shares in your account convert to
Class A shares, all shares or amounts representing Class B shares then in
your account that were acquired through the automatic reinvestment of
dividends and other distributions will convert to Class A shares.
For purposes of determining the number of Eligible Shares, if the Class
B shares in your account on any conversion date are the result of multiple
purchases at different net asset values per share, the number of Eligible
Shares calculated as described above will generally be either more or less
than the number of shares actually purchased approximately five years
before such conversion date. For example, if 100 shares were initially
purchased at $10 per share (for a total of $1,000) and a second purchase of
100 shares was subsequently made at $11 per share (for a total of $1,100),
95.24 shares would convert approximately five years from the initial
purchase (i.e., $1,000 divided by $2,100 (47.62%) multiplied by 200 shares
equals 95.24 shares). The Manager reserves the right to modify the formula
for determining the number of Eligible Shares in the future as it deems
appropriate on notice to shareholders.
25
<PAGE>
Since annual distribution-related fees are lower for Class A shares
than Class B shares, the per share net asset value of the Class A shares
may be higher than that of the Class B shares at the time of conversion.
Thus, although the aggregate dollar value will be the same, you may receive
fewer Class A shares than Class B shares converted. See "How the Fund
Values its Shares."
For purposes of calculating the applicable holding period for
conversions, all payments for Class B shares during a month will be deemed
to have been made on the last day of the month, or for Class B shares
acquired through exchange, or a series of exchanges, on the last day of the
month in which the original payment for purchases of such Class B shares
was made. For Class B shares previously exchanged for shares of a money
market fund, the time period during which such shares were held in the
money market fund will be excluded. For example, Class B shares held in a
money market fund for one year will not convert to Class A shares until
approximately six years from purchase. For purposes of measuring the time
period during which shares are held in a money market fund, exchanges will
be deemed to have been made on the last day of the month. Class B shares
acquired through exchange will convert to Class A shares after expiration
of the conversion period applicable to the original purchase of such
shares. It is currently anticipated that the first conversion of Class B
shares will occur in or about January, 1995. At that time all amounts
representing Class B shares then outstanding beyond the applicable
conversion period will automatically convert to Class A shares together
with all shares or amounts representing Class B shares acquired through the
automatic reinvestment of dividends and distributions then held in your
account.
The conversion feature may be subject to the continuing availability of
opinions of counsel or rulings of the Internal Revenue Service, (i) that
the dividends and other distributions paid on Class A, Class B, and Class C
shares will not constitute "preferential dividends" under the Internal
Revenue Code and (ii) that the conversion of shares does not constitute a
taxable event. The conversion of Class B shares into Class A shares may be
suspended if such opinions or rulings are no longer available. If
conversions are suspended, Class B shares of the Portfolio will continue to
be subject, possibly indefinitely, to their higher annual distribution and
service fee.
HOW TO EXCHANGE YOUR SHARES
As a shareholder of the Portfolio, you have an exchange privilege with
certain other Prudential Mutual Funds, including one or more specified
money market funds, subject to the minimum investment requirements of such
funds. Class A, Class B and Class C shares of the Portfolio may be
exchanged for Class A, Class B and Class C shares, respectively, of another
fund on the basis of the relative net asset value per share. Any applicable
CDSC payable upon the redemption of shares exchanged will be that imposed
by the fund in which shares were initially purchased and will be calculated
from the first day of the month after the initial purchase, excluding the
time shares were held in a money market fund. Class B and Class C shares
may not be exchanged into money market funds other than Prudential Special
Money Market Fund. For purposes of calculating the holding period
applicable to the Class B conversion feature, the time period during which
Class B shares were held in a money market fund will be excluded. See
"Conversion Feature-Class B Shares" above. If your investment in shares of
Prudential Mutual Funds (excluding money market funds other than those
acquired pursuant to the exchange privilege) reach $1 million and you then
hold Class B and/or Class C shares of the Fund which are free of CDSC, you
will be so notified and offered the opportunity to exchange those shares
for Class A shares of the Fund without the imposition of any sales charge.
In the case of tax-exempt shareholders, if no response is received within
60 days of the mailing of such notice, eligible Class B and/or Class C
shares will be automatically exchanged for Class A shares. All other
shareholders must affirmatively elect to have their eligible Class B and/or
Class C shares exchanged for Class A shares. An exchange will be treated as
a redemption and purchase for tax purposes. See "Shareholder Investment
Account-Exchange Privilege" in the Statement of Additional Information.
In order to exchange shares by telephone, you must authorize the
telephone exchange privilege on your initial application form or by written
notice to the Transfer Agent and hold shares in non-certificate form.
Thereafter, you may call the Portfolio at (800) 225-1852 to execute a
telephone exchange of shares, weekdays, except holidays, between the hours
of 8:00 A.M. and 6:00 P.M., New York time. For your protection and to
prevent fraudulent exchanges, your telephone call will be recorded and you
will be asked to provide your personal identification number. A written
confirmation of the exchange transaction will be sent to you. Neither the
Fund nor its agents will be liable for any loss, liability or cost
26
<PAGE>
which results from acting upon instructions reasonably believed to be
genuine under the foregoing procedures. All exchanges will be made on the
basis of the relative NAV of the two funds next determined after the
request is received in good order. The exchange privilege is available only
in states where the exchange may legally be made.
If you hold shares through Prudential Securities, you must exchange
your shares by contacting your Prudential Securities financial adviser.
If you hold certificates, the certificates, signed in the name(s) shown
on the face of the certificates must be returned in order for the shares to
be exchanged. See "How to Sell Your Shares."
You may also exchange shares by mail by writing to Prudential Mutual
Fund Services, Inc., Attention: Exchange Processing, P.O. Box 15010, New
Brunswick, New Jersey 08906-5010.
In periods of severe market or economic conditions the telephone
exchange of shares may be difficult to implement and you should make
exchanges by mail by writing to Prudential Mutual Fund Services, Inc., at
the address noted above.
The Exchange Privilege may be modified or terminated at any time on 60
days' notice to shareholders.
SHAREHOLDER SERVICES
In addition to the exchange privilege, as a shareholder in the Fund,
you can take advantage of the following additional services and privileges:
* Automatic Reinvestment of Dividends and/or Distributions Without a
Sales Charge. For your convenience, all dividends and distributions are
automatically reinvested in full and fractional shares of the Portfolio at
NAV without a sales charge. You may direct the Transfer Agent in writing
not less than 5 full business days prior to the record date to have
subsequent dividends and/or distributions sent in cash rather than
reinvested. If you hold shares through Prudential Securities, you should
contact your financial adviser.
* Automatic Savings Accumulation Plan (ASAP). Under ASAP you may make
regular purchases of the Portfolio's shares in amounts as little as $50 via
an automatic debit to a bank account or Prudential Securities account
(including a Command Account). For additional information about this
service, you may contact your Prudential Securities financial adviser,
Prusec registered representative or the Transfer Agent directly.
* Tax-Deferred Retirement Plans. Various tax-deferred retirement plans,
including a 401(k) plan, self-directed individual retirement accounts and
"tax-sheltered accounts" under Section 403(b)(7) of the Internal Revenue
Code are available through the Distributor. These plans are for use by both
self-employed individuals and corporate employers. These plans permit
either self-direction of accounts by participants, or a pooled account
arrangement. Information regarding the establishment of these plans, the
administration, custodial fees and other details is available from
Prudential Securities or the Transfer Agent. If you are considering
adopting such a plan, you should consult with your own legal or tax adviser
with respect to the establishment and maintenance of such a plan.
* Systematic Withdrawal Plan. A systematic withdrawal plan is available
for shareholders which provides for monthly or quarterly checks.
Withdrawals of Class B and Class C shares may be subject to a CDSC. See
"How to Sell Your Shares-Contingent Deferred Sales Charges."
* Reports to Shareholders. The Portfolio will send you annual and
semi-annual reports. The financial statements appearing in annual reports
are audited by independent accountants. In order to reduce duplicate
mailing and printing expenses, the Portfolio will provide one annual and
semi-annual shareholder report and annual prospectus per household. You may
request additional copies of such reports by calling (800) 225-1852 or by
writing to the Fund at One Seaport Plaza, New York, New York 10292. In
addition, monthly unaudited financial data is available from the Portfolio
upon request.
* Shareholder Inquiries. Inquiries should be addressed to the Portfolio
at One Seaport Plaza, New York, New York 10292, or by telephone, at (800)
225-1852 (toll-free) or, from outside the U.S.A., at (908) 417-7555
(collect).
For additional information regarding the services and privileges
described above, see "Shareholder Investment Account" in the Statement of
Additional Information.
27
<PAGE>
APPENDIX
DESCRIPTION OF SECURITY RATINGS
Moody's Investors Service
Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or
by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of
such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than Aaa bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements which make the long-term risks appear somewhat larger
than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Commercial Paper
Moody's commercial paper ratings are opinions of the ability of issuers
to repay punctually promissory obligations not having an original maturity
in excess of nine months.
P-1: The designation "Prime-1" or "P-1" indicates the highest quality
repayment capacity of the rated issue.
P-2: The designation "Prime-2" or "P-2" indicates a strong capacity for
repayment. Standard & Poor's Ratings Group
AAA: Debt rated AAA has the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely
strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher
rated categories.
A-1
<PAGE>
BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for debt in
higher rated categories.
BB, B, CCC, CC: Debt rated BB, B, CCC and CC is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
Commercial Paper
Standard & Poor's commercial paper ratings are current assessments of
the likelihood of timely payment of debt having an original maturity of no
more than 270 days.
A-1: The A-1 designation indicates that the degree of safety regarding
timely payment is very strong.
A-2: Capacity for timely payment on issues with the designation A-2 is
strong. However, the relative degree of safety is not as overwhelming as
for issues designated A-1.
A-2
<PAGE>
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THE PRUDENTIAL MUTUAL FUND FAMILY
- -------------------------------------------------------------------------------
Prudential Mutual Fund Management offers a broad range of mutual funds
designed to meet your individual needs. We welcome you to review the
investment options available through our family of funds. For more
information on the Prudential Mutual Funds, including charges and expenses,
contact your Prudential Securities financial adviser or Prusec registered
representative or telephone the Fund at (800) 225-1852 for a free
prospectus. Read the prospectus carefully before you invest or send money.
Taxable Bond Funds
Prudential Adjustable Rate Securities Fund, Inc.
Prudential GNMA Fund, Inc.
Prudential Government Income Fund Inc.
Prudential Government Securities Trust
Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential Structured Maturity Fund, Inc.
Income Portfolio
Prudential U.S. Government Fund
The BlackRock Government Income Trust
Tax-Exempt Bond Funds
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Yield Series
Insured Series
Modified Term Series
Prudential Municipal Series Fund
Arizona Series
Florida Series
Georgia Series
Maryland Series
Massachusetts Series
Michigan Series
Minnesota Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
Global Funds
Prudential Global Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Global Natural Resources Fund Inc.
Prudential Intermediate Global Income Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential Short-Term Global Income Fund, Inc.
Global Assets Portfolio
Short-Term Global Income Portfolio
Global Utility Fund, Inc.
Equity Funds
Prudential Allocation Fund
Conservatively Managed Portfolio
Strategy Portfolio
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Strategy Portfolio
Prudential Growth Opportunity Fund, Inc.
Prudential IncomeVertible\'AE Fund, Inc.
Prudential Multi-Sector Fund, Inc.
Prudential Strategist Fund, Inc.
Prudential Utility Fund, Inc.
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Money Market Funds
* Taxable Money Market Funds
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund
Money Market Series
Prudential MoneyMart Assets
* Tax-Free Money Market Funds
Prudential Tax-Free Money Fund
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
* Command Funds
Command Money Fund
Command Government Fund
Command Tax-Free Fund
* Institutional Money Market Funds
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
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<PAGE>
No dealer, sales representative or any other person has
been authorized to give any information or to make any
representations, other than those contained in this
Prospectus, in connection with the offer contained
herein, and, if given or made, such other information or
representations must not be relied upon as having been
authorized by the Fund or the Distributor. This
Prospectus does not constitute and offer by the Fund or
by the Distributor to sell or a solicitation of an offer to
buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make
such offer in such jurisdiction.
___________________________________________________________
TABLE OF CONTENTS
Page
----
FUND HIGHLIGHTS.............................. 2
FUND EXPENSES................................ 4
FINANCIAL HIGHLIGHTS......................... 5
HOW THE FUND INVESTS......................... 6
Investment Objective and Policies.......... 6
Risk Factors............................... 8
Other Investments and Investment Techniques 9
Investment Restrictions.................... 13
HOW THE FUND IS MANAGED...................... 13
Manager.................................... 13
Fee Waivers and Subsidy.................... 14
Portfolio Transactions..................... 16
Custodian and Transfer and
Dividend Disbursing Agent................ 16
HOW THE FUND VALUES ITS SHARES............... 16
HOW THE FUND CALCULATES PERFORMANCE.......... 16
TAXES, DIVIDENDS AND DISTRIBUTIONS........... 17
GENERAL INFORMATION.......................... 18
Description of Common Stock................ 18
Additional Information..................... 19
SHAREHOLDER GUIDE............................ 19
How to Buy Shares of the Fund.............. 19
Alternative Purchase Plan.................. 20
How to Sell Your Shares.................... 23
Conversion Feature--Class B Shares......... 25
How to Exchange Your Shares................ 26
Shareholder Services....................... 27
DESCRIPTION OF SECURITY RATINGS..............A-1
THE PRUDENTIAL MUTUAL FUND FAMILY............B-1
________________________________________________
MF144A
________________________________________________
Class A: 74436H 10 1
CUSIP Nos.: Class B: 74436H 20 0
Class C:
________________________________________________
Prudential
Short-Term
Global Income
Fund, Inc.
(Short-Term Global Income Portfolio)
Prudential Mutual Funds (LOGO)
Building Your Future
On Our StrengthSM
PROSPECTUS
, 1994
<PAGE>
Prudential Short-Term
Global Income Fund, Inc.
(Global Assets Portfolio)
- -------------------------------------------------------------------------------
Prospectus dated [ ], 1994
- -------------------------------------------------------------------------------
Prudential Short-Term Global Income Fund, Inc., (the Fund)--Global Assets
Portfolio (the Portfolio) is one of two separate portfolios of an open-end,
management investment company. Only shares of the Global Assets Portfolio
are offered by means of this Prospectus. The Global Assets Portfolio's
investment objective is high current income with minimum risk to principal.
The Portfolio seeks to achieve its objective by investing in a portfolio of
high-quality debt securities having remaining maturities of not more than
one year. The Portfolio seeks high current yields by investing in debt
securities denominated in the U.S. dollar and a range of foreign
currencies. The Portfolio is non-diversified and may invest more than 5% of
its total assets in the securities of one or more issuers. Investment in a
non-diversified portfolio involves greater risk than investment in a
diversified portfolio. The Global Assets Portfolio, which is not a money
market fund, is designed for the investor who seeks a higher yield than a
money market fund and less fluctuation in net asset value than a
longer-term bond fund. There can be no assurance that the Portfolio's
investment objective will be achieved. See "How the Fund Invests-Investment
Objective and Policies." The Portfolio is currently not accepting purchase
orders for its Class B shares. The Portfolio continues to accept purchase
orders for its Class A shares. The Fund's address is One Seaport Plaza, New
York, New York 10292, and its telephone number is (800) 225-1852.
- -------------------------------------------------------------------------------
This Prospectus sets forth concisely the information about the Fund and the
Portfolio that a prospective investor ought to know before investing.
Additional information about the Fund and the Portfolio has been filed with
the Securities and Exchange Commission in a Statement of Additional
Information, dated [ ], 1994, which information is incorporated
herein by reference (is legally considered a part of this Prospectus) and
is available without charge upon request to the Fund at the address or
telephone number noted above.
- -------------------------------------------------------------------------------
Investors are advised to read this Prospectus and retain it for future
reference.
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
- -------------------------------------------------------------------------------
FUND HIGHLIGHTS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
What is Prudential Short-Term Global Income Fund, Inc., Global Assets
Portfolio?
Prudential Short-Term Global Income Fund, Inc., Global Assets Portfolio
is a mutual fund. A mutual fund pools the resources of investors by selling
its shares to the public and investing the proceeds of such sale in a
portfolio of securities designed to achieve its investment objective.
Technically, the Fund is an open-end, non-diversified management investment
company.
What is the Portfolio's Investment Objective?
The Portfolio's investment objective is high current income with
minimum risk to principal. See "How the Fund Invests-Investment Objectives
and Policies" at page 6.
What are the Portfolio's Special Characteristics and Risks?
In seeking to achieve its investment objective, the Portfolio invests
in a portfolio of high quality debt securities having remaining maturities
of not more than one year. The Portfolio, which is not a money market fund,
seeks high current yields by investing in debt securities denominated in
the U.S. dollar and a range of foreign securities. See "How the Fund
Invests-Investment Objectives and Policies" at page 6. Investing in
securities of foreign companies and countries involves certain
considerations and risks not typically associated with investing in U.S.
Government Securities and securities of domestic companies. See "How the
Fund Invests-Risk Factors on Foreign Investments" at page 8. The Portfolio
may also engage in hedging, and income enhancement strategies, including
the purchase and sale of put and call options and related short-term
trading. See "How the Fund Invests-Other Investments and Investment
Techniques" at page 8.
Who Manages the Fund?
Prudential Mutual Fund Management, Inc. (PMF or the Manager) is the
Manager of the Fund and is compensated for its services at an annual rate
of .55 of 1% of the Fund's average daily net assets. As of March 31, 1994,
PMF served as manager or administrator to [66] investment companies,
including [37] mutual funds, with aggregate assets of approximately $49
billion. The Prudential Investment Corporation (PIC or the Subadviser)
furnishes investment advisory services in connection with the management of
the Fund under a Subadvisory Agreement with PMF. See "How the Fund is
Managed-Manager" at page 12.
Who Distributes the Portfolio's Shares?
Prudential Mutual Fund Distributors, Inc. (PMFD) acts as the
Distributor of the Portfolio's Class A shares and is paid for its services
at an annual rate of up to .50 of 1% of the average daily net assets of the
Class A shares.
Prudential Securities Incorporated (Prudential Securities or PSI), a
major securities underwriter and securities and commodities broker, acts as
the Distributor of the Portfolio's Class B shares. Prudential Securities is
reimbursed for its expenses related to the distribution of Class B shares
at an annual rate of up to 1% of the average daily net assets of the Class
B shares. See "How the Fund is Managed-Distributor" at page 13.
- -------------------------------------------------------------------------------
2
<PAGE>
- -------------------------------------------------------------------------------
What is the Minimum Investment?
The minimum initial investment is $5,000. Thereafter, the minimum
investment is $1,000. There is no minimum investment requirement for
certain retirement plans or custodial accounts for the benefit of minors.
For purchases made through the Automatic Savings Accumulation Plan the
minimum initial and subsequent investment is $50. See "Shareholder
Guide-How to Buy Shares of the Fund" at page 18 and "Shareholder Guide-
Shareholder Services" at page 24.
How Do I Purchase Shares?
You may purchase shares of the Portfolio through Prudential Securities,
Pruco Securities Corporation (Prusec) or directly from the Fund, through
its transfer agent, Prudential Mutual Fund Services, Inc. (PMFS or the
Transfer Agent), at the net asset value per share (NAV) next determined
after receipt of your purchase order by the Transfer Agent or Prudential
Securities plus a sales charge which may be imposed either at the time of
purchase or on a deferred basis. See "How the Fund Values Its Shares" at
page 15 and "Shareholder Guide-How to Buy Shares of the Fund" at page 18.
What Are My Purchase Alternatives?
The Portfolio offers two classes of shares which may be purchased at
the next determined NAV plus a sales charge which, at your election, may be
imposed either at the time of purchase (Class A shares) or on a deferred
basis(Class B shares).
* Class A shares are sold with an initial sales charge of up to .99% of
the amount invested.
* Class B shares are sold without an initial sales charge but are
subject to a contingent deferred sales charge or CDSC (of 1% of the lower
of the amount invested or the redemption proceeds) if they are redeemed
within one-year of purchase. Class B shares will be automatically converted
to Class A shares after the one-year CDSC period has expired.
The Portfolio is currently no longer accepting purchase orders for
Class B shares. The Portfolio continues to accept purchase orders for Class
A shares.
See "Shareholder Guide-Alternative Purchase Plan" at page 19.
How Do I Sell My Shares?
You may redeem your shares at any time at the NAV next determined after
Prudential Securities or the Transfer Agent receives your sell order.
Although Class B shares are sold without an initial sales charge, the
proceeds of redemptions of Class B shares held for one year or less may be
subject to a contingent deferred sales charge of 1%. See "Shareholder
Guide-How to Sell Your Shares" at page 21.
How Are Dividends and Distributions Paid?
The Portfolio expects to pay dividends of net investment income monthly
and make distributions of any net capital gains at least annually.
Dividends and distributions will be automatically reinvested in additional
shares of the Portfolio at NAV without a sales charge unless you request
that they be paid to you in cash. See "Taxes, Dividends and Distributions"
at page 16.
- -------------------------------------------------------------------------------
3
<PAGE>
- -------------------------------------------------------------------------------
FUND EXPENSES-GLOBAL ASSETS PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares
(Initial Sales Charge (Deferred Sales Charge
Alternative) Alternative)
------------ ------------
<S> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage of offering .99% None
price)
Maximum Sales Load or Deferred Sales Load Imposed on Reinvested None None
Dividends
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, whichever is lower)* None 1% during the first year
and 0% thereafter
Redemption Fees None None
Exchange Fees None None
</TABLE>
<TABLE>
Annual Portfolio Operating Expenses** (as a percentage of average net assets)
<CAPTION>
Class A Class B
<S> <C> <C>
Management Fees .55% .55%
12b-1 Fees\D .50 1.00\D\D
Other Expenses .43 .43
Total Portfolio Operating Expenses 1.48% 1.98%
</TABLE>
<TABLE>
Example
- -------
You would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and (2) redemption at the
end of each time period:
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $25 $56 $90 $185
Class B $30 $52 $86 $181
You would pay the following expenses on the same investment, assuming no redemption:
Class A $25 $56 $90 $185
Class B $20 $52 $86 $181
<FN>
The above example is based on restated data for the Portfolio's fiscal year ended October 31, 1993. The example should not be
considered a representation of past or future expenses. Actual expenses may be greater or less than those shown.
The purpose of this table is to assist investors in understanding the various costs and expenses that an investor in the
Portfolio will bear, whether directly or indirectly. For more complete descriptions of the various costs and expenses, see
"How the Fund is Managed." "Other Expenses" includes an estimate of operating expenses of the Portfolio, such as directors'
and professional fees, registration fees, reports to shareholders and transfer agency and custodian fees (foreign and domestic).
</TABLE>
<TABLE>
<C> <S>
* Class B shares will automatically convert to Class A shares after the one year contingent deferred sales charge period
has expired.
** PMF may from time to time agree to waive its management fee and subsidize certain operating expenses with respect to the
Portfolio. Fee waivers and expense subsidies lower the overall expenses of the Portfolio. See "How the Fund is Managed--
Manager."
\D Pursuant to rules of the National Association of Securities Dealers, Inc., the aggregate initial sales charges, deferred
sales charges and asset-based sales charges on shares of the Portfolio may not exceed 6.25% of total gross sales, subject to
certain exclusions. This 6.25% limitation is imposed on the Portfolio rather than on a per shareholder basis. Therefore,
long-term Class B shareholders of the Portfolio may pay more in total sales charges than the economic equivalent of 6.25% of
such shareholders' investment in such shares. See "How the Fund is Managed--Distributor."
\D\D The Distributor currently has no distribution costs reimbursable to it under the Class B Plan and therefore, the Fund has
discontinued assessing any 12b-1 fees on the Class B shares and has discontinued the payment to the Distributor of any
contingent deferred sales charges collected on the redemption of Class B shares (any such contingent deferred sales charges
collected on the redemption of Class B shares are paid to the Fund). As a result and under current conditions, Total Fund
Operating Expenses will be lower for Class B shares than for the Class A shares. The Fund is no longer accepting purchase
orders for the Class B shares.
</TABLE>
- -------------------------------------------------------------------------------
4
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(for a share of common stock outstanding throughout each of the
periods indicated)
- -------------------------------------------------------------------------------
The following financial highlights (with the exception of the six months
ended April 30, 1994) have been audited by Deloitte & Touche, independent
accountants, whose report thereon was unqualified. This information should
be read in conjunction with the financial statements and notes thereto,
which appear in the Statement of Additional Information. The following
highlights contain selected data for a share of common stock outstanding,
total return, ratios to average net assets and other supplemental data for
the periods indicated. The information is based on data contained in the
financial statements.
- -------------------------------------------------------------------------------
<TABLE>
Global Assets Portfolio
<CAPTION>
Class A Class B
--------------------------------------------- ------------------------------------------
Six Feb. 15, Six Feb. 15,
Months 1991* Months 1991*
Ended Year ended Oct. 31, through Ended Year ended Oct. 31, through
April 30, ------------------- Oct. 31, April 30, ------------------- Oct. 31,
1994 1993 1992 1991 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of period $ 1.88 $ 1.89 $ 2.00 $ 2.00 $1.90 $ 1.89 $ 2.00 $ 2.00
-------- -------- -------- ------- ----- ------- -------- --------
Income from investment operations
Net investment income ............... .03 .12 .16 .12\D .04 .12 .15 .11\D
Net realized and unrealized gain
(loss) on investment and foreign
currency transactions ............. (.02) (.04) (.13) - (.02) (.04) (.13) -
-------- -------- -------- ------- ----- ------- -------- --------
Total from investment operations .... .01 .08 .03 .12 .02 .08 .02 .11
Less distributions
Dividends from net investment income. (.01) (.04) (.14) (.12) (.01) (.04) (.13) (.11)
Dividends in excess of net investment
income ............................ (.03) - - - (.04) - - -
Taxable return of capital
distributions ..................... - (.05) - - - (.05) - -
Total distributions ................. (.04) (.09) (.14) (.12) (.05) (.09) (.13) (.11)
-------- -------- -------- ------- ----- ------- -------- --------
Contingent deferred sales charges
collected ......................... - - - - .03 .02 - -
-------- -------- -------- ------- ----- ------- -------- --------
Net asset value, end of period $ 1.85 $ 1.88 $ 1.89 $ 2.00 $1.90 $ 1.90 $ 1.89 $ 2.00
-------- -------- -------- ------- ----- ------- -------- --------
-------- -------- -------- ------- ----- ------- -------- --------
TOTAL RETURN# .76% 4.36% 1.46% 5.91% 2.60% 5.47% 0.94% 5.53%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 75,908 $127,490 $113,412 $86,443 $ 52 $ 2,023 $199,890 $134,015
Average net assets (000)
$101,704 $153,339 $138,331 $23,224 $ 548 $52,653 $248,941 $ 42,449
Ratios to average net assets:
Expenses, including distribution fees 1.73%** 1.48% 1.33% 1.25%\D** 1.23%** 1.61% 1.83% 1.75%\D**
Expenses, excluding distribution fees 1.23%** .98% .83% .75%\D** 1.23%** .98% .83% .75%\D**
Net investment income 3.92%** 6.44% 8.16% 8.64%\D** 4.48%** 6.31% 7.66% 8.21%\D**
<FN>
- -------------------
* Commencement of investment operations.
** Annualized.
# 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. Total returns for periods
of less than a full year are not annualized.
\D Net of expense subsidy.
</TABLE>
- -------------------------------------------------------------------------------
5
<PAGE>
- -------------------------------------------------------------------------------
HOW THE FUND INVESTS
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Portfolio is high current income with
minimum risk to principal. The Portfolio seeks to achieve its objective by
investing primarily in a portfolio of high-quality debt securities having
remaining maturities of not more than one year. The Portfolio will invest
at least 65% of its total assets in income-producing securities. There can
be no assurance that the Portfolio will achieve its investment objective.
The Portfolio seeks high current yields by investing in debt securities
denominated in U.S. dollars and a range of foreign currencies. While the
Portfolio normally will maintain a substantial portion of its assets in
debt securities denominated in foreign currencies, the Portfolio, under
normal circumstances, will maintain at least 35% of its net assets in U.S.
dollar denominated securities and will also invest in debt securities of
issuers in at least three different countries. The Portfolio, which is not
a money market fund, is designed for the investor who seeks a higher yield
than a money market fund and less fluctuation in net asset value than a
longer-term bond fund. Investors should understand that the Portfolio's net
asset value will fluctuate based on the value of its underlying securities.
The Portfolio's investment objective is a fundamental policy and cannot
be changed without the approval of the holders of a majority of the
Portfolio's outstanding voting securities as defined in the Investment
Company Act of 1940 (the Investment Company Act). Fund policies that are
not fundamental may be modified by the Board of Directors.
In pursuing its investment objective, the Portfolio seeks to minimize
credit risk and fluctuations in net asset value by investing primarily in
shorter-term debt securities. Normally, a high proportion of the
Portfolio's investments consist of money market instruments. The
Portfolio's investments are managed in accordance with a multi-market
strategy, allocating the Portfolio's investments among securities
denominated in the U.S. dollar and the currencies of a number of foreign
countries and, within each such country, among different types of debt
securities. The investment adviser adjusts the Portfolio's exposure to each
currency based on its perception of the most favorable markets and issuers.
In this regard, the percentage of assets invested in securities of a
particular country or denominated in a particular currency will vary in
accordance with the investment adviser's assessment of the relative yield
of such securities and the relationship of a country's currency to the U.S.
dollar. The Portfolio may from time to time invest 25% or more of its total
assets in securities of issuers in one or more countries depending upon the
investment adviser's assessment. The investment adviser considers
fundamental economic strength, credit quality and interest rate trends in
determining whether to increase or decrease the emphasis placed upon a
particular type of security or industry sector within the Portfolio's
investment portfolio. The Portfolio may also purchase and sell covered call
and put options on certain of these securities, indices and currencies, as
well as on futures contracts relating to such securities, indices and
currencies.
Returns on short-term foreign currency denominated debt instruments can
be adversely affected by changes in exchange rates. The Portfolio's
investment adviser believes that the use of foreign currency hedging
techniques, including "cross-currency hedges," may assist, under certain
conditions, in helping to protect against declines in the U.S. dollar value
of income available for distribution to shareholders and declines in the
net asset value of the Portfolio's shares resulting from adverse changes in
currency exchange rates. For example, the return available from securities
denominated in a particular foreign currency would diminish in the event
the value of the U.S. dollar increased against such currency. Such a
decline could be partially or completely offset by an increase in value of
a cross-currency hedge involving a forward exchange contract to sell a
different foreign currency, where such contract is available on terms more
advantageous to the Portfolio than a contract to sell the currency in which
the position being hedged is denominated. Cross-currency hedges can,
therefore, under certain conditions, provide protection of net asset value
in the event of a general rise in the U.S. dollar against foreign
currencies. However, there can be no assurance that the Fund will be able
to engage in cross-currency hedging or that foreign exchange rate
relationships will be sufficiently predictable to enable the investment
adviser to successfully employ cross- currency hedging techniques. A
cross-currency hedge cannot protect against exchange rates risks perfectly,
and if the investment adviser is incorrect in its
6
<PAGE>
judgment of future exchange rate relationships, the Portfolio could be in
a less advantageous position than if such a hedge had not been established.
The Portfolio invests in debt securities denominated in the currencies
of countries whose governments are considered stable by the Fund's
investment adviser. In addition to the U.S. dollar, such currencies
include, among others, the Australian Dollar, Austrian Schilling, British
Pound Sterling, Canadian Dollar, Dutch Guilder, European Currency Unit
(ECU), French Franc, German Mark, Italian Lira, Finnish Marka, Mexican
Peso, Japanese Yen, New Zealand Dollar, Spanish Peseta, Danish Kroner,
Norwegian Kroner, Swedish Krona and Swiss Franc. An issuer of debt
securities purchased by the Portfolio may be domiciled in a country other
than the country in whose currency the instrument is denominated.
The Portfolio seeks to minimize investment risk by limiting its
portfolio investments to debt securities of high quality. Accordingly, the
Portfolio's investments consist of: (i) debt securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities (U.S.
Government securities); (ii) obligations issued or guaranteed by a foreign
government or any of its political subdivisions, authorities, agencies, or
instrumentalities, or by supranational entities, all of which are rated AAA
or AA by Standard & Poor's Corporation (S&P) or Aaa or Aa by Moody's
Investors Service (Moody's) (High Quality Rating) or, if unrated,
determined by the Portfolio's investment adviser to be of equivalent
quality utilizing similar rating standards; (iii) corporate debt securities
having at least one High Quality Rating or, if unrated, determined by the
Portfolio's investment adviser to be of equivalent quality utilizing
similar rating standards; (iv) certificates of deposit and bankers'
acceptances issued or guaranteed by, or time deposits maintained at, banks
(including foreign branches of U.S. banks or U.S. or foreign branches of
foreign banks) having total assets of more than $500 million and determined
by the investment adviser to be of high quality utilizing similar rating
standards; (v) commercial paper rated A-1 by S&P, Prime-1 by Moody's, or,
if not rated, issued by U.S. or foreign companies having outstanding long
term debt securities rated AAA, AA or A by S&P, or Aaa, Aa or A by Moody's
and determined by the investment adviser to be of high quality utilizing
similar rating standards; and (vi) loan participation interests having a
remaining term not exceeding one year in loans extended by banks to such
companies. The value of longer-term fixed- income securities will fluctuate
inversely with interest rates. See the description of securities ratings in
the Appendix.
The Portfolio may invest without limitation in commercial paper and
other instruments which are indexed to certain specific foreign currency
exchange rates. The terms of such instruments provide that its principal
amount is adjusted upwards or downwards (but not below zero) at maturity to
reflect changes in the exchange rate between two currencies while the
obligation is outstanding. The Portfolio will purchase such instruments
with the currency in which it is denominated and, at maturity, will receive
interest and principal payments thereon in that currency, but the amount of
principal payable by the issuer at maturity will change in proportion to
the change (if any) in the exchange rate between the two specified
currencies between the date the instrument is issued and the date the
instrument matures. The Portfolio will establish a segregated account with
respect to its investments in this type of instrument and maintain in such
account cash or liquid high-quality debt securities having a value at least
equal to the aggregate principal amount of outstanding instruments of this
type. While such instruments entail the risk of loss of principal, the
potential for realizing gains as a result of changes in foreign currency
exchange rates enables the Portfolio to hedge (or cross-hedge) against a
decline in the U.S. dollar value of investments denominated in foreign
currencies while providing an attractive money market rate of return.
The Portfolio may invest in debt securities issued by supranational
organizations such as the World Bank, which was chartered to finance
development projects in developing member countries; the European
Community, which is a twelve-nation organization engaged in cooperative
economic activities; the European Coal and Steel Community, which is an
economic union of various European nations' steel and coal industries; and
the Asian Development Bank, which is an international development bank
established to lend funds, promote investment and provide technical
assistance to member nations in the Asian and Pacific regions.
7
<PAGE>
The Portfolio may invest in debt securities denominated in the ECU,
which is a "basket" consisting of specified amounts of currencies of
certain of the twelve member states of the European Community. The specific
amounts of currencies comprising the ECU may be adjusted by the Council of
Ministers of the European Community to reflect changes in relative values
of the underlying currencies. The Fund's investment adviser does not
believe that such adjustments will adversely affect holders of
ECU-denominated obligations or the marketability of such securities.
European supranationals, in particular, issue ECU-denominated obligations.
The Portfolio is "non-diversified" so that the Portfolio may invest
more than 5% of its total assets in the securities of one or more issuers.
Investment in a non-diversified portfolio involves greater risk than
investment in a diversified portfolio because a loss resulting from the
default of a single issuer may represent a greater portion of the total
assets of a non-diversified portfolio.
RISK FACTORS
Risk Factors on Foreign Investments
Investing in securities issued by foreign governments and corporations
involves considerations and possible risks not typically associated with
investing in obligations issued by the U.S. government and domestic
corporations. The values of foreign investments are affected by changes in
currency rates or exchange control regulations, application of foreign tax
laws, including withholding taxes, changes in governmental administration
or economic or monetary policy (in this country or abroad) or changed
circumstances in dealings between nations. Costs are incurred in connection
with conversions between various currencies. In addition, foreign brokerage
commissions are generally higher than in the United States, and foreign
securities markets may be less liquid, more volatile and less subject to
governmental supervision than in the United States. Investments in foreign
countries could be affected by other factors not present in the United
States, including expropriation, confiscatory taxation, lack of uniform
accounting and auditing standards and potential difficulties in enforcing
contractual obligations and could be subject to extended settlement
periods.
OTHER INVESTMENTS AND INVESTMENT TECHNIQUES
In addition, the Portfolio is permitted to make the investments and
engage in the investment techniques described below. Under normal
circumstances, these investments will represent no more than 35% of the
total assets of the Portfolio.
Hedging and Income Enhancement Strategies
The Portfolio may engage in various portfolio strategies to reduce
certain risks of its investments and to attempt to enhance income, but not
for speculation. These strategies currently include the use of options,
forward currency exchange contracts and futures contracts and options
thereon. The Portfolio's ability to use these strategies may be limited by
market conditions, regulatory limits and tax considerations and there can
be no assurance that any of these strategies will succeed. See "Additional
Investment Information-Investment Policies" in the Statement of Additional
Information. New financial products and risk management techniques continue
to be developed and a portfolio may use these new investments and
techniques to the extent consistent with its investment objective and
policies.
Options Transactions
The Portfolio may purchase and write (i.e., sell) put and call options
on securities and currencies that are traded on national securities
exchanges or in the over-the-counter market to enhance income or to hedge
its portfolio investments. These options will be on debt securities,
financial indices (e.g., S&P 500), U.S. Government securities (listed on an
exchange and over-the-counter, i.e., purchased or sold through U.S.
Government securities dealers), foreign government securities and foreign
currencies. The Portfolio may write covered put and call options to
generate additional income through the receipt of premiums, purchase put
options in an effort to protect the value of a
8
<PAGE>
security that it owns against a decline in market value and purchase call
options in an effort to protect against an increase in price of securities
(or currencies) it intends to purchase. The Portfolio may also purchase
put and call options to offset previously written put and call options of
the same series. See "Additional Investment Information-Additional Risks-
Options on Securities" in the Statement of Additional Information.
A call option gives the purchaser, in exchange for a premium paid, the
right for a specified period of time to purchase the securities or currency
subject to the option at a specified price (the exercise price or strike
price). The writer of a call option, in return for the premium, has the
obligation, upon exercise of the option, to deliver, depending upon the
terms of the option contract, the underlying securities or a specified
amount of cash to the purchaser upon receipt of the exercise price. When
the Portfolio writes a call option, it gives up the potential for gain on
the underlying securities or currency in excess of the exercise price of
the option during the period that the option is open.
A put option gives the purchaser, in return for a premium, the right,
for a specified period of time, to sell the securities or currency subject
to the option to the writer of the put at the specified exercise price. The
writer of the put option, in return for the premium, has the obligation,
upon exercise of the option, to acquire the securities or currency
underlying the option at the exercise price. The Portfolio might,
therefore, be obligated to purchase the underlying securities or currency
for more than their current market price.
The Portfolio will write only "covered" options. An option is covered
if, so long as the Portfolio is obligated under the option, it owns an
offsetting position in the underlying security or currency or maintains
cash, U.S. Government securities or other liquid high-grade debt
obligations with a value sufficient at all times to cover its obligations
in a segregated account. See "Additional Investment Information-Additional
Risks" in the Statement of Additional Information.
There is no limitation on the amount of call options the Portfolio may
write. The Portfolio may only write covered put options to the extent that
cover for such options does not exceed 25% of its net assets. The Portfolio
will not purchase an option if, as a result of such purchase, more than 20%
of its total assets would be invested in premiums for options and options
on futures.
Forward Currency Exchange Contracts
The Portfolio may enter into forward foreign currency exchange
contracts to protect the value of its portfolio against future changes in
the level of currency exchange rates. The Portfolio may enter into such
contracts on a spot, i.e., cash, basis at the rate then prevailing in the
currency exchange market or on a forward basis, by entering into a forward
contract to purchase or sell currency. A forward contract on foreign
currency is an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days agreed upon by the
parties from the date of the contract at a price set on the date of the
contract.
The Portfolio's dealings in forward contracts will be limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of a forward contract with
respect to specific receivables or payables of the Portfolio generally
arising in connection with the purchase or sale of its portfolio securities
and accruals of interest or dividends receivable and Portfolio expenses.
Position hedging is the sale of a foreign currency with respect to
portfolio security positions denominated or quoted in that currency or in a
different currency (cross-hedge). Although there are no limits on the
number of forward contracts which the Portfolio may enter into, the
Portfolio may not position hedge with respect to a particular currency for
an amount greater than the aggregate market value (determined at the time
of making any sale of forward currency) of the securities held in its
portfolio denominated or quoted in, or currently convertible into or
bearing substantial correlation to, such currency. See "Additional
Investment Information-Additional Risks-Forward Currency Exchange
Contracts" in the Statement of Additional Information.
Futures Contracts and Options Thereon
The Portfolio may purchase and sell financial futures contracts and
options thereon which are traded on a commodities exchange or board of
trade for certain hedging, return enhancement and risk management purposes
9
<PAGE>
in accordance with regulations of the Commodity Futures Trading
Commission. These futures contracts and related options will be on debt
securities, financial indices, U.S. Government securities, foreign
government securities and foreign currencies. A financial futures contract
is an agreement to purchase or sell an agreed amount of securities or
currencies at a set price for delivery in the future.
The Portfolio may not purchase or sell futures contracts and related
options for return enhancement or risk management purposes, if immediately
thereafter the sum of the amount of initial margin deposits on the Fund's
existing futures and options on futures and premiums paid for such related
options would exceed 5% of the liquidation value of the Fund's total
assets. The Portfolio may purchase and sell futures contracts and related
options without limitation, for bona fide hedging purposes. The value of
all futures contracts sold will not exceed the total market value of the
Fund's portfolio.
The Portfolio's successful use of futures contracts and related options
depends upon the investment adviser's ability to predict the direction of
the market and is subject to various additional risks. The correlation
between movements in the price of a futures contract and the price of the
securities or currencies being hedged is imperfect and there is a risk that
the value of the securities or currencies being hedged may increase or
decrease at a greater rate than the related futures contracts resulting in
losses to the Portfolio. Certain futures exchanges or boards of trade have
established daily limits on the amount that the price of futures contracts
or related options may vary, either up or down, from the previous day's
settlement price. These daily limits may restrict the Portfolio's ability
to purchase or sell certain futures contracts or related options on any
particular day.
The Portfolio's ability to enter into futures contracts and options
thereon is limited by the requirements of the Internal Revenue Code of
1986, as amended (the Internal Revenue Code), for qualification as a
regulated investment company. See "Additional Investment Information-
Futures Contracts and Options Thereon" and "Taxation" in the Statement of
Additional Information.
Special Risks of Hedging and Income Enhancement Strategies
Participation in the options or futures markets and in currency
exchange transactions involves investment risks and transaction costs to
which the Portfolio would not be subject, absent the use of these
strategies. If the investment adviser's predictions of movements in the
direction of the securities, foreign currency and interest rate markets are
inaccurate, the adverse consequences to the Portfolio may leave the
Portfolio in a worse position than if such strategies were not used. Risks
inherent in the use of options, foreign currency and futures contracts and
options on futures contracts include (1) dependence on the investment
adviser's ability to predict correctly movements in the direction of
interest rates, securities prices and currency markets; (2) imperfect
correlation between the price of options and futures contracts and options
thereon and movements in the prices of the securities or currencies being
hedged; (3) the fact that skills needed to use these strategies are
different from those needed to select portfolio securities; (4) the
possible absence of a liquid secondary market for any particular instrument
at any time; (5) the possible need to defer closing out certain hedged
positions to avoid adverse tax consequences; and (6) the possible inability
of the Portfolio to purchase or sell a security at a time that otherwise
would be favorable for it to do so, or the possible need for the Portfolio
to sell a security at a disadvantageous time, due to the need for the
Portfolio to maintain "cover" or to segregate securities in connection with
hedging transactions. See "Taxation" in the Statement of Additional
Information.
Short Sales Against-the-Box
The Portfolio may make short sales against-the-box for the purpose of
deferring realization of gain or loss for federal income tax purposes. A
short sale "against-the-box" is a short sale in which the Portfolio owns an
equal amount of the securities sold short or owns securities convertible
into or exchangeable, without payment of any further consideration, for
securities of the same issue as, and equal in amount to, the securities
sold short.
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Repurchase Agreements
The Portfolio may enter into repurchase agreements, whereby the seller
of a security agrees to repurchase that security from the Portfolio at a
mutually agreed-upon time and price. The repurchase date is usually within
a day or two of the original purchase, although it may extend over a number
of months. The resale price is in excess of the purchase price, reflecting
an agreed-upon rate of return effective for the period of time the
Portfolio's money is invested in the security. The Portfolio's repurchase
agreements will at all times be fully collateralized in an amount at least
equal to the purchase price including accrued interest earned on the
underlying securities. The instruments held as collateral are valued daily,
and as the value of instruments declines, the Portfolio will require
additional collateral. If the seller defaults and the value of the
collateral securing the repurchase agreement declines, the Portfolio may
incur a loss. The Portfolio participates in a joint repurchase account with
other investment companies managed by Prudential Mutual Fund Management,
Inc. pursuant to an order of the Securities and Exchange Commission (SEC or
Commission). See "Additional Investment Information-Repurchase Agreements"
in the Statement of Additional Information.
Securities Lending
The Portfolio may lend its portfolio securities to brokers or dealers,
banks or other recognized institutional borrowers of securities, provided
that the borrower at all times maintains cash or equivalent collateral or
secures an irrevocable letter of credit in favor of the Portfolio in an
amount equal to at least 100% of the market value of the securities loaned.
During the time portfolio securities are on loan, the borrower will pay the
Portfolio an amount equivalent to any dividend or interest paid on such
securities and the Portfolio may invest the cash collateral and earn
additional income, or it may receive an agreed-upon amount of interest
income from the borrower. As a matter of fundamental policy, the Portfolio
cannot lend more than 30% of the value of its total assets.
When-Issued and Delayed Delivery Securities
The Portfolio may purchase or sell securities on a when-issued or
delayed delivery basis. When-issued or delayed delivery transactions arise
when securities are purchased or sold by the Portfolio with payment and
delivery taking place a month or more in the future in order to secure what
is considered to be an advantageous price and yield to the Portfolio at the
time of entering into the transaction. The Fund's Custodian will maintain,
in a segregated account of the Fund, cash, U.S. Government securities or
other liquid high-grade debt obligations having a value equal to or greater
than the Portfolio's purchase commitments; the Custodian will likewise
segregate securities sold on a delayed delivery basis.
Borrowing
The Portfolio may borrow an amount equal to no more than 20% of the
value of its total assets (computed at the time the loan is made) from
banks for temporary, extraordinary or emergency purposes or for the
clearance of transactions. During periods when the Portfolio has borrowed
for temporary, extraordinary or emergency purposes or for the clearance of
transactions, the Portfolio may pursue its investment objective by
purchasing additional securities which can result in increased volatility
of the Portfolio's net asset value. The Portfolio will not borrow to take
advantage of investment opportunities. See "Additional Investment
Information-Borrowing" in the Statement of Additional Information. The
Portfolio may pledge up to 20% of its total assets to secure these
borrowings.
Illiquid Securities
The Portfolio may invest not more than 10% of its total assets in
illiquid securities including repurchase agreements which have a maturity
of longer than seven days, securities with legal or contractual
restrictions on resale and securities that are not readily marketable.
Securities that have legal or contractual restrictions on resale but have a
readily available market are not considered illiquid for purposes of this
limitation. Repurchase agreements subject to demand are deemed to have a
maturity equal to the applicable notice period. The investment adviser will
monitor the liquidity of restricted securities under the supervision of the
Board of Directors.
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<PAGE>
The staff of the Commission has taken the position that purchased OTC
options and the assets used as "cover" for written OTC options are illiquid
securities. However, the Portfolio may treat the securities it uses as
cover for written OTC options as liquid provided it follows a specified
procedure. The Portfolio may sell OTC options only to qualified dealers who
agree that the Portfolio may repurchase any OTC options it writes for a
maximum price to be calculated by a predetermined formula. In such cases,
the OTC option would be considered illiquid only to the extent that the
maximum repurchase price under the formula exceeds the intrinsic value of
the option.
Portfolio Turnover
Portfolio turnover rate is typically defined as the lesser of the
amount of the securities purchased or securities sold, excluding all
securities whose maturity or expiration date at the time of acquisition was
one year or less, divided by the average monthly value of such securities
owned during the year. Because the Portfolio will invest in securities
having remaining maturities of not more than one year, the Portfolio does
not expect to have a turnover rate as so defined. However, because of the
short-term nature of the Portfolio's investments, it expects to have
substantial amounts of portfolio transactions. High portfolio turnover may
involve correspondingly greater brokerage commissions and other transaction
costs which will be borne directly by the Portfolio. See "Portfolio
Transactions and Brokerage" in the Statement of Additional Information.
INVESTMENT RESTRICTIONS
The Portfolio is subject to certain investment restrictions which, like
its investment objective, constitute fundamental policies. Fundamental
policies cannot be changed without the approval of the holders of a
majority of the Portfolio's outstanding voting securities, as defined in
the Investment Company Act. See "Investment Restrictions" in the Statement
of Additional Information.
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HOW THE FUND IS MANAGED
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The Fund has a Board of Directors which, in addition to overseeing the
actions of the Portfolio's Manager, Subadviser and Distributor, as set
forth below, decides upon matters of general policy. The Portfolio's
Manager conducts and supervises the daily business operations of the
Portfolio. The Fund's Subadviser furnishes daily investment advisory
services.
For the year ended October 31, 1993, total expenses for the Portfolio's
Class A and Class B shares as a percentage of average net assets were 1.48%
and 1.61% respectively. See "Financial Highlights," and "Fee Waivers and
Subsidy."
MANAGER
Prudential Mutual Fund Management, Inc. (PMF or the Manager), One
Seaport Plaza, New York, New York 10292, is the manager of the Fund and is
compensated for its services at an annual rate of .55 of 1% of the
Portfolio's average daily net assets. It was incorporated in May 1987 under
the laws of the State of Delaware. For the fiscal year ended October 31,
1993, the Portfolio paid management fees to PMF of .55% of the average net
assets of the Portfolio.
As of March 31, 1994, PMF served as the manager to [37] open-end
investment companies, constituting substantially all of the Prudential
Mutual Funds, and as manager or administrator to [29] closed-end investment
companies with aggregate assets of approximately [$49] billion.
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<PAGE>
Under the Management Agreement with the Fund, PMF manages the
investment operations of the Portfolio of the Fund and also administers the
Fund's corporate affairs. See "Manager" in the Statement of Additional
Information.
Under the Subadvisory Agreement between PMF and The Prudential
Investment Corporation (PIC or the Subadviser), the Subadviser furnishes
investment advisory services in connection with the management of the
Portfolio and is reimbursed by PMF for its reasonable costs and expenses
incurred in providing such services. Under the Management Agreement, PMF
continues to have responsibility for all investment advisory services and
supervises PIC's performance of such services.
The Global Assets Portfolio is managed by Global Advisors, a unit of
The Prudential Investment Corporation (PIC). Nicholas Sargen, as Chief
Investment Officer of Global Advisors, sets broad investment strategies
which are then implemented by a senior portfolio manager, Jeffrey
Brummette, who has responsibility for the day-to-day management of the
portfolio. Mr. Brummette performs these duties with the assistance of the
mutual fund investment team. Messrs. Sargen and Brummette are Managing
Directors of PIC. Mr. Sargen has managed the Portfolio since October 1991.
Mr. Brummette has managed the Portfolio since February 1991. Mr. Sargen has
been employed by PIC since October 1991 and was previously Director of
International Bond Market Research at Salomon Brothers where he was
employed from 1984 to 1991. Mr. Brummette has been employed by PIC since
1986. Mr. Brummette also serves as the portfolio manager of the Short-Term
Global Income Portfolio of the Fund, of The Global Yield Fund, Inc. and for
other institutional client portfolios.
PMF and PIC are indirect, wholly-owned subsidiaries of The Prudential
Insurance Company of America (Prudential), a major diversified insurance
and financial services company.
FEE WAIVERS AND SUBSIDY
PMF may from time to time agree to waive its management fee and
subsidize certain operating expenses with respect to the Portfolio,
although no such waiver or subsidy is currently in effect. Fee waivers and
expense subsidies will lower the overall expenses of the Portfolio and
increase its yield and total return. See "How the Fund Calculates
Performance." The fee waiver or expense subsidies may be terminated at any
time without notice after which the Portfolio's expenses will increase and
its yield and total return will be reduced.
DISTRIBUTOR
Prudential Mutual Fund Distributors, Inc. (PMFD), One Seaport Plaza,
New York, New York 10292, is a corporation organized under the laws of the
State of Delaware and serves as the distributor of the Class A shares of
the Portfolio. It is a wholly-owned subsidiary of PMF.
Prudential Securities Incorporated, (Prudential Securities or PSI) One
Seaport Plaza, New York, New York 10292, is a corporation organized under
the laws of the State of Delaware and serves as the distributor of the
Class B shares of the Portfolio. It is an indirect, wholly-owned subsidiary
of Prudential.
Under separate Distribution and Service Plans (the Class A Plan and the
Class B Plan, collectively the Plans) adopted by the Portfolio under Rule
12b-1 under the Investment Company Act and separate distribution agreements
(the Distribution Agreements), PMFD and Prudential Securities (collectively
the Distributor) incur the expenses of distributing the Class A and Class B
shares of the Portfolio, respectively. These expenses include commissions
and account servicing fees paid to, or on account of, financial advisers of
Prudential Securities and Pruco Securities Corporation (Prusec), an
affiliated broker-dealer, commissions paid to, or on account of, other
broker-dealers or financial institutions (other than national banks) which
have entered into agreements with the Distributor, interest and/or carrying
charges (Class B only), advertising expenses, the cost of printing and
mailing prospectuses to potential investors and indirect and overhead costs
of Prudential Securities and Prusec associated with the sale of Fund
shares,
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<PAGE>
including lease, utility, communications and sales promotion expenses. The
State of Texas requires that shares of the Portfolio may be sold in that
state only by dealers or other financial institutions which are registered
there as broker-dealers.
Under the Class A Plan, the Portfolio is obligated to pay distribution
and/or service fees to the Distributor as compensation for its distribution
and service activities, not as reimbursement for specific expenses
incurred, as is the case under the Class B Plan. If the Distributor's
expenses under the Class A Plan exceed its distribution and service fees,
the Portfolio will not be obligated to pay any additional expenses under
the Class A Plan. If the Distributor's expenses under the Class A Plan are
less than such distribution and service fees, it will retain its full fees
and realize a profit.
Under the Class A Plan, the Portfolio may pay PMFD for its
distribution-related expenses with respect to Class A shares at an annual
rate of up to .50 of 1% of the average daily net assets of the Class A
shares. The Class A Plan provides that (i) up to .25 of 1% of the average
daily net assets of the Class A shares may be used to pay for personal
service and/or the maintenance of shareholder accounts (service fee) and
(ii) total distribution fees (including the service fee of .25 of 1%) may
not exceed .50 of 1% of the average daily net assets of the Class A shares.
For the fiscal year ended October 31, 1993, PMFD received payments
under the Class A Plan of $766,695 as reimbursement of expenses related to
the distribution of Class A shares. This amount was primarily expended for
payment of account servicing fees to financial advisers and other persons
who sell Class A shares. In addition, for the period, PMFD received
approximately $38,300 in initial sales charges.
Under the Class B Plan, the Portfolio reimburses Prudential Securities
for its distribution-related expenses with respect to Class B shares
(asset-based sales charges) at an annual rate of up to .75 of 1% of the
average daily net assets of the Class B shares. Prudential Securities
recovers the distribution expenses it incurs through the receipt of
reimbursement payments from the Portfolio under the Class B Plan and the
receipt of contingent deferred sales charges from certain redeeming
shareholders. See "Shareholder Guide-How to Sell Your Shares- Contingent
Deferred Sales Charge-Class B Shares." For the fiscal year ended October
31, 1993, Prudential Securities received approximately $96,700 in
contingent deferred sales charges.
The Class B Plan also provides for the payment of a service fee to
Prudential Securities at a rate not to exceed .25 of 1% of the average
daily net asset value of the Class B shares. The service fee is used to pay
for personal service and/or the maintenance of shareholder accounts.
The Distributor currently has no distribution costs reimbursable to it
under the Class B Plan and therefore, the Fund has discontinued assessing
any 12b-1 fees on the Class B shares and has discontinued the payment to
the Distributor of any contingent deferred sales charges collected on the
redemption of Class B shares (any such contingent deferred sales charges
collected on the redemption of Class B shares will be paid to the Fund). As
a result and under current conditions, Total Fund Operating Expenses will
be lower for Class B shares than for the Class A shares.
Actual distribution expenses (asset-based sales charges) for Class B
shares for any given year may exceed the fees received pursuant to the
Class B Plan and will be carried forward and paid by the Portfolio in
future years so long as the Class B Plan is in effect. Interest is accrued
monthly on such carry forward amounts at a rate comparable to that paid by
Prudential Securities for bank borrowings. See "Distributor" in the
Statement of Additional Information.
The aggregate distribution fee for Class B shares (asset-based sales
charges plus service fees) will not exceed the annual rate of 1% of the
average daily net asset value of the Class B shares under the Class B Plan.
For the fiscal year ended October 31, 1993, Prudential Securities
received $337,966 from the Portfolio under the Class B Plan and spent
approximately $70,000 on behalf of the Portfolio.
For the fiscal year ended October 31, 1993, the Fund paid distribution
expenses of .50% and .63% of the average net assets of the Class A and
Class B shares of the Portfolio, respectively. The Portfolio records all
payments made under the Plans as expenses in the calculation of net
investment income.
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<PAGE>
Distribution expenses attributable to the sale of both Class A and
Class B shares will be allocated to each class based upon the ratio of
sales of each class to the sales of all shares of the Portfolio. The
distribution fee and initial sales charge in the case of Class A shares
will not be used to subsidize the sale of Class B shares. Similarly, the
distribution fee and contingent deferred sales charge in the case of Class
B shares will not be used to subsidize the sale of Class A shares.
Each Plan provides that it shall continue in effect from year to year
provided that a majority of the Board of Directors of the Fund, including a
majority of the Directors who are not "interested persons" of the Fund (as
defined in the Investment Company Act) and who have no direct or indirect
financial interest in the operation of the Plan or any agreement related to
the Plan (the Rule 12b-1 Directors), vote annually to continue the Plan.
Each Plan may be terminated at any time by vote of a majority of the Rule
12b-1 Directors or of a majority of the outstanding shares of the
applicable class of the Portfolio. In the event of termination or
noncontinuation of the Class B Plan, the Board of Directors may consider
the appropriateness of having the Portfolio reimburse Prudential Securities
for the outstanding carry forward amounts plus interest thereon.
In addition to distribution and service fees paid by the Portfolio
under the Class A and Class B Plans, the Manager (or one of its affiliates)
may make payments to dealers and other persons which distribute shares of
the Portfolio. Such payments may be calculated by reference to the net
asset value of shares sold by such persons or otherwise.
The Distributor is subject to the rules of the National Association of
Securities Dealers, Inc., governing maximum sales charges. See
"Distributor" in the Statement of Additional Information.
PORTFOLIO TRANSACTIONS
Prudential Securities may act as a broker or futures commission
merchant for the Portfolio provided that the commissions, fees or other
remuneration received by Prudential Securities are fair and reasonable. See
"Portfolio Transactions and Brokerage" in the Statement of Additional
Information.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Portfolio's investment
securities and cash and, in that capacity, maintains certain financial and
accounting books and records pursuant to an agreement with the Fund. Its
mailing address is P.O. Box 1713, Boston, Massachusetts 02105.
Prudential Mutual Fund Services, Inc., Raritan Plaza One, Edison, New
Jersey 08837, serves as Transfer Agent and Dividend Disbursing Agent and in
those capacities maintains certain books and records for the Fund. PMFS is
a wholly-owned subsidiary of PMF. Its mailing address is P.O. Box 15005,
New Brunswick, New Jersey 08906-5005.
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HOW THE FUND VALUES ITS SHARES
- -------------------------------------------------------------------------------
The Portfolio's net asset value per share or NAV is determined by
subtracting its liabilities from the value of its assets and dividing the
remainder by the number of outstanding shares of the Portfolio. NAV is
calculated separately for each class. For valuation purposes, quotations of
foreign securities in a foreign currency are converted to U.S. dollar
equivalents. The Board of Directors has fixed the specific time of day for
the computation of the Portfolio's net asset value to be as of 4:15 p.m.,
New York time.
Portfolio securities are valued based on market quotations or, if not
readily available, at fair value as determined in good faith under
procedures established by the Fund's Board of Directors.
The Portfolio will compute its NAV once daily on days that the New York
Stock Exchange is open for trading except on days on which no orders to
purchase, sell or redeem shares have been received by the Fund or days on
which changes
15
<PAGE>
in the value of the Portfolio's securities do not materially affect the
NAV. The New York Stock Exchange is closed on the following holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. See "Net Asset Value" in
the Statement of Additional Information.
Although the legal rights of Class A and Class B shares are
substantially identical, the different expenses borne by each class may
result in different NAV and dividends. As long as the Portfolio declares
dividends daily, the NAV of Class A and Class B shares will generally be
the same. It is expected, however, that the dividends will differ by
approximately the amount of the distribution expense differential between
the classes.
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HOW THE FUND CALCULATES PERFORMANCE
- -------------------------------------------------------------------------------
From time to time the Portfolio may advertise its total return
(including "average annual" total return and "aggregate" total return) in
advertisements or sales literature. Total return is calculated separately
for Class A and Class B shares. These figures are based on historical
earnings and are not intended to indicate future performance. The "total
return" shows how much an investment in the Portfolio would have increased
(decreased) over a specified period of time (i.e., one, five or ten years
or since inception of the Portfolio) assuming that all distributions and
dividends by the Portfolio were reinvested on the reinvestment dates during
the period and less all recurring fees. The "aggregate" total return
reflects actual performance over a stated period of time. "Average annual"
total return is a hypothetical rate of return that, if achieved annually,
would have produced the same aggregate total return if performance had been
constant over the entire period. "Average annual" total return smooths out
variations in performance and takes into account any applicable initial or
contingent deferred sales charges. Neither "average annual" total return
nor "aggregate" total return takes into account any federal or state income
taxes which may be payable upon redemption. The Portfolio may also from
time to time advertise its 30-day yield. See "Performance Information" in
the Statement of Additional Information. The Portfolio also may include
comparative performance information in advertising or marketing the
Portfolio's shares. Such performance information may include data from
Lipper Analytical Services, Inc., other industry publications, business
periodicals and market indices. See "Performance Information" in the
Statement of Additional Information. The Portfolio will include performance
data for both Class A and Class B shares of the Portfolio in any
advertisement or information including performance data of the Fund.
Further performance information is contained in the Portfolio's annual and
semi-annual reports to shareholders, which may be obtained without charge.
See "Shareholder Guide-Shareholder Services-Reports to Shareholders."
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TAXES, DIVIDENDS AND DISTRIBUTIONS
- -------------------------------------------------------------------------------
Taxation of the Portfolio
The Portfolio has elected to qualify and intends to remain qualified as
a regulated investment company under the Internal Revenue Code.
Accordingly, the Portfolio will not be subject to federal income taxes on
its net investment income and capital gains, if any, that it distributes to
its shareholders.
Gains or losses on disposition of debt securities denominated in a
foreign currency attributable to fluctuations in the value of foreign
currency between the date of acquisition of the security and the date of
disposition also are treated as ordinary gain or loss. These gains or
losses increase or decrease the amount of the Portfolio's investment
company taxable income available to be distributed to you as ordinary
income, rather than increasing or decreasing the amount of the Portfolio's
net capital gain. If currency fluctuation losses exceed other investment
company taxable income during a taxable year, distributions made by a
Portfolio during the year would be characterized as a return of capital to
you, reducing your basis in your Portfolio shares.
In addition, under the Internal Revenue Code, special rules apply to
the treatment of certain options and futures contracts (Section 1256
contracts). At the end of each year, such investments held by the Portfolio
will be required to be
16
<PAGE>
"marked to market" for federal income tax purposes; that is, treated as
having been sold at market value. Sixty percent of any gain or loss
recognized on these "deemed sales" and on actual dispositions may be
treated as long-term capital gain or loss, and the remainder will be
treated as short-term capital gain or loss. See "Taxation" in the Statement
of Additional Information.
Taxation of Shareholders
All dividends out of net investment income, together with distributions
of short-term capital gains, will be taxable as ordinary income to you
whether or not reinvested. Any net long-term capital gains distributed to
you will be taxable as such to you, whether or not reinvested and
regardless of the length of time you owned your shares although the
Portfolio does not expect to incur long-term capital gains. The maximum
long-term capital gains rate for individuals is 28%. The maximum long-term
capital gains rate for corporate shareholders is currently the same as the
maximum tax rate for ordinary income.
Any gain or loss realized upon a sale or redemption of shares by a
shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held more than one year and
otherwise as short-term capital gain or loss. Any short-term capital loss,
however, will be treated as long-term capital loss to the extent of any
capital gain distributions received by the shareholder regardless of the
length of time such shares are held.
Withholding Taxes
Under U.S. Treasury Regulations, the Portfolio is required to withhold
and remit to the U.S. Treasury 31% of dividend, capital gain income and
redemption proceeds payable on your account if you fail to furnish your tax
identification numbers on IRS Form W-9 (or IRS Form W-8 in the case of
certain foreign shareholders) with the required certifications regarding
your status under the federal income tax law.
Shareholders are advised to consult their own tax advisers regarding
specific questions as to federal, state or local taxes. See "Taxation" in
the Statement of Additional Information. Dividends and Distributions
The Portfolio expects to declare daily and pay monthly dividends of all
or substantially all of its net investment income and make distributions at
least annually of any net capital gains. Dividends paid by the Portfolio
with respect to Class A and Class B shares, to the extent any dividends are
paid, will be calculated in the same manner, at the same time, on the same
day and will be in the same amount except that each class will bear its own
distribution charges. Distribution of net capital gains, if any, will be
paid in the same amount for Class A and Class B shares. See "How The Fund
Values Its Shares."
Dividends and distributions will be paid in additional shares of the
Portfolio at net asset value computed on the payment date and record date,
respectively, or such other date as the Board of Directors may determine,
unless you elects in writing not less than five business days prior to the
record date to receive such dividends and distributions in cash. Such
election should be submitted to Prudential Mutual Fund Services, Inc.,
Account Maintenance, P.O. Box 15015, New Brunswick, New Jersey 08906-5015.
If you hold shares through Prudential Securities, you should contact your
financial adviser to receive dividends and distributions in cash. The Fund
will notify each shareholder after the close of the Fund's taxable year
both the dollar amount and the taxable status of that year's dividends and
distributions on a per share basis.
When the Portfolio goes "ex-dividend," its NAV is reduced by the amount
of the dividend or distribution. If you buy shares just prior to the
ex-dividend date, the price you pay will include the dividend or
distribution and a portion of your investment will be returned to you as a
taxable distribution. You should, therefore, consider the timing of
dividends when making your purchases.
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<PAGE>
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GENERAL INFORMATION
- -------------------------------------------------------------------------------
DESCRIPTION OF COMMON STOCK
The Fund was incorporated in Maryland on February 21, 1990. The Fund is
authorized to issue 2 billion shares of common stock, $.001 par value per
share, divided with respect to the Portfolio into two classes designated
Class A and Class B common stock. Each of the Class A and Class B common
stock of the Fund consists of 250 million authorized shares. Both Class A
and Class B common stock represent an interest in the same assets of the
Portfolio and are identical in all respects except that each class bears
certain distribution expenses and has exclusive voting rights with respect
to its distribution plan. See "How the Fund is Managed-Distributor."
Pursuant to an order from the SEC, the Portfolio is permitted to issue
multiple classes of common stock. Currently, the Portfolio has issued only
two classes of Common Stock, Class A and Class B. The Portfolio no longer
accepts purchase orders for Class B shares. In accordance with the Fund's
Articles of Incorporation, the Board of Directors may authorize the
creation of additional series of common stock and classes within such
series, with such preferences, privileges, limitations and voting and
dividend rights as the Board may determine.
The Board of Directors may increase or decrease the number of
authorized shares without the approval of shareholders. Shares of the
Portfolio, when issued, are fully paid, nonassessable, fully transferable
and redeemable at the option of the holder. Shares are also redeemable at
the option of the Portfolio under certain circumstances as described under
"Shareholder Guide-How to Sell Your Shares." Each share of Class A and
Class B common stock is equal as to earnings, assets and voting privileges,
except as noted above, and each class bears the expenses related to the
distribution of its shares. There are no conversion, preemptive or other
subscription rights except with respect to the conversion of Class B shares
into Class A shares described above. In the event of liquidation, each
share of common stock of the Portfolio is entitled to its portion of all of
the Portfolio's assets after all debt and expenses of the Portfolio have
been paid. The Portfolio's shares do not have cumulative voting rights for
the election of Directors.
The Fund does not intend to hold annual meetings of shareholders unless
otherwise required by law. The Fund will not be required to hold meetings
of shareholders unless, for example, the election of Directors is required
to be acted on by shareholders under the Investment Company Act.
Shareholders have certain rights, including the right to call a meeting
upon a vote of 10% of the Fund's outstanding shares for the purpose of
voting on the removal of one or more Directors or to transact any other
business.
ADDITIONAL INFORMATION
This Prospectus, including the Statement of Additional Information
which has been incorporated by reference herein, does not contain all the
information set forth in the Registration Statement filed by the Fund with
the SEC under the Securities Act of 1933. Copies of the Registration
Statement may be obtained at a reasonable charge from the SEC or may be
examined, without charge, at the office of the SEC in Washington, D.C.
- -------------------------------------------------------------------------------
SHAREHOLDER GUIDE
- -------------------------------------------------------------------------------
HOW TO BUY SHARES OF THE FUND
You may purchase shares of the Portfolio through Prudential Securities,
Prusec or directly from the Fund through its Transfer Agent, Prudential
Mutual Fund Services, Inc. (PMFS). The minimum initial investment is
$5,000. The minimum subsequent investment is $1,000. All minimum investment
requirements are waived for certain retirement and employee savings plans
or custodial accounts for the benefit of minors. For purchases made through
the Automatic Savings Accumulation Plan, the minimum initial and subsequent
investment is $50. See "Shareholder Services."
The purchase price is the NAV per share next determined following
receipt of an order by the Transfer Agent or Prudential Securities plus a
sales charge which, at the option of the purchaser, may be imposed at the
time of
18
<PAGE>
purchase or on a deferred basis, See "Alternative Purchase Plan" below.
See also "How the Fund Values its Shares".
Application forms can be obtained from PMFS, Prudential Securities or
Prusec. If a stock certificate is desired, it must be requested in writing
for each transaction. Certificates are issued only for full shares.
Shareholders who hold their shares through Prudential Securities will not
receive stock certificates.
The Fund reserves the right to reject any purchase order (including an
exchange) or to suspend or modify the continuous offering of its shares.
The Fund no longer accepts purchase orders for Class B shares. See "How to
Sell Your Shares."
Your dealer is responsible for forwarding payment promptly to the Fund.
The Distributor reserves the right to cancel any purchase order for which
payment has not been received by the fifth business day following the
investment.
Transactions in Fund shares may be subject to postage and handling
charges imposed by your dealer.
Purchase by Wire. For an initial purchase of shares of the Portfolio by
wire, you must first telephone PMFS to receive an account number at (800)
225-1852 (toll-free). The following information will be requested: your
name, address, tax identification number, class election, dividend
distribution election, amount being wired and wiring bank. Instructions
should then be given by you to your bank to transfer funds by wire to State
Street Bank and Trust Company, Boston, Massachusetts, Custody and
Shareholder Services Division, Attention: Prudential Short- Term Global
Income Fund, Inc.-Global Assets Portfolio, specifying on the wire the
account number assigned by PMFS and your name and identifying the sales
charge alternative (Class A or Class B shares).
If you arrange for receipt by State Street of Federal Funds prior to
4:15 p.m., New York time, on a business day, you may purchase shares of the
Fund as of that day.
In making a subsequent purchase order by wire, you should wire State
Street directly and should be sure that the wire specifies Prudential
Short-Term Global Income Fund, Inc. -Global Assets Portfolio, Class A or
Class B shares and your name and individual account number. It is not
necessary to call PMFS to make subsequent purchase orders utilizing Federal
Funds. The minimum amount which may be invested by wire is $5,000.
ALTERNATIVE PURCHASE PLAN
The Portfolio offers two classes of shares which allows you to choose
the most beneficial sales charge structure for your individual
circumstances given the amount of the purchase, the length of time you
expect to hold the shares and other relevant circumstances. You may
purchase shares at the next determined NAV plus a sales charge which, at
your election, may be imposed either at the time of purchase (the Class A
shares or the initial sales charge alternative) or on a deferred basis (the
Class B shares or the deferred sales charge alternative) (the Alternative
Purchase Plan). The Fund no longer accepts purchase orders for Class B
shares.
Class A shares are subject to an initial sales charge of up to .99% of
the amount invested and an annual distribution fee which is currently being
charged at a rate of up to .50 of 1% of the average daily net assets of the
Class A shares. Certain purchases of Class A shares may qualify for
reduction or waiver of initial sales charges. See "Initial Sales Charge
Alternative-Class A Shares-Reduction or Waiver of Initial Sales Charges"
below.
Class B shares do not incur a sales charge when they are purchased but
are subject to a contingent deferred sales charge for one-year from the
date of purchase of the lesser of the amount involved or the redemption
proceeds and an annual distribution fee of up to 1% of the average daily
net asset value of the Class B shares. Class B shares will automatically
convert to Class A shares after the one-year CDSC period has expired.
The two classes of shares represent an interest in the same portfolio
of investments of the Portfolio and have the same rights, except that each
class bears the separate expenses of its Rule 12b-1 distribution plan and
has exclusive voting rights with respect to such a plan. The net income
attributable to each class and the dividends payable on the
19
<PAGE>
shares of each class will be reduced by the amount of the distribution fee
of each class. Class B shares typically bear the expenses of a higher
distribution fee which will typically cause the Class B shares to have a
higher expense ratio and to pay lower dividends than the Class A shares.
However, because the Distributor currently has no distribution costs
reimbursable to it under the Class B Plan and because the Fund has
discontinued assessing any 12b-1 fees on the Class B shares. Total Fund
Operating Expenses are currently lower for Class B shares than for the
Class A shares.
Financial advisers and other sales agents who sell shares of the
Portfolio will receive different compensation for selling Class A and Class
B shares.
The following illustrations are provided to assist you in determining
which method of purchase best suits your individual circumstances:
If you qualify for a reduced sales charge, you might elect the initial
sales charge alternative because a similar sales are subject to a lower
distribution fee than are Class B shares. However, because the initial
sales charge is deducted at the time of purchase, you would not have all of
your funds invested initially.
If you do not qualify for a reduced initial sales charge and expect to
maintain your investment in the Portfolio for less than one year you might
also elect the initial sales charge alternative because Class A shares are
not subject to a deferred sales charge upon the redemption and because
Class A shares are subject to a lower distribution fee than are Class B
shares. Again, however, you must weigh this consideration against the fact
that not all of your funds will be invested initially.
On the other hand, you might determine that it is more advantageous to
have all of your funds invested initially, although you are subject, for a
one year period, to a distribution fee of 1% and a contingent deferred
sales charge. If you are not entitled to a reduced initial sales charge and
you expect to maintain your investment in the Portfolio for more than one
year, you should consider purchasing Class B shares since Class B shares
will be automatically converted into Class A shares after the one year
contingent deferred sales charge period has expired. You will thereafter
become a Class A shareholder and, as such, will be subject to the lower
distribution fee applicable to Class A shareholders.
Initial Sales Charge Alternative-Class A Shares
The offering price of Class A shares for investors choosing the initial
sales charge alternative is the next determined NAV plus a sales charge
(expressed as a percentage of the offering price and of the amount
invested) as shown in the following table:
<TABLE>
<CAPTION>
Sales Charge as Sales Charge as Dealer Concession as
Percentage of Percentage of Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
------------------ -------------- --------------- --------------
<S> <C> <C> <C>
Less than $1,000,000 .99% 1.0% .99%
$1,000,000 and above 0.0% 0.0% 0.0%
</TABLE>
Selling dealers may be deemed to be underwriters, as that term is
defined under federal securities laws.
Reduction and Waiver of Initial Sales Charges. Reduced sales charges
are available through Rights of Accumulation and Letters of Intent. Shares
of the Fund and shares of other Prudential Mutual Funds (excluding money
market funds other than those acquired pursuant to the exchange privilege)
may be aggregated to determine the applicable reduction. See "Reduction and
Waiver of Initial Sales Charges-Class A shares" in the Statement of
Additional Information. Class A shares may be purchased at NAV, without
payment of an initial sales charge, by pension, profit-sharing or other
employee benefit plans qualified under Section 401 of the Internal Revenue
Code and deferred compensation and annuity plans under Sections 457 and
403(b)(7) of the Internal Revenue Code (Benefit Plans), provided that the
plan has existing assets of at least $1 million invested in shares of
Prudential Mutual Funds (excluding money market funds other than those
acquired pursuant to the exchange privilege) or 1,000 eligible employees or
members. In the case of Benefit Plans whose accounts are held directly with
the Transfer Agent and for which the
20
<PAGE>
Transfer Agent does individual account record keeping (Direct Account
Benefit Plans) and Benefit Plans sponsored by PSI or its subsidiaries (PSI
or Subsidiary Prototype Benefit Plans), Class A shares may be purchased at
NAV by participants who are repaying loans made from such plans to the
participant. Additional information concerning the reduction and waiver of
initial sales charges is set forth in the Statement of Additional
Information.
In addition, Class A shares may be purchased at NAV, through Prudential
Securities or the Transfer Agent, by the following persons: (a) Directors
and officers of the Fund and other Prudential Mutual Funds, (b) employees
of Prudential Securities and PMF and their subsidiaries and members of the
families of such persons who maintain an "employee related" account at
Prudential Securities or the Transfer Agent, (c) employees and special
agents of Prudential and its subsidiaries and all persons who have retired
directly from active service with Prudential or one of its subsidiaries,
(d) registered representatives and employees of dealers who have entered
into a selected dealer agreement with Prudential Securities provided that
purchases at NAV are permitted by such person's employer and (e) investors
who have a business relationship with a financial adviser who joined
Prudential Securities from another investment firm, provided that (i) the
purchase is made within 90 days of the commencement of the financial
adviser's employment at Prudential Securities, (ii) the purchase is made
with proceeds of a redemption of shares of any open-end, non-money market
fund sponsored by the financial adviser's previous employer (other than a
fund which imposes a distribution or service fee of .25 of 1% or less) on
which no deferred sales load, fee or other charge was imposed on redemption
and (iii) the financial adviser served as the client's broker on the
previous purchases.
You must notify the Transfer Agent either directly or through
Prudential Securities or Prusec that you are entitled to the reduction or
waiver of the sales charge. The reduction or waiver will be granted subject
to confirmation of your entitlement. No initial sales charges are imposed
upon Class A shares purchased upon the reinvestment of dividends and
distributions. See "Purchase and Redemption of Fund Shares-Reduction and
Waiver of Initial Sales Charges-Class A Shares" in the Statement of
Additional Information.
Deferred Sales Charge Alternative-Class B Shares
The offering price of Class B shares for investors choosing the
deferred sales charge alternative is the NAV per share next determined
following receipt of an order by the Transfer Agent or Prudential
Securities. Although there is no sales charge imposed at the time of
purchase, the Class B shares may be subject to a contingent deferred sales
charge. See "How to Sell Your Shares-Contingent Deferred Sales Charge-
Class B Shares." Currently, the Portfolio is not offering Class B shares.
HOW TO SELL YOUR SHARES
You can redeem shares of the Portfolio at any time for cash at the NAV
per share next determined after the redemption request is received in
proper form by the Transfer Agent or Prudential Securities. See "How the
Fund Values its Shares." In certain cases, however, redemption proceeds
from the Class B shares will be reduced by the amount of any applicable
contingent deferred sales charge, as described below. See "Contingent
Deferred Sales Charge-Class B Shares."
If you hold shares through Prudential Securities, you must redeem your
shares by contacting your Prudential Securities Financial Adviser. If you
hold shares in non-certificate form, a written request for redemption
signed by you exactly as the account is registered is required. If you hold
certificates, the certificates signed in the name(s) shown on the face of
the certificates, must be received by the Transfer Agent in order for the
redemption request to be processed. If redemption is requested by a
corporation, partnership, trust or fiduciary, written evidence of authority
acceptable to the Transfer Agent must be submitted before such request will
be accepted. All correspondence and documents concerning redemptions should
be sent to the Portfolio in care of the Transfer Agent, Prudential Mutual
Fund Services, Inc., Attention: Redemption Services, P.O. Box 15010, New
Brunswick, New Jersey 08906- 5010.
If the proceeds of the redemption (a) exceed $50,000, (b) are to be
paid to a person other than the record owner, (c) are to be sent to an
address other than the address on the Transfer Agent's records, or (d) are
to be paid to a corporation,
21
<PAGE>
partnership, trust or fiduciary, the signature(s) on the redemption request
and on the certificates, if any, or stock power must be guaranteed by an
"eligible guarantor institution." An "eligible guarantor institution"
includes any bank, broker, dealer or credit union. The Transfer Agent
reserves the right to request additional information from, and make
reasonable inquiries of, any eligible guarantor institution. For clients of
Prusec, a signature guarantee may be obtained from the agency or office
manager of most Prudential Insurance and Financial Services or Preferred
Services offices.
Payment for shares presented for redemption will be made by check
within seven days after receipt by the Transfer Agent of the certificate
and/or written request except as indicated below. Such payment may be
postponed or the right of redemption suspended at times (a) when the New
York Stock Exchange is closed for other than customary weekends and
holidays, (b) when trading on such Exchange is restricted, (c) when an
emergency exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets,
or (d) during any other period when the SEC, by order, so permits; provided
that applicable rules and regulations of the SEC shall govern as to whether
the conditions prescribed in (b), (c) or (d) exist.
Payment for redemption of recently purchased shares will be delayed
until the Portfolio or the Transfer Agent has been advised that the
purchase check has been honored, up to 10 calendar days from the time of
receipt of the purchase check by the Transfer Agent. Such delay may be
avoided by purchasing shares by wire or by certified or official bank
check.
Redemption in Kind. If the Board of Directors determines that it would
be detrimental to the best interests of the remaining shareholders of the
Portfolio to make payment wholly or partly in cash, the Portfolio may pay
the redemption price in whole or in part by a distribution in kind of
securities from the investment portfolio of the Portfolio, in lieu of cash,
in conformity with applicable rules of the SEC. Securities will be readily
marketable and will be valued in the same manner as in a regular
redemption. See "How the Fund Values its Shares." If your shares are
redeemed in kind, you would incur transaction costs in converting the
assets into cash. The Portfolio, however, has elected to be governed by
Rule 18f-1 under the Investment Company Act, pursuant to which the
Portfolio is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Portfolio during any 90-day
period for any one shareholder.
Involuntary Redemption. In order to reduce expenses of the Portfolio,
the Board of Directors may redeem all of the shares of any shareholder,
other than a shareholder which is an IRA or other tax- deferred retirement
plan, whose account has a net asset value of less than $500 due to a
redemption. The Portfolio will give such shareholders 60 days' prior
written notice in which to purchase sufficient additional shares to avoid
such redemption.
30-day Repurchase Privilege. If you redeem your shares and have not
previously exercised the repurchase privilege you may reinvest any portion
or all of the proceeds of such redemption in shares of the Portfolio at the
NAV next determined after the order is received, which must be within 30
days after the date of the redemption. No sales charge will apply to such
repurchases. You will receive pro rata credit for any contingent deferred
sales charge paid in connection with the redemption of Class B shares. You
must notify the Portfolio's Transfer Agent, either directly or through
Prudential Securities or Prusec, at the time the repurchase privilege is
exercised that you are entitled to credit for the contingent deferred sales
charge previously paid. Exercise of the repurchase privilege will generally
not affect federal income tax treatment of any gain realized upon
redemption. If the redemption resulted in a loss, some or all of the loss,
depending on the amount reinvested, will not be allowed for federal income
tax purposes.
Contingent Deferred Sales Charge-Class B Shares
If you have elected to purchase shares without an initial sales charge
(Class B), a contingent deferred sales charge or CDSC of 1% will be imposed
on all redemptions made within one year of purchase. The CDSC will be
deducted from the redemption proceeds and reduce the amount paid to you. A
CDSC will be applied on the lesser of the original
22
<PAGE>
purchase price or the current value of the shares being redeemed.
Increases in the value of your shares purchased through reinvestment of
dividends or distributions are not subject to a CDSC. The amount of any
contingent deferred sales charge will be paid to and retained by the
Distributor to the extent the Distributor has costs reimbursable to it
under the Class B Plan. See "How the Fund is Managed-Distributor."
In determining the contingent deferred sales charge applicable to a
redemption, it will be assumed that the redemption is made first of shares
acquired pursuant to reinvestment of dividends and distributions and then
of shares held for the longest period of time within the one-year period.
For purposes of calculating the one-year period, all payments for the
purchase of shares during a month will be aggregated and deemed to have
been made on the last day of the month. No contingent deferred sales charge
will be applicable after the one-year period.
For example, assume you purchased 1000 shares at $2 per share for a
cost of $2,000. Subsequently, you acquired 50 additional shares through
dividend reinvestment. Six months after the purchase, you decided to redeem
200 shares. Assuming at the time of redemption, the net asset value had
appreciated to $2.20 per share, the proceeds of the redemption would be
$440. Fifty shares would not be subject to charge because of dividend
reinvestment. With respect to the remaining 150 shares, the charge would be
applied to the original cost of $2 per share and not to the increase in net
asset value per share of $.20. Therefore, $300 of the $440 redemption
proceeds would be charged at a rate of 1%.
For federal income tax purposes, the amount of the contingent deferred
sales charge will reduce the gain or increase the loss, as the case may be,
on the amount recognized on the redemption of shares.
HOW TO EXCHANGE YOUR SHARES
Class A and Class B shareholders of the Portfolio each have an exchange
privilege with the Class A and Class B shares, respectively, of Prudential
Adjustable Rate Securities Fund, Inc. subject to the minimum investment
requirements of that Fund. In addition, Class B shares of the Portfolio may
be exchanged into shares of the Prudential Government Securities Trust,
Intermediate Term Series. Class A and Class B shareholders of the Portfolio
may exchange their shares for Class A and Class B shares, respectively, of
Prudential Adjustable Rate Securities Fund, Inc. (and, for Class B shares,
into shares of the Prudential Government Securities Trust, Intermediate
Term Series) on the basis of the relative net asset value per share. Any
applicable CDSC payable upon the redemption of shares exchanged will be
calculated from the first day of the month after the initial purchase of
such shares, rather than the date of the exchange. An exchange will be
treated as a redemption and purchase for tax purposes.
In order to exchange shares by telephone, you must authorize telephone
exchange on your initial application form or by written notice to the
Transfer Agent and hold shares in non-certificate form. Thereafter, you may
call the Fund at (800) 225-1852 to execute a telephone exchange of shares,
weekdays, except holidays, between the hours of 8:00 A.M. and 6:00 P.M.,
New York time. For your protection and to prevent fraudulent exchanges,
your telephone call will be recorded and you will be asked to provide your
personal identification number. A written confirmation of the exchange will
be sent to you. Neither the Fund nor its agents will be liable for any
loss, liability or cost which results from acting upon instructions
reasonably believed to be genuine under the foregoing procedures. All
exchanges will be made on the basis of the relative NAV of the two funds
next determined after the request is received in good order. The Exchange
Privilege is available only in states where the exchange may legally be
made.
If you hold shares through Prudential Securities you must exchange your
shares by contacting your Prudential Securities financial adviser.
If you hold certificates, the certificates, signed in the name(s) shown
on the face of the certificates must be returned in order for the shares to
be exchanged. See "How to Sell Your Shares."
You may also exchange your shares by mail by writing to Prudential
Mutual Fund Services, Inc., Attention: Exchange Processing, P.O. Box 15010,
New Brunswick, New Jersey 08906-5010.
23
<PAGE>
In periods of severe market or economic conditions the telephone
exchange of shares may be difficult to implement and you should make
exchanges by mail by writing to Prudential Mutual Fund Services, Inc., at
the address noted above.
The Exchange Privilege may be modified or terminated at any time on
sixty days' notice to shareholders.
SHAREHOLDER SERVICES
In addition to the exchange privilege, as a shareholder in the
Portfolio, you can take advantage of the following additional services and
privileges:
* Automatic Reinvestment of Dividends and/or Distributions Without a
Sales Charge. For your convenience, all dividends and distributions are
automatically reinvested in full and fractional shares of the Fund at NAV
without a sales charge. You may direct the Transfer Agent in writing not
less than 5 full business days prior to the record date to have subsequent
dividends and/or distributions sent in cash rather than reinvested. If you
hold shares through Prudential Securities, you should contact your
financial adviser.
* Automatic Savings Accumulation Plan (ASAP). Under ASAP you may make
regular purchases of the Portfolio's Class B shares (if and when the Fund
accepts purchase orders for Class B shares) in amounts as little as $50 via
an automatic debit to a bank account or Prudential Securities account
(including a Command Account). ASAP is not available for purchases of Class
A shares. For additional information about this service, you may contact
your Prudential Securities financial adviser, PruSec registered
representative or the Transfer Agent directly.
* Tax-Deferred Retirement Plans. Various tax-deferred retirement plans,
including a 401(k) plan, self-directed individual retirement accounts and
"tax-sheltered accounts" under Section 403(b)(7) of the Internal Revenue
Code are available through the Distributor. These plans are for use by both
self-employed individuals and corporate employers. These plans permit
either self-direction of accounts by participants, or a pooled account
arrangement. Information regarding the establishment of these plans, the
administration, custodial fees and other details is available from
Prudential Securities or the Transfer Agent. If you are considering
adopting such a plan, you should consult with your own legal or tax adviser
with respect to the establishment and maintenance of such a plan.
* Systematic Withdrawal Plan. A systematic withdrawal plan is available
for shareholders having Class A shares of the Portfolio which provides for
monthly or quarterly checks. See "How to Sell Your Shares- Contingent
Deferred Sales Charge-Class B Shares."
* Reports to Shareholders. The Portfolio will send you annual and
semi-annual reports. The financial statements appearing in annual reports
are audited by independent accountants. In order to reduce duplicate
mailing and printing expenses, the Portfolio will provide one annual and
semi-annual shareholder report and annual prospectus per household. You may
request additional copies of such reports by calling (800) 225-1852 or by
writing to the Portfolio at One Seaport Plaza, New York, New York 10292. In
addition, monthly unaudited financial data are available upon request from
the Fund.
* Shareholder Inquiries. Inquiries should be addressed to the Portfolio
at One Seaport Plaza, New York, New York 10292, or by telephone, at (800)
225-1852 (toll-free) or, from outside the U.S.A. at (908) 417-7555
(collect).
For additional information regarding the services and privileges
described above, see "Shareholder Investment Account" in the Statement of
Additional Information.
24
<PAGE>
APPENDIX
DESCRIPTION OF SECURITY RATINGS
Moody's Investors Service
Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or
by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of
such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than Aaa bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements which make the long-term risks appear somewhat larger
than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Commercial Paper
Moody's commercial paper ratings are opinions of the ability of issuers
to repay punctually promissory obligations not having an original maturity
in excess of nine months.
P-1: The designation "Prime-1" or "P-1" indicates the highest quality
repayment capacity of the rated issue.
P-2: The designation "Prime-2" or "P-2" indicates a strong capacity for
repayment. Standard & Poor's Corporation
AAA: Debt rated AAA has the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely
strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher
rated categories.
A-1
<PAGE>
BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for debt in
higher rated categories.
BB, B, CCC, CC: Debt rated BB, B, CCC and CC is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
Commercial Paper
Standard & Poor's commercial paper ratings are current assessments of
the likelihood of timely payment of debt having an original maturity of no
more than 270 days.
A-1: The A-1 designation indicates that the degree of safety regarding
timely payment is very strong.
A-2: Capacity for timely payment on issues with the designation A-2 is
strong. However, the relative degree of safety is not as overwhelming as
for issues designated A-1.
A-2
<PAGE>
- -------------------------------------------------------------------------------
THE PRUDENTIAL MUTUAL FUND FAMILY
- -------------------------------------------------------------------------------
Prudential Mutual Fund Management offers a broad range of mutual funds
designed to meet your individual needs. We welcome you to review the
investment options available through our family of funds. For more
information on the Prudential Mutual Funds, including charges and expenses,
contact your Prudential Securities financial adviser or Prusec registered
representative or telephone the Fund at 1 (800) 225-1852 for a free
prospectus. Read the prospectus carefully before you invest or send money.
- -------------------------------------------------------------------------------
Taxable Bond Funds
Prudential Adjustable Rate Securities Fund, Inc.
Prudential GNMA Fund
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential Structured Maturity Fund, Inc.
Income Portfolio
Prudential U.S. Government Fund
The BlackRock Government Income Trust
Tax-Exempt Bond Funds
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Yield Series
Insured Series
Modified Term Series
Prudential Municipal Series Fund
Arizona Series
Florida Series
Georgia Series
Maryland Series
Massachusetts Series
Michigan Series
Minnesota Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
Global Funds
Prudential Global Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Global Natural Resources Fund, Inc.
Prudential Intermediate Global Income Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential Short-Term Global Income Fund, Inc.
Global Assets Portfolio
Short-Term Global Income Portfolio
Global Utility Fund, Inc.
Equity Funds
Prudential Allocation Fund
Conservatively Managed Portfolio
Strategy Portfolio
Prudential Equity Fund
Prudential Equity Income Fund, Strategy Portfolio
Prudential Growth Opportunity Fund
Prudential IncomeVertible\'AE Fund, Inc.
Prudential Multi-Sector Fund, Inc.
Prudential Strategist Fund, Inc.
Prudential Utility Fund
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Money Market Funds
* Taxable Money Market Funds
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund
Money Market Series
Prudential MoneyMart Assets
* Tax-Free Money Market Funds
Prudential Tax-Free Money Fund
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
* Command Funds
Command Money Fund
Command Government Fund
Command Tax-Free Fund
* Institutional Money Market Funds
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
- -------------------------------------------------------------------------------
<PAGE>
No dealer, sales representative or any other person has
been authorized to give any information or to make any
representations, other than those contained in this
Prospectus, in connection with the offer contained
herein, and, if given or made, such other information or
representations must not be relied upon as having been
authorized by the Fund or the Distributor. This
Prospectus does not constitute and offer by the Fund or
by the Distributor to sell or a solicitation of an offer to
buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make
such offer in such jurisdiction.
___________________________________________________________
TABLE OF CONTENTS
Page
----
FUND HIGHLIGHTS.............................. 2
FUND EXPENSES................................ 4
FINANCIAL HIGHLIGHTS......................... 5
HOW THE FUND INVESTS......................... 6
Investment Objective and Policies.......... 6
Risk Factors............................... 8
Other Investments and Investment Techniques 8
Investment Restrictions.................... 12
HOW THE FUND IS MANAGED...................... 12
Manager.................................... 12
Fee Waivers and Subsidy.................... 13
Distributor ............................... 13
Portfolio Transactions..................... 15
Custodian and Transfer and
Dividend Disbursing Agent................ 15
HOW THE FUND VALUES ITS SHARES............... 15
HOW THE FUND CALCULATES PERFORMANCE.......... 16
TAXES, DIVIDENDS AND DISTRIBUTIONS........... 16
GENERAL INFORMATION.......................... 18
Description of Common Stock................ 18
Additional Information..................... 18
SHAREHOLDER GUIDE............................ 18
How to Buy Shares of the Fund.............. 18
Alternative Purchase Plan.................. 19
How to Sell Your Shares.................... 21
How to Exchange Your Shares................ 23
Shareholder Services....................... 24
APPENDIX OF SECURITY RATINGS.................A-1
THE PRUDENTIAL MUTUAL FUND FAMILY............ 27
________________________________________________
MF144A
________________________________________________
Class A: 74436H 10 1
CUSIP Nos.:
Class B: 74436H 20 0
________________________________________________
Prudential
Short-Term
Global Income
Fund, Inc.
(Global Assets Portfolio)
Prudential Mutual Funds (LOGO)
Building Your Future
On Our StrengthSM
PROSPECTUS
, 1994
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
Statement of Additional Information
dated [ ]
Prudential Short-Term Global Income Fund, Inc. (the Fund) is an open-
end, non-diversified management investment company, or mutual fund
comprised of two Portfolios, the Global Assets Portfolio and the Short-
Term Global Income Portfolio. The investment objective of the Short-Term
Global Income Portfolio (the Portfolio) is to maximize total return, the
components of which are current income and capital appreciation. The
investment objective of the Global Assets Portfolio is high current income
with minimum risk to principal. There is no assurance that the Portfolios
will achieve their investment objectives.
The Short-Term Global Income Portfolio seeks to achieve its objective
by investing primarily in a portfolio of investment grade debt securities
having remaining maturities of not more than three years. The Portfolio,
which is not a money market fund, seeks to maximize current income by
investing in debt securities denominated in U.S. dollars and a range of
foreign currencies.
The Global Assets Portfolio seeks to achieve its objective by investing
primarily in a portfolio of high-quality debt securities having remaining
maturities of not more than one year. The Global Assets Portfolio seeks
high current yields by investing in debt securities denominated in U.S.
dollars and a range of foreign currencies. The Portfolio, which is not a
money market fund, is designed for the investor who seeks a higher yield
than a money market fund and less fluctuation in net asset value than a
longer-term bond fund.
Under normal circumstances, each Portfolio will invest its assets in
debt securities of issuers in at least three different countries including
the United States. There can be no assurance that a Portfolio's objective
will be achieved.
Each Portfolio operates as a separate fund. Information about each
Portfolio is set forth in separate prospectuses, copies of which may be
obtained from the Fund upon request. This Statement contains additional
information about each Portfolio. Each Portfolio is also subject to certain
investment restrictions. See"Investment Restrictions."
The Fund's address is One Seaport Plaza, New York, New York 10292, and
its telephone number is (800) 225-1852.
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Prospectus of each Portfolio, dated
[ , 1994], a copy of which may be obtained from the Fund at One
Seaport Plaza, New York, New York 10292.
-----------------
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Cross-reference
to page in
Page Prospectus
---- ---------------
<S> <C> <C>
Additional Investment Information ...................................................... B-2
Investment Restrictions ................................................................ B-9 13
Directors and Officers ................................................................. B-10 12
Manager ................................................................................ B-12 13
Distributor ........................................................................... B-14 14
Portfolio Transactions and Brokerage ................................................... B-15 16
Purchase and Redemption of Fund Shares ................................................. B-16 20
Shareholder Investment Account ........................................................ B-18 24
Net Asset Value ........................................................................ B-22 16
Taxation .............................................................................. B-22 17
Performance Information ................................................................ B-23 16/17
Custodian, Transfer and Dividend Disbursing Agent, and Independent Accountants ........ B-25 16
Financial Statements B-26/38 -
Independent Auditors' Reports B-37/48 -
- -------------------------------------------------------------------------------------------------------------------
MF1498
</TABLE>
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
Investment Policies
U.S. Government Securities
"U.S. Government securities" shall include the following:
U.S. Treasury Securities. Each Portfolio may invest in U.S. Treasury
securities, including bills, notes and bonds issued by the U.S. Treasury.
These instruments are direct obligations of the U.S. Government and, as
such, are backed by the "full faith and credit" of the United States. They
differ primarily in their interest rates, the lengths of their maturities
and the dates of their issuances.
Obligations Issued or Guaranteed by U.S. Government Agencies and
Instrumentalities. Each Portfolio may invest in obligations issued by
agencies of the U.S. Government or instrumentalities established or
sponsored by the U.S. Government. These obligations, including those that
are guaranteed by federal agencies or instrumentalities, may or may not be
backed by the "full faith and credit" of the United States. Obligations of
the Government National Mortgage Association (GNMA), the Farmers Home
Administration and the Export-Import Bank are backed by the full faith and
credit of the U.S. Government. Securities in which a Portfolio may invest
that are not backed by the full faith and credit of the U.S. Government
include obligations issued by the Tennessee Valley Authority, the Federal
National Mortgage Association (FNMA), the Federal Home Loan Mortgage
Corporation (FHLMC), the Resolution Funding Corporation and the United
States Postal Service, each of which has the right to borrow from the
United States Treasury to meet its obligations, and obligations of the
Federal Farm Credit Bank and the Federal Home Loan Bank, the obligations of
which may be satisfied only by the individual credit of the issuing agency.
In the case of securities not backed by the full faith and credit of the
United States, a Portfolio must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment and may not be able to
assert a claim against the United States if the agency or instrumentality
does not meet its commitments.
The Short-Term Global Income Portfolio may invest in U.S. Government
securities that are zero-coupon securities. Zero-coupon securities pay no
cash income but are purchased at a discount from their value at maturity.
When held to maturity, their entire return, which consists of the
amortization of the discount, equals the difference between their purchase
price and their maturity value. At no time will the aggregate market value
of the Portfolio's investments in zero-coupon securities exceed 5% of the
Portfolio's total assets.
Special Considerations. U.S. Government securities are considered among
the most creditworthy of fixed income investments. The yields available
from U.S. Government securities are generally lower than the yields
available from corporate debt securities. The values of U.S. Government
securities (like those of fixed-income securities generally) will change as
interest rates fluctuate. During periods of falling U.S. interest rates,
the values of outstanding long-term U.S. Government securities generally
rise. Conversely, during periods of rising interest rates, the values of
such securities generally decline. The magnitude of those fluctuations will
generally be greater for securities with longer maturities. Although
changes in the value of U.S. Government securities will not affect
investment income from those securities, they will affect the net asset
value of each Portfolio.
At a time when a Portfolio has written call options on a portion of its
U.S. Government securities, its ability to profit from declining interest
rates will be limited. Any appreciation in the value of the securities held
in the portfolio above the strike price would likely be partially or wholly
offset by unrealized losses on call options written by the Portfolio. The
termination of option positions under these conditions would generally
result in the realization of capital losses, which would reduce the
Portfolio's capital gains distributions. Accordingly, a Portfolio would
generally seek to realize capital gains to offset realized losses by
selling portfolio securities. In such circumstances, however, it is likely
that the proceeds of such sales would be reinvested in lower yielding
securities. See "Additional Risks-Options Transactions and Related Risks."
Loan Participations
Each Portfolio may invest up to 5% of its total assets in high quality
participation interests having remaining maturities not exceeding one year
in loans extended by banks to United States and foreign companies. In a
typical corporate loan syndication, a number of lenders, usually banks
(co-lenders), lend a corporate borrower a specified sum pursuant to the
terms and conditions of a loan agreement. One of the co-lenders usually
agrees to act as the agent bank with respect to the loan. The loan
agreement among the corporate borrower and the co-lenders identifies the
agent bank as well as sets forth the rights and duties of the parties. The
agreement often (but not always) provides for the collateralization of the
corporate borrower's obligations thereunder and includes various types of
restrictive covenants which must be met by the borrower.
The participation interests acquired by a Portfolio may, depending on
the transaction, take the form of a direct or co-lending relationship with
the corporate borrower, an assignment of an interest in the loan by a co-
lender or another participant, or a
B-2
<PAGE>
participation in the seller's share of the loan. Typically, the Portfolio
will look to the agent bank to collect principal of and interest on a
participation interest, to monitor compliance with loan covenants, to
enforce all credit remedies, such as foreclosures on collateral, and to
notify co-lenders of any adverse changes in the borrower's financial
condition or declarations of insolvency. The agent bank in such cases will
be qualified to serve as a custodian for a registered investment company
such as the Fund. The agent bank is compensated for these services by the
borrower pursuant to the terms of the loan agreement.
When a Portfolio acts as co-lender in connection with a participation
interest or when a Portfolio acquires a participation interest the terms
of which provide that the Portfolio will be in privity with the corporate
borrower, the Portfolio will have direct recourse against the borrower in
the event the borrower fails to pay scheduled principal and interest. In
cases where the Portfolio lacks such direct recourse, the Portfolio will
look to the agent bank to enforce appropriate credit remedies against the
borrower.
Each Portfolio believes that the principal credit risk associated with
acquiring participation interests from a co-lender or another participant
is the credit risk associated with the underlying corporate borrower. A
Portfolio may incur additional credit risk, however, when a Portfolio is in
the position of participant rather than a co-lender because the Portfolio
must assume the risk of insolvency of the co-lender from which the
participation interest was acquired and that of any person interpositioned
between the Portfolio and the co-lender. However, in acquiring
participation interests, the Portfolio will conduct analysis and evaluation
of the financial condition of each such co-lender and participant to ensure
that the participation interest meets the Portfolio's high quality standard
and will continue to do so as long as it holds a participation. For
purposes of a Portfolio's requirement to maintain diversification for tax
purposes, the issuer of a loan participation will be the underlying
borrower. In cases where a Portfolio does not have recourse directly
against the borrower, both the borrower and each agent bank and co-lender
interposed between the Portfolio and the borrower will be deemed issuers of
the loan participation for tax diversification purposes.
For purposes of each Portfolio's fundamental investment restriction
against investing 25% or more of its total assets in any one industry, a
Portfolio will consider all relevant factors in determining who is the
issuer of a loan participation including the credit quality of the
underlying borrower, the amount and quality of the collateral, the terms of
the loan participation agreement and other relevant agreements (including
any intercreditor agreements), the degree to which the credit of such
intermediary was deemed material to the decision to purchase the loan
participation, the interest environment, and general economic conditions
applicable to the borrower and such intermediary.
Certificates of Deposit and Bankers' Acceptances
Certificates of deposit are receipts issued by a depository institution
in exchange for the deposit of funds. The issuer agrees to pay the amount
deposited plus interest to the bearer of the receipt on the date specified
on the certificate. The certificate usually can be traded in the secondary
market prior to maturity. Bankers' acceptances typically arise from
short-term credit arrangements designed to enable businesses to obtain
funds to finance commercial transactions. Generally, an acceptance is a
time draft drawn on a bank by an exporter or an importer to obtain a stated
amount of funds to pay for specific merchandise. The draft is then
"accepted" by a bank that, in effect, unconditionally guarantees to pay the
face value of the instrument on its maturity date. The acceptance may then
be held by the accepting bank as an earning asset or it may be sold in the
secondary market at the going rate of discount for a specific maturity.
Although maturities for acceptance can be as long as 270 days, most
acceptances have maturities of six months or less.
Commercial Paper
Commercial paper consists of short-term (usually from 1 to 270 days)
unsecured promissory notes issued by corporations in order to finance their
current operations. A variable amount master demand note (which is a type
of commercial paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter agreement between
a commercial paper issuer and an institutional lender pursuant to which the
lender may determine to invest varying amounts.
Additional Risks
Options Transactions and Related Risks
Each Portfolio may purchase put and call options and sell covered put
and call options which are traded on United States or other foreign
exchanges and may also engage in over-the-counter options transactions with
United States securities dealers or foreign government securities dealers
(OTC options).
Options on Securities. The purchaser of a call option has the right,
for a specified period of time, to purchase the securities subject to the
option at a specified price (the exercise price or strike price). By
writing a call option, a Portfolio becomes obligated during the term of the
option, upon exercise of the option, to deliver the underlying securities
or a specified amount of cash to the purchaser against receipt of the
exercise price. When a Portfolio writes a call option, the Portfolio loses
the potential for gain on the underlying securities in excess of the
exercise price of the option during the period that the option is open.
B-3
<PAGE>
The purchaser of a put option has the right, for a specified period of
time, to sell the securities subject to the option to the writer of the put
at the specified exercise price. By writing a put option, the Portfolio
becomes obligated during the term of the option, upon exercise of the
option, to purchase the securities underlying the option at the exercise
price. The Portfolio might, therefore, be obligated to purchase the
underlying securities for more than their current market price.
The writer of an option retains the amount of the premium, although
this amount may be offset or exceeded, in the case of a covered call
option, by a decline and, in the case of a covered put option, by an
increase in the market value of the underlying security during the option
period.
A Portfolio may wish to protect certain portfolio securities against a
decline in market value through purchase of put options on other carefully
selected securities which the Investment Advisers believe may move in the
same direction as those portfolio securities. If the investment adviser's
judgment is correct, changes in the value of the put options should
generally offset changes in the value of the portfolio securities being
hedged. If the investment adviser's judgment is not correct, the value of
the securities underlying the put option may decrease less than the value
of the Portfolio's investments and therefore the put option may not provide
complete protection against a decline in the value of the Portfolio's
investments below the level sought to be protected by the put option.
A Portfolio may similarly wish to hedge against appreciation in the
value of debt securities that it intends to acquire through purchase of
call options on other carefully selected debt securities which the
Investment Advisers believe may move in the same direction as those
portfolio securities. In such circumstances the Portfolio will be subject
to risks analogous to those summarized above in the event that the
correlation between the value of call options so purchased and the value of
the securities intended to be acquired by the Portfolio is not as close as
anticipated and the value of the securities underlying the call options
increases less than the value of the securities to be acquired by the
Portfolio.
Each Portfolio may write options on securities in connection with buy-
and-write transactions; that is, the Portfolio may purchase a security and
concurrently write a call option against that security. If the call option
is exercised, the Portfolio's maximum gain will be the premium it received
for writing the option, adjusted upwards or downwards by the difference
between the Portfolio's purchase price of the security and the exercise
price of the option. If the option is not exercised and the price of the
underlying security declines, the amount of the decline will be offset in
part, or entirely, by the premium received.
The exercise price of a call option may be below (in-the-money), equal
to (at-the-money) or above (out-of-the money) the current value of the
underlying security at the time the option is written. Buy-and-write
transactions using in-the-money call options may be used when it is
expected that the price of the underlying security will remain flat or
decline moderately during the option period. Buy-and-write transactions
using at-the-money call options may be used when it is expected that the
price of the underlying security will remain fixed or advance moderately
during the option period. A buy-and-write transaction using an out-of-the-
money call option may be used when it is expected that the premium received
from writing the call option plus the appreciation in the market price of
the underlying security up to the exercise price will be greater than the
appreciation in the price of the underlying security alone. If the call
option is exercised in such a transaction, the Portfolio's maximum gain
will be the premium received by it for writing the option, adjusted upwards
or downwards by the difference between the Portfolio's purchase price of
the security and the exercise price of the option. If the option is not
exercised and the price of the underlying security declines, the amount of
the decline will be offset in part, or entirely, by the premium received.
Each Portfolio may write both American style options and European style
options. An American style option is an option which may be exercised by
the holder at any time prior to its expiration. A European style option,
however, may only be exercised as of the expiration of the option.
Prior to being notified of exercise of the option, the writer of an
exchange-traded option that wishes to terminate its obligation may effect a
"closing purchase transaction" by buying an option of the same series as
the option previously written. (Options of the same series are options with
respect to the same underlying security, having the same expiration date
and the same strike price.) The effect of the purchase is that the writer's
position will be cancelled by the exchange's affiliated clearing
organization. Likewise, an investor who is the holder of an option may
liquidate a position by effecting a "closing sale transaction" by selling
an option of the same series as the option previously purchased. There is
no guarantee that either a closing purchase or a closing sale transaction
can be effected.
Exchange-traded options in the United States are issued by a clearing
organization affiliated with the exchange on which the option is listed
which, in effect, gives its guarantee to every exchange-traded option
transaction. In contrast, OTC options are contracts between a Portfolio and
its contra-party with no clearing organization guarantee. Thus, when a
Portfolio purchases an OTC option, it relies on the dealer from which it
has purchased the OTC option to make or take delivery of the securities
underlying the option. Failure by the dealer to do so would result in the
loss of the premium paid by the Portfolio as well as the loss of the
expected benefit of the transaction. The Board of Directors of the Fund
will approve a list of dealers with which the Portfolios may engage in OTC
options.
When a Portfolio writes an OTC option, it generally will be able to
close out the OTC options prior to its expiration only by entering into a
closing purchase transaction with the dealer to which the Portfolio
originally wrote the OTC option. While the
B-4
<PAGE>
Portfolio will enter into OTC options only with dealers which agree to,
and which are expected to be capable of, entering into closing transactions
with the Portfolio, there can be no assurance that the Portfolio will be
able to liquidate an OTC option at a favorable price at any time prior to
expiration. Until the Portfolio is able to effect a closing purchase
transaction in a covered OTC call option the Portfolio has written, it will
not be able to liquidate securities used as cover until the option expires
or is exercised or different cover is substituted. In the event of
insolvency of the contra-party, the Portfolio may be unable to liquidate an
OTC option.
OTC options purchased by a Portfolio will be treated as illiquid
securities subject to any applicable limitation on such securities.
Similarly, the assets used to "cover" OTC options written by a Portfolio
will be treated as illiquid unless the OTC options are sold to qualified
dealers who agree that the Portfolio may repurchase any OTC options it
writes for a maximum price to be calculated by a formula set forth in the
option agreement. The "cover" for an OTC option written subject to this
procedure would be considered illiquid only to the extent that the maximum
repurchase price under the formula exceeds the intrinsic value of the
option.
Each Portfolio may write only "covered" options. This means that so
long as a Portfolio is obligated as the writer of a call option, it will
own the underlying securities subject to the option or an option to
purchase the same underlying securities, having an exercise price equal to
or less than the exercise price of the "covered" option, or will establish
and maintain with its Custodian for the term of the option a segregated
account consisting of cash, U.S. Government securities or other liquid
high-grade debt obligations having a value equal to the fluctuating market
value of the optioned securities. A put option written by a Portfolio will
be considered "covered" if, so long as the Portfolio is obligated as the
writer of the option, it owns an option to sell the underlying securities
subject to the option having an exercise price equal to or greater than the
exercise price of the "covered" option, or it deposits and maintains with
its Custodian in a segregated account cash, U.S. Government securities or
other liquid high-grade debt obligations having a value equal to or greater
than the exercise price of the option. The Fund may also write straddles
(i.e., a combination of a call and a put written on the same security at
the same strike price where the same segregated collateral is considered
"cover" for both the put and the call). In such cases, the Fund will also
segregate or deposit cash, U.S. Government securities or liquid high-grade
obligations equivalent to the amount, if any, by which the put is "in the
money."
Options on Currencies
Instead of purchasing or selling futures, options on futures or forward
currency exchange contracts, a Portfolio may attempt to accomplish similar
objectives by purchasing put or call options on currencies either on
exchanges or in over-the-counter markets or by writing put options or
covered call options on currencies. A put option gives the Portfolio the
right to sell a currency at the exercise price until the option expires. A
call option gives the Portfolio the right to purchase a currency at the
exercise price until the option expires. Both options serve to insure
against adverse currency price movements in the underlying portfolio assets
designated in a given currency.
Futures Contracts and Options Thereon
Each Portfolio will purchase or sell interest rate or currency futures
contracts to take advantage of or to protect a Portfolio against
fluctuations in interest rates affecting the value of debt securities which
the Portfolio holds or intends to acquire and may also purchase or sell
currency futures contracts and options thereon to manage currency risks.
Since the futures market may be more liquid than the cash market, the use
of futures contracts as a risk management technique permits the Fund to
maintain a defensive position without having to sell portfolio securities.
A "sale" of a futures contract (or a "short" futures position) means
the assumption of a contractual obligation to deliver the securities or
currency underlying the contract at a specified price at a specified future
time. A "purchase" of a futures contract (or a "long" futures position)
means the assumption of a contractual obligation to acquire the securities
or currency underlying the contract at a specified price at a specified
future time.
At the time a futures contract is purchased or sold, a Portfolio must
allocate cash or securities as a deposit payment (initial margin). It is
expected that the initial margin on United States exchanges will vary from
one-half of 1% to 4% of the value of the securities or commodities
underlying the contract. Under certain circumstances, however, such as
periods of high volatility, the Portfolio may be required by an exchange to
increase the level of its initial margin payment. Thereafter, the futures
contract is valued daily and the payment of "variation margin" may be
required, a process known as "mark to the market." Each day the Portfolio
is required to provide or is entitled to receive variation margin in an
amount equal to any decline (in the case of a long futures position) or
increase (in the case of a short futures position) in the contract's value
since the preceding day.
Certain futures contracts are settled on a net cash payment basis
rather than by the sale and delivery of the securities or currency
underlying the futures contracts. United States futures contracts are
traded on exchanges that have been designated as "contract markets" by the
Commodity Futures Trading Commission (the CFTC), an agency of the U.S.
Government, and must be executed through a futures commission merchant
(i.e., a brokerage firm) which is a member of the relevant contract market.
Futures contracts trade on these contract markets and the exchange's
affiliated clearing organization guarantees performance of the contracts as
between the clearing members of the exchange.
B-5
<PAGE>
Although futures contracts by their terms may require the actual
delivery or acquisition of underlying assets, in most cases the contractual
obligation is extinguished by offset before the expiration of the contract
without having to make or take delivery of the assets. The offsetting of a
contractual obligation is accomplished by buying (to offset an earlier
sale) or selling (to offset an earlier purchase) an identical futures
contract calling for delivery in the same month.
The ordinary spreads between values in the cash and futures markets,
due to differences in the character of those markets, are subject to
distortions. Due to the possibility of distortion, a correct forecast of
general interest rate or currency trends by the investment adviser may
still not result in a successful transaction.
Although the Fund believes that use of futures contracts will benefit
the Portfolios, if the investment adviser's judgment about the general
direction of interest rates or currency values is incorrect, the
Portfolio's overall performance would be poorer than if it had not entered
into any such contracts.
Options on Futures
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a
long position if the option is a call and a short position if the option is
a put) at a specified exercise price at any time during the option exercise
period. The writer of the option is required upon exercise to assume a
short futures position (if the option is a call) or a long futures position
(if the option is a put). Upon exercise of the option, the assumption of an
offsetting futures position by the writer and holder of the option will be
accompanied by delivery of the accumulated cash balance in the writer's
futures margin account which represents the amount by which the market
price of the futures contract at exercise exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on
the futures contract.
Each Portfolio may only write "covered" put and call options on futures
contracts. A Portfolio will be considered "covered" with respect to a call
option it writes on a futures contract if the Portfolio owns the assets
which are deliverable under the futures contract or an option to purchase
that futures contract having a strike price equal to or less than the
strike price of the "covered" option and having an expiration date not
earlier than the expiration date of the "covered" option, or if it
segregates and maintains with its Custodian for the term of the option
cash, U.S. Government securities or other liquid high-grade debt
obligations equal to the fluctuating value of the optioned future. A
Portfolio will be considered "covered" with respect to a put option it
writes on a futures contract if it owns an option to sell that futures
contract having a strike price equal to or greater than the strike price of
the "covered" option, or if it segregates and maintains with its Custodian
for the term of the option cash, U.S. Government securities or liquid
high-grade debt obligations at all times equal in value to the exercise
price of the put (less any initial margin deposited by the Portfolio with
its Custodian with respect to such put option). There is no limitation on
the amount of the Fund's assets which can be placed in the segregated
account.
Forward Currency Exchange Contracts
A Portfolio's transactions in forward currency exchange contracts will
be limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is the forward purchase or sale of currency
with respect to specific receivables or payables of the Fund generally
arising in connection with the purchase or sale of its portfolio securities
and accruals of interest receivable and Fund expenses. Position hedging is
the forward sale of currency with respect to portfolio security positions
denominated or quoted in that currency or in a currency bearing a high
degree of positive correlation to the value of that currency.
A Portfolio may not position hedge with respect to a particular
currency for an amount greater than the aggregate market value (determined
at the time of making any sale of forward currency) of the securities held
in its portfolio denominated or quoted in, or currently convertible into,
such currency. If a Portfolio enters into a position hedging transaction,
the Fund's Custodian or subcustodian will place cash or U.S. Government
securities or other high-grade debt obligations in a segregated account of
the Portfolio in an amount equal to the value of the Portfolio's total
assets committed to the consummation of the given forward contract. If the
value of the securities placed in the segregated account declines,
additional cash or securities will be placed in the account so that the
value of the account will, at all times, equal the amount of the
Portfolio's commitment with respect to the forward contract.
At or before the maturity of a forward sale contract, the Portfolio may
either sell a portfolio security and make delivery of the currency, or
retain the security and offset its contractual obligations to deliver the
currency by purchasing a second contract pursuant to which the Portfolio
will obtain, on the same maturity date, the same amount of the currency
which it is obligated to deliver. If the Portfolio retains the portfolio
security and engages in an offsetting transaction, the Portfolio, at the
time of execution of the offsetting transaction, will incur a gain or a
loss to the extent that movement has occurred in forward contract prices.
Should forward prices decline during the period between the Portfolio
entering into a forward contract for the sale of a currency and the date it
enters into an offsetting contract for the purchase of the currency, the
Portfolio will realize a gain to the extent the price of the
B-6
<PAGE>
currency it has agreed to purchase is less than the price of the currency
it has agreed to sell. Should forward prices increase, the Portfolio will
suffer a loss to the extent the price of the currency it has agreed to
purchase exceeds the price of the currency it has agreed to sell. Closing
out forward purchase contracts involves similar offsetting transactions.
The use of foreign currency contracts does not eliminate fluctuations
in the underlying prices of the securities, but it does establish a rate of
exchange that can be achieved in the future. In addition, although forward
currency contracts limit the risk of loss due to a decline in the value of
the hedged currency, they also limit any potential gain that might result
if the value of the currency increases.
Additional Risks of Options on Securities and Currencies, Futures
Contracts and Options Thereon and Forward Contracts
Options, futures contracts, options on futures contracts and forward
contracts on securities and currencies may be traded on foreign exchanges.
Such transactions may not be regulated as effectively as similar
transactions in the United States, may not involve a clearing mechanism and
related guarantees, and are subject to the risk of governmental action
affecting trading in, or the prices of, foreign securities. The value of
such positions also could be adversely affected by (i) other complex
foreign political, legal and economic factors, (ii) lesser availability
than in the United States of data on which to make trading decisions, (iii)
delays in the Fund's ability to act upon economic events occurring in the
foreign markets during non-business hours in the United States, (iv) the
imposition of different exercise and settlement terms and procedures and
margin requirements than in the United States and (v) lesser trading
volume.
Exchanges on which options, futures and options on futures are traded
may impose limits on the positions that the Portfolio may take in certain
circumstances. If so, this would limit the ability of the Portfolio fully
to hedge against these risks.
Futures exchanges may establish daily limits in the amount that the
price of a futures contract or related options contract may vary either up
or down from the previous day's settlement price. Once the daily limit has
been reached in a particular contract, no trades may be made that day at a
price beyond the limit. The daily limit governs only price movements during
a particular trading day and therefore does not limit potential losses
because the limit may prevent the liquidation of unfavorable positions.
Futures or options contract prices could move to the daily limit for
several consecutive trading days with little or no trading and thereby
prevent prompt liquidation of positions and subject some traders to
substantial losses. In such event, it may not be possible for a Portfolio
to close a position, and in the event of adverse price movements, the
Portfolio would have to make daily cash payments of variation margin
(except in the case of purchased options).
An exchange-traded option position may be closed out only where there
exists a secondary market for an option of the same series. If a secondary
market does not exist, it might not be possible to effect closing
transactions in particular options a Portfolio has purchased with the
result that the Portfolio would have to exercise the options in order to
realize any profit. If the Portfolio is unable to effect a closing purchase
transaction in a secondary market in an option the Portfolio has written,
it will not be able to sell the underlying security until the option
expires or it delivers the underlying security upon exercise or it
otherwise covers its position. Reasons for the absence of a liquid
secondary market include the following: (i) there may be insufficient
trading interest in certain options; (ii) restrictions may be imposed by a
securities exchange on operating transactions or closing transactions or
both; (iii) trading halts, suspensions or other restrictions may be imposed
with respect to particular classes or series of options or underlying
securities; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or clearing
organization may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of
options (or a particular class or series of options), in which event the
secondary market on that exchange (or a particular class or series of
options) would cease to exist, although outstanding options would continue
to be exercisable in accordance with their terms.
A Portfolio's ability to establish and close out positions in futures
contracts and options on futures contracts will be subject to the
maintenance of a liquid market. Although a Portfolio generally will
purchase or sell only those futures contracts and options thereon for which
there appears to be a liquid market, there is no assurance that a liquid
market on an exchange will exist for any particular futures contract or
option thereon at any particular time. In the event no liquid market exists
for a particular futures contract or option thereon in which the Portfolio
maintains a position, it will not be possible to effect a closing
transaction in that contract or to do so at a satisfactory price and the
Portfolio would have to either make or take delivery under the futures
contract or, in the case of a written option, wait to sell the underlying
securities until the option expires or is exercised or, in the case of a
purchased option, exercise the option. In the case of a futures contract or
an option on a futures contract which the Portfolio has written and which
the Portfolio is unable to close, the Portfolio would be required to
maintain margin deposits on the futures contract or option and to make
variation margin payments until the contract is closed.
B-7
<PAGE>
Limitations on the Purchase and Sale of Futures Contracts and Options on
Futures Contracts
Each Portfolio will engage in transactions in interest rate and foreign
currency futures contracts and options thereon only for bona fide hedging,
yield enhancement and risk management purposes, in each case in accordance
with the rules and regulations of the CFTC, and not for speculation.
In accordance with CFTC regulations, a Portfolio may not purchase or
sell futures contracts or options thereof for yield enhancement or risk
management purposes if immediately thereafter the sum of the amounts of
initial margin deposits on the Portfolio's existing futures and premiums
paid for options on futures would exceed 5% of the liquidation value of the
Portfolio's total assets after taking into account unrealized profits and
unrealized losses on any such contracts; provided, however, that in the
case of an option that is in-the-money at the time of the purchase, the
in-the-money amount may be excluded in calculating the 5% limitation. The
above restriction does not apply to the purchase and sale of futures
contracts and options thereon for bona fide hedging purposes. In instances
involving the purchase of futures contracts or call options thereon or the
writing of put options thereon by a Portfolio, an amount of cash, U.S.
Government securities or other liquid, high-grade debt obligations, equal
to the market value of the futures contracts and options thereon (less any
related margin deposits), will be deposited in a segregated account with
its Custodian to cover the position, or alternative cover will be employed
thereby insuring that the use of such futures contracts and options is
unleveraged.
As an alternative to bona fide hedging, a Portfolio may comply with a
different standard established by CFTC rules as to each long position with
respect to a futures contract or an option thereon which will be used as a
part of a portfolio management strategy and which is incidental to the
Portfolio' activities on the securities markets, under which the underlying
commodity value of the contract at all times will not exceed the sum of (i)
cash set aside in an identifiable manner or short-term U.S. Government or
other United States dollar-denominated high grade short-term money market
instruments segregated for this purpose plus margin deposited in the
market, (ii) cash proceeds from existing investments due within thirty days
and (iii) accrued profits on the particular futures contract or option
thereon.
CFTC regulations may impose limitations on a Portfolio's ability to
engage in certain yield enhancement and risk management strategies. There
are no limitations on a Portfolio's use of futures contracts and options on
futures contracts beyond the restrictions set forth above.
When-Issued and Delayed Delivery Securities
Each Portfolio may purchase or sell securities on a when issued or
delayed delivery basis. When-issued or delayed delivery transactions arise
when securities are purchased or sold by the Portfolio with payment and
delivery taking place in the future in order to secure what is considered
to be an advantageous price and yield to the Portfolio at the time of
entering into the transaction. The Fund's Custodian will maintain, in a
segregated account of each Portfolio, cash, U.S. Government securities or
other liquid high-grade debt obligations having a value equal (which is
marked to market daily) to or greater than the Portfolio's purchase
commitments; the Custodian will likewise segregate securities sold on a
delayed delivery basis.
Borrowing
When a Portfolio borrows money for temporary, extraordinary or
emergency purposes or for the clearance of transactions, it will borrow no
more than 20% of its net assets and, in any event, the value of its total
assets (i.e., including borrowings) less its liabilities (excluding
borrowings) must at all times be maintained at not less than 300% of all
outstanding borrowings. If, for any reason, including adverse market
conditions, a Portfolio should fail to meet this test, it will be required
to reduce its borrowings within three days (not including Sundays and
holidays) to the extent necessary to meet the test. This requirement may
make it necessary for a Portfolio to sell a portion of its portfolio
securities at a time when it is disadvantageous to do so.
Repurchase Agreements
A Portfolio will enter into repurchase transactions only with parties
meeting creditworthiness standards approved by the Fund's Board of
Directors. The Fund's investment adviser will monitor the creditworthiness
of such parties, under the general supervision of the Board of Directors.
In the event of a default or bankruptcy by a seller, the Portfolio will
promptly seek to liquidate the collateral. To the extent that the proceeds
from any sale of such collateral upon a default in the obligation to
repurchase are less than the repurchase price, the Portfolio will suffer a
loss.
The Fund participates in a joint repurchase account with other
investment companies managed by Prudential Mutual Fund Management, Inc.
(PMF) pursuant to an order of the Securities and Exchange Commission. On a
daily basis, any uninvested cash balances of the Portfolio may be
aggregated with those of such other investment companies and invested in
one or more repurchase agreements. Each fund participates in the income
earned or accrued in the joint account based on the percentage of its
investment.
B-8
<PAGE>
INVESTMENT RESTRICTIONS
The following restrictions are fundamental policies. The Fund's
fundamental policies as they affect a particular Portfolio cannot be
changed without the approval of the outstanding shares of such Portfolio by
a vote which is the lesser of (i) 67% or more of the voting securities of
such Portfolio represented at a meeting at which more than 50% of the
outstanding voting securities of such Portfolio are present in person or
represented by proxy or (ii) more than 50% of the outstanding voting
securities of such Portfolio. With respect to the submission of a change in
fundamental policy or investment objective to a particular Portfolio, such
matters shall be deemed to have been effectively acted upon with respect to
all Portfolios of the Fund if a majority of the outstanding voting
securities of the particular Portfolio votes for the approval of such
matters as provided above, notwithstanding (1) that such matter has not
been approved by a majority of the outstanding voting securities of any
other Portfolio affected by such matter and (2) that such matter has not
been approved by a majority of the outstanding voting securities of the
Fund.
Each Portfolio may not:
(1) Invest 25% or more of its total assets in any one industry. For
this purpose "industry" does not include the U.S. Government and agencies
and instrumentalities of the U.S. Government.
(2) Make short sales of securities or maintain a short position, except
short sales "against the box."
(3) Issue senior securities, borrow money or pledge its assets, except
that a Portfolio may borrow up to 20% of the value of its total assets
(calculated when the loan is made) for temporary, extraordinary or
emergency purposes or for the clearance of transactions. Each Portfolio may
pledge up to 20% of the value of its total assets to secure such
borrowings. For purposes of this restriction, the purchase or sale of
securities on a when-issued or delayed delivery basis, the purchase of
securities subject to repurchase agreements, collateral arrangements with
respect to interest rate swap transactions, reverse repurchase agreements
or dollar roll transactions or the purchase or sale of options and futures
contracts or options thereon, are not deemed to be a pledge of assets or
the issuance of a senior security; and neither such arrangements, the
purchase or sale of options, futures contracts or related options nor
obligations of the Fund to the Directors pursuant to deferred compensation
arrangements, are deemed to be the issuance of a senior security.
(4) Buy or sell commodities, commodity contracts, real estate or
interests in real estate (including mineral leases or rights), except that
a Portfolio may purchase and sell futures contracts, options on futures
contracts and securities secured by real estate or interests therein or
issued by companies that invest therein. Transactions in foreign currencies
and forward contracts and options on foreign currencies are not considered
by a Portfolio to be transactions in commodities or commodity contracts.
(5) Make loans, except (i) through repurchase agreements, (ii) through
loan participations, and (iii) loans of portfolio securities (limited to
30% of a Portfolio's total assets).
(6) Make investments for the purpose of exercising control or
management over the issuers of any security.
(7) Act as an underwriter except to the extent that, in connection with
the disposition of portfolio securities, a Portfolio may be deemed to be an
underwriter under certain federal securities laws.
The foregoing restrictions are fundamental policies that may not be
changed without the approval of a majority of each Portfolio's outstanding
voting securities.
Whenever any fundamental investment policy or investment restriction
states a maximum percentage of a Portfolio's assets, it is intended that if
the percentage limitation is met at the time the investment is made, a
later change in percentage resulting from changing total or net asset
values will not be considered a violation of such policy. However, in the
event that a Portfolio's asset coverage for borrowings falls below 300%,
the Portfolio will take prompt action to reduce its borrowings, as required
by applicable law.
In order to comply with certain state "blue sky" restrictions, each
Portfolio will not as a matter of operating policy:
1. Invest in oil, gas and mineral leases or programs.
2. Purchase any interests in real estate including real estate limited
partnerships which are not readily marketable.
3. Invest in securities of any issuer if, to the knowledge of the Fund,
any officer or director of the Fund or the Fund's Manager or Subadviser
owns more than 1/2 of 1% of the outstanding securities of such issuer, and
such officers and directors who own more than 1/2 of 1% own in the
aggregate more than 5% of the outstanding securities of such issuer.
B-9
<PAGE>
4. Purchase warrants if as a result a Portfolio would then have more
than 5% of its net assets (determined at the time of investment) invested
in warrants. Warrants will be valued at the lower of cost or market and
investment in warrants which are not listed on the New York Stock Exchange
or American Stock Exchange will be limited to 2% of the Portfolio's net
assets determined at the time of investment). For the purpose of this
limitation, warrants acquired in units or attached to securities are deemed
to be without value.
5. Purchase more than 10% of the voting securities or more than 10% of
any class of securities of any issuer. For purposes of this restriction,
all outstanding debt securities of an issuer are considered as one class,
and all preferred stocks of an issuer are considered as one class.
6. Invest more than 5% of its total assets in securities of companies
having a record, together with predecessors, of less than three years of
continuous operation. This limitation shall not apply to direct obligations
of the U.S. Government and obligations issued by agencies of the U.S.
Government or instrumentalities established or sponsored by the U.S.
Government.
7. Purchase securities of other registered investment companies, except
in connection with a merger, consolidation, reorganization or acquisition
of assets.
8. Invest more than 50% of its total assets in the securities of any
one issuer. This limitation will not apply to securities which are direct
obligations of the U.S. Government, its agencies or instrumentalities or to
obligations of the government of Canada.
9. Purchase securities on margin, except for such short-term credits as
are necessary for the clearance of purchases and sales of portfolio
securities.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
Position with Principal Occupations
Name and Address the Fund During Past 5 Years
- ---------------- -------- -------------------
<S> <C> <C>
Stephen C. Eyre Director Executive Director, The John A. Hartford Foundation (charitable
c/o Prudential Mutual Fund foundation) (since May 1985); Director of Faircom, Inc.
Management, Inc.
One Seaport Plaza
New York, New York
Delayne Dedrick Gold Director Marketing and Management Consultant.
c/o Prudential Mutual Fund
Management, Inc.
One Seaport Plaza
New York, New York
Don G. Hoff Director Chairman and Chief Executive Officer of Intertec, Inc. (investments) since
c/o Prudential Mutual Fund 1980; Director of Innovative Capital Management Inc., The Asia Pacific
Management, Inc. Fund and The Greater China Fund.
One Seaport Plaza
New York, New York
*Harry A. Jacobs, Jr. Director Senior Director (since January 1986) of Prudential Securities Incorporated
One Seaport Plaza (Prudential Securities); formerly Interim Chairman and Chief Executive
New York, New York Officer of Prudential Mutual Fund Management, Inc. (PMF);
(June-September 1993); formerly Chairman of the Board of Prudential
Securities (1982-1985); Chairman and Chief Executive Officer of Bache
Group Inc. (1977-1982); Trustee of The Trudeau Institute; Director of The
First Australia Fund, Inc., The First Australia Prime Income Fund, Inc., The
Global Government Plus Fund, Inc., The Global Yield Fund, Inc. and the
Center for National Policy.
Sidney R. Knafel Director Managing Partner of SRK Management Company (investments) since 1981;
c/o Prudential Mutual Fund Chairman of Insight Communications Company, L.P. and Microbiological
Management, Inc. Associates, Inc.; Director of Cellular Communications, Inc., Cellular
One Seaport Plaza Communications of Puerto Rico Inc., IGENE Biotechnology, Inc.,
New York, New York International CabelTel Incorporated, Medical Imaging Centers of America,
Inc. and a number of private companies.
Robert E. LaBlanc Director President of Robert E. LaBlanc Associates, Inc. (telecommunications) since
c/o Prudential Mutual Fund 1981; Director of Contel Cellular, Inc., M/A-COM, Inc., Storage Technology
Management, Inc. Corporation, TIE/communications, Inc. and Tribune Company; Trustee of
One Seaport Plaza Manhattan College.
New York, New York
B-10
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Position with Principal Occupations
Name and Address the Fund During Past 5 Years
- ---------------- -------- -------------------
<S> <C> <C>
*Lawrence C. McQuade President and Vice Chairman of PMF (since 1988) and Managing Director, Investment
One Seaport Plaza Director Banking, of Prudential Securities (1988-1991); Director, BUNZL, P.L.C.
New York, New York (since June 1991); Director, Quixote Corporation (since February 1992);
formerly Director of Crazy Eddie Inc. (1987-1990), Kaiser Tech., Ltd.,
Kaiser Aluminum and Chemical Corp. (March 1987-November 1988);
formerly Executive Vice President and Director of W. R. Grace & Co.
(1975-1987); President and Director of The High Yield Income Fund, Inc.,
The Global Yield Fund, Inc. and The Global Government Plus Fund, Inc.
Thomas A. Owens, Jr. Director Consultant.
c/o Prudential Mutual Fund
Management, Inc.
One Seaport Plaza
New York, New York
*Richard A. Redeker Director President, Chief Executive Officer and Director (since October 1993), PMF;
One Seaport Plaza Executive Vice President, Director and Member of the Operating Committee
New York, New York (since October 1993); Prudential Securities; Director (since October 1993)
of Prudential Securities Group, Inc. (PSG). Formerly Senior Executive
Vice President and Director of Kemper Financial Services, Inc. (September
1978-September 1993); Director of The Global Government Plus Fund, Inc.
and The High Yield Income Fund, Inc.
Clay T. Whitehead Director President of National Exchange Inc. (since May 1983).
c/o Prudential Mutual Fund
Management, Inc.
One Seaport Plaza
New York, New York
Robert F. Gunia Vice President Director (since January 1989), Chief Administrative Officer (since August
One Seaport Plaza 1990) and Executive Vice President, Treasurer and Chief Financial Officer
New York, New York (since June 1987) of PMF; Senior Vice President (since March 1987) of
Prudential Securities; Vice President and Director of The Asia Pacific
Fund, Inc. (since May 1989).
S. Jane Rose Secretary Senior Vice President (since January 1991), Senior Counsel (since June
One Seaport Plaza 1987) and First Vice President (June 1987-December 1990) of PMF;
New York, New York Senior Vice President and Senior Counsel of Prudential Securities (since
July 1992); formerly Vice President and Associate General Counsel of
Prudential Securities.
Susan C. Cote Treasurer and Senior Vice President (since January 1989) and First Vice President (June
One Seaport Plaza Principal 1987-December 1988) of PMF; Senior Vice President (since January
New York, New York Financial and 1992) and Vice President (January 1986-December 1991) of Prudential
Accounting Securities.
Officer
Domenick Pugliese Assistant Vice President (since June 1992) and Associate General Counsel (since
One Seaport Plaza Secretary March 1992) of PMF; Vice President and Associate General Counsel of
New York, New York Prudential Securities (since July 1992); prior thereto, associated with the
law firm of Battle Fowler.
<FN>
- -----------------
* "Interested" director, as defined in the Investment Company Act, by reason of his affiliation with Prudential Securities or PMF.
</TABLE>
Directors and officers of the Fund are also trustees, directors and
officers of some or all of the other investment companies distributed by
Prudential Securities or Prudential Mutual Fund Distributors, Inc. (PMFD).
The officers conduct and supervise the daily business operations of the
Fund, while the directors, in addition to their functions set forth under
"Manager" and "Distributor," review such actions and decide on general
policy.
B-11
<PAGE>
The Fund pays each of its Directors who is not an affiliated person of
the Manager annual compensation of $10,000, in addition to certain
out-of-pocket expenses.
Directors may receive their Directors' fees pursuant to a deferred fee
agreement with the Fund. Under the terms of the agreement, the Fund accrues
daily the amount of Directors' fees which accrue interest at a rate
equivalent to the prevailing rate applicable to 90-day U.S. Treasury Bills
at the beginning of each calendar quarter or at the daily rate of return of
a Portfolio of the Fund (the Fund rate). Payment of the interest so accrued
is also deferred and accruals become payable at the option of the Director.
The Fund's obligation to make payments of deferred Directors' fees,
together with interest thereon, is a general obligation of the Fund.
As of June 17, 1994, the Directors and officers of the Fund, as a
group, owned beneficially less than 1% of the common stock of each
Portfolio.
As of June 17, 1993, Midland National Life Insurance Company, One
Midland Plaza, Sioux Falls, South Dakota 57193-0001 owned 663,124 Class A
shares (17.6% of the outstanding Class A shares) of the Short-Term Global
Income Portfolio and Investor's Life Insurance Company of Nebraska, One
Midland Plaza, Sioux Falls, South Dakota 57193-0001 owned 509,113 Class A
shares (13.5% of the outstanding Class A shares) of the Short-Term Global
Income Portfolio.
As of June 17, 1994, Prudential Securities was the record holder for
other beneficial owners with respect to the Short-Term Global Income
Portfolio of 3,218,777 Class A shares (or 85.4% of the outstanding Class A
shares) and 24,704,146 Class B shares (or 86.2% of the outstanding Class B
shares) and, with respect to the Global Assets Portfolio, of 1,931,329 Class
A shares (5.2% of the outstanding Class A shares). In the event of any
meetings of shareholders, Prudential Securities will forward, or cause the
forwarding of, proxy materials to the beneficial owners for which it is the
record holder.
MANAGER
The manager of the Fund is Prudential Mutual Fund Management, Inc. (PMF
or the Manager), One Seaport Plaza, New York, New York 10292. PMF serves as
manager to substantially all of the other investment companies that,
together with the Fund, comprise the "Prudential Mutual Funds." See "How
the Fund is Managed" in the Prospectus. As of March 31, 1994, PMF managed
and/or administered open-end and closed-end management investment companies
with assets of approximately [$49] billion. According to the Investment
Company Institute, as of December 31, 1993, the Prudential Mutual Funds
were the 12th largest family of mutual funds in the United States.
Pursuant to the Management Agreement with the Fund (the Management
Agreement), PMF, subject to the supervision of the Fund's Board of
Directors and in conformity with the stated policies of each Portfolio,
manages both the investment operations of each Portfolio and the
composition of each Portfolio's investments, including the purchase,
retention, disposition and loan of securities. In connection therewith, PMF
is obligated to keep certain books and records of the Fund. PMF also
administers the Fund's corporate affairs and, in connection therewith,
furnishes the Fund with office facilities, together with those ordinary
clerical and bookkeeping services which are not being furnished by State
Street Bank and Trust Company, the Fund's custodian, and Prudential Mutual
Fund Services, Inc. (PMFS or the Transfer Agent), the Fund's transfer and
dividend disbursing agent. The management services of PMF for the Fund are
not exclusive under the terms of the Management Agreement and PMF is free
to, and does, render management services to others.
For its services, PMF receives, pursuant to the Management Agreement, a
fee at an annual rate of .55 of 1% of the average daily net assets of each
Portfolio. The fee is computed daily and payable monthly. The Management
Agreement also provides that, in the event the expenses of a Portfolio
(including the fees of PMF, but excluding interest, taxes, brokerage
commissions, distribution fees and litigation and indemnification expenses
and other extraordinary expenses not incurred in the ordinary course of the
Fund's business) for any fiscal year exceed the lowest applicable annual
expense limitation established and enforced pursuant to the statutes or
regulations of any jurisdiction in which the Fund's shares are qualified
for offer and sale, the compensation due to PMF will be reduced by the
amount of such excess. Reductions in excess of the total compensation
payable to PMF will be paid by PMF to the applicable Portfolio. No such
reductions were required during the fiscal year ended October 31, 1993.
Currently, the Fund believes that the most restrictive expense limitation
of state securities commissions is 2 1/2% of the Fund's average daily net
assets up to $30 million, 2% of the next $70 million of such assets and 1
1/2% of such assets in excess of $100 million.
The Management Agreement was last approved by the Board of Directors,
including a majority of the Directors who are not interested persons of the
Fund and who have no direct or indirect financial interest in the
Management Agreement, on June 3, 1993, and was approved by shareholders of
each Portfolio on October 21, 1991.
In connection with its management of the corporate affairs of the Fund,
PMF bears the following expenses:
(a) the salaries and expenses of all of its and the Fund's personnel
except the fees and expenses of Directors who are not affiliated persons of
PMF or the Fund's investment adviser;
B-12
<PAGE>
(b) all expenses incurred, by PMF or by the Fund in connection with
managing the ordinary course of the Fund's business, other than those
assumed by the Fund as described below; and
(c) the costs and expenses payable to The Prudential Investment
Corporation (PIC) pursuant to the subadvisory agreement between PMF and PIC
(the Subadvisory Agreement).
Under the terms of the Management Agreement, the Fund is responsible
for the payment of the following expenses: (a) the fees payable to the
Manager, (b) the fees and expenses of Directors who are not affiliated
persons of the Manager or the Fund's investment adviser, (c) the fees and
certain expenses of the Custodian and Transfer and Dividend Disbursing
Agent, including the cost of providing records to the Manager in connection
with its obligation of maintaining required records of the Fund and of
pricing the Fund's shares, (d) the charges and expenses of legal counsel
and independent accountants for the Fund, (e) brokerage commissions and any
issue or transfer taxes chargeable to the Fund in connection with its
securities transactions, (f) all taxes and corporate fees payable by the
Fund to governmental agencies, (g) the fees of any trade associations of
which the Fund may be a member, (h) the cost of stock certificates
representing shares of the Fund, (i) the cost of fidelity and liability
insurance, (j) certain organization expenses of the Fund and the fees and
expenses involved in registering and maintaining registration of the Fund
and of its shares with the Securities and Exchange Commission, registering
the Fund and qualifying its shares under state securities laws, including
the preparation and printing of the Fund's registration statements and
prospectuses for such purposes, (k) allocable communications expenses with
respect to investor services and all expenses of shareholders' and
Directors' meetings and of preparing, printing and mailing reports, proxy
statements and prospectuses to shareholders in the amount necessary for
distribution to the shareholders, (l) litigation and indemnification
expenses and other extraordinary expenses not incurred in the ordinary
course of the Fund's business and (m) distribution fees.
The Management Agreement provides that PMF will not be liable for any
error of judgment or for any loss suffered by the Fund in connection with
the matters to which the Management Agreement relates, except a loss
resulting from willful misfeasance, bad faith, gross negligence or reckless
disregard of duty. The Management Agreement provides that it will terminate
automatically if assigned, and that it may be terminated without penalty by
either party upon not more than 60 days' nor less than 30 days' written
notice. The Management Agreement will continue in effect for a period of
more than two years from the date of execution only so long as such
continuance is specifically approved at least annually in conformity with
the Investment Company Act.
For the fiscal years ended October 31, 1993, 1992 and 1991 PMF received
management fees of $2,994,867, $5,136,480 and $2,207,904 from the
Short-Term Global Income Portfolio, respectively. With respect to the
Global Assets Portfolio, for the fiscal years ended October 31, 1993 and
1992 PMF received management fees of $1,132,954 and $2,126,994,
respectively and for the fiscal period ended October 31, 1991, PMF waived
all of its management fees ($257,863 or $.002 per share). In addition, PMF
subsidized $26,481 ($.0002 per share) of the Global Assets Portfolio's
expenses for the period ended October 31, 1991.
PMF has entered into the Subadvisory Agreement with PIC, a wholly-
owned subsidiary of The Prudential Insurance Company of America (the
Prudential). The Subadvisory Agreement provides that PIC furnish investment
advisory services in connection with the management of the Fund. In
connection therewith, PIC is obligated to keep certain books and records of
the Fund. PMF continues to have responsibility for all investment advisory
services pursuant to the Management Agreement and supervises PIC's
performance of such services. PIC is reimbursed by PMF for the reasonable
costs and expenses incurred by PIC in furnishing those services.
The Subadvisory Agreement was approved by the Board of Directors,
including a majority of the Directors who are not interested persons of the
Fund and who have no direct or indirect financial interest in the
Subadvisory Agreement, on June 6, 1994, and was approved by the
shareholders of the Fund on October 21, 1991. The Subadvisory Agreement
provides that it will terminate in the event of its assignment (as defined
in the Investment Company Act) or upon the termination of the Management
Agreement. The Subadvisory Agreement may be terminated by the Fund, PMF or
PIC upon not more than 60 days', nor less than 30 days' written notice. The
Subadvisory Agreement provides that it will continue in effect for a period
of more than two years from its execution only so long as such continuance
is specifically approved at least annually in accordance with the
requirements of the Investment Company Act.
The Manager and the Subadviser (The Prudential Investment Corporation)
are subsidiaries of The Prudential which, as of December 31, 1993, was the
largest insurance company in North America. Prudential has been engaged in
the insurance business since 1875. In July 1993, Institutional Investor
ranked The Prudential the third largest institutional money manager of the
300 largest money management organizations in the United States as of
December 31, 1992.
DISTRIBUTOR
Prudential Mutual Fund Distributors, Inc. (PMFD), One Seaport Plaza,
New York, New York 10292, acts as the distributor of the Class A shares of
each Portfolio. Prudential Securities Incorporated (Prudential Securities),
One Seaport Plaza, New York,
B-13
<PAGE>
New York 10292, acts as the distributor of the Class B shares of each
Portfolio and of the Class C shares of the Short-Term Global Income
Portfolio.
Short-Term Global Income Portfolio. Pursuant to separate Distribution
and Service Plans (the Class A Plan, the Class B Plan and the Class C Plan,
collectively, the Plans) adopted by the Fund under Rule 12b-1 under the
Investment Company Act and separate distribution agreements (the
Distribution Agreements), PMFD and Prudential Securities (collectively, the
Distributor) incur the expenses of distributing the Class A, Class B and
Class C shares of the Short-Term Global Income Portfolio. See "How Fund the
is Managed-Distributor" in the Prospectus.
On June 3, 1993, the Board of Directors, including a majority of the
Rule 12b-1 Directors, at a meeting called for the purpose of voting on
each Plan, approved the continuance of the Class A and Class B Plans and
Distribution Agreements and approved modifications of the Portfolio's
Class A and Class B Plans and Distribution Agreements to conform them to
recent amendments to the National Association of Securities Dealers, Inc.
(NASD) maximum sales charge rule described below. As modified, the Class A
Plan for the Portfolio provides that (i) up to .25 of 1% of the average
daily net assets of the Class A shares may be used to pay for personal
service and the maintenance of shareholder accounts (service fee) and (ii)
total distribution fees (including the service fee of .25 of 1%) may not
exceed .30 of 1%. As modified, the Class B Plan for the Portfolio provides
that (i) up to .25 of 1% of the average daily net assets of the Class B
shares may be paid as a service fee and (ii) up to .75 of 1% (not
including the service fee) may be used as reimbursement for distribution-
related expenses with respect to the Class B shares (asset-based sales
charge). Total distribution fees (including the service fee of .25 of 1%)
under the Class B Plan for the Portfolio may not exceed 1.00%. On March
14, 1993, the Board of Directors, including a majority of the Rule 12b-1
Directors, at a meeting called for the purpose of voting on each Plan,
adopted a plan of distribution for the Class C shares of the Portfolio and
approved further amendments to the plans of distribution for the
Portfolio's Class A and Class B Plans changing them from reimbursement
type plans to compensation type plans. The Plans were last approved by the
Board of Directors, including a majority of the Rule 12b-1 Directors, on
June 6, 1994. The Class A Plan, as amended, was approved by Class A and
Class B shareholders, and the Class B Plan, as amended, was approved by
Class B shareholders on , 1994. The Class C Plan was approved
by the sole shareholder of Class C shares on , 1994.
Class A Plan. For the fiscal year ended October 31, 1993 PMFD received
payments of $105,520 under the Class A Plan as reimbursement of expenses
related to the distribution of Class A shares. This amount was primarily
expended for payment of account servicing fees to financial advisers and
other persons who sell Class A shares. For the fiscal year ended October
31, 1993. PMFD also received approximately $64,400 in initial sales
charges.
Class B Plan. For the fiscal year ended October 31, 1993, Prudential
Securities received $4,741,746 from the Portfolio under the Class B Plan
and spent approximately $2,326,500 in distributing the Portfolio's Class B
shares. It is estimated that of the latter amount, approximately $1,900
(0.1%) was spent on printing and mailing of prospectuses to other than
current shareholders; $630,700 (27.1%) on interest and/or carrying costs;
$197,700 (8.5%) on compensation to Pruco Securities Corporation, an
affiliated broker-dealer, for commissions to its financial advisers and
other expenses, including an allocation on account of overhead and other
branch office distribution-related expenses, incurred by it for
distribution of shares of the Portfolio; and $1,496,200 (64.3%) on the
aggregate of (i) payments of commissions and account servicing fees to
financial advisers ($700,000 or 30.1%) and (ii) an allocation on account of
overhead and other branch office distribution-related expenses ($796,200
or 34.2%). The term "overhead and other branch office distribution-related
expenses" represents (a) the expenses of operating Prudential Securities
branch offices in connection with the sale of Fund Shares, including lease
costs, the salaries and employee benefits of operations and sales support
personnel, utility costs, communications costs and the costs of stationery
and supplies, (b) the costs of client sales seminars, (c) expenses of
mutual fund sales coordinators to promote the sale of Fund shares; and (d)
other incidental expenses relating to branch promotion of Fund shares.
Prudential Securities also receives the proceeds of contingent deferred
sales charges paid by investors upon certain redemptions of Class B shares.
See "Shareholder Guide-How to Sell Your Shares-Contingent Deferred Sales
Charges" in the Prospectus. For the fiscal year ended October 31, 1993,
Prudential Securities received approximately $2,203,700 in contingent
deferred sales charges.
Class C Plan. Prudential Securities receives the proceeds of contingent
deferred sales charges paid by investors upon certain redemptions of Class
C shares. See "Shareholder Guide-How to Sell Your Shares-Contingent
Deferred Sales Charges" in the Prospectus. Prior to the date of this
Statement of Additional Information, no distribution expenses were incurred
under the Class C Plan.
Global Assets Portfolio. Pursuant to separate Distribution and Service
Plans (the Class A Plan and the Class B Plan, collectively the Plans)
adopted by the Fund under Rule 12b-1 under the Investment Company Act and
separate distribution agreements (the Distribution Agreements), PMFD and
Prudential Securities (collectively the Distributor) incur the expenses of
distributing the Class A and Class B shares, respectively, of the Global
Assets Portfolio. On June 3, 1993, the Board of Directors, including a
majority of the Rule 12b-1 Directors, at a meeting called for the purpose
of voting on each Plan, approved the
B-14
<PAGE>
continuance of the Plans and Distribution Agreements and approved
modifications of the Portfolio's Class A and Class B Plans and Distribution
Agreements to conform them with recent amendments to the NASD maximum sales
charge rule described below. As modified, the Class A Plan provides that
(i) up to .25 of 1% of the average daily net assets of the Class A shares
may be used to pay for personal service and the maintenance of shareholder
accounts (service fee) and (ii) total distribution fees (including the
service fee of .25 of 1%) may not exceed .50 of 1%. As modified, the Class
B Plan provides that (i) up to .25 of 1% of the average daily net assets of
the Class B shares may be paid as a service fee and (ii) up to .75 of 1%
(not including the service fee) may be used as reimbursement for
distribution-related expenses with respect to the Class B shares
(asset-based sales charge). Total distribution fees (including the service
fee of .25 of 1%) under the Class B Plan for the Portfolio may not exceed
1.00%. On March 14, 1993, the Board of Directors, including a majority of
the Rule 12b-Directors, at a meeting called for the purpose of voting on
the Class A Plan, approved an amendment to the Class A Plan to change it
from a reimbursement type plan (such as the Class B Plan) to a compensation
type plan. The Plans were last approved by the Board of Directors,
including a majority of the Rule 12b-1 Directors, on [June 6, 1994]. The
Class A Plan, as amended, was approved by the Class A shareholders on ,
1994. See "How Fund is Managed-Distributor" in the Prospectus.
Class A Plan. For the fiscal year ended October 31, 1993 PMFD received
payments of $766,695 was under the Class A Plan as reimbursement of
expenses related to the distribution of Class A shares. For the same
period, PMFD received initial sales charges of approximately $38,300 for
the Portfolio.
Class B Plan. For the fiscal year ended October 31, 1993, Prudential
Securities received $337,966 from the Portfolio under the Class B Plan and
spent approximately $70,000 in distributing the Class B shares of the Fund.
It is estimated that of the latter amount, approximately $5,100 (7.3%) was
spent on printing and mailing of prospectuses to other than current
shareholders, $1,200 (1.7%) on interest and carrying costs, $13,200 (18.9%)
on compensation to Pruco Securities Corporation, an affiliated
broker-dealer, for commissions to its financial advisers and other
expenses, including an allocation on account of overhead and other branch
office distribution-related expenses incurred by it for distribution of
Fund shares; and $50,500 (72.1%) on the aggregate of (i) payment of
commissions and account servicing fees to financial advisers ($7,600 or
(10.8%), and (ii) an allocation on account of overhead and other branch
office distribution-related expenses ($42,900 or 61.3%). The term "overhead
and other branch office distribution-related expenses" represents (a) the
expenses of operating branch offices of Prusec and Prudential Securities in
connection with the sale of Fund shares, including lease costs, the
salaries and employee benefits of operations and sales support
personnel,utility costs, communications costs and the costs of stationery
and supplies, (b) the costs of client sales seminars, (c) expenses of
mutual fund sales coordinators to promote the sale of Fund shares and (d)
other incidental expenses relating to branch promotion of Fund sales.
The Distributor also receives the proceeds of contingent deferred sales
charges paid by holders of Class B shares upon certain redemptions of Class
B shares. See "Shareholder Guide-How to Sell Your Shares-Contingent
Deferred Sales Charge-Class B Shares" in the Prospectus of the Portfolio.
For the fiscal year ended October 31, 1993, the Distributor received
approximately $96,700 in contingent deferred sales charges. Currently, all
contingent deferred sales charges paid on the redemption of Class B shares
of the Portfolio are being paid to the Fund.
The Class A, Class B and Class C Plans continue in effect from year to
year, provided that each such continuance is approved at least annually by
a vote of the Board of Directors, including a majority vote of the Rule
12b-1 Directors, cast in person at a meeting called for the purpose of
voting on such continuance. The Plans may each be terminated at any time,
without penalty, by the vote of a majority of the Rule 12b-1 Directors or
by the vote of the holders of a majority of the outstanding shares of the
applicable class on not more than 30 days' written notice to any other
party to the Plans. The Plans may not be amended to increase materially the
amounts to be spent for the services described therein without approval by
the shareholders of the applicable class (by both Class A and Class B
shareholders, voting separately, in the case of material amendments to the
Class A Plan for the Short-Term Global Income Portfolio), and all material
amendments are required to be approved by the Board of Directors in the
manner described above. Each Plan will automatically terminate in the event
of its assignment. The Fund will not be contractually obligated to pay
expenses incurred under any Plan if it is terminated or not continued.
Pursuant to each Plan, the Board of Directors will review at least
quarterly a written report of the distribution expenses incurred on behalf
of each share of the Fund by the Distributor. The report will include an
itemization of the distribution expenses and the purposes of such
expenditures. In addition, as long as the Plans remain in effect, the
selection and nomination of Rule 12b-1 Directors shall be committed to the
Rule 12b-1 Directors.
Pursuant to each Distribution Agreement, the Fund has agreed to
indemnify PMFD and Prudential Securities to the extent permitted by
applicable law against certain liabilities under the Securities Act of
1933, as amended. Each Distribution Agreement was approved by the Board of
Directors, including a majority of the Rule 12b-1 Directors, on March 4,
1993.
NASD Maximum Sales Charge Rule. Pursuant to rules of the NASD, the
Distributor is required to limit aggregate initial sales charges, deferred
sales charges and asset-based sales charges to 6.25% of total gross sales
of each class of shares. In the case of Class B shares interest charges on
unreimbursed distribution expenses equal to the prime rate plus one percent
per annum may be added to the 6.25% limitation. Sales from the reinvestment
of dividends and distributions are not included in the calculation of the
6.25% limitation. The annual asset-based sales charge on shares of the
Fund may not exceed .75 of 1% per class. The 6.25% limitation applies to
the Fund rather than on a per shareholder basis. If aggregate sales charges
were to exceed 6.25% of total gross sales of any class, all sales charges
on shares of that class would be suspended.
B-15
<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Manager is responsible for decisions to buy and sell securities,
futures contracts and options on such securities and futures for each
Portfolio of the Fund, the selection of brokers, dealers and futures
commission merchants to effect the transactions and the negotiation of
brokerage commissions, if any. (For purposes of this section, the term
"Manager" includes the Subadviser.) Broker-dealers may receive brokerage
commissions on portfolio transactions of a Portfolio, including options,
futures, and options on futures transactions and the purchase and sale of
underlying securities upon the exercise of options. Orders may be directed
to any broker or futures commission merchant including, to the extent and
in the manner permitted by applicable law, Prudential Securities and its
affiliates.
Debt securities are generally traded on a "net" basis with dealers
acting as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer.
In underwritten offerings, securities are purchased at a fixed price which
includes an amount of compensation to the underwriter, generally referred
to as the underwriter's concession or discount. On occasion, certain money
market instruments and agency securities may be purchased directly from the
issuer, in which case no commissions or discounts are paid. A Portfolio
will not deal with Prudential Securities in any transaction in which
Prudential Securities acts as principal. Thus, it will not deal in
securities with Prudential Securities acting as market maker, and it will
not execute a negotiated trade with Prudential Securities if execution
involves Prudential Securities' acting as principal with respect to any
part of the Portfolio's order.
Portfolio securities may not be purchased from any underwriting or
selling syndicate of which Prudential Securities (or any affiliate), during
the existence of the syndicate, is a principal underwriter (as defined in
the Investment Company Act), except in accordance with rules of the
Securities and Exchange Commission. This limitation, in the opinion of the
Fund, will not significantly affect a Portfolio's ability to pursue its
present investment objective. However, in the future in other
circumstances, a Portfolio may be at a disadvantage because of this
limitation in comparison to other funds with similar objectives but not
subject to such limitations.
In placing orders for portfolio securities of the Fund, the Manager is
required to give primary consideration to obtaining the most favorable
price and efficient execution. Within the framework of this policy, the
Manager will consider the research and investment services provided by
brokers, dealers or futures commission merchants who effect or are parties
to portfolio transactions of the Fund, the Manager or the Manager's other
clients. Such research and investment services are those which brokerage
houses customarily provide to institutional investors and include
statistical and economic data and research reports on particular companies
and industries. Such services are used by the Manager in connection with
all of its investment activities, and some of such services obtained in
connection with the execution of transactions for the Fund may be used in
managing other investment accounts. Conversely, brokers, dealers or futures
commission merchants furnishing such services may be selected for the
execution of transactions of such other accounts, whose aggregate assets
are far larger than the Fund, and the services furnished by such brokers,
dealers or futures commission merchants may be used by the Manager in
providing investment management for the Fund. Commission rates are
established pursuant to negotiations with the broker, dealer or futures
commission merchant based on the quality and quantity of execution services
provided by the broker or futures commission merchant in the light of
generally prevailing rates. The Manager's policy is to pay higher
commissions to brokers, dealers and futures commission merchants, other
than Prudential Securities, for particular transactions than might be
charged if a different broker had been selected, on occasions when, in the
Manager's opinion, this policy furthers the objective of obtaining best
price and execution. In addition, the Manager is authorized to pay higher
commissions on brokerage transactions for the Fund to brokers and futures
commission merchants other than Prudential Securities in order to secure
research and investment services described above, subject to review by the
Fund's Board of Directors from time to time as to the extent and
continuation of this practice. The allocation of orders among brokers and
futures commission merchants and the commission rates paid are reviewed
periodically by the Fund's Board of Directors.
Subject to the above considerations, Prudential Securities may act as a
broker or futures commission merchant for the Fund. In order for Prudential
Securities (or any affiliate) to effect any Portfolio transactions for a
Portfolio, the commissions, fees or other remuneration received by
Prudential Securities (or any affiliate) must be reasonable and fair
compared to the commissions, fees or other remuneration paid to other such
brokers or futures commission merchants in connection with comparable
transactions involving similar securities or futures contracts being
purchased or sold on an exchange or board of trade during a comparable
period of time. This standard would allow Prudential Securities (or any
affiliate) to receive no more than the remuneration which would be expected
to be received by an unaffiliated broker or futures commission merchant in
a commensurate arms-length transaction. Furthermore, the Board of Directors
of the Fund, including a majority of the Rule 12b-1 Directors, has adopted
procedures which are reasonably designed to provide that any commissions,
fees or other remuneration paid to Prudential Securities (or any affiliate)
are consistent with the foregoing standard. In accordance with Section
11(a) under the Securities Exchange Act of 1934, Prudential Securities may
not retain compensation for effecting transactions on a national securities
exchange for the Fund unless the Fund has expressly authorized the
retention of such compensation. Prudential Securities must furnish to the
Fund at least annually a statement setting forth the total amount of all
compensation retained by
B-16
<PAGE>
Prudential Securities from transactions effected for the Fund during
the applicable period. Brokerage transactions with Prudential Securities
(or any affiliate) are also subject to such fiduciary standards as may be
imposed by applicable law.
During the fiscal periods ended October 31, 1993, 1992 and 1991, neither
Portfolio paid any brokerage commissions to Prudential Securities.
PURCHASE AND REDEMPTION OF FUND SHARES
Shares of each Portfolio may be purchased at a price equal to the next
determined net asset value per share plus a sales charge which, at the
election of the investor, may be imposed either (i) at the time of purchase
(Class A shares), or (ii) on a deferred basis (Class B or, in the case of
the Short-Term Global Income Portfolio, Class C shares). See "Shareholder
Guide" in the Prospectus.
Each class of shares represents an interest in the same portfolio of
investments of the Portfolio and has the same rights, except that (i) each
class bears the separate expenses of its Rule 12b-1 distribution and
service plan, (ii) each class has exclusive voting rights with respect to
its plan, (except that the Fund has agreed with the SEC in connection with
the offering of a conversion feature on Class B shares of the Short-Term
Global Income Portfolio to submit any amendment of the Class A distribution
and service plan for that Portfolio to both Class A and Class B
shareholders of that Portfolio) and (iii) only Class B shares have a
conversion feature. See "Distributor." Each class also has separate
exchange privileges. See "Shareholder Investment Account-Exchange
Privilege."
Specimen Price Make-Up
Under the current distribution arrangements between the Fund and the
Distributor, Class A shares are sold at a maximum sales charge of 3% with
respect to the Short-Term Global Income Portfolio and 0.99% with repect to
the Global Assets Portfolio and Class B* and, in the case of
the Short-Term Global Income Portfolio, Class C* shares are sold at
net asset value. Using the Fund's net asset value at October 31, 1993, the
maximum offering price of the Portfolio's shares is as follows:
<TABLE>
Short-Term Global
Global Income Assets
Portfolio Portfolio
--------- ---------
<S> <C> <C>
Class A
Net asset value and redemption price per Class A share .................................. $9.29 $1.88
Maximum Sales Charge: (3% of offering price) ............................................ .29 -
(0.99% of offering price) ......................................... - .02
----- -----
Offering price to public ................................................................ $9.58 $1.90
===== =====
Class B
Net asset value, redemption price and offering price to public per Class B share* ....... $9.29 $1.90
===== =====
Class C
Net asset value, offering price and redemption price per Class C share* ................. $9.29 N.A.
===== =====
<FN>
- -------------
*Class B and, in the case of the Short-Term Global Income Portfolio, Class C shares are subject to a contingent deferred sales
charge on certain redemptions. See "Shareholder Guide--How to Sell Your Shares--Contingent Deferred Sales Charges" in the
Prospectus.
</TABLE>
Reduced Initial Sales Charges-Class A Shares
Combined Purchase and Cumulative Purchase Privilege. If an investor or
eligible group of related investors purchases Class A shares of the Fund
concurrently with Class A shares of other Prudential Mutual Funds, the
purchases may be combined to take advantage of the reduced sales charges
applicable to larger purchases. See the table of breakpoints under
"Shareholder Guide-Alternative Purchase Plan" in the Prospectus.
An eligible group of related Fund investors includes any combination of
the following:
(a) an individual;
(b) the individual's spouse, their children and their parents;
(c) the individual's and spouses Individual Retirement Account (IRA);
(d) any company controlled by the individual (a person, entity or group
that holds 25% or more of the outstanding voting securities of a company
will be deemed to control the company, and a partnership will be deemed to
be controlled by each of its general partners);
B-17
<PAGE>
(e) a trust created by the individual, the beneficiaries of which are
the individual, his or her spouse, parents or children;
(f) a Uniform Gifts to Minors Act/Uniform Transfers to Minors Act
account created by the individual or the individual's spouse; and
(g) one or more employee benefit plans of a company controlled by an
individual.
[In addition, an eligible group of related Fund investors may include
the following an employer (or group of related employers) and one or more
qualified retirement plans of such employer or employers (an employer
controlling, controlled by or under common control with another employer is
deemed related to that employer).]
The Distributor must be notified at the time of purchase that the
investor is entitled to a reduced sales charge. The reduced sales charge
will be granted subject to confirmation of the investor's holdings. The
Combined Purchase and Cumulative Purchase Privilege does not apply to
individual participants in the retirement and group plans described above
under "Retirement and Group Plans."
Rights of Accumulation. Reduced sales charges are also available
through Rights of Accumulation, under which an investor or an eligible
group of related investors, as described above under "Combined Purchase and
Cumulative Purchase Privilege," may aggregate the value of their existing
holdings of the shares of the Fund and shares of other Prudential Mutual
Funds (excluding money market funds other than those acquired pursuant to
the exchange privilege) to determine the reduced sales charge. However, the
value of shares held directly with the Transfer Agent and through
Prudential Securities will not be aggregated to determine the reduced sales
charge. All shares must be held either directly with the Transfer Agent or
through Prudential Securities. The value of existing holdings for purposes
of determining the reduced sales charge is calculated using the maximum
offering or price (net asset value plus maximum sales charge) as of the
previous business day. See "How the Fund Values Its Shares" in the
Prospectus. The Distributor must be notified at the time of purchase that
the investor is entitled to a reduced sales charge. The reduced sales
charges will be granted subject to confirmation of the investor's holdings.
Rights of Accumulation are not available to individual participants in any
retirement or group plans.
Letters of Intent. Reduced sales charges are available to investors or
an eligible group of related investors who enter into a written Letter of
Intent providing for the purchase, within a thirteen-month period, of
shares of the Fund and shares of other Prudential Mutual Funds. All shares
of the Fund and shares of other Prudential Mutual Funds which (excluding
money market funds other than those acquired pursuant to the exchange
privilege) were previously purchased and are still owned are also included
in determining the applicable reduction. However, the value of shares held
directly with the Transfer Agent and through Prudential Securities will not
be aggregated to determine the reduced sales charge. All shares must be
held either directly with the Transfer Agent or through Prudential
Securities. The Distributor must be notified at the time of purchase that
the investor is entitled to a reduced sales charge. The reduced sales
charge will be granted subject to confirmation of the investor's holdings.
Letters of Intent are not available to individual participants in any
retirement or group plans.
A Letter of Intent permits a purchaser to establish a total investment
goal to be achieved by any number of investments over a thirteen-month
period. Each investment made during the period will receive the reduced
sales charge applicable to the amount represented by the goal, as if it
were a single investment. Escrowed Class A shares totaling 5% of the dollar
amount of the Letter of Intent will be held by the Transfer Agent in the
name of the purchaser. The effective date of a Letter of Intent may be
back-dated up to 90 days, in order that any investments made during this
90-day period, valued at the purchaser's cost, can be applied to the
fulfillment of the Letter of Intent goal.
The Letter of Intent does not obligate the investor to purchase, nor
the Fund to sell, the indicated amount. In the event the Letter of Intent
goal is not achieved within the thirteen-month period, the purchaser is
required to pay the difference between the sales charge otherwise
applicable to the purchases made during this period and sales charges
actually paid. Such payment may be made directly to the Distributor or, if
not paid, the Distributor will liquidate sufficient escrowed shares to
obtain such difference. If the goal is exceeded in an amount which
qualifies for a lower sales charge, a price adjustment is made by refunding
to the purchaser the amount of excess sales charge, if any, paid during the
thirteen-month period. Investors electing to purchase Class A shares of the
Fund pursuant to a Letter of Intent should carefully read such Letter of
Intent.
SHAREHOLDER INVESTMENT ACCOUNT
A Shareholder Investment Account is established for each investor upon
the initial purchase of shares of the Fund. The Fund makes available to its
stockholders the following privileges and plans.
Equity Participation Program
Under the Equity Participation Program, an investor may arrange to have
a specified number of Class A or Class B shares of the Short-Term Global
Income Portfolio automatically exchanged into either one or two Prudential
equity funds on a monthly
B-18
<PAGE>
basis (subject to minimum initial and subsequent investment of $1,000 and
$100, respectively). Further details about this service and an application
form are available from the Transfer Agent, Prudential Securities or
Prusec.
Automatic Reinvestment of Dividends and/or Distributions. For the
convenience of investors, all dividends and distributions are automatically
reinvested in full and fractional shares of a Portfolio of the Fund at net
asset value. An investor may direct the Transfer Agent in writing not less
than 5 full business days prior to the payment date to have subsequent
dividends and/or distributions sent in cash rather than reinvested. In the
case of recently purchased shares for which registration instructions have
not been received on the payment date, cash payment will be made directly
to the dealer. Any shareholder who receives a cash payment representing a
dividend or distribution may reinvest such distribution at net asset value
by returning the check or the proceeds to the Transfer Agent within 30 days
after the payment date. Such investment will be made at the net asset value
per share next determined after receipt of the check or proceeds by the
Transfer Agent.
Exchange Privilege
Global Assets Portfolio. Class A and Class B shareholders of the Global
Assets Portfolio each have an exchange privilege with the Class A and Class
B shares, respectively, of Prudential Adjustable Rate Securities Fund, Inc.
subject to the minimum investment requirements of that Fund. Class B shares
of the Global Assets Portfolio may also be exchanged into shares of the
Prudential Government Securities Trust, Intermediate Term Series. Class A
and Class B shareholders of the Global Assets Portfolio may exchange their
shares for Class A and Class B shares, respectively, of Prudential
Adjustable Rate Securities Fund, Inc., and Class B shares of the Global
Assets Portfolio may be exchanged into shares of the Prudential Government
Securities Trust, Intermediate Term Series, on the basis of the relative
net asset value per share. Any applicable contingent deferred sales charge
payable upon the redemption of shares exchanged will be calculated from the
date of the initial purchase of such shares, rather than the date of the
exchange. An exchange will be treated as a redemption and purchase for tax
purposes.
Short-Term Global Income Portfolio. The Fund makes available to its
shareholders the privilege of exchanging their shares of the Short-Term
Global Income Portfolio for shares of certain other Prudential Mutual
Funds, including one or more specified money market funds, subject in each
case to the minimum investment requirements of such funds. Shares of such
other Prudential Mutual Funds may also be exchanged for shares of the
Portfolio. All exchanges are made on the basis of relative net asset value
next determined after receipt of an order in proper form. An exchange will
be treated as a redemption and purchase for tax purposes. Shares may be
exchanged for shares of another fund only if shares of such fund may
legally be sold under applicable state laws. For retirement and group plans
having a limited menu of Prudential Mutual Funds, the Exchange Privilege is
available for those funds eligible for investment in the particular
program.
It is contemplated that the Exchange Privilege may be applicable to
new mutual funds whose shares may be distributed by the Distributor.
Class A. Shareholders of the Short-Term Global Income Portfolio may
exchange their Class A shares for Class A shares of certain other
Prudential Mutual Funds, shares of Prudential Structured Maturity Fund,
Inc. and Prudential Government Securities Trust (Intermediate Term Series)
and shares of the money market funds specified below. No fee or sales load
will be imposed upon the exchange. Shareholders of money market funds who
acquired such shares upon exchange of Class A shares may use the Exchange
Privilege only to acquire Class A shares of the Prudential Mutual Funds
participating in the Exchange Privilege.
The following money market funds participate in the Class A Exchange
Privilege:
Prudential California Municipal Fund
(California Money Market Series)
Prudential Government Securities Trust
(Money Market Series)
(U.S. Treasury Money Market Series)
Prudential Municipal Series Fund
(Connecticut Money Market Series)
(Massachusetts Money Market Series)
(New Jersey Money Market Series)
(New York Money Market Series)
Prudential MoneyMart Assets
Prudential Tax-Free Money Fund
Class B and Class C. Shareholders of the Short-Term Global Income
Portfolio may exchange their Class B and Class C shares for Class B and
Class C shares, respectively, of certain other Prudential Mutual Funds and
shares of Prudential Special Money
B-19
<PAGE>
Market Fund, a money market fund. No contingent deferred sales charge will
be payable upon such exchange, but a CDSC may be payable upon the
redemption of Class B and Class C shares acquired as a result of the
exchange. The applicable sales charge will be that imposed by the fund in
which shares were initially purchased and the purchase date will be deemed
to be the date of the initial purchase, rather than the date of the
exchange.
Class B and Class C shares of the Short-Term Global Income Portfolio
may also be exchanged for shares of Prudential Special Money Market Fund,
without imposition of any CDSC at the time of exchange. Upon subsequent
redemption from such money market fund or after re-exchange into the
Portfolio, such shares will be subject to the CDSC calculated without
regard to the time such shares were held in the money market fund. In order
to minimize the period of time in which shares are subject to a CDSC,
shares exchanged out of the money market fund will be exchanged on the
basis of their remaining holding periods, with the longest remaining
holding periods being transferred first. In measuring the time period
shares are held in a money market fund and "tolled" for purposes of
calculating the CDSC holding period, exchanges are deemed to have been made
on the last day of the month. Thus, if shares are exchanged into the Fund
from a money market fund during the month (and are held in the Fund at the
end of the month), the entire month will be included in the CDSC holding
period. Conversely, if shares are exchanged into a money market fund prior
to the last day of the month (and are held in the money market fund on the
last day of the month), the entire month will be excluded from the CDSC
holding period. For purposes of calculating the five year holding period
applicable to the Class B conversion feature, the time period during which
Class B shares were held in a money market fund will be excluded.
At any time after acquiring shares of other funds participating in the
Class B or Class C Exchange Privilege, a shareholder may again exchange
those shares (and any reinvested dividends and distributions) for Class B
or Class C shares of the Portfolio, respectively, without subjecting such
shares to any CDSC. Shares of any fund participating in the Class B or
Class C Exchange Privilege that were acquired through reinvestment of
dividends or distributions may be exchanged for Class B or Class C shares,
respectively, of other funds without being subject to any CDSC.
Additional details about the Exchange Privilege and prospectuses for
each of the Prudential Mutual Funds are available from the Fund's Transfer
Agent, Prudential Securities or Prusec. The Exchange Privilege may be
modified, terminated or suspended on sixty days' notice, and any fund,
including the Fund, or the Distributor, has the right to reject any
exchange application relating to such fund's shares.
Dollar Cost Averaging
Dollar cost averaging is a method of accumulating shares by investing a
fixed amount of dollars in shares at set intervals. An investor buys more
shares when the price is low and fewer shares when the price is high. The
average cost per share is lower than it would be if a constant number of
shares were bought at set intervals.
Dollar cost averaging may be used, for example, to plan for retirement,
to save for a major expenditure, such as the purchase of a home, or to
finance a college education. The cost of a year's education at a four-year
college today averages around $14,000 at a private college and around
$4,800 at a public university. Assuming these costs increase at a rate of
7% a year, as has been projected, for the freshman class of 2007, the cost
of four years at a private college could reach $163,000 and over $97,000 at
a public university.1
The following chart shows how much you would need in monthly
investments to achieve specified lump sums to finance your investment
goals.2
<TABLE>
<CAPTION>
Period of
Monthly investments: $100,000 $150,000 $200,000 $250,000
--------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
25 Years......................... $ 110 $ 165 $ 220 $ 275
20 Years......................... 176 264 352 440
15 Years......................... 296 444 592 740
10 Years......................... 555 833 1,110 1,388
5 Years......................... 1,371 2,057 2,742 3,428
<FN>
- --------------
See "Automatic Savings Accumulation Plan".
1Source information concerning the costs of education at public
universities is available from The College Board Annual Survey of
Colleges, 1992. Information about the costs of private colleges is from
the Digest of Education Statistics, 1992; The National Center for
Educational Statistics; and the U.S. Department of Education. Average
costs for private institutions include tuition, fees, room and board.
2The chart assumes an effective rate of return of 8% (assuming monthly
compounding). This example is for illustrative purposes only and is not
intended to reflect the performance of an investment in shares of the
Fund. The investment return and principal value of an investment will
fluctuate so that an investor's shares when redeemed may be worth more or
less than their original cost.
</TABLE>
B-20
<PAGE>
Automatic Savings Accumulation Plan (ASAP)
Under ASAP, an investor may arrange to have a fixed amount
automatically invested in shares of the Short-Term Global Income Portfolio
or Class B shares of the Global Assets Portfolio monthly by authorizing his
or her bank account or Prudential Securities account (including a Command
Account) to be debited to invest specified dollar amounts in shares of the
Fund. The investor's bank must be a member of the Automatic Clearing House
System. Stock certificates are not issued to ASAP participants.
Further information about this program and an application form can be
obtained from the Transfer Agent, Prudential Securities or Prusec.
Systematic Withdrawal Plan
A systematic withdrawal plan is available to shareholders through
Prudential Securities or the Transfer Agent. The systematic withdrawal plan
is not available to Class B shares of the Global Assets Portfolio. Such
withdrawal plan provides for monthly or quarterly checks in any amount,
except as provided below, up to the value of the shares in the
shareholder's account. Withdrawals of Class B or Class C shares may be
subject to a CDSC. See "Shareholder Guide-How to Sell Your
Shares-Contingent Deferred Sales Charges" in the Prospectus.
In the case of shares held through the Transfer Agent (i) a $10,000
minimum account value applies, (ii) withdrawals may not be for less than
$100 and (iii) the shareholder must elect to have all dividends and/or
distributions automatically reinvested in additional full and fractional
shares at net asset value on shares held under this plan. See "Shareholder
Investment Account-Automatic Reinvestment of Dividends and/or
Distributions."
Prudential Securities and the Transfer Agent act as agents for the
shareholder in redeeming sufficient full and fractional shares to provide
the amount of the periodic withdrawal payment. The systematic withdrawal
plan may be terminated at any time, and the Distributor reserves the right
to initiate a fee of up to $5 per withdrawal, upon 30 days' written notice
to the shareholder.
Withdrawal payments should not be considered as dividends, yield or
income. If periodic withdrawals continuously exceed reinvested dividends
and distributions, the shareholder's original investment will be
correspondingly reduced and ultimately exhausted.
Furthermore, each withdrawal constitutes a redemption of shares, and
any gain or loss realized must be recognized for federal income tax
purposes. In addition, withdrawals made concurrently with purchases of
additional shares are inadvisable because of the sales charges applicable
to (i) the purchase of Class A shares and (ii) the withdrawal of Class B
and Class C shares. Each shareholder should consult his or her own tax
adviser with regard to the tax consequences of the plan, particularly if
used in connection with a retirement plan.
Tax-Deferred Retirement Plans
Various tax-deferred retirement plans, including a 401(k) plan,
self-directed individual retirement accounts and "tax-sheltered accounts"
under Section 403(b)(7) of the Internal Revenue Code are available through
the Distributor. These plans are for use by both self-employed individuals
and corporate employers. These plans permit either self-direction of
accounts by participants, or a pooled account arrangement. Information
regarding the establishment of these plans, the administration, custodial
fees and other details are available from Prudential Securities or the
Transfer Agent.
Investors who are considering the adoption of such a plan should
consult with their own legal counsel or tax adviser with respect to the
establishment and maintenance of any such plan.
Tax-Deferred Retirement Accounts
Individual Retirement Accounts. An individual retirement account (IRA)
permits the deferral of federal income tax on income earned in the account
until the earnings are withdrawn. The following chart represents a
comparison of the earnings in a personal savings account with those in an
IRA, assuming a $2,000 annual contribution, an 8% rate of return and a
39.6% federal income tax bracket and shows how much more retirement income
can accumulate within an IRA as opposed to a taxable individual savings
account.
Tax-Deferred Compounding1
Contributions Personal
Made Over: Savings IRA
------------- -------- --------
10 years $ 26,165 $ 31,291
15 years 44,675 58,649
20 years 68,109 98,846
25 years 97,780 157,909
30 years 135,346 244,692
[FN]
- --------------
1The chart is for illustrative purposes only and does not represent
the performance of the Portfolio or any specific investment. It shows
taxable versus tax-deferred compounding for the periods and on the terms
indicated. Earnings in the IRA account will be subject to tax when
withdrawn from the account.
B-21
<PAGE>
NET ASSET VALUE
Under the Investment Company Act, the Board of Directors is responsible
for determining in good faith the fair market value of the securities of
each Portfolio. The net asset value per share is the net worth of the
Portfolio (assets, including securities at value, minus liabilities)
divided by the number of shares outstanding. Net asset value is calculated
separately for each class. In accordance with procedures adopted by the
Board of Directors, the value of each Portfolio will be determined as
follows:
Government securities for which quotations are available will be based
on prices provided by independent pricing services or principal market
makers. Other 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, will be valued at the average of
the quoted bid and asked prices provided by an independent pricing service
or by principal market makers. 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. Quotations of foreign securities in a foreign currency
will be converted to U.S. dollar equivalents. Forward currency exchange
contracts will be valued at the current cost of covering or offsetting the
contract. Options will be valued at their last sale price as of the close
of options trading on the applicable exchanges. If there is no sale on the
applicable options exchange on a given day, options will be valued at the
average of the quoted bid and asked prices as of the close of the
applicable exchange. The Fund may engage pricing services to obtain such
prices. Over-the-counter options will be valued at the average between the
bid and asked prices provided by principal market makers. Options will be
valued at market value or fair value if no market exists. Futures contracts
are marked to market daily, and options thereon are valued at their last
sale price, as of the close of the applicable commodities exchanges.
Short-term instruments which mature in 60 days or less are valued at
amortized cost, if their original maturity was 60 days or less, or by
amortizing their value on the 61st pay prior to maturity, unless the Fund's
Manager determines that such valuation does not represent fair value. The
Manager has determined that amortized cost does not represent fair value
regarding certain short-term securities with remaining maturities of 60
days or less. Such securities are valued at market value. Repurchase
agreements will be valued at cost plus accrued interest. Securities or
other assets for which reliable market quotations are not readily available
are valued by the Manager in good faith at fair value in accordance with
procedures adopted by the Board of Directors on the basis of the following
factors: cost of the security, transactions in comparable securities,
relationships among various securities and such other factors as may be
determined by the Manager to materially affect the value of the security.
As long as a Portfolio declares dividends daily, the net asset value of
Class A, Class B and, with respect to the Short-Term Global Income
Portfolio, Class C shares, will generally be the same. It is expected,
however, that a Portfolio's dividends will differ by approximately the
amount of the distribution expense accrual among the classes.
TAXATION
General. Each Portfolio has elected to qualify and intends to remain
qualified as a regulated investment company under Subchapter M of the
Internal Revenue Code for each taxable year. Accordingly, each Portfolio
must, among other things, (a) derive at least 90% of its gross income
(without offset for losses from the sale or other disposition of securities
or foreign currencies) from dividends, interest, proceeds from loans of
securities and gains from the sale or other disposition of securities or
foreign currencies or other income, including, but not limited to, gains
derived from options and futures on such securities or foreign currencies;
(b) derive less than 30% of its gross income from gains (without offset for
losses) from the sale or other disposition of securities or options thereon
held less than three months; and (c) diversify its holdings so that, at the
end of each fiscal quarter, (i) 50% of the market value of a Portfolio's
assets is represented by cash, U.S. Government securities and other
securities limited, in respect of any one issuer, to an amount not greater
than 5% of the Portfolio's assets and no more than 10% of the outstanding
voting securities of any such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other
than U.S. Government securities). These requirements may limit the
Portfolio's ability to engage in transactions involving options on
securities, interest rate futures and options thereon.
As a regulated investment company, each Portfolio will not be subject
to federal income tax on its net investment income and capital gains, if
any, that it distributes to its stockholders, provided that it distributes
at least 90% of its net investment income and short-term capital gains
earned in each year. Distributions of net investment income and net short-
term capital gains will be taxable to the stockholder at ordinary income
rates regardless of whether the stockholder receives such distributions in
additional shares or in cash. Distributions of net long-term capital gains,
if any, are taxable as long-term capital gains regardless of how long the
investor has held his or her Fund shares. However, if a stockholder holds
shares in the Portfolio for not more than six months, then any loss
recognized on the sale of such shares will be treated as long-term capital
loss to the extent of any distribution on the shares which was treated as
long-term capital gain. Stockholders will be notified annually by the Fund
as to the federal tax status of distributions made by a Portfolio of the
Fund. A 4% nondeductible excise tax will be imposed on the Portfolio of the
Fund to the extent a Portfolio does not meet certain distribution
requirements by the end of each calendar year. Distributions may be subject
to additional state and local taxes. See "Taxes, Dividends and
Distributions" in the Prospectus.
B-22
<PAGE>
The per share dividends on Class B and, with respect to the Short-Term
Global Income Portfolio, Class C shares will typically be lower than the
per share dividends and distributions on Class A shares as a result of the
higher distribution-related fee applicable to the Class B and Class C
shares. The per share distributions of capital gains, if any, will be in
the same amounts for Class A, Class B and, with respect to the Short-Term
Global Income Portfolio, Class C shares. See "How the Fund Values its
Shares" in the Prospectus. Currently, total operating expenses of the
Global Assets Portfolio are lower for Class B shares than for Class A
shares. See "Fund Expenses" in the Prospectus of the Global Assets
Portfolio.
For federal income tax purposes, the Short-Term Global Income Portfolio
had a capital loss carryforward as of October 31, 1993, of approximately
$26,697,000 which expires in 2001. For federal income tax purposes, the
Global Assets Portfolio has a capital loss carryforward as of October 31,
1993 of approximately $10,954,000 of which $4,701,000 expires in 2000 and
$6,253,000 expires in 2001. Accordingly, no capital gains distributions are
expected to be paid to shareholders until future net gains have been
realized in excess of such carryforwards.
Currency Fluctuations. Gains or losses attributable to fluctuations in
exchange rates which occur between the time the Portfolio accrues interest
or other receivables or accrues expenses or other liabilities denominated
in a foreign currency and the time the Portfolio actually collects such
receivables or pays such liabilities are treated as ordinary income or
ordinary loss. Similarly, gains or losses on disposition of debt securities
denominated in a foreign currency attributable to fluctuations in the value
of foreign currency between the date of acquisition of the security and the
date of disposition also are treated as ordinary gain or loss. These gains
or losses increase or decrease the amount of the Portfolio's investment
company taxable income available to be distributed to shareholders as
ordinary income, rather than increasing or decreasing the amount of the
Portfolio's net capital gain. If currency fluctuation losses exceed other
investment company taxable income during a taxable year, distributions made
by the Portfolio during the year would be characterized as a return of
capital to shareholders, reducing each shareholder's basis in their shares.
Backup Withholding. With limited exceptions, the Fund is required to
withhold federal income tax at the rate of 31% of all taxable distributions
payable after December 31, 1993 to shareholders who fail to provide the
Fund with their correct taxpayer identification number or to make required
certification or who have been notified by the Internal Revenue Service
that they are subject to backup withholding. Any amounts withheld may be
credited against a shareholder's federal income tax liability.
Other Taxation. Distributions may also be subject to state, local and
foreign taxes depending on each shareholder's particular situation.
Shareholders are advised to consult their own tax advisers with respect to
the particular tax consequences to them of an investment in the Fund.
PERFORMANCE INFORMATION
Yield. Each Portfolio may from time to time advertise its "yield" as
calculated over a 30-day period. Yield is determined separately for Class
A, Class B and Class C shares. The yield will be computed by dividing each
Portfolio's net investment income per share earned during this 30-day
period by the offering price on the last day of this period. The average
number of shares used in determining the net investment income per share
will be the average daily number of shares outstanding during the 30-day
period that were eligible to receive dividends. In accordance with SEC
regulations, income will be computed by totaling the interest earned on all
debt obligations during the 30-day period and subtracting from that amount
the total of all expenses incurred during the period, which include
management and distribution fees. The 30-day yield is then annualized on a
bond-equivalent basis assuming semi-annual reinvestment and compounding of
net investment income, as described in the Prospectus. Yields for the Fund
will vary based on a number of factors including changes in net asset
value, market conditions, the level of interest rates and the level of Fund
income and expenses.
With respect to the Short-Term Global Income Portfolio, the yield for
the 30 days ended April 30, 1994 was 5.80% and 5.12% for Class A and
Class B shares, respectively. During this period, no Class C shares were
outstanding for the Portfolio. With respect to the Global Assets Portfolio,
the yield for the 30 days ended April 30, 1994 was 3.16% and 3.50% for
Class A and Class B shares, respectively.
The Portfolio's yield is calculated according to the following formula:
a - b
YIELD = 2 [ (------ + 1) 6- 1 ]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
B-23
<PAGE>
Average Annual Total Return. Each Portfolio may from time
to time advertise its average annual total return. Average annual total
return is calculated separately for Class A, Class B and, for the Short-
Term Global Income Portfolio, Class C shares. See "How the Fund Calculates
Performance" in the Prospectus. The average annual total returns for the
one year period ended April 30, 1994 and for the period from inception
of the Portfolios were as follows:
Year Ended
April 30,
1994 From Inception
---- --------------
Short-Term Global Income Portfolio-Class A -0.52% 4.10%
Short-Term Global Income Portfolio-Class B -1.25% 3.86%
Global Assets Portfolio-Class A 0.52% 3.57%
Global Assets Portfolio-Class B 3.72% 4.53%
The average annual total return is computed according to the following
formula:
P (1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the 1, 5 or 10 year
periods (or fractional portion thereof) of hypothetical
$1,000 payment made at the beginning of the 1, 5 or 10 year
periods.
Average annual total return does not take into account any federal or
state income taxes that may be payable upon redemption. Average annual
total return takes into account any applicable initial or deferred sales
charges. During these periods, no Class C shares were outstanding.
Aggregate Total Return. The Portfolio may also advertise
its aggregate total return. Aggregate total return is determined
separately for Class A, Class B and, for the Short-Term Global Income
Portfolio, Class C shares. See "How the Fund Calculates Performance" in
the Prospectus.
Aggregate total return represents the cumulative change in the value
of an investment in the Fund and is computed according to the following
formula:
ERV - P
-------
P
Where: P = a hypothetical initial payment of $1,000.
ERV = ending redeemable value at the end of the 1, 5 or 10 year
periods (or fractional portion thereof) of a hypothetical
$1,000 payment made at the beginning of the 1, 5 or 10 year
periods.
Aggregate total return does not take into account any federal or state
income taxes that may be payable upon redemption or any applicable initial
or contingent deferred sales charges.
The aggregate total returns for the one year period ended April 30, 1994
and for the period from inception of the Portfolio were as follows:
Year Ended
April 30,
1994 From Inception
---- --------------
Short-Term Global Income Portfolio-Class A 2.55% 18.65%
Short-Term Global Income Portfolio-Class B 1.75% 15.19%
Global Assets Portfolio-Class A 1.53% 13.02%
Global Assets Portfolio-Class B 4.72% 15.27%
During these periods, no Class C shares were outstanding.
B-24
<PAGE>
Performance Chart
From time to time, the performance of the Fund may be
measured against various indices. Set forth below is a chart which
compares the performance of different types of investments over the long-
term and the rate of inflation.1
[CHART]
1Source: Ibbotson Associates, "Stocks, Bonds, Bills and Inflation-1993
Yearbook" (annually updates the work of Roger G. Ibbotson and Rex A.
Sinquefield). Common stock returns are based on the Standard & Poor's 500
Stock Index, a market-weighted, unmanaged index of 500 common stocks in a
variety of industry sectors. It is a commonly used indicator of broad
stock price movements. This chart is for illustrative purposes only, and
is not intended to represent the performance of any particular investment
or fund.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
AND INDEPENDENT ACCOUNTANTS
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171 serves as Custodian for the Fund's portfolio securities
and cash and, in that capacity, maintains certain financial and accounting
books and records pursuant to an agreement with the Fund.
Prudential Mutual Fund Services, Inc. (PMFS), Raritan Plaza One,
Edison, New Jersey 08837, serves as the Transfer and Dividend Disbursing
Agent of the Fund. Its mailing address is P.O. Box 15005, New Brunswick,
New Jersey 08906-5005. PMFS is a wholly-owned subsidiary of PMF. PMFS
provides customary transfer agency services to the Fund, including the
handling of shareholder communications, the processing of shareholder
transactions, the maintenance of shareholder account records, payment of
dividends and distributions, and related functions. For these services, PMF
receives an annual fee per shareholder account, a new account set up fee
for each manually established account and a monthly inactive zero balance
account fee. For the fiscal year ended October 31, 1993, the Fund incurred
fees of approximately $544,800 for the Short-Term Global Income Portfolio
and $107,600 for the Global Assets Portfolio, for the services of PMFS.
PMFS is also reimbursed for its out-of-pocket expenses, including but not
limited to postage, stationery, printing, allocable communications expenses
and other costs.
Deloitte & Touche, 1633 Broadway, New York, N.Y. 10019, serves as the
Fund's independent accountants and in that capacity audits the Fund's
annual financial statements.
B-25
<PAGE>
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description(a) (Note 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--82.7%
Australia--11.3%
Australian Gov't.
Bonds,
A$ 3,840# 12.50%, 4/15/95........ $ 2,826,913
Queensland Treasury
Corp.,
21,700# 12.00%, 3/15/95........ 15,779,924
State Electric Comm.
Victoria,
25,700# 12.00%, 10/22/95....... 19,261,117
Western Australia
Treasury Corp.,
15,400# 12.00%, 9/15/95........ 11,487,762
------------
49,355,716
------------
Canada--7.6%
Alberta Province
Canada,
C$ 20,000# 5.75%, 9/3/96.......... 15,252,366
Canadian Gov't. Bonds,
22,650# 6.50%, 8/1/96.......... 17,672,214
------------
32,924,580
------------
Denmark--10.2%
Danish Treasury Notes,
DKr 285,000# 9.25%, 8/10/95......... 44,207,403
------------
Finland--3.0%
Finland Gov't. Bonds,
FM 74,000 6.50%, 9/15/96......... 12,954,601
------------
France--5.6%
Gov't. of France,
FF 163,000# Zero Coupon, 4/25/96... 24,305,478
------------
Germany--2.3%
German Gov't. Bonds,
DM 15,600# 8.50%, 4/22/96......... 9,983,348
------------
Ireland--1.7%
Irish Gov't. Bonds,
IEP 5,000 9.00%, 7/30/96......... 7,543,346
------------
Italy--12.0%
Eurofima,
Lira 5,500,000# 12.13%, 8/9/95......... $ 3,603,410
Export Finance of
Norway,
8,000,000# 12.25%, 8/5/96......... 5,396,193
General Electric
Capital Corp.,
4,000,000# 11.50%, 2/7/95......... 2,553,648
Italian Gov't. BTP,
63,750,000# 10.00%, 8/1/96......... 40,659,505
------------
52,212,756
------------
New Zealand--9.1%
Electric Corp. of New
Zealand,
NZ$ 30,000# 10.00%, 6/15/96........ 18,319,246
New Zealand Gov't.
Bonds,
36,000# 10.00%, 2/15/95........ 21,065,637
------------
39,384,883
------------
Norway--1.6%
Bolig Og Norgeskreditt
Mortgage Bonds,
NKr 45,200 10.50%, 12/20/95....... 6,762,033
------------
Spain--12.3%
Kingdom of Spain,
Pts 1,500,000 11.90%, 7/15/96........ 12,155,163
4,900,000 11.85%, 8/30/96........ 40,008,229
Nordic Investment Bank,
150,000 13.80%, 11/30/95....... 1,220,213
------------
53,383,605
------------
Sweden--2.3%
SBAB,
SKr 20,000 13.00%, 9/20/95........ 2,712,870
Swedish Gov't. Bonds,
55,000 11.50%, 9/1/95......... 7,323,431
------------
10,036,301
------------
</TABLE>
See Notes to Financial Statements.
B-26
<PAGE>
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description(a) (Note 1)
<C> <S> <C>
United Kingdom--3.7%
Bayerische Hypothelsen
Bank,
; 5,000# 11.13%, 6/24/96........ $ 8,338,297
United Kingdom Treasury
Notes,
5,000# 10.25%, 7/21/95........ 8,033,502
------------
16,371,799
------------
Total long-term
investments
(cost
US$358,046,699)...... 359,425,849
------------
SHORT-TERM INVESTMENTS--13.3%
Mexico--3.5%
Mexican Treasury
Bills,**
MP 5,676# 14.25%, 11/4/93........ 1,813,633
12,417# 16.95%, 11/11/93....... 3,956,929
8,469# 15.10%, 11/18/93....... 2,691,785
15,490# 13.80%, 12/23/93....... 4,869,268
5,979# 14.73%, 2/3/94......... 1,849,323
------------
15,180,938
------------
United Kingdom--3.4%
Dresdner Bank Sterling
C.D.,
; 10,000# 5.84%, 12/22/93........ 14,890,768
------------
United States--6.4%
Cariplo, IND.,
US$ 5,000 10.25%, 10/11/94....... 2,786,000
Nordbanken, IND.,
5,000 10.00%, 8/16/94........ 3,297,000
5,000 13.30%, 9/6/94......... 2,858,500
5,000 9.85%, 9/27/94......... 3,655,000
Joint Repurchase
Agreement Account,
US$ 15,270 2.93%, 11/1/93 (Note
5)................... $ 15,270,000
------------
27,866,500
------------
Total short-term
investments
(cost US$65,590,035)... 57,938,206
------------
<CAPTION>
OUTSTANDING OPTIONS
Contracts+ PURCHASED*--1.0%
- --------------
<C> <S> <C>
Call Options--0.2%
Japanese Yen,
Y= 18,900,000 expiring 1/13/94 @
Y=109.20............ 262,710
17,600,000 expiring 1/25/94 @
Y=110.00............ 225,280
------------
487,990
------------
Put Options--0.8%
Deutschemarks,
DM 35,100 expiring 1/25/94
@DM1.72.............. 621,270
40,000 expiring 3/29/94
@DM1.68.............. 1,568,000
19,000 expiring 4/18/94
@DM1.68.............. 725,800
French Francs,
FF 19,000 expiring 4/18/94
@FF6.08.............. 513,000
------------
3,428,070
------------
Total outstanding
options
purchased
(cost
US$3,234,535)........ 3,916,060
------------
Total Investments Before
Outstanding Put Options
Written--97.0%
(cost US$426,871,269;
Note 4).............. 421,280,115
------------
</TABLE>
See Notes to Financial Statements.
B-27
<PAGE>
<TABLE>
<CAPTION>
US$
Value
Contracts+ Description (Note 1)
<C> <S> <C>
OUTSTANDING PUT OPTIONS
WRITTEN*--(0.1%)
Deutschemarks,
DM 30,500 expiring 11/24/93
@DM1.70
(premiums received
US$230,275).......... $ (274,500)
------------
Total Investments, Net of
Outstanding Put Options
Written--96.9%..........421,005,615
Other assets in excess
of
other
liabilities--3.1%.... 13,466,062
------------
Net Assets--100%....... $434,471,677
------------
------------
</TABLE>
- ------------------
Portfolio securities are classified according to the security's
currency denomination.
(a) The following abbreviations are used in portfolio descriptions:
C.D.--Certificate of Deposit.
IND.--Foreign Currency Index Linked Commercial Paper.
# Principal amount segregated as collateral for forward currency
contracts and put options written. Aggregate value of segregated
securities--$298,817,669.
* Non-income producing security.
** Percentage quoted represent yields to maturity as of purchase date.
+ Expressed in thousands of local currency units.
See Notes to Financial Statements.
B-28
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
Short-Term Global Income Portfolio
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Assets
October 31, 1993
----------------
<S>
<C>
Investments, at value (cost $426,871,269) ...................................... $421,280,115
Foreign currency, at value (cost $2,155,068) ................................... 2,147,115
Cash ........................................................................... 65,948
Receivable for investments sold ................................................ 17,991,844
Interest receivable ............................................................ 8,237,166
Forward currency contracts--net amount receivable from counterparties .......... 821,121
Receivable for Fund shares sold ................................................ 104,241
Deferred expenses and other assets.............................................. 90,468
----------------
Total assets ............................................................... 450,738,018
----------------
Liabilities
Payable for investments purchased .............................................. 11,627,027
Payable for Fund shares reacquired.............................................. 2,630,208
Dividends payable............................................................... 628,545
Accrued expenses................................................................ 360,103
Due to Distributors............................................................. 334,905
Outstanding put options written, at value (premiums received $230,275).......... 274,500
Due to Manager.................................................................. 209,665
Withholding taxes payable....................................................... 201,388
-------------
Total liabilities........................................................... 16,266,341
-------------
Net Assets...................................................................... $434,471,677
-------------
-------------
Net assets were comprised of:
Common stock, at par.......................................................... $ 46,785
Paid-in capital in excess of par.............................................. 472,008,986
-------------
472,055,771
Overdistributed net investment income......................................... (5,978,475)
Accumulated net realized loss on investment and foreign currency transactions. (26,697,014)
Net unrealized depreciation on investments and foreign currencies............. (4,908,605)
--------------
Net assets, October 31, 1993.................................................... $434,471,677
--------------
--------------
Class A:
Net asset value and redemption price per share ($59,458,310 / 6,399,282
shares of common stock issued and outstanding)............................... $9.29
Maximum sales charge (3.00% of offering price)................................ .29
-------------
Maximum offering price to public.............................................. $9.58
-------------
-------------
Class B:
Net asset value, offering price and redemption price per share
($375,013,367 / 40,385,776 shares of common stock issued and outstanding).... $9.29
-------------
-------------
</TABLE>
See Notes to Financial Statements.
B-29
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
Short-Term Global Income Portfolio
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
October 31,
Net Investment Income 1993
------------
<S> <C>
Income
Interest (net of foreign
withholding
taxes of $450,769)............... $ 61,871,823
------------
Expenses
Distribution fee--Class A.......... 105,520
Distribution fee--Class B.......... 4,741,746
Management fee..................... 2,994,867
Custodian's fees and expenses...... 770,000
Transfer agent's fees and
expenses......................... 625,000
Reports to shareholders............ 161,000
Registration fees.................. 43,000
Amortization of organization
expenses......................... 40,000
Audit fee.......................... 38,000
Directors' fees.................... 35,000
Legal.............................. 28,000
Miscellaneous...................... 25,279
------------
Total expenses................... 9,607,412
------------
Net investment income................ 52,264,411
------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign
Currency Transactions
Net realized gain (loss) on:
Investment transactions............ (18,599,346)
Foreign currency transactions...... (36,226,723)
Written option transactions........ 2,782,651
------------
(52,043,418)
------------
Net change in unrealized
appreciation/
depreciation of:
Investments........................ 51,502,372
Foreign currencies................. (14,324,433)
Written options.................... (21,806)
------------
37,156,133
------------
Net loss on investments, foreign
currencies and written options..... (14,887,285)
------------
Net Increase in Net Assets
Resulting from Operations............ $ 37,377,126
------------
------------
</TABLE>
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
Short-Term Global Income Portfolio
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
Increase (Decrease) ----------------------------
in Net Assets 1993 1992
------------- ------------
<S> <C> <C>
Operations
Net investment income... $ 52,264,411 $ 85,611,889
Net realized loss on
investment and
foreign currency
transactions........ (52,043,418) (51,353,219)
Net change in
unrealized
appreciation/depreciation
of investments and
foreign
currencies.......... 37,156,133 (38,850,911)
------------- ------------
Net increase
(decrease) in net
assets resulting
from operations..... 37,377,126 (4,592,241)
------------- ------------
Net equalization
debits.............. (7,869,071) (3,256,032)
------------- ------------
Dividends to
shareholders from net
investment income
(Note 1)
Class A............... (4,363,707) (9,993,936)
Class B............... (25,199,590) (61,597,698)
------------- ------------
(29,563,297) (71,591,634)
------------- ------------
Fund share transactions
(Note 6)
Proceeds from shares
subscribed.......... 39,187,479 486,194,823
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends........... 17,172,475 38,998,777
Cost of shares
reacquired.......... (330,090,306) (511,730,357)
------------- ------------
Net increase (decrease)
in net assets from
Fund share
transactions.......... (273,730,352) 13,463,243
------------- ------------
Total decrease.......... (273,785,594) (65,976,664)
Net Assets
Beginning of year....... 708,257,271 774,233,935
------------- ------------
End of year............. $ 434,471,677 $708,257,271
------------- ------------
------------- ------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
B-30
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
Short-Term Global Income Portfolio
Notes to Financial Statements
Prudential Short-Term Global Income Fund, Inc. (the ``Fund'') is
registered under the Investment Company Act of 1940 as a non-diversified,
open-end management investment company. The Fund consists of two series,
namely: Short-Term Global Income Portfolio and Global Assets Portfolio. The
Fund was incorporated in Maryland on February 21, 1990 and had no
significant operations other than the issuance of 5,000 shares each of
Class A and Class B common stock of the Short-Term Global Income Portfolio
for $100,000 on September 21, 1990 to Prudential Mutual Fund Management,
Inc. (``PMF''). The Short-Term Global Income Portfolio (the ``Portfolio'')
commenced investment operations on November 1, 1990. The investment
objective of the Portfolio is to seek high current income with minimum risk
to principal, by investing primarily in high-quality debt securities in
both the U.S. and abroad having remaining maturities of not more than three
years. The ability of the issuers of the debt securities held by the Fund
to meet their obligations may be affected by economic developments in a
specific country or industry.
Note 1. Accounting The following is a summary
Policies of significant accounting poli
cies followed by the Fund, and the Portfolio 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 currency value. Government securities for
which quotations are available will be based on prices provided by an
independent pricing service or principal market makers. Other 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, will be valued at the average of the quoted bid and asked
prices provided by an independent pricing service or by principal market
makers. 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.
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.
Short-term securities which mature in more than 60 days are valued at
current market quotations. Short-term securities which mature in 60 days or
less are valued at amortized cost which approximates market value. Certain
short-term securities with remaining maturities of 60 days or less are
valued at market value.
In connection with transactions in repurchase agreements with U.S.
financial institutions, it is the Fund's policy that its custodian takes
possession of the underlying collateral securities, 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 daily rate of exchange;
(ii) purchases and sales of investment securities, income and
expenses--at the rate 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 year, the Fund
does not isolate that portion of the results of operations arising as a
result of changes in the foreign exchange rates from the fluctuations
arising from changes in the market prices of securities held at the end of
the fiscal year. Similarly, the Fund does not isolate the effect of changes
in foreign exchange rates from the fluctuations arising from changes in the
market prices of long-term debt securities sold during the fiscal year.
Accordingly, realized foreign currency gains and losses are included in the
reported net realized loss on investment transactions.
Net realized loss on foreign currency transactions represents net
foreign exchange gains or losses from sales and maturities of short-term
securities, holding of foreign currencies, currency gains or losses
realized between the trade and settlement dates on security transactions,
and the difference between the amounts of interest and foreign taxes
recorded on the Fund's books and the U.S. dollar equivalent amounts
actually received or paid. Net currency gains and losses from valuing
foreign currency denominated assets (excluding investments) and liabilities
at fiscal year end
B-31
<PAGE>
exchange rates are reflected as a component of net unrealized
depreciation on investments and foreign currencies.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of U.S.
companies as a result of, among other factors, the possibility of political
and economic instability and the level of governmental supervision and
regulation of foreign securities markets.
Forward Currency Contracts: The Fund enters into forward currency
contracts in order to hedge its exposure to changes in foreign currency
exchange rates on its foreign portfolio holdings. A forward contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. The gain or loss arising from the difference
between the settlement value of the original and renegotiated forward
contracts, if any, is isolated and is included in net realized gain (loss)
from foreign currency transactions. Risks may arise upon entering into
these contracts from the potential inability of the counterparties to meet
the terms of their contracts.
Option Writing: When the Fund writes an option, an amount equal to the
premium received by the Fund is recorded as a liability and is subsequently
adjusted to the current market value of the option written. Premiums
received from writing options which expire unexercised are treated by the
Fund on the expiration date as realized gains from securities or currencies
based on the type of option written. The difference between the premium and
the amount paid on effecting a closing purchase transaction, including
brokerage commissions, is also treated as a realized gain, or if the
premium is less than the amount paid for the closing purchase transaction,
as a realized loss. If a call option is exercised, the premium is added to
the proceeds from the sale of the underlying security or currency in
determining whether the Fund has realized a gain or loss. If a put option
is exercised, the premium reduces the cost basis of the securities or
currencies purchased by the Fund. The Fund as writer of an option may have
no control over whether the underlying securities or currencies may be sold
(called) or purchased (put) and as a result bears the market risk of an
unfavorable change in the price of the security or currency underlying the
written option.
Securities Transactions and Investment Income: Securities transactions
are recorded on the trade date. Realized gains and losses from security and
currency transactions are calculated on the identified cost basis. Interest
income is recorded on the accrual basis.
Net investment income (other than distribution fees) and unrealized
and realized gains or losses are allocated daily to each class of shares
based upon the relative proportion of net assets of each class at the
beginning of the day.
Equalization: The Fund follows the accounting practice known as
equalization by which a portion of the proceeds from sales and costs of
reacquisitions of Fund shares, equivalent on a per share basis to the
amount of distributable net investment income on the date of the
transaction, is credited or charged to undistributed net investment income.
As a result, undistributed net investment income per share is unaffected by
sales or reacquisitions of the Fund's shares.
Dividends and Distributions: The Fund declares daily and pays
dividends of net investment income monthly and makes distributions at least
annually of any net capital gains. Dividends and distributions are recorded
on the ex-dividend date.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for foreign currency transactions.
Reclassification of Capital Accounts: Effective November 1, 1992, the
Fund began accounting and reporting for distributions to shareholders in
accordance with 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 caused by
adopting this statement was to decrease paid-in capital by $40,708,162,
decrease undistributed net investment income by $31,574,741 and decrease
accumulated net realized loss by $72,282,903 with respect to amounts
reported through October 31, 1993. Net investment income, net realized
gains and net assets were not affected by this change.
Federal Income Taxes: For federal income tax purposes, each portfolio
in the Fund is treated as a separate taxpaying entity. It is the
Portfolio's intent to continue to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income to shareholders. Therefore, no federal income tax
provision is required.
Withholding taxes on foreign interest have been provided for in
accordance with the Fund's understanding of the applicable country's tax
rules and rates.
Deferred Organization Expenses: Approximately $200,000 of organization
and initial registration costs were incurred. These costs have been
deferred and are being amortized over the period of benefit not to exceed
60 months from the date the Portfolio commenced investment operations. PMF
has agreed not to redeem the 10,000
B-32
<PAGE>
shares purchased until all organization expenses have been amortized.
Note 2. Agreements The Fund has a management
agreement with PMF. Pursuant to this agreement,
PMF has responsibility for all investment advisory services and
supervises the subadviser's performance of such services. PMF has entered
into a subadvisory agreement with The Prudential Investment Corporation
(``PIC''); PIC furnishes investment advisory services in connection with
the managment of the Fund. PMF pays for the cost of the subadviser's
services, the compensation of officers of the Fund, occupancy and certain
clerical and bookkeeping costs of the Fund. The Fund bears all other costs
and expenses.
The management fee paid PMF is computed daily and payable monthly at
an annual rate of .55 of 1% of the average daily net assets of the
Portfolio.
The Fund has distribution agreements with Prudential Mutual Fund
Distributors, Inc. (``PMFD''), which acts as the distributor of the Class A
shares of the Fund and with Prudential Securities Incorporated (``PSI'')
which acts as distributor of the Class B shares of the Fund (collectively,
the ``Distributors''). To reimburse the Distributors for their expenses
incurred in distributing and servicing the Fund's Class A and B shares, the
Fund, pursuant to plans of distribution, pays the Distributors a
reimbursement, accrued daily and payable monthly.
Pursuant to the Class A Plan, the Portfolio reimburses PMFD for its
expenses with respect to Class A shares at an annual rate of up to .30 of
1% of the average daily net assets of the Class A shares. Such expenses
under the Class A Plan were .15 of 1% of the average daily net assets of
the Class A shares for the fiscal year ended October 31, 1993. PMFD pays
various broker-dealers, including PSI and Pruco Securities Corporation
(``Prusec''), affiliated broker-dealers, for account servicing fees and
other expenses incurred by such broker-dealers.
Pursuant to the Class B Plan, the Portfolio reimburses PSI for its
distribution-related expenses with respect to Class B shares at an annual
rate of up to 1% of the average daily net assets of the Class B shares.
The Class B distribution expenses include commission credits for
payment of commissions and account servicing fees to financial advisers and
an allocation for overhead and other distribution-related expenses,
interest and/or carrying charges, the cost of printing and mailing
prospectuses to potential investors and of advertising incurred in
connection with the distribution of shares.
The Distributors recover the distribution expenses and account
servicing fees incurred through the receipt of reimbursement payments from
the Portfolio under the plans and the receipt of initial sales charges
(Class A only) and contingent deferred sales charges (Class B only) from
shareholders.
PMFD has advised the Portfolio that it has received approximately
$64,400 in front-end sales charges resulting from sales of Class A shares
during the fiscal year ended October 31, 1993. From these fees, PMFD paid
such sales charges to dealers (PSI and Prusec) which in turn paid
commissions to salespersons.
With respect to the Class B Plan, at any given time the amount of
expenses incurred by PSI in distributing the Portfolio's shares and not
recovered through the imposition of contingent deferred sales charges in
connection with certain redemptions of shares may exceed the total payments
made by the Portfolio pursuant to the Class B Plan. PSI has advised the
Portfolio that, for the fiscal year ended October 31, 1993, it received
approximately $2,203,700 in contingent deferred sales charges imposed upon
certain redemptions by investors. PSI, as distributor, has also advised the
Portfolio that at October 31, 1993, the amount of distribution expenses
incurred by PSI and not yet reimbursed by the Portfolio or recovered
through contingent deferred sales charges approximated $15,751,800. This
amount may be recovered through future payments under the Class B Plan or
contingent deferred sales charges.
In the event of termination or noncontinuation of the Class B Plan,
the Fund would not be contractually obligated to pay PSI, as distributor,
for any expenses not previously reimbursed or recovered through contingent
deferred sales charges.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are
indirect, wholly-owned subsidiaries of The Prudential Insurance Company of
America.
Note 3. Other Prudential Mutual Fund Ser
Transactions vices, Inc. (``PMFS'') a wholly-
With Affiliates owned subsidiary of PMF,
serves as the Fund's transfer agent and during the
fiscal year ended October 31, 1993, the Portfolio incurred fees of
approximately $544,800 for the services of PMFS. As of October 31, 1993,
approximately $37,700 of such fees were due to PMFS for its services.
Transfer agent fees and expenses in the Statement of Operations include
certain out-of-pocket expenses paid to non-affiliates.
B-33
<PAGE>
Note 4. Portfolio Purchases and sales of invest
Securities ment securities, other than
short-term investments and options, for the fiscal
year ended October 31, 1993 aggregated $1,291,897,873 and
$1,350,325,743, respectively.
The federal income tax basis of the Portfolio's investments at October
31, 1993 was $428,334,476 and, accordingly, net unrealized depreciation for
federal income tax purposes was $7,054,361 (gross unrealized appreciation--
$4,122,681; gross unrealized depreciation--$11,177,042).
For federal income tax purposes, the Portfolio had a capital loss
carryforward as of October 31, 1993, of approximately $26,697,000 which
expires in 2001. Accordingly, no capital gains distributions are expected
to be paid to shareholders until future net gains have been realized in
excess of such carryforward.
Transactions in options written during the fiscal year ended October
31, 1993 were as follows:
<TABLE>
<CAPTION>
Number of
Contracts Premiums
(000) Received
--------- -----------
<S> <C> <C>
Options outstanding at
October 31, 1992............ 1,112 $ 695,000
Options written............... 442,208 6,190,524
Options terminated in closing
purchase transactions....... (316,745) (4,514,322)
Options expired............... (96,075) (2,140,927)
--------- -----------
Options outstanding at
October 31, 1993............ 30,500 $ 230,275
--------- -----------
--------- -----------
</TABLE>
At October 31, 1993, the Portfolio had outstanding forward currency
contracts, both to purchase and sell foreign currencies, as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Purchase Contracts Payable Value (Depreciation)
- ------------------ --------------- ------------ -----------
<S> <C> <C> <C>
Australian
Dollars,
expiring
11/16/93........ $ 14,145,407 $ 13,973,601 $ (171,806)
Belgian Francs,
expiring
11/17//93....... 24,549,557 23,924,519 (625,038)
British Pounds,
expiring 11/2-
11/9/93......... 20,548,825 20,609,508 60,683
Canadian Dollars,
expiring
11/10/93........ 18,540,489 18,561,189 20,700
Danish Kroner,
expiring 11/1-
11/15/93........ 45,664,273 46,012,293 348,020
Deutschemarks,
expiring
11/4/93-
3/3/94.......... 167,624,265 165,346,862 (2,277,403)
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Purchase Contracts Payable Value (Depreciation)
- ------------------ --------------- ------------ -----------
<S> <C> <C> <C>
French Francs,
expiring 2/7-
2/14/94......... $ 64,665,845 $ 63,612,265 $(1,053,580)
Italian Lira,
expiring 11/15-
11/24/93........ 24,072,525 23,045,518 (1,027,007)
New Zealand
Dollars,
expiring
12/2/93......... 9,970,144 9,921,089 (49,055)
Spanish Pesetas,
expiring 11/2-
1/27/94......... 55,093,021 55,083,455 (9,566)
Swedish Krona,
expiring 11/10-
11/29/93........ 20,629,370 20,437,377 (191,993)
Swiss Francs,
expiring
11/8/93......... 53,742,316 51,330,773 (2,411,543)
--------------- ------------ -----------
$ 519,246,037 $511,858,449 $(7,387,588)
--------------- ------------ -----------
--------------- ------------ -----------
</TABLE>
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- ------------------ --------------- ------------ -----------
<S> <C> <C> <C>
Australian
Dollars,
expiring
11/16/93........ $ 19,881,425 $ 20,327,438 $ (446,013)
Belgian Francs,
expiring 11/9-
11/16/93........ 48,181,987 47,788,761 393,226
British Pounds,
expiring
11/9/93......... 11,421,280 11,309,479 111,801
Canadian Dollars,
expiring 11/9-
11/10/93........ 40,300,000 39,812,040 487,960
Danish Kroner,
expiring 11/1-
12/1/93......... 112,577,537 110,971,009 1,606,528
Deutschemarks,
expiring
11/1/93-
3/3/94.......... 200,173,868 197,000,447 3,173,421
French Francs,
expiring
11/4/93-
2/14/94......... 116,925,020 117,045,973 (120,953)
Italian Lira,
expiring 11/15-
11/17/93........ 45,163,381 43,935,801 1,227,580
Japanese Yen,
expiring 11/4-
11/8/93......... 4,426,666 4,284,090 142,576
New Zealand
Dollars,
expiring
12/2/93......... 12,310,420 12,388,364 (77,944)
Norwegian Kroner,
expiring
11/26/93........ 7,026,179 6,945,979 80,200
Spanish Pesetas,
expiring
11/2/93-
1/14/94......... 91,037,924 89,643,732 1,394,192
Swedish Krona,
expiring 11/1-
11/29/93........ 19,794,621 19,782,288 12,333
Swiss Francs,
expiring
11/8/93......... 10,933,085 10,709,283 223,802
--------------- ------------ -----------
$ 740,153,393 $731,944,684 $ 8,208,709
--------------- ------------ -----------
--------------- ------------ -----------
</TABLE>
B-34
<PAGE>
Note 5. Joint The Portfolio, along with
Repurchase other affiliated registered
Agreement investment companies, trans
Account fers uninvested cash balances
into a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements
collateralized by U.S. Treasury or Federal agency obligations. As of
October 31, 1993, the Portfolio has a 1.1% undivided interest in the
repurchase agreements in the joint account. The undivided interest for the
Portfolio represents $15,270,000 in principal amount. As of such date, each
repurchase agreement in the joint account and the collateral therefor were
as follows:
CS First Boston Corp., 2.93%, in the principal amount of $360,000,000,
repurchase price $360,087,900, due 11/1/93, collateralized by $47,400,000
U.S. Treasury Notes, 6.75%, due 2/28/97; $40,000,000 U.S. Treasury Notes,
11.25%, due 2/15/95; $100,000,000 U.S. Treasury Bonds, 7.50%, due 11/15/16;
$50,000,000 U.S. Treasury Bonds, 10.375%, due 11/15/12 and $50,000,000 U.S.
Treasury Bonds, 12.00%, due 5/15/05; aggregate value including accrued
interest--$368,368,052.
Goldman Sachs & Co., 2.93%, in the principal amount of $450,154,000,
repurchase price $450,263,913, due 11/1/93, collateralized by $104,915,000
U.S. Treasury Bonds, 12.00%, due 8/15/13 and $200,000,000 U.S. Treasury
Bonds, 10.75%, due 8/15/05; aggregate value including accrued
interest--$462,739,932.
Kidder, Peabody & Co. Inc., 2.95%, in the principal amount of
$305,000,000, repurchase price $305,074,979, due 11/1/93, collateralized by
$210,030,000 U.S. Treasury Bonds, 9.875%, due 11/15/15; value including
accrued interest--$311,527,136. Nomura Securities International, Inc.,
2.90%, in the principal amount of $60,889,000, repurchase price
$60,903,715, due 11/1/93, collateralized by $8,280,000 U.S. Treasury Notes,
7.75%, due 2/15/95; $25,000,000 U.S. Treasury Notes, 7.375%, due 5/15/96
and $22,775,000 U.S. Treasury Notes, 8.875%, due 2/15/96; aggregate value
including accrued interest--$62,140,276. Smith Barney Shearson, Inc.,
2.94%, in the principal amount of $175,000,000, repurchase price
$175,042,875, due 11/1/93, collateralized by $4,465,000 U.S. Treasury
Bonds, 12.00%, due 5/15/05; $11,435,000 U.S. Treasury Notes, 9.125%, due
5/15/99; $75,000,000 U.S. Treasury Bonds, 8.125%, due 8/15/19 and
$50,000,000 U.S. Treasury Bonds, 8.00%, due 11/15/21; aggregate value
including accrued interest--$178,771,706.
Note 6. Capital The Portfolio offers both
Class A and Class B shares. Class A shares are
sold with a front-end sales charge of up to 3.0%. Class B shares are
sold with a contingent deferred sales charge which declines from 3% to zero
depending on the period of time the shares are held. Both classes of shares
have equal rights as to earnings, assets and voting privileges except that
each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan.
There are 1.5 billion authorized shares of $.001 par value common
stock divided into two classes, designated Class A and Class B common
stock, each of which consists of 750 million authorized shares. Of the
46,758,058 shares issued and outstanding at October 31, 1993, PMF owned
10,000 shares.
Transactions in shares of common stock for the fiscal years ended
October 31, 1993 and fiscal 1992 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ---------------------------- ----------- -------------
<S> <C> <C>
Year ended October 31, 1993:
Shares sold................. 2,800,748 $ 25,157,507
Shares issued in
reinvestment of
dividends................. 334,726 3,006,237
Shares reacquired........... (7,797,277) (69,726,785)
----------- -------------
Net decrease in shares
outstanding............... (4,661,803) $ (41,563,041)
----------- -------------
----------- -------------
Year ended October 31, 1992:
Shares sold................. 8,598,472 $ 84,065,302
Shares issued in
reinvestment of
dividends................. 575,099 5,554,232
Shares reacquired........... (8,654,040) (83,274,185)
----------- -------------
Net increase in shares
outstanding............... 519,531 $ 6,345,349
----------- -------------
----------- -------------
<CAPTION>
Class B
- ----------------------------
<S> <C> <C>
Year ended October 31, 1993:
Shares sold................. 1,558,807 $ 14,029,972
Shares issued in
reinvestment of
dividends................. 1,575,399 14,166,238
Shares reacquired........... (29,032,710) (260,363,521)
----------- -------------
Net decrease in shares
outstanding............... (25,898,504) $(232,167,311)
----------- -------------
----------- -------------
Year ended October 31, 1992:
Shares sold................. 40,963,635 $ 402,129,521
Shares issued in
reinvestment of
dividends................. 3,451,357 33,444,545
Shares reacquired........... (45,225,866) (428,456,172)
----------- -------------
Net decrease in shares
outstanding............... (810,874) $ 7,117,894
----------- -------------
----------- -------------
</TABLE>
B-35
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
Short-Term Global Income Portfolio
Financial Highlights
<TABLE>
<CAPTION>
Class A Class B
---------------------------------- ----------------------------------
Year Ended October 31, Year Ended October 31,
---------------------------------- ----------------------------------
1993 1992 1991 1993 1992 1991
---------- -------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year................. $ 9.16 $ 9.97 $ 10.00 $ 9.16 $ 9.97 $ 10.00
--------- -------- -------- --------- -------- --------
Income from investment operations
Net investment income.............................. .97 .96 1.03 .88 .88 .95
Net realized and unrealized loss on investment and
foreign currency transactions.................... (.26) (.95) (.02) (.26) (.95) (.02)
---------- -------- -------- ---------- -------- --------
Total from investment operations................. .71 .01 1.01 .62 (.07) .93
---------- -------- -------- ---------- -------- --------
Less distributions
Dividends from net investment income............... (.58) (.82) (1.03) (.49) (.74) (.95)
Distributions from net capital gains............... -- -- (.01) -- -- (.01)
---------- -------- -------- ---------- -------- --------
Total distributions.............................. (.58) (.82) (1.04) (.49) (.74) (.96)
---------- -------- -------- ---------- -------- --------
Net asset value, end of year....................... $ 9.29 $ 9.16 $ 9.97 $ 9.29 $ 9.16 $ 9.97
---------- -------- -------- ---------- -------- --------
---------- -------- -------- ---------- -------- --------
TOTAL RETURN#:..................................... 7.96% (0.07)% 10.41% 7.00% (0.86)% 9.51%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)...................... $59,458 $101,358 $105,148 $375,013 $606,899 $669,086
Average net assets (000)........................... $70,347 $119,171 $51,830 $474,175 $814,734 $349,607
Ratios to average net assets:
Expenses, including distribution fees............ 1.02% 1.08% 1.01% 1.87% 1.93% 1.87%
Expenses, excluding distribution fees............ .87% .93% .86% .87% .93% .87%
Net investment income............................ 10.81% 9.93% 10.23% 9.42% 9.05% 9.46%
Portfolio turnover rate............................ 307% 180% 66% 307% 180% 66%
- ---------------
# 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.
</TABLE>
See Notes to Financial Statements.
B-36
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
Prudential Short-Term Global Income Fund, Inc.
Short-Term Global Income Portfolio
We have audited the accompanying statement of assets and liabilities
of Prudential Short-Term Global Income Fund, Inc., Short-Term Global Income
Portfolio, including the portfolio of investments, as of October 31, 1993,
the related statements of operations for the year then ended and of changes
in 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.
These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of the
securities owned as of October 31, 1993 by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Prudential Short-Term Global Income Fund, Inc., Short-Term Global Income
Portfolio, as of October 31, 1993, the results of its operations, the
changes in its net assets and its financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
Deloitte & Touche
New York, New York
December 15, 1993
B-37
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC. Portfolio of Investments
Short-Term Global Income Portfolio April 30, 1994 (Unaudited)
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--76.1%
Australia--17.5%
New South Wales
Treasury Corp.,
A$ 18,000# 8.50%, 3/1/96.......... $ 13,209,052
South Australia Fin.
Auth.,
5,000# 13.00%, 7/15/95........ 3,850,605
12,650# 12.50%, 10/15/96....... 10,056,178
Victorian Treasury
Corp.,
17,200# 12.50%, 7/15/96........ 13,598,660
Western Australia
Treasury Corp.,
18,607# 10.00%, 1/15/97........ 14,067,885
------------
54,782,380
------------
Canada--11.9%
Alberta Province
Canada,
C$ 20,000# 5.75%, 9/3/96.......... 13,975,282
Canadian Gov't. Bonds,
32,650# 6.50%, 8/1/96.......... 23,209,676
------------
37,184,958
------------
Ireland--3.4%
Irish Gov't. Bonds,
IEP 7,000# 9.00%, 7/30/96......... 10,752,990
------------
Italy--14.3%
Credit Local De France,
Lira 4,500,000# 12.20%, 6/12/96........ 3,054,270
Deutsche Bank,
10,000,000# 12.00%, 10/2/96........ 6,812,556
European Investor Bank,
10,000,000# 7.625%, 11/25/96....... 6,297,267
Export Finance of
Norway,
8,000,000# 12.25%, 8/5/96......... 5,414,133
Italian Gov't. BTP,
Lira 2,000,000# 10.00%, 8/1/96......... $ 1,294,936
30,000,000# 9.00%, 10/1/96......... 19,080,342
4,000,000# 12.00%, 1/1/97......... 2,691,032
------------
44,644,536
------------
New Zealand--4.7%
New Zealand Gov't.
Bonds,
NZ$ 25,000# 8.00%, 11/15/95........ 14,653,449
------------
Spain--12.9%
Nordic Investment Bank,
Pts 150,000 13.80%, 11/30/95....... 1,204,168
Spanish Gov't. Bonds,
5,167,000 9.00%, 2/28/97......... 38,932,162
------------
40,136,330
------------
Sweden--4.3%
Statens Bostad Housing
Fund,
SKr 70,000 12.50%, 1/23/97........ 10,064,367
Swedish Gov't. Bonds,
25,000 11.50%, 9/1/95......... 3,442,185
------------
13,506,552
------------
United Kingdom--7.1%
Bayerische Hypothelsen
Bank,
(BrPd) 5,000# 11.13%, 6/24/96........ 8,186,251
United Kingdom Treasury
Bills,
8,550# 10.50%, 2/21/97........ 14,108,528
------------
22,294,779
------------
Total long-term
investments
(cost
US$237,243,990)...... 237,955,974
------------
</TABLE>
See Notes to Financial Statements.
B-38
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
Short-Term Global Income Portfolio
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
SHORT-TERM INVESTMENT--24.7%
Canada--3.7%
Canadian Treasury
Bills,**
C$ 9,000# 6.39%, 4/6/95.......... $ 6,116,795
8,000# 6.96%, 4/20/95......... 5,423,368
------------
11,540,163
------------
New Zealand--10.1%
New Zealand Gov't.
Bonds,
NZ$ 26,000# 10.00%, 2/15/95........ 15,389,348
New Zealand Treasury
Bills,**
1,300# 6.05%, 5/4/94.......... 748,285
7,000# 6.63%, 7/6/94.......... 3,983,420
20,000# 6.85%, 7/6/94.......... 11,381,131
------------
31,502,184
------------
Sweden--3.9%
Swedish Treasury
Bills,**
SKr 92,000 7.08%, 5/18/94......... 12,062,758
------------
United States--7.0%
Joint Repurchase
Agreement Account,
US$ 15,328 3.54%, 5/2/94 (Note
5)................... 15,328,000
United States Treasury
Bills,**
7,000 4.48%, 4/6/95.......... 6,681,959
------------
22,009,959
------------
Total short-term
investments
(cost US$75,577,179)... 77,115,064
------------
</TABLE>
<TABLE>
<CAPTION>
US$
Value
Contracts(D) Description (Note 1)
<C> <S> <C>
OUTSTANDING OPTIONS
PURCHASED*--0.3%
Currency Call Options
Deutschemarks,
DM 82,400 expiring 7/18/94
@DM1.80.............. $ 98,880
French Francs,
FF 55,000 expiring 12/19/94
@FF94.40............. 7,666
Japanese Yen,
(YEN) 19,300 expiring 5/17/94
@ (YEN)107.00........ 5,790
------------
112,336
------------
Currency Put Options
Deutschemarks,
DM 19,000 expiring 6/28/94
@DM1.66.............. 300,200
------------
Cross-Currency Call Options
Deutschemarks,
24,700 expiring 6/16/94
@DM1025.00
per Italian Lira..... 1,348
------------
Cross-Currency Put Options
Deutschemarks,
expiring 1/12/95
15,000 @DM974.16
per Italian Lira..... 212,856
9,700 @DM972.30
per Italian Lira..... 135,882
27,400 expiring 1/20/95
@DM4.6015
per Swedish Krona.... 320,691
------------
669,429
------------
</TABLE>
See Notes to Financial Statements.
B-39
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
Short-Term Global Income Portfolio
<TABLE>
<CAPTION>
US$
Value
Contracts(D) Description (Note 1)
<C> <S> <C>
Total outstanding
options purchased
(cost US$3,134,929).... $ 1,083,313
------------
Total Investments
Before Outstanding
Options Written--
101.1%
(cost US$315,956,098;
Note 4).............. 316,154,351
------------
OUTSTANDING OPTIONS
WRITTEN*--(0.5%)
Currency Put Options
French Francs,
FF 55,000 expiring 12/19/94
@FF94.20............. (3,724)
Italian Lira,
Lira 24,700 expiring 6/16/94
@L967.60............. (197,720)
Japanese Yen,
(YEN) 19,300 expiring 5/17/94
@ (YEN)107.00........ (1,103,960)
------------
(1,305,404)
------------
Cross-Currency Call Options
Deutschemark,
DM 24,700 expiring 1/12/95
@DM1025.00 per
Italian Lira......... (132,292)
------------
Cross-Currency Put Options
Deutschemark,
DM 27,400 expiring 1/20/95
@DM4.55
per Swedish Krona.... $ (252,565)
------------
Total outstanding
options written
(premiums
received
US$1,054,220)........ (1,690,261)
------------
Total Investments,
Net of Outstanding
Options Written--
100.6%............... 314,464,090
Other liabilities in
excess of
other assets--(0.6%)... (1,919,565)
------------
Net Assets--100%....... $312,544,525
------------
------------
</TABLE>
- ------------------
Portfolio securities are classified according to the security's currency
denomination.
# Principal amount segregated as collateral for forward currency contracts and
options written. Aggregate value of segregated securities--$227,355,439.
* Non-income producing security.
** Percentage quoted represent yields to maturity as of purchase date.
(DAG) Expressed in thousands of local currency units.
See Notes to Financial Statements.
B-40
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
Short-Term Global Income Portfolio
Statement of Assets and Liabilities
(Unaudited)
<TABLE>
<CAPTION>
Assets April 30, 1994
--------------
<S> <C>
Investments, at value (cost $315,956,098)................................................. $ 316,154,351
Foreign currency, at value (cost $14,785)................................................. 14,765
Receivable for investments sold........................................................... 10,144,675
Interest receivable....................................................................... 6,665,946
Receivable for Fund shares sold........................................................... 75,094
Deferred expenses and other assets........................................................ 74,328
--------------
Total assets.......................................................................... 333,129,159
--------------
Liabilities
Bank overdraft............................................................................ 5,786
Payable for investments purchased......................................................... 10,145,561
Forward contracts-net amount payable to counterparties.................................... 4,450,159
Payable for Fund shares reacquired........................................................ 2,904,784
Outstanding options written, at value (premiums received $1,054,220)...................... 1,690,261
Dividends payable......................................................................... 417,598
Accrued expenses.......................................................................... 371,683
Distribution fee payable.................................................................. 240,523
Withholding taxes payable................................................................. 212,452
Management fee payable.................................................................... 145,827
--------------
Total liabilities..................................................................... 20,584,634
--------------
Net Assets................................................................................ $ 312,544,525
--------------
--------------
Net assets were comprised of:
Common stock, at par.................................................................... $ 34,837
Paid-in capital in excess of par........................................................ 362,388,119
--------------
362,422,956
Overdistributed net investment income................................................... (9,057,814)
Accumulated net realized loss on investment and foreign currency transactions........... (36,103,598)
Net unrealized depreciation on investments and foreign currencies....................... (4,717,019)
--------------
Net assets, April 30, 1994.............................................................. $ 312,544,525
--------------
--------------
Class A:
Net asset value and redemption price per share ($34,820,662 / 3,880,432 shares of common
stock issued and outstanding)......................................................... $8.97
Maximum sales charge (3.00% of offering price).......................................... .28
--------------
Maximum offering price to public........................................................ $9.25
--------------
--------------
Class B:
Net asset value, offering price and redemption price per share ($277,723,863 /
30,956,930 shares of common stock issued and outstanding)............................. $8.97
--------------
--------------
</TABLE>
See Notes to Financial Statements.
B-41
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
Short-Term Global Income Portfolio
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
April 30,
Net Investment Income 1994
------------
<S> <C>
Income
Interest (net of foreign
withholding
taxes of $215,861)............... $ 16,071,236
------------
Expenses
Distribution fee--Class A.......... 33,123
Distribution fee--Class B.......... 1,638,910
Management fee..................... 1,022,851
Custodian's fees and expenses...... 416,000
Transfer agent's fees and
expenses........................... 256,000
Reports to shareholders............ 40,000
Registration fees.................. 28,000
Amortization of organization
expenses........................... 20,000
Audit fee.......................... 19,000
Directors' fees.................... 17,500
Legal.............................. 11,000
Miscellaneous...................... 5,104
------------
Total expenses................... 3,507,488
------------
Net investment income................ 12,563,748
------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign
Currency Transactions
Net realized gain (loss) on:
Investment transactions............ (11,321,275)
Foreign currency transactions...... (4,370,105)
Written option transactions........ 692,743
------------
(14,998,637)
------------
Net change in unrealized
appreciation/ depreciation of:
Investments........................ 5,789,408
Foreign currencies................. (5,006,006)
Written options.................... (591,816)
------------
191,586
------------
Net loss on investments, foreign
currencies and written options..... (14,807,051)
------------
Net Decrease in Net Assets
Resulting from Operations............ $ (2,243,303)
------------
------------
</TABLE>
See Notes to Financial Statements.
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
Short-Term Global Income Portfolio
Statement of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Net Increase (Decrease) April 30, October 31,
in Net Assets 1994 1993
------------- -------------
<S> <C> <C>
Operations
Net investment
income............. $ 12,563,748 $ 52,264,411
Net realized loss on
investments........ (14,998,637) (52,043,418)
Net change in
unrealized
appreciation/depreciation
of investments..... 191,586 37,156,133
------------- -------------
Net increase
(decrease) in net
assets resulting
from operations.... (2,243,303) 37,377,126
------------- -------------
Net equalization
debits............. -- (7,869,071)
------------- -------------
Dividends to
shareholders from net
investment income
(Note 1)
Class A.............. (1,369,621) (4,363,707)
Class B.............. (8,681,413) (25,199,590)
------------- -------------
(10,051,034) (29,563,297)
------------- -------------
Fund share transactions
(Note 6)
Net proceeds from
shares
subscribed......... 5,441,743 39,187,479
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends.......... 6,081,069 17,172,475
Cost of shares
reacquired......... (121,155,627) (330,090,306)
------------- -------------
Net decrease in net
assets from Fund
share
transactions....... (109,632,815) (273,730,352)
------------- -------------
Total decrease......... (121,927,152) (273,785,594)
Net Assets
Beginning of period.... 434,471,677 708,257,271
------------- -------------
End of period.......... $ 312,544,525 $ 434,471,677
------------- -------------
------------- -------------
</TABLE>
See Notes to Financial Statements.
B-42
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
Short-Term Global Income Portfolio
Notes to Financial Statements
(Unaudited)
Prudential Short-Term Global Income Fund, Inc. (the ``Fund'') is
registered under the Investment Company Act of 1940 as a non-diversified,
open-end management investment company. The Fund consists of two series,
namely: Short-Term Global Income Portfolio and Global Assets Portfolio. The
Fund was incorporated in Maryland on February 21, 1990 and had no
significant operations other than the issuance of 5,000 shares each of
Class A and Class B common stock of the Short-Term Global Income Portfolio
for $100,000 on September 21, 1990 to Prudential Mutual Fund Management,
Inc. (``PMF''). The Short-Term Global Income Portfolio (the ``Portfolio'')
commenced investment operations on November 1, 1990. The investment
objective of the Portfolio is to seek high current income with minimum risk
to principal, by investing primarily in high-quality debt securities in
both the U.S. and abroad having remaining maturities of not more than three
years. The ability of the issuers of the debt securities held by the Fund
to meet their obligations may be affected by economic developments in a
specific country or industry.
Note 1. Accounting The following is a summary
Policies of significant accounting poli-
cies followed by the Fund, and the Portfolio
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 currency value. Government securities for
which quotations are available will be based on prices provided by an
independent pricing service or principal market makers. Other 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, will be valued at the average of the quoted bid and asked
prices provided by an independent pricing service or by principal market
makers. 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.
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.
Short-term securities which mature in more than 60 days are valued at
current market quotations. Short-term securities which mature in 60 days or
less are valued at amortized cost which approximates market value.
In connection with transactions in repurchase agreements with U.S.
financial institutions, it is the Fund's policy that its custodian or
designated subcustodians, as the case may be under triparty repurchase
agreements, takes 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 daily rate of exchange;
(ii) purchases and sales of investment securities, income and
expenses--at the rate 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 securities held at the end of
the fiscal period. Similarly, the Fund does not isolate the effect of
changes in foreign exchange rates from the fluctuations arising from
changes in the market prices of long-term debt securities sold during the
fiscal period. Accordingly, realized foreign currency gains and losses are
included in the reported net realized loss on investment transactions.
Net realized loss on foreign currency transactions represents net
foreign exchange gains or losses from sales and maturities of short-term
securities, holding of foreign currencies, currency gains or losses
realized between the trade and settlement dates on security transactions,
and the difference between the amounts of interest and foreign taxes
recorded on the Fund's books and the U.S. dollar equivalent amounts
actually received or paid. Net currency gains and losses from
B-43
<PAGE>
valuing foreign currency denominated assets (excluding investments)
and liabilities at fiscal period end exchange rates are reflected as a
component of net unrealized depreciation on investments and foreign
currencies.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of U.S.
companies as a result of, among other factors, the possibility of political
and economic instability and the level of governmental supervision and
regulation of foreign securities markets.
Forward Currency Contracts: The Fund enters into forward currency
contracts in order to hedge its exposure to changes in foreign currency
exchange rates on its foreign portfolio holdings. A forward contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. The gain or loss arising from the difference
between the settlement value of the original and renegotiated forward
contracts, if any, is isolated and is included in net realized gain (loss)
from foreign currency transactions. Risks may arise upon entering into
these contracts from the potential inability of the counterparties to meet
the terms of their contracts.
Option Writing: When the Fund writes an option, an amount equal to the
premium received by the Fund is recorded as a liability and is subsequently
adjusted to the current market value of the option written. Premiums
received from writing options which expire unexercised are treated by the
Fund on the expiration date as realized gains from securities or currencies
based on the type of option written. The difference between the premium and
the amount paid on effecting a closing purchase transaction, including
brokerage commissions, is also treated as a realized gain, or if the
premium is less than the amount paid for the closing purchase transaction,
as a realized loss. If a call option is exercised, the premium is added to
the proceeds from the sale of the underlying security or currency in
determining whether the Fund has realized a gain or loss. If a put option
is exercised, the premium reduces the cost basis of the securities or
currencies purchased by the Fund. The Fund as writer of an option may have
no control over whether the underlying securities or currencies may be sold
(called) or purchased (put) and as a result bears the market risk of an
unfavorable change in the price of the security or currency underlying the
written option.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses from security and
currency transactions are calculated on the identified cost basis. Interest
income is recorded on the accrual basis.
Net investment income (other than distribution fees) and unrealized and
realized gains or losses are allocated daily to each class of shares based
upon the relative proportion of net assets of each class at the beginning
of the day.
Equalization: The Fund follows the accounting practice known as
equalization by which a portion of the proceeds from sales and costs of
reacquisitions of Fund shares, equivalent on a per share basis to the
amount of distributable net investment income on the date of the
transaction, is credited or charged to undistributed net investment income.
As a result, undistributed net investment income per share is unaffected by
sales or reacquisitions of the Fund's shares.
Dividends and Distributions: The Fund declares daily and pays dividends of
net investment income monthly and makes distributions at least annually of
any net capital gains. Dividends and distributions are recorded on the
ex-dividend date.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for foreign currency transactions.
Reclassification of Capital Accounts: The Fund accounts and reports for
distributions to shareholders in accordance with A.I.C.P.A.'s 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
decrease undistributed net investment income and decrease accumulated net
realized loss by $5,592,053. Net investment income, net realized gains and
net assets were not affected by this change.
Federal Income Taxes: For federal income tax purposes, each portfolio in
the Fund is treated as a separate taxpaying entity. It is the Portfolio's
intent to continue to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
taxable income to shareholders. Therefore, no federal income tax provision
is required.
Withholding taxes on foreign interest have been provided for in
accordance with the Fund's understanding of the applicable country's tax
rules and rates.
Deferred Organization Expenses: Approximately $200,000 of organization and
initial registration costs were incurred. These costs have been deferred
and are being amortized over the period of benefit not to exceed 60 months
from the date the Portfolio commenced investment operations. PMF has agreed
not to redeem the 10,000
B-44
<PAGE>
shares purchased until all organization expenses have been amortized.
Note 2. Agreements The Fund has a management
agreement with PMF. Pursuant to this agreement,
PMF has responsibility for all investment advisory services and supervises the
subadviser's performance of such services. PMF has entered into a subadvisory
agreement with The Prudential Investment Corporation (``PIC''); PIC furnishes
investment advisory services in connection with the managment of the Fund. PMF
pays for the cost of the subadviser's services, the compensation of officers of
the Fund, occupancy and certain clerical and bookkeeping costs of the Fund. The
Fund bears all other costs and expenses.
The management fee paid PMF is computed daily and payable monthly at
an annual rate of .55 of 1% of the average daily net assets of the
Portfolio.
The Fund has distribution agreements with Prudential Mutual Fund
Distributors, Inc. (``PMFD''), which acts as the distributor of the Class A
shares of the Fund and with Prudential Securities Incorporated (``PSI'')
which acts as distributor of the Class B shares of the Fund (collectively,
the ``Distributors''). To reimburse the Distributors for their expenses
incurred in distributing and servicing the Fund's Class A and B shares, the
Fund, pursuant to plans of distribution, pays the Distributors a
reimbursement, accrued daily and payable monthly.
Pursuant to the Class A Plan, the Portfolio reimburses PMFD for its expenses
with respect to Class A shares at an annual rate of up to .30 of 1% of the
average daily net assets of the Class A shares. Such expenses under the Class A
Plan were .15 of 1% of the average daily net assets of the Class A shares for
the six months ended April 30, 1994. PMFD pays various broker-dealers, including
PSI and Pruco Securities Corporation (``Prusec''), affiliated broker-dealers,
for account servicing fees and other expenses incurred by such broker-dealers.
Pursuant to the Class B Plan, the Portfolio reimburses PSI for its
distribution-related expenses with respect to Class B shares at an annual
rate of up to 1% of the average daily net assets of the Class B shares.
The Class B distribution expenses include commission credits for
payment of commissions and account servicing fees to financial advisers and
an allocation for overhead and other distribution-related expenses,
interest and/or carrying charges, the cost of printing and mailing
prospectuses to potential investors and of advertising incurred in
connection with the distribution of shares.
The Distributors recover the distribution expenses and account
servicing fees incurred through the receipt of reimbursement payments from
the Portfolio under the plans and the receipt of initial sales charges
(Class A only) and contingent deferred sales charges (Class B only) from
shareholders.
PMFD has advised the Portfolio that it has received approximately
$8,700 in front-end sales charges resulting from sales of Class A shares
during the six months ended April 30, 1994. From these fees, PMFD paid such
sales charges to dealers (PSI and Prusec) which in turn paid commissions to
salespersons.
With respect to the Class B Plan, at any given time the amount of
expenses incurred by PSI in distributing the Portfolio's shares and not
recovered through the imposition of contingent deferred sales charges in
connection with certain redemptions of shares may exceed the total payments
made by the Portfolio pursuant to the Class B Plan. PSI has advised the
Portfolio that, for the six months ended April 30, 1994, it received
approximately $556,900 in contingent deferred sales charges imposed upon
certain redemptions by investors. PSI, as distributor, has also advised the
Portfolio that at April 30, 1994, the amount of distribution expenses
incurred by PSI and not yet reimbursed by the Portfolio or recovered
through contingent deferred sales charges approximated $14,290,100. This
amount may be recovered through future payments under the Class B Plan or
contingent deferred sales charges.
In the event of termination or noncontinuation of the Class B Plan,
the Fund would not be contractually obligated to pay PSI, as distributor,
for any expenses not previously reimbursed or recovered through contingent
deferred sales charges.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are
indirect, wholly-owned subsidiaries of The Prudential Insurance Company of
America.
Note 3. Other Prudential Mutual Fund Ser-
Transactions vices, Inc. (``PMFS'') a
With Affiliates wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent and during the six months
ended April 30, 1994, the Portfolio incurred fees of approximately $204,900
for the services of PMFS. As of April 30, 1994, approximately $32,100 of
such fees were due to PMFS for its services. Transfer agent fees and
expenses in the Statement of Operations include certain out-of-pocket
expenses paid to non-affiliates.
Note 4. Portfolio Purchases and sales of invest-
Securities ment securities, other than
short-term investments and
B-45
<PAGE>
options, for the six months ended April 30, 1994 aggregated
$367,003,418 and $482,084,982, respectively.
The federal income tax basis of the Portfolio's investments at April
30, 1994 was $316,530,194 and, accordingly, net unrealized depreciation for
federal income tax purposes was $375,843 (gross unrealized appreciation--
$5,709,256; gross unrealized depreciation--$6,085,099).
For federal income tax purposes, the Portfolio had a capital loss
carryforward as of October 31, 1993, of approximately $26,697,000 which
expires in 2001. Accordingly, no capital gains distributions are expected
to be paid to shareholders until future net gains have been realized in
excess of such carryforward.
Transactions in options written during the six months ended April 30,
1994 were as follows:
<TABLE>
<CAPTION>
Number of
Contracts Premiums
(000) Received
--------- -----------
<S> <C> <C>
Options outstanding at
October 31, 1993................. 30,500 $ 230,275
Options written.................... 492,600 3,192,716
Options terminated in closing
purchase transactions............ (322,700) (2,090,021)
Options expired.................... (36,500) (38,400)
Options exercised.................. (12,800) (240,350)
--------- -----------
Options outstanding at
April 30, 1994................... 151,100 $ 1,054,220
--------- -----------
--------- -----------
</TABLE>
At April 30, 1994, the Portfolio had outstanding forward currency
contracts, both to purchase and sell foreign currencies, as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Purchase Contracts Payable Value (Depreciation)
- ------------------ --------------- ------------ -----------
<S> <C> <C> <C>
Australian
Dollars,
expiring
5/4-5/9/94...... $ 46,890,932 $ 46,731,802 $ (159,130)
Belgian Francs,
expiring
5/4/94.......... 12,526,459 12,785,198 258,739
British Pounds,
expiring
5/20-5/27/94.... 13,215,441 13,389,838 174,397
Canadian Dollars,
expiring
5/4/94.......... 15,696,694 15,734,836 38,142
Deutschemarks,
expiring
5/6-5/20/94..... 110,258,925 113,354,173 3,095,248
French Francs,
expiring
6/21/94......... 14,716,681 15,300,572 583,891
Italian Lira,
expiring
5/16-5/31/94.... $ 13,427,267 $ 13,792,567 $ 365,300
Japanese Yen,
expiring
5/2/94.......... 55,462,120 56,451,635 989,515
Spanish Pesetas,
expiring
5/5/94.......... 7,481,367 7,632,910 151,543
Swedish Krona,
expiring
5/10/94......... 1,359,807 1,422,909 63,102
--------------- ------------ -----------
$ 291,035,693 $296,596,440 $ 5,560,747
--------------- ------------ -----------
--------------- ------------ -----------
</TABLE>
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- ----------------- --------------- ------------ ------------
<S> <C> <C> <C>
Australian
Dollars,
expiring
5/4-5/9/94..... $ 63,226,944 $ 64,130,120 $ (903,176)
Belgian Francs,
expiring
5/4/94......... 12,326,536 12,785,198 (458,662)
Canadian Dollars,
expiring
5/4-5/24/94.... 26,885,589 26,847,001 38,588
Deutschemarks,
expiring
5/6-10/11/94... 166,581,807 171,667,309 (5,085,502)
French Francs,
expiring
6/21/94........ 33,605,947 34,265,979 (660,032)
Italian Lira,
expiring
5/31/94........ 5,622,796 5,723,619 (100,823)
Japanese Yen,
expiring
5/2-5/16/94.... 36,790,796 37,871,997 (1,081,201)
New Zealand
Dollars,
expiring
5/31/94........ 6,639 6,661 (22)
Spanish Pesetas,
expiring
5/20-5/31/94... 22,181,524 22,615,263 (433,739)
Swedish Krona,
expiring
5/10/94........ 6,100,000 6,358,932 (258,932)
Swiss Francs,
expiring
5/19-10/26/94.. 30,892,644 31,960,049 (1,067,405)
--------------- ------------ ------------
$ 404,221,222 $414,232,128 $(10,010,906)
--------------- ------------ ------------
--------------- ------------ ------------
</TABLE>
B-46
<PAGE>
Note 5. Joint The Portfolio, along with
Repurchase other affiliated registered
Agreement investment companies, trans-
Account fers uninvested cash balances
into a single joint account, the daily aggregate balance of which is
invested in one or more repurchase agreements collateralized by U.S.
Treasury or Federal agency obligations. As of April 30, 1994, the Portfolio
has a 1.6% undivided interest in the repurchase agreements in the joint
account. The undivided interest for the Portfolio represents $15,328,000 in
principal amount. As of such date, each repurchase agreement in the joint
account and the value of the collateral therefor were as follows:
Barclays de Zoete Wedd, Inc., 3.55%, in the principal amount of
$53,000,000, repurchase price $53,015,679, due 5/2/94. The value of the
collateral including accrued interest is $54,060,428.
Goldman Sachs & Co., 3.50%, in the principal amount of $315,000,000,
repurchase price $315,091,875, due 5/2/94. The value of the collateral
including accrued interest is $321,300,231.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 3.55%, in the principal
amount of $315,000,000, repurchase price $315,093,188, due 5/2/94. The
value of the collateral including accrued interest is $321,300,584.
Morgan (J.P.) Securities, Inc., 3.58%, in the principal amount of
$295,000,000, repurchase price $295,088,008, due 5/2/94. The value of the
collateral including accrued interest is $300,901,625.
Note 6. Capital The Portfolio offers both
Class A and Class B shares. Class A shares are
sold with a front-end sales charge of up to 3.0%. Class B shares are
sold with a contingent deferred sales charge which declines from 3% to zero
depending on the period of time the shares are held. Both classes of shares
have equal rights as to earnings, assets and voting privileges except that
each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan.
There are 1.5 billion authorized shares of $.001 par value common
stock divided into two classes, designated Class A and Class B common
stock, each of which consists of 750 million authorized shares. Of the
34,837,362 shares issued and outstanding at April 30, 1994, PMF owned
10,000 shares.
Transactions in shares of common stock for the six months ended April
30, 1994 and the year ended October 31, 1993 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------ ----------- -------------
<S> <C> <C>
Six months ended April 30,
1994:
Shares sold................... 72,160 $ 663,130
Shares issued in reinvestment
of
dividends................... 109,676 1,006,473
Shares reacquired............. (2,700,686) (24,909,015)
----------- -------------
Net decrease in shares
outstanding................. (2,518,850) $ (23,239,412)
----------- -------------
----------- -------------
Year ended October 31, 1993:
Shares sold................... 2,800,748 $ 25,157,507
Shares issued in reinvestment
of
dividends................... 334,726 3,006,237
Shares reacquired............. (7,797,277) (69,726,785)
----------- -------------
Net decrease in shares
outstanding................. (4,661,803) $ (41,563,041)
----------- -------------
----------- -------------
Class B
- ------------------------------
Six months ended April 30,
1994:
Shares sold................... 519,967 $ 4,778,613
Shares issued in reinvestment
of
dividends................... 553,776 5,074,596
Shares reacquired............. (10,502,589) (96,246,612)
----------- -------------
Net decrease in shares
outstanding................. (9,428,846) $ (86,393,403)
----------- -------------
----------- -------------
Year ended October 31, 1993:
Shares sold................... 1,558,807 $ 14,029,972
Shares issued in reinvestment
of
dividends................... 1,575,399 14,166,238
Shares reacquired............. (29,032,710) (260,363,521)
----------- -------------
Net decrease in shares
outstanding................. (25,898,504) $(232,167,311)
----------- -------------
----------- -------------
</TABLE>
B-47
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
Short-Term Global Income Portfolio
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Class A Class B
------------------------------------------------ ------------------------------------------------
Six Months Six Months
Ended Year Ended October 31, Ended Year Ended October 31,
April 30, ---------------------------------- April 30, ----------------------------------
1994 1993 1992 1991 1994 1993 1992 1991
---------- ---------- -------- -------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period............... $ 9.29 $ 9.16 $ 9.97 $ 10.00 $ 9.29 $ 9.16 $ 9.97 $ 10.00
---------- ---------- -------- -------- ---------- ---------- -------- --------
Income from investment
operations
Net investment income..... .35 .97 .96 1.03 .30 .88 .88 .95
Net realized and
unrealized loss on
investment and foreign
currency transactions... (.38) (.26) (.95) (.02) (.38) (.26) (.95) (.02)
---------- ---------- -------- -------- ---------- ---------- -------- --------
Total from investment
operations.............. (.03) .71 .01 1.01 (.08) .62 (.07) .93
---------- ---------- -------- -------- ---------- ---------- -------- --------
Less distributions
Dividends from net
investment income....... (.29) (.58) (.82) (1.03) (.24) (.49) (.74) (.95)
Distributions from net
capital gains........... -- -- -- (.01) -- -- -- (.01)
---------- ---------- -------- -------- ---------- ---------- -------- --------
Total distributions..... (.29) (.58) (.82) (1.04) (.24) (.49) (.74) (.96)
---------- ---------- -------- -------- ---------- ---------- -------- --------
Net asset value, end of
period.................. $ 8.97 $ 9.29 $ 9.16 $ 9.97 $ 8.97 $ 9.29 $ 9.16 $ 9.97
---------- ---------- -------- -------- ---------- ---------- -------- --------
---------- ---------- -------- -------- ---------- ---------- -------- --------
TOTAL RETURN#:............ (0.39)% 7.96% (0.07)% 10.41% (0.85)% 7.00% (0.86)% 9.51%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)................... $34,821 $59,458 $101,358 $105,148 $277,724 $375,013 $606,899 $669,086
Average net assets
(000)................... $44,530 $70,347 $119,171 $51,830 $330,498 $474,175 $814,734 $349,607
Ratios to average net
assets:
Expenses, including
distribution fees..... 1.14%* 1.02% 1.08% 1.01% 1.99%* 1.87% 1.93% 1.87%
Expenses, excluding
distribution fees..... .99%* .87% .93% .86% .99%* .87% .93% .87%
Net investment income... 7.52%* 10.81% 9.93% 10.23% 6.65%* 9.42% 9.05% 9.46%
Portfolio turnover rate... 214% 307% 180% 66% 214% 307% 180% 66%
</TABLE>
- ---------------
* Annualized.
# Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
See Notes to Financial Statements.
B-48
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC. Portfolio of Investments
GLOBAL ASSETS PORTFOLIO October 31, 1993
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (a) (Note 1)
<C> <S> <C>
Australia--5.1%
Australian Treasury
Bills,**
A$ 10,100# 4.73%, 1/12/94........... $ 6,669,861
------------
Canada--12.1%
Canadian Treasury
Bills,**
C$ 11,016# 6.49%, 2/10/94........... 8,241,856
Quebec Treasury Bills,**
10,000# 6.23%, 5/20/94........... 7,368,895
------------
15,610,751
------------
Italy--8.4%
Banco Commerciale
Italiano, T.D.,
Lira 3,033,507 11.40%, 4/13/94.......... 1,868,430
Italian Treasury Bills,**
15,000,000# 12.00%, 3/30/94.......... 8,959,943
------------
10,828,373
------------
Mexico--3.9%
Mexican Treasury Bills,**
MP 3,406,140 18.45%, 11/4/93.......... 1,077,564
5,979,560 18.60%, 11/11/93......... 1,905,359
6,753,150 19.37%, 2/3/94........... 2,088,678
------------
5,071,601
------------
New Zealand--18.7%
New Zealand Treasury
Bills,**
NZ$ 10,700 6.95%, 3/23/94........... 5,806,773
33,850 7.05%, 3/23/94........... 18,370,025
------------
24,176,798
------------
Spain--3.2%
Kingdom of Spain,
Pts 580,000 9.97%, 7/15/94........... 4,080,695
------------
Sweden--3.7%
Swedish Treasury Bills,**
SKr 40,000 7.58%, 1/19/94........... $ 4,842,511
------------
United Kingdom--4.6%
Morgan Guaranty Bank,
Plc., C.D.,
; 3,000# 5.94%, 11/24/93.......... 4,466,879
Union Bank of
Switzerland, C.D.,
1,000# 5.66%, 12/24/93.......... 1,488,668
------------
5,955,547
------------
United States--41.0%
Federal Home Loan
Mortgage Corp.,
US$ 10,000 3.02%, 11/19/93.......... 9,999,657
7,000 3.00%, 11/29/93.......... 6,999,513
Fuji Bank, Ltd., T.D.,
10,000 3.00%, 11/1/93........... 10,000,000
Norwest Corp., T.D.,
10,000 3.13%, 11/22/93.......... 9,981,741
Potomac Elec. Pwr. Co.,
T.D.,
7,015 3.11%, 11/2/93........... 7,014,394
Joint Repurchase
Agreement
Account,
2.93%, 11/1/93, (Note
9,113 5)..................... 9,113,000
------------
53,108,305
------------
</TABLE>
See Notes to Financial Statements.
B-49
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
<TABLE>
<CAPTION>
US$
Value
Contracts+ Description (Note 1)
<C> <S> <C>
OUTSTANDING OPTIONS
PURCHASED*--0.9%
Call Options--0.1%
Japanese Yen,
expiring 1/13/94
Y= 5,500,000 @ Y=102.00............. $ 18,150
expiring 1/25/94
6,100,000 @ Y=109.20............. 84,790
------------
102,940
------------
Put Options--0.8%
Deutschemarks,
expiring 1/25/94
DM 11,000 @DM1.72................ 194,700
expiring 3/29/94
10,000 @DM1.68................ 392,000
expiring 4/18/94
6,000 @DM1.68................ 229,200
French Francs,
expiring 4/18/94
FF 6,000 @FF6.08................ 162,000
Japanese Yen,
expiring 1/13/94
Y= 6,100,000 @ Y=100.50............. 6,710
expiring 1/25/94
5,500,000 @ Y=110.00............. 70,400
------------
1,055,010
------------
Total outstanding options
purchased
(cost US$1,113,660).... 1,157,950
------------
Total Investments Before
Outstanding Put Options
Written--101.6%
(cost US$131,390,605;
Note 4)................ 131,502,392
------------
OUTSTANDING PUT OPTIONS
WRITTEN*--(0.1%)
Deutschemarks,
DM 9,500 expiring 11/24/93 @DM1.70
(premiums received
US$71,725)............. $ (85,500)
------------
Total Investments, Net of
Outstanding Put Options
Written--101.5%........ 131,416,892
Other liabilities in
excess of
other assets--(1.5%)... (1,904,368)
------------
Net Assets--100%......... $129,512,524
------------
------------
</TABLE>
- ------------------
Portfolio securities are classified by country according to the
security's currency denomination.
(a) The following abbreviations are used in portfolio descriptions:
C.D.--Certificate of Deposit.
T.D.--Time Deposit.
# Principal amount segregated as collateral for forward currency
contracts and put options written. Aggregate value of segregated
securities--$37,196,102.
* Non-income producing security.
** Percentage quoted represent yields to maturity as of purchase date.
+ Expressed in thousands of local currency units.
See Notes to Financial Statements.
B-50
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Assets October 31, 1993
----------------
<S> <C>
Investments, at value (cost $131,390,605)............................................... $131,502,392
Foreign currency, at value (cost $858,569).............................................. 864,031
Interest receivable..................................................................... 287,059
Receivable for Fund shares sold......................................................... 7,409
Deferred expenses and other assets...................................................... 27,346
----------------
Total assets.......................................................................... 132,688,237
----------------
Liabilities
Payable for Fund shares reacquired...................................................... 1,850,845
Forward currency contracts--net amount payable to counterparties........................ 712,572
Accrued expenses........................................................................ 232,742
Dividends payable....................................................................... 167,798
Outstanding put options written, at value (premiums received $71,725)................... 85,500
Due to Manager.......................................................................... 60,422
Due to Distributor...................................................................... 50,894
Withholding taxes payable............................................................... 14,940
----------------
Total liabilities..................................................................... 3,175,713
----------------
Net Assets.............................................................................. $129,512,524
----------------
----------------
Net assets were comprised of:
Common stock, at par.................................................................. $ 68,816
Paid-in capital in excess of par...................................................... 145,685,303
----------------
145,754,119
Accumulated distributions in excess of net investment income.......................... (4,673,778)
Accumulated net realized loss on investment and foreign currency transactions......... (10,954,049)
Net unrealized depreciation on investments and foreign currencies..................... (613,768)
----------------
Net assets, October 31 ,1993............................................................ $129,512,524
----------------
----------------
Class A:
Net asset value and redemption price per share ($127,489,968 / 67,753,600 shares of
common stock
issued and outstanding)............................................................. $1.88
Maximum sales charge (.99% of offering price)......................................... .02
----------------
Maximum offering price to public...................................................... $1.90
----------------
----------------
Class B:
Net asset value and redemption price per share ($2,022,556 / 1,062,687 shares of
common stock
issued and outstanding)............................................................. $1.90
----------------
----------------
</TABLE>
See Notes to Financial Statements.
B-51
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
October 31,
Net Investment Income 1993
------------
<S> <C>
Income
Interest (net of foreign
withholding
taxes of $30,390)................ $ 17,448,926
------------
Expenses
Management fee..................... 1,132,954
Distribution fee--Class A.......... 766,695
Distribution fee--Class B.......... 337,966
Custodian's fees and expenses...... 409,000
Transfer agent's fees and
expenses........................... 257,000
Registration fees.................. 56,000
Reports to shareholders............ 40,000
Directors' fees.................... 35,000
Audit fee.......................... 30,000
Legal fees......................... 23,000
Amortization of organization
expense............................ 12,000
Miscellaneous...................... 21,723
------------
Total expenses................... 3,121,338
------------
Net investment income................ 14,327,588
------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign
Currency Transactions
Net realized gain (loss) on:
Investment transactions............ (10,234,268)
Foreign currency transactions...... (11,504,995)
Written option transactions........ 577,550
------------
(21,161,713)
------------
Net change in unrealized
appreciation/ depreciation of:
Investments........................ 23,210,345
Foreign currencies................. (6,048,398)
Written options.................... (3,936)
------------
17,158,011
------------
Net loss on investments, foreign
currencies and written options..... (4,003,702)
------------
Net Increase in Net Assets
Resulting from Operations............ $ 10,323,886
------------
------------
</TABLE>
See Notes to Financial Statements.
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
Increase (Decrease) ------------------------------
in Net Assets 1993 1992
------------- -------------
<S> <C> <C>
Operations
Net investment
Income................. $ 14,327,588 $ 30,353,603
Net realized loss on
investment and
foreign currency
transactions......... (21,161,713) (7,972,334)
Net change in
unrealized
appreciation/depreciation
of investments and
foreign currencies... 17,158,011 (17,605,231)
------------- -------------
Net increase in net
assets resulting from
operations........... 10,323,886 4,776,038
------------- -------------
Contingent deferred sales
charges collected (Note
2)..................... 25,932 --
------------- -------------
Net equalization
debits................. (3,675,103) (830,877)
------------- -------------
Dividends and
distributions (Note 1)
Dividends paid to
shareholders from net
investment income
Class A.............. (3,217,487) (4,271,370)
Class B.............. (1,053,946) (7,114,130)
------------- -------------
(4,271,433) (11,385,500)
------------- -------------
Distributions paid to
shareholders from
paid-in capital
Class A.............. (4,026,397) (5,345,237)
Class B.............. (1,318,920) (8,902,696)
------------- -------------
(5,345,317) (14,247,933)
------------- -------------
Fund share transactions
(Note 6)
Proceeds from shares
subscribed........... 169,695,598 399,041,474
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends............ 5,821,978 15,398,999
Cost of shares
reacquired............. (356,365,191) (299,907,510)
------------- -------------
Net increase (decrease)
in net assets from
Fund share
transactions......... (180,847,615) 114,532,963
------------- -------------
Total increase
(decrease)............. (183,789,650) 92,844,691
Net Assets
Beginning of year........ 313,302,174 220,457,483
------------- -------------
End of year.............. $ 129,512,524 $ 313,302,174
------------- -------------
------------- -------------
</TABLE>
See Notes to Financial Statements.
B-52
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Notes to Financial Statements
Prudential Short-Term Global Income Fund, Inc. (the ``Fund''),
registered under the Investment Company Act of 1940 as a non-diversified,
open-end management investment company, was incorporated in Maryland on
February 21, 1990. The Fund consists of two series, namely: Short-Term
Global Income Portfolio and Global Assets Portfolio. The Global Assets
Portfolio (the ``Portfolio'') commenced investment operations on February
15, 1991. The investment objective of the Portfolio is to seek high current
income with minimum risk to principal, by investing primarily in
high-quality debt securities in the U.S. and abroad having remaining
maturities of not more than one year. The ability of the issuers of the
debt securities held by the Fund to meet their obligations may be affected
by economic developments in a specific country or industry.
Note 1. Accounting The following is a summary
Policies of significant accounting
policies followed by the
Fund, and the Portfolio 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. Government securities for which
quotations are available will be based on prices provided by an independent
pricing service or principal market makers. Other 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,
will be valued at the average of the quoted bid and asked prices provided
by an independent pricing service or by principal market makers. 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. 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.
Short-term securities which mature in more than 60 days are valued at
current market quotations. Short-term securities which mature in 60 days or
less are valued at amortized cost which approximates market value. Certain
short-term securities with remaining maturities of 60 days or less are valued
at market value.
In connection with transactions in repurchase agreements with U.S.
financial institutions, it is the Fund's policy that its custodian takes
possession of the underlying collateral securities, 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 daily rate of exchange;
(ii) purchases and sales of investment securities, income and
expenses--at the rate 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 year, the Fund
does not isolate that portion of the results of operations arising as a
result of changes in the foreign exchange rates from the fluctuations
arising from changes in the market prices of securities held at the end of
the fiscal year. 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 debt securities sold during the fiscal year. Accordingly,
realized foreign currency gains and losses are included in the reported net
realized loss on investment transactions.
Net realized loss on foreign currency transactions represents net
foreign exchange gains or losses from sales and maturities of short-term
securities, holding of foreign currencies, currency gains or losses
realized between the trade and settlement dates on security transactions,
and the difference between the amounts of interest and foreign taxes
recorded on the Fund's books and the U.S. dollar equivalent amounts
actually received or paid. Net currency gains and losses from valuing
foreign currency denominated assets (excluding investments) and liabilities
B-53
<PAGE>
at fiscal year end exchange rates are reflected as a component of net
unrealized depreciation on investments and foreign currencies.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of U.S.
companies as a result of, among other factors, the possibility of political
and economic instability and the level of governmental supervision and
regulation of foreign securities markets.
Forward Currency Contracts: The Fund enters into forward currency contracts
in order to hedge its exposure to changes in foreign currency exchange
rates on its foreign portfolio holdings. A forward contract is a commitment
to purchase or sell a foreign currency at a future date at a negotiated
forward rate. The gain or loss arising from the difference between the
settlement value of the original and renegotiated forward contracts, if
any, is isolated and is included in net realized gain (loss) from foreign
currency transactions. Risks may arise upon entering into these contracts
from the potential inability of the counterparties to meet the terms of
their contracts.
Option Writing: When the Fund writes an option, an amount equal to the
premium received by the Fund is recorded as a liability and is subsequently
adjusted to the current market value of the option written. Premiums
received from writing options which expire unexercised are treated by the
Fund on the expiration date as realized gains from securities or currencies
based on the type of option written. The difference between the premium and
the amount paid on effecting a closing purchase transaction, including
brokerage commissions, is also treated as a realized gain, or if the
premium is less than the amount paid for the closing purchase transaction,
as a realized loss. If a call option is exercised, the premium is added to
the proceeds from the sale of the underlying security or currency in
determining whether the Fund has realized a gain or loss. If a put option
is exercised, the premium reduces the cost basis of the securities or
currencies purchased by the Fund. The Fund as writer of an option may have
no control over whether the underlying securities or currencies may be sold
(called) or purchased (put) and as a result bears the market risk of an
unfavorable change in the price of the security or currency underlying the
written option.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses from security and
currency transactions are calculated on the identified cost basis. Interest
income is recorded on the accrual basis.
Net investment income (other than distribution fees) and unrealized and
realized gains or losses are allocated daily to each class of shares based
upon the relative proportion of net assets of each class at the beginning
of the day.
Equalization: The Fund follows the accounting practice known as
equalization by which a portion of the proceeds from sales and costs of
reacquisitions of Fund shares, equivalent on a per share basis to the
amount of distributable net investment income on the date of the
transaction, is credited or charged to undistributed net investment income.
As a result, undistributed net investment income per share is unaffected by
sales or reacquisitions of the Fund's shares.
Dividends and Distributions: The Fund declares daily and pays dividends of
net investment income monthly and makes distributions at least annually of
any net capital gains. Dividends and distributions are recorded on the
ex-dividend date.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for foreign currency transactions.
Reclassification of Capital Accounts: Effective November 1, 1992, the Fund
began accounting and reporting for distributions to shareholders in
accordance with 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 caused by
adopting this statement was to decrease paid-in capital by $3,433,904,
decrease undistributed net investment income by $15,060,910 and decrease
accumulated net realized loss on investments by $18,494,814 with respect to
amounts reported through October 31, 1993, which includes the effect of the
1993 distributions from paid-in capital reported in the Statement of
Changes in Net Assets. Net investment income, net realized gains and net
assets were not affected by this change.
Federal Income Taxes: For federal income tax purposes, each portfolio in
the Fund is treated as a separate taxpaying entity. It is the Portfolio's
intent 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.
B-54
<PAGE>
Withholding taxes on foreign interest have been provided for in
accordance with the Fund's understanding of the applicable country's tax
rules and rates.
Deferred Organization Expenses: Approximately $60,000 of organization and
initial registration costs were incurred. These costs have been deferred
and are being amortized over the period of benefit not to exceed 60 months
from the date the Portfolio commenced investment operations.
Note 2. Agreements The Fund has a manage
ment agreement with Prudential Mutual Fund
Management, Inc. (``PMF''). Pursuant to this agreement, PMF has
responsibility for all investment advisory services and supervises the
subadviser's performance of such services. PMF has entered into a
subadvisory agreement with The Prudential Investment Corporation (``PIC'');
PIC furnishes investment advisory services in connection with the managment
of the Fund. PMF pays for the cost of the subadviser's services, the
compensation of officers of the Fund, occupancy and certain clerical and
bookkeeping costs of the Fund. The Fund bears all other costs and expenses.
The management fee paid PMF is computed daily and payable monthly at
an annual rate of .55 of 1% of the average daily net assets of the
Portfolio.
The Fund has distribution agreements with Prudential Mutual Fund
Distributors, Inc. (``PMFD''), which acts as the distributor of the Class A
shares of the Fund and with Prudential Securities Incorporated (``PSI'')
which acts as distributor of the Class B shares of the Fund (collectively,
the ``Distributors'').
Pursuant to the Class A Plan, the Portfolio reimburses PMFD for its
expenses with respect to distributing and servicing the Fund's Class A
shares at an annual rate of up to .50 of 1% of the average daily net assets
of the Class A shares. PMFD pays various broker-dealers, including PSI and
Pruco Securities Corporation (``Prusec''), affiliated broker-dealers, for
account servicing fees and other expenses incurred by such broker-dealers.
PMFD recovers the distribution expenses and account servicing fees
incurred through the receipt of reimbursement payments from the Fund under
the Class A Plan and the receipt of initial sales charges. PMFD has advised
the Portfolio that it has received approximately $38,300 in front-end sales
charges resulting from sales of Class A shares during the fiscal year ended
October 31, 1993. From these fees, PMFD paid such sales charges to dealers
(PSI and Prusec) which in turn paid commissions to salespersons.
Pursuant to the Class B Plan, the Portfolio reimburses PSI for its
distribution-related expenses with respect to Class B shares, at an annual
rate of up to 1% of the average daily net assets of the Class B shares.
Effective February 1, 1993, PSI had no distribution costs reimbursable
to it under the Class B Plan and therefore, as of such date, the Fund
discontinued assessing distribution fees on the Class B shares and
discontinued the payment to PSI of any contingent deferred sales charges
collected on the redemption of Class B shares. All such contingent deferred
sales charges collected on the redemption of Class B shares are being
retained and credited to the Fund's Class B shares paid-in capital account.
PSI has advised the Portfolio that, for the period ended January 31, 1993,
it received approximately $96,700 in contingent deferred sales charges
imposed upon certain redemptions by investors.
The Class B distribution expenses included commission credits for
payment of commissions and account servicing fees to financial advisers and
an allocation for overhead and other distribution-related expenses,
interest and/or carrying charges, the cost of printing and mailing
prospectuses to potential investors and of advertising incurred in
connection with the distribution of shares.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are
indirect, wholly-owned subsidiaries of The Prudential Insurance Company of
America.
Note 3. Other Prudential Mutual Fund
Transactions Services, Inc. (``PMFS''), a
With Affiliates wholly-owned subsidiary of
PMF, serves as the Fund's
transfer agent and during the fiscal year ended October 31, 1993, the
Portfolio incurred fees of approximately $170,200 for the services of PMFS.
As of October 31, 1993, approximately $10,200 of such fees were due to PMFS
for its services. Transfer agent fees and expenses in the Statement of
Operations include certain out-of-pocket expenses paid to non-affiliates.
Note 4. Portfolio The federal income tax
Securities basis of the Portfolio's
investments at October 31,
1993 was $131,830,823 and, accordingly, net unrealized depreciation
for federal income tax purposes was $328,431 (gross unrealized
appreciation--$1,119,588; gross unrealized depreciation--$1,448,019).
For federal income tax purposes, the Portfolio has a capital loss
carryforward as of October 31, 1993 of approximately $10,954,000 of which
$4,701,000 expires in 2000 and $6,253,000 expires in 2001. Accordingly, no
B-55
<PAGE>
capital gains distributions are expected to be paid to shareholders
until future net gains have been realized in excess of such carryforward.
Transactions in options written during the fiscal year ended October
31, 1993 were as follows:
<TABLE>
<CAPTION>
Number of
Contracts Premiums
(000) Received
--------- -----------
<S> <C> <C>
Options outstanding at
October 31, 1992............. 488 $ 305,000
Options written................ 134,875 1,781,866
Options terminated in closing
purchase transactions........ (91,817) (1,553,609)
Options expired................ (19,931) (210,475)
Options exercised.............. (14,115) (251,057)
--------- -----------
Options outstanding at
October 31, 1993............. 9,500 $ 71,725
--------- -----------
--------- -----------
</TABLE>
At October 31, 1993, the Portfolio had outstanding forward currency
contracts, both to purchase and sell foreign currencies, as follows:
<TABLE>
<CAPTION>
Foreign Currency Value at
Purchase Settlement Date Current Appreciation
Contracts Payable Value (Depreciation)
- ------------------- --------------- ----------- --------------
<S> <C> <C> <C>
Australian Dollars,
expiring
11/16/93......... $ 10,851,754 $10,736,172 $ (115,582)
British Pounds,
expiring 11/1-
11/15/93......... 11,472,841 11,345,835 (127,006)
Deutschemarks,
expiring 11/5/93-
3/3/94........... 49,200,000 48,507,865 (692,135)
French Francs,
expiring 2/7-
2/14/94.......... 11,400,000 10,941,842 (458,158)
Italian Lira,
expiring
11/15/93......... 6,163,088 5,954,595 (208,493)
Spanish Pesetas,
expiring 11/2/93-
1/27/94.......... 6,785,598 6,784,293 (1,305)
Swedish Krona,
expiring
11/29/93......... 3,100,000 3,090,247 (9,753)
--------------- ----------- --------------
$ 98,973,281 $97,360,849 $ (1,612,432)
--------------- ----------- --------------
--------------- ----------- --------------
</TABLE>
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- ------------------- --------------- ------------ --------------
<S> <C> <C> <C>
Australian Dollars,
expiring
11/16/93......... $ 2,151,105 $ 2,199,362 $(48,257)
Belgian Francs,
expiring
11/9/93.......... 6,228,574 6,287,862 (59,288)
British Pounds,
expiring
11/1/93.......... 4,498,163 4,467,561 30,602
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- ------------------- --------------- ------------ --------------
<S> <C> <C> <C>
Canadian Dollars,
expiring 11/9-
11/10/93......... $ 12,621,078 $ 12,488,722 $132,356
Danish Kroner,
expiring
11/15/93......... 6,954,987 6,758,032 196,955
Deutschemarks,
expiring 11/5/93-
3/3/94........... 44,889,127 44,375,683 513,444
French Francs,
expiring 11/5/93-
2/14/94.......... 17,629,296 17,790,087 (160,791)
Italian Lira,
expiring
11/15/93......... 3,232,731 3,094,503 138,228
Japanese Yen,
expiring 11/4-
11/8/93.......... 2,326,591 2,249,645 76,946
New Zealand
Dollars,
expiring
12/2/93.......... 12,586,740 12,609,585 (22,845)
Spanish Pesetas,
expiring 11/3/93-
1/14/94.......... 8,820,759 8,720,084 100,675
Swedish Krona,
expiring
11/29/93......... 2,000,000 1,998,165 1,835
--------------- ------------ --------------
$ 123,939,151 $123,039,291 $899,860
--------------- ------------ --------------
--------------- ------------ --------------
</TABLE>
Note 5. Joint The Portfolio, along with
Repurchase other affiliated registered
Agreement investment companies,
Account transfers uninvested cash
balances into a single joint
account, the daily aggregate balance of which is invested in one or
more repurchase agreements collateralized by U.S. Treasury or Federal
agency obligations. As of October 31, 1993, the Portfolio has a 0.67%
undivided interest in the repurchase agreements in the joint account. The
undivided interest for the Portfolio represents $9,113,000 in principal
amount. As of such date, each repurchase agreement in the joint account and
the collateral therefor were as follows:
CS First Boston Corp., 2.93%, in the principal amount of $360,000,000,
repurchase price $360,087,900, due 11/1/93, collateralized by $47,400,000
U.S. Treasury Notes, 6.75%, due 2/28/97; $40,000,000 U.S. Treasury Notes,
11.25%, due 2/15/95; $100,000,000 U.S. Treasury Bonds, 7.50%, due 11/15/16;
$50,000,000 U.S. Treasury Bonds, 10.375%, due 11/15/12 and $50,000,000 U.S.
Treasury Bonds, 12.00%, due 5/15/05; aggregate value including accrued
interest-- $368,368,052.
B-56
<PAGE>
Goldman Sachs & Co., 2.93%, in the principal amount of $450,154,000,
repurchase price $450,263,913, due 11/1/93, collateralized by $104,915,000
U.S. Treasury Bonds, 12.00%, due 8/15/13 and $200,000,000 U.S. Treasury
Bonds, 10.75%, due 8/15/05; aggregate value including accrued
interest--$462,739,932.
Kidder, Peabody & Co. Inc., 2.95%, in the principal amount of
$305,000,000, repurchase price $305,074,979, due 11/1/93, collateralized by
$210,030,000 U.S. Treasury Bonds, 9.875%, due 11/15/15; value including
accrued interest--$311,527,136.
Nomura Securities International, Inc., 2.90%, in the principal amount
of $60,889,000, repurchase price $60,903,715, due 11/1/93, collateralized
by $8,280,000 U.S. Treasury Notes, 7.75%, due 2/15/95; $25,000,000 U.S.
Treasury Notes, 7.375%, due 5/15/96 and $22,775,000 U.S. Treasury Notes,
8.875%, due 2/15/96; aggregate value including accrued
interest--$62,140,276.
Smith Barney Shearson, Inc., 2.94%, in the principal amount of
$175,000,000, repurchase price $175,042,875, due 11/1/93, collateralized by
$4,465,000 U.S. Treasury Bonds, 12.00%, due 5/15/05; $11,435,000 U.S.
Treasury Notes, 9.125%, due 5/15/99; $75,000,000 U.S. Treasury Bonds,
8.125%, due 8/15/19 and $50,000,000 U.S. Treasury Bonds, 8.00%, due
11/15/21; aggregate value including accrued interest--$178,771,706.
Note 6. Capital The Portfolio currently
offers only Class A shares.
Class A shares are sold with a front-end sales charge of up to .99%.
Prior to April 14, 1993, Class B shares were sold with a contingent
deferred sales charge of 1% on shares that were held for less than one
year. Both classes of shares have equal rights as to earnings, assets and
voting privileges except that each class has exclusive voting rights with
respect to its distribution plan. Class B shares held greater than one year
from date of purchase are automatically converted into Class A shares.
There are 500 million authorized shares of $.001 par value common stock
divided into two classes, designated Class A and Class B common stock, each
of which consists of 250 million authorized shares.
Transactions in shares of common stock for the fiscal years ended
October 31, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- --------------------------- ------------ -------------
<S> <C> <C>
Year ended October 31,
1993:
Shares sold................ 6,064,340 $ 11,274,743
Shares sold--conversion
from Class B............. 83,379,084 154,875,114
Shares issued in
reinvestment of
dividends................ 2,229,981 4,138,266
Shares reacquired.......... (83,960,705) (155,987,024)
------------ -------------
Net increase in shares
outstanding.............. 7,712,700 $ 14,301,099
------------ -------------
------------ -------------
Year ended October 31,
1992:
Shares sold................ 62,227,845 $ 123,936,868
Shares sold--conversion
from
Class B.................. 36,073,212 69,181,633
Shares issued in
reinvestment
of dividends............. 2,381,023 4,661,342
Shares reacquired.......... (83,915,984) (163,633,251)
------------ -------------
Net increase in shares
outstanding.............. 16,766,096 $ 34,146,592
------------ -------------
------------ -------------
<CAPTION>
Class B
- ---------------------------
<S> <C> <C>
Year ended October 31,
1993:
Shares sold................ 1,902,610 $ 3,545,741
Shares issued in
reinvestment of
dividends................ 903,347 1,683,712
Shares reacquired.......... (24,366,585) (45,503,053)
Shares
reacquired--conversion
into Class A............. (83,275,750) (154,875,114)
------------ -------------
Net decrease in shares
outstanding.............. (104,836,378) $(195,148,714)
------------ -------------
------------ -------------
Year ended October 31,
1992:
Shares sold................ 103,880,763 $ 205,922,973
Shares issued in
reinvestment
of dividends............. 5,480,989 10,737,657
Shares reacquired.......... (34,364,047) (67,092,626)
Shares
reacquired--conversion
into Class A............. (36,073,212) (69,181,633)
------------ -------------
Net increase in shares
outstanding.............. 38,924,493 $ 80,386,371
<CAPTION>
------------ -------------
------------ -------------
</TABLE>
B-57
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Financial Highlights
<TABLE>
<CAPTION>
Class A Class B
--------------------------------------- ------------------------------------
Year Ended February 15, Year Ended February 15,
October 31, 1991* through October 31, 1991* through
-------------------- October 31, ------------------- October 31,
1993 1992 1991 1993 1992 1991
-------- -------- --------------- ------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 1.89 $ 2.00 $ 2.00 $ 1.89 $ 2.00 $ 2.00
-------- -------- ------- ------- -------- -------------
Income from investment operations
Net investment income......................... .12 .16 .12+ .12 .15 .11+
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions................................ (.04) (.13) -- (.04) (.13) --
-------- -------- ------- ------- -------- -------------
Total from investment operations............ .08 .03 .12 .08 .02 .11
-------- -------- ------- ------- -------- -------------
Less distributions
Dividends from net investment income.......... (.04) (.14) (.12) (.04) (.13) (.11)
Distributions from paid-in capital............ (.05) -- -- (.05) -- --
-------- -------- ------- ------- -------- -------------
Total distributions......................... (.09) (.14) (.12) (.09) (.13) (.11)
-------- -------- ------- ------- -------- -------------
Contingent deferred sales charges collected... -- -- -- .02 -- --
-------- -------- ------- ------- -------- -------------
Net asset value, end of period................ $ 1.88 $ 1.89 $ 2.00 $ 1.90 $ 1.89 $ 2.00
-------- -------- ------- ------- -------- -------------
-------- -------- ------- ------- -------- -------------
TOTAL RETURN#:................................ 4.36% 1.46% 5.91% 5.47% 0.94% 5.53%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $127,490 $113,412 $86,443 $ 2,023 $199,890 $ 134,015
Average net assets (000)...................... $153,339 $138,331 $23,224 $52,653 $248,941 $ 42,449
Ratios to average net assets:
Expenses, including distribution fees....... 1.48% 1.33% 1.25%+** 1.61% 1.83% 1.75%+**
Expenses, excluding distribution fees....... .98% .83% .75%+** .98% .83% .75%+**
Net investment income....................... 6.44% 8.16% 8.64%+** 6.31% 7.66% 8.21%+**
<FN>
- ---------------
* Commencement of investment operations.
** Annualized.
# 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. Total returns for periods of less than a full year are not annualized.
+ Net of expense subsidy.
</TABLE>
See Notes to Financial Statements.
B-58
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
Prudential Short-Term Global Income Fund, Inc.
Global Assets Portfolio
We have audited the accompanying statement of assets and liabilities
of Prudential Short-Term Global Income Fund, Inc., Global Assets Portfolio,
including the portfolio of investments, as of October 31, 1993, the related
statements of operations for the year then ended and of changes in net
assets for each of the two years in the period then ended, and the
financial highlights for each of the two years in the period then ended and
for the period February 15, 1991 (commencement of investment operations) to
October 31, 1991. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of the
securities owned as of October 31, 1993 by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Prudential Short-Term Global Income Fund, Inc., Global Assets Portfolio, as
of October 31, 1993, the results of its operations, the changes in its net
assets and the financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche
New York, New York
December 15, 1993
B-59
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC. Portfolio of Investments
GLOBAL ASSETS PORTFOLIO April 30, 1994 (Unaudited)
<TABLE>
<CAPTION>
Principal Description US$
Amount Value
(000) (Note 1)
<C> <S> <C>
Canada--4.6%
Canadian Treasury
Bills,**
C$ 2,000 5.75%, 10/6/94........... $ 1,406,237
3,000 6.55%, 10/13/94.......... 2,106,558
-----------
3,512,795
-----------
Italy--5.9%
General Electric Capital
Corp.,
Lira 7,000,000# 11.50%, 2/7/95........... 4,511,562
-----------
New Zealand--15.0%
New Zealand Treasury
Bills,**
NZ$ 20,000# 4.93%, 6/22/94........... 11,408,727
-----------
Spain--5.6%
Kingdom of Spain,**
Pts 580,000# 9.77%, 7/15/94........... 4,254,311
-----------
Sweden--4.1%
Swedish Treasury Bills,**
SKr 24,000 6.87%, 5/18/94........... 3,146,743
-----------
United States--66.6%
American Telephone &
Telegraph Co., C.P.,
US$ 2,500 3.60%, 5/9/94............ 2,498,000
Associates Corp. of North
America, C.P.,
4,000 3.65%, 5/18/94........... 3,993,106
Heller Financial
Services, Inc., C.P.,
3,000 3.875%, 5/19/94.......... 2,994,188
McCormick & Co., Inc.,
C.P.,
2,000 3.65%, 5/3/94............ 1,999,594
Sonoco Products Company,
C.P.,
4,000 3.62%, 5/16/94........... 3,993,967
United States Treasury
Bills,**
10,000 4.06%, 10/6/94........... 9,818,405
10,000 4.32%, 10/20/94.......... 9,801,030
Joint Repurchase
Agreement Account,
3.54%, 5/2/94, (Note
15,470 5)..................... 15,470,000
-----------
50,568,290
<CAPTION>
Contracts(D) Description US$
Value
(Note 1)
-----------
OUTSTANDING OPTIONS
PURCHASED*--0.4%
Currency Call Options
Deutschemarks,
expiring 7/18/94
DM 20,600 @ DM 1.80.............. $ 24,720
Japanese Yen,
expiring 5/7/94 @ (YEN)
(YEN) 5,800 107.00................. 1,740
Cross-Currency Call Options
Deutschemarks,
expiring 6/16/94
@ DM 1025.00 per
6,400 Italian Lira........... 349
Currency Put Options
Deutschemarks,
expiring 6/28/94
4,600 @ DM 1.66.............. 72,680
Cross-Currency Put Options
Deutschemarks,
expiring 1/12/95
@ DM 974.16 per Italian
DM 3,700 Lira................... 52,505
@ DM 972.30 per Italian
2,700 Lira................... 37,823
expiring 1/20/95
@ DM 4.6015
7,600 per Swedish Krona...... 88,951
-----------
Total outstanding options
purchased
(cost US$801,444)........ 278,768
-----------
Total Investments Before
Outstanding Options
Written--102.2%
(cost US$77,651,243; Note
4)..................... 77,681,196
-----------
</TABLE>
See Notes to Financial Statements.
B-60
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
<TABLE>
<CAPTION>
Contracts(D) Description US$
Value
(Note 1)
<C> <S> <C>
OUTSTANDING OPTIONS
WRITTEN*--(0.6%)
Currency Call Options
Japanese Yen,
expiring 5/17/94 @ (YEN)
(YEN) 5,800 107.00................. $ (331,760)
Cross-Currency Call Options
Deutschemarks,
expiring 1/12/95
@ DM 1025.00 per
DM 6,400 Italian Lira........... (34,403)
Cross-Currency Put Options
Deutschemarks,
expiring 6/16/94
@ DM 967.60 per Italian
6,400 Lira................... (51,231)
expiring 1/20/95
@ DM 4.55
7,600 per Swedish Krona...... (70,054)
-----------
Total outstanding options
written (premiums
received US$289,570)... (487,448)
-----------
Total Investments,
Net of Outstanding
Options
Written--101.6%........ 77,193,748
Other liabilities in
excess of
other assets--(1.6%)..... (1,233,248)
-----------
Net Assets--100%......... $75,960,500
-----------
-----------
</TABLE>
- ------------------
Portfolio securities are classified by country according to the
security's currency denomination.
C.P.--Commercial Paper
# Principal amount segregated as collateral for forward currency contracts and
options written. Aggregate value of segregated securities--$20,174,600.
* Non-income producing security.
** Percentage quoted represent yields to maturity as of purchase date.
(D) Expressed in thousands of local currency units.
See Notes to Financial Statements.
B-61
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Statement of Assets and Liabilities
(Unaudited)
<TABLE>
<CAPTION>
Assets April 30, 1994
--------------
<S> <C>
Investments, at value (cost $77,651,243).................................................. $ 77,681,196
Foreign currency, at value (cost $20,902)................................................. 21,151
Interest receivable....................................................................... 125,679
Deferred expenses and other assets........................................................ 21,274
--------------
Total assets............................................................................ 77,849,300
--------------
Liabilities
Payable for Fund shares reacquired........................................................ 800,891
Outstanding options written, at value (premiums received $289,570)........................ 487,448
Accrued expenses.......................................................................... 229,021
Forward currency contracts--net amount payable to counterparties.......................... 219,022
Dividends payable......................................................................... 88,662
Due to Manager............................................................................ 35,767
Due to Distributor........................................................................ 27,989
--------------
Total liabilities....................................................................... 1,888,800
--------------
Net Assets................................................................................ $ 75,960,500
--------------
--------------
Net assets were comprised of:
Common stock, at par.................................................................... $ 41,020
Paid-in capital in excess of par........................................................ 93,730,094
--------------
93,771,114
Overdistributed net investment income................................................... (6,569,143)
Accumulated net realized loss on investment and foreign currency transactions........... (10,860,115)
Net unrealized depreciation on investments and foreign currencies....................... (381,356)
--------------
Net assets, April 30 ,1994................................................................ $ 75,960,500
--------------
--------------
Class A:
Net asset value and redemption price per share ($75,908,453 / 40,992,966 shares of
common stock
issued and outstanding)............................................................... $1.85
Maximum sales charge (.99% of offering price)........................................... .02
--------------
Maximum offering price to public........................................................ $1.87
--------------
--------------
Class B:
Net asset value and redemption price per share ($52,047 / 27,448 shares of common stock
issued and outstanding)............................................................... $1.90
--------------
--------------
</TABLE>
See Notes to Financial Statements.
B-62
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Six months
Ended
Net Investment Income April 30, 1994
--------------
<S> <C>
Income
Interest........................... $ 2,866,410
--------------
Expenses
Management fee..................... 278,882
Distribution fee--Class A.......... 252,171
Custodian's fees and expenses...... 171,000
Transfer agent's fees and
expenses........................... 68,000
Reports to shareholders............ 27,000
Registration fees.................. 23,000
Directors' fees.................... 17,500
Audit fee.......................... 15,000
Legal fees......................... 12,000
Amortization of organization
expense............................ 6,000
Miscellaneous...................... 6,754
--------------
Total expenses................... 877,307
--------------
Net investment income................ 1,989,103
--------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign
Currency Transactions
Net realized gain (loss) on:
Investment transactions............ (341,934)
Foreign currency transactions...... (1,458,138)
Written option transactions........ 206,121
--------------
(1,593,951)
--------------
Net change in unrealized
appreciation/ depreciation of:
Investments........................ (81,835)
Foreign currencies................. 498,350
Written options.................... (184,103)
--------------
232,412
--------------
Net loss on investments, foreign
currencies and written options..... (1,361,539)
--------------
Net Increase in Net Assets
Resulting from Operations............ $ 627,564
--------------
--------------
</TABLE>
See Notes to Financial Statements.
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Statement of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
Six Months Year Ended
Net Increase (Decrease) Ended October 31,
in Net Assets April 30, 1994 1993
-------------- -------------
<S> <C> <C>
Operations
Net investment
Income................. $ 1,989,103 $ 14,327,588
Net realized loss on
investments.......... (1,593,951) (21,161,713)
Net change in
unrealized
appreciation/depreciation
of investments....... 232,412 17,158,011
-------------- -------------
Net increase in net
assets resulting from
operations........... 627,564 10,323,886
-------------- -------------
Contingent deferred sales
charges collected (Note
2)..................... 8,161 25,932
-------------- -------------
Net equalization
debits................. -- (3,675,103)
-------------- -------------
Dividends and
distributions (Note 1)
Dividends from net
investment income
Class A.............. (513,651) (3,217,487)
Class B.............. (2,953) (1,053,946)
-------------- -------------
(516,604) (4,271,433)
-------------- -------------
Dividends in excess of
net investment income
Class A.............. (1,884,531) --
Class B.............. (10,834) --
-------------- -------------
(1,895,365) --
-------------- -------------
Taxable return of
capital distributions
Class A.............. -- (4,026,397)
Class B.............. -- (1,318,920)
-------------- -------------
-- (5,345,317)
-------------- -------------
Fund share transactions
(Note 6)
Net proceeds from
shares subscribed.... 2,080,033 169,695,598
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends and
distributions........ 1,615,733 5,821,978
Cost of shares
reacquired............. (55,471,546) (356,365,191)
-------------- -------------
Net decrease in net
assets from Fund
share transactions... (51,775,780) (180,847,615)
-------------- -------------
Total decrease........... (53,552,024) (183,789,650)
Net Assets
Beginning of period...... 129,512,524 313,302,174
-------------- -------------
End of period............ $ 75,960,500 $ 129,512,524
-------------- -------------
-------------- -------------
</TABLE>
See Notes to Financial Statements.
B-63
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Notes to Financial Statements
(Unaudited)
Prudential Short-Term Global Income Fund, Inc. (the ``Fund''),
registered under the Investment Company Act of 1940 as a non-diversified,
open-end management investment company, was incorporated in Maryland on
February 21, 1990. The Fund consists of two series, namely: Short-Term
Global Income Portfolio and Global Assets Portfolio. The Global Assets
Portfolio (the ``Portfolio'') commenced investment operations on February
15, 1991. The investment objective of the Portfolio is to seek high current
income with minimum risk to principal, by investing primarily in
high-quality debt securities in the U.S. and abroad having remaining
maturities of not more than one year. The ability of the issuers of the
debt securities held by the Fund to meet their obligations may be affected
by economic developments in a specific country or industry.
Note 1. Accounting The following is a summary
Policies of significant accounting poli-
cies followed by the Fund,
and the Portfolio 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. Government securities for which
quotations are available will be based on prices provided by an independent
pricing service or principal market makers. Other 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,
will be valued at the average of the quoted bid and asked prices provided
by an independent pricing service or by principal market makers. 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. 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.
Short-term securities which mature in more than 60 days are valued at
current market quotations. Short-term securities which mature in 60 days or
less are valued at amortized cost which approximates market value.
In connection with transactions in repurchase agreements with U.S.
financial institutions, it is the Fund's policy that its custodian or
designated subcustodians, as the case may be under triparty repurchase
agreements, takes 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 daily rate of exchange;
(ii) purchases and sales of investment securities, income and
expenses--at the rate 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 securities held at the end of
the fiscal period. 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 debt securities sold during the fiscal
period. Accordingly, realized foreign currency gains and losses are
included in the reported net realized loss on investment transactions.
Net realized loss on foreign currency transactions represents net
foreign exchange gains or losses from sales and maturities of short-term
securities, holding of foreign currencies, currency gains or losses
realized between the trade and settlement dates on security transactions,
and the difference between the amounts of interest and foreign taxes
recorded on the Fund's books and the U.S. dollar equivalent amounts
actually received or paid. Net currency gains and losses from valuing
foreign currency denominated assets (excluding investments) and liabilities
at fiscal period end exchange rates are reflected as a component of net
unrealized depreciation on investments and foreign currencies.
B-64
<PAGE>
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of U.S.
companies as a result of, among other factors, the possibility of political
and economic instability and the level of governmental supervision and
regulation of foreign securities markets.
Forward Currency Contracts: The Fund enters into forward currency contracts
in order to hedge its exposure to changes in foreign currency exchange
rates on its foreign portfolio holdings. A forward contract is a commitment
to purchase or sell a foreign currency at a future date at a negotiated
forward rate. The gain or loss arising from the difference between the
settlement value of the original and renegotiated forward contracts, if
any, is isolated and is included in net realized gain (loss) from foreign
currency transactions. Risks may arise upon entering into these contracts
from the potential inability of the counterparties to meet the terms of
their contracts.
Option Writing: When the Fund writes an option, an amount equal to the
premium received by the Fund is recorded as a liability and is subsequently
adjusted to the current market value of the option written. Premiums
received from writing options which expire unexercised are treated by the
Fund on the expiration date as realized gains from securities or currencies
based on the type of option written. The difference between the premium and
the amount paid on effecting a closing purchase transaction, including
brokerage commissions, is also treated as a realized gain, or if the
premium is less than the amount paid for the closing purchase transaction,
as a realized loss. If a call option is exercised, the premium is added to
the proceeds from the sale of the underlying security or currency in
determining whether the Fund has realized a gain or loss. If a put option
is exercised, the premium reduces the cost basis of the securities or
currencies purchased by the Fund. The Fund as writer of an option may have
no control over whether the underlying securities or currencies may be sold
(called) or purchased (put) and as a result bears the market risk of an
unfavorable change in the price of the security or currency underlying the
written option.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses from security and currency
transactions are calculated on the identified cost basis. Interest income is
recorded on the accrual basis.
Net investment income (other than distribution fees) and unrealized
and realized gains or losses are allocated daily to each class of shares
based upon the relative proportion of net assets of each class at the
beginning of the day.
Equalization: The Fund follows the accounting practice known as
equalization by which a portion of the proceeds from sales and costs of
reacquisitions of Fund shares, equivalent on a per share basis to the
amount of distributable net investment income on the date of the
transaction, is credited or charged to undistributed net investment income.
As a result, undistributed net investment income per share is unaffected by
sales or reacquisitions of the Fund's shares. Dividends and Distributions:
The Fund declares daily and pays dividends of net investment income monthly
and makes distributions at least annually of any net capital gains.
Dividends and distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for foreign currency transactions.
Reclassification of Capital Accounts: The Fund accounts and reports for
distributions to shareholders in accordance with A.I.C.P.A.'s 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
decrease paid-in capital by $215,386, decrease undistributed net investment
income by $1,472,499 and decrease accumulated net realized loss on
investments by $1,687,885. Net investment income, net realized gains and
net assets were not affected by this change.
Federal Income Taxes: For federal income tax purposes, each portfolio in
the Fund is treated as a separate taxpaying entity. It is the Portfolio's
intent to continue to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
taxable income to shareholders. Therefore, no federal income tax provision
is required.
Withholding taxes on foreign interest have been provided for in
accordance with the Fund's understanding of the applicable country's tax
rules and rates. Deferred Organization Expenses: Approximately $60,000 of
organization and initial registration costs were incurred. These costs have
been deferred and are being amortized over the period of benefit not to
exceed 60 months from the date the Portfolio commenced investment
operations.
Note 2. Agreements The Fund has a management
agreement with Prudential
Mutual Fund Management, Inc. (``PMF''). Pursuant to this
B-65
<PAGE>
agreement, PMF has responsibility for all investment advisory services and
supervises the subadviser's performance of such services. PMF has entered
into a subadvisory agreement with The Prudential Investment Corporation
(``PIC''); PIC furnishes investment advisory services in connection with
the managment of the Fund. PMF pays for the cost of the subadviser's
services, the compensation of officers of the Fund, occupancy and certain
clerical and bookkeeping costs of the Fund. The Fund bears all other costs
and expenses.
The management fee paid PMF is computed daily and payable monthly at
an annual rate of .55 of 1% of the average daily net assets of the
Portfolio.
The Fund has distribution agreements with Prudential Mutual Fund
Distributors, Inc. (``PMFD''), which acts as the distributor of the Class A
shares of the Fund and with Prudential Securities Incorporated (``PSI'')
which acts as distributor of the Class B shares of the Fund (collectively
the ``Distributors'').
Pursuant to the Class A Plan, the Portfolio reimburses PMFD for its
expenses with respect to distributing and servicing the Fund's Class A
shares at an annual rate of up to .50 of 1% of the average daily net assets
of the Class A shares. PMFD pays various broker-dealers, including PSI and
Pruco Securities Corporation (``Prusec''), affiliated broker-dealers, for
account servicing fees and other expenses incurred by such broker-dealers.
PMFD recovers the distribution expenses and account servicing fees
incurred through the receipt of reimbursement payments from the Fund under
the Class A Plan and the receipt of initial sales charges. PMFD has advised
the Portfolio that it has received approximately $5,400 in front-end sales
charges resulting from sales of Class A shares during the six months ended
April 30, 1994. From these fees, PMFD paid such sales charges to dealers
(PSI and Prusec) which in turn paid commissions to salespersons.
Pursuant to the Class B Plan, the Portfolio reimburses PSI for its
distribution-related expenses with respect to Class B shares, at an annual
rate of up to 1% of the average daily net assets of the Class B shares.
Effective February 1, 1993, PSI had no distribution costs reimbursable
to it under the Class B Plan and therefore, as of such date, the Fund
discontinued assessing distribution fees on the Class B shares and
discontinued the payment to PSI of any contingent deferred sales charges
collected on the redemption of Class B shares. All such contingent deferred
sales charges collected on the redemption of Class B shares are being
retained and credited to the Fund's Class B shares paid-in capital account.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are
indirect, wholly-owned subsidiaries of The Prudential Insurance Company of
America.
Note 3. Other Prudential Mutual Fund
Transactions Services, Inc. (``PMFS''), a
With Affiliates wholly-owned subsidiary of
PMF, serves as the Fund's
transfer agent and during the six months ended April 30, 1994, the
Portfolio incurred fees of approximately $55,500 for the services of PMFS.
As of April 30, 1994, approximately $8,600 of such fees were due to PMFS
for its services. Transfer agent fees and expenses in the Statement of
Operations include certain out-of-pocket expenses paid to non-affiliates.
Note 4. Portfolio The federal income tax basis
Securities of the Portfolio's investments
at April 30, 1994 was sub-
stantially the same as the basis for financial reporting purposes and,
accordingly, net unrealized appreciation for federal income tax purposes
was $29,953 (gross unrealized appreciation--$579,744; gross unrealized
depreciation--$549,791).
For federal income tax purposes, the Portfolio has a capital loss
carryforward as of October 31, 1993 of approximately $10,954,000 of which
$4,701,000 expires in 2000 and $6,253,000 expires in 2001. Accordingly, no
capital gains distributions are expected to be paid to shareholders until
future net gains have been realized in excess of such carryforward.
Transactions in options written during the six months ended April 30,
1994 were as follows:
<TABLE>
<CAPTION>
Number of
Contracts Premiums
(000) Received
--------- ---------
<S> <C> <C>
Options outstanding at
October 31, 1993................. 9,500 $ 71,725
Options written.................... 119,800 888,305
Options terminated in closing
purchase transactions............ (88,100) (584,085)
Options expired.................... (11,600) (76,175)
Options exercised.................. (3,400) (10,200)
--------- ---------
Options outstanding at
April 30, 1994................... 26,200 $ 289,570
--------- ---------
--------- ---------
</TABLE>
At April 30, 1994, the Portfolio had outstanding forward currency
contracts, both to purchase and sell foreign currencies, as follows:
B-66
<PAGE>
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Purchase Contracts Payable Value (Depreciation)
- --------------------- --------------- ----------- --------------
<S> <C> <C> <C>
Australian Dollars,
expiring
5/4-5/9/94......... $ 15,423,946 $15,476,453 $ 52,507
British Pounds,
expiring 5/31/94... 10,050,134 10,143,993 93,859
Canadian Dollars,
expiring 5/4/94.... 8,746,092 8,732,515 (13,577)
Deutschemarks,
expiring
5/3-5/20/94........ 28,095,847 28,886,464 790,617
Italian Lira,
expiring
5/13-5/31/94....... 8,004,128 8,168,276 164,148
Japanese Yen,
expiring
5/2-6/2/94......... 14,962,555 15,208,895 246,340
Spanish Pesetas,
expiring
5/5-5/20/94........ 2,531,679 2,585,237 53,558
Swedish Krona,
expiring 5/10/94... 8,842,040 9,199,531 357,491
--------------- ----------- --------------
$ 96,656,421 $98,401,364 $ 1,744,943
--------------- ----------- --------------
--------------- ----------- --------------
</TABLE>
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- --------------------- --------------- ----------- --------------
<S> <C> <C> <C>
Australian Dollars,
expiring
5/4-5/9/94......... $ 3,988,261 $ 3,992,498 $ (4,237)
Canadian Dollars,
expiring
5/4-5/24/94........ 3,502,618 3,504,209 (1,591)
Deutschemarks,
expiring
5/3-10/11/94....... 39,741,345 40,875,350 (1,134,005)
French Francs,
expiring 6/21/94... 5,248,765 5,333,639 (84,874)
Japanese Yen,
expiring
5/2-5/16/94........ 9,534,227 9,712,086 (177,859)
New Zealand Dollars,
expiring 5/31/94... 2,488 2,496 (8)
Swedish Krona,
expiring 5/10/94... 7,545,489 7,845,158 (299,669)
Swiss Francs,
expiring
5/19-10/26/94...... 7,598,336 7,860,058 (261,722)
--------------- ----------- --------------
$ 77,161,529 $79,125,494 $ (1,963,965)
--------------- ----------- --------------
--------------- ----------- --------------
</TABLE>
Note 5. Joint The Portfolio, along with
Repurchase other affiliated registered
Agreement investment companies, trans-
Account fers uninvested cash balances
into a single joint account,
the daily aggregate balance of which is invested in one or more
repurchase agreements collateralized by U.S. Treasury or Federal agency
obligations. At April 30, 1994, the Portfolio had a 1.6% undivided interest
in the repurchase agreements in the joint account. The undivided interest
for the Portfolio represented $15,470,000 in principal amount. As of such
date, each repurchase agreement in the joint account and the value of the
collateral therefor was as follows:
Barclays de Zoete Wedd, Inc., 3.55%, in the principal amount of
$53,000,000, repurchase price $53,015,679, due 5/2/94. The value of the
collateral including accrued interest is $54,060,428.
Goldman Sachs & Co., 3.50%, in the principal amount of $315,000,000,
repurchase price $315,091,875, due 5/2/94. The value of the collateral
including accrued interest is $321,300,231.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 3.55%, in the principal
amount of $315,000,000, repurchase price $315,093,188, due 5/2/94. The
value of the collateral including accrued interest is $321,300,584.
Morgan (J.P.) Securities, Inc., 3.58%, in the principal amount of
$295,000,000, repurchase price $295,088,008, due 5/2/94. The value of the
collateral including accrued interest is $300,901,625.
Note 6. Capital The Portfolio currently offers
only Class A shares. Class A
shares are sold with a front-end sales charge of up to .99%. Prior to
April 14, 1993, Class B shares were sold with a contingent deferred sales
charge of 1% on shares that were held for less than one year. Both classes
of shares have equal rights as to earnings, assets and voting privileges
except that each class has exclusive voting rights with respect to its
distribution plan. Class B shares held greater than one year from date of
purchase are automatically converted into Class A shares. Effective May 10,
1994, the remaining Class B shares converted to Class A shares. There are
500 million authorized shares of $.001 par value common stock divided into
two classes, designated Class A and Class B common stock, each of which
consists of 250 million authorized shares.
B-67
<PAGE>
Transactions in shares of common stock for the six months ended April
30, 1994 and the fiscal year ended October 31, 1993 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ---------------------------- ------------ -------------
<S> <C> <C>
Six months ended April 30,
1994:
Shares sold................. 285,794 $ 533,304
Shares sold--conversion from
Class B................... 826,184 1,546,729
Shares issued in
reinvestment of
dividends................. 862,004 1,606,290
Shares reacquired........... (28,734,616) (53,496,735)
------------ -------------
Net decrease in shares
outstanding............... (26,760,634) $ (49,810,412)
------------ -------------
------------ -------------
Year ended October 31, 1993:
Shares sold................. 6,064,340 $ 11,274,743
Shares sold--conversion from
Class B................... 83,379,084 154,875,114
Shares issued in
reinvestment of dividends
and distributions......... 2,229,981 4,138,266
Shares reacquired........... (83,960,705) (155,987,024)
------------ -------------
Net increase in shares
outstanding............... 7,712,700 $ 14,301,099
------------ -------------
------------ -------------
<CAPTION>
Class B Shares Amount
- ---------------------------- ------------ -------------
Six months ended April 30,
1994:
Shares issued in
reinvestment of
dividends................. 4,960 $ 9,443
Shares reacquired........... (226,904) (428,082)
Shares
reacquired--conversion
into Class A.............. (813,295) (1,546,729)
------------ -------------
Net decrease in shares
outstanding............... (1,035,239) $ (1,965,368)
------------ -------------
------------ -------------
Year ended October 31, 1993:
Shares sold................. 1,902,610 $ 3,545,741
Shares issued in
reinvestment of dividends
and distributions......... 903,347 1,683,712
Shares reacquired........... (24,366,585) (45,503,053)
Shares
reacquired--conversion
into Class A.............. (83,275,750) (154,875,114)
------------ -------------
Net decrease in shares
outstanding............... (104,836,378) $(195,148,714)
------------ -------------
------------ -------------
</TABLE>
B-68
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Class A Class B
-------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
February 15, February 15,
Six Months Year Ended 1991* Six Months Year Ended 1991*
Ended October 31, through Ended October 31, through
April 30, -------------------- October 31, April 30, ------------------- October 31,
1994 1993 1992 1991 1994 1993 1992 1991
---------- -------- -------- ------------ ---------- ------- -------- ------------
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of
period.............. $ 1.88 $ 1.89 $ 2.00 $ 2.00 $ 1.90 $ 1.89 $ 2.00 $ 2.00
---------- -------- -------- ------------ ---------- ------- -------- ------------
Income from investment operations
Net investment
income.............. .03 .12 .16 .12(D) .04 .12 .15 .11(D)
Net realized and
unrealized gain
(loss) on investment
and foreign currency
transactions........ (.02) (.04) (.13) -- (.02) (.04) (.13) --
---------- -------- -------- ------------ ---------- ------- -------- ------------
Total from
investment
operations........ .01 .08 .03 .12 .02 .08 .02 .11
---------- -------- -------- ------------ ---------- ------- -------- ------------
Less distributions
Dividends from net
investment
income.............. (.01) (.04) (.14) (.12) (.01) (.04) (.13) (.11)
Dividends in excess of
net investment
income.............. (.03) -- -- -- (.04) -- -- --
Taxable return of
capital
distributions....... -- (.05) -- -- -- (.05) -- --
---------- -------- -------- ------------ ---------- ------- -------- ------------
Total
distributions....... (.04) (.09) (.14) (.12) (.05) (.09) (.13) (.11)
---------- -------- -------- ------------ ---------- ------- -------- ------------
Contingent deferred
sales charges
collected........... -- -- -- -- .03 .02 -- --
---------- -------- -------- ------------ ---------- ------- -------- ------------
Net asset value, end
of period........... $ 1.85 $ 1.88 $ 1.89 $ 2.00 $ 1.90 $ 1.90 $ 1.89 $ 2.00
---------- -------- -------- ------------ ---------- ------- -------- ------------
---------- -------- -------- ------------ ---------- ------- -------- ------------
TOTAL RETURN#:........ .76% 4.36% 1.46% 5.91% 2.60% 5.47% 0.94% 5.53%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000)........ $ 75,908 $127,490 $113,412 $ 86,443 $ 52 $ 2,023 $199,890 $ 134,015
Average net assets
(000)............... $ 101,704 $153,339 $138,331 $ 23,224 $ 548 $52,653 $248,941 $ 42,449
Ratios to average net
assets:
Expenses, including
distribution
fees.............. 1.73%** 1.48% 1.33% 1.25%(D)** 1.23%** 1.61% 1.83% 1.75%(D)**
Expenses, excluding
distribution
fees.............. 1.23%** .98% .83% .75%(D)** 1.23%** .98% .83% .75%(D)**
Net investment
income............ 3.92%** 6.44% 8.16% 8.64%(D)** 4.48%** 6.31% 7.66% 8.21%(D)**
</TABLE>
- ---------------
* Commencement of investment operations.
** Annualized.
# 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. Total returns for periods of less than a full year are not
annualized.
(D) Net of expense subsidy.
See Notes to Financial Statements.
B-69
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
(1) The following financial statements are included in the
Prospectus constituting Part A of this Registration Statement:
Financial Highlights.
(2) The following financial statements are included in the Statement
of Additional Information, constituting Part B of this
Registration Statement on behalf of the Short-Term Global
Income Fund:
For the Short-Term Global Income Portfolio
Portfolio of Investments at October 31, 1993
Statement of Assets and Liabilities at October 31, 1993
Statement of Operations for the fiscal year ended October 31, 1993
Statement of Changes in Net Assets for the fiscal years ended October 31,
1993 and October 31, 1992
Notes to Financial Statements
Financial Highlights
Independent Auditors' Report
Portfolio of Investments at April 30, 1994 (unaudited)
Statement of Assets and Liabilities at April 30, 1994 (unaudited)
Statement of Operations for the six months ended April 30, 1994 (unaudited)
Statement of Changes in Net Assets for six months ended April 30, 1994
(unaudited)
Notes to Financial Statements (unaudited)
Financial Highlights (unaudited)
For the Global Assets Portfolio
Portfolio of Investments at October 31, 1993
Statement of Assets and Liabilities at October 31, 1993
Statement of Operations for the fiscal year ended October 31, 1993
Statement of Changes in Net Assets for the years ended October 31, 1993
and October 31, 1992
Notes to Financial Statements
Financial Highlights
Independent Auditors' Report
Portfolio of Investments at April 30, 1994 (unaudited)
Statement of Assets and Liabilities at April 30, 1994 (unaudited)
Statement of Operations for the six months ended April 30, 1994 (unaudited)
Statement of Changes in Net Assets for six months ended April 30, 1994
(unaudited)
Notes to Financial Statements (unaudited)
Financial Highlights (unaudited)
C-1
<PAGE>
(b) Exhibits:
1. Articles of Incorporation of the Registrant. Incorporated by
reference to Exhibit 1 in Registrant's initial Registration
Statement on Form N-1A (File No. 33-33479) filed on February
23, 1990.
(a) Articles of Amendment to Articles of Incorporation.
Incorporated by reference to Exhibit 1(a) to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A
(File No. 33-33479) filed by Registrant on August 24, 1990.
(b) Articles Supplementary. Incorporated by reference to
Exhibit 1(b) to Post-Effective Amendment No. 1 to the
Registration Statement on Form N-1A (File No. 33-33479) filed
by Registrant on December 18, 1990.
(c) Articles of Amendment of Articles of Incorporation.
Incorporated by reference to Exhibit 1(c) to Post-Effective
Amendment No. 4 to the Registration Statement on Form N-1A
(File No. 33-33479) filed by Registrant on December 31, 1991.
(d) Form of Amended and Restated Articles of Incorporation,
incorporated by reference to Exhibit 1(d) to Post-Effective
Amendment No. 7 to the Registration Statement on Form N-1A
(File No. 33-33479) filed via EDGAR on May 9, 1994.
2. By-Laws of the Registrant incorporated by reference to Exhibit
No. 2 to Pre-Effective Amendment No. 3 to the Registration
Statement on Form N-1A (File No. 33-33479) filed by
Registrant on October 22, 1990.
4. Instruments defining rights of shareholders. Incorporated by
reference to Exhibit 4 to Post-Effective Amendment No. 6 to
the Registration Statement on Form N-1A (File No. 33-33470)
filed on Edgar by Registrant on December 30, 1993.
5. (a) Management Agreement between the Registrant and Prudential
Mutual Fund Management, Inc, Incorporated by reference to
Exhibit 5(a) to Pre-Effective Amendment No. 3 to the
Registration Statement on Form N-1A (File No. 33-33479) filed
by Registrant on October 22, 1990.
(b) Subadvisory Agreement between Prudential Mutual Fund
Management, Inc. and The Prudential Investment Corporation,
Incorporated by reference to Exhibit No. 5(b) to Pre-Effective
Amendment No. 3 to the Registration Statement on Form N-1A
(File No. 33-33479) filed by Registrant on October 22, 1990.
6. (a) Subscription Offering Agreement among the Registrant,
Prudential-Bache Securities Inc. and Prudential Mutual Fund
Distributors, Inc. incorporated by reference to Exhibit No.
6(c) to Pre-Effective Amendment No. 3 to the Registration
Statement on Form N-1A (File No. 33-33479) filed by Registrant
on October 22, 1990.
(b) Subscription Offering Agreement among the Registrant,
Prudential-Bache Securities Inc. and Prudential Mutual Fund
Distributors, Inc. incorporated by reference to Exhibit No.
6(d) to Post-Effective Amendment No. 1 to the Registration
Statement on Form N-1A (File No. 33-33479) filed by Registrant
on December 18, 1990.
(c)(i) Distribution Agreement between the Registrant and
Prudential Mutual Fund Distributors for the Class A shares of
each Portfolio dated July 1, 1993, incorporated by reference
to Exhibit 6 (e)(ii) to Post-Effective Amendment No. 6 to the
Registration Statement on Form N-1A (File No. 33-33479) filed
via EDGAR on December 30, 1993.
(c)(ii) Restated Distribution Agreement between the Fund and
Prudential Securities Incorporated for the Class B shares
dated July 1, 1993, incorporated by reference to Exhibit 6
(e)(iii) to Post-Effective Amendment No. 6 to the Registration
Statement on Form N-1A (File No. 33-33479) filed via EDGAR on
December 30, 1993.
(c)(iii) Form of Distribution Agreement for Class A shares of
both Portfolios, incorporated by reference to Exhibit
6(c)(iii) to Post-Effective Amendment No. 7 to the
Registration Statement on Form N-1A (File No. 33-33479) filed
via EDGAR on May 9, 1994.
(c)(v) Form of Distribution Agreement for Class B shares of
the Short-Term Global Income Portfolio, incorporated by
reference to Exhibit 6(c)(iv) to Post-Effective Amendment No. 7
to the Registration Statement on Form N-1A (File No. 33-33479)
filed via EDGAR on May 9, 1994.
(c)(vi) Form of Distribution Agreement for Class C shares of
the Short-Term Global Income Portfolio, incorporated by
reference to Exhibit 6(c)(v) to Post-Effective Amendment No.
7 to the Registration Statement on Form N-1A (File No.
33-33479) filed via EDGAR on May 9, 1994.
C-2
<PAGE>
8. Custodian Contract between the Registrant and State Street Bank
and Trust Company. Incorporated by reference to Exhibit No. 8
to Pre-Effective Amendment No. 3 to the Registration Statement
on Form N-1A (File No. 33-33479) filed by Registrant on
October 22, 1990.
9. Transfer Agency and Dividend Disbursing Agreement between the
Registrant and Prudential Mutual Fund Services, Inc.
Incorporated by reference to Exhibit No. 9 to Pre-Effective
Amendment No. 3 to the Registration Statement on Form N-1A
(File No. 33-33479) filed by Registrant on October 22, 1990.
10. Opinion of Counsel. Incorporated by reference to Exhibit No. 10
to Pre-Effective Amendment No. 3 to the Registration
Statement on Form N-1A (File No. 33-33479) filed by Registrant
on October 22, 1990.
11. Consent of Independent Accountants.*
13. Purchase Agreement. Incorporated by reference to Exhibit 13 to
Pre-Effective Amendment No. 3 to the Registration Statement on
Form N-1A (File No. 33-33479) filed by Registrant on
October 22, 1990.
14. Not Applicable.
15. (a)(i) Distribution and Service Plan for Class A shares of
Short-Term Global Income Portfolio dated July 1, 1993,
incorporated by reference to Exhibit 15(a)(i) to
Post-Effective Amendment No. 6 to the Registration Statement
on Form N-1A (File No. 33-33479) filed via EDGAR on December
30, 1993.
(b)(i) Distribution and Service Plan for Class B shares of the
Fund dated July 1, 1993, incorporated by reference to Exhibit
15(b)(ii) to Post-Effective Amendment No. 6 to the
Registration Statement on Form N-1A (File No. 33-33479) filed
via EDGAR on December 30, 1993.
(b)(ii) Distribution and Service Plan for Class A shares of
Global Assets Portfolio dated July 1, 1993, incorporated by
reference to Exhibit 15(b)(ii) to Post-Effective Amendment No.
6 to the Registration Statement on Form N-1A (File No.
33-33479) filed via EDGAR on December 30, 1993.
(c) Form of Distribution and Service Plan for Class A shares
of the Short-Term Global Income Portfolio and Global Assets
Portfolio, incorporated by reference to Exhibit 15(c) to
Post-Effective Amendment No. 7 to the Registration Statement
on Form N-1A (File No. 33-33479) filed via EDGAR on May 9, 1994.
(d) Form of Distribution and Service Plan for Class B shares
of the Short-Term Global Income Portfolio, incorporated by
reference to Exhibit 15(d) to Post-Effective Amendment No. 7
to the Registration Statement on Form N-1A (File No. 33-33479)
filed via EDGAR on May 9, 1994.
(e) Form of Distribution and Service Plan for Class C shares
of the Short-Term Global Income Portfolio, incorporated by
reference to Exhibit 15(e) to Post-Effective Amendment No. 7
to the Registration Statement on Form N-1A (File No. 33-33479)
filed via EDGAR on May 9, 1994.
16. (a) Not Applicable.
17. (a) Not Applicable.
- ------------
* Filed herewith.
Item 25. Persons Controlled by or Under Common Control with Registrant.
No person is controlled by or under common control with the Registrant.
Item 26. Number of Holders of Securities.
As of June 17, 1994 there were 4,156 Class A shareholders and 0 Class B
shareholders of the Global Assets Portfolio and 2,014 Class A shareholders
and 20,819 Class B shareholders of the Short-Term Global Income Portfolio of
the Fund.
Item 27. Indemnification.
As permitted by Sections 17(h) and (i) of the Investment Company Act of
1940 (the "1940 Act") and pursuant to Article VI of the Fund's Articles of
Incorporation (Exhibit 1 to the Registration Statement) and Section 2-418
of the Maryland General Law, officers and directors of the Registrant may
be indemnified against liabilities in connection with the Registrant unless
it is proved that (i) the act or omission of the director of officer was
material to the cause of action adjudicated in the proceeding and was
committed in bad faith or with active and deliberate dishonesty, (ii) the
director actually received an improper personal benefit in money, property
or services, or (iii) in the case of a criminal proceeding, the director
had reasonable cause to believe
C-3
<PAGE>
that the act or omission was unlawful. As permitted by Section 17(i) of
the 1940 Act, pursuant to Section 10 of each Distribution Agreement
(Exhibit 6(a) and (b) to the Registration Statement), each Distributor of
the Registrant may be indemnified against liabilities which it may incur
except liabilities arising from bad faith, gross negligence, willful
misfeasance or reckless disregard of duties.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in connection
with the successful defense of any action, suit or proceeding) is asserted
against the Registrant by such director, officer or controlling person in
connection with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such
issue.
The Registrant intends to purchase an insurance policy insuring its
officers and directors against certain liabilities, and certain costs of
defending claims against such officers and directors, to the extent such
officers and directors are not found to have committed conduct constituting
willful misfeasance, bad faith, gross negligence or reckless disregard of
their duties. The insurance policy also insures the Registrant against the
cost of indemnification payments to officers and directors under certain
circumstances.
Section 9 of the Management Agreement (Exhibit 5(a) to the Registration
Statement) and Section 4 of the Subadvisory Agreement (Exhibit 5(b) to the
Registration Statement) limit the liability of Prudential Mutual Fund
Management, Inc. (PMF) and The Prudential Investment Corporation (PIC),
respectively, to liabilities arising from willful misfeasance, bad faith or
gross negligence in the performance of their respective duties or from
reckless disregard by them of their respective obligations and duties under
the agreements.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its By-Laws, the Management Agreement and each Distribution
Agreement in a manner consistent with Release No. 11330 of the Securities
and Exchange Commission under the 1940 Act so long as the interpretation of
Sections 17(h) and 17(i) of such Act remain, in effect.
Item 28. Business and other Connections of Investment Adviser
(a) Prudential Mutual Fund Management, Inc.
See "How the Fund is Managed-Manager" in the Prospectus constituting
Part A of this Registration Statement and "Manager" in the Statement of
Additional Information constituting Part B of this Registration Statement.
The business and other connections of the officers of PMF are listed in
Schedules A and D of Form ADV of PMF as currently on file with the
Securities and Exchange Commission, the text of which is hereby
incorporated by reference (File No. 801-31104, filed in October 1993).
The business and other connections of PMF's directors and principal
executive officers are set forth below. Except as otherwise indicated, the
address of each person is One Seaport Plaza, New York, NY 10292.
<TABLE>
<CAPTION>
Name and Address Position with PMF Principal Occupations
- ---------------- ----------------- ---------------------
<S> <C> <C>
Brendan D. Boyle Executive Vice Executive Vice President, PMF; Senior Vice President,
President and Prudential Securities Incorporated (Prudential Securities)
Director of
Marketing
John D. Brookmeyer, Jr. Director Senior Vice President, The Prudential Insurance Company of
Two Gateway Center America (Prudential)
Newark, NJ 07102
Susan C. Cote Senior Vice President Senior Vice President, PMF; Senior Vice President, Prudential Securities
Fred A. Fiandaca Executive Vice Executive Vice President, Chief Operating Officer and Director, PMF;
Raritan Plaza One President, Chief Chief Executive Officer and Director, Prudential Mutual Fund
Edison, NJ 08847 Operating Officer Services, Inc.
and Director
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
Name and Address Position with PMF Principal Occupations
- ---------------- ----------------- ---------------------
<S> <C> <C>
Stephen P. Fisher Senior Vice President Senior Vice President, PMF; Senior Vice President, Prudential Securities
Frank W. Giordano Executive Vice Executive Vice President, General Counsel and Secretary, PMF; Senior Vice
President, General President, Prudential Securities
Counsel and
Secretary
Robert F. Gunia Executive Vice Executive Vice President, Chief Financial and Administrative Officer,
President, Chief Treasurer and Director, PMF; Senior Vice President, Prudential Securities
Financial and
Administrative
Officer, Treasurer
and Director
Eugene B. Heimberg Director Senior Vice President, Prudential; President, Director and Chief Investment
Prudential Plaza Officer, PIC
Newark, NJ 07101
Lawrence C. McQuade Vice Chairman Vice Chairman, PMF
Leland B. Paton Director Executive Vice President, Director and Member of the Operating Committee,
Prudential Securities; Director, Prudential Securities Group, Inc., ("PSG")
Richard A. Redeker President, Chief President, Chief Executive Officer and Director, PMF; Executive Vice
Executive Officer and President, Director and Member of Operating Committee, Prudential
Director Securities; Director, PSG
S. Jane Rose Senior Vice Senior Vice President, Senior Counsel and Assistant Secretary, PMF; Senior
President, Senior Vice President and Senior Counsel, Prudential Securities
Counsel and
Assistant Secretary
Donald G. Southwell Director Senior Vice President, Prudential; Director, PSG
213 Washington Street
Newark, NJ 07102
</TABLE>
(b) Prudential Investment Corporation (PIC)
See "How the Fund is Managed-Subadviser" in the Prospectus constituting
Part A of this Registration Statement and "Subadviser" in the Statement of
Additional Information constituting Part B of this Registration Statement.
The business and other connections of PIC's directors and executive
officers are set forth below. Except as otherwise indicated, the address of
each person is Prudential Plaza, Newark, NJ 07101.
<TABLE>
<CAPTION>
Name and Address Position with PIC Principal Occupations
- ---------------- ----------------- ---------------------
<S> <C> <C>
Martin A. Berkowitz Senior Vice President Vice President, Prudential Chief Financial Officer and Chief
Chief Financial Compliance Officer, PIC; Vice President, Prudential
Officer and Chief
Compliance Officer
William M. Bethke Senior Vice President Senior Vice President, Prudential; Senior Vice President, PIC
Two Gateway Center
Newark, NJ 07102
John D. Brookmeyer, Jr. Senior Vice President Senior Vice President, Prudential; Senior Vice President, PIC
Two Gateway Center
Newark, NJ 07102
Eugene B. Heimberg President, Director, Senior Vice President, Prudential; President, Director and Chief
and Chief Investment Chief Investment Officer, PIC
Officer
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
Name and Address Position with PIC Principal Occupations
- ---------------- ----------------- ---------------------
<S> <C> <C>
Garnett L. Keith, Jr. Director Vice Chairman and Director, Prudential; Director, PIC
William P. Link Senior Vice Executive Vice President, Prudential; Senior Vice President, PIC
Four Gateway Center President
Newark, NJ 07102
James W. Stevens Executive Vice Executive Vice President, Prudential; Director, PSG
Four Gateway Center President
Newark, NJ 07102
Robert C. Winters Director Chairman of the Board and Chief Executive Officer, Prudential; Director, PIC;
Chairman of the Board and Director, PSG
Claude J. Zinngrabe, Jr. Executive Vice Vice President, Prudential; Executive Vice President, PIC
President
</TABLE>
Item 29. Principal Underwriters
(a)(i) Prudential Securities
Prudential Securities is distributor for Prudential Government
Securities Trust (Intermediate Term Series) and The Target Portfolio Trust
for Class D shares of Prudential Municipal Series Fund (Florida Series) and
for Class B shares of Prudential Adjustable Rate Securities Fund, Inc., The
BlackRock Government Income Trust, Prudential California Municipal Fund and
(California Income Series and California Series), Prudential Equity Fund,
Inc., Prudential Equity Income Fund, Prudential FlexiFund, Prudential
Global Fund, Inc., Prudential-Bache Global Genesis Fund, Inc. (d/b/a
Prudential Global Genesis Fund), Prudential-Bache Global Natural Resources
Fund, Inc. (d/b/a Prudential Global Natural Resources Fund), Prudential-
Bache GNMA Fund, Inc. (d/b/a Prudential GNMA Fund), Prudential-Bache
Government Plus Fund, Inc. (d/b/a Prudential Government Plus Fund),
Prudential Growth Fund, Inc., Prudential-Bache Growth Opportunity Fund,
Inc. (d/b/aPrudential Growth Opportunity Fund), Prudential-Bache High Yield
Fund, Inc. (d/b/a Prudential High Yield Fund), Prudential
IncomeVertible\'AE Fund, Inc., Prudential Intermediate Global Income Fund,
Inc., Prudential Multi-Sector Fund, Inc., Prudential Municipal Bond Fund,
Prudential Municipal Series Fund (except Connecticut Money Market Series,
Massachusetts Money Market Series, New York Money Market Series, New Jersey
Money Market Series and Florida Series), Prudential-Bache National
Municipals Fund, Inc. (d/b/a Prudential National Municipals Fund),
Prudential Pacific Growth Fund, Inc., Prudential Short-Term Global Income
Fund, Inc., Prudential-Bache Structured Maturity Fund (d/b/a Prudential
Structured Maturity Fund), Prudential U.S. Government Fund,
Prudential-Bache Utility Fund, Inc. (d/b/a Prudential Utility Fund), Global
Utility Fund, Inc., Nicholas-Applegate Fund, Inc. (Nicholas-Applegate
Growth Equity Fund). Prudential Securities is also a depositor for the
following unit investment trusts:
The Corporate Income Fund
Corporate Investment Trust Fund
Equity Income Fund
Government Securities Income Fund
International Bond Fund
Municipal Investment Trust
Prudential Equity Trust Shares
National Equity Trust
Prudential Unit Trusts
Government Securities Equity Trust
National Municipal Trust
(ii) Prudential Mutual Fund Distributors, Inc.
Prudential Mutual Fund Distributors, Inc. is distributor for Command
Government Fund, Command Money Fund, Command Tax-Free Fund, Prudential
California Municipal Fund (California Money Market Series), Prudential
Government Securities Trust (Money Market Series and U.S. Treasury Money
Market Series), Prudential-Bache MoneyMart Assets (d/b/a
C-6
<PAGE>
Prudential MoneyMart Assets), Prudential Municipal Series Fund
(Connecticut Money Market Series, Massachusetts Money Market Series, New
York Money Market Series and New Jersey Money Market Series), Prudential
Institutional Liquidity Portfolio, Inc., Prudential-Bache Special Money
Market Fund, Inc. (d/b/a Prudential Special Money Market Fund),
Prudential-Bache Tax-Free Money Fund, Inc. (d/b/a Prudential Tax-
Free Money Fund), and for Class A shares of Prudential Adjustable Rate
Securities Fund, Inc., The BlackRock Government Income Trust, Prudential
California Municipal Fund (California Series), Prudential-Bache Equity
Fund, Inc., (d/b/a Prudential Equity Fund), Prudential Equity Income Fund,
Prudential FlexiFund, Prudential Global Fund, Inc., Prudential-Bache Global
Genesis Fund, Inc. (d/b/a Prudential Global Genesis Fund), Prudential-Bache
Global Natural Resources Fund, Inc. (d/b/a Prudential Global Natural
Resources Fund), Prudential-Bache GNMA Fund, Inc. (d/b/a Prudential GNMA
Fund), Prudential-Bache Government Plus Fund, Inc. (d/b/a Prudential
Government Plus Fund), Prudential Growth Fund, Inc., Prudential-Bache
Growth Opportunity Fund, Inc. (d/b/a Prudential Growth Opportunity Fund),
Prudential-Bache High Yield Fund, Inc. (d/b/a Prudential High Yield Fund),
Prudential-Bache IncomeVertible\'AE Fund, Inc., Prudential Intermediate
Global Income Fund, Inc., Prudential Multi-Sector Fund, Inc., Prudential
Municipal Bond Fund, Prudential Municipal Series Fund (Arizona Series,
Georgia Series, Maryland Series, Massachusetts Series, Michigan Series,
Minnesota Series, New Jersey Series, North Carolina Series, Ohio Series and
Pennsylvania Series), Prudential-Bache National Municipals Fund, Inc.
(d/b/a Prudential National Municipals Fund), Prudential Pacific Growth
Fund, Inc., Prudential Short-Term Global Income Fund, Inc.,
Prudential-Bache Structured Maturity Fund (d/b/a Prudential Structured
Maturity Fund), Prudential U.S. Government Fund and Prudential-Bache
Utility Fund, Inc. (d/b/a Prudential Utility Fund), Global Utility Fund,
Inc., and Nicholas-Applegate Fund, Inc. (Nicholas-Applegate Growth Equity
Fund).
(b)(i) Information concerning the directors and officers of Prudential
Securities Incorporated is set forth below.
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name(1) Underwriter Registrant
- ------- ------------- -------------
<S> <C> <C>
Alan D. Hogan .............. Executive Vice President, Chief Administrative None
Officer and Director
Howard A. Knight ........... Executive Vice President, Director, Corporate None
Strategy and New Business Development
George A. Murray ........... Executive Vice President and Director None
John P. Murray ............. Executive Vice President and Director of Risk None
Management
Leland B. Paton ............ Executive Vice President and Director None
Richard A. Redeker ......... Director Director
Hardwick Simmons ........... Chief Executive Officer, President and Director None
Lee B. Spenser, Jr. ................ General Counsel, Executive Vice President None
and Director
</TABLE>
(ii) Prudential Mutual Fund Distributors, Inc.:
<TABLE>
<S> <C> <C>
Joanne Accurso-Soto ........ Vice President None
Dennis Annarumma ........... Vice President, Assistant Treasurer None
and Assistant Comptroller
Phyllis J. Berman .......... Vice President None
Fred A. Fiandaca ........... President, Chief Executive Officer and Director None
Raritan Plaza One
Edison, NJ 08847
Stephen P. Fisher .......... Vice President None
Frank W. Giordano .......... Executive Vice President, General Counsel, None
Secretary and Director
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name(1) Underwriter Registrant
- ------- ------------- -------------
<S> <C> <C>
Robert F. Gunia ............ Executive Vice President, Treasurer, Comptroller Vice President
and Director
Andrew J. Varley ........... Vice President None
Anita Whelan ............... Vice President and Assistant Secretary None
<FN>
- -------------
(1) The address of each person named is One Seaport Plaza, New York, NY
10292 unless otherwise indicated.
</TABLE>
(c) Registrant has no principal underwriter who is not an affiliated
person of the Registrant.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the Rules thereunder are maintained at
the offices of State Street Bank and Trust Company, 1776 Heritage Drive,
North Quincy, Massachusetts, The Prudential Investment Corporation,
Prudential Plaza, 745 Broad Street, Newark, New Jersey, the Registrant, One
Seaport Plaza, New York, New York, and Prudential Mutual Fund Services,
Inc., Raritan Plaza One, Edison, New Jersey. Documents required by Rules
31a-1 (b)(5), (6), (7), (9), (10) and (11) and 31a-1(f) will be kept at Two
Gateway Center, documents required by Rules 31a-1(b)(4) and (11) and
31a-1(d) at One Seaport Plaza and the remaining accounts, books and other
documents required by such other pertinent provisions of Section 31(a) and
the Rules promulgated thereunder will be kept by State Street Bank and
Trust Company and Prudential Mutual Fund Services, Inc.
Item 31. Management Services
Other than as set forth under the captions "How the Fund is
Managed-Manager" and "How the Fund is Managed-Distributor" in the
Prospectus and the captions "Manager" and "Distributor" in the Statement of
Additional Information, constituting Parts A and B, respectively, of this
Registration Statement, Registrant is not a party to any management-
related service contract.
Item 32. Undertakings
1. The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
C-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, has duly caused this Post-Effective
Amendment to the Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized in the City of New York, and State of
New York, on the 7th day of July, 1994.
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
By Lawrence C. McQuade
----------------------------------------------
Lawrence C. McQuade, President
Pursuant to the requiements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed
below by the following persons in the capacities and on the dates
indicated.
Signature Title Date
- --------- ----- ----
Lawrence C. McQuade President and Director July 7, 1994
- --------------------------------
Lawrence C. McQuade
Stephen C. Eyre Director July 7, 1994
- --------------------------------
Stephen C. Eyre
Delayne D. Gold Director July 7, 1994
- --------------------------------
Delayne D. Gold
Dan G. Hoff Director July 7, 1994
- --------------------------------
Dan G. Hoff
Harry A. Jacobs Jr. Director July 7, 1994
- --------------------------------
Harry A. Jacobs, Jr.
Sidney R. Knafel Director July 7, 1994
- --------------------------------
Sidney R. Knafel
Robert E. LaBlanc Director July 7, 1994
- --------------------------------
Robert E. LaBlanc
Thomas A. Owens Jr. Director July 7, 1994
- --------------------------------
Thomas A. Owens, Jr.
Richard A. Redeker Director July 7, 1994
- --------------------------------
Richard A. Redeker
Clay T. Whitehead Director July 7, 1994
- --------------------------------
Clay T. Whitehead
Susan C. Cote Treasurer and July 7, 1994
- -------------------------------- Principal Financial and
Susan C. Cote Accounting Officer
<PAGE>
EXHIBIT INDEX
1. Articles of Incorporation of the Registrant. Incorporated by reference
to Exhibit 1 in Registrant's initial Registration Statement on Form
N-1A (File No. 33-33479) filed on February 23, 1990.
(a) Articles of Amendment to Articles of Incorporation. Incorporated by
reference to Exhibit 1(a) to Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A (File No. 33-33479) filed by
Registrant on August 24, 1990.
(b) Articles Supplementary. Incorporated by reference to Exhibit 1(b)
to Post-Effective Amendment No. 1 to the Registration Statement on Form
N-1A (File No. 33-33479) filed by Registrant on December 18, 1990.
(c) Articles of Amendment of Articles of Incorporation. Incorporated by
reference to Exhibit 1(c) to Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A (File No. 33-33479) filed by
Registrant on December 31, 1991.
(d) Form of Amended and Restated Articles of Incorporation,
incorporated by reference to Exhibit 1(d) to Post-Effective Amendment
No. 7 to the Registration Statement on Form N-1A (File No. 33-33479)
filed via EDGAR on May 9, 1994.
2. By-Laws of the Registrant incorporated by reference to Exhibit No. 2
to Pre-Effective Amendment No. 3 of the Registration Statement on Form
N-1A (File No. 33-33479) filed by Registrant on October 22, 1990.
4. Instruments defining rights of shareholders. Incorporated by reference
to Exhibit 4 to Post-Effective Amendment No. 6 to the Registration
Statement on Form N-1A (File No. 33-33470) filed on Edgar by Registrant
on December 30, 1993.
5. (a) Management Agreement between the Registrant and Prudential Mutual
Fund Management, Inc, Incorporated by reference to Exhibit 5(a) to
Pre-Effective Amendment No. 3 to the Registration Statement on Form
N-1A (File No. 33-33479) filed by Registrant on October 22, 1990.
(b) Subadvisory Agreement between Prudential Mutual Fund Management,
Inc. and The Prudential Investment Corporation, Incorporated by
reference to Exhibit No. 5(b) to Pre-Effective Amendment No. 3 to the
Registration Statement on Form N-1A (File No. 33-33479) filed by
Registrant on October 22, 1990.
6. (a) Subscription Offering Agreement among the Registrant, Prudential-
Bache Securities Inc. and Prudential Mutual Fund Distributors, Inc.
incorporated by reference to Exhibit No. 6(c) to Pre-Effective Amendment
No. 3 to the Registration Statement on Form N-1A (File No. 33-33479)
filed by Registrant on October 22, 1990.
(b) Subscription Offering Agreement among the Registrant,
Prudential-Bache Securities Inc. and Prudential Mutual Fund
Distributors, Inc. incorporated by reference to Exhibit No. 6(d) to
Post-Effective Amendment No. 1 to the Registration Statement on Form
N-1A (File No. 33-33479) filed by Registrant on December 18, 1990.
(c)(i) Distribution Agreement between the Registrant and Prudential
Mutual Fund Distributors for the Class A shares dated July 1, 1993,
incorporated by reference to Exhibit 6 (e)(ii) to Post-Effective
Amendment No. 6 to the Registration Statement on Form N-1A (File No.
33-33479) filed via EDGAR on December 30, 1993.
(c)(ii) Restated Distribution Agreement between the Fund and Prudential
Securities Incorporated for the Class B shares dated July 1, 1993,
incorporated by reference to Exhibit 6 (e)(iii) to Post-Effective
Amendment No. 6 to the Registration Statement on Form N-1A (File No.
33-33479) filed via EDGAR on December 30, 1993.
(c)(iii) Form of Distribution Agreement for Class A shares of both
Portfolios, incorporated by reference to Exhibit 6(c)(iii) to
Post-Effective Amendment No. 7 to the Registration Statement on Form
N-1A (File No. 33-33479) filed via EDGAR on May 9, 1994.
(c)(v) Form of Distribution Agreement for Class B shares of the
Short-Term Global Income Portfolio, incorporated by reference to
Exhibit 6(c)(iv) to Post-Effective Amendment No. 7 to the Registration
Statement on Form N-1A (File No. 33-33479) filed via EDGAR on May 9,
1994.
(c)(vi) Form of Distribution Agreement for Class C shares of the Short-
Term Global Income Portfolio, incorporated by reference to Exhibit
(c)(v) to Post-Effective Amendment No. 7 to the Registration Statement
on Form N-1A (File No. 33-33479) filed via EDGAR on May 9, 1994.
<PAGE>
8. Custodian Contract between the Registrant and State Street Bank and
Trust Company. Incorporated by reference to Exhibit No. 8 to
Pre-Effective Amendment No. 3 to the Registration Statement on Form N-1A
(File No. 33-33479) filed by Registrant on October 22, 1990.
9. Transfer Agency and Dividend Disbursing Agreement between the
Registrant and Prudential Mutual Fund Services, Inc. Incorporated by
reference to Exhibit No. 9 to Pre-Effective Amendment No. 3 to the
Registration Statement on Form N-1A (File No. 33-33479) filed by
Registrant on October 22, 1990.
10. Opinion of Counsel. Incorporated by reference to Exhibit No. 10 to
Pre-Effective Amendment No. 3 to the Registration Statement on Form N-1A
(File No. 33-33479) filed by Registrant on October 22, 1990.
11. Consent of Independent Accountants.*
13. Purchase Agreement. Incorporated by reference to Exhibit 13 to
Pre-Effective Amendment No. 3 to the Registration Statement on Form N-1A
(File No. 33-33479) filed by Registrant on October 22, 1990.
14. Not Applicable.
15. (a)(i) Distribution and Service Plan for Class A shares of Short-Term
Global Income Portfolio dated July 1, 1993, incorporated by reference to
Exhibit 15(a)(i) to Post-Effective Amendment No. 6 to the Registration
Statement on Form N-1A (File No. 33-33479) filed via EDGAR on December
30, 1993.
(b)(i) Distribution and Service Plan for Class B shares of the Fund
dated July 1, 1993, incorporated by reference to Exhibit 15(b)(ii) to
Post-Effective Amendment No. 6 to the Registration Statement on Form
N-1A (File No. 33-33479) filed via EDGAR on December 30, 1993.
(b)(ii) Distribution and Service Plan for Class A shares of Global
Assets Portfolio dated July 1, 1993, incorporated by reference to
Exhibit 15(b)(ii) to Post-Effective Amendment No. 6 to the Registration
Statement on Form N-1A (File No. 33-33479) filed via EDGAR on December
30, 1993.
(c) Form of Distribution and Service Plan for Class A shares of the
Short-Term Global Income Portfolio and Global Assets Portfolio,
incorporated by reference to Exhibit 15(c) to Post-Effective Amendment
No. 7 to the Registration Statement on Form N-1A (File No. 33-33479)
filed via EDGAR on May 9, 1994.
(d) Form of Distribution and Service Plan for Class B shares of the
Short-Term Global Income Portfolio, incorporated by reference to
Exhibit 15(d) to Post-Effective Amendment No. 7 to the Registration
Statement on Form N-1A (File No. 33-33479) filed via EDGAR on May 9,
1994.
(e) Form of Distribution and Service Plan for Class C shares of the
Short-Term Global Income Portfolio, incorporated by reference to
Exhibit 15(e) to Post-Effective Amendment No. 7 to the Registration
Statement on Form N-1A (File No. 33-33479) filed via EDGAR on May 9,
1994.
16. (a) Not Applicable.
17. (a) Not Applicable.
- ------------
* Filed herewith.
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in Post-Effective Amendment No. 8 to Registration
Statement No. 33-33479 of Prudential Short-Term Global Income Fund, Inc. of
our reports dated December 15, 1993, appearing in the Statement of
Additional Information, which is part of such Registration Statement, and
to the references to us under the headings "Financial Highlights" in the
Prospectus, which is part of such Registration Statement, and Custodian,
Transfer and Dividend Disbursing Agent and Independent Accountants" in the
Statement of Additional Information.
Deloitte & Touche
New York, New York
July 6, 1994
