PRUDENTIAL SHORT TERM GLOBAL INCOME FUND INC, 497, 1994-08-04

PRUDENTIAL SHORT TERM GLOBAL INCOME FUND INC
497, 1994-08-04

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Rule 497(c)
Registration No. 33-33479
PRUDENTIAL SHORT-TERM
GLOBAL INCOME FUND, INC.

(SHORT-TERM GLOBAL INCOME PORTFOLIO)

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PROSPECTUS DATED AUGUST 1, 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 should 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 August
1, 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. There can be no
assurance that the Portfolio's objective will be achieved. See "How the Fund
Invests--Investment Objectives and Policies" at page 6.

RISK FACTORS AND SPECIAL CHARACTERISTICS

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. Companies in which the Fund
may invest may have limited product lines, markets or financial resources and
may lack management depth. The securities of these companies may have limited
marketability and may be subject to more abrupt or erratic market movements than
securities of larger, more established companies or the market averages in
general. See "How the Fund Invests-Risk Factors-Medium and Lower-Rated
Securities" at page 8. The Portfolio may also engage in various hedging and
income enhancement strategies, including investing in derivatives, the purchase
and sale of put and call options and related short-term trading. See "How the
Fund Invests--Other Investments and Investment Techniques--Hedging and Income
Enhancement Strategies--Risks of Hedging and Income Enhancement Strategies" at
page 11.

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 June 30, 1994, PMF served as
manager or administrator to 66 investment companies, including 37 mutual funds,
with aggregate assets of approximately $47 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 13.

WHO DISTRIBUTES THE PORTFOLIO'S SHARES?

Prudential Mutual Fund Distributors, Inc. (PMFD) acts as the Distributor of
the Portfolio's Class A shares. The Portfolio currently reimburses PMFD for
expenses related to the distribution of Class A shares at an annual rate of up
to .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 an annual
distribution and service fee which is currently being charged at the rate of .75
of 1% of the average daily net assets of each of the Class B and Class C shares.
See "How the Fund is Managed--Distributor" at page 14.
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<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 19 and "Shareholder Guide--Shareholder Services"
at page 28.

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 16 and "Shareholder Guide--How to Buy Shares of the Fund" at
page 19.

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 distribution-related
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 20.

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 23.

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 17.

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<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 B SHARES
-------------- -------------- --------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES+
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++ ............................ .15% .75% .75%
Other Expenses ............................ .32% .32% .32%
---- ---- ----
Total Portfolio Operating Expenses ........ 1.02% 1.62% 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 ................................................................. $46 $61 $ 88 $ 155
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 ................................................................. $16 $51 $ 88 $ 155
Class C** .............................................................. $16 $51 $ 88 $ 192

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).

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* 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.
+ 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 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."
++ Although the Class A, Class B 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 B and 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
limit its distribution fees to no more than .75 of 1% of the average
daily net assets of each of the Class B and Class C shares, for the
fiscal year ending October 31, 1994. See "How the Fund is
Managed-Distributor." Total operating expenses without such limitation
would be 1.17% for the Class A shares and 1.87% for the Class B and
Class C shares.

</TABLE>

<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

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
---- ---- ---- ---- ---- ---- ---- ----
(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>
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* 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.
</FN>
</TABLE>
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'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, 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 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.

<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. COMPANIES IN THESE
MARKETS IN WHICH THE FUND MAY INVEST MAY HAVE LIMITED PRODUCT LINES, MARKETS OR
FINANCIAL RESOURCES AND MAY LACK MANAGEMENT DEPTH. THE SECURITIES OF THESE
COMPANIES MAY HAVE LIMITED MARKETABILITY AND MAY BE SUBJECT TO MORE ABRUPT OR
ERRATIC MARKET MOVEMENTS THAN SECURITIES OF LARGER, MORE ESTABLISHED COMPANIES
OR THE MARKET AVERAGES IN GENERAL.

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.

7
<PAGE>

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.

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

<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 54.0%
AA/Aa 37.7%
A/A 2.3%
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

<PAGE>

Policies" in the Statement of 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

<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.

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.

<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)
and privately placed commercial paper 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, to unwind the over-the-counter option.
The exercise of such an option ordinarily

<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 June 30, 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 $47 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.

<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 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 representatives of 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 Class A Plan, the Portfolio pays the Distributor a distribution
and service fee as reimbursement for expenses incurred in distributing the
Portfolio's Class A shares. Under the Class B and Class C Plans, the Portfolio
pays distribution and/or service fees to the Distributor as compensation for its
distribution and service activities undertaken in connection with the Class B
and Class C shares, not as reimbursement for specific expenses incurred. If the

<PAGE>

Distributor's expenses under the Class B and Class C Plans 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.

UNDER THE CLASS A PLAN, THE PORTFOLIO REIMBURSES 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. It is expected that, in the case
of Class A shares, proceeds from the distribution fee will be used primarily to
pay account servicing fees to financial advisers. PMFD has advised the Portfolio
that distribution-related expenses under the Class A Plan will not exceed .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 ACTIVITIES WITH RESPECT TO CLASS B AND CLASS C
SHARES AT AN ANNUAL RATE OF UP TO 1% OF THE AVERAGE DAILY NET ASSETS OF THE
CLASS B AND CLASS C SHARES, RESPECTIVELY. 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 B and Class C Plans to .75 of 1% of the average daily net assets of the
Class B and 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 $4,741,746 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. Prior to
the date of this Prospectus, the Class B Plan operated as a "reimbursement type"
plan and provided for the reimbursement of distribution expenses incurred in
current and prior years. See "Distributor" in the Statement of Additional
Information.

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.

<PAGE>

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 out of its own resources 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 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.

<PAGE>

- --------------------------------------------------------------------------------
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
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., Morningstar Publications, 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.

<PAGE>

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 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 opinions of counsel to the effect that neither (i) the
conversion of Class B shares into Class A shares nor (ii) the exchange of Class
B or Class C shares for Class A shares constitutes a taxable event for federal
income tax purposes. However, such opinions are 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

<PAGE>

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."

<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 into the Fund) 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 .30 of 1% (Currently Initial sales charge waived or reduced
the public offering price being charged at a rate for certain purchases
of .15 of 1%)

CLASS B Maximum contingent deferred sales 1% (Currently being Shares convert to Class A shares
charge or CDSC of 3% of the lesser of charged at a rate of .75 approximately five years after
the amount invested or the redemption of 1%) 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 redemp- charged at a rate of .75
tion proceeds on redemptions made of 1%)
within one year of purchase

</TABLE>

<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 less than 5 years and
do not qualify for a reduced sales charge on Class A shares, since Class A
shares are subject to a maximum 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 5 years or more and do not qualify
for a reduced sales charge on Class A shares, since Class B shares convert to
Class A shares approximately 5 years after purchase and because all of your
money would be invested initially in the case of Class B shares, you should
consider purchasing Class B shares over either Class A 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 B or Class C shares, you would have to hold your investment for
more than 5 years in the case of Class B shares and Class C shares 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:

<PAGE>

<TABLE>
SALES CHARGE AS SALES CHARGE AS DEALER CONCESSION
PERCENTAGE OF PERCENTAGE OF AS PERCENTAGE OF
AMOUNT 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 "Purchase and Redemption of Fund
Shares--Reduction and Waiver of Initial Sales Charges--Class A shares" in the
Statement of Additional Information.

Benefit Plans. 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 or Prudential Securities and for which
the Transfer Agent or Prudential Securities 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.

Prudential Retirement Accumulation Program 401(k) Plan. Class A shares may
be purchased at net asset value, with a waiver of the initial sales charge, by
or on behalf of participants in the Prudential Retirement Accumulation Program
401(k) Plan for which the Transfer Agent or Prudential Securities provides
recordkeeping services (PruRap Plan) provided that (i) for existing plans, the
plan has existing assets of $1 million or more, as measured on the last business
day of the month, invested in shares of Prudential Mutual Funds (excluding money
market funds other than those acquired pursuant to the exchange privilege) held
at the Transfer Agent or Prudential Securities and (ii) for new plans, the plan
initially invests $1 million or more in shares of non-money market Prudential
Mutual Funds or has at least 1,000 eligible employees or members.

Special Rules Applicable to Retirement Plans. After a Benefit Plan or the
PruRap Plan qualifies to purchase Class A shares at NAV, all subsequent
purchases will be made at NAV.

Miscellaneous Waivers. 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.

<PAGE>

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.
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. IF YOU HOLD SHARES THROUGH PRUDENTIAL
SECURITIES, PAYMENT FOR SHARES PRESENTED FOR REDEMPTION WILL BE CREDITED TO YOUR
PRUDENTIAL SECURITIES ACCOUNT, UNLESS YOU INDICATE OTHERWISE. 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.

<PAGE>

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.

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 or Class C 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--Class B Shares" 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
CDSC 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. See "How
to Exchange Your Shares."

The following table sets forth the rates of the CDSC applicable to
redemptions of Class B shares:

<PAGE>

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.

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: (i) in the case of a
tax-deferred retirement plan, a lump-sum or other distribution after retirement;
(ii) in the case of an IRA or Section 403(b) custodial account, a lump-sum or
other distribution after attaining age 59-1/2; and (iii) 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 (i.e.,
following voluntary or involuntary termination of employment or following
retirement). Under no circumstances will the CDSC be waived on redemptions
resulting from the termination of a tax-deferred retirement plan, unless such
redemptions otherwise qualify for a waiver as described above. 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 and provide the Transfer Agent with such supporting

<PAGE>

documentation as it may deem appropriate. The waiver will be granted subject to
confirmation of your entitlement. See "Purchase and Redemption of Fund
Shares--Waiver of the Contingent Deferred Sales Charge--Class B Shares" in the
Statement of Additional Information.

A quantity discount may apply to redemptions of Class B shares purchased
prior to August 1, 1994. See "Purchase and Redemption of Fund Shares--Quantity
Discount--Class B Shares Purchased Prior to August 1, 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. It is currently anticipated that
conversions will occur during the months of February, May, August and November
commencing in or about February 1995. Conversions will be effected at relative
net asset value without the imposition of any additional sales charge.

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 purchased and then held 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.

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. The conversion feature described above will not be implemented and,
consequently, the first conversion of Class B shares will not occur before
February, 1995, but as soon thereafter as practicable. 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.

<PAGE>

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. No sales charge will be imposed at the time
of the exchange. 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. 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 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.

SPECIAL EXCHANGE PRIVILEGE. Commencing in or about February 1995, a special
exchange privilege is available for shareholders who qualify to purchase Class A
shares at NAV. See "Alternative Purchase Plan--Class A Shares--Reduction and
Waiver of Initial Sales Charges" above. Under this exchange privilege, amounts
representing any Class B and Class C shares (which are not subject to a CDSC)
held in such a shareholder's account will be automatically exchanged for Class A
shares on a quarterly basis, unless the shareholder elects otherwise. It is
currently anticipated that this exchange will occur quarterly in February, May,
August and November. Eligibility for this exchange privilege will be calculated
on the business day prior to the date of the exchange. Amounts representing
Class B or Class C shares which are not subject to a CDSC include the following:
(1) amounts representing Class B or Class C shares acquired

<PAGE>

pursuant to the automatic reinvestment of dividends and distributions, (2)
amounts representing the increase in the net asset value above the total amount
of payments for the purchase of Class B or Class C shares and (3) amounts
representing Class B or Class C shares held beyond the applicable CDSC period.
Class B and Class C shareholders must notify the Transfer Agent either directly
or through Prudential Securities or Prusec that they are eligible for this
special exchange privilege.

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 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.

<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>

- --------------------------------------------------------------------------------
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 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 Europe Growth Fund, Inc.
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
Prudential Growth Opportunity Fund, Inc.
Prudential IncomeVertible(R) 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

B-1

<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 an 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.

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TABLE OF CONTENTS
Page
----
FUND HIGHLIGHTS.............................. 2
Risk Factors and Special Characteristics .. 2
FUND EXPENSES................................ 4
FINANCIAL HIGHLIGHTS......................... 5
HOW THE FUND INVESTS......................... 6
Investment Objectives 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
Distributor................................ 14
Portfolio Transactions..................... 16
Custodian and Transfer and
Dividend Disbursing Agent................ 16
HOW THE FUND VALUES ITS SHARES............... 16
HOW THE FUND CALCULATES PERFORMANCE.......... 17
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......... 26
How to Exchange Your Shares................ 27
Shareholder Services....................... 28
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: 74436H 50 7
- ------------------------------------------------

PRUDENTIAL
SHORT-TERM
GLOBAL INCOME
FUND, INC.
(SHORT-TERM GLOBAL INCOME PORTFOLIO)
- ------------------------------------

PROSPECTUS

August 1, 1994

Prudential Mutual Funds
Building Your Future
On Our Strength(SM) LOGO

<PAGE>

PRUDENTIAL SHORT-TERM
GLOBAL INCOME FUND, INC.
(GLOBAL ASSETS PORTFOLIO)

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PROSPECTUS DATED AUGUST 1, 1994
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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 should 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 August
1, 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.

- --------------------------------------------------------------------------------

<PAGE>

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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. There can be no assurance that the Portfolio's objective will
be achieved. See "How the Fund Invests--Investment Objectives and Policies" at
page 6.

RISK FACTORS AND SPECIAL CHARACTERISTICS

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 various hedging and income enhancement
strategies, including investing in derivatives, the purchase and sale of put and
call options and related short-term trading. See "How the Fund Invests--Other
Investments and Investment Techniques--Hedging and Income Enhancement
Strategies--Risks of Hedging and Income Enhancement Strategies" at page 10.

WHO MANAGES THE FUND?

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 an annual distribution and service
fee at the 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.

- --------------------------------------------------------------------------------

<PAGE>

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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
(which are subject to lower ongoing distribution-related expenses) 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?

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<PAGE>

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FUND EXPENSES--GLOBAL ASSETS PORTFOLIO

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- -------------------------------------------------------------------------------
<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
price) ..................................................................... .99% None
Maximum Sales Load or Deferred Sales Load Imposed on Reinvested
Dividends .................................................................. None None
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+ ................................................................ .50 1.00++
Other Expenses ............................................................. .43 .43
---- ----
Total Portfolio Operating Expenses ......................................... 1.48% 1.98%
---- ----
---- ----
</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:

<TABLE>
<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
</TABLE>

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.

- ------------
* 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."

+ 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
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."

++ 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.

<PAGE>

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.

- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT EACH OF THE
PERIODS INDICATED)
- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
GLOBAL ASSETS PORTFOLIO
<TABLE>
<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+ .04 .12 .15 .11+
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# ....................... 0.76% 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%+** 1.23%** 1.61% 1.83% 1.75%+**
Expenses, excluding distribution
fees ............................ 1.23%** .98% .83% .75%+** 1.23%** .98% .83% .75+***
Net investment income ............. 3.92%** 6.44% 8.16% 8.64%+** 4.48%** 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.
</FN>
</TABLE>
- --------------------------------------------------------------------------------

<PAGE>

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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'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.

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.

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

<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.

<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.

RISK FACTORS

RISK FACTORS ON FOREIGN INVESTMENTS

OTHER INVESTMENTS AND INVESTMENT TECHNIQUES

HEDGING AND INCOME ENHANCEMENT STRATEGIES

THE PORTFOLIO MAY ENGAGE IN VARIOUS PORTFOLIO STRATEGIES, INCLUDING
INVESTING IN DERIVATIVES, 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

<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.

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'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

<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.

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

<PAGE>

REPURCHASE AGREEMENTS

SECURITIES LENDING

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 Fund 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 (restricted
securities) 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) and privately placed commercial paper that
have a readily available market are not considered illiquid for purposes of this
limitation. The investment adviser will monitor the liquidity of such 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.

<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.

- --------------------------------------------------------------------------------
HOW THE FUND IS MANAGED
- --------------------------------------------------------------------------------

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.

<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 wholly-owned subsidiaries of The Prudential Insurance
Company of America (Prudential), a major diversified insurance and financial
services company.

FEE WAIVERS AND SUBSIDY

DISTRIBUTOR

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 representatives of 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,

<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 ACTIVITIES 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. 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. Prior
to the date of this Prospectus, the Class A Plan operated as a "reimbursement
type" plan. See "Distributor" in the Statement of Additional Information.

<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 out of its own resources 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

- --------------------------------------------------------------------------------
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.

<PAGE>

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 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. It is expected, however, that the dividends will differ by
approximately the amount of the distribution expense differential between the
classes.

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., Morningstar Publications, 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."

TAXATION OF THE PORTFOLIO

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.

<PAGE>

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.

WITHHOLDING TAXES

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.

<PAGE>

- --------------------------------------------------------------------------------
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.

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

<PAGE>

PURCHASE OR ON A DEFERRED BASIS, SEE "ALTERNATIVE PURCHASE PLAN" BELOW. SEE ALSO
"HOW THE FUND VALUES ITS SHARES".

The Fund reserves the right to reject any purchase order (including an
exchange into the Fund) 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."

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

<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 Class A shares 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

SALES CHARGE AS SALES CHARGE AS DEALER CONCESSION AS
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
------------------ --------------- --------------- --------------
Less than $1,000,000 .99% 1.0% .99%
$1,000,000 and above 0.0% 0.0% 0.0%

Selling dealers may be deemed to be underwriters, as that term is defined
under federal securities laws.

<PAGE>

members. In the case of Benefit Plans whose accounts are held directly with the
Transfer Agent or Prudential Securities and for which the Transfer Agent or
Prudential Securities 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.

Prudential Retirement Accumulation Program 401(k) Plan. Class A shares may
be purchased at net asset value, with a waiver of the initial sales charge, by
or on behalf of participants in the Prudential Retirement Accumulation Program
401(k) Plan for which the Transfer Agent or Prudential Securities provides
recordkeeping services (PruRap Plan) provided that (i) for existing plans, the
plan has existing assets of $1 million or more, as measured on the last business
day of the month, invested in shares of Prudential Mutual Funds (excluding money
market funds other than those acquired pursuant to the exchange privilege) held
at the Transfer Agent and (ii) for new plans, the plan initially invests $1
million or more in shares of non-money market Prudential Mutual Funds or has at
least 1,000 eligible employees or members.

Special Rules Applicable to Retirement Plans. After a Benefit Plan or the
PruRap Plan qualifies to purchase Class A shares at NAV, all subsequent
purchases will be made at NAV.

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

<PAGE>

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."

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. IF YOU HOLD SHARES THROUGH PRUDENTIAL
SECURITIES, PAYMENT FOR SHARES PRESENTED FOR REDEMPTION WILL BE CREDITED TO YOUR
PRUDENTIAL SECURITIES ACCOUNT, UNLESS YOU INDICATE OTHERWISE. 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.

<PAGE>

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 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%.

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. No sales charge will be
imposed at the time of the exchange. 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

<PAGE>

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.

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 representative or the Transfer Agent
directly.

* 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.

For additional information regarding the services and privileges described
above, see "Shareholder Investment Account" in the Statement of Additional
Information.

<PAGE>

APPENDIX
DESCRIPTION OF SECURITY RATINGS

MOODY'S INVESTORS SERVICE

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.

A-1

<PAGE>

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 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
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
GLOBAL FUNDS
- --------------------------------------------------------------------------------

Prudential Europe Growth Fund, Inc.
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
Prudential Growth Opportunity Fund
Prudential IncomeVertible(R) 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
- --------------------------------------------------------------------------------

* 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

B-1

<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
Risk Factors and Special Characteristics .. 2
FUND EXPENSES................................ 4
FINANCIAL HIGHLIGHTS......................... 5
HOW THE FUND INVESTS......................... 6
Investment Objectives 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.....................................A-1
THE PRUDENTIAL MUTUAL FUND FAMILY............B-1
- ------------------------------------------------
MF149A

- ------------------------------------------------
Class A: 74436H 10 1
CUSIP Nos.:
Class B: 74436H 20 0

- ------------------------------------------------

PRUDENTIAL
SHORT-TERM
GLOBAL INCOME
FUND, INC.
(GLOBAL ASSETS PORTFOLIO)
- ------------------------------------

PROSPECTUS

August 1, 1994

Prudential Mutual Funds
Building Your Future
On Our Strength(SM) (LOGO)

<PAGE>
Rule 497(c)
Registration No. 33-33479

PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.

Statement of Additional Information
dated August 1, 1994

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 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 August 1, 1994,
a copy of which may be obtained from the Fund at One Seaport Plaza, New York,
New York 10292.

-----------------

TABLE OF CONTENTS
<TABLE>
<CAPTION>
CROSS-REFERENCE
TO PAGE IN
PROSPECTUS
-----------------------------
SHORT-TERM
GLOBAL INCOME GLOBAL ASSETS
PAGE PORTFOLIO PORTFOLIO
---- ------------- -------------
<S> <C> <C> <C>

Additional Investment Information ..................................................... B-2 6 6
Investment Restrictions ................................................................ B-9 13 12
Directors and Officers ................................................................. B-10 13 12
Manager ............................................................................... B-12 13 12
Distributor ............................................................................ B-14 14 13
Portfolio Transactions and Brokerage ................................................... B-16 16 15
Purchase and Redemption of Fund Shares ................................................. B-17 19 18
Shareholder Investment Account ......................................................... B-20 28 24
Net Asset Value ....................................................................... B-23 16 15
Taxation ............................................................................... B-23 17 16
Performance Information ................................................................ B-24 17 16
Custodian, Transfer and Dividend Disbursing Agent, and Independent
Accountants ............................................................................ B-26 16 15
Financial Statements ................................................................... B-27 -- --
Independent Auditors' Reports .......................................................... B-70 -- --
</TABLE>

- --------------------------------------------------------------------------------
MF1498

<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

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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.

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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

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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.

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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

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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.

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.

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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.

ILLIQUID SECURITIES

Each Portfolio may not invest more than 10% of its net assets in repurchase
agreements which have a maturity longer than seven days or in other illiquid
securities, including securities that are illiquid by virtue of the absence of a
readily available market (either within or outside of the United States) or
legal or contractual restrictions on resale. Historically, illiquid securities
have included securities subject to contractual or legal restrictions on resale
because they have not been registered under the Securities Act of 1933, as
amended (Securities Act), securities which are otherwise not readily marketable
and repurchase agreements having a maturity of longer than seven days.
Securities which have not been registered under the Securities Act are

B-8

<PAGE>

referred to as private placements or restricted securities and are purchased
directly from the issuer or in the secondary market. Mutual funds do not
typically hold a significant amount of these restricted or other illiquid
securities because of the potential for delays on resale and uncertainty in
valuation. Limitations on resale may have an adverse effect on the marketability
of portfolio securities and a mutual fund might be unable to dispose of
restricted or other illiquid securities promptly or at reasonable prices and
might thereby experience difficulty satisfying redemptions within seven days. A
mutual fund might also have to register such restricted securities in order to
dispose of them resulting in additional expense and delay. Adverse market
conditions could impede such a public offering of securities.

In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act including
repurchase agreements, commercial paper, foreign securities, municipal
securities, convertible securities and corporate bonds and notes. Institutional
investors depend on an efficient institutional market in which the unregistered
security can be readily resold or on an issuer's ability to honor a demand for
repayment. The fact that there are contractual or legal restrictions on resale
to the general public or to certain institutions may not be indicative of the
liquidity of such investments.

Rule 144A under the Securities Act allows for a broader institutional
trading market for securities otherwise subject to restriction on resale to the
general public. Rule 144A establishes a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers. The investment adviser anticipates that the
market for certain restricted securities such as institutional commercial paper
and foreign securities will expand further as a result of this regulation and
the development of automated systems for the trading, clearance and settlement
of unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc.

Restricted securities eligible for resale pursuant to Rule 144A under the
Securities Act and commercial paper for which there is a readily available
market will not be deemed to be illiquid. The investment adviser will monitor
the liquidity of such restricted securities subject to the supervision of the
Board of Directors. In reaching liquidity decisions, the investment adviser will
consider, inter alia, the following factors: (1) the frequency of trades and
quotes for the security; (2) the number of dealers wishing to purchase or sell
the security and the number of other potential purchasers; (3) dealer
undertakings to make a market in the security and (4) the nature of the security
and the nature of the marketplace trades (e.g., the time needed to dispose of
the security, the method of soliciting offers and the mechanics of the
transfer). In addition, in order for commercial paper that is issued in reliance
on Section 4(2) of the Securities Act to be considered liquid, (i) it must be
rated in one of the two highest rating categories by at least two nationally
recognized statistical rating organizations (NRSRO), or if only one NRSRO rates
the securities, by that NRSRO, or, if unrated, be of comparable quality in the
view of the investment adviser; and (ii) it must not be "traded flat" (i.e.,
without accrued interest) or in default as to principal or interest. Repurchase
agreements subject to demand are deemed to have a maturity equal to the notice
period.

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 a majority of such Portfolio's outstanding voting securities. A
"majority of a Portfolio's outstanding voting securities" when used in this
Statement of Additional Information means 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.

B-9

<PAGE>

(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.

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.

<TABLE>

DIRECTORS AND OFFICERS

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

B-10

<PAGE>

POSITION WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE FUND DURING PAST 5 YEARS
- ---------------- -------- -------------------
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

*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).

- ------------
* "Interested" director, as defined in the Investment Company Act, by reason of
his affiliation with Prudential Securities or PMF.

B-11

<PAGE>
POSITION WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE FUND DURING PAST 5 YEARS
- ---------------- -------- -------------------
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.
</FN>
</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.

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, 1994, 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 June 30, 1994, PMF managed and/or administered open-end
and closed-end management investment companies with assets of approximately $47
billion. According to the Investment Company Institute, as of April 30, 1994 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

B-12
<PAGE>

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 6, 1994, 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) 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

B-13
<PAGE>

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 parties to the contract or interested
persons of any such party as defined in the Investment Company Act 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, 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
Directors who are not interested persons of the Fund and who have no direct or
indirect financial interest in the operation of the Class A or Class B Plan or
in any agreement related to the Plan (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 plan of distribution for the Portfolio's
Class B Plan changing it from a reimbursement type 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 B Plan, as
amended, was approved by Class B shareholders on July 19, 1994. The Class C Plan
was approved by the sole shareholder of Class C shares on August 1, 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 representatives 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

B-14
<PAGE>

$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
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-1 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 July 19, 1994. See "How Fund is
Managed--Distributor" in the Prospectus.

Class A Plan. For the fiscal year ended October 31, 1993 PMFD received
payment of $766,695 under the Class A Plan. 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
representatives 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 Plans of each Portfolio 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-Directors, cast in
person at a meeting called

B-15
<PAGE>

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
of the Short-Term Global Income Portfolio, 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 June 6, 1994.

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. 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.

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

B-16
<PAGE>

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
noninterested 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 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 respect 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:

B-17
<PAGE>

SHORT-TERM GLOBAL
GLOBAL INCOME ASSETS
PORTFOLIO PORTFOLIO
--------- ---------
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.
===== =====

- ------------
*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. Class C Shares did not exist on October 31, 1993.

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;

(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);

(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 any
retirement or 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

B-18
<PAGE>

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.

WAIVER OF THE CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES OF THE
SHORT-TERM GLOBAL INCOME PORTFOLIO

The Contingent Deferred Sales Charge is waived under circumstances
described in the Prospectus for the Short-Term Global Income Portfolio. See
"Shareholder Guide--How to Sell Your Shares--Waiver of Contingent Deferred Sales
Charges--Class B Shares" in the Prospectus. In connection with these waivers,
the Transfer Agent will require you to submit the supporting documentation set
forth below.

<TABLE>
<CAPTION>
CATEGORY OF WAIVER REQUIRED DOCUMENTATION

<S> <C>
Death A copy of the shareholder's death
certificate or, in the case of a trust,
a copy of the grantor's death
certificate, plus a copy of the trust
agreement identifying the grantor.

Disability-An individual will be A copy of the Social Security
considered disabled if he or she is Administration award letter or a letter
unable to engage in any substantial from a physician on the physician's
gainful activity by reason of any letterhead stating that the shareholder
medically determinable physical or (or, in the case of a trust, the
mental impairment which can be expected grantor) is permanently disabled. The
to result in death or to be of letter must also indicate the date of
long-continued and indefinite duration. disability.

Distribution from an IRA or 403(b) A copy of the distribution form from the
Custodial Account custodial firm indicating (i) the date
of birth of the shareholder and (ii)
that the shareholder is over age 59-1/2
and is taking a normal
distribution--signed by the shareholder.

Distribution from Retirement Plan A letter signed by the plan
administrator/trustee indicating the
reason for the distribution.

Excess Contributions A letter from the shareholder (for an
IRA) or the plan administrator/trustee
on company letterhead indicating the
amount of the excess and whether or not
taxes have been paid.

</TABLE>

The Transfer Agent reserves the right to request such additional documents
as it may deem appropriate.

QUANTITY DISCOUNT--SHARES PURCHASED PRIOR TO AUGUST 1, 1994

While a quantity discount is not available for Class B shares of the Fund, a
quantity discount may apply to Class B shares of another Prudential Mutual Fund
acquired pursuant to the exchange of Class B shares of the Fund. The applicable
quantity discount, if any, will be that applicable to the shares acquired as a
result of the exchange of Class B shares of the Fund.

B-19

<PAGE>

SHAREHOLDER INVESTMENT ACCOUNT

Upon the initial purchase of Fund shares, a Shareholder Investment Account
is established for each investor under which the shares are held for the
investor by the Transfer Agent. If a stock certificate is desired, it must be
requested in writing for each transaction. Certificates are issued only for full
shares and may be redeposited in the Account at any time. There is no charge to
the investor for issuance of a certificate. The Fund makes available to the
shareholders 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 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-20
<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)

PERIOD OF
MONTHLY INVESTMENTS: $100,000 $150,000 $200,000 $250,000
-------------------- -------- -------- -------- --------

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

See "Automatic Savings Accumulation Plan".

- ------------
(1) Source 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.

(2) The 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.

B-21
<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 COMPOUNDING(1)

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

- ------------
(1) The 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-22
<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.

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.

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

B-23
<PAGE>

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-24
<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-25
<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)

[The Table below was represented as a graph in the printed material]

A Look At Performance Over the Long-Term
(1926-1992)

Common Stocks Average Annual Return 10.3%
Long-Term Government Bonds Average Annual Return 4.8%
Inflation 3.1%

- ------------
(1) Source: 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 $170,200 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-26
<PAGE>

PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC. Portfolio of Investments
Short-Term Global Income Portfolio April 30, 1994 (Unaudited)
- --------------------------------------------------------------------------------
Principal US$
Amount Value
(000) Description (Note 1)
- -------------------------------------------------------
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
------------

See Notes to Financial Statements.

B-27
<PAGE>

PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
Short-Term Global Income Portfolio
- --------------------------------------------------------------------------------
Principal US$
Amount Value
(000) Description (Note 1)
- -------------------------------------------------------
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
------------

Contracts+
- ----------
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
------------

See Notes to Financial Statements.

B-28
<PAGE>

PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
Short-Term Global Income Portfolio
- --------------------------------------------------------------------------------
US$
Value
Contracts+ Description (Note 1)
- -------------------------------------------------------
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
============

- ------------------
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.
+ Expressed in thousands of local currency units.

See Notes to Financial Statements.

B-29
<PAGE>

PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
Short-Term Global Income Portfolio
Statement of Assets and Liabilities
(Unaudited)
- --------------------------------------------------------------------------------

APRIL 30, 1994
--------------
<S> <C>
ASSETS
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-30
<PAGE>

PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
Short-Term Global Income Portfolio
Statement of Operations
(Unaudited)
- --------------------------------------------------------------------------------
Six Months
Ended
April 30,
1994
------------
Net Investment Income
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)
============

See Notes to Financial Statements.

PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
Short-Term Global Income Portfolio
Statement of Changes in Net Assets
(Unaudited)

Six Months
Ended Year Ended
April 30, October 31,
1994 1993
------------- -------------
Net Increase (Decrease)
in Net Assets

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
============= =============

See Notes to Financial Statements.

B-31
<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 POLICIES

The following is a summary 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.

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.

B-32
<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.

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-33
<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 TRANSACTIONS WITH AFFILIATES

Prudential Mutual Fund Services, Inc. ("PMFS") a 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 SECURITIES

Purchases and sales of investment securities, other than short-term investments
and

B-34
<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:

Number of
Contracts Premiums
(000) Received
--------- -----------
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
========= ===========

At April 30, 1994, the Portfolio had outstanding forward currency
contracts, both to purchase and sell foreign currencies, as follows:

Value at
Foreign Currency Settlement Date Current Appreciation
Purchase Contracts Payable Value (Depreciation)
- ------------------ --------------- ------------ -----------
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
=============== ============ ===========

Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- ----------------- --------------- ------------ ------------
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)
=============== ============ ============

B-35
<PAGE>

NOTE 5. JOINT REPURCHASE AGREEMENT ACCOUNT

The Portfolio, along with other affiliated registered investment companies,
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 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:

Class A Shares Amount
- ------- ----------- -------------
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)
=========== =============

- ------------
THESE FINANCIAL STATEMENTS ARE UNAUDITED AND REFLECT ALL ADJUSTMENTS (CONSISTING
ONLY OF NORMAL RECURRING ADJUSTMENTS) WHICH ARE, IN THE OPINION OF MANAGEMENT,
NECESSARY FOR A FAIR PRESENTATION OF THE RESULTS FOR THE INTERIM PERIOD
PRESENTED.

B-36
<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-37

<PAGE>

PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC. PORTFOLIO OF INVESTMENTS
SHORT-TERM GLOBAL INCOME PORTFOLIO OCTOBER 31, 1993
- --------------------------------------------------------------------------------
Principal US$
Amount Value
(000) Description(a) (Note 1)
- --------------------------------------------------------
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
------------
See Notes to Financial Statements.

B-38

<PAGE>

PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
SHORT-TERM GLOBAL INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Principal US$
Amount Value
(000) Description(a) (Note 1)
- --------------------------------------------------------
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
------------

OUTSTANDING OPTIONS
Contracts+ PURCHASED*--1.0%
- --------------
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
------------

See Notes to Financial Statements.
B-39

<PAGE>

- ------------------
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-40

<PAGE>

PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
Short-Term Global Income Portfolio
Statement of Assets and Liabilities

<TABLE>
<CAPTION>
OCTOBER 31, 1993
----------------
<S> <C>
ASSETS
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-41

<PAGE>

PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
Short-Term Global Income Portfolio
Statement of Operations
- --------------------------------------------------------------------------------
YEAR ENDED
OCTOBER 31,
1993
------------
NET INVESTMENT INCOME
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
============

See Notes to Financial Statements.

PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
Short-Term Global Income Portfolio
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------

YEAR ENDED OCTOBER 31,
----------------------------
1993 1992
------------- ------------
INCREASE (DECREASE
IN NET ASSETS
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
------------- ------------
------------- ------------

See Notes to Financial Statements.

B-42

<PAGE>

PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.

Short-Term Global Income Portfolio
Notes to Financial Statements

NOTE 1. ACCOUNTING POLICIES

The following is a summary of significant accounting poli cies followed by the
Fund, and the Portfolio in the preparation of its financial statements.

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-43

<PAGE>

exchange rates are reflected as a component of net unrealized depreciation on
investments and foreign currencies.

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.

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.

B-44

<PAGE>

shares purchased until all organization expenses have been amortized.

NOTE 2. AGREEMENTS

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.

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.

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.

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 TRANSACTIONS WITH AFFILIATES

Prudential Mutual Fund Ser vices, Inc. ("PMFS") a 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 $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-45

<PAGE>

NOTE 4. PORTFOLIO SECURITIES

Purchases and sales of invest 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).

Transactions in options written during the fiscal year ended October 31,
1993 were as follows:

NUMBER OF
CONTRACTS PREMIUMS
(000) RECEIVED
--------- -----------
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
========= ===========

At October 31, 1993, the Portfolio had outstanding forward currency
contracts, both to purchase and sell foreign currencies, as follows:

VALUE AT
FOREIGN CURRENCY SETTLEMENT DATE CURRENT APPRECIATION
PURCHASE CONTRACTS PAYABLE VALUE (DEPRECIATION)
- ------------------ --------------- ------------ -----------
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)
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)
============== ============ ===========

VALUE AT
FOREIGN CURRENCY SETTLEMENT DATE CURRENT APPRECIATION
SALE CONTRACTS RECEIVABLE VALUE (DEPRECIATION)
- ------------------ --------------- ------------ -----------
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
============== ============ ===========

B-46

<PAGE>

NOTE 5. JOINT REPURCHASE AGREEMENT ACCOUNT

The Portfolio, along with other affiliated registered investment companies,
trans 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

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:

Class A SHARES AMOUNT
- ------- ----------- -------------
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
=========== =============

Class B
- -------
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
=========== =============

B-47

<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-48

<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-49

<PAGE>

PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC. Portfolio of Investments
GLOBAL ASSETS PORTFOLIO April 30, 1994 (Unaudited)

- --------------------------------------------------------------------------------
Principal Description US$
Amount Value
(000) (Note 1)
- ------------------------------------------------------
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,
15,470 3.54%, 5/2/94, (Note
5)..................... 15,470,000
-----------
50,568,290
-----------

Contracts+
- ----------
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
-----------

See Notes to Financial Statements.

B-50
<PAGE>

PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
- --------------------------------------------------------------------------------
Contracts+ Description US$
Value
(Note 1)
- ------------------------------------------------------
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
===========

- ------------------
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.
+ Expressed in thousands of local currency units.

See Notes to Financial Statements.

B-51
<PAGE>

PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Statement of Assets and Liabilities
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
APRIL 30, 1994
--------------
<S> <C>
ASSETS
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-52
<PAGE>

PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Statement of Operations
(Unaudited)
- --------------------------------------------------------------------------------
Six months
Ended
April 30, 1994
--------------
NET INVESTMENT INCOME
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
==============

See Notes to Financial Statements.

PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Statement of Changes in Net Assets
(Unaudited)

SIX MONTHS YEAR ENDED
ENDED OCTOBER 31,
APRIL 30, 1994 1993
-------------- -------------
NET INCREASE (DECREASE)
IN NET ASSETS

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
============== =============

See Notes to Financial Statements.

B-53
<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 POLICIES

The following is a summary 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.

(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.

B-54
<PAGE>

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.

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.

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-55
<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.

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 TRANSACTIONS WITH AFFILIATES

Prudential Mutual Fund Services, Inc. ("PMFS"), a 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 SECURITIES

The federal income tax basis 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:

NUMBER OF
CONTRACTS PREMIUMS
(000) RECEIVED
--------- ---------
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
========= =========

At April 30, 1994, the Portfolio had outstanding forward currency
contracts, both to purchase and sell foreign currencies, as follows:

B-56
<PAGE>

Value at
Foreign Currency Settlement Date Current Appreciation
Purchase Contracts Payable Value (Depreciation)
- --------------------- --------------- ----------- --------------
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
=============== =========== =============

Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- --------------------- --------------- ----------- --------------
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)
=============== =========== =============

NOTE 5. JOINT REPURCHASE AGREEMENT ACCOUNT

The Portfolio, along with other affiliated registered investment companies,
trans- 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.

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-57
<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:

CLASS A SHARES AMOUNT
- ------- ------------ -------------
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
============ =============

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)
============ =============

- ------------
These financial statements are unaudited and reflect all adjustments (consisting
only of normal recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation of the results for the interim period
presented.

B-58
<PAGE>

PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Financial Highlights
(Unaudited)

<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------------------------------- --------------------------------------------------
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
---------- -------- -------- ------------ ---------- ------- -------- ------------
<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+ .04 .12 .15 .11+
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%+** 1.23%** 1.61% 1.83% 1.75%+**
Expenses, excluding
distribution
fees.............. 1.23%** .98% .83% .75%+** 1.23%** .98% .83% .75%+**
Net investment
income............ 3.92%** 6.44% 8.16% 8.64%+** 4.48%** 6.31% 7.66% 8.21%+**

</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.
+ Net of expense subsidy.

See Notes to Financial Statements.

B-59

<PAGE>

PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC. Portfolio of Investments
GLOBAL ASSETS PORTFOLIO October 31, 1993
- --------------------------------------------------------------------------------
Principal US$
Amount Value
(000) Description (a) (Note 1)
- -------------------------------------------------------
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
------------

See Notes to Financial Statements.

B-60
<PAGE>

PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
- --------------------------------------------------------------------------------
US$
Value
Contracts+ Description (Note 1)
- -------------------------------------------------------
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
============

- ------------------
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-61
<PAGE>

PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
OCTOBER 31, 1993
----------------
<S> <C>
ASSETS
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-62
<PAGE>

PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Statement of Operations
- --------------------------------------------------------------------------------
Year Ended
October 31,
1993
------------
Net Investment Income
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
============

See Notes to Financial Statements.

PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Statement of Changes in Net Assets

Year Ended October 31,
------------------------------
1993 1992
------------- -------------
Increase (Decrease)
in Net Assets
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
============= =============

See Notes to Financial Statements.

B-63

<PAGE>

PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Notes to Financial Statements
- --------------------------------------------------------------------------------

NOTE 1. ACCOUNTING POLICIES

The following is a summary of significant accounting policies followed by the
Fund, and the Portfolio in the preparation of its financial statements.

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.

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.

B-64
<PAGE>

at fiscal year end exchange rates are reflected as a component of net unrealized
depreciation on investments and foreign currencies.

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.

B-65
<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.

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.

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 TRANSACTIONS WITH AFFILIATES

Prudential Mutual Fund Services, Inc. ("PMFS"), a 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 SECURITIES

The federal income tax 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).

B-66
<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:

Number of
Contracts Premiums
(000) Received
--------- -----------
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
========= ===========

At October 31, 1993, the Portfolio had outstanding forward currency
contracts, both to purchase and sell foreign currencies, as follows:

Foreign Currency Value at
Purchase Settlement Date Current Appreciation
Contracts Payable Value (Depreciation)
- ------------------- --------------- ----------- --------------
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)
=============== =========== =============

Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- ------------------- --------------- ------------ --------------
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
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
=============== ============ ========

NOTE 5. JOINT REPURCHASE AGREEMENT ACCOUNT

The Portfolio, along with other affiliated registered investment companies,
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:

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<PAGE>

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:

Class A SHARES AMOUNT
- ------- ------------ -------------
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
============ =============

Class B
- -------
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
============ =============

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<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.
</FN>
</TABLE>

See Notes to Financial Statements.

B-69
<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.

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-70