As filed with the Securities and Exchange Commission
on January 3, 1995
Registration No. 33-33479
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 9 [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 11 [X]
(Check appropriate box or boxes)
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PRUDENTIAL SHORT-TERM
GLOBAL INCOME FUND, INC.
(Exact name of registrant as specified in charter)
ONE SEAPORT PLAZA,
NEW YORK, NEW YORK 10292
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 214-1250
S. Jane Rose, Esq.
One Seaport Plaza
New York, New York 10292
(Name and Address of Agent for Service)
Approximate date of proposed public offering:
As soon as practicable after the effective
date of the Registration Statement.
It is proposed that this filing will become effective
(check appropriate box):
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date), pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for
a previously filed post-effective amendment
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Securities Amount Being Offering Price Aggregate Amount of
Being Registered Registered Per Share* Offering Price** Registration Fee
<S> <C> <C> <C> <C>
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Shares of Common Stock,
par value $0.001 per share Indefinite*** N/A N/A N/A
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Shares of Common Stock,
par value $0.001 per share 69,067,576 $5.25 $289,997.98 $100
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<FN>
* Computed under Rule 457(d) on the basis of the offering price per share on the close of business on December 20, 1994, calculated
by averaging the offering prices of the classes (if any) of each portfolio, which offering prices on the close of business on
December 20, 1994 were $8.69 (Short-Term Global Income Portfolio) and $1.80 (Global Assets Portfolio).
** Registrant elects to calculate the maximum aggregate offering price pursuant to Rule 24e-2. 69,012,339 shares was redeemed during
the fiscal year ended October 31, 1994. None of such shares was used for reductions pursuant to paragraph (a) of Rule 24e-2 or
paragraph (c) of Rule 24f-2 during the current fiscal year ended October 31, 1994. 69,012,339 shares redeemed during the
Registrant's previous fiscal year are being used for reduction for this amendment.
*** Registrant has registered an indefinite number of shares under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940. The Rule 24f-2 Notice for the Registrant's most recent fiscal year ended October 31, 1994 will be
filed on or before December 30, 1994.
</TABLE>
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<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 495)
<TABLE>
N-1A Item No. Location
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Part A
<S> <C>
Item 1. Cover Page ..................................................... Cover Page
Item 2. Synopsis ....................................................... Fund Expenses; Fund Highlights
Item 3. Condensed Financial Information ................................ Fund Highlights; How the Fund Invests
Item 4. General Description of Registrant .............................. Cover Page; Fund Expenses; Financial
Highlights; How the Fund Calculates
Performance; Description of Common
Stock
Item 5. Management of the Fund ......................................... How The Fund Is Managed
Item 6. Capital Stock and Other Securities ............................. How The Fund Is Managed; Taxes,
Dividends and Distributions; Description
of Common Stock
Item 7. Purchase of Securities Being Offered ........................... Shareholder Guide; How the Fund
Values Its Shares
Item 8. Redemption or Repurchase ....................................... Shareholder Guide; How the Fund
Values Its Shares
Item 9. Pending Legal Proceedings ...................................... Not Applicable
Part B
Item 10. Cover Page ..................................................... Cover Page
Item 11. Table of Contents .............................................. Table of Contents
Item 12. General Information and History ................................ Organization and Capitalization
Item 13. Investment Objectives and Policies ............................. Investment Objectives and Policies;
Investment Restrictions; Additional
Investment Information
Item 14. Management of the Fund ......................................... Directors and Officers; Manager;
Distributor
Item 15. Control Persons and Principal Holders of Securities ............ Not Applicable
Item 16. Investment Advisory and Other Services ......................... Manager; Distributor; Custodian,
Transfer and Dividend Disbursing
Agent and Independent Accountants
Item 17. Brokerage Allocation and Other Practices ....................... Portfolio Transactions and Brokerage
Item 18. Capital Stock and Other Securities ............................. Not Applicable
Item 19. Purchase, Redemption and Pricing of Securities Being Offered ... Purchase and Redemption of Fund
Shares; Shareholder Investment
Account
Item 20. Tax Status ..................................................... Taxes
Item 21. Underwriters ................................................... Distributor
Item 22. Calculation of Performance Data ................................ Performance Information
Item 23. Financial Statements ........................................... Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the
Post-Effective Amendment to the appropriate Item, so numbered, in Part C to this
Registration Statement.
<PAGE>
Prudential Short-Term
Global Income Fund, Inc.
(Short-Term Global Income Portfolio)
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Prospectus dated January 3, 1995
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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 January
3, 1995, 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 7.
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 7. 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 9. 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 (defined below). 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 9. 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 12. The amount of income available for distribution to
shareholders will be affected by any foreign currency gains or losses generated
by the Portfolio upon the disposition of debt securities denominated in a
foreign currency and by certain hedging activities of the Portfolio. See "Taxes,
Dividends and Distributions" at page 19.
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 November 30, 1994, PMF served as
manager or administrator to 68 investment companies, including 38 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 14.
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 15.
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2
<PAGE>
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What is the Minimum Investment?
The minimum initial investment for Class A and Class B shares is $1,000 per
class and $5,000 for Class C shares. The minimum subsequent investment is $100
for all classes. There is no minimum investment requirement for certain
retirement and employee savings plans or custodial accounts for the benefit of
minors. For purchases made through the Automatic Savings Accumulation Plan the
minimum initial and subsequent investment is $50. See "Shareholder Guide-How to
Buy Shares of the Fund" at page 21 and "Shareholder Guide-Shareholder Services"
at page 29.
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 18 and "Shareholder Guide-How to Buy Shares of the Fund" at
page 21.
What Are My Purchase Alternatives?
The Portfolio offers three classes of shares:
<TABLE>
<S> <C>
. 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 22.
</TABLE>
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 24.
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. The amount of income available for distribution to shareholders
will be affected by any foreign currency gains or losses generated by the
Portfolio upon the disposition of debt securities denominated in a foreign
currency and by certain hedging activities of the Portfolio. See "Taxes,
Dividends and Distributions" at page 19.
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3
<PAGE>
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FUND EXPENSES-SHORT-TERM GLOBAL INCOME PORTFOLIO
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<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
-------------- -------------- --------------
Shareholder Transaction Expenses\D
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) ..... 3% None None
Maximum Sales Load or Deferred Sales Load
Imposed on Reinvested Dividends ........... None None None
Deferred Sales Load (as a percentage of
original purchase price or redemption
proceeds, whichever is lower) ............. None 3% during the first year, 1% on redemptions
decreasing by 1% annually made within one year
to 1% in the third year and of purchase
1% in the fourth year and
0% in the fifth year*
Redemption Fees ........................... None None None
Exchange Fees ............................. None None None
</TABLE>
Annual Portfolio Operating Expenses
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares**
-------------- -------------- --------------
<S> <C> <C> <C>
Management Fees ........................... .55% .55% .55%
12b-1 Fees\D\D ............................ .15% .75% .75%
Other Expenses ............................ .47% .47% .47%
---- ---- ----
Total Portfolio Operating Expenses ........ 1.17% 1.77% 1.77%
==== ==== ====
</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 ................................................................. $42 $66 $ 92 $ 168
Class B ................................................................. $48 $66 $ 96 $ 171
Class C** .............................................................. $28 $56 $ 96 $ 208
You would pay the following expenses on the same investment, assuming
no redemption:
Class A ................................................................. $42 $66 $ 92 $ 168
Class B ................................................................. $18 $56 $ 96 $ 185
Class C** .............................................................. $18 $56 $ 96 $ 208
<FN>
The above example with respect to Class A and Class B shares is based on
restated data for the Portfolio's fiscal year ended October 31, 1994. 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 entire fiscal
year ended October 31, 1994. The example should not be considered a
representation of past or future expenses. Actual expenses may be greater or
less than those shown.
The purpose of this table is to assist investors in understanding the
various costs and expenses that an investor in the Portfolio will bear, whether
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "How the Fund is Managed." "Other Expenses" includes an estimate
of operating expenses of the Portfolio, such as directors' and professional
fees, registration fees, reports to shareholders and transfer agency and
custodian fees (foreign and domestic).
- --------------
*Class B shares will automatically convert to Class A shares
approximately five years after purchase. See "Shareholder
Guide--Conversion Feature--Class B Shares."
**Estimated based on expenses expected to have been incurred if Class C
shares had been in existence during the entire fiscal year ended
October 31, 1994.
\D Pursuant to rules of the National Association of Securities Dealers,
Inc., the aggregate initial sales charges, deferred sales charges
and asset-based sales charges on shares of the Portfolio may not
exceed 6.25% of total gross sales, subject to certain exclusions.
This 6.25% limitation is imposed on the Portfolio rather than on a
per shareholder basis. Therefore, long-term Class B and Class C
shareholders of the Portfolio may pay more in total sales charges
than the economic equivalent of 6.25% of such shareholders'
investment in such shares. See "How the Fund is Managed--
Distributor."
\D\D Although the Class A and Class C Distribution and Service Plans
provide that the Portfolio may pay up to an annual rate of .30 of
1% of the average daily net assets of the Class A shares and up to
1% per annum of the average daily net assets of the Class C shares,
the Distributor has agreed to limit its distribution expenses with
respect to the Class A shares of the Portfolio to no more than .15
of 1% of the average daily net asset value of the Class A shares
and to no more than .75 of 1% of the average daily net assets of
the Class C shares for the fiscal year ending October 31, 1995. See
"How the Fund is Managed--Distributor." Total operating expenses
without such limitation would be 1.32% for the Class A shares and
2.02% for the Class B and Class C shares.
</TABLE>
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4
<PAGE>
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FINANCIAL HIGHLIGHTS
(for a share of common stock outstanding throughout each of the
periods indicated)
(Class A Shares)
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The following financial highlights have been audited by Deloitte & Touche
LLP, 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 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.
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Short-Term Global Income Portfolio
<TABLE>
<CAPTION>
CLASS A
-------------------------------------
Year ended October 31,
-------------------------------------
1994 1993 1992 1991
PER SHARE OPERATING
PERFORMANCE:
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............ $ 9.29 $ 9.16 $ 9.97 $ 10.00
Income from investment operations
Net investment income ........................... .70 .97 .96 1.03
Net realized and unrealized loss on investment
and foreign currency transactions ............. (.86) (.26) (.95) (.02)
Total from investment operations ................ (.16) .71 .01 1.01
Less distributions
Dividends from net investment income ............ - (.58) (.82) (1.03)
Tax return of capital distributions ............. (.57) - - -
Distributions from net capital gains ............ - - - (.01)
Total distributions ............................. (.57) (.58) (.82) (1.04)
Net asset value, end of period .................. $ 8.56 $ 9.29 $ 9.16 $ 9.97
TOTAL RETURN# ................................... (1.89)% 7.96% (0.07)% 10.41%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ................. $28,841 $59,458 $101,358 $105,148
Average net assets (000) ........................ $38,000 $70,347 $119,171 $ 51,830
Ratios to average net assets:
Expenses, including distribution fees ........... 1.17% 1.02% 1.08% 1.01%
Expenses, excluding distribution fees ........... 1.02% .87% .93% .86%
Net investment income ........................... 7.67% 10.81% 9.93% 10.23%
Portfolio turnover rate ......................... 231% 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>
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5
<PAGE>
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FINANCIAL HIGHLIGHTS
(for a share outstanding throughout the indicated periods)
(Class B and C Shares)
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The following financial highlights have been audited by Deloitte & Touche
LLP, 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 B and C shares
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.
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Short-Term Global Income Portfolio
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------ -----------
August 1,
1994\d
Year ended October 31, through
------------------------------------ October 31,
1994 1993 1992 1991 1994
---- ---- ---- ---- ----
PER SHARE OPERATING
PERFORMANCE:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 9.29 $ 9.16 $ 9.97 $ 10.00 $ 8.61
Income from investment operations
- ---------------------------------
Net investment income .................... .62 .88 .88 .95 .14
Net realized and unrealized loss on invest-
ment and foreign currency transactions ... (.86) (.26) (.95) (.02) (.06)
Total from investment operations ......... (.24) .62 (.07) .93 .08
Less distributions
- ------------------
Dividends from net investment income ..... - (.49) (.74) (.95) -
Tax return of capital distributions ...... (.49) - - - (.13)
Distributions from net capital gains ..... - - - (.01) -
Total distributions ...................... (.49) (.49) (.74) (.96) (.13)
Net asset value, end of period ........... $ 8.56 $ 9.29 $ 9.16 $ 9.97 $ 8.56
TOTAL RETURN# ............................ (2.62)% 7.00% (0.86)% 9.51% 0.75%
RATIOS/SUPPLEMENTAL DATA:\d\d
Net assets, end of period (000) .......... $188,966 $375,013 $606,899 $669,086 $200@
Average net assets (000) ................. $281,143 $474,175 $814,734 $349,607 $199@
Ratios to average net assets:
Expenses, including distribution fees .... 1.97% 1.87% 1.93% 1.87% .93%*
Expenses, excluding distribution fees .... 1.02% .87% .93% .87% .18%*
Net investment income .................... 6.82% 9.42% 9.05% 9.46% 7.02%*
Portfolio turnover rate .................. 232% 307% 180% 66% 232%
* Annualized.
\d Commencement of offering of Class C shares.
\d\d Because of the event referred to in \d and the timing of such, the ratios
for the Class C shares are not necessarily comparable to that of Class A or
B shares and are not necessarily indicative of future ratios.
@ Figures are actual and not rounded to the nearest thousand.
# Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
</TABLE>
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6
<PAGE>
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HOW THE FUND INVESTS
- -------------------------------------------------------------------------------
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 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
as amended (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.
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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, Colombia, 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 inversely with interest rates. See the description of securities
ratings in the Appendix.
The Portfolio may also invest up to 10% of its total assets in securities
rated B or BB by S&P or B or Ba by Moody's or by any other NRSRO, or if unrated,
are determined by the Portfolio's investment adviser to be of equivalent rating
using similar rating standards. Investment in non-investment grade securities
may entail additional risks to the Portfolio. See "Medium and Lower-Rated
Securities".
The Portfolio may invest without limitation in commercial paper and other
instruments which are indexed to certain specific foreign currency exchange
rates. The terms of such instruments provide that its principal amount is
adjusted upwards or downwards (but not below zero) at maturity to reflect
changes in the exchange rate between two currencies while the obligation is
outstanding. The Portfolio will purchase such instruments with the currency in
which it is denominated and, at maturity, will receive interest and principal
payments thereon in that currency, but the amount of principal payable by the
issuer at maturity will change in proportion to the change (if any) in the
exchange rate between the two specified currencies between the date the
instrument is issued and the date the instrument matures. The Portfolio will
establish a segregated account with respect to its investments in this type of
instrument and maintain in such account cash or liquid high quality debt
securities having a value at least equal to the aggregate principal amount of
outstanding instruments of this type. While such instruments entail the risk of
loss of principal, the potential for realizing gains as a result of changes in
foreign currency exchange rates enables the Portfolio to hedge (or cross-hedge)
against a decline in the U.S. dollar value of investments denominated in foreign
currencies while providing an attractive money market rate of return.
The Portfolio may invest in debt securities issued by supranational
organizations such as the World Bank, which was chartered to finance development
projects in developing member countries; the European Community, which is a
twelve-nation organization engaged in cooperative economic activities; the
European Coal and Steel Community, which is
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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
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<PAGE>
of comparable quality generally are unsecured and frequently are subordinated to
the prior payment of senior indebtedness. The investment adviser, under the
supervision of the Manager and the Directors, in evaluating the creditworthiness
of an issue whether rated or unrated, take various factors into consideration,
which may include, as applicable, the issuer's financial resources, its
sensitivity to economic conditions and trends, the operating history of and the
community support for the facility financed by the issue, the ability of the
issuer's management and regulatory matters.
In addition, the market value of securities in lower-rated categories is
more volatile than that of higher-quality securities, and the markets in which
medium and lower-rated or unrated securities are traded are more limited than
those in which higher-rated securities are traded. The existence of limited
markets may make it more difficult for the Portfolio to obtain accurate market
quotations for purposes of valuing its portfolio and calculating its net asset
value. Moreover, the lack of a liquid trading market may restrict the
availability of securities for the Portfolio to purchase and may also have the
effect of limiting the ability of the Portfolio to sell securities at their fair
value either to meet redemption requests or to respond to changes in the economy
or the financial markets.
Lower-rated debt obligations also present risks based on payment
expectations. If an issuer calls the obligation for redemption, the Portfolio
may have to replace the security with a lower- yielding security, resulting in a
decreased return for investors. Also, as the principal value of bonds moves
inversely with movements in interest rates, in the event of rising interest
rates the value of the securities held by the Portfolio may decline
proportionately more than a portfolio consisting of higher-rated securities. If
the Portfolio experiences unexpected net redemptions, it may be forced to sell
its higher-rated bonds, resulting in a decline in the overall credit quality of
the securities held by the Portfolio and increasing the exposure of the
Portfolio to the risks of lower-rated securities. Investments in zero coupon
bonds may be more speculative and subject to greater fluctuations in value due
to changes in interest rates than bonds that pay interest currently.
Subsequent to its purchase by the Portfolio, an issue of securities may
cease to be rated or its rating may be reduced below the minimum required for
purchase by the Portfolio. Neither event will require sale of these securities
by the Portfolio, but the investment adviser will consider this event in its
determination of whether the Portfolio should continue to hold the securities.
As of October 31, 1994, 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 53.62%
AA/Aa 21.79%
A/A 7.65%
BBB/Baa --
BB/Ba --
B/B --
Unrated 13.70%
OTHER INVESTMENTS AND INVESTMENT TECHNIQUES
In addition, the Portfolio is permitted to make the investments and engage
in the investment techniques described below. Under normal circumstances, these
investments will represent no more than 35% of the total assets of the
Portfolio.
Hedging and Income Enhancement Strategies
The Portfolio may engage in various portfolio strategies, 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
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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
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<PAGE>
value (determined at the time of making any sale of forward currency) of the
securities held in its portfolio denominated or quoted in, or currently
convertible into or bearing substantial correlation to, such currency. See
"Additional Investment Information-Forward Currency Exchange Contracts" in the
Statement of Additional Information.
Futures Contracts and Options Thereon
The Portfolio may purchase and sell financial futures contracts and options
thereon which are traded on a commodities exchange or board of trade for certain
hedging, return enhancement and risk management purposes in accordance with
regulations of the Commodity Futures Trading Commission. These futures contracts
and related options will be on debt securities, financial indices, U.S.
Government securities, foreign government securities and foreign currencies. A
financial futures contract is an agreement to purchase or sell an agreed amount
of securities or currencies at a set price for delivery in the future.
The Portfolio may not purchase or sell futures contracts and related options
for return enhancement or risk management purposes, if immediately thereafter
the sum of the amount of initial margin deposits on the Portfolio's existing
futures and options on futures and premiums paid for such related options would
exceed 5% of the liquidation value of the Portfolio's total assets. The
Portfolio may purchase and sell futures contracts and related options, without
limitation, for bona fide hedging purposes. Although there are no other limits
applicable to futures contracts, the value of all futures contracts sold will
not exceed the total market value of the Portfolio's portfolio.
The Portfolio's successful use of futures contracts and related options
depends upon the investment adviser's ability to predict the direction of the
market and is subject to various additional risks. The correlation between
movements in the price of a futures contract and the price of the securities or
currencies being hedged is imperfect and there is a risk that the value of the
securities or currencies being hedged may increase or decrease at a greater rate
than the related futures contracts resulting in losses to the Portfolio. Certain
futures exchanges or boards of trade have established daily limits on the amount
that the price of futures contracts or related options may vary, either up or
down, from the previous day's settlement price. These daily limits may restrict
the Portfolio's ability to purchase or sell certain futures contracts or related
options on any particular day.
The Portfolio's ability to enter into futures contracts and options thereon
is limited by the requirements of the Internal Revenue Code of 1986, as amended
(the Internal Revenue Code), for qualification as a regulated investment
company. See "Additional Investment Information-Futures Contracts and Options
Thereon" and "Taxation" in the Statement of Additional Information.
Risks of Hedging and Income Enhancement Strategies
Participation in the options or futures markets and in currency exchange
transactions involves investment risks and transaction costs to which the
Portfolio would not be subject absent the use of these strategies. If the
investment adviser's prediction of movements in the direction of the securities,
foreign currency and interest rate markets are inaccurate, the adverse
consequences to the Portfolio may leave the Portfolio in a worse position than
if such strategies were not used. Risks inherent in the use of options, foreign
currency and futures contracts and options on futures contracts include (1)
dependence on the investment adviser's ability to predict correctly movements in
the direction of interest rates, securities prices and currency markets; (2)
imperfect correlation between the price of options and futures contracts and
options thereon and movements in the prices of the securities or currencies
being hedged; (3) the fact that skills needed to use these strategies are
different from those needed to select portfolio securities; (4) the possible
absence of a liquid secondary market for any particular instrument at any time;
(5) the possible need to defer closing out certain hedged positions to avoid
adverse tax consequences; and (6) the possible inability of the Portfolio to
purchase or sell a security at a time that otherwise would be favorable for it
to do so, or the possible need for the Portfolio to sell a security at a
disadvantageous time, due to the need for the Portfolio to maintain "cover" or
to segregate securities in connection with hedging transactions. See "Taxation"
in the Statement of Additional Information.
Short Sales Against-the-Box
The Portfolio may make short sales against-the-box for the purpose of
deferring realization of gain or loss for federal income tax purposes. A short
sale "against-the-box" is a short sale in which the Portfolio owns an equal
amount of the securities sold short or owns securities convertible into or
exchangeable, without payment of any further consideration, for securities of
the same issue as, and equal in amount to, the securities sold short.
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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, at the Fund's election, to unwind the
over-the-counter option. The exercise of such an option ordinarily
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<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
(over 100%) 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, 1994, the Portfolio's portfolio turnover rate was 232%.
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, 1994, total expenses for the Portfolio's
Class A, Class B and Class C shares as a percentage of average net assets were
1.17%, 1.97% and 0.93% (annualized), respectively. See "Financial Highlights."
Class C shares were first offered on August 1, 1994.
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, 1994, the Portfolio
paid a management fee to PMF of .55 of 1% of the average net assets of the
Portfolio.
As of November 30, 1994, PMF served as the manager to 38 open-end investment
companies, constituting substantially all of the Prudential Mutual Funds, and as
manager or administrator to 30 closed-end investment companies with aggregate
assets of approximately $47 billion.
Under the Management Agreement with the Fund, PMF manages the investment
operations of the Portfolio and also administers the Portfolio's corporate
affairs. See "Manager" in the Statement of Additional Information.
Under the Subadvisory Agreement between PMF and The Prudential Investment
Corporation (PIC or the Subadviser), the Subadviser furnishes investment
advisory services in connection with the management of the
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<PAGE>
Portfolio and is reimbursed by PMF for its reasonable costs and expenses
incurred in providing such services. Under the Management Agreement, PMF
continues to have responsibility for all investment advisory services and
supervises PIC's performance of such services.
The Portfolio is managed by Global Advisors, a unit of The Prudential
Investment Corporation (PIC). Jeffrey Brummette, a senior portfolio manager 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.
Mr. Brummette is a Managing Director of PIC. He has managed the Portfolio since
November 1990. 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
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.
15
<PAGE>
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, 1995.
For the fiscal year ended October 31, 1994, PMFD received payments of
$57,000, 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, 1994. PMFD also received
approximately $15,000 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, 1995.
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, 1994, Prudential Securities incurred
distribution expenses of approximately $1,382,000 under the Class B Plan and
received $2,679,726 from the Fund under the Class B Plan and approximately
$1,291,500 in contingent deferred sales charges from redemptions of Class B
shares. For the fiscal year ended October 31, 1994, Prudential Securities did
not receive any remuneration under the Class C Plan nor did Prudential
Securities incur any costs in distributing the Portfolio's Class C shares.
For the fiscal year ended October 31, 1994, the Fund paid distribution
expenses of .15%, .95% and .75% of the average net assets of the Class A, Class
B and Class C shares of the Portfolio, respectively. The Fund records all
payments made under the Plans as expenses in the calculation of net investment
income. Prior to August 1, 1994, 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.
Each Plan provides that it shall continue in effect from year to year
provided that a majority of the Board of Directors of the Fund, including a
majority of the Directors who are not "interested persons" of the Fund (as
defined in the Investment Company Act) and who have no direct or indirect
financial interest in the operation of the Plan or any agreement related to the
Plan (the Rule 12b-1 Directors), vote annually to continue the Plan. Each Plan
may be terminated at any time by vote of a majority of the Rule 12b-1 Directors
or of a majority of the outstanding shares of the applicable class of the
Portfolio. The Fund will not be obligated to pay expenses incurred under any
plan if it is terminated or not continued.
16
<PAGE>
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. (the NASD) governing maximum sales charges. See
"Distributor" in the Statement of Additional Information.
On October 21, 1993, PSI entered into an omnibus settlement with the SEC,
state securities regulators (with the exception of the Texas Securities
Commissioner who joined the settlement on January 18, 1994) and the NASD to
resolve allegations that from 1980 through 1990 PSI sold certain limited
partnership interests in violation of securities laws to persons for whom such
securities were not suitable and misrepresented the safety, potential returns
and liquidity of these investments. Without admitting or denying the allegations
asserted against it, PSI consented to the entry of an SEC Administrative Order
which stated that PSl's conduct violated the federal securities laws, directed
PSI to cease and desist from violating the federal securities laws, pay civil
penalties, and adopt certain remedial measures to address the violations.
Pursuant to the terms of the SEC settlement, PSI agreed to the imposition of
a $10,000,000 civil penalty, established a settlement fund in the amount of
$330,000,000 and procedures to resolve legitimate claims for compensatory
damages by purchasers of the partnership interests. PSI's settlement with the
state securities regulators included an agreement to pay a penalty of $500,000
per jurisdiction. PSI consented to a censure and to the payment of a $5,000,000
fine in settling the NASD action.
In October 1994, a criminal complaint was filed with the United States
Magistrate for the Southern District of New York alleging that PSI committed
fraud in connection with the sale of certain limited partnership interests in
violation of federal securities laws. An agreement was simultaneously filed to
defer prosecution of these charges for a period of three years from the signing
of the agreement, provided that PSI complies with the terms of the agreement.
If, upon completion of the three year period, PSI has complied with the terms of
the agreement, no prosecution will be instituted by the United States for the
offenses charged in the complaint. If on the other hand, during the course of
the three year period, PSI violates the terms of the agreement, the U.S.
Attorney can then elect to pursue these charges. Under the terms of the
agreement, PSI agreed, among other things, to pay an additional $330,000,000
into the fund established by the SEC to pay restitution to investors who
purchased certain PSI limited partnership interests.
For more detailed information concerning the foregoing matters, see
"Distributor" in the Statement of Additional Information, a copy of which may be
obtained at no cost by caling 1-800-225-1852.
The Fund is not affected by PSI's financial condition and is an entirely
separate legal entity from PSI, which has no beneficial ownership therein and
the Fund's assets which are held by State Street Bank & Trust Company, an
independent custodian, are separate and distinct from PSI.
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.
17
<PAGE>
Prudential Mutual Fund Services, Inc., Raritan Plaza One, Edison, New Jersey
08837, serves as Transfer Agent and Dividend Disbursing Agent and in those
capacities maintains certain books and records for the Fund. PMFS is a
wholly-owned subsidiary of PMF.
Its mailing address is P.O. Box 15005, New Brunswick, New Jersey 08906-5005.
- --------------------------------------------------------------------------------
HOW THE FUND VALUES ITS SHARES
- --------------------------------------------------------------------------------
The Portfolio's net asset value per share or NAV is determined by
subtracting its liabilities from the value of its assets and dividing the
remainder by the number of outstanding shares. NAV is calculated separately for
each class. For valuation purposes, quotations of foreign securities in a
foreign currency are converted to U.S. dollar equivalents. The Board of
Directors has fixed the specific time of day for the computation of the
Portfolio's net asset value to be as of 4:15 P.M., New York time.
Portfolio securities are valued based on market quotations or, if not
readily available, at fair value as determined in good faith under procedures
established by the Fund's Board of Directors.
The Portfolio will compute its NAV once daily on days that the New York
Stock Exchange is open for trading except on days on which no orders to
purchase, sell or redeem shares have been received by the Portfolio or days on
which changes in the value of the Portfolio's securities do not materially
affect the NAV. The New York Stock Exchange is closed on the following holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. See "Net Asset Value" in the
Statement of Additional Information.
Although the legal rights of each class of shares are substantially
identical, the different expenses borne by each class may result in different
NAVs and dividends. As long as the Portfolio declares dividends daily, the NAV
of Class A, Class B and Class C shares will generally be the same. It is
expected, however, that the dividends will differ by approximately the amount of
the distribution-related expense accrual differential among the classes.
- --------------------------------------------------------------------------------
HOW THE FUND CALCULATES PERFORMANCE
- --------------------------------------------------------------------------------
From time to time the Portfolio may advertise its total return (including
"average annual" total return and "aggregate" total return) and yield in
advertisements or sales literature. Total return and yield are calculated
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.,
18
<PAGE>
other industry publications, business periodicals and market indices. See
"Performance Information" in the Statement of Additional Information. The
Portfolio will include performance data for each class of shares of the
Portfolio in any advertisement or information including performance data of the
Portfolio. Further performance information is contained in the Portfolio's
annual and semi-annual reports to shareholders, which may be obtained without
charge. See "Shareholder Guide-Shareholder Services-Reports to Shareholders."
- --------------------------------------------------------------------------------
TAXES, DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
Taxation of the Portfolio
The Portfolio has elected to qualify and intends to remain qualified as a
regulated investment company under the Internal Revenue Code. Accordingly, the
Portfolio will not be subject to federal income taxes on its net investment
income and capital gains, if any, that it distributes to its shareholders.
Gains or losses on disposition of debt securities denominated in a foreign
currency attributable to fluctuations in the value of foreign currency between
the date of acquisition of the security and the date of disposition also are
treated as ordinary gain or loss. These gains or losses increase or decrease the
amount of the Portfolio's investment company taxable income available to be
distributed to you as ordinary income, rather than increasing or decreasing the
amount of the Portfolio's net capital gain. If currency fluctuation losses
exceed other investment company taxable income during a taxable year,
distributions made by the Portfolio during the year would be characterized as a
return of capital to you, reducing your basis in your Portfolio shares.
In addition, under the Internal Revenue Code, special rules apply to the
treatment of certain options and futures contracts (Section 1256 contracts). At
the end of each year, such investments held by the Portfolio will be required to
be "marked to market" for federal income tax purposes; that is, treated as
having been sold at market value. Sixty percent of any gain or loss recognized
on these "deemed sales" and on actual dispositions may be treated as long-term
capital gain or loss, and the remainder will be treated as short-term capital
gain or loss. See "Taxation" in the Statement of Additional Information.
Taxation of Shareholders
Any dividends out of net taxable investment income, together with
distributions of net short-term gains (i.e., the excess of net short-term
capital gains over net long-term capital losses) distributed to shareholders,
will be taxable as ordinary income to the shareholder whether or not reinvested.
Any net capital gains (i.e., the excess of net long-term capital gains over net
short-term capital losses) distributed to shareholders will be taxable as
long-term capital gains to shareholders, whether or not reinvested and
regardless of the length of time a shareholder has owned his or her 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
19
<PAGE>
identification numbers on IRS Form W-9 (or IRS Form W-8 in the case of certain
foreign shareholders) with the required certifications regarding your status
under the federal income tax law.
Dividends And Distributions
The Portfolio expects to declare daily and pay monthly dividends of all or
substantially all of the net investment income (if any) and make distributions
at least annually of any net capital gains. Dividends paid by the Portfolio with
respect to each class of shares, to the extent any dividends are paid, will be
calculated in the same manner, at the same time, on the same day and will be in
the same amount except that each class will bear its own distribution charges,
generally resulting in lower dividends for Class B and Class C shares.
Distribution of net capital gains, if any, will be paid in the same amount for
each class of shares. See "How the Fund Values Its Shares."
Dividends and distributions will be paid in additional shares based on the
NAV of each class on record date, or such other date as the Board of Directors
may determine, unless the shareholder elects in writing not less than five
business days prior to the record date to receive such dividends and
distributions in cash. Such election should be submitted to Prudential Mutual
Fund Services, Inc., Account Maintenance, P.O. Box 15015, New Brunswick, New
Jersey 08906-5015. If you hold shares through Prudential Securities, you should
contact your financial adviser to elect to receive dividends and distributions
in cash. The Fund will notify each shareholder after the close of the Fund's
taxable year both of the dollar amount and the taxable status of that year's
dividends and distributions on a per share basis.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
DESCRIPTION OF COMMON STOCK
The Fund was incorporated in Maryland on February 21, 1990. The Fund is
authorized to issue 2 billion shares of common stock, $.001 par value per share,
divided with respect to the Portfolio into three classes designated Class A,
Class B and Class C common stock. Each of the Class A, Class B and Class C
common stock of the Portfolio consists of 500 million authorized shares. Each
class of common stock represents an interest in the same assets of the Portfolio
and is identical in all respects to other shares of the Portfolio except that
(i) each class bears different distribution expenses, (ii) each class has
exclusive voting rights with respect to its distribution and service plan
(except that the Fund has agreed with the SEC in connection with the offering of
a conversion feature on Class B shares to submit any amendment of the Class A
Plan for the Portfolio to both Class A and Class B shareholders of the
Portfolio), (iii) each class has a different exchange privilege and (iv) only
Class B shares have a conversion feature. See "How the Fund is
Managed-Distributor." The Fund has received an order from the SEC permitting the
issuance and sale of multiple classes of common stock. Currently, the Portfolio
is offering three classes, designated Class A, Class B and Class C shares. In
accordance with the Fund's Articles of Incorporation, the Board of Directors may
authorize the creation of additional series of common stock and classes within
such series, with such preferences, privileges, limitations and voting and
dividend rights as the Board may determine.
The Board of Directors may increase or decrease the number of authorized
shares without the approval of shareholders. Shares of the Portfolio, when
issued, are fully paid, nonassessable, fully transferable and redeemable at the
option of the holder. Shares are also redeemable at the option of the Portfolio
under certain circumstances as described under "Shareholder Guide-How to Sell
Your Shares." Each share of each class of common stock is equal as to earnings,
assets and voting privileges, except as noted above, and each class bears the
expenses related to the distribution of its shares. Except for the conversion
feature applicable to the Class B shares of the Portfolio, there are no
conversion, preemptive or other subscription rights. In the event of
liquidation, each share of common stock of the Portfolio is entitled to its
portion of all of the Portfolio's assets after all debt and expenses of the
Portfolio have been paid. Since Class B and Class C shares generally bear higher
distribution expenses than Class A shares, the liquidation proceeds to
shareholders of those classes are likely to be lower than to Class A
shareholders. The Portfolio's shares do not have cumulative voting rights for
the election of Directors.
20
<PAGE>
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. The minimum initial investment
requirement is waived for purchases of Class A shares effected through an
exchange of Class B shares of The BlackRock Government Income Trust. 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."
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).
21
<PAGE>
If you arrange for receipt by State Street of Federal Funds prior to 4:15
P.M., New York time, on a business day, you may purchase shares of the Portfolio
as of that day.
In making a subsequent purchase order by wire, you should wire State Street
directly and should be sure that the wire specifies Prudential Short-Term Global
Income Fund, Inc.-Short-Term Global Income Portfolio, Class A, Class B or Class
C shares and your name and individual account number. It is not necessary to
call PMFS to make subsequent purchase orders utilizing Federal Funds. The
minimum amount which may be invested by wire is $1,000.
ALTERNATIVE PURCHASE PLAN
The Fund offers three classes of shares (Class A, Class B and Class C
shares) which allows you to choose the most beneficial sales charge structure
for your individual circumstances given the amount of the purchase, the length
of time you expect to hold the shares and other relevant circumstances
(Alternative Purchase Plan).
<TABLE>
<CAPTION>
Annual 12b-1 Fees
(as a % of average daily
Sales Charge net assets) Other information
------------------------------------- ------------------------- --------------------------------------
<S> <C> <C> <C>
Class A Maximum initial sales charge of 3% of 0.30 of 1% (Currently Initial sales charge waived or reduced
the public offering price being charged at a for certain purchases
rate of 0.15 of 1%)
Class B Maximum contingent deferred sales 1% (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 redemption charged at a rate of
proceeds on redemptions made .75 of 1%)
within one year of purchase
</TABLE>
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).
22
<PAGE>
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:
<TABLE>
<CAPTION>
Sales Charge as Sales Charge as Dealer Concession
Amount of Percentage of Percentage of as Percentage of
Purchase Offering Price Amount Invested Offering Price
- ---------------- --------------- --------------- -----------------
<S> <C> <C> <C>
Less than $100,000 3.0% 3.09% 2.75%
$100,000 but less than $500,000 2.5 2.56 2.25
$500,000 but less than $1,000,000 2.0 2.04 1.75
$1,000,000 but less than $3,000,000 1.5 1.52 1.30
$3,000,000 and above* 0.0 0.00 0.00
</TABLE>
Selling dealers may be deemed to be underwriters, as that term is defined
in the Securities Act.
Reduction and Waiver of Initial Sales Charges. Reduced sales charges are
available through Rights of Accumulation and Letters of Intent. Shares of the
Fund and shares of other Prudential Mutual Funds (excluding money market funds
other than those acquired pursuant to the exchange privilege) may be aggregated
to determine the applicable reduction. See "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
23
<PAGE>
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 participants. 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.
Special Rules Applicable to Retirement Plans. After a Benefit Plan qualifies
to purchase Class A shares at NAV, all subsequent purchases will be made at NAV.
Other 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.
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
acquired 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
24
<PAGE>
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.
Payment for redemption of recently purchased shares will be delayed until
the Portfolio or the Transfer Agent has been advised that the purchase check has
been honored, up to 10 calendar days from the time of receipt of the purchase
check by the Transfer Agent. Such delay may be avoided by purchasing shares by
wire or by certified or official bank check.
Redemption in Kind. If the Board of Directors determines that it would be
detrimental to the best interests of the remaining shareholders of the Portfolio
to make payment wholly or partly in cash, the Portfolio may pay the redemption
price in whole or in part by a distribution in kind of securities from the
investment portfolio of the Portfolio, in lieu of cash, in conformity with
applicable rules of the Commission. Securities will be readily marketable and
will be valued in the same manner as in a regular redemption. See "How the Fund
Values its Shares." If your shares are redeemed in kind, you would incur
transaction costs in converting the assets into cash. The Portfolio, however,
has elected to be governed by Rule 18f-1 under the Investment Company Act,
pursuant to which the Portfolio is obligated to redeem shares solely in cash up
to the lesser of $250,000 or 1% of the net asset value of the Portfolio during
any 90-day period for any one shareholder.
Involuntary Redemption. In order to reduce expenses of the Portfolio, the
Board of Directors may redeem all of the shares of any shareholder, other than a
shareholder which is an IRA or other tax-deferred retirement plan, whose account
has a net asset value of less than $500 due to a redemption. The Portfolio will
give such shareholders 60 days' prior written notice in which to purchase
sufficient additional shares to avoid such redemption.
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
25
<PAGE>
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:
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.
26
<PAGE>
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 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
27
<PAGE>
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.
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
28
<PAGE>
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 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:
(bullet) 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.
(bullet) 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.
(bullet) 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
29
<PAGE>
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.
(bullet) 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."
(bullet) 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.
(bullet) 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.
30
<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 registered representative or telephone
the Fund at (800) 225-1852 for a free prospectus. Read the prospectus carefully
before you invest or send money.
Taxable Bond Funds
Prudential Adjustable Rate Securities Fund, Inc.
Prudential GNMA Fund, Inc.
Prudential Government Income Fund Inc.
Prudential Government Securities Trust
Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential Structured Maturity Fund, Inc.
Income Portfolio
Prudential U.S. Government Fund
The BlackRock Government Income Trust
Tax-Exempt Bond Funds
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Yield Series
Insured Series
Modified Term Series
Prudential Municipal Series Fund
Arizona Series
Florida Series
Georgia Series
Hawaii Income Series
Maryland Series
Massachusetts Series
Michigan Series
Minnesota Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
Global Funds
Prudential Global Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Global Natural Resources Fund Inc.
Prudential Intermediate Global Income Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential Short-Term Global Income Fund, Inc.
Global Assets Portfolio
Short-Term Global Income Portfolio
Global Utility Fund, Inc.
Equity Funds
Prudential Allocation Fund
Conservatively Managed Portfolio
Strategy Portfolio
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Strategy Portfolio
Prudential Growth Opportunity Fund, Inc.
Prudential IncomeVertible\'AE Fund, Inc.
Prudential Multi-Sector Fund, Inc.
Prudential Strategist Fund, Inc.
Prudential Utility Fund, Inc.
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Money Market Funds
* Taxable Money Market Funds
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund
Money Market Series
Prudential MoneyMart Assets
* Tax-Free Money Market Funds
Prudential Tax-Free Money Fund
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
* Command Funds
Command Money Fund
Command Government Fund
Command Tax-Free Fund
* Institutional Money Market Funds
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
- -------------------------------------------------------------------------------
<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......................... 7
Investment Objective and Policies.......... 7
Risk Factors............................... 9
Other Investments and Investment Techniques 10
Investment Restrictions.................... 14
HOW THE FUND IS MANAGED...................... 14
Manager.................................... 14
Fee Waivers and Subsidy.................... 15
Distributor ............................... 15
Portfolio Transactions..................... 17
Custodian and Transfer and
Dividend Disbursing Agent................ 17
HOW THE FUND VALUES ITS SHARES............... 18
HOW THE FUND CALCULATES PERFORMANCE.......... 18
TAXES, DIVIDENDS AND DISTRIBUTIONS........... 19
GENERAL INFORMATION.......................... 20
Description of Common Stock................ 20
Additional Information..................... 21
SHAREHOLDER GUIDE............................ 21
How to Buy Shares of the Fund.............. 21
Alternative Purchase Plan.................. 22
How to Sell Your Shares.................... 24
Conversion Feature--Class B Shares......... 27
How to Exchange Your Shares................ 28
Shareholder Services....................... 29
APPENDIX.....................................A-1
THE PRUDENTIAL MUTUAL FUND FAMILY............B-1
________________________________________________
MF144A 444129Y
________________________________________________
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)
Prudential Mutual Funds (LOGO)
Building Your Future
On Our StrengthSM
PROSPECTUS
January 3, 1995
<PAGE>
Prudential Short-Term
Global Income Fund, Inc.
(Global Assets Portfolio)
- --------------------------------------------------------------------------------
Prospectus dated January 3, 1995
- --------------------------------------------------------------------------------
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 January
3, 1995, which information is incorporated herein by reference (is legally
considered a part of this Prospectus) and is available without charge upon
request to the Fund at the address or telephone number noted above.
- --------------------------------------------------------------------------------
Investors are advised to read this Prospectus and retain it for future
reference.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
- --------------------------------------------------------------------------------
FUND HIGHLIGHTS
- --------------------------------------------------------------------------------
What is Prudential Short-Term Global Income Fund, Inc., Global Assets Portfolio?
Prudential Short-Term Global Income Fund, Inc., Global Assets Portfolio is a
mutual fund. A mutual fund pools the resources of investors by selling its
shares to the public and investing the proceeds of such sale in a portfolio of
securities designed to achieve its investment objective. Technically, the Fund
is an open-end, non-diversified management investment company.
What is the Portfolio's Investment Objective?
The Portfolio's investment objective is high current income with minimum
risk to principal. 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. The
amount of income available for distribution to shareholders will be affected by
any foreign currency gains or losses generated by the Portfolio upon the
disposition of debt securities denominated in a foreign currency and by certain
hedging activities of the Portfolio. See "Taxes, Dividends and Distributions" at
page 17.
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 November 30, 1994, PMF served as
manager or administrator to 68 investment companies, including 38 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 12.
Who Distributes the Portfolio's Shares?
Prudential Mutual Fund Distributors, Inc. (PMFD) acts as the Distributor of
the Portfolio's Class A shares and is paid 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.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
What is the Minimum Investment?
The minimum initial investment is $5,000. Thereafter, the minimum investment
is $1,000. There is no minimum investment requirement for certain retirement
plans or custodial accounts for the benefit of minors. For purchases made
through the Automatic Savings Accumulation Plan the minimum initial and
subsequent investment is $50. See "Shareholder Guide-How to Buy Shares of the
Fund" at page 19 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 16 and "Shareholder
Guide-How to Buy Shares of the Fund" at page 19.
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 no longer accepts 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 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. 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
CDSC of 1%. See "Shareholder Guide-How to Sell Your Shares" at page 22.
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. The amount of income available for distribution to shareholders
will be affected by any foreign currency gains or losses generated by the
Portfolio upon the disposition of debt securities denominated in a foreign
currency and by certain hedging activities of the Portfolio. See "Taxes,
Dividends and Distributions" at page 17.
- --------------------------------------------------------------------------------
3
<PAGE>
- -------------------------------------------------------------------------------
FUND EXPENSES-GLOBAL ASSETS PORTFOLIO
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares
(Initial Sales Charge (Deferred Sales Charge
Alternative) Alternative)
------------ ------------
<S> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage of offering .99% None
price) ...................................................................
Maximum Sales Load or Deferred Sales Load Imposed on Reinvested None None
Dividends ................................................................
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, whichever is lower)* ................................ None 1% during the first year
and 0% thereafter
Redemption Fees ............................................................ None None
Exchange Fees .............................................................. None None
</TABLE>
<TABLE>
Annual Portfolio Operating Expenses** (as a percentage of average net assets)
<CAPTION>
Class A Class B
<S> <C> <C>
Management Fees ............................................................ .55% .55%
12b-1 Fees\D ............................................................... .50 1.00\D\D
Other Expenses ............................................................. .68 .68
--- ---
Total Portfolio Operating Expenses ......................................... 1.73% 2.23%
==== ====
</TABLE>
<TABLE>
Example
- -------
You would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and (2) redemption at the
end of each time period:
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A ..................................................................... $27 $64 $103 $212
Class B ..................................................................... $33 $70 $119 $238
You would pay the following expenses on the same investment, assuming no redemption:
Class A ..................................................................... $27 $64 $103 $212
Class B ..................................................................... $23 $59 $98 $207
<FN>
The above example is based on data for the Portfolio's fiscal year ended October 31, 1994. The example should not be
considered a representation of past or future expenses. Actual expenses may be greater or less than those shown.
The purpose of this table is to assist investors in understanding the various costs and expenses that an investor in the
Portfolio will bear, whether directly or indirectly. For more complete descriptions of the various costs and expenses, see
"How the Fund is Managed." "Other Expenses" includes an estimate of operating expenses of the Portfolio, such as directors'
and professional fees, registration fees, reports to shareholders and transfer agency and custodian fees (foreign and domestic).
</TABLE>
<TABLE>
<C> <S>
* Class B shares will automatically convert to Class A shares after the one year contingent deferred sales charge period
has expired.
** PMF may from time to time agree to waive its management fee and subsidize certain operating expenses with respect to the
Portfolio. Fee waivers and expense subsidies lower the overall expenses of the Portfolio. See "How the Fund is Managed--
Manager."
\D Pursuant to rules of the National Association of Securities Dealers, Inc., the aggregate initial sales charges, deferred
sales charges and asset-based sales charges on shares of the Portfolio may not exceed 6.25% of total gross sales, subject to
certain exclusions. This 6.25% limitation is imposed on the Portfolio rather than on a per shareholder basis. Therefore,
long-term Class B shareholders of the Portfolio may pay more in total sales charges than the economic equivalent of 6.25% of
such shareholders' investment in such shares. See "How the Fund is Managed--Distributor."
\D\D The Distributor currently has no distribution costs reimbursable to it under the Class B Plan and therefore, the Fund has
discontinued assessing any 12b-1 fees on the Class B shares and has discontinued the payment to the Distributor of any
contingent deferred sales charges collected on the redemption of Class B shares (any such contingent deferred sales charges
collected on the redemption of Class B shares are paid to the Fund). As a result and under current conditions, Total Fund
Operating Expenses will be lower for Class B shares than for the Class A shares. The Fund is no longer accepting purchase
orders for the Class B shares.
</TABLE>
- -------------------------------------------------------------------------------
4
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(for a share of common stock outstanding throughout each of the
periods indicated)
- -------------------------------------------------------------------------------
The following financial highlights have been audited by Deloitte & Touche
LLP, independent accountants, whose report thereon was unqualified. This
information should be read in conjunction with the financial statements and
notes thereto, which appear in the Statement of Additional Information. The
following highlights contain selected data for a share of common stock
outstanding, total return, ratios to average net assets and other supplemental
data for the periods indicated. The information is based on data contained in
the financial statements.
- -------------------------------------------------------------------------------
<TABLE>
Global Assets Portfolio
<CAPTION>
Class A Class B
--------------------------------------------- ------------------------------------------
Feb. 15, Nov. 1, Feb. 15,
1991* 1993 1991*
Year ended Oct. 31, through through Year ended Oct. 31, through
---------------------------- Oct. 31, May 9, ------------------- Oct. 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 ............... .08 .12 .16 .12\D .04 .12 .15 .11\D
Net realized and unrealized gain
(loss) on investment and foreign
currency transactions ............. (.07) (.04) (.13) - (.03) (.04) (.13) -
-------- -------- -------- ------- ----- ------- -------- --------
Total from investment operations .... .01 .08 .03 .12 .01 .08 .02 .11
Less distributions
Dividends from net investment income. - (.04) (.14) (.12) - (.04) (.13) (.11)
Taxable return of capital
distributions ..................... (.09) (.05) - - (.05) (.05) - -
-------- -------- -------- ------- ----- ------- -------- --------
Total distributions ................. (.09) (.09) (.14) (.12) (.05) (.09) (.13) (.11)
-------- -------- -------- ------- ----- ------- -------- --------
Contingent deferred sales charges
collected ......................... - - - - .03 .02 - -
-------- -------- -------- ------- ----- ------- -------- --------
Net asset value, end of period ...... $ 1.80 $ 1.88 $ 1.89 $ 2.00 $1.89 $ 1.90 $ 1.89 $ 2.00
-------- -------- -------- ------- ----- ------- -------- --------
-------- -------- -------- ------- ----- ------- -------- --------
TOTAL RETURN# ....................... 0.47% 4.36% 1.46% 5.91% 2.33% 5.47% 0.94% 5.53%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ..... $ 50,537 $127,490 $113,412 $86,443 $ 0 $ 2,023 $199,890 $134,015
Average net assets (000) ............ $ 82,267 $153,339 $138,331 $23,224 $ 525 $52,653 $248,941 $ 42,449
Ratios to average net assets:@@
Expenses, including distribution fees 1.73% 1.48% 1.33% 1.25%\D** 1.21%** 1.61% 1.83% 1.75%\D**
Expenses, excluding distribution fees 1.23% .98% .83% .75%\D** 1.21%** .98% .83% .75%\D**
Net investment income ............... 4.09% 6.44% 8.16% 8.64%\D** 4.48%** 6.31% 7.66% 8.21%\D**
<FN>
- -------------------
* Commencement of investment operations.
** Annualized.
# Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and includes reinvestment of dividends. Total returns for periods
of less than a full year are not annualized.
\D Net of expense subsidy.
@ Last day of investment operations of Class B shares. On May 10, 1994, all existing Class B shares were converted to Class A
shares.
@@ Because of the events referred to in @ and the timing of such, the Class B shares ratios for the most recent period are not
necessarily comparable to that of Class A shares.
</TABLE>
- -------------------------------------------------------------------------------
5
<PAGE>
- -------------------------------------------------------------------------------
HOW THE FUND INVESTS
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Portfolio is high current income with
minimum risk to principal. The Portfolio seeks to achieve its objective by
investing primarily in a portfolio of high-quality debt securities having
remaining maturities of not more than one year. The Portfolio will invest at
least 65% of its total assets in income-producing securities. There can be no
assurance that the Portfolio will achieve its investment objective.
The Portfolio'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
6
<PAGE>
judgment of future exchange rate relationships, the Portfolio could be in a less
advantageous position than if such a hedge had not been established.
The Portfolio invests in debt securities denominated in the currencies of
countries whose governments are considered stable by the Fund's investment
adviser. In addition to the U.S. dollar, such currencies include, among others,
the Australian Dollar, Austrian Schilling, British Pound Sterling, Canadian
Dollar, Dutch Guilder, European Currency Unit (ECU), French Franc, German Mark,
Italian Lira, Finnish Marka, Mexican Peso, Japanese Yen, New Zealand Dollar,
Spanish Peseta, Danish Kroner, Norwegian Kroner, Swedish Krona and Swiss Franc.
An issuer of debt securities purchased by the Portfolio may be domiciled in a
country other than the country in whose currency the instrument is denominated.
The Portfolio seeks to minimize investment risk by limiting its portfolio
investments to debt securities of high quality. Accordingly, the Portfolio's
investments consist of: (i) debt securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities (U.S. Government securities); (ii)
obligations issued or guaranteed by a foreign government or any of its political
subdivisions, authorities, agencies, or instrumentalities, or by supranational
entities, all of which are rated AAA or AA by Standard & Poor's Ratings Group
(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.
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The Portfolio may invest in debt securities denominated in the ECU, which is
a "basket" consisting of specified amounts of currencies of certain of the
twelve member states of the European Community. The specific amounts of
currencies comprising the ECU may be adjusted by the Council of Ministers of the
European Community to reflect changes in relative values of the underlying
currencies. The Fund's investment adviser does not believe that such adjustments
will adversely affect holders of ECU-denominated obligations or the
marketability of such securities. European supranationals, in particular, issue
ECU-denominated obligations.
The Portfolio is "non-diversified" so that the Portfolio may invest more
than 5% of its total assets in the securities of one or more issuers. Investment
in a non-diversified portfolio involves greater risk than investment in a
diversified portfolio because a loss resulting from the default of a single
issuer may represent a greater portion of the total assets of a non-diversified
portfolio.
RISK FACTORS
Risk Factors on Foreign Investments
Investing in securities issued by foreign governments and corporations
involves considerations and possible risks not typically associated with
investing in obligations issued by the U.S. government and domestic
corporations. The values of foreign investments are affected by changes in
currency rates or exchange control regulations, application of foreign tax laws,
including withholding taxes, changes in governmental administration or economic
or monetary policy (in this country or abroad) or changed circumstances in
dealings between nations. Costs are incurred in connection with conversions
between various currencies. In addition, foreign brokerage commissions are
generally higher than in the United States, and foreign securities markets may
be less liquid, more volatile and less subject to governmental supervision than
in the United States. Investments in foreign countries could be affected by
other factors not present in the United States, including expropriation,
confiscatory taxation, lack of uniform accounting and auditing standards and
potential difficulties in enforcing contractual obligations and could be subject
to extended settlement periods.
OTHER INVESTMENTS AND INVESTMENT TECHNIQUES
In addition, the Portfolio is permitted to make the investments and engage
in the investment techniques described below. Under normal circumstances, these
investments will represent no more than 35% of the total assets of the
Portfolio.
Hedging and Income Enhancement Strategies
The Portfolio may engage in various portfolio strategies, 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
The Portfolio may purchase and write (i.e., sell) put and call options on
securities and currencies that are traded on national securities exchanges or in
the over-the-counter market to enhance income or to hedge its portfolio
investments. These options will be on debt securities, financial indices (e.g.,
S&P 500), U.S. Government securities (listed on an exchange and
over-the-counter, i.e., purchased or sold through U.S. Government securities
dealers), foreign government securities and foreign currencies. The Portfolio
may write covered put and call options to generate additional income through the
receipt of premiums, purchase put options in an effort to protect the value of a
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<PAGE>
security that it owns against a decline in market value and purchase call
options in an effort to protect against an increase in price of securities (or
currencies) it intends to purchase. The Portfolio may also purchase put and call
options to offset previously written put and call options of the same series.
See "Additional Investment Information-Additional Risks-Options on Securities"
in the Statement of Additional Information.
A call option gives the purchaser, in exchange for a premium paid, the right
for a specified period of time to purchase the securities or currency subject to
the option at a specified price (the exercise price or strike price). The writer
of a call option, in return for the premium, has the obligation, upon exercise
of the option, to deliver, depending upon the terms of the option contract, the
underlying securities or a specified amount of cash to the purchaser upon
receipt of the exercise price. When the Portfolio writes a call option, it gives
up the potential for gain on the underlying securities or currency in excess of
the exercise price of the option during the period that the option is open.
A put option gives the purchaser, in return for a premium, the right, for a
specified period of time, to sell the securities or currency subject to the
option to the writer of the put at the specified exercise price. The writer of
the put option, in return for the premium, has the obligation, upon exercise of
the option, to acquire the securities or currency underlying the option at the
exercise price. The Portfolio might, therefore, be obligated to purchase the
underlying securities or currency for more than their current market price.
The Portfolio will write only "covered" options. An option is covered if, so
long as the Portfolio is obligated under the option, it owns an offsetting
position in the underlying security or currency or maintains cash, U.S.
Government securities or other liquid high-grade debt obligations with a value
sufficient at all times to cover its obligations in a segregated account. See
"Additional Investment Information-Additional Risks" in the Statement of
Additional Information.
There is no limitation on the amount of call options the Portfolio may
write. The Portfolio may only write covered put options to the extent that cover
for such options does not exceed 25% of its net assets. The Portfolio will not
purchase an option if, as a result of such purchase, more than 20% of its total
assets would be invested in premiums for options and options on futures.
Forward Currency Exchange Contracts
The Portfolio may enter into forward foreign currency exchange contracts to
protect the value of its portfolio against future changes in the level of
currency exchange rates. The Portfolio may enter into such contracts on a spot,
i.e., cash, basis at the rate then prevailing in the currency exchange market or
on a forward basis, by entering into a forward contract to purchase or sell
currency. A forward contract on foreign currency is an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
agreed upon by the parties from the date of the contract at a price set on the
date of the contract.
The Portfolio's dealings in forward contracts will be limited to hedging
involving either specific transactions or portfolio positions. Transaction
hedging is the purchase or sale of a forward contract with respect to specific
receivables or payables of the Portfolio generally arising in connection with
the purchase or sale of its portfolio securities and accruals of interest or
dividends receivable and Portfolio expenses. Position hedging is the sale of a
foreign currency with respect to portfolio security positions denominated or
quoted in that currency or in a different currency (cross-hedge). Although there
are no limits on the number of forward contracts which the Portfolio may enter
into, the Portfolio may not position hedge with respect to a particular currency
for an amount greater than the aggregate market value (determined at the time of
making any sale of forward currency) of the securities held in its portfolio
denominated or quoted in, or currently convertible into or bearing substantial
correlation to, such currency. See "Additional Investment Information-Additional
Risks-Forward Currency Exchange Contracts" in the Statement of Additional
Information.
Futures Contracts and Options Thereon
The Portfolio may purchase and sell financial futures contracts and options
thereon which are traded on a commodities exchange or board of trade for certain
hedging, return enhancement and risk management purposes
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<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 Portfolio'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 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 predictions of movements in the direction of the
securities, foreign currency and interest rate markets are inaccurate, the
adverse consequences to the Portfolio may leave the Portfolio in a worse
position than if such strategies were not used. Risks inherent in the use of
options, foreign currency and futures contracts and options on futures contracts
include (1) dependence on the investment adviser's ability to predict correctly
movements in the direction of interest rates, securities prices and currency
markets; (2) imperfect correlation between the price of options and futures
contracts and options thereon and movements in the prices of the securities or
currencies being hedged; (3) the fact that skills needed to use these strategies
are different from those needed to select portfolio securities; (4) the possible
absence of a liquid secondary market for any particular instrument at any time;
(5) the possible need to defer closing out certain hedged positions to avoid
adverse tax consequences; and (6) the possible inability of the Portfolio to
purchase or sell a security at a time that otherwise would be favorable for it
to do so, or the possible need for the Portfolio to sell a security at a
disadvantageous time, due to the need for the Portfolio to maintain "cover" or
to segregate securities in connection with hedging transactions. See "Taxation"
in the Statement of Additional Information.
Short Sales Against-the-Box
The Portfolio may make short sales against-the-box for the purpose of
deferring realization of gain or loss for federal income tax purposes. A short
sale "against-the-box" is a short sale in which the Portfolio owns an equal
amount of the securities sold short or owns securities convertible into or
exchangeable, without payment of any further consideration, for securities of
the same issue as, and equal in amount to, the securities sold short.
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<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 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.
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The staff of the Commission has taken the position that purchased OTC
options and the assets used as "cover" for written OTC options are illiquid
securities. However, the Portfolio may treat the securities it uses as cover for
written OTC options as liquid provided it follows a specified procedure. The
Portfolio may sell OTC options only to qualified dealers who agree that the
Portfolio may repurchase any OTC options it writes for a maximum price to be
calculated by a predetermined formula. In such cases, the OTC option would be
considered illiquid only to the extent that the maximum repurchase price under
the formula exceeds the intrinsic value of the option.
Portfolio Turnover
Portfolio turnover rate is typically defined as the lesser of the amount of
the securities purchased or securities sold, excluding all securities whose
maturity or expiration date at the time of acquisition was one year or less,
divided by the average monthly value of such securities owned during the year.
Because the Portfolio will invest in securities having remaining maturities of
not more than one year, the Portfolio does not expect to have a turnover rate as
so defined. However, because of the short-term nature of the Portfolio's
investments, it expects to have substantial amounts of portfolio transactions.
High portfolio turnover may involve correspondingly greater brokerage
commissions and other transaction costs which will be borne directly by the
Portfolio. See "Portfolio Transactions and Brokerage" in the Statement of
Additional Information.
INVESTMENT RESTRICTIONS
The Portfolio is subject to certain investment restrictions which, like its
investment objective, constitute fundamental policies. Fundamental policies
cannot be changed without the approval of the holders of a majority of the
Portfolio's outstanding voting securities, as defined in the Investment Company
Act. See "Investment Restrictions" in the Statement of Additional Information.
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HOW THE FUND IS MANAGED
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The Fund has a Board of Directors which, in addition to overseeing the
actions of the Portfolio's Manager, Subadviser and Distributor, as set forth
below, decides upon matters of general policy. The Portfolio's Manager conducts
and supervises the daily business operations of the Portfolio. The Fund's
Subadviser furnishes daily investment advisory services.
For the year ended October 31, 1994, total expenses for the Portfolio's
Class A shares as a percentage of average net assets were 1.73%. For the period
November 1, 1993 through May 9, 1994, total expenses of the Portfolio's Class B
shares as a percentage of average net assets were 1.21%. 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, 1994, the Portfolio paid
management fees to PMF of .55% of the average net assets of the Portfolio.
As of November 30, 1994, PMF served as the manager to 38 open-end investment
companies, constituting substantially all of the Prudential Mutual Funds, and as
manager or administrator to 30 closed-end investment companies with aggregate
assets of approximately $47 billion.
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Under the Management Agreement with the Fund, PMF manages the investment
operations of the Portfolio 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). Jeffrey Brummette, a senior portfolio
manager 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. Mr. Brummette is a Managing Director of PIC. He has managed the
Portfolio since February 1991. Mr. Brummette has been employed by PIC since
1986. He 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
PMF may from time to time agree to waive its management fee and subsidize
certain operating expenses with respect to the Portfolio, although no such
waiver or subsidy is currently in effect. Fee waivers and expense subsidies will
lower the overall expenses of the Portfolio and increase its yield and total
return. See "How the Fund Calculates Performance." The fee waiver or expense
subsidies may be terminated at any time without notice after which the
Portfolio's expenses will increase and its yield and total return will be
reduced.
DISTRIBUTOR
Prudential Mutual Fund Distributors, Inc. (PMFD), One Seaport Plaza, New
York, New York 10292, is a corporation organized under the laws of the State of
Delaware and serves as the distributor of the Class A shares of the Portfolio.
It is a wholly-owned subsidiary of PMF.
Prudential Securities Incorporated, (Prudential Securities or PSI) One
Seaport Plaza, New York, New York 10292, is a corporation organized under the
laws of the State of Delaware and serves as the distributor of the Class B
shares of the Portfolio. It is an indirect, wholly-owned subsidiary of
Prudential.
Under separate Distribution and Service Plans (the Class A Plan and the
Class B Plan, collectively the Plans) adopted by the Portfolio under Rule 12b-1
under the Investment Company Act and separate distribution agreements (the
Distribution Agreements), PMFD and Prudential Securities (collectively the
Distributor) incur the expenses of distributing the Class A and Class B shares
of the Portfolio, respectively. These expenses include commissions and account
servicing fees paid to, or on account of, financial advisers of Prudential
Securities and 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,
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.
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<PAGE>
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, 1994, PMFD received payments under the
Class A Plan of $411,334. 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 $24,100 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, 1994, Prudential Securities did not receive any
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.
For the fiscal year ended October 31, 1994, the Distributor had no
distribution costs reimbursable to it under the Class B Plan and therefore, the
Fund discontinued assessing 12b-1 fees on the Class B shares and 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 was 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, 1994, the Fund paid distribution
expenses of .50% of the average net assets of the Class A shares of the
Portfolio. The Portfolio records all payments made under the Plans as expenses
in the calculation of net investment income. Prior to August 1, 1994, the Class
A Plan operated as a "reimbursement type" plan. See "Distributor" in the
Statement of Additional Information.
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.
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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. (the NASD), governing maximum sales charges. See
"Distributor" in the Statement of Additional Information.
On October 21, 1993, PSI entered into an omnibus settlement with the SEC,
state securities regulators (with the exception of the Texas Securities
Commissioner who joined the settlement on January 18, 1994) and the NASD to
resolve allegations that from 1980 through 1990 PSI sold certain limited
partnership interests in violation of securities laws to persons for whom such
securities were not suitable and misrepresented the safety, potential returns
and liquidity of these investments. Without admitting or denying the allegations
asserted against it, PSI consented to the entry of an SEC Administrative Order
which stated that PSl's conduct violated the federal securities laws, directed
PSI to cease and desist from violating the federal securities laws, pay civil
penalties, and adopt certain remedial measures to address the violations.
Pursuant to the terms of the SEC settlement, PSI agreed to the imposition of
a $10,000,000 civil penalty, established a settlement fund in the amount of
$330,000,000 and procedures to resolve legitimate claims for compensatory
damages by purchasers of the partnership interests. PSI's settlement with the
state securities regulators included an agreement to pay a penalty of $500,000
per jurisdiction. PSI consented to a censure and to the payment of a $5,000,000
fine in settling the NASD action.
In October 1994, a criminal complaint was filed with the United States
Magistrate for the Southern District of New York alleging that PSI committed
fraud in connection with the sale of certain limited partnership interests in
violation of federal securities laws. An agreement was simultaneously filed to
defer prosecution of these charges for a period of three years from the signing
of the agreement, provided that PSI complies with the terms of the agreement.
If, upon completion of the three year period, PSI has complied with the terms of
the agreement, no prosecution will be instituted by the United States for the
offenses charged in the complaint. If on the other hand, during the course of
the three year period, PSI violates the terms of the agreement, the U.S.
Attorney can then elect to pursue these charges. Under the terms of the
agreement, PSI agreed, among other things, to pay an additional $330,000,000
into the fund established by the SEC to pay restitution to investors who
purchased certain PSI limited partnership interests.
For more detailed information concerning the foregoing matters, see
"Distributor" in the Statement of Additional Information, a copy of which may be
obtained at no cost by caling 1-800-225-1852.
The Fund is not affected by PSI's financial condition and is an entirely
separate legal entity from PSI, which has no beneficial ownership therein and
the Fund's assets which are held by State Street Bank & Trust Company, an
independent custodian, are separate and distinct from PSI.
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PORTFOLIO TRANSACTIONS
Prudential Securities may act as a broker or futures commission merchant for
the Portfolio provided that the commissions, fees or other remuneration received
by Prudential Securities are fair and reasonable. See "Portfolio Transactions
and Brokerage" in the Statement of Additional Information.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Portfolio's investment
securities and cash and, in that capacity, maintains certain financial and
accounting books and records pursuant to an agreement with the Fund. Its mailing
address is P.O. Box 1713, Boston, Massachusetts 02105.
Prudential Mutual Fund Services, Inc., Raritan Plaza One, Edison, New
Jersey 08837, serves as Transfer Agent and Dividend Disbursing Agent and in
those capacities maintains certain books and records for the Fund. PMFS is a
wholly-owned subsidiary of PMF. Its mailing address is P.O. Box 15005, New
Brunswick, New Jersey 08906-5005.
- -------------------------------------------------------------------------------
HOW THE FUND VALUES ITS SHARES
- -------------------------------------------------------------------------------
The Portfolio's net asset value per share or NAV is determined by
subtracting its liabilities from the value of its assets and dividing the
remainder by the number of outstanding shares of the Portfolio. NAV is
calculated separately for each class. For valuation purposes, quotations of
foreign securities in a foreign currency are converted to U.S. dollar
equivalents. The Board of Directors has fixed the specific time of day for the
computation of the Portfolio's net asset value to be as of 4:15 p.m., New York
time.
Portfolio securities are valued based on market quotations or, if not
readily available, at fair value as determined in good faith under procedures
established by the Fund's Board of Directors.
The Portfolio will compute its NAV once daily on days that the New York
Stock Exchange is open for trading except on days on which no orders to
purchase, sell or redeem shares have been received by the Fund or days on which
changes 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.
- -------------------------------------------------------------------------------
HOW THE FUND CALCULATES PERFORMANCE
- -------------------------------------------------------------------------------
From time to time the Portfolio may advertise its total return (including
"average annual" total return and "aggregate" total return) in advertisements or
sales literature. Total return is calculated separately for Class A and Class B
shares. These figures are based on historical earnings and are not intended to
indicate future performance. The "total return" shows how much an investment in
the Portfolio would have increased (decreased) over a specified period of time
(i.e., one, five or ten years or since inception of the Portfolio) assuming that
all distributions and dividends by the Portfolio were reinvested on the
reinvestment dates during the period and less all recurring fees. The
"aggregate" total return reflects actual performance over a stated period of
time. "Average annual" total return is a hypothetical rate of return that, if
achieved annually, would have produced the same aggregate total return if
performance had been constant
16
<PAGE>
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."
- -------------------------------------------------------------------------------
TAXES, DIVIDENDS AND DISTRIBUTIONS
- -------------------------------------------------------------------------------
Taxation of the Portfolio
The Portfolio has elected to qualify and intends to remain qualified as a
regulated investment company under the Internal Revenue Code. Accordingly, the
Portfolio will not be subject to federal income taxes on its net investment
income and capital gains, if any, that it distributes to its shareholders.
Gains or losses on disposition of debt securities denominated in a foreign
currency attributable to fluctuations in the value of foreign currency between
the date of acquisition of the security and the date of disposition also are
treated as ordinary gain or loss. These gains or losses increase or decrease the
amount of the Portfolio's investment company taxable income available to be
distributed to you as ordinary income, rather than increasing or decreasing the
amount of the Portfolio's net capital gain. If currency fluctuation losses
exceed other investment company taxable income during a taxable year,
distributions made by a Portfolio during the year would be characterized as a
return of capital to you, reducing your basis in your Portfolio shares.
In addition, under the Internal Revenue Code, special rules apply to the
treatment of certain options and futures contracts (Section 1256 contracts). At
the end of each year, such investments held by the Portfolio will be required to
be "marked to market" for federal income tax purposes; that is, treated as
having been sold at market value. Sixty percent of any gain or loss recognized
on these "deemed sales" and on actual dispositions may be treated as long-term
capital gain or loss, and the remainder will be treated as short-term capital
gain or loss. See "Taxation" in the Statement of Additional Information.
Taxation of Shareholders
Any dividends out of net taxable investment income, together with
distributions of net short-term gains (i.e., the excess of net short-term
capital gains over net long-term capital losses) distributed to shareholders,
will be taxable as ordinary income to the shareholder whether or not reinvested.
Any net capital gains (i.e., the excess of net long-term capital gains over net
short-term capital losses) distributed to shareholders will be taxable as
long-term capital gains to the shareholders, whether or not reinvested and
regardless of the length of time a shareholder has owned his or her shares. The
maximum long-term capital gains rate for individuals is 28%. The maximum
long-term capital gains rate for corporate shareholders is currently is the same
as the maximum tax rate for ordinary income.
Any gain or loss realized upon a sale or redemption of shares by a
shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held more than one year and
otherwise as short-term capital gain or loss. Any short-term capital loss,
however, will be treated as long-term capital loss to the extent of any capital
gain distributions received by the shareholder regardless of the length of time
such shares are held.
Withholding Taxes
Under U.S. Treasury Regulations, the Portfolio is required to withhold and
remit to the U.S. Treasury 31% of dividend, capital gain income and redemption
proceeds payable on your account if you fail to furnish your tax
17
<PAGE>
identification numbers on IRS Form W-9 (or IRS Form W-8 in the case of certain
foreign shareholders) with the required certifications regarding your status
under the federal income tax law.
Shareholders are advised to consult their own tax advisers regarding
specific questions as to federal, state or local taxes. See "Taxation" in the
Statement of Additional Information.
Dividends and Distributions
The Portfolio expects to declare daily and pay monthly dividends of all or
substantially all of its net investment income and make distributions at least
annually of any net capital gains. Dividends paid by the Portfolio with respect
to Class A and Class B shares, to the extent any dividends are paid, will be
calculated in the same manner, at the same time, on the same day and will be in
the same amount except that each class will bear its own distribution charges.
Distribution of net capital gains, if any, will be paid in the same amount for
Class A and Class B shares. See "How The Fund Values Its Shares."
Dividends and distributions will be paid in additional shares of the
Portfolio at net asset value computed on the payment date and record date,
respectively, or such other date as the Board of Directors may determine, unless
you elects in writing not less than five business days prior to the record date
to receive such dividends and distributions in cash. Such election should be
submitted to Prudential Mutual Fund Services, Inc., Account Maintenance, P.O.
Box 15015, New Brunswick, New Jersey 08906-5015. If you hold shares through
Prudential Securities, you should contact your financial adviser to receive
dividends and distributions in cash. The Fund will notify each shareholder after
the close of the Fund's taxable year both the dollar amount and the taxable
status of that year's dividends and distributions on a per share basis.
When the Portfolio goes "ex-dividend," its NAV is reduced by the amount of
the dividend or distribution. If you buy shares just prior to the ex-dividend
date, the price you pay will include the dividend or distribution and a portion
of your investment will be returned to you as a taxable distribution. You
should, therefore, consider the timing of dividends when making your purchases.
- -------------------------------------------------------------------------------
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
18
<PAGE>
stock of the Portfolio is entitled to its portion of all of the Portfolio's
assets after all debt and expenses of the Portfolio have been paid. The
Portfolio's shares do not have cumulative voting rights for the election of
Directors.
The Fund does not intend to hold annual meetings of shareholders unless
otherwise required by law. The Fund will not be required to hold meetings of
shareholders unless, for example, the election of Directors is required to be
acted on by shareholders under the Investment Company Act. Shareholders have
certain rights, including the right to call a meeting upon a vote of 10% of the
Fund's outstanding shares for the purpose of voting on the removal of one or
more Directors or to transact any other business.
ADDITIONAL INFORMATION
This Prospectus, including the Statement of Additional Information which has
been incorporated by reference herein, does not contain all the information set
forth in the Registration Statement filed by the Fund with the SEC under the
Securities Act of 1933. Copies of the Registration Statement may be obtained at
a reasonable charge from the SEC or may be examined, without charge, at the
office of the SEC in Washington, D.C.
- -------------------------------------------------------------------------------
SHAREHOLDER GUIDE
- -------------------------------------------------------------------------------
HOW TO BUY SHARES OF THE FUND
You may purchase shares of the Portfolio through Prudential Securities,
Prusec or directly from the Fund through its Transfer Agent, Prudential Mutual
Fund Services, Inc. (PMFS). The minimum initial investment is $5,000. The
minimum subsequent investment is $1,000. All minimum investment requirements are
waived for certain retirement and employee savings plans or custodial accounts
for the benefit of minors. For purchases made through the Automatic Savings
Accumulation Plan, the minimum initial and subsequent investment is $50. The
minimum initial investment requirement is waived for purchases of Class A shares
effected through an exchange of Class B shares of The BlackRock Government
Income Trust. 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 purchase or
on a deferred basis, See "Alternative Purchase Plan" below. See also "How the
Fund Values its Shares".
Application forms can be obtained from PMFS, Prudential Securities or
Prusec. If a stock certificate is desired, it must be requested in writing for
each transaction. Certificates are issued only for full shares. Shareholders who
hold their shares through Prudential Securities will not receive stock
certificates.
The Fund reserves the right to reject any purchase order (including an
exchange 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."
Your dealer is responsible for forwarding payment promptly to the Fund. The
Distributor reserves the right to cancel any purchase order for which payment
has not been received by the fifth business day following the investment.
Transactions in Fund shares may be subject to postage and handling charges
imposed by your dealer.
Purchase by Wire. For an initial purchase of shares of the Portfolio by
wire, you must first telephone PMFS to receive an account number at (800)
225-1852 (toll-free). The following information will be requested: your name,
address, tax identification number, class election, dividend distribution
election, amount being wired and wiring bank. Instructions should then be given
by you to your bank to transfer funds by wire to State Street Bank and Trust
Company, Boston, Massachusetts, Custody and Shareholder Services Division,
Attention: Prudential Short-Term Global Income Fund, Inc.-Global Assets
Portfolio, specifying on the wire the account number assigned by PMFS and your
name and identifying the sales charge alternative (Class A or Class B shares).
19
<PAGE>
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 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
20
<PAGE>
are not entitled to a reduced initial sales charge and you expect to maintain
your investment in the Portfolio for more than one year, you should consider
purchasing Class B shares since Class B shares will be automatically converted
into Class A shares after the one year contingent deferred sales charge period
has expired. You will thereafter become a Class A shareholder and, as such, will
be subject to the lower distribution fee applicable to Class A shareholders.
Initial Sales Charge Alternative-Class A Shares
The offering price of Class A shares for investors choosing the initial
sales charge alternative is the next determined NAV plus a sales charge
(expressed as a percentage of the offering price and of the amount invested) as
shown in the following table:
<TABLE>
<CAPTION>
Sales Charge as Sales Charge as Dealer Concession as
Percentage of Percentage of Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
------------------ -------------- --------------- --------------
<S> <C> <C> <C>
Less than $1,000,000 .99% 1.0% .99%
$1,000,000 and above 0.0% 0.0% 0.0%
</TABLE>
Selling dealers may be deemed to be underwriters, as that term is defined
under federal securities laws.
Reduction and Waiver of Initial Sales Charges. Reduced sales charges are
available through Rights of Accumulation and Letters of Intent. Shares of the
Fund and shares of other Prudential Mutual Funds (excluding money market funds
other than those acquired pursuant to the exchange privilege) may be aggregated
to determine the applicable reduction. See "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 participants. 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.
Special Rules Applicable to Retirement Plans. After a Benefit Plan qualifies
to purchase Class A shares at NAV, all subsequent purchases will be made at NAV.
Other 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 client's
broker on the previous purchases.
21
<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
acquired upon the reinvestment of dividends and distributions. See "Purchase and
Redemption of Fund Shares-Reduction and Waiver of Initial Sales Charges-Class A
Shares" in the Statement of Additional Information.
Deferred Sales Charge Alternative-Class B Shares
The offering price of Class B shares for investors choosing the deferred
sales charge alternative is the NAV per share next determined following receipt
of an order by the Transfer Agent or Prudential Securities. Although there is no
sales charge imposed at the time of purchase, the Class B shares may be subject
to a contingent deferred sales charge. See "How to Sell Your Shares-Contingent
Deferred Sales Charge-Class B Shares." Currently, the Portfolio is not offering
Class B Shares.
HOW TO SELL YOUR SHARES
You can redeem shares of the Portfolio at any time for cash at the NAV per
share next determined after the redemption request is received in proper form by
the Transfer Agent or Prudential Securities. See "How the Fund Values its
Shares." In certain cases, however, redemption proceeds from the Class B shares
will be reduced by the amount of any applicable contingent deferred sales
charge, as described below. See "Contingent Deferred Sales Charge-Class B
Shares."
If you hold shares through Prudential Securities, you must redeem your
shares by contacting your Prudential Securities Financial Adviser. If you hold
shares in non-certificate form, a written request for redemption signed by you
exactly as the account is registered is required. If you hold certificates, the
certificates signed in the name(s) shown on the face of the certificates, must
be received by the Transfer Agent in order for the redemption request to be
processed. If redemption is requested by a corporation, partnership, trust or
fiduciary, written evidence of authority acceptable to the Transfer Agent must
be submitted before such request will be accepted. All correspondence and
documents concerning redemptions should be sent to the Portfolio in care of the
Transfer Agent, Prudential Mutual Fund Services, Inc., Attention: Redemption
Services, P.O. Box 15010, New Brunswick, New Jersey 08906-5010.
If the proceeds of the redemption (a) exceed $50,000, (b) are to be paid to
a person other than the record owner, (c) are to be sent to an address other
than the address on the Transfer Agent's records, or (d) are to be paid to a
corporation, 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 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.
22
<PAGE>
Redemption in Kind. If the Board of Directors determines that it would be
detrimental to the best interests of the remaining shareholders of the Portfolio
to make payment wholly or partly in cash, the Portfolio may pay the redemption
price in whole or in part by a distribution in kind of securities from the
investment portfolio of the Portfolio, in lieu of cash, in conformity with
applicable rules of the SEC. Securities will be readily marketable and will be
valued in the same manner as in a regular redemption. See "How the Fund Values
its Shares." If your shares are redeemed in kind, you would incur transaction
costs in converting the assets into cash. The Portfolio, however, has elected to
be governed by Rule 18f-1 under the Investment Company Act, pursuant to which
the Portfolio is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Portfolio during any 90-day period
for any one shareholder.
Involuntary Redemption. In order to reduce expenses of the Portfolio, the
Board of Directors may redeem all of the shares of any shareholder, other than a
shareholder which is an IRA or other tax-deferred retirement plan, whose account
has a net asset value of less than $500 due to a redemption. The Portfolio will
give such shareholders 60 days' prior written notice in which to purchase
sufficient additional shares to avoid such redemption.
30-day Repurchase Privilege. If you redeem your shares and have not
previously exercised the repurchase privilege you may reinvest any portion or
all of the proceeds of such redemption in shares of the Portfolio at the NAV
next determined after the order is received, which must be within 30 days after
the date of the redemption. No sales charge will apply to such repurchases. You
will receive pro rata credit for any contingent deferred sales charge paid in
connection with the redemption of Class B shares. You must notify the
Portfolio's Transfer Agent, either directly or through Prudential Securities or
Prusec, at the time the repurchase privilege is exercised that you are entitled
to credit for the contingent deferred sales charge previously paid. Exercise of
the repurchase privilege will generally not affect federal income tax treatment
of any gain realized upon redemption. If the redemption resulted in a loss, some
or all of the loss, depending on the amount reinvested, will not be allowed for
federal income tax purposes.
Contingent Deferred Sales Charge-Class B Shares
If you have elected to purchase shares without an initial sales charge
(Class B), a contingent deferred sales charge or CDSC of 1% will be imposed on
all redemptions made within one year of purchase. The CDSC will be deducted from
the redemption proceeds and reduce the amount paid to you. A CDSC will be
applied on the lesser of the original purchase price or the current value of the
shares being redeemed. Increases in the value of your shares purchased through
reinvestment of dividends or distributions are not subject to a CDSC. The amount
of any contingent deferred sales charge will be paid to and retained by the
Distributor to the extent the Distributor has costs reimbursable to it under the
Class B Plan. See "How the Fund is Managed-Distributor."
In determining the contingent deferred sales charge applicable to a
redemption, it will be assumed that the redemption is made first of shares
acquired pursuant to reinvestment of dividends and distributions and then of
shares held for the longest period of time within the one-year period. For
purposes of calculating the one-year period, all payments for the purchase of
shares during a month will be aggregated and deemed to have been made on the
last day of the month. No contingent deferred sales charge will be applicable
after the one-year period.
For example, assume you purchased 1000 shares at $2 per share for a cost of
$2,000. Subsequently, you acquired 50 additional shares through dividend
reinvestment. Six months after the purchase, you decided to redeem 200 shares.
Assuming at the time of redemption, the net asset value had appreciated to $2.20
per share, the proceeds of the redemption would be $440. Fifty shares would not
be subject to charge because of dividend reinvestment. With respect to the
remaining 150 shares, the charge would be applied to the original cost of $2 per
share and not to the increase in net asset value per share of $.20. Therefore,
$300 of the $440 redemption proceeds would be charged at a rate of 1%.
For federal income tax purposes, the amount of the contingent deferred sales
charge will reduce the gain or increase the loss, as the case may be, on the
amount recognized on the redemption of shares.
HOW TO EXCHANGE YOUR SHARES
Class A and Class B shareholders of the Portfolio each have an exchange
privilege with the Class A and Class B shares, respectively, of Prudential
Adjustable Rate Securities Fund, Inc. subject to the minimum investment
23
<PAGE>
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 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.
In periods of severe market or economic conditions the telephone exchange of
shares may be difficult to implement and you should make exchanges by mail by
writing to Prudential Mutual Fund Services, Inc., at the address noted above.
The Exchange Privilege may be modified or terminated at any time on sixty
days' notice to shareholders.
SHAREHOLDER SERVICES
In addition to the exchange privilege, as a shareholder in the Portfolio,
you can take advantage of the following additional services and privileges:
(bullet) 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.
(bullet) 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.
(bullet) 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
24
<PAGE>
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.
(bullet) 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."
(bullet) 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.
(bullet) 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.
25
<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 registered representative or telephone
the Fund at 1 (800) 225-1852 for a free prospectus. Read the prospectus
carefully before you invest or send money.
- -------------------------------------------------------------------------------
Taxable Bond Funds
Prudential Adjustable Rate Securities Fund, Inc.
Prudential GNMA Fund
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential Structured Maturity Fund, Inc.
Income Portfolio
Prudential U.S. Government Fund
The BlackRock Government Income Trust
Tax-Exempt Bond Funds
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Yield Series
Insured Series
Modified Term Series
Prudential Municipal Series Fund
Arizona Series
Florida Series
Georgia Series
Hawaii Income Series
Maryland Series
Massachusetts Series
Michigan Series
Minnesota Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
Global Funds
Prudential Global Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Global Natural Resources Fund, Inc.
Prudential Intermediate Global Income Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential Short-Term Global Income Fund, Inc.
Global Assets Portfolio
Short-Term Global Income Portfolio
Global Utility Fund, Inc.
Equity Funds
Prudential Allocation Fund
Conservatively Managed Portfolio
Strategy Portfolio
Prudential Equity Fund
Prudential Equity Income Fund, Strategy Portfolio
Prudential Growth Opportunity Fund
Prudential IncomeVertible\'AE Fund, Inc.
Prudential Multi-Sector Fund, Inc.
Prudential Strategist Fund, Inc.
Prudential Utility Fund
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Money Market Funds
* Taxable Money Market Funds
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund
Money Market Series
Prudential MoneyMart Assets
* Tax-Free Money Market Funds
Prudential Tax-Free Money Fund
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
* Command Funds
Command Money Fund
Command Government Fund
Command Tax-Free Fund
* Institutional Money Market Funds
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
- -------------------------------------------------------------------------------
<PAGE>
No dealer, sales representative or any other person has
been authorized to give any information or to make any
representations, other than those contained in this
Prospectus, in connection with the offer contained
herein, and, if given or made, such other information or
representations must not be relied upon as having been
authorized by the Fund or the Distributor. This
Prospectus does not constitute and offer by the Fund or
by the Distributor to sell or a solicitation of an offer to
buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make
such offer in such jurisdiction.
___________________________________________________________
TABLE OF CONTENTS
Page
----
FUND HIGHLIGHTS.............................. 2
Risk Factors and Special Characteristics... 2
FUND EXPENSES................................ 4
FINANCIAL HIGHLIGHTS......................... 5
HOW THE FUND INVESTS......................... 6
Investment Objective and Policies.......... 6
Risk Factors............................... 8
Other Investments and Investment Techniques 8
Investment Restrictions.................... 12
HOW THE FUND IS MANAGED...................... 12
Manager.................................... 12
Fee Waivers and Subsidy.................... 13
Distributor ............................... 13
Portfolio Transactions..................... 16
Custodian and Transfer and
Dividend Disbursing Agent................ 16
HOW THE FUND VALUES ITS SHARES............... 16
HOW THE FUND CALCULATES PERFORMANCE.......... 16
TAXES, DIVIDENDS AND DISTRIBUTIONS........... 17
GENERAL INFORMATION.......................... 18
Description of Common Stock................ 18
Additional Information..................... 19
SHAREHOLDER GUIDE............................ 19
How to Buy Shares of the Fund.............. 19
Alternative Purchase Plan.................. 20
How to Sell Your Shares.................... 22
How to Exchange Your Shares................ 23
Shareholder Services....................... 24
APPENDIX.....................................A-1
THE PRUDENTIAL MUTUAL FUND FAMILY............B-1
________________________________________________
MF149A 4443343
________________________________________________
Class A: 74436H 10 1
CUSIP Nos.:
Class B: 74436H 20 0
________________________________________________
Prudential
Short-Term
Global Income
Fund, Inc.
(Global Assets Portfolio)
Prudential Mutual Funds (LOGO)
Building Your Future
On Our StrengthSM
PROSPECTUS
January 3, 1995
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
Statement of Additional Information
dated January 3, 1995
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
January 3, 1995, a copy of which may be obtained from the Fund at One
Seaport Plaza, New York, New York 10292.
-----------------
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Cross-reference
to page in
Prospectus
--------------------------------
Short-Term
Global Income Global Assets
Page Portfolio Portfolio
---- --------------- -------------
<S> <C> <C> <C>
Additional Investment Information ...................................................... B-2 7 6
Investment Restrictions ................................................................ B-9 14 12
Directors and Officers ................................................................. B-10 14 12
Manager ................................................................................ B-12 14 12
Distributor ............................................................................ B-14 15 13
Portfolio Transactions and Brokerage ................................................... B-16 17 16
Purchase and Redemption of Fund Shares ................................................. B-17 21 19
Shareholder Investment Account ......................................................... B-20 29 24
Net Asset Value ........................................................................ B-23 18 16
Taxation ............................................................................... B-24 19 17
Performance Information ................................................................ B-25 18 16
Custodian, Transfer and Dividend Disbursing Agent, and Independent Accountants ......... B-27 17 16
Financial Statements ................................................................... B-28 - -
Independent Auditors' Reports .......................................................... B-49 - -
- ------------------------------------------------------------------------------------------------------------------------------------
MF1498
</TABLE>
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
Investment Policies
U.S. Government Securities
"U.S. Government securities" shall include the following:
U.S. Treasury Securities. Each Portfolio may invest in U.S. Treasury
securities, including bills, notes and bonds issued by the U.S. Treasury.
These instruments are direct obligations of the U.S. Government and, as
such, are backed by the "full faith and credit" of the United States. They
differ primarily in their interest rates, the lengths of their maturities
and the dates of their issuances.
Obligations Issued or Guaranteed by U.S. Government Agencies and
Instrumentalities. Each Portfolio may invest in obligations issued by
agencies of the U.S. Government or instrumentalities established or
sponsored by the U.S. Government. These obligations, including those that
are guaranteed by federal agencies or instrumentalities, may or may not be
backed by the "full faith and credit" of the United States. Obligations of
the Government National Mortgage Association (GNMA), the Farmers Home
Administration and the Export-Import Bank are backed by the full faith and
credit of the U.S. Government. Securities in which a Portfolio may invest
that are not backed by the full faith and credit of the U.S. Government
include obligations issued by the Tennessee Valley Authority, the Federal
National Mortgage Association (FNMA), the Federal Home Loan Mortgage
Corporation (FHLMC), the Resolution Funding Corporation and the United
States Postal Service, each of which has the right to borrow from the
United States Treasury to meet its obligations, and obligations of the
Federal Farm Credit Bank and the Federal Home Loan Bank, the obligations of
which may be satisfied only by the individual credit of the issuing agency.
In the case of securities not backed by the full faith and credit of the
United States, a Portfolio must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment and may not be able to
assert a claim against the United States if the agency or instrumentality
does not meet its commitments.
The Short-Term Global Income Portfolio may invest in U.S. Government
securities that are zero-coupon securities. Zero-coupon securities pay no
cash income but are purchased at a discount from their value at maturity.
When held to maturity, their entire return, which consists of the
amortization of the discount, equals the difference between their purchase
price and their maturity value. At no time will the aggregate market value
of the Portfolio's investments in zero-coupon securities exceed 5% of the
Portfolio's total assets.
Special Considerations. U.S. Government securities are considered among
the most creditworthy of fixed income investments. The yields available
from U.S. Government securities are generally lower than the yields
available from corporate debt securities. The values of U.S. Government
securities (like those of fixed-income securities generally) will change as
interest rates fluctuate. During periods of falling U.S. interest rates,
the values of outstanding long-term U.S. Government securities generally
rise. Conversely, during periods of rising interest rates, the values of
such securities generally decline. The magnitude of those fluctuations will
generally be greater for securities with longer maturities. Although
changes in the value of U.S. Government securities will not affect
investment income from those securities, they will affect the net asset
value of each Portfolio.
At a time when a Portfolio has written call options on a portion of its
U.S. Government securities, its ability to profit from declining interest
rates will be limited. Any appreciation in the value of the securities held
in the portfolio above the strike price would likely be partially or wholly
offset by unrealized losses on call options written by the Portfolio. The
termination of option positions under these conditions would generally
result in the realization of capital losses, which would reduce the
Portfolio's capital gains distributions. Accordingly, a Portfolio would
generally seek to realize capital gains to offset realized losses by
selling portfolio securities. In such circumstances, however, it is likely
that the proceeds of such sales would be reinvested in lower yielding
securities. See "Additional Risks--Options Transactions and Related Risks."
Loan Participations
Each Portfolio may invest up to 5% of its total assets in high quality
participation interests having remaining maturities not exceeding one year
in loans extended by banks to United States and foreign companies. In a
typical corporate loan syndication, a number of lenders, usually banks
(co-lenders), lend a corporate borrower a specified sum pursuant to the
terms and conditions of a loan agreement. One of the co-lenders usually
agrees to act as the agent bank with respect to the loan. The loan
agreement among the corporate borrower and the co-lenders identifies the
agent bank as well as sets forth the rights and duties of the parties. The
agreement often (but not always) provides for the collateralization of the
corporate borrower's obligations thereunder and includes various types of
restrictive covenants which must be met by the borrower.
The participation interests acquired by a Portfolio may, depending on
the transaction, take the form of a direct or co-lending relationship with
the corporate borrower, an assignment of an interest in the loan by a co-
lender or another participant, or a
B-2
<PAGE>
participation in the seller's share of the loan. Typically, the Portfolio
will look to the agent bank to collect principal of and interest on a
participation interest, to monitor compliance with loan covenants, to
enforce all credit remedies, such as foreclosures on collateral, and to
notify co-lenders of any adverse changes in the borrower's financial
condition or declarations of insolvency. The agent bank in such cases will
be qualified to serve as a custodian for a registered investment company
such as the Fund. The agent bank is compensated for these services by the
borrower pursuant to the terms of the loan agreement.
When a Portfolio acts as co-lender in connection with a participation
interest or when a Portfolio acquires a participation interest the terms
of which provide that the Portfolio will be in privity with the corporate
borrower, the Portfolio will have direct recourse against the borrower in
the event the borrower fails to pay scheduled principal and interest. In
cases where the Portfolio lacks such direct recourse, the Portfolio will
look to the agent bank to enforce appropriate credit remedies against the
borrower.
Each Portfolio believes that the principal credit risk associated with
acquiring participation interests from a co-lender or another participant
is the credit risk associated with the underlying corporate borrower. A
Portfolio may incur additional credit risk, however, when a Portfolio is in
the position of participant rather than a co-lender because the Portfolio
must assume the risk of insolvency of the co-lender from which the
participation interest was acquired and that of any person interpositioned
between the Portfolio and the co-lender. However, in acquiring
participation interests, the Portfolio will conduct analysis and evaluation
of the financial condition of each such co-lender and participant to ensure
that the participation interest meets the Portfolio's high quality standard
and will continue to do so as long as it holds a participation. For
purposes of a Portfolio's requirement to maintain diversification for tax
purposes, the issuer of a loan participation will be the underlying
borrower. In cases where a Portfolio does not have recourse directly
against the borrower, both the borrower and each agent bank and co-lender
interposed between the Portfolio and the borrower will be deemed issuers of
the loan participation for tax diversification purposes.
For purposes of each Portfolio's fundamental investment restriction
against investing 25% or more of its total assets in any one industry, a
Portfolio will consider all relevant factors in determining who is the
issuer of a loan participation including the credit quality of the
underlying borrower, the amount and quality of the collateral, the terms of
the loan participation agreement and other relevant agreements (including
any intercreditor agreements), the degree to which the credit of such
intermediary was deemed material to the decision to purchase the loan
participation, the interest environment, and general economic conditions
applicable to the borrower and such intermediary.
Certificates of Deposit and Bankers' Acceptances
Certificates of deposit are receipts issued by a depository institution
in exchange for the deposit of funds. The issuer agrees to pay the amount
deposited plus interest to the bearer of the receipt on the date specified
on the certificate. The certificate usually can be traded in the secondary
market prior to maturity. Bankers' acceptances typically arise from
short-term credit arrangements designed to enable businesses to obtain
funds to finance commercial transactions. Generally, an acceptance is a
time draft drawn on a bank by an exporter or an importer to obtain a stated
amount of funds to pay for specific merchandise. The draft is then
"accepted" by a bank that, in effect, unconditionally guarantees to pay the
face value of the instrument on its maturity date. The acceptance may then
be held by the accepting bank as an earning asset or it may be sold in the
secondary market at the going rate of discount for a specific maturity.
Although maturities for acceptance can be as long as 270 days, most
acceptances have maturities of six months or less.
Commercial Paper
Commercial paper consists of short-term (usually from 1 to 270 days)
unsecured promissory notes issued by corporations in order to finance their
current operations. A variable amount master demand note (which is a type
of commercial paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter agreement between
a commercial paper issuer and an institutional lender pursuant to which the
lender may determine to invest varying amounts.
Additional Risks
Options Transactions and Related Risks
Each Portfolio may purchase put and call options and sell covered put
and call options which are traded on United States or other foreign
exchanges and may also engage in over-the-counter options transactions with
United States securities dealers or foreign government securities dealers
(OTC options).
Options on Securities. The purchaser of a call option has the right,
for a specified period of time, to purchase the securities subject to the
option at a specified price (the exercise price or strike price). By
writing a call option, a Portfolio becomes obligated during the term of the
option, upon exercise of the option, to deliver the underlying securities
or a specified amount of cash to the purchaser against receipt of the
exercise price. When a Portfolio writes a call option, the Portfolio loses
the potential for gain on the underlying securities in excess of the
exercise price of the option during the period that the option is open.
B-3
<PAGE>
The purchaser of a put option has the right, for a specified period of
time, to sell the securities subject to the option to the writer of the put
at the specified exercise price. By writing a put option, the Portfolio
becomes obligated during the term of the option, upon exercise of the
option, to purchase the securities underlying the option at the exercise
price. The Portfolio might, therefore, be obligated to purchase the
underlying securities for more than their current market price.
The writer of an option retains the amount of the premium, although
this amount may be offset or exceeded, in the case of a covered call
option, by a decline and, in the case of a covered put option, by an
increase in the market value of the underlying security during the option
period.
A Portfolio may wish to protect certain portfolio securities against a
decline in market value through purchase of put options on other carefully
selected securities which the Investment Advisers believe may move in the
same direction as those portfolio securities. If the investment adviser's
judgment is correct, changes in the value of the put options should
generally offset changes in the value of the portfolio securities being
hedged. If the investment adviser's judgment is not correct, the value of
the securities underlying the put option may decrease less than the value
of the Portfolio's investments and therefore the put option may not provide
complete protection against a decline in the value of the Portfolio's
investments below the level sought to be protected by the put option.
A Portfolio may similarly wish to hedge against appreciation in the
value of debt securities that it intends to acquire through purchase of
call options on other carefully selected debt securities which the
Investment Advisers believe may move in the same direction as those
portfolio securities. In such circumstances the Portfolio will be subject
to risks analogous to those summarized above in the event that the
correlation between the value of call options so purchased and the value of
the securities intended to be acquired by the Portfolio is not as close as
anticipated and the value of the securities underlying the call options
increases less than the value of the securities to be acquired by the
Portfolio.
Each Portfolio may write options on securities in connection with buy-
and-write transactions; that is, the Portfolio may purchase a security and
concurrently write a call option against that security. If the call option
is exercised, the Portfolio's maximum gain will be the premium it received
for writing the option, adjusted upwards or downwards by the difference
between the Portfolio's purchase price of the security and the exercise
price of the option. If the option is not exercised and the price of the
underlying security declines, the amount of the decline will be offset in
part, or entirely, by the premium received.
The exercise price of a call option may be below (in-the-money), equal
to (at-the-money) or above (out-of-the-money) the current value of the
underlying security at the time the option is written. Buy-and-write
transactions using in-the-money call options may be used when it is
expected that the price of the underlying security will remain flat or
decline moderately during the option period. Buy-and-write transactions
using at-the-money call options may be used when it is expected that the
price of the underlying security will remain fixed or advance moderately
during the option period. A buy-and-write transaction using an out-of-the-
money call option may be used when it is expected that the premium received
from writing the call option plus the appreciation in the market price of
the underlying security up to the exercise price will be greater than the
appreciation in the price of the underlying security alone. If the call
option is exercised in such a transaction, the Portfolio's maximum gain
will be the premium received by it for writing the option, adjusted upwards
or downwards by the difference between the Portfolio's purchase price of
the security and the exercise price of the option. If the option is not
exercised and the price of the underlying security declines, the amount of
the decline will be offset in part, or entirely, by the premium received.
Each Portfolio may write both American style options and European style
options. An American style option is an option which may be exercised by
the holder at any time prior to its expiration. A European style option,
however, may only be exercised as of the expiration of the option.
Prior to being notified of exercise of the option, the writer of an
exchange-traded option that wishes to terminate its obligation may effect a
"closing purchase transaction" by buying an option of the same series as
the option previously written. (Options of the same series are options with
respect to the same underlying security, having the same expiration date
and the same strike price.) The effect of the purchase is that the writer's
position will be cancelled by the exchange's affiliated clearing
organization. Likewise, an investor who is the holder of an option may
liquidate a position by effecting a "closing sale transaction" by selling
an option of the same series as the option previously purchased. There is
no guarantee that either a closing purchase or a closing sale transaction
can be effected.
Exchange-traded options in the United States are issued by a clearing
organization affiliated with the exchange on which the option is listed
which, in effect, gives its guarantee to every exchange-traded option
transaction. In contrast, OTC options are contracts between a Portfolio and
its contra-party with no clearing organization guarantee. Thus, when a
Portfolio purchases an OTC option, it relies on the dealer from which it
has purchased the OTC option to make or take delivery of the securities
underlying the option. Failure by the dealer to do so would result in the
loss of the premium paid by the Portfolio as well as the loss of the
expected benefit of the transaction. The Board of Directors of the Fund
will approve a list of dealers with which the Portfolios may engage in OTC
options.
When a Portfolio writes an OTC option, it generally will be able to
close out the OTC options prior to its expiration only by entering into a
closing purchase transaction with the dealer to which the Portfolio
originally wrote the OTC option. While the
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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's 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
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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" where 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.
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(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.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
Position with Principal Occupations
Name and Address the Fund During Past 5 Years
- ---------------- -------- -------------------
<S> <C> <C>
Stephen C. Eyre Director Executive Director, The John A. Hartford Foundation (charitable
c/o Prudential Mutual Fund foundation) (since May 1985); Director of Faircom, Inc.
Management, Inc.
One Seaport Plaza
New York, New York
Delayne Dedrick Gold Director Marketing and Management Consultant.
c/o Prudential Mutual Fund
Management, Inc.
One Seaport Plaza
New York, New York
B-10
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Position with Principal Occupations
Name and Address the Fund During Past 5 Years
- ---------------- -------- -------------------
<S> <C> <C>
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., General American Investors Company,
New York, New York Inc., IGENE Biotechnology, Inc., International CableTel 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, of Czech & Slovak
New York, New York American Enterprise Fund (since October 1994); Director, BUNZL, P.L.C.(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); Vice President, The Prudential
Investment Corporation (since July, 1994). 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
<FN>
- -----------------
* "Interested" director, as defined in the Investment Company Act, by reason of his affiliation with Prudential Securities or PMF.
</TABLE>
B-11
<PAGE>
<TABLE>
<CAPTION>
Position with Principal Occupations
Name and Address the Fund During Past 5 Years
- ---------------- -------- -------------------
<S> <C> <C>
Robert F. Gunia Vice President Director (since January 1989), Chief Administrative Officer (since August
One Seaport Plaza 1990) and Executive Vice President, Treasurer and Chief Financial Officer
New York, New York (since June 1987) of PMF; Senior Vice President (since March 1987) of
Prudential Securities; Vice President and Director of The Asia Pacific
Fund, Inc. (since May 1989).
S. Jane Rose Secretary Senior Vice President (since January 1991), Senior Counsel (since June
One Seaport Plaza 1987) and First Vice President (June 1987-December 1990) of PMF;
New York, New York Senior Vice President and Senior Counsel of Prudential Securities (since
July 1992); formerly Vice President and Associate General Counsel of
Prudential Securities.
Susan C. Cote Treasurer and Senior Vice President (since January 1989) and First Vice President (June
One Seaport Plaza Principal 1987-December 1988) of PMF; Senior Vice President (since January
New York, New York Financial and 1992) and Vice President (January 1986-December 1991) of Prudential
Accounting Securities.
Officer
<FN>
- -----------------
* "Interested" director, as defined in the Investment Company Act, by reason of his affiliation with Prudential Securities or PMF.
</TABLE>
Directors and officers of the Fund are also trustees, directors and
officers of some or all of the other investment companies distributed by
Prudential Securities or Prudential Mutual Fund Distributors, Inc. (PMFD).
The officers conduct and supervise the daily business operations of the
Fund, while the directors, in addition to their functions set forth under
"Manager" and "Distributor," review such actions and decide on general
policy.
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 December 2, 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 December 2, 1994, the only beneficial owners, directly, or
indirectly, of more than 5% of the outstanding common stock of the
Prudential Short-Term Global Income Fund, Inc. were Champlain Enterprises
Inc., ATTN Antony Von Elbe, 518 Rugar St, Plattsburgh, NY 12901-1993, which
held 1,403,762 Class A shares of the Global Asset Portfolio (5.4%); Midland
National Life Ins Co, One Midland Plaza, Sioux Falls, SD 57193-0001, which
held 485,265 Class A shares of the Income Portfolio (15.6%); Investors Life
Insurance Co. of Nebraska, One Midland Plaza, Sioux Falls, SD 57193-0001,
which held 526,245 Class A shares of the Income Portfolio (17.0%); and
Prudential Mutual Fund Services, PMFS Audit Account, P.O. Box 15025, New
Brunswick, NJ 08906-5025, which held 23 Class C shares of the Income
Portfolio (98.1%).
As of December 2, 1994, Prudential Securities was the record holder for
other beneficial owners with respect to the Short-Term Global Income
Portfolio of 2,612,180 Class A shares (or 84% of the outstanding Class A
shares), 17,733,897 Class B shares (or 84% of the outstanding Class B
shares) and 0 Class C shares (or 0% of the outstanding Class C shares) and,
with respect to the Global Assets Portfolio, of 24,393,453 Class A shares
(94% of the outstanding Class A shares) and 0 Class B shares (or 0% of the
outstanding Class B 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 November 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.
B-12
<PAGE>
Pursuant to the Management Agreement with the Fund (the Management
Agreement), PMF, subject to the supervision of the Fund's Board of Directors and
in conformity with the stated policies of each Portfolio, manages both the
investment operations of each Portfolio and the composition of each Portfolio's
investments, including the purchase, retention, disposition and loan of
securities. In connection therewith, PMF is obligated to keep certain books
and records of the Fund. PMF also administers the Fund's corporate affairs and,
in connection therewith, furnishes the Fund with office facilities, together
with those ordinary clerical and bookkeeping services which are not being
furnished by State Street Bank and Trust Company, the Fund's custodian, and
Prudential Mutual Fund Services, Inc. (PMFS or the Transfer Agent), the Fund's
transfer and dividend disbursing agent. The management services of PMF for the
Fund are not exclusive under the terms of the Management Agreement and PMF is
free to, and does, render management services to others.
For its services, PMF receives, pursuant to the Management Agreement, a
fee at an annual rate of .55 of 1% of the average daily net assets of each
Portfolio. The fee is computed daily and payable monthly. The Management
Agreement also provides that, in the event the expenses of a Portfolio
(including the fees of PMF, but excluding interest, taxes, brokerage
commissions, distribution fees and litigation and indemnification expenses
and other extraordinary expenses not incurred in the ordinary course of the
Fund's business) for any fiscal year exceed the lowest applicable annual
expense limitation established and enforced pursuant to the statutes or
regulations of any jurisdiction in which the Fund's shares are qualified
for offer and sale, the compensation due to PMF will be reduced by the
amount of such excess. Reductions in excess of the total compensation
payable to PMF will be paid by PMF to the applicable Portfolio. No such
reductions were required during the fiscal year ended October 31, 1993.
Currently, the Fund believes that the most restrictive expense limitation
of state securities commissions is 2 1/2% of the Fund's average daily net
assets up to $30 million, 2% of the next $70 million of such assets and
1 1/2% of such assets in excess of $100 million.
The Management Agreement was last approved by the Board of Directors,
including a majority of the Directors who are not interested persons of the
Fund and who have no direct or indirect financial interest in the
Management Agreement, on June 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, 1994, 1993 and 1992 PMF received
management fees of $1,755,285, $2,994,867 and $5,136,480 from the
Short-Term Global Income Portfolio, respectively. With respect to the Global
Assets Portfolio, for the fiscal
B-13
<PAGE>
years ended October 31, 1994, 1993 and 1992 PMF received management fees of
$453,970, $1,132,954 and $2,126,994, respectively.
PMF has entered into the Subadvisory Agreement with PIC, a wholly-
owned subsidiary of The Prudential Insurance Company of America (the
Prudential). The Subadvisory Agreement provides that PIC furnish investment
advisory services in connection with the management of the Fund. In
connection therewith, PIC is obligated to keep certain books and records of
the Fund. PMF continues to have responsibility for all investment advisory
services pursuant to the Management Agreement and supervises PIC's
performance of such services. PIC is reimbursed by PMF for the reasonable
costs and expenses incurred by PIC in furnishing those services.
The Subadvisory Agreement was approved by the Board of Directors,
including a majority of the Directors who are not 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 the Fund
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, 1994 PMFD received
payments of $57,000 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, 1994. PMFD also received approximately $15,000 in initial sales
charges.
Class B Plan. For the fiscal year ended October 31, 1994, Prudential
Securities received $2,679,726 from the Portfolio under the Class B Plan and
spent approximately $1,382,000 in distributing the Portfolio's Class B shares.
It is estimated that of the latter
B-14
<PAGE>
amount, approximately $17,200 (1.2%) was spent on printing and mailing of
prospectuses to other than current shareholders; $427,900 (31.0%) on interest
and/or carrying costs; $36,100 (2.6%) 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 $900,800 (65.2%) on the aggregate
of (i) payments of commissions and account servicing fees to financial advisers
($593,100 or 42.9%) and (ii) an allocation on account of overhead and other
branch office distribution-related expenses ($307,700 or 22.3%). 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, 1994,
Prudential Securities received approximately $1,291,500 in contingent
deferred sales charges.
Class C Plan. Prudential Securities also receives the proceeds of
contingent deferred sales charges paid by investors upon certain
redemptions of Class C shares. For the fiscal year ended October 31, 1994,
Prudential Securities did not receive any remuneration under the Class C
Plan and nor did Prudential Securities incur any costs in distributing the
Portfolio's Class C shares. See "Shareholder Guide--How to Sell Your
Shares--Contingent Deferred Sales Charges" in the Prospectus.
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 the Fund is
Managed--Distributor" in the Prospectus.
Class A Plan. For the fiscal year ended October 31, 1994 PMFD received
payments of $411,334 under the Class A Plan. For the same period, PMFD received
initial sales charges of approximately $24,100 for the Portfolio.
Class B Plan. There were no distribution costs incurred nor reimbursable
under the Class B Plan for the fiscal year ended October 31, 1994. All
contingent deferred sales charges collected on the redemption of Class B shares
were retained and credited to the Fund's Class B shares paid-in capital account.
See "Shareholder Guide--How to Sell Your Shares--Contingent Deferred Sales
Charge--Class B Shares" in the Prospectus of the Global Assets Portfolio.
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-1 Directors, cast in
person at a meeting called for the purpose of voting on such continuance. The
Plans may each be terminated at any time, without penalty, by the vote of a
majority of the Rule 12b-1 Directors or by the vote of the holders of a majority
of the outstanding shares of the applicable class on not more than 30 days'
written notice to any other party to the Plans. The Plans may not be amended to
increase materially the amounts to be spent for the services described therein
without approval by the shareholders of the applicable class (by both Class A
and Class B shareholders 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
B-15
<PAGE>
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.
On October 21, 1993, PSI entered into an omnibus settlement with the SEC,
state securities regulators in 51 jurisdictions and the NASD to resolve
allegations that PSI sold interests in more than 700 limited partnerships (and a
limited number of other types of securities) from January 1, 1980 through
December 31, 1990, in violation of securities laws to persons for whom such
securities were not suitable in light of the individuals' financial condition or
investment objectives. It was also alleged that the safety, potential returns
and liquidity of the investments had been misrepresented. The limited
partnerships principally involved real estate, oil and gas producing properties
and aircraft leasing ventures. The SEC Order (i) included findings that PSI's
conduct violated the federal securities laws and that an order issued by the SEC
in 1986 requiring PSI to adopt, implement and maintain certain supervisory
procedures had not been complied with; (ii) directed PSI to cease and desist
from violating the federal securities laws and imposed a $10 million civil
penalty; and (iii) required PSI to adopt certain remedial measures including the
establishment of a Compliance Committee of its Board of Directors. Pursuant to
the terms of the SEC settlement, PSI established a settlement fund in the amount
of $330,000,000 and procedures, overseen by a court approved Claims
Administrator, to resolve legitimate claims for compensatory damages by
purchasers of the partnership interests. PSI has agreed to provide additional
funds, if necessary, for that purpose. PSI's settlement with the state
securities regulators included an agreement to pay a penalty of $500,000 per
jurisdiction. PSI consented to a censure and to the payment of a $5,000,000 fine
in settling the NASD action. In settling the above referenced matters, PSI
neither admitted nor denied the allegations asserted against it.
On January 8, 1994, PSI agreed to the entry of a Final Consent Order and a
Parallel Consent Order by the Texas Securities Commissioner. The firm also
entered into a related agreement with the Texas Securities Commissioner. The
allegations were that the firm had engaged in improper sales practices and other
improper conduct resulting in pecuniary losses and other harm to investors
residing in Texas with respect to purchases and sales of limited partnership
interests during the period of January 1, 1980 through December 31, 1990.
Without admitting or denying the allegations, PSI consented to a reprimand,
agreed to cease and desist from future violations, and to provide voluntary
donations to the State of Texas in the aggregate amount of $1,500,000. The firm
agreed to suspend the creation of new customer accounts, the general
solicitation of new accounts, and the offer for sale of securities in or from
PSI's North Dallas office to new customers during a period of twenty consecutive
business days, and agreed that its other Texas offices would be subject to the
same restrictions for a period of five consecutive business days. PSI also
agreed to institute training programs for its securities salesmen in Texas.
On October 27, 1994, Prudential Securities Group, Inc. and PSI entered into
agreements with the United States Attorney deferring prosecution (provided PSI
complies with the terms of the agreement for three years) for any alleged
criminal activity related to the sale of certain limited partnership programs
from 1983 to 1990. In connection with these agreements, PSI agreed to add the
sum of $330,000,000 to the Fund established by the SEC and executed a
stipulation providing for a reversion of such funds to the United States Postal
Inspection Service. PSI further agreed to obtain a mutually acceptable outside
director to sit on the Board of Directors of PSG and the Compliance Committee of
PSI. The new director will also serve as an independent "ombudsman" whom PSI
employees can call anonymously with complaints about ethics and compliance.
Prudential Securities shall report any allegations or instances of criminal
conduct and material improprieties to the new director. The new director will
submit compliance reports which shall identify all such allegations or instances
of criminal conduct and material improprieties every three months for a
three-year period.
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.
B-16
<PAGE>
Debt securities are generally traded on a "net" basis with dealers
acting as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer.
In underwritten offerings, securities are purchased at a fixed price which
includes an amount of compensation to the underwriter, generally referred
to as the underwriter's concession or discount. On occasion, certain money
market instruments and agency securities may be purchased directly from the
issuer, in which case no commissions or discounts are paid. A Portfolio
will not deal with Prudential Securities in any transaction in which
Prudential Securities acts as principal. Thus, it will not deal in
securities with Prudential Securities acting as market maker, and it will
not execute a negotiated trade with Prudential Securities if execution
involves Prudential Securities' acting as principal with respect to any
part of the Portfolio's order.
Portfolio securities may not be purchased from any underwriting or
selling syndicate of which Prudential Securities (or any affiliate), during
the existence of the syndicate, is a principal underwriter (as defined in
the Investment Company Act), except in accordance with rules of the
Securities and Exchange Commission. This limitation, in the opinion of the
Fund, will not significantly affect a Portfolio's ability to pursue its
present investment objective. However, in the future in other
circumstances, a Portfolio may be at a disadvantage because of this
limitation in comparison to other funds with similar objectives but not
subject to such limitations.
In placing orders for portfolio securities of the Fund, the Manager is
required to give primary consideration to obtaining the most favorable
price and efficient execution. Within the framework of this policy, the
Manager will consider the research and investment services provided by
brokers, dealers or futures commission merchants who effect or are parties
to portfolio transactions of the Fund, the Manager or the Manager's other
clients. Such research and investment services are those which brokerage
houses customarily provide to institutional investors and include
statistical and economic data and research reports on particular companies
and industries. Such services are used by the Manager in connection with
all of its investment activities, and some of such services obtained in
connection with the execution of transactions for the Fund may be used in
managing other investment accounts. Conversely, brokers, dealers or futures
commission merchants furnishing such services may be selected for the
execution of transactions of such other accounts, whose aggregate assets
are far larger than the Fund, and the services furnished by such brokers,
dealers or futures commission merchants may be used by the Manager in
providing investment management for the Fund. Commission rates are
established pursuant to negotiations with the broker, dealer or futures
commission merchant based on the quality and quantity of execution services
provided by the broker or futures commission merchant in the light of
generally prevailing rates. The Manager's policy is to pay higher
commissions to brokers, dealers and futures commission merchants, other
than Prudential Securities, for particular transactions than might be
charged if a different broker had been selected, on occasions when, in the
Manager's opinion, this policy furthers the objective of obtaining best
price and execution. In addition, the Manager is authorized to pay higher
commissions on brokerage transactions for the Fund to brokers and futures
commission merchants other than Prudential Securities in order to secure
research and investment services described above, subject to review by the
Fund's Board of Directors from time to time as to the extent and
continuation of this practice. The allocation of orders among brokers and
futures commission merchants and the commission rates paid are reviewed
periodically by the Fund's Board of Directors.
Subject to the above considerations, Prudential Securities may act as a
broker or futures commission merchant for the Fund. In order for Prudential
Securities (or any affiliate) to effect any Portfolio transactions for a
Portfolio, the commissions, fees or other remuneration received by Prudential
Securities (or any affiliate) must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other such brokers or futures
commission merchants in connection with comparable transactions involving
similar securities or futures contracts being purchased or sold on an exchange
or board of trade during a comparable period of time. This standard would allow
Prudential Securities (or any affiliate) to receive no more than the
remuneration which would be expected to be received by an unaffiliated broker or
futures commission merchant in a commensurate arms-length transaction.
Furthermore, the Board of Directors of the Fund, including a majority of the
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, 1994, 1993 and 1992, 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
B-17
<PAGE>
basis (Class B or, in the case of the Short-Term Global Income Portfolio,
Class C shares). See "Shareholder Guide" in the Prospectus.
Each class of shares represents an interest in the same portfolio of
investments of the Portfolio and has the same rights, except that (i) each
class bears the separate expenses of its Rule 12b-1 distribution and
service plan, (ii) each class has exclusive voting rights with respect to
its plan, (except that the Fund has agreed with the SEC in connection with
the offering of a conversion feature on Class B shares of the Short-Term
Global Income Portfolio to submit any amendment of the Class A distribution
and service plan for that Portfolio to both Class A and Class B
shareholders of that Portfolio) and (iii) only Class B shares have a
conversion feature. See "Distributor." Each class also has separate
exchange privileges. See "Shareholder Investment Account--Exchange
Privilege."
Specimen Price Make-Up
Under the current distribution arrangements between the Fund and the
Distributor, Class A shares are sold at a maximum sales charge of 3% with
respect to the Short-Term Global Income Portfolio and 0.99% with repect to
the Global Assets Portfolio and Class B* and, in the case of
the Short-Term Global Income Portfolio, Class C* shares are sold at
net asset value. Using the Fund's net asset value at October 31, 1994, the
maximum offering price of the Portfolio's shares is as follows:
<TABLE>
Short-Term Global
Global Income Assets
Portfolio Portfolio
--------- ---------
<S> <C> <C>
Class A
Net asset value and redemption price per Class A share .................................. $8.56 $1.80
Maximum Sales Charge: (3% of offering price) ............................................ .26 -
(0.99% of offering price) ......................................... - .02
----- -----
Offering price to public ................................................................ $8.82 $1.82
===== =====
Class B
Net asset value, redemption price and offering price to public per Class B share* ....... $8.56 N.A.
===== =====
Class C
Net asset value, offering price and redemption price per Class C share* ................. $8.56 N.A.
===== =====
<FN>
- -------------
*Class B and, in the case of the Short-Term Global Income Portfolio, Class C shares are subject to a contingent deferred sales
charge on certain redemptions. See "Shareholder Guide--How to Sell Your Shares--Contingent Deferred Sales Charges" in the
Prospectus.
</TABLE>
Reduced Initial Sales Charges--Class A Shares
Combined Purchase and Cumulative Purchase Privilege. If an investor or
eligible group of related investors purchases Class A shares of the Fund
concurrently with Class A shares of other Prudential Mutual Funds, the
purchases may be combined to take advantage of the reduced sales charges
applicable to larger purchases. See the table of breakpoints under
"Shareholder Guide--Alternative Purchase Plan" in the Prospectus.
An eligible group of related Fund investors includes any combination of
the following:
(a) an individual;
(b) the individual's spouse, their children and their parents;
(c) the individual's and spouse's Individual Retirement Account (IRA);
(d) any company controlled by the individual (a person, entity or group
that holds 25% or more of the outstanding voting securities of a company
will be deemed to control the company, and a partnership will be deemed to
be controlled by each of its general partners);
(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).
B-18
<PAGE>
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 and group plans.
Rights of Accumulation. Reduced sales charges are also available
through Rights of Accumulation, under which an investor or an eligible
group of related investors, as described above under "Combined Purchase and
Cumulative Purchase Privilege," may aggregate the value of their existing
holdings of the shares of the Fund and shares of other Prudential Mutual
Funds (excluding money market funds other than those acquired pursuant to
the exchange privilege) to determine the reduced sales charge. However, the
value of shares held directly with the Transfer Agent and through
Prudential Securities will not be aggregated to determine the reduced sales
charge. All shares must be held either directly with the Transfer Agent or
through Prudential Securities. The value of existing holdings for purposes
of determining the reduced sales charge is calculated using the maximum
offering or price (net asset value plus maximum sales charge) as of the
previous business day. See "How the Fund Values Its Shares" in the
Prospectus. The Distributor must be notified at the time of purchase that
the investor is entitled to a reduced sales charge. The reduced sales
charges will be granted subject to confirmation of the investor's holdings.
Rights of Accumulation are not available to individual participants in any
retirement or group plans.
Letters of Intent. Reduced sales charges are available to investors (or an
eligible group of related investors), including retirement and group plans, who
enter into a written Letter of Intent providing for the purchase, within a
thirteen-month period, of shares of the Fund and shares of other Prudential
Mutual Funds. All shares of the Fund and shares of other Prudential Mutual Funds
which (excluding money market funds other than those acquired pursuant to the
exchange privilege) were previously purchased and are still owned are also
included in determining the applicable reduction. However, the value of shares
held directly with the Transfer Agent and through Prudential Securities will not
be aggregated to determine the reduced sales charge. All shares must be held
either directly with the Transfer Agent or through Prudential Securities. The
Distributor must be notified at the time of purchase that the investor is
entitled to a reduced sales charge. The reduced sales charge will be granted
subject to confirmation of the investor's holdings. Letters of Intent are not
available to individual participants in any retirement or group plans.
A Letter of Intent permits a purchaser to establish a total investment goal
to be achieved by any number of investments over a thirteen-month period. Each
investment made during the period will receive the reduced sales charge
applicable to the amount represented by the goal, as if it were a single
investment. Escrowed Class A shares totaling 5% of the dollar amount of the
Letter of Intent will be held by the Transfer Agent in the name of the
purchaser, except in the case of retirement and group plans where the employer
or plan sponsor will be responsible for paying any applicable sales charge. 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 except in
the case of retirement and group plans.
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 (or the employer or
plan sponsor in the case of any retirement or group plan) 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.
Category of Waiver
Death
Disability--An individual will be considered disabled if he or she is unable
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or to be of long-continued and indefinite duration.
Required Documentation
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.
A copy of the Social Security Administration award letter or a letter from a
physician on the physician's letterhead stating that the shareholder (or, in the
case of a trust, the grantor) is permanently disabled. The letter must also
indicate the date of disability.
B-19
<PAGE>
Distribution from an IRA or 403(b) Custodial Account
Distribution from Retirement Plan
Excess Contributions
A copy of the distribution form from the 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.
A letter signed by the plan administrator/trustee indicating the reason for
the distribution.
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.
The Transfer Agent reserves the right to request such additional documents as
it may deem appropriate.
Quality 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.
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 its stockholders the following privileges and plans.
Equity Participation Program
Under the Equity Participation Program, an investor may arrange to have a
specified number of Class A or Class B shares of the Short-Term Global Income
Portfolio automatically exchanged into either one or two Prudential equity funds
on a monthly 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
B-20
<PAGE>
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 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.
B-21
<PAGE>
Dollar Cost Averaging
Dollar cost averaging is a method of accumulating shares by investing a
fixed amount of dollars in shares at set intervals. An investor buys more
shares when the price is low and fewer shares when the price is high. The
average cost per share is lower than it would be if a constant number of
shares were bought at set intervals.
Dollar cost averaging may be used, for example, to plan for retirement,
to save for a major expenditure, such as the purchase of a home, or to
finance a college education. The cost of a year's education at a four-year
college today averages around $14,000 at a private college and around
$4,800 at a public university. Assuming these costs increase at a rate of
7% a year, as has been projected, for the freshman class of 2007, the cost
of four years at a private college could reach $163,000 and over $97,000 at
a public university.1
The following chart shows how much you would need in monthly
investments to achieve specified lump sums to finance your investment
goals.2
<TABLE>
<CAPTION>
Period of
Monthly investments: $100,000 $150,000 $200,000 $250,000
--------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
25 Years......................... $ 110 $ 165 $ 220 $ 275
20 Years......................... 176 264 352 440
15 Years......................... 296 444 592 740
10 Years......................... 555 833 1,110 1,388
5 Years......................... 1,371 2,057 2,742 3,428
<FN>
- --------------
See "Automatic Savings Accumulation Plan".
1Source information concerning the costs of education at public
universities is available from The College Board Annual Survey of
Colleges, 1992. Information about the costs of private colleges is from
the Digest of Education Statistics, 1992; The National Center for
Educational Statistics; and the U.S. Department of Education. Average
costs for private institutions include tuition, fees, room and board.
2The chart assumes an effective rate of return of 8% (assuming monthly
compounding). This example is for illustrative purposes only and is not
intended to reflect the performance of an investment in shares of the
Fund. The investment return and principal value of an investment will
fluctuate so that an investor's shares when redeemed may be worth more or
less than their original cost.
</TABLE>
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 of the Short-Term Global Income Portfolio 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
B-22
<PAGE>
because of the sales charges applicable to (i) the purchase of Class A shares
and (ii) the withdrawal of Class B and Class C shares. Each shareholder
should consult his or her own tax adviser with regard to the tax consequences of
the plan, particularly if used in connection with a retirement plan.
Tax-Deferred Retirement Plans
Various tax-deferred retirement plans, including a 401(k) plan,
self-directed individual retirement accounts and "tax-sheltered accounts"
under Section 403(b)(7) of the Internal Revenue Code are available through
the Distributor. These plans are for use by both self-employed individuals
and corporate employers. These plans permit either self-direction of
accounts by participants, or a pooled account arrangement. Information
regarding the establishment of these plans, the administration, custodial
fees and other details are available from Prudential Securities or the
Transfer Agent.
Investors who are considering the adoption of such a plan should
consult with their own legal counsel or tax adviser with respect to the
establishment and maintenance of any such plan.
Tax-Deferred Retirement Accounts
Individual Retirement Accounts. An individual retirement account (IRA)
permits the deferral of federal income tax on income earned in the account
until the earnings are withdrawn. The following chart represents a
comparison of the earnings in a personal savings account with those in an
IRA, assuming a $2,000 annual contribution, an 8% rate of return and a
39.6% federal income tax bracket and shows how much more retirement income
can accumulate within an IRA as opposed to a taxable individual savings
account.
Tax-Deferred Compounding1
Contributions Personal
Made Over: Savings IRA
------------- -------- --------
10 years $ 26,165 $ 31,291
15 years 44,675 58,649
20 years 68,109 98,846
25 years 97,780 157,909
30 years 135,346 244,692
[FN]
- --------------
1The chart is for illustrative purposes only and does not represent
the performance of the Portfolio or any specific investment. It shows
taxable versus tax-deferred compounding for the periods and on the terms
indicated. Earnings in the IRA account will be subject to tax when
withdrawn from the account.
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 day 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
B-23
<PAGE>
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 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, 1994, of approximately $38,708,000
of which $26,697,000 expires in 2001 and $12,011,000 expires in 2002. For
federal income tax purposes, the Global Assets Portfolio has a capital loss
carryforward as of October 31, 1994 of approximately $10,837,000 of which
$4,584,000 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 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.
B-24
<PAGE>
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 October 31, 1994 was 6.62%, 6.21% and 6.53% for Class A, Class B and
Class C shares, respectively. With respect to the Global Assets Portfolio, the
yield for the 30 days ended October 31, 1994 was 4.37% for Class A shares.
During this period, no Class B shares were outstanding for the Global Assets
Portfolio.
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.
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 October 30, 1994 and for the period from inception
of the Portfolios were as follows:
Year Ended
October 31,
1994 From Inception
---- --------------
Short-Term Global Income Portfolio-Class A -4.83% 3.21%
Short-Term Global Income Portfolio-Class B -5.62% 2.90%
Short-Term Global Income Portfolio-Class C N.A. -0.25%
Global Assets Portfolio-Class A -0.52% 2.99%
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.
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.
B-25
<PAGE>
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 October 31, 1994
and for the period from inception of the Portfolio were as follows:
Year Ended
October 31,
1994 From Inception
---- --------------
Short-Term Global Income Portfolio-Class A -1.89% 17.00%
Short-Term Global Income Portfolio-Class B -2.62% 13.13%
Short-Term Global Income Portfolio-Class C N.A. 0.75%
Global Assets Portfolio-Class A 0.47% 12.65%
Performance Chart
From time to time, the performance of the Fund may be
measured against various indices. Set forth below is a chart which
compares the performance of different types of investments over the long-
term and the rate of inflation.1
[CHART]
1Source: Ibbotson Associates, "Stocks, Bonds, Bills and Inflation--1993
Yearbook" (annually updates the work of Roger G. Ibbotson and Rex A.
Sinquefield). Common stock returns are based on the Standard & Poor's 500
Stock Index, a market-weighted, unmanaged index of 500 common stocks in a
variety of industry sectors. It is a commonly used indicator of broad
stock price movements. This chart is for illustrative purposes only, and
is not intended to represent the performance of any particular investment
or fund.
B-26
<PAGE>
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, 1994, the Fund incurred
fees of approximately $368,900 for the Short-Term Global Income Portfolio
and $88,200 for the Global Assets Portfolio, for the services of PMFS.
PMFS is also reimbursed for its out-of-pocket expenses, including but not
limited to postage, stationery, printing, allocable communications expenses
and other costs.
Deloitte & Touche LLP, Two World Financial Center, New York, N.Y. 10281,
serves as the Fund's independent accountants and in that capacity audits the
Fund's annual financial statements.
B-27
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC. Portfolio of Investments
SHORT-TERM GLOBAL INCOME PORTFOLIO October 31, 1994
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--61.7%
Australia--13.5%
Australian Gov't. Bonds,
A$ 10,500# 13.00%, 7/15/96......... $ 8,289,330
New South Wales Treasury
Corp.,
8,000# 8.50%, 3/1/96........... 5,921,098
Victorian Treasury
Corp.,
12,765# 12.50%, 7/15/96......... 9,987,162
Western Australia
Treasury
Corp.,
7,000# 10.00%, 1/15/97......... 5,259,261
------------
29,456,851
------------
Brazil--1.3%
Republic of Brazil,
BRL 3,528 6.06%, 1/1/01........... 2,888,550
------------
Canada--3.1%
Canadian Gov't. Bonds,
C$ 9,000 7.75%, 9/15/96.......... 6,664,904
------------
Denmark--4.2%
Danish Gov't. Bullet,
DKr 53,050 9.00%, 11/15/96......... 9,155,884
------------
France--3.0%
Gov't. of France,
FF 34,000 6.50%, 10/12/96......... 6,521,884
------------
Ireland--2.6%
Irish Gov't. Bonds,
IEP 3,500 9.00%, 7/30/96.......... 5,692,959
------------
Italy--3.0%
Export Finance of
Norway,
Lira 8,000,000 12.25%, 8/5/96.......... 5,291,360
Italian Gov't. BTP,
2,000,000 10.00%, 8/1/96.......... 1,281,500
------------
6,572,860
------------
Mexico--1.5%
Mexican Treasury
Bills,**
MP 13,947# 14.13%, 10/10/96........ $ 3,170,600
------------
Spain--4.3%
Kingdom of Spain,
Pts 1,000,000 11.90%, 7/15/96......... 8,177,941
Nordic Investment Bank,
150,000 13.80%, 11/30/95........ 1,247,907
------------
9,425,848
------------
Sweden--3.0%
Statens Bostad Housing
Fund,
SKr 45,000 12.50%, 1/23/97......... 6,463,944
------------
United Kingdom--16.2%
Bayerische Hypothelsen
Bank,
(BR PD)5,000 11.13%, 6/24/96......... 8,487,924
United Kingdom Treasury
Bonds,
10,350 13.25%, 1/22/97......... 18,569,794
5,000 8.75%, 9/1/97........... 8,223,550
------------
35,281,268
------------
United States--6.0%
Cedulas Hipotecarias
Rurales,
US$ 4,400 7.90%, 9/1/00........... 3,971,000
Republic of Argentina
Bote,
23,000 4.94%, 5/31/96.......... 9,108,000
------------
13,079,000
------------
Total long-term
investments
(cost
US$133,117,733)....... 134,374,552
------------
SHORT-TERM INVESTMENTS--38.6%
Canada--4.1%
Canadian Treasury
Bills,**
C$ 9,640 7.90%, 6/29/95.......... 6,841,845
</TABLE>
See Notes to Financial Statements.
B-28
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
SHORT-TERM GLOBAL INCOME PORTFOLIO
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
Canada--cont'd.
Ontario Province
Canada,**
C$ 3,000 6.00%, 3/21/95.......... $ 2,166,712
------------
9,008,557
------------
Mexico--8.3%
Mexican Treasury
Bills,**
MP 6,900# 14.30%, 12/8/94......... 1,980,402
24,500# 14.50%, 12/8/94......... 7,031,863
19,490# 13.20%, 9/7/95.......... 5,062,817
15,288# 13.10%, 9/21/95......... 3,952,223
------------
18,027,305
------------
New Zealand--15.0%
New Zealand Gov't.
Bonds,
NZ$ 26,000 10.00%, 2/15/95......... 16,080,847
New Zealand Treasury
Bills,**
9,000 6.82%, 11/9/94.......... 5,491,066
1,400 7.02%, 11/9/94.......... 854,166
1,500 7.10%, 12/7/94.......... 916,586
15,489 7.56%, 1/11/95.......... 9,388,376
------------
32,731,041
------------
United States--11.2%
Joint Repurchase
Agreement Account,
US$ 8,847 4.77%, 11/1/94 (Note
5).................... 8,847,000
Mexican Tesobonos,**
5,695 8.69%, 7/27/95.......... 5,360,841
2,632 8.35%, 8/3/95........... 2,473,829
8,200 8.41%, 8/17/95.......... 7,681,119
------------
24,362,789
------------
Total short-term
investments
(cost
US$82,568,380)........ 84,129,692
------------
OUTSTANDING OPTIONS
PURCHASED*--0.2%
Currency Call Options
A$ 32,000 Australian Dollars,
expiring 11/23/94
@A$.7413.............. $ 156,768
(YEN) 15,000 Japanese Yen,
expiring 5/5/95
@(YEN)105.50.......... 40,500
------------
197,268
------------
Currency Put Options
(YEN) 12,300 Japanese Yen,
expiring 1/26/95
@(YEN)93.70........... 99,630
------------
Cross-Currency Put Options
5,820
Deutschemarks,
expiring 1/12/95
@DM972.30 per Italian
DM 9,700 Lira..................
15,000 @DM974.16 per Italian
Lira.................. 2,985
27,400 expiring 1/20/95
@DM4.6015 per Swedish
Krona................. 69,048
------------
77,853
------------
Total outstanding
options
purchased
(cost US$1,481,065)... 374,751
------------
Total Investments--100.5%
(cost $217,167,178; Note
4).................... 218,878,995
Liabilities in excess of
other
assets--(0.5)%........ (1,071,128)
------------
Net Assets--100%........ $217,807,867
------------
------------
</TABLE>
- ---------------
Portfolio securities are classified according to the security's
currency denomination.
# Principal amount segregated as collateral for
forward currency contracts. Aggregate value of
segregated securities--$50,654,756.
* Non-income producing security.
** Percentage quoted represents yield to maturity
as of purchase date.
See Notes to Financial Statements.
B-29
<PAGE>
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
(D) Expressed in thousands of local currency units.
See Notes to Financial Statements.
B-30
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
SHORT-TERM GLOBAL INCOME PORTFOLIO
</TABLE>
<TABLE>
<CAPTION>
October 31, 1994
----------------
<S> <C>
Statement of Assets and Liabilities
Assets
Investments, at value (cost $217,167,178)............................................... $218,878,995
Foreign currency, at value (cost $47,559)............................................... 48,834
Interest receivable..................................................................... 4,029,767
Forward currency contracts--net amount receivable from counterparties................... 2,755,484
Receivable for Fund shares sold......................................................... 28,298
Deferred expenses and other assets...................................................... 49,197
----------------
Total assets........................................................................ 225,790,575
----------------
Liabilities
Forward currency contracts--net amount payable to counterparties........................ 3,754,380
Payable for Fund shares reacquired...................................................... 3,244,590
Dividends payable....................................................................... 385,050
Accrued expenses........................................................................ 271,445
Due to Distributors..................................................................... 128,803
Due to Manager.......................................................................... 105,402
Withholding taxes payable............................................................... 93,038
----------------
Total liabilities................................................................... 7,982,708
----------------
Net Assets.............................................................................. $217,807,867
----------------
----------------
Net assets were comprised of:
Common stock, at par.................................................................. $ 25,452
Paid-in capital in excess of par...................................................... 266,606,388
----------------
266,631,840
Accumulated distributions in excess of net investment income.......................... (10,975,642)
Accumulated net realized loss on investments.......................................... (38,707,984)
Net unrealized appreciation on investments and foreign currencies..................... 859,653
----------------
Net assets, October 31, 1994............................................................ $217,807,867
----------------
----------------
Class A:
Net asset value and redemption price per share
($28,841,436 / 3,369,859 shares of common stock issued and outstanding)............. $8.56
Maximum sales charge (3.00% of offering price)........................................ .26
----------------
Maximum offering price to public...................................................... $8.82
----------------
----------------
Class B:
Net asset value, offering price and redemption price per share
($188,966,231 / 22,082,197 shares of common stock issued and outstanding)........... $8.56
----------------
----------------
Class C:
Net asset value, offering price and redemption price per share
($200.23 / 23.401 shares of common stock issued and outstanding).................... $8.56
----------------
----------------
</TABLE>
See Notes to Financial Statements.
B-31
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
SHORT-TERM GLOBAL INCOME PORTFOLIO
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
October 31,
Net Investment Income 1994
------------
<S> <C>
Income
Interest (net of foreign
withholding
taxes of $106,062)............... $ 28,076,745
------------
Expenses
Distribution fee--Class A.......... 57,000
Distribution fee--Class B.......... 2,679,726
Management fee..................... 1,755,285
Custodian's fees and expenses...... 671,000
Transfer agent's fees and
expenses......................... 425,000
Reports to shareholders............ 180,000
Registration fees.................. 58,000
Amortization of organization
expenses......................... 40,000
Audit fee.......................... 35,000
Directors' fees.................... 35,000
Legal.............................. 26,000
Miscellaneous...................... 18,079
------------
Total expenses................... 5,980,090
------------
Net investment income................ 22,096,655
------------
Realized and Unrealized
Gain (Loss) on Investments and
Foreign Currency Transactions
Net realized gain (loss) on:
Investment transactions............ (23,776,265)
Foreign currency transactions...... (13,261,084)
Written option transactions........ 1,595,280
Future transactions................ (8,570)
------------
(35,450,639)
------------
Net change in unrealized
appreciation/
depreciation of:
Investments........................ 7,302,972
Foreign currencies................. (1,578,939)
Written options.................... 44,225
------------
5,768,258
------------
Net loss on investments, foreign
currencies and written options..... (29,682,381)
------------
Net Decrease in Net Assets
Resulting from Operations............ $ (7,585,726)
------------
------------
</TABLE>
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
SHORT-TERM GLOBAL INCOME PORTFOLIO
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
Increase (Decrease) ---------------------------
in Net Assets 1994 1993
------------ ------------
<S> <C> <C>
Operations
Net investment
income................. $ 22,096,655 $ 52,264,411
Net realized loss on
investments and
foreign currency
transactions......... (35,450,639) (52,043,418)
Net change in
unrealized
appreciation/depreciation
of investments and
foreign currencies... 5,768,258 37,156,133
------------ ------------
Net increase (decrease)
in net assets resulting
from operations........ (7,585,726) 37,377,126
------------ ------------
Net equalization
debits................. -- (7,869,071)
------------ ------------
Dividends and distributions (Note 1)
Dividends from net
investment income
Class A.............. -- (4,363,707)
Class B.............. -- (25,199,590)
------------ ------------
-- (29,563,297)
------------ ------------
Tax return of capital
distributions
Class A.............. (2,411,703) --
Class B.............. (15,406,444) --
------------ ------------
(17,818,147) --
------------ ------------
Fund share transactions
(Note 6)
Proceeds from shares
subscribed........... 11,205,281 39,187,479
Net asset value of
shares issued in
reinvestment of
dividends and
distributions........ 10,703,295 17,172,475
Cost of shares
reacquired........... (213,168,513) (330,090,306)
------------ ------------
Net decrease in net
assets from Fund share
transactions........... (191,259,937) (273,730,352)
------------ ------------
Total decrease........... (216,663,810) (273,785,594)
Net Assets
Beginning of year........ 434,471,677 708,257,271
------------ ------------
End of year.............. $217,807,867 $434,471,677
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
B-32
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
SHORT-TERM GLOBAL INCOME PORTFOLIO
Notes to Financial Statements
Prudential Short-Term Global Income Fund, Inc. (the ``Fund'') is registered
under the Investment Company Act of 1940 as a non-diversified, open-end
management investment company. The Fund consists of two series, namely:
Short-Term Global Income Portfolio and Global Assets Portfolio. The Fund was
incorporated in Maryland on February 21, 1990 and had no significant operations
other than the issuance of 5,000 shares each of Class A and Class B common stock
of the Short-Term Global Income Portfolio for $100,000 on September 21, 1990 to
Prudential Mutual Fund Management, Inc. (``PMF''). The Short-Term Global Income
Portfolio (the ``Portfolio'') commenced investment operations on November 1,
1990. The investment objective of the Portfolio is to maximum total return, the
components of which are current income and capital appreciation, by investing
primarily in a portfolio of investment grade debt securities denominated in U.S.
dollar and a range of foreign currencies having remaining maturities of not more
than three years. The ability of the issuers of the debt securities held by the
Fund to meet their obligations may be affected by economic developments in a
specific country or industry.
Note 1. Accounting The following is a summary of
Policies significant accounting policies
followed by the Fund, and the Portfolio in the
preparation of its financial statements.
Securities Valuation: In valuing the Fund's assets, quotations of foreign
securities in a foreign currency are converted to U.S. dollar equivalents at the
then current currency value. Government securities for which quotations are
available will be based on prices provided by an independent pricing service or
principal market makers. Other portfolio securities that are actively traded in
the over-the-counter market, including listed securities for which the primary
market is believed to be over-the-counter, will be valued at the average of the
quoted bid and asked prices provided by an independent pricing service or by
principal market makers. Any security for which the primary market is on an
exchange is valued at the last sale price on such exchange on the day of
valuation or, if there was no sale on such day, the last bid price quoted on
such day. Securities for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Board of Directors.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost which approximates market value.
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian or designated
subcustodians, as the case may be under triparty repurchase agreements, takes
possession of the underlying collateral securities, the value of which exceeds
the principal amount of the repurchase transaction including accrued interest.
If the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
Foreign Currency Translation: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(i) market value of investment securities, other assets and liabilities--at
the closing daily rate of exchange;
(ii) purchases and sales of investment securities, income and expenses--at
the rate of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange
rates and market values at the close of the fiscal 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.
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 unrealized
currency gains and losses from valuing foreign currency denominated assets and
liabilities at fiscal year end exchange rates are reflected as a component of
net unrealized appreciation/depreciation on investments and foreign currencies.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with
B-33
<PAGE>
those of U.S. companies as a result of, among other factors, the possibility of
political and economic instability and the level of governmental supervision
and regulation of foreign securities markets.
Forward Currency Contracts: The Fund enters into forward currency contracts
in order to hedge its exposure to changes in foreign currency exchange rates on
its foreign portfolio holdings. A forward contract is a commitment to purchase
or sell a foreign currency at a future date at a negotiated forward rate. The
gain or loss arising from the difference between the settlement value of the
original and renegotiated forward contracts, if any, is isolated and is included
in net realized gain (loss) from foreign currency transactions. Risks may arise
upon entering into these contracts from the potential inability of the
counterparties to meet the terms of their contracts.
Option Writing: When the Fund writes an option, an amount equal to the
premium received by the Fund is recorded as a liability and is subsequently
adjusted to the current market value of the option written. Premiums received
from writing options which expire unexercised are treated by the Fund on the
expiration date as realized gains from securities or currencies based on the
type of option written. The difference between the premium and the amount paid
on effecting a closing purchase transaction, including brokerage commissions, is
also treated as a realized gain, or if the premium is less than the amount paid
for the closing purchase transaction, as a realized loss. If a call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security or currency in determining whether the Fund has realized a gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
securities or currencies purchased by the Fund. The Fund as writer of an option
may have no control over whether the underlying securities or currencies may be
sold (called) or purchased (put) and as a result bears the market risk of an
unfavorable change in the price of the security or currency underlying the
written option.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses from security and currency
transactions are calculated on the identified cost basis. Interest income is
recorded on the accrual basis.
Net investment income (other than distribution fees) and unrealized and
realized gains or losses are allocated daily to each class of shares based upon
the relative proportion of net assets of each class at the beginning of the day.
Equalization: The Fund follows the accounting practice known as equalization by
which a portion of the proceeds from sales and costs of reacquisitions of Fund
shares, equivalent on a per share basis to the amount of distributable net
investment income on the date of the transaction, is credited or charged to
undistributed net investment income. As a result, undistributed net investment
income per share is unaffected by sales or reacquisitions of the Fund's shares.
Dividends and Distributions: The Fund declares daily and pays dividends from
book basis 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 Portfolio accounts and reports
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 of applying this statement was to increase accumulated distributions in
excess of net investment income by $27,093,822, decrease accumulated net
realized loss on investments by $23,439,669 and increase paid-in capital by
$3,654,153. This was primarily the result of net foreign currency losses
incurred for the fiscal year ended October 31, 1994. Net investment income, net
realized gains and net assets were not affected by this change. Included in
accumulated distributions in excess of net investment income as of October 31,
1994 is $11,125,103 of equalization debits.
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 shares purchased until all organization expenses have been amortized.
B-34
<PAGE>
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 Portfolio 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 and Class C shares of the Fund. The Portfolio
reimburses PMFD and compensates PSI for distributing and servicing the Fund's
Class A, Class B and Class C shares, pursuant to plans of distribution (the
``Class A, B and C Plans''). The distribution fees are accrued daily and payable
monthly.
Pursuant to the Class A Plan, the Portfolio reimburses PMFD for its expenses
with respect to Class A shares at an annual rate of up to .30 of 1% of the
average daily net assets of the Class A shares. Such expenses under the Class A
Plan were .15 of 1% of the average daily net assets of the Class A shares for
the fiscal year ended October 31, 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.
On July 19, 1994, shareholders of the Portfolio approved amendments to the
Class B distribution plan under which the Class B distribution plan became a
compensation plan, effective August 1, 1994. Prior thereto, the Class B
distribution plan was a reimbursement plan, under which PSI was reimbursed for
expenses actually incurred by it up to the amount permitted under the Class B
Plan. The Portfolio is not obligated to pay any prior or future excess
distribution costs (costs incurred by PSI in excess of distribution fees paid by
the Fund or contingent deferred sales charges received by PSI). The Portfolio
began offering Class C shares on August 1, 1994.
Pursuant to the Class B and C Plans, the Portfolio compensates PSI for
distribution-related activities at an annual rate of up to 1% of the average
daily net assets of both the Class B and C shares. Such expenses under the Class
B Plan were charged at an effective rate of .95 of 1% of the average daily net
assets of the Class B shares for the fiscal year ended October 31, 1994 and are
currently charged at a rate of .75 of 1% of the average daily net assets of the
Class B shares. Such expenses under the Class C Plan were charged at .75 of 1%
of the average daily net assets of the Class C shares for the fiscal year ended
October 31, 1994.
PMFD has advised the Portfolio that it has received approximately $15,000 in
front-end sales charges resulting from sales of Class A shares during the fiscal
year ended October 31, 1994. From these fees, PMFD paid such sales charges to
dealers which in turn paid commissions to salespersons.
PSI has advised the Portfolio that for the fiscal year ended October 31,
1994, it received approximately $1,291,500 in contingent deferred sales charges
imposed upon certain redemptions by Class B shareholders.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are indirect,
wholly-owned subsidiaries of The Prudential Insurance Company of America.
Note 3. Other Prudential Mutual Fund Ser-
Transactions vices, Inc. (``PMFS'') a
With Affiliates wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent and
during the fiscal year ended October 31, 1994, the Portfolio incurred fees of
approximately $368,900 for the services of PMFS. As of October 31, 1994,
approximately $24,100 of such fees were due to PMFS. Transfer agent fees and
expenses in the Statement of Operations include certain out-of-pocket expenses
paid to non-affiliates.
Note 4. Portfolio Purchases and sales of invest-
Securities ment securities, other than
short-term investments and options, for the fiscal
year ended October 31, 1994 aggregated $595,732,470 and $826,634,833,
respectively.
The United States federal income tax basis of the Fund's investments at
October 31, 1994 was substantially the same as for financial reporting purposes
and, accordingly, net unrealized appreciation of investments, for United States
federal income tax purposes was $1,711,817 (gross unrealized
appreciation--$3,837,980; gross unrealized depreciation--$2,126,163).
For federal income tax purposes, the Portfolio had a capital loss
carryforward as of October 31, 1994, of approximately $38,708,000 of which
$26,697,000 expires in 2001 and $12,011,000 expires in 2002. Accordingly, no
capital gains distributions are expected to be paid to shareholders until future
net gains have been realized in excess of such carryforward.
B-35
<PAGE>
Transactions in options written during the year ended October 31, 1994 were
as follows:
<TABLE>
<CAPTION>
Number of
Contracts Premiums
(000) Received
--------- -----------
<S> <C> <C>
Options outstanding at
October 31, 1993................. 30,500 $ 230,275
Options written.................... 808,475 4,633,666
Options terminated in closing
purchase transactions............ (625,575) (3,723,804)
Options expired.................... (157,600) (593,882)
Options exercised.................. (55,800) (546,255)
--------- -----------
Options outstanding at
October 31, 1994................. -- --
--------- -----------
--------- -----------
</TABLE>
At October 31, 1994, the Portfolio had outstanding forward currency
contracts, both to purchase and sell foreign currencies, as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Purchase Contracts Payable Value (Depreciation)
- ------------------ --------------- ------------ -----------
<S> <C> <C> <C>
Australian
Dollars,
expiring
11/28/94........ $ 10,000,000 $ 10,014,548 $ 14,548
Canadian Dollars,
expiring
11/14/94........ 21,585,502 21,497,829 (87,673)
Deutschemarks,
expiring
11/7-11/30/94... 174,593,203 175,115,626 522,423
Italian Lira,
expiring
12/13/94........ 15,625,681 15,880,098 254,417
Japanese Yen,
expiring
11/7-11/18/94... 34,058,007 34,168,798 110,791
Spanish Pesetas,
expiring
12/22/94........ 13,495,279 13,617,258 121,979
Swedish Krona,
expiring
11/7/94......... 3,997,331 3,911,744 (85,587)
--------------- ------------ -----------
$ 273,355,003 $274,205,901 $ 850,898
--------------- ------------ -----------
--------------- ------------ -----------
</TABLE>
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- ------------------ --------------- ------------ -----------
<S> <C> <C> <C>
Australian
Dollars,
expiring
11/28/94-
1/6/95.......... $ 40,376,270 $ 40,538,994 $ (162,724)
Canadian Dollars,
expiring
11/14/94........ 26,000,000 25,941,819 58,181
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- ------------------ --------------- ------------ -----------
<S> <C> <C> <C>
Deutschemarks,
expiring
11/7-11/30/94... $ 176,275,718 $177,005,919 $ (730,201)
French Francs,
expiring
11/18/94........ 6,574,879 6,548,585 26,294
Italian Lira,
expiring
12/13/94........ 15,544,328 15,880,098 (335,770)
Japanese Yen,
expiring
11/7-11/14/94... 12,814,751 13,054,249 (239,498)
Spanish Pesetas,
expiring
12/22/94........ 17,889,590 18,160,408 (270,818)
Swedish Krona,
expiring
11/7/94......... 11,600,110 11,563,002 37,108
Swiss Francs,
expiring
11/14/94........ 15,173,823 15,406,189 (232,366)
--------------- ------------ -----------
$ 322,249,469 $324,099,263 $(1,849,794)
--------------- ------------ -----------
--------------- ------------ -----------
</TABLE>
Note 5. Joint The Portfolio, along with
Repurchase other affiliated registered
Agreement investment companies, trans-
Account fers uninvested cash balances
into a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements collateralized
by U.S. Treasury or Federal agency obligations. As of October 31, 1994, the
Portfolio has a 0.98% undivided interest in the repurchase agreements in the
joint account. The undivided interest for the Portfolio represents $8,847,000 in
principal amount. As of such date, each repurchase agreement in the joint
account and the value of the collateral therefor were as follows:
Smith Barney, Inc., 4.80%, in the principal amount of $260,000,000,
repurchase price $260,034,667, due 11/1/94. The value of the collateral
including accrued interest is $265,200,122.
Nomura Securities International, Inc., 4.77%, in the principal amount of
$100,000,000, repurchase price $100,013,250, due 11/1/94. The value of the
collateral including accrued interest is $102,000,391.
Goldman, Sachs & Co., 4.75%, in the principal amount of $275,000,000,
repurchase price $275,036,285, due 11/1/94. The value of the collateral
including accrued interest is $280,500,611.
B-36
<PAGE>
CS First Boston Corp., 4.75%, in the principal amount of $265,000,000,
repurchase price $265,034,965, due 11/1/94. The value of the collateral
including accrued interest is $271,053,272.
Note 6. Capital The Portfolio currently offers
Class A, Class B and Class C 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. Class C shares are sold
with a contingent deferred sales charge of 1% during the first year. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately five years after purchase commencing in or about February 1995.
The Fund has authorized 1.5 billion shares of common stock at $.001 par value
per share equally divided into Class A, B and C shares. Of the 25,452,079 shares
of common stock issued and outstanding at October 31, 1994, PMF owned 10,000
shares.
Transactions in shares of common stock for the fiscal years ended October 31,
1994 and 1993 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------ ----------- -------------
<S> <C> <C>
Year ended October 31, 1994:
Shares sold................... 551,897 $ 4,763,324
Shares issued in reinvestment
of
dividends and
distributions............... 194,713 1,743,925
Shares reacquired............. (3,776,033) (34,191,806)
----------- -------------
Net decrease in shares
outstanding................. (3,029,423 $ (27,684,557)
----------- -------------
----------- -------------
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)
----------- -------------
----------- -------------
<CAPTION>
Class B Shares Amount
- ------------------------------ ----------- -------------
<S> <C> <C>
Year ended October 31, 1994:
Shares sold................... 710,218 $ 6,441,757
Shares issued in reinvestment
of
dividends and
distributions............... 1,001,413 8,959,370
Shares reacquired............. (20,015,210) (178,976,707)
----------- -------------
Net decrease in shares
outstanding................. (18,303,579) $(163,575,580)
----------- -------------
----------- -------------
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)
----------- -------------
----------- -------------
<CAPTION>
Class C
- ------------------------------
<S> <C> <C>
August 1, 1994* through
October 31, 1994:
Shares sold................... 23 $ 200
----------- -------------
Increase in shares
outstanding................. 23 $ 200
----------- -------------
----------- -------------
</TABLE>
- ---------------
* Commencement of offering of Class C shares.
B-37
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
SHORT-TERM GLOBAL INCOME PORTFOLIO
Financial Highlights
<TABLE>
<CAPTION>
Class A Class B Class C
---------------------------------------------- ---------------------------------------------- ----------
August 1,
1994(D)
through
Year Ended October 31, Year Ended October 31, October
---------------------------------------------- ---------------------------------------------- 31,
1994 1993 1992 1991 1994 1993 1992 1991 1994
---------- -------- -------- -------- ---------- -------- -------- -------- ----------
<S> <C> <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 $ 8.61
---------- -------- -------- -------- ---------- -------- -------- -------- ------
Income from
investment
operations
Net investment
income........ .70 .97 .96 1.03 .62 .88 .88 .95 .14
Net realized and
unrealized
gain (loss) on
investment and
foreign
currency
transactions... (.86) (.26) (.95) (.02) (.86) (.26) (.95) (.02) (.06)
---------- -------- -------- -------- ---------- -------- -------- -------- -----
Total from
investment
operations... (.16) .71 .01 1.01 (.24) .62 (.07) .93 .08
---------- -------- -------- -------- ---------- -------- -------- -------- -----
Less
distributions
Dividends from
net investment
income........ -- (.58) (.82) (1.03) -- (.49) (.74) (.95) --
Tax return of
capital
distributions... (.57) -- -- -- (.49) -- -- -- (.13)
Distributions
from net
capital
gains......... -- -- -- (.01) -- -- -- (.01) --
---------- -------- -------- -------- ---------- -------- -------- -------- -----
Total
distributions... (.57) (.58) (.82) (1.04) (.49) (.49) (.74) (.96) (.13)
---------- -------- -------- -------- ---------- -------- -------- -------- -----
Net asset value,
end of
period........ $ 8.56 $ 9.29 $ 9.16 $ 9.97 $ 8.56 $ 9.29 $ 9.16 $ 9.97 $ 8.56
---------- -------- -------- -------- ---------- -------- -------- -------- -----
---------- -------- -------- -------- ---------- -------- -------- -------- -----
TOTAL
RETURN#:...... (1.89)% 7.96% (0.07)% 10.41% (2.62)% 7.00% (0.86)% 9.51% 0.75%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of period
(000)......... $28,841 $59,458 $101,358 $105,148 $188,966 $375,013 $606,899 $669,086 $200@
Average net
assets
(000)......... $38,000 $70,347 $119,171 $51,830 $281,143 $474,175 $814,734 $349,607 $199@
Ratios to average net
assets:(D)(D)
Expenses,
including
distribution
fees........ 1.17% 1.02% 1.08% 1.01% 1.97% 1.87% 1.93% 1.87% .93%*
Expenses,
excluding
distribution
fees........ 1.02% .87% .93% .86% 1.02% .87% .93% .87% .18%*
Net investment
income...... 7.67% 10.81% 9.93% 10.23% 6.82% 9.42% 9.05% 9.46% 7.02%*
Portfolio
turnover
rate.......... 232% 307% 180% 66% 232% 307% 180% 66% 232%
</TABLE>
- ---------------
* Annualized.
(D) Commencement of offering of Class C shares.
(D)(D) Because of the event referred to in (D) and the timing of such, the
ratios for the Class C shares are not necessarily comparable to that of
Class A or B shares and are not necessarily indicative of future ratios.
@ Figures are actual and not rounded to the nearest thousand.
# 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-38
<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, 1994, 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 four 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, 1994 by correspondence with the custodian. 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, 1994, 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 LLP
New York, New York
December 16, 1994
B-39
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC. Portfolio of Investments
GLOBAL ASSETS PORTFOLIO October 31, 1994
<TABLE>
<CAPTION>
Principal US$ Principal US$
Amount Value Amount Value
(000) Description (Note 1) (000) Description (Note 1)
<C> <S> <C>
SHORT-TERM INVESTMENTS--101.6%
Australia--5.3%
South Australia Finance
Auth.,
A$ 3,500 13.00%, 7/15/95.......... $ 2,691,902
-----------
Canada--4.2%
Canadian Treasury
Bills,**
C$ 1,000 7.83%, 6/29/95........... 709,735
2,000 6.90%, 8/10/95........... 1,407,119
-----------
2,116,854
-----------
Italy--3.9%
General Electric Capital
Corp.,
Lira 3,000,000 11.50%, 2/7/95........... 1,956,318
-----------
Mexico--9.8%
Mexican Cetes,**
MP 3,500 14.50%, 12/8/94.......... 1,003,983
10,773 13.20%, 8/17/95.......... 2,818,954
510 13.20%, 9/7/95........... 132,480
3,822 13.10%, 9/21/95.......... 988,057
-----------
4,943,474
-----------
New Zealand--17.1%
New Zealand Treasury
Bills,**
NZ$ 10,500 7.45%, 12/19/94.......... 6,399,163
3,668 7.56%, 1/11/95........... 2,223,291
-----------
8,622,454
-----------
Spain--4.2%
Kingdom of Spain,**
Pts 265,000 11.40%, 7/15/95.......... 2,144,717
-----------
United States--57.1%
Fuji Bank, Ltd., C.P.,
US$ 4,000 4.84%, 11/1/94........... 4,000,000
Joint Repurchase
Agreement Account,
4.77%, 11/1/94 (Note
US$ 9,966 5)..................... $ 9,966,000
Mexican Tesobonos,**
2,078 7.10%, 11/10/94.......... 2,075,507
3,156 8.45%, 7/27/95........... 2,970,819
2,000 8.41%, 8/17/95........... 1,873,443
Mitsubishi Bank, Ltd.,
C.P.,
4,000 4.88%, 11/1/94........... 4,000,000
Wal-Mart Stores Inc.,
C.P.,
4,000 4.75%, 11/2/94........... 3,999,472
-----------
28,885,241
-----------
Total short-term
investments
(cost US$51,095,673)... 51,360,960
-----------
<CAPTION>
OUTSTANDING OPTIONS
Contracts(D) PURCHASED*--0.2%
- ------------
<C> <S> <C>
Currency Call Options
Australian Dollars,
A$ 7,700 expiring 11/23/94
@ A$0.7413............. 37,722
Japanese Yen,
(YEN) 3,600 expiring 5/5/95
@ (YEN)105.50.......... 9,720
Currency Put Options
Japanese Yen,
(YEN) 2,900 expiring 1/26/95
@ (YEN)93.70........... 23,490
Cross-Currency Put
Options
Deutschemarks,
expiring 1/12/95
@ DM 972.30 per Italian
DM 2,700 Lira................... 1,620
@ DM 974.16 per Italian
3,700 Lira................... 737
</TABLE>
See Notes to Financial Statements.
B-40
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
<TABLE>
<CAPTION>
US$
Value
Contracts(D) Description (Note 1)
<C> <S> <C>
Cross-Currency Put
Options--cont'd.
Deutschemarks,
expiring 1/20/95
DM 7,600 @ DM 4.6015
per Swedish Krona...... $ 19,152
-----------
Total outstanding options
purchased (cost
US$377,947)............ 92,441
-----------
Total Investments--101.8%
(cost $51,473,620; Note
4)..................... 51,453,401
Liabilities in excess of
other assets--(1.8%)... (916,021)
-----------
Net Assets--100%......... $50,537,380
-----------
-----------
</TABLE>
- ------------------
Portfolio securities are classified by country according to the
security's currency denomination.
C.P.--Commercial Paper
* Non-income producing security.
** Percentage quoted represents yield to maturity as of purchase date.
(D) Expressed in thousands of local currency units.
See Notes to Financial Statements.
B-41
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Assets October 31, 1994
----------------
<S> <C>
Investments, at value (cost $51,473,620)................................................ $ 51,453,401
Cash.................................................................................... 29,306
Foreign currency, at value (cost $3,769)................................................ 3,790
Forward currency contracts--net amount receivable from counterparties................... 647,171
Interest receivable..................................................................... 338,383
Deferred expenses and other assets...................................................... 13,341
----------------
Total assets.......................................................................... 52,485,392
----------------
Liabilities
Payable for Fund shares reacquired...................................................... 964,012
Forward currency contracts--net amount payable to counterparties........................ 710,661
Accrued expenses........................................................................ 147,027
Dividends payable....................................................................... 69,065
Due to Manager.......................................................................... 24,747
Due to Distributor...................................................................... 22,497
Withholding taxes payable............................................................... 10,003
----------------
Total liabilities..................................................................... 1,948,012
----------------
Net Assets.............................................................................. $ 50,537,380
----------------
----------------
Net assets were comprised of:
Common stock, at par.................................................................. $ 28,039
Paid-in capital in excess of par...................................................... 66,031,930
----------------
66,059,969
Accumulated distributions in excess of net investment income.......................... (4,612,582)
Accumulated net realized loss on investments.......................................... (10,836,547)
Net unrealized depreciation on investments and foreign currencies..................... (73,460)
----------------
Net assets, October 31, 1994............................................................ $ 50,537,380
----------------
----------------
Class A:
Net asset value and redemption price per share ($50,537,380 / 28,039,288 shares of
common stock
issued and outstanding)............................................................. $1.80
Maximum sales charge (.99% of offering price)......................................... .02
----------------
Maximum offering price to public...................................................... $1.82
----------------
----------------
</TABLE>
See Notes to Financial Statements.
B-42
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
October 31,
Net Investment Income 1994
--------------
<S> <C>
Income
Interest........................... $ 4,813,682
--------------
Expenses
Management fee..................... 453,970
Distribution fee--Class A.......... 411,334
Custodian's fees and expenses...... 303,000
Transfer agent's fees and
expenses........................... 97,000
Reports to shareholders............ 36,000
Directors' fees.................... 35,000
Legal fees......................... 27,000
Audit fee.......................... 25,000
Registration fees.................. 22,000
Amortization of organization
expenses........................... 12,000
Miscellaneous...................... 13,517
--------------
Total expenses................... 1,435,821
--------------
Net investment income................ 3,377,861
--------------
Realized and Unrealized
Gain (Loss) on Investments and
Foreign Currency Transactions
Net realized gain (loss) on:
Investment transactions............ (1,211,080)
Foreign currency transactions...... (2,748,152)
Written option transactions........ 420,651
--------------
(3,538,581)
--------------
Net change in unrealized
appreciation/ depreciation of:
Investments........................ (132,005)
Foreign currencies................. 658,538
Written options.................... 13,775
--------------
540,308
--------------
Net loss on investments, foreign
currencies and written options..... (2,998,273)
--------------
Net Increase in Net Assets
Resulting from Operations............ $ 379,588
--------------
--------------
</TABLE>
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
Net Increase (Decrease) -------------------------------
in Net Assets 1994 1993
-------------- -------------
<S> <C> <C>
Operations
Net investment
income................. $ 3,377,861 $ 14,327,588
Net realized loss on
investments and
foreign currency
transactions......... (3,538,581) (21,161,713)
Net change in
unrealized
appreciation/depreciation
of investments and
foreign currencies... 540,308 17,158,011
-------------- -------------
Net increase in net
assets resulting from
operations........... 379,588 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.............. -- (3,217,487)
Class B.............. -- (1,053,946)
-------------- -------------
-- (4,271,433)
-------------- -------------
Dividends in excess of
net investment income
Class A.............. (117,091) --
Class B.............. (411) --
-------------- -------------
(117,502) --
-------------- -------------
Tax return of capital
distributions
Class A.............. (3,826,815) (4,026,397)
Class B.............. (13,439) (1,318,920)
-------------- -------------
(3,840,254) (5,345,317)
-------------- -------------
Fund share transactions
(Note 6)
Net proceeds from
shares subscribed.... 4,822,020 169,695,598
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends and
distributions........ 2,685,643 5,821,978
Cost of shares
reacquired............. (82,912,800) (356,365,191)
-------------- -------------
Net decrease in net
assets from Fund
share transactions... (75,405,137) (180,847,615)
-------------- -------------
Total decrease........... (78,975,144) (183,789,650)
Net Assets
Beginning of year........ 129,512,524 313,302,174
-------------- -------------
End of year.............. $ 50,537,380 $ 129,512,524
-------------- -------------
-------------- -------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
B-43
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Notes to Financial Statements
Prudential Short-Term Global Income Fund, Inc. (the ``Fund''), registered
under the Investment Company Act of 1940 as a non-diversified, open-end
management investment company, was incorporated in Maryland on February 21,
1990. The Fund consists of two series, namely: Short-Term Global Income
Portfolio and Global Assets Portfolio. The Global Assets Portfolio (the
``Portfolio'') commenced investment operations on February 15, 1991. The
investment objective of the Portfolio is to seek high current income with
minimum risk to principal, by investing primarily in high-quality debt
securities in the U.S. and abroad having remaining maturities of not more than
one year. The ability of the issuers of the debt securities held by the Fund to
meet their obligations may be affected by economic developments in a specific
country or industry.
Note 1. Accounting The following is a summary
Policies of significant accounting poli-
cies followed by the Fund, and the Portfolio in
the preparation of its financial statements.
Securities Valuation: In valuing the Fund's assets, quotations of foreign
securities in a foreign currency are converted to U.S. dollar equivalents at the
then current exchange rate. Government securities for which quotations are
available will be based on prices provided by an independent pricing service or
principal market makers. Other portfolio securities that are actively traded in
the over-the-counter market, including listed securities for which the primary
market is believed to be over-the-counter, will be valued at the average of the
quoted bid and asked prices provided by an independent pricing service or by
principal market makers. Any security for which the primary market is on an
exchange is valued at the last sale price on such exchange on the day of
valuation or, if there was no sale on such day, the last bid price quoted on
such day. Securities for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Board of Directors.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost which approximates market value.
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian or designated
subcustodians, as the case may be under triparty repurchase agreements, takes
possession of the underlying collateral securities, the value of which exceeds
the principal amount of the repurchase transaction including accrued interest.
If the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
Foreign Currency Translation: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(i) market value of investment securities, other assets and liabilities--at
the closing daily rate of exchange;
(ii) purchases and sales of investment securities, income and expenses--at
the rate of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange
rates and market values at the close of the fiscal 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.
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 unrealized
currency gains and losses from valuing foreign currency denominated assets and
liabilities at fiscal year end exchange rates are reflected as a component of
net unrealized appreciation/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.
B-44
<PAGE>
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 were allocated daily to each class of shares based upon
the relative proportion of net assets of each class at the beginning of the day.
As of October 31, 1994, there are no Class B shares outstanding (see Note 6).
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 from
book basis 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 Portfolio accounts and reports
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 of applying this statement was to increase accumulated distributions in
excess of net investment income by $3,316,665, decrease accumulated net realized
loss on investments by $3,656,083 and decrease paid-in capital by $339,418. This
was primarily the result of net foreign currency losses incurred for the fiscal
year ended October 31, 1994. Net investment income, net realized gains and net
assets were not affected by this change. Included in accumulated distributions
in excess of net investment income as of October 31, 1994 is $4,505,980 of
equalization debits.
Federal Income Taxes: For federal income tax purposes, each portfolio in
the Fund is treated as a separate taxpaying entity. It is the Portfolio's intent
to continue to meet the requirements of the Internal Revenue Code applicable to
regulated investment companies and to distribute all of its taxable income to
shareholders. Therefore, no federal income tax provision is required.
Withholding taxes on foreign interest have been provided for in accordance
with the Fund's understanding of the applicable country's tax rules and rates.
Deferred Organization Expenses: Approximately $60,000 of organization and
initial registration costs were incurred. These costs have been deferred and are
being amortized over the period of benefit not to exceed 60 months from the date
the Portfolio commenced investment operations.
Note 2. Agreements The Fund has a management
agreement with Prudential Mutual Fund Management,
Inc. (``PMF''). Pursuant to this
B-45
<PAGE>
agreement, PMF has responsibility for all investment advisory services and
supervises the subadviser's performance of such services. PMF has entered into a
subadvisory agreement with The Prudential Investment Corporation (``PIC''); PIC
furnishes investment advisory services in connection with the managment of the
Fund. PMF pays for the cost of the subadviser's services, the compensation of
officers of the Fund, occupancy and certain clerical and bookkeeping costs of
the Fund. The Fund bears all other costs and expenses.
The management fee paid PMF is computed daily and payable monthly at an
annual rate of .55 of 1% of the average daily net assets of the Portfolio.
The Portfolio has a distribution agreement with Prudential Mutual Fund
Distributors, Inc. (``PMFD''), which acts as the distributor of the Class A
shares of the Portfolio. The Portfolio compensates PMFD for distributing and
servicing the Portfolio's Class A shares, pursuant to a plan of distribution,
regardless of expenses actually incurred by PMFD. The distribution fees are
accrued daily and payable monthly.
On July 19, 1994, shareholders of the Portfolio approved amendments to the
Class A distribution plan under which the Class A distribution plan became a
compensation plan, effective August 1, 1994. Prior thereto, the Class A
distribution plan was a reimbursement plan, under which PMFD was reimbursed for
expenses actually incurred by it up to the amount permitted under the Class A
Plan. The Portfolio is not obligated to pay any prior or future excess
distribution costs (costs incurred by PMFD in excess of distribution fees paid
by the Portfolio or contingent deferred sales charges received by PMFD). The
rate of the distribution fees charged to Class A shares of the Portfolio did not
change under the amended plan of distribution.
Pursuant to the Class A Plan, the Portfolio compensates PMFD for
distribution-related activities at an annual rate of up to .50 of 1% of the
average daily net assets of the Class A shares.
PMFD has advised the Portfolio that it has received approximately $24,100 in
front-end sales charges resulting from sales of Class A shares during the fiscal
year ended October 31, 1994. From these fees, PMFD paid such sales charges to
PSI and Pruco Securities Corporation, affiliated broker-dealers, which in turn
paid commissions to salespersons and incurred other distribution costs.
As of May 10, 1994, there are no Class B shares outstanding. Prior thereto,
the Portfolio reimbursed Prudential Securities Incoporated (``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.
There were no distribution costs incurred nor reimbursable under the Class B
Plan for the fiscal year ended October 31, 1994. All contingent deferred sales
charges collected on the redemption of Class B shares were retained and credited
to the Fund's Class B shares paid-in capital account.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are indirect,
wholly-owned subsidiaries of The Prudential Insurance Company of America.
Note 3. Other Prudential Mutual Fund Ser-
Transactions vices, Inc. (``PMFS''), a
With Affiliates wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent and
during the fiscal year ended October 31, 1994, the Portfolio incurred fees of
approximately $88,200 for the services of PMFS. As of October 31, 1994,
approximately $4,200 of such fees were due to PMFS for its services. Transfer
sgent fees and expenses in the Statement of Operations include certain
out-of-pocket expenses paid to non-affiliates.
Note 4. Portfolio The federal income tax basis
Securities of the Portfolio's investments
at October 31, 1994 was substantially the same as
the basis for financial reporting purposes and, accordingly, net unrealized
depreciation for federal income tax purposes was $20,219 (gross unrealized
appreciation--$390,534; gross unrealized depreciation--$410,753).
For federal income tax purposes, the Portfolio has a capital loss
carryforward as of October 31, 1994 of approximately $10,837,000 of which
$4,584,000 expires in 2000 and $6,253,000 expires in 2001. Such carryforward is
after utilization of approximately $118,000 to offset net taxable gains realized
during the fiscal year ended October 31, 1994. Accordingly, no capital gains
distributions are expected to be paid to shareholders until future net gains
have been realized in excess of such carryforward.
Transactions in options written during the fiscal year ended October 31, 1994
were as follows:
<TABLE>
<CAPTION>
Number of
Contracts Premiums
(000) Received
--------- ----------
<S> <C> <C>
Options outstanding at
October 31, 1993................ 9,500 $ 71,725
Options written................... 194,486 1,232,665
Options terminated in closing
purchase transactions........... (147,586) (989,488)
Options expired................... (39,000) (146,797)
Options exercised................. (17,400) (168,105)
--------- ----------
Options outstanding at
October 31, 1994................ -- $ --
--------- ----------
--------- ----------
</TABLE>
B-46
<PAGE>
At October 31, 1994, the Portfolio had outstanding forward currency
contracts, both to purchase and sell foreign currencies, as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Purchase Contracts Payable Value (Depreciation)
- ----------------------- --------------- ----------- --------------
<S> <C> <C> <C>
Australian Dollars,
expiring 11/28/94.... $ 1,500,000 $ 1,502,182 $ 2,182
British Pounds,
expiring 11/8/94..... 3,787,934 3,803,715 15,781
Canadian Dollars,
expiring 11/14/94.... 3,839,874 3,824,278 (15,596)
Deutschemarks,
expiring
11/7-11/30/94........ 43,549,474 43,744,309 194,835
Italian Lira,
expiring 12/13/94.... 5,582,088 5,604,324 22,236
Japanese Yen, expiring
11/7-11/18/94........ 8,071,856 8,098,057 26,201
--------------- ----------- --------------
$ 66,331,226 $66,576,865 $ 245,639
--------------- ----------- --------------
--------------- ----------- --------------
</TABLE>
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- --------------------- --------------- ----------- --------------
<S> <C> <C> <C>
Australian Dollars,
expiring
11/28/94-1/6/95.... $ 4,292,121 $ 4,305,984 $ (13,863)
Canadian Dollars,
expiring 11/14/94.. 3,340,000 3,333,068 6,932
Deutschemarks,
expiring
11/7-11/30/94...... 36,905,323 36,987,699 (82,376)
Italian Lira,
expiring 12/13/94.. 4,893,603 5,004,106 (110,503)
Japanese Yen,
expiring
11/7/94-11/14/94... 3,027,086 3,083,844 (56,758)
Spanish Pesetas
expiring 12/22/94.. 1,795,479 1,790,831 4,648
Swedish Krona,
expiring 11/7/94... 267,059 266,205 854
Swiss Francs,
expiring 11/14/94.. 3,000,000 3,058,063 (58,063)
--------------- ----------- --------------
$ 57,520,671 $57,829,800 $ (309,129)
--------------- ----------- --------------
--------------- ----------- --------------
</TABLE>
Note 5. Joint The Portfolio, along with
Repurchase other affiliated registered
Agreement investment companies, trans-
Account fers uninvested cash balances
into a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements collateralized
by U.S. Treasury or Federal agency obligations. At October 31, 1994, the Fund
had a 1.11% undivided interest in the repurchase agreements in the joint
account. The undivided interest for the Fund represented $9,966,000 in principal
amount. As of such date, each repurchase agreement in the joint account and the
value of the collateral therefor were as follows:
Smith Barney, Inc., 4.80%, in the principal amount of $260,000,000,
repurchase price $260,034,667, due 11/1/94. The value of the collateral
including accrued interest is $265,200,122.
Nomura Securities International, Inc., 4.77%, in the principal amount of
$100,000,000, repurchase price $100,013,250, due 11/1/94. The value of the
collateral including accrued interest is $102,000,391.
Goldman, Sachs & Co., 4.75%, in the principal amount of $275,000,000,
repurchase price $275,036,285, due 11/1/94. The value of the collateral
including accrued interest is $280,500,611.
CS First Boston Corp., 4.75%, in the principal amount of $265,000,000,
repurchase price $265,034,965, due 11/1/94. The value of the collateral
including accrued interest is $271,053,272.
Note 6. Capital The Portfolio currently offers
only Class A shares which are sold with a
front-end sales charge of up to .99%. The Portfolio discontinued offering Class
B shares on April 14, 1993. Class B shares automatically converted to Class A
shares upon being held longer than one year from the date of purchase. 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-47
<PAGE>
Transactions in shares of common stock for the fiscal years ended October 31,
1994 and 1993 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ---------------------------- ------------ -------------
<S> <C> <C>
Year ended October 31, 1994:
Shares sold................. 1,787,071 $ 3,241,520
Shares sold--conversion from
Class B................... 844,439 1,580,500
Shares issued in
reinvestment of
dividends................. 1,447,695 2,676,200
Shares reacquired........... (43,793,517) (80,885,842)
------------ -------------
Net decrease in shares
outstanding............... (39,714,312) $ (73,387,622)
------------ -------------
------------ -------------
Year ended October 31, 1993:
Shares sold................. 6,064,340 $ 11,274,743
Shares sold--conversion from
Class B................... 83,379,084 154,875,114
Shares issued in
reinvestment of dividends
and distributions......... 2,229,981 4,138,266
Shares reacquired........... (83,960,705) (155,987,024)
------------ -------------
Net increase in shares
outstanding............... 7,712,700 $ 14,301,099
------------ -------------
------------ -------------
<CAPTION>
Class B Shares Amount
- ---------------------------- ------------ -------------
<S> <C> <C>
Year ended October 31, 1994:
Shares issued in
reinvestment of
dividends................. 4,960 $ 9,443
Shares reacquired........... (236,484) (446,458)
Shares
reacquired--conversion
into Class A.............. (831,163) (1,580,500)
------------ -------------
Net decrease in shares
outstanding............... (1,062,687) $ (2,017,515)
------------ -------------
------------ -------------
Year ended October 31, 1993:
Shares sold................. 1,902,610 $ 3,545,741
Shares issued in
reinvestment of dividends
and distributions......... 903,347 1,683,712
Shares reacquired........... (24,366,585) (45,503,053)
Shares
reacquired--conversion
into Class A.............. (83,275,750) (154,875,114)
------------ -------------
Net decrease in shares
outstanding............... (104,836,378) $(195,148,714)
------------ -------------
------------ -------------
</TABLE>
B-48
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Financial Highlights
<TABLE>
<CAPTION>
Class A Class B
----------------------------------------------- ---------------------------------------------------
February 15, November 1, February 15,
Year Ended 1991* 1993 Year Ended 1991*
October 31, through through October 31, through
------------------------------- October 31, May 9, ------------------- 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... .08 .12 .16 .12(D) .04 .12 .15 .11(D)
Net realized and
unrealized gain (loss)
on investment and
foreign currency
transactions.......... (.07) (.04) (.13) -- (.03) (.04) (.13) --
------- -------- -------- ------------ ----------- ------- -------- ------------
Total from investment
operations.......... .01 .08 .03 .12 .01 .08 .02 .11
------- -------- -------- ------------ ----------- ------- -------- ------------
Less distributions
Dividends from net
investment
income................ -- (.04) (.14) (.12) -- (.04) (.13) (.11)
Tax return of capital
distributions......... (.09) (.05) -- -- (.05) (.05) -- --
------- -------- -------- ------------ ----------- ------- -------- ------------
Total distributions... (.09) (.09) (.14) (.12) (.05) (.09) (.13) (.11)
------- -------- -------- ------------ ----------- ------- -------- ------------
Contingent deferred
sales charges
collected............. -- -- -- -- .03 .02 -- --
------- -------- -------- ------------ ----------- ------- -------- ------------
Net asset value, end of
period................ $ 1.80 $ 1.88 $ 1.89 $ 2.00 $1.89 $ 1.90 $ 1.89 $ 2.00
------- -------- -------- ------------ ----------- ------- -------- ------------
------- -------- -------- ------------ ----------- ------- -------- ------------
TOTAL RETURN#:.......... 0.47% 4.36% 1.46% 5.91% 2.33% 5.47% 0.94% 5.53%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000).......... $50,537 $127,490 $113,412 $ 86,443 $0 $ 2,023 $199,890 $ 134,015
Average net assets
(000)................. $82,267 $153,339 $138,331 $ 23,224 $ 525 $52,653 $248,941 $ 42,449
Ratios to average net
assets:@@
Expenses, including
distribution fees... 1.73% 1.48% 1.33% 1.25%(D)** 1.21%** 1.61% 1.83% 1.75%(D)**
Expenses, excluding
distribution fees... 1.23% .98% .83% .75%(D)** 1.21%** .98% .83% .75%(D)**
Net investment
income.............. 4.09% 6.44% 8.16% 8.64%(D)** 4.48%** 6.31% 7.66% 8.21%(D)**
<FN>
- ---------------
* Commencement of investment operations.
** Annualized.
# Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase
of shares on the first day and a sale on the last day of each period reported and includes reinvestment
of dividends. Total returns for periods of less than a full year are not annualized.
(D) Net of expense subsidy.
@ Last day of investment operations of Class B shares. On May 10, 1994, all existing Class B shares were
converted to Class A shares.
@@ Because of the events referred to in @ and the timing of such, the Class B shares ratios for the most
recent period are not necessarily comparable to that of Class A shares.
</TABLE>
See Notes to Financial Statements.
B-49
<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, 1994, 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 and for the period February
15, 1991 (commencement of investment operations) to October 31, 1991. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
October 31, 1994 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Prudential
Short-Term Global Income Fund, Inc., Global Assets Portfolio, as of October 31,
1994, 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 LLP
New York, New York
December 16, 1994
B-50
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
(1) The following financial statements are included in the
Prospectus constituting Part A of this Registration Statement:
Financial Highlights.
(2) The following financial statements are included in the Statement
of Additional Information, constituting Part B of this Registration
Statement on behalf of the Short-Term Global Income Fund:
For the Short-Term Global Income Portfolio
Portfolio of Investments at October 31, 1994
Statement of Assets and Liabilities at October 31, 1994
Statement of Operations for the fiscal year ended October 31, 1994
Statement of Changes in Net Assets for the fiscal years ended October 31,
1994 and October 31, 1993
Notes to Financial Statements
Financial Highlights
Independent Auditors' Report
For the Global Assets Portfolio
Portfolio of Investments at October 31, 1994
Statement of Assets and Liabilities at October 31, 1994
Statement of Operations for the fiscal year ended October 31, 1994
Statement of Changes in Net Assets for the years ended October 31, 1994
and October 31, 1993
Notes to Financial Statements
Financial Highlights
Independent Auditors' Report
C-1
<PAGE>
(b) Exhibits:
1. Amended and Restated Articles of Incorporation.*
2. By-Laws of the Registrant incorporated by reference to Exhibit
No. 2 to Pre-Effective Amendment No. 3 to the Registration
Statement on Form N-1A (File No. 33-33479) filed by
Registrant on October 22, 1990.
4. Instruments defining rights of shareholders. Incorporated by
reference to Exhibit 4 to Post-Effective Amendment No. 6 to
the Registration Statement on Form N-1A (File No. 33-33470)
filed on Edgar by Registrant on December 30, 1993.
5. (a) Management Agreement between the Registrant and Prudential
Mutual Fund Management, Inc., Incorporated by reference to
Exhibit 5(a) to Pre-Effective Amendment No. 3 to the
Registration Statement on Form N-1A (File No. 33-33479) filed
by Registrant on October 22, 1990.
(b) Subadvisory Agreement between Prudential Mutual Fund
Management, Inc. and The Prudential Investment Corporation,
Incorporated by reference to Exhibit No. 5(b) to Pre-Effective
Amendment No. 3 to the Registration Statement on Form N-1A
(File No. 33-33479) filed by Registrant on October 22, 1990.
6. (a) Subscription Offering Agreement among the Registrant,
Prudential-Bache Securities Inc. and Prudential Mutual Fund
Distributors, Inc. incorporated by reference to Exhibit No.
6(c) to Pre-Effective Amendment No. 3 to the Registration
Statement on Form N-1A (File No. 33-33479) filed by Registrant
on October 22, 1990.
(b) Subscription Offering Agreement among the Registrant,
Prudential-Bache Securities Inc. and Prudential Mutual Fund
Distributors, Inc. incorporated by reference to Exhibit No.
6(d) to Post-Effective Amendment No. 1 to the Registration
Statement on Form N-1A (File No. 33-33479) filed by Registrant
on December 18, 1990.
(c)(i) Distribution Agreement between the Registrant and
Prudential Mutual Fund Distributors for the Class A shares of
each Portfolio dated July 1, 1993, incorporated by reference
to Exhibit 6 (e)(ii) to Post-Effective Amendment No. 6 to the
Registration Statement on Form N-1A (File No. 33-33479) filed
via EDGAR on December 30, 1993.
(c)(ii) Restated Distribution Agreement between the Fund and
Prudential Securities Incorporated for the Class B shares
dated July 1, 1993, incorporated by reference to Exhibit 6
(e)(iii) to Post-Effective Amendment No. 6 to the Registration
Statement on Form N-1A (File No. 33-33479) filed via EDGAR on
December 30, 1993.
(c)(iii) Distribution Agreement for Class A shares of both
Portfolios.*
(c)(iv) Distribution Agreement for Class B shares of the Short-Term
Global Income Portfolio.*
(c)(v) Distribution Agreement for Class C shares of the Short-Term
Global Income Portfolio.*
8. Custodian Contract between the Registrant and State Street Bank
and Trust Company. Incorporated by reference to Exhibit No. 8
to Pre-Effective Amendment No. 3 to the Registration Statement
on Form N-1A (File No. 33-33479) filed by Registrant on
October 22, 1990.
9. Transfer Agency and Dividend Disbursing Agreement between the
Registrant and Prudential Mutual Fund Services, Inc.
Incorporated by reference to Exhibit No. 9 to Pre-Effective
Amendment No. 3 to the Registration Statement on Form N-1A
(File No. 33-33479) filed by Registrant on October 22, 1990.
10. Opinion of Counsel.*
11. Consent of Independent Accountants.*
13. Purchase Agreement. Incorporated by reference to Exhibit 13 to
Pre-Effective Amendment No. 3 to the Registration Statement on
Form N-1A (File No. 33-33479) filed by Registrant on
October 22, 1990.
14. Not Applicable.
15. (a)(i) Distribution and Service Plan for Class A shares of
Short-Term Global Income Portfolio dated July 1, 1993,
incorporated by reference to Exhibit 15(a)(i) to
Post-Effective Amendment No. 6 to the Registration Statement
on Form N-1A (File No. 33-33479) filed via EDGAR on December
30, 1993.
(b)(i) Distribution and Service Plan for Class B shares of the
Fund dated July 1, 1993, incorporated by reference to Exhibit
15(b)(ii) to Post-Effective Amendment No. 6 to the
Registration Statement on Form N-1A (File No. 33-33479) filed
via EDGAR on December 30, 1993.
(b)(ii) Distribution and Service Plan for Class A shares of
Global Assets Portfolio dated July 1, 1993, incorporated by
reference to Exhibit 15(b)(ii) to Post-Effective Amendment No.
6 to the Registration Statement on Form N-1A (File No.
33-33479) filed via EDGAR on December 30, 1993.
C-2
<PAGE>
(c) Distribution and Service Plan for Class A shares of the
Short-Term Global Income Portfolio and Global Assets Portfolio.*
(d) Distribution and Service Plan for Class B shares of the
Short-Term Global Income Portfolio.*
(e) Distribution and Service Plan for Class C shares of the
Short-Term Global Income Portfolio.*
16. (a) Not Applicable.
17. (a) Not Applicable.
27. Financial Data Schedules.*
- ------------
* Filed herewith.
Item 25. Persons Controlled by or Under Common Control with Registrant.
No person is controlled by or under common control with the Registrant.
Item 26. Number of Holders of Securities.
As of December 2, 1994 there were 3,256 Class A shareholders and 0 Class B
shareholders of the Global Assets Portfolio and 1,690 Class A shareholders,
16,549 Class B shareholders and 2 Class C shareholders of the Short-Term Global
Income Portfolio of the Fund.
Item 27. Indemnification.
As permitted by Sections 17(h) and (i) of the Investment Company Act of 1940
(the "1940 Act") and pursuant to Article VI of the Fund's Articles of
Incorporation (Exhibit 1 to the Registration Statement) and Section 2-418 of the
Maryland General Law, officers and directors of the Registrant may be
indemnified against liabilities in connection with the Registrant unless it is
proved that (i) the act or omission of the director or officer was material to
the cause of action adjudicated in the proceeding and was committed in bad faith
or with active and deliberate dishonesty, (ii) the director actually received an
improper personal benefit in money, property or services, or (iii) in the case
of a criminal proceeding, the director had reasonable cause to believe that the
act or omission was unlawful. As permitted by Section 17(i) of the 1940 Act,
pursuant to Section 10 of each Distribution Agreement (Exhibit 6(a) and (b) to
the Registration Statement), each Distributor of the Registrant may be
indemnified against liabilities which it may incur except liabilities arising
from bad faith, gross negligence, willful misfeasance or reckless disregard of
duties.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 ("Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in connection with the successful defense
of any action, suit or proceeding) is asserted against the Registrant by such
director, officer or controlling person in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The Registrant intends to purchase an insurance policy insuring its
officers and directors against certain liabilities, and certain costs of
defending claims against such officers and directors, to the extent such
officers and directors are not found to have committed conduct constituting
willful misfeasance, bad faith, gross negligence or reckless disregard of
their duties. The insurance policy also insures the Registrant against the
cost of indemnification payments to officers and directors under certain
circumstances.
Section 9 of the Management Agreement (Exhibit 5(a) to the Registration
Statement) and Section 4 of the Subadvisory Agreement (Exhibit 5(b) to the
Registration Statement) limit the liability of Prudential Mutual Fund
Management, Inc. (PMF) and The Prudential Investment Corporation (PIC),
respectively, to liabilities arising from willful misfeasance, bad faith or
gross negligence in the performance of their respective duties or from
reckless disregard by them of their respective obligations and duties under
the agreements.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its By-Laws, the Management Agreement and each Distribution
Agreement in a manner consistent with Release No. 11330 of the Securities
and Exchange Commission under the 1940 Act so long as the interpretation of
Sections 17(h) and 17(i) of such Act remain, in effect.
C-3
<PAGE>
Item 28. Business and other Connections of Investment Adviser
(a) Prudential Mutual Fund Management, Inc.
See "How the Fund is Managed--Manager" in the Prospectus constituting
Part A of this Registration Statement and "Manager" in the Statement of
Additional Information constituting Part B of this Registration Statement.
The business and other connections of the officers of PMF are listed in
Schedules A and D of Form ADV of PMF as currently on file with the
Securities and Exchange Commission, the text of which is hereby
incorporated by reference (File No. 801-31104, filed in October 1993).
The business and other connections of PMF's directors and principal
executive officers are set forth below. Except as otherwise indicated, the
address of each person is One Seaport Plaza, New York, NY 10292.
<TABLE>
<CAPTION>
Name and Address Position with PMF Principal Occupations
- ---------------- ----------------- ---------------------
<S> <C> <C>
Brendan D. Boyle Executive Vice Executive Vice President and Director of Marketing, PMF; Senior
President and Vice President, Prudential Securities Incorporated (Prudential Securities)
Director of
Marketing
John D. Brookmeyer, Jr. Director Senior Vice President, The Prudential Insurance Company of
Two Gateway Center America (Prudential)
Newark, NJ 07102
Susan C. Cote Senior Vice President Senior Vice President, PMF; Senior Vice President, Prudential Securities
Stephen P. Fisher Senior Vice President Senior Vice President, PMF; Senior Vice President, Prudential Securities
Frank W. Giordano Executive Vice Executive Vice President, General Counsel and Secretary, PMF; Senior Vice
President, General President, Prudential Securities
Counsel and
Secretary
Robert F. Gunia Executive Vice Executive Vice President, Chief Financial and Administrative Officer,
President, Chief Treasurer and Director, PMF; Senior Vice President, Prudential Securities
Financial and
Administrative
Officer, Treasurer
and Director
Eugene B. Heimberg Director Senior Vice President, Prudential; President, Director and Chief Investment
Prudential Plaza Officer, PIC
Newark, NJ 07102
Lawrence C. McQuade Vice Chairman Vice Chairman, PMF
Leland B. Paton Director Executive Vice President, Director and Member of the Operating Committee,
Prudential Securities; Director, Prudential Securities Group, Inc. ("PSG")
Richard A. Redeker President, Chief President, Chief Executive Officer and Director, PMF; Executive Vice
Executive Officer and President, Director and Member of Operating Committee, Prudential
Director Securities; Director, PSG; Vice President, PIC
S. Jane Rose Senior Vice Senior Vice President, Senior Counsel and Assistant Secretary, PMF; Senior
President, Senior Vice President and Senior Counsel, Prudential Securities
Counsel and
Assistant Secretary
Donald G. Southwell Director Senior Vice President, Prudential; Director, PSG
213 Washington Street
Newark, NJ 07102
</TABLE>
(b) The Prudential Investment Corporation (PIC)
See "How the Fund is Managed--Manager" in the Prospectus constituting
Part A of this Registration Statement and "Manager" in the Statement of
Additional Information constituting Part B of this Registration Statement.
C-4
<PAGE>
The business and other connections of PIC's directors and executive
officers are set forth below. Except as otherwise indicated, the address of
each person is Prudential Plaza, Newark, NJ 07102.
<TABLE>
<CAPTION>
Name and Address Position with PIC Principal Occupations
- ---------------- ----------------- ---------------------
<S> <C> <C>
Martin A. Berkowitz Senior Vice President Senior Vice President and Chief Financial and
and Chief Financial Compliance Officer, PIC; Vice President, Prudential
and Compliance Officer
William M. Bethke Senior Vice President Senior Vice President, Prudential; Senior Vice President, PIC
Two Gateway Center
Newark, NJ 07102
John D. Brookmeyer, Jr. Senior Vice President Senior Vice President, Prudential; Senior Vice President, PIC
Two Gateway Center
Newark, NJ 07102
Theresa A. Hamacher Vice President Second Vice President, Prudential; Vice President, PIC
Eugene B. Heimberg President, Director, President and Chief Investment Officer, PIC;
and Chief Investment Senior Vice President, Prudential
Officer
Garnett L. Keith, Jr. Director Vice Chairman and Director, Prudential; Director, PIC
William P. Link Senior Vice Executive Vice President, Prudential; Senior Vice President, PIC
Four Gateway Center President
Newark, NJ 07102
Richard A. Redeker Vice President President, Chief Executive Officer and Director, PMF; Executive Vice
One Seaport Plaza President, Director and Member of Operating Committee, Prudential
New York, NY 10292 Securities; Director, PSG; Vice President, PIC
James W. Stevens Executive Vice Executive Vice President, Prudential; Director, PSG
Four Gateway Center President
Newark, NJ 07102
Robert C. Winters Director Chairman of the Board and Chief Executive Officer, Prudential; Director, PIC;
Chairman of the Board and Director, PSG
Claude J. Zinngrabe, Jr. Executive Vice Vice President, Prudential; Executive Vice President, PIC
President
</TABLE>
Item 29. Principal Underwriters
(a)(i) Prudential Securities Incorporated
Prudential Securities is distributor for Prudential Government Securities
Trust (Intermediate Term Series), The Target Portfolio Trust, for Class B and
Class C shares of Prudential Adjustable Rate Securities Fund, Inc., for Class B
and Class C shares of Prudential Allocation Fund, Prudential California
Municipal Fund (California Income Series and California Series), Prudential
Equity Fund, Inc., Prudential Equity Income Fund, Prudential Europe Growth Fund
Inc., Prudential Global Fund, Inc., Prudential Global Genesis Fund, Inc.,
Prudential Global Natural Resources Fund, Inc., Prudential GNMA Fund, Inc.,
Prudential Government Income Fund, Inc., Prudential Growth Opportunity Fund,
Inc., Prudential High Yield Fund, Inc., Prudential IncomeVertible (R) Fund,
Inc., Prudential Intermediate Global Income Fund, Inc., Prudential Multi-Sector
Fund, Inc., Prudential Municipal Bond Fund, Prudential Municipal Series Fund
(except New York Money Market Series, Connecticut Money Market Series,
Massachusetts Money Market Series and New Jersey Money Market Series),
Prudential National Municipals Fund, Inc., Prudential Pacific Growth Fund, Inc.,
Prudential Short-Term Global Income Fund, Inc., Prudential Strategist Fund,
Inc., Prudential Structured Maturity Fund, Inc., Prudential U.S. Government
Fund, Prudential Utility Fund,
C-5
<PAGE>
Inc., Global Utility Fund, Inc., Nicholas-Applegate Fund, Inc.
(Nicholas-Applegate Growth Equity Fund) and The BlackRock Government Income
Trust. Prudential Securities is also a depositor for the following unit
investment trusts:
Corporate Investment Trust Fund
Prudential Equity Trust Shares
National Equity Trust
Prudential Unit Trusts
Government Securities Equity Trust
National Municipal Trust
(ii) Prudential Mutual Fund Distributors, Inc.
Prudential Mutual Fund Distributors, Incorporated is distributor for Command
Government Fund, Command Money Fund, Command Tax-Free Fund, Prudential
California Municipal Fund (California Money Market Series), Prudential
Institutional Liquidity Portfolio, Prudential Intermediate Global Income Fund,
Inc., Prudential-Bache Special Money Market Fund, Inc. (d/b/a Prudential Special
Money Market Fund), Prudential Structured Maturity Fund, Inc., Prudential-Bache
Tax-Free Money Fund, Inc. (d/b/a Prudential Tax-Free Money Fund), and for Class
A shares of Prudential Adjustable Rate Securities Fund, Inc. Prudential
Allocation Fund, Prudential California Municipal Fund (California Income Series
and California Series), Prudential Equity Fund, Inc., Prudential Equity Income
Fund, Prudential Europe Growth Fund, Inc., Prudential Global Fund, Inc.,
Prudential Global Genesis Fund, Inc., Prudential Global Natural Resources Fund,
Inc., Prudential GNMA Fund, Inc., Prudential Government Income Fund, Inc.,
Prudential Government Securities Trust (Money Market Series and U.S. Treasury
Money Market Series), Prudential Growth Fund, Inc., Prudential Growth
Opportunity Fund, Inc., Prudential High Yield Fund, Inc., Prudential
IncomeVertible (R) Fund, Inc., Prudential Intermediate Global Income Fund, Inc.,
Prudential-Bache MoneyMart Assets Inc. (d/b/a Prudential MoneyMart Assets Fund),
Prudential Multi-Sector Fund, Inc., Prudential Municipal Bond Fund, Prudential
Municipal Series Fund (Connecticut Money Market Series, Massachusetts Money
Market Series and New York Money Market Series and New Jersey Money Market
Series), Prudential National Municipals Fund, Inc., Prudential Pacific Growth
Fund, Inc., Prudential Short-term Global Income Fund, Inc., Prudential
Strategist Fund, Inc., Prudential Structured Maturity Fund, Prudential U.S.
Government Fund, Prudential Utility Fund, Inc., Global Utility Fund, Inc.,
Nicholas-Applegate Fund, Inc. (Nicholas-Applegate Growth Equity Fund) and The
BlackRock Government Income Trust.
(b)(i) Information concerning the directors and officers of Prudential
Securities Incorporated is set forth below.
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name(1) Underwriter Registrant
- ------- ------------- -------------
<S> <C> <C>
Alan D. Hogan .............. Executive Vice President, Chief Administrative None
Officer and Director
George A. Murray ........... Executive Vice President and Director None
John P. Murray ............. Executive Vice President and Director of Risk None
Management
Leland B. Paton ............ Executive Vice President and Director None
Vincent T. Pica, II ........ Executive Vice President and Director None
Richard A. Redeker ......... Director Director
Hardwick Simmons ........... Chief Executive Officer, President and Director None
Lee B. Spenser, Jr. ........ General Counsel, Executive Vice President None
and Director
</TABLE>
(ii) Prudential Mutual Fund Distributors, Inc.:
<TABLE>
<S> <C> <C>
Joanne Accurso-Soto ........ Vice President None
Dennis Annarumma ........... Vice President, Assistant Treasurer None
and Assistant Comptroller
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name(1) Underwriter Registrant
- ------- ------------- -------------
<S> <C> <C>
Phyllis J. Berman .......... Vice President None
Fred A. Fiandaca ........... President, Chief Executive Officer and Director None
Raritan Plaza One
Edison, NJ 08847
Stephen P. Fisher .......... Vice President None
Frank W. Giordano .......... Executive Vice President, General Counsel, None
Secretary and Director
Robert F. Gunia ............ Executive Vice President, Treasurer, Comptroller Vice President
and Director
Andrew J. Varley ........... Vice President None
Anita Whelan ............... Vice President and Assistant Secretary None
<FN>
- -------------
(1) The address of each person named is One Seaport Plaza, New York, NY
10292 unless otherwise indicated.
(c) Registrant has no principal underwriter who is not an affiliated
person of the Registrant.
</TABLE>
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the Rules thereunder are maintained at the offices of
State Street Bank and Trust Company, 1776 Heritage Drive, North Quincy,
Massachusetts, The Prudential Investment Corporation, Prudential Plaza, 745
Broad Street, Newark, New Jersey 07102, the Registrant, One Seaport Plaza, New
York, New York 10292, and Prudential Mutual Fund Services, Inc., Raritan Plaza
One, Edison, New Jersey 08837. Documents required by Rules 31a-1 (b)(5), (6),
(7), (9), (10) and (11) and 31a-1(f) will be kept at Two Gateway Center,
documents required by Rules 31a-1(b)(4) and (11) and 31a-1(d) at One Seaport
Plaza and the remaining accounts, books and other documents required by such
other pertinent provisions of Section 31(a) and the Rules promulgated thereunder
will be kept by State Street Bank and Trust Company and Prudential Mutual Fund
Services, Inc.
Item 31. Management Services
Other than as set forth under the captions "How the Fund is
Managed--Manager" and "How the Fund is Managed--Distributor" in the
Prospectus and the captions "Manager" and "Distributor" in the Statement of
Additional Information, constituting Parts A and B, respectively, of this
Registration Statement, Registrant is not a party to any management-
related service contract.
Item 32. Undertakings
1. The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
C-7
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized in the City of New York, and
State of New York, on the 29th day of December, 1994.
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
By Lawrence C. McQuade
----------------------------------------------
Lawrence C. McQuade, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed
below by the following persons in the capacities and on the dates
indicated.
Signature Title Date
- --------- ----- ----
Lawrence C. McQuade President and Director December 29, 1994
- --------------------------------
Lawrence C. McQuade
Stephen C. Eyre Director December 29, 1994
- --------------------------------
Stephen C. Eyre
Delayne D. Gold Director December 29, 1994
- --------------------------------
Delayne D. Gold
Dan G. Hoff Director December 29, 1994
- --------------------------------
Dan G. Hoff
Harry A. Jacobs Jr. Director December 29, 1994
- --------------------------------
Harry A. Jacobs, Jr.
Sidney R. Knafel Director December 29, 1994
- --------------------------------
Sidney R. Knafel
Director December 29, 1994
- --------------------------------
Robert E. LaBlanc
Thomas A. Owens Jr. Director December 29, 1994
- --------------------------------
Thomas A. Owens, Jr.
Richard A. Redeker Director December 29, 1994
- --------------------------------
Richard A. Redeker
Clay T. Whitehead Director December 29, 1994
- --------------------------------
Clay T. Whitehead
Susan C. Cote Treasurer and December 29, 1994
- -------------------------------- Principal Financial and
Susan C. Cote Accounting Officer
<PAGE>
EXHIBIT INDEX
1. Amended and Restated Articles of Incorporation.*
2. By-Laws of the Registrant incorporated by reference to Exhibit No. 2
to Pre-Effective Amendment No. 3 of the Registration Statement on Form
N-1A (File No. 33-33479) filed by Registrant on October 22, 1990.
4. Instruments defining rights of shareholders. Incorporated by reference
to Exhibit 4 to Post-Effective Amendment No. 6 to the Registration
Statement on Form N-1A (File No. 33-33470) filed on EDGAR by Registrant
on December 30, 1993.
5. (a) Management Agreement between the Registrant and Prudential Mutual
Fund Management, Inc, Incorporated by reference to Exhibit 5(a) to
Pre-Effective Amendment No. 3 to the Registration Statement on Form
N-1A (File No. 33-33479) filed by Registrant on October 22, 1990.
(b) Subadvisory Agreement between Prudential Mutual Fund Management,
Inc. and The Prudential Investment Corporation, Incorporated by
reference to Exhibit No. 5(b) to Pre-Effective Amendment No. 3 to the
Registration Statement on Form N-1A (File No. 33-33479) filed by
Registrant on October 22, 1990.
6. (a) Subscription Offering Agreement among the Registrant, Prudential-
Bache Securities Inc. and Prudential Mutual Fund Distributors, Inc.
incorporated by reference to Exhibit No. 6(c) to Pre-Effective Amendment
No. 3 to the Registration Statement on Form N-1A (File No. 33-33479)
filed by Registrant on October 22, 1990.
(b) Subscription Offering Agreement among the Registrant,
Prudential-Bache Securities Inc. and Prudential Mutual Fund
Distributors, Inc. incorporated by reference to Exhibit No. 6(d) to
Post-Effective Amendment No. 1 to the Registration Statement on Form
N-1A (File No. 33-33479) filed by Registrant on December 18, 1990.
(c)(i) Distribution Agreement between the Registrant and Prudential
Mutual Fund Distributors for the Class A shares dated July 1, 1993,
incorporated by reference to Exhibit 6 (e)(ii) to Post-Effective
Amendment No. 6 to the Registration Statement on Form N-1A (File No.
33-33479) filed via EDGAR on December 30, 1993.
(c)(ii) Restated Distribution Agreement between the Fund and Prudential
Securities Incorporated for the Class B shares dated July 1, 1993,
incorporated by reference to Exhibit 6 (e)(iii) to Post-Effective
Amendment No. 6 to the Registration Statement on Form N-1A (File No.
33-33479) filed via EDGAR on December 30, 1993.
(c)(iii) Distribution Agreement for Class A shares of both Portfolios.*
(c)(iv) Distribution Agreement for Class B shares of the Short-Term Global
Income Portfolio.*
(c)(v) Distribution Agreement for Class C shares of the Short-Term Global
Income Portfolio.*
8. Custodian Contract between the Registrant and State Street Bank and
Trust Company. Incorporated by reference to Exhibit No. 8 to
Pre-Effective Amendment No. 3 to the Registration Statement on Form N-1A
(File No. 33-33479) filed by Registrant on October 22, 1990.
9. Transfer Agency and Dividend Disbursing Agreement between the
Registrant and Prudential Mutual Fund Services, Inc. Incorporated by
reference to Exhibit No. 9 to Pre-Effective Amendment No. 3 to the
Registration Statement on Form N-1A (File No. 33-33479) filed by
Registrant on October 22, 1990.
10. Opinion of Counsel.*
11. Consent of Independent Accountants.*
13. Purchase Agreement. Incorporated by reference to Exhibit 13 to
Pre-Effective Amendment No. 3 to the Registration Statement on Form N-1A
(File No. 33-33479) filed by Registrant on October 22, 1990.
14. Not Applicable.
15. (a)(i) Distribution and Service Plan for Class A shares of Short-Term
Global Income Portfolio dated July 1, 1993, incorporated by reference to
Exhibit 15(a)(i) to Post-Effective Amendment No. 6 to the Registration
Statement on Form N-1A (File No. 33-33479) filed via EDGAR on December
30, 1993.
(b)(i) Distribution and Service Plan for Class B shares of the Fund
dated July 1, 1993, incorporated by reference to Exhibit 15(b)(ii) to
Post-Effective Amendment No. 6 to the Registration Statement on Form
N-1A (File No. 33-33479) filed via EDGAR on December 30, 1993.
(b)(ii) Distribution and Service Plan for Class A shares of Global
Assets Portfolio dated July 1, 1993, incorporated by reference to
Exhibit 15(b)(ii) to Post-Effective Amendment No. 6 to the Registration
Statement on Form N-1A (File No. 33-33479) filed via EDGAR on December
30, 1993.
<PAGE>
(c) Distribution and Service Plan for Class A shares of the
Short-Term Global Income Portfolio and Global Assets Portfolio.*
(d) Distribution and Service Plan for Class B shares of the
Short-Term Global Income Portfolio.*
(e) Distribution and Service Plan for Class C shares of the
Short-Term Global Income Portfolio.*
16. (a) Not Applicable.
17. (a) Not Applicable.
27. Financial Data Schedules.*
- ------------
* Filed herewith.
EXHIBIT 1
ARTICLES OF RESTATEMENT
OF
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
Prudential Short-Term Global Income Fund, Inc., a Maryland
corporation, having its principal office in the city of Baltimore,
(hereinafter called the "Corporation"), hereby certifies to the
State Department of Assessments and Taxation of Maryland, that:
FIRST: The Charter of the Corporation is hereby restated in
its entirety to read as follows:
ARTICLE I.
The name of the corporation (hereinafter called the
"Corporation") is Prudential Short-Term Global Income Fund, Inc.
ARTICLE II.
Purposes
The purpose for which the Corporation is formed is to act as
an open-end investment company of the management type registered as
such with the Securities and Exchange Commission pursuant to the
Investment Company Act of 1940, as amended (the "Investment Company
Act"), and to exercise and generally to enjoy all of the powers,
rights and privileges granted to, or conferred upon, corporations
by the General Laws of the State of Maryland now or hereafter in
force.
ARTICLE III.
Address in Maryland
The post office address of the place at which the principal
office of the Corporation in the State of Maryland is located is
c/o CT Corporation System, 32 South Street Baltimore, Maryland
21202 said resident agent South Street, Baltimore, Maryland 21202.
1
<PAGE>
The name of the Corporation's resident agent is The
Corporation Trust Incorporated, and its post office address is 32
South Street, Baltimore, Maryland 21202. Said resident agent is a
corporation of the State of Maryland.
ARTICLE IV.
Common Stock
Section 1. The total number of shares of capital stock which
the Corporation shall have authority to issue is 2,000,000,000
shares of the par value of $.001 per share and of the aggregate par
value of $2,000,000 to be divided initially into 250,000,000 shares
of Class A Capital Stock of the Global Assets Portfolio,
250,000,000 shares of Class B Capital Stock of the Global Assets
Portfolio, 500,000,000 shares of Class A Capital Stock of the
Short-Term Global Income Portfolio, 500,000,000 shares of Class B
Capital Stock of the Short-Term Global Income Portfolio and
500,000,000 shares of the Class C Capital Stock of the Short-Term
Global Income Portfolio.
(a) Each share of Class A, Class B and Class C Common
Stock of the Corporation shall represent the same interest in
the Corporation and have identical voting, dividend,
liquidation and other rights except that (i) Expenses related
to the distribution of each class of shares shall be borne
solely by such class; (ii) The bearing of such expenses solely
by shares of each class shall be appropriately reflected (in
the manner determined by the Board of Directors) in the net
asset value, dividends, distribution and liquidation rights of
2
<PAGE>
the shares of such class; (iii) The Class A Common Stock shall
be subject to a front-end sales load and a Rule 12b-1
distribution fee as determined by the Board of Directors from
time to time; (iv) The Class B Common Stock shall be subject
to a contingent deferred sales charge and a Rule 12b-1
distribution fee as determined by the Board of Directors from
time to time; and (v) The Class C Common Stock shall be
subject to a contingent deferred sales charge and a Rule 12b-1
distribution fee as determined by the Board of Directors from
time to time. All shares of each particular class shall
represent an equal proportionate interest in that class, and
each share of any particular class shall be equal to each
other share of that class.
(b) Each share of the Class B Common Stock of a Portfolio
of the Corporation shall be converted automatically, and
without any action or choice on the part of the holder
thereof, into shares (including fractions thereof) of the
Class A Common Stock of the same Portfolio of the Corporation
(computed in the manner hereinafter described), at the
applicable net asset value per share of each Class, at the
time of the calculation of the net asset value of such Class
B Common Stock at such times, which may vary between shares
originally issued for cash and shares purchased through the
automatic reinvestment of dividends and distributions with
respect to Class B Common Stock (each "Conversion Date"),
determined by the Board of Directors in accordance with
3
<PAGE>
applicable laws, rules, regulations, and interpretations of
the Securities and Exchange Commission and the National
Association of Securities Dealers, Inc. and pursuant to such
procedures as may be established from time to time by the
Board of Directors and disclosed in the Corporation's then
current prospectus for such Class A and Class B Common Stock.
(c) The number of shares of the Class A Common Stock of
the Corporation into which a share of the Class B Common Stock
is converted pursuant to Paragraph (1)(b) hereof shall equal
the number (including for this purpose fractions of a share)
obtained by dividing the net asset value per share of the
Class B Common Stock for purposes of sales and redemptions
thereof at the time of the calculation of the net asset value
on the Conversion Date by the net asset value per share of the
Class A Common Stock for purposes of sales and redemptions
thereof at the time of the calculation of the net asset value
on the Conversion Date.
(d) On the Conversion Date, the shares of the Class B
Common Stock of the Corporation converted into shares of the
Class A Common Stock will cease to accrue dividends and will
no longer be outstanding and the rights of the holders thereof
will cease (except the right to receive declared but unpaid
dividends to the Conversion Date).
(e) The Board of Directors shall have full power and
authority to adopt such other terms and conditions concerning
the conversion of shares of Class B Common Stock to shares of
4
<PAGE>
the Class A Common Stock as they deem appropriate; provided
such terms and conditions are not inconsistent with the terms
contained in this Section 1 and subject to any restrictions or
requirements under the Investment Company Act of 1940 and the
rules, regulations and interpretations thereof promulgated or
issued by the Securities and Exchange Commission, any
conditions or limitations contained in an order issued by the
Securities and Exchange Commission applicable to the
Corporation, or any restrictions or requirements under the
Internal Revenue Code of 1986, as amended, and the rules,
regulations and interpretations promulgated or issued
thereunder.
Section 2. The Board of Directors may, in its discretion,
classify and reclassify any unissued shares of the capital stock of
the Corporation into one or more additional or other classes or
series by setting or changing in any one or more respects the
designations, conversion or other rights, restrictions, limitations
as to dividends, qualifications or terms or conditions of
redemption of such shares and pursuant to such classification or
reclassification to increase or decrease the number of authorized
shares of any existing class or series. If designated by the Board
of Directors, particular classes or series of capital stock may
relate to separate portfolios of investments.
Section 3. Unless otherwise expressly provided in the charter
of the Corporation, including any Articles Supplementary creating
any class or series of capital stock, the holders of each class and
5
<PAGE>
series of capital stock of the Corporation shall be entitled to
dividends and distributions in such amounts and at such times as
may be determined by the Board of Directors, and the dividends and
distributions paid with respect to the various classes or series of
capital stock may vary among such classes or series. Expenses
related to the distribution of, and other identified expenses that
should properly be allocated to, the shares of a particular class
or series of capital stock may be charged to and borne solely by
such class or series and the bearing of expenses solely by a class
or series may be appropriately reflected (in a manner determined by
the Board of Directors) and cause differences in the net asset
value attributable to, and the dividend, redemption and liquidation
rights of, the shares of each such class or series of capital
stock.
Section 4. Unless otherwise expressly provided in the charter
of the Corporation, including any Articles Supplementary creating
any class or series of capital stock, on each matter submitted to
a vote of stockholders, each holder of a share of capital stock of
the Corporation shall be entitled to one vote for each share
standing in such holder's name on the books of the Corporation,
irrespective of the class or series thereof, and all shares of all
classes and series shall vote together as a single class; provided,
however, that (a) as to any matter with respect to which a separate
vote of any class or series is required by the Investment Company
Act, and in effect from time to time, or any rules, regulations or
orders issued thereunder, or by the Maryland General Corporation
6
<PAGE>
Law, such requirement as to a separate vote by that class or series
shall apply in lieu of a general vote of all classes or series as
described above; (b) in the event that the separate vote
requirements referred to in (a) above apply with respect to one or
more classes or series, then subject to paragraph (c) below, the
shares of all other classes and series not entitled to a separate
vote shall vote together as a single class; and (c) as to any
matter which in the judgment of the Board of Directors (which shall
be conclusive) does not affect the interest of a particular class
or series, such class or series shall not be entitled to any vote
and only the holders of shares of the one or more affected classes
and series shall be entitled to vote.
Section 5. Unless otherwise expressly provided in the charter
of the Corporation, including any Articles Supplementary creating
any class or series of capital stock, in the event of any
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, holders of shares of capital stock of the
Corporation shall be entitled, after payment or provision for
payment of the debts and other liabilities of the Corporation (as
such liabilities may affect one or more of the classes of shares of
capital stock of the Corporation), to share ratably in the
remaining net assets of the Corporation; provided, however, that in
the event the capital stock of the Corporation shall be classified
or reclassified into series, holders of any shares of capital stock
within such series shall be entitled to share ratably out of assets
7
<PAGE>
belonging to such series pursuant to the provisions of Section 7(c)
of this Article IV.
Section 6. Each share of any class of the capital stock of
the Corporation, and in the event the capital stock of the
Corporation shall be classified or reclassified into series, each
share of any class of capital stock of the Corporation within such
series shall be subject to the following provisions:
(a) The net asset value of each outstanding share
of capital stock of the Corporation (or of a class or
series, in the event the capital stock of the Corporation
shall be so classified or reclassified into series),
subject to subsection (b) of this Section 6, shall be the
quotient obtained by dividing the value of the net assets
of the Corporation (or the net assets of the Corporation
attributable or belonging to that class or series as
designated by the Board of Directors pursuant to Articles
Supplementary) by the total number of outstanding shares
of capital stock of the Corporation (or of such class or
series, in the event the capital stock of the Corporation
shall be classified or reclassified into series). Subject
to subsection (b) of this Section 6, the value of the net
assets of the Corporation (or of such class or series, in
the event the capital stock of the Corporation shall be
classified or reclassified into series) shall be
determined pursuant to the procedures or methods (which
procedures or methods, in the event the capital stock of
8
<PAGE>
the Corporation shall be classified or reclassified into
series, may differ from class to class or from series to
series) prescribed or approved by the Board of Directors
in its discretion, and shall be determined at the time or
times (which time or times may, in the event the capital
stock of the Corporation shall be classified into classes
or series, differ from series to series) prescribed or
approved by the Board of Directors in its discretion. In
addition, subject to subsection (b) of this Section 6,
the Board of Directors, in its discretion, may suspend
the daily determination of net asset value of any share
of any series or class of capital stock of the
Corporation.
(b) The net asset value of each share of the
capital stock of the Corporation or any class or series
thereof shall be determined in accordance with any
applicable provision of the Investment Company Act, any
applicable rule, regulation or order of the Securities
and Exchange Commission thereunder, and any applicable
rule or regulation made or adopted by any securities
association registered under the Securities Exchange Act
of 1934.
(c) All shares now or hereafter authorized shall be
subject to redemption and redeemable at the option of the
stockholder pursuant to the applicable provisions of the
Investment Company Act and laws of the State of Maryland,
including any applicable rules and regulations
thereunder. Each holder of a share of any class or
9
<PAGE>
series, upon request to the Corporation (if such holder's
shares are certificated, such request being accompanied
by surrender of the appropriate stock certificate or
certificates in proper form for transfer), shall be
entitled to require the Corporation to redeem all or any
part of such shares outstanding in the name of such
holder on the books of the Corporation (or as represented
by share certificates surrendered to the Corporation by
such redeeming holder) at a redemption price per share
determined in accordance with subsection (a) of this
Section 6.
(d) Notwithstanding subsection (c) of this Section
6, the Board of Directors of the Corporation may suspend
the right of the holders of shares of any or all classes
or series of capital stock to require the Corporation to
redeem such shares or may suspend any purchase of such
shares:
(i) for any period (A) during which the
New York Stock Exchange is closed, other than
customary weekend and holiday closings, or (B)
during which trading on the New York Stock
Exchange is restricted;
(ii) for any period during which an
emergency, as defined by the rules of the
Securities and Exchange Commission or any
successor thereto, exists as a result of which
(A) disposal by the Corporation of securities
owned by it and belonging to the affected
series of capital stock (or the Corporation,
if the shares of capital stock of the
10
<PAGE>
Corporation have not been classified or
reclassified into series) is not reasonably
practicable, or (B) it is not reasonably
practicable for the Corporation fairly to
determine the value of the net assets of the
affected series of capital stock; or
(iii) for such other periods as the
Securities and Exchange Commission or any
successor thereto may by order permit for the
protection of the holders of shares of capital
stock of the Corporation.
(e) All shares of the capital stock of the
Corporation now or hereafter authorized shall be subject
to redemption and redeemable at the option of the
Corporation. The Board of Directors may by resolution
from time to time authorize the Corporation to require
the redemption of all or any part of the outstanding
shares of any class or series upon the sending of written
notice thereof to each holder whose shares are to be
redeemed and upon such terms and conditions as the Board
of Directors, in its discretion, shall deem advisable,
out of funds legally available therefor, at the net asset
value per share of that class or series determined in
accordance with subsections (a) and (b) of this Section
6 and take all other steps deemed necessary or advisable
in connection therewith.
11
<PAGE>
(f) The Board of Directors may by resolution from
time to time authorize the purchase by the Corporation,
either directly or through an agent, of Shares of any
class or series of the capital stock of the Corporation
upon such terms and conditions and for such consideration
as the Board of Directors, in its discretion, shall deem
advisable out of funds legally available therefor at
prices per share not in excess of the net asset value per
share of that class or series determined in accordance
with subsections (a) and (b) of this Section 6 and to
take all other steps deemed necessary or advisable in
connection therewith.
(g) Except as otherwise permitted by the Investment
Company Act, payment of the redemption price of shares of
any class or series of the capital stock of the
Corporation surrendered to the Corporation for redemption
pursuant to the provisions of subsection (c) of this
Section 6 or for purchase by the Corporation pursuant to
the provisions of subsection (e) or (f) of this Section
6 shall be made by the Corporation within seven days
after surrender of such Shares to the Corporation for
such purpose. Any such payment may be made in whole or
in part in portfolio securities or in cash, as the Board
of Directors, in its discretion, shall deem advisable,
and no stockholder shall have the right, other than as
12
<PAGE>
determined by the Board of Directors, to have his or her
shares redeemed in portfolio securities.
(h) In the absence of any specification as to the
purposes for which shares are redeemed or repurchased by
the Corporation, all shares so redeemed or repurchased
shall be deemed to be acquired for retirement in the
sense contemplated by the laws of the State of Maryland.
Shares of any class or series retired by repurchase or
redemption shall thereafter have the status of authorized
but unissued shares of such class or series.
Section 7. In the event the Board of Directors shall
authorize the classification or reclassification of shares into
classes or series, the Board of Directors may (but shall not be
obligated to) provide that each class or series shall have the
following powers, preferences and voting or other special rights,
and the qualifications, restrictions and limitations thereof shall
be as follows:
(a) All consideration received by the Corporation
for the issue or sale of shares of capital stock of each
series, together with all income, earnings, profits and
proceeds received thereon, including any proceeds derived
from the sale, exchange or liquidation thereof, and any
funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall
irrevocably belong to the series with respect to which
such assets, payments or funds were received by the
13
<PAGE>
Corporation for all purposes, subject only to the rights
of creditors, and shall be so handled upon the books of
account of the Corporation. Such assets, payments and
funds, including any proceeds derived from the sale,
exchange or liquidation thereof, and any assets derived
from any reinvestment of such proceeds in whatever form
the same may be, are herein referred to as "assets
belonging to" such series.
(b) The Board of Directors may from time to time
declare and pay dividends or distributions, in additional
shares of capital stock of such series or in cash, on any
or all series of capital stock, the amount of such
dividends and the means of payment being wholly in the
discretion of the Board of Directors.
(i) Dividends or distributions on shares
of any series shall be paid only out of earned
surplus or other lawfully available assets
belonging to such series.
(ii) Inasmuch as one goal of the
Corporation is to qualify as a "regulated
investment company" under the Internal Revenue
Code of 1986, as amended, or any successor or
comparable statute thereto, and Regulations
promulgated thereunder, and inasmuch as the
computation of net income and gains for
federal income tax purposes may vary from the
14
<PAGE>
computation thereof on the books of the
Corporation, the Board of Directors shall have
the power, in its discretion, to distribute in
any fiscal year as dividends, including
dividends designated in whole or in part as
capital gains distributions, amounts
sufficient, in the opinion of the Board of
Directors, to enable the Corporation to
qualify as a regulated investment company and
to avoid liability for the Corporation for
federal income tax in respect of that year.
In furtherance, and not in limitation of the
foregoing, in the event that a series has a
net capital loss for a fiscal year, and to the
extent that the net capital loss offsets net
capital gains from such series, the amount to
be deemed available for distribution to that
series with the net capital gain may be
reduced by the amount offset.
(c) In the event of the liquidation or dissolution
of the Corporation, holders of shares of capital stock of
each series shall be entitled to receive, as a series,
out of the assets of the Corporation available for
distribution to such holders, but other than general
assets not belonging to any particular series, the assets
belonging to such series; and the assets so distributable
15
<PAGE>
to the holders of shares of capital stock of any series
shall be distributed, subject to the provisions of
subsection (d) of this Section 7, among such stockholders
in proportion to the number of shares of such series held
by them and recorded on the books of the Corporation. In
the event that there are any general assets not belonging
to any particular series and available for distribution,
such distribution shall be made to the holders of all
series in proportion to the net asset value of the
respective series determined in accordance with the
charter of the Corporation.
(d) The assets belonging to any series shall be
charged with the liabilities in respect to such series,
and shall also be charged with its share of the general
liabilities of the Corporation, in proportion to the
asset value of the respective series determined in
accordance with the charter of the Corporation. The
determination of the Board of Directors shall be
conclusive as to the amount of liabilities, including
accrued expenses and reserves, as to the allocation of
the same as to a given series, and as to whether the same
or general assets of the Corporation are allocable to one
or more classes.
Section 8. Any fractional shares shall carry proportionately
all the rights of a whole share, excepting any right to receive a
certificate evidencing such fractional share, but including,
16
<PAGE>
without limitation, the right to vote and the right to receive
dividends.
Section 9. No holder of shares of Common Stock of the
Corporation shall, as such holder, have any pre-emptive right to
purchase or subscribe for any shares of the Common Stock of the
Corporation of any class or series which it may issue or sell
(whether out of the number of shares authorized by the Articles of
Incorporation, or out of any shares of the Common Stock of the
Corporation acquired by it after the issue thereof, or otherwise).
Section 10. All persons who shall acquire any shares of
capital stock of the Corporation shall acquire the same subject to
the provisions of the charter and By-Laws of the Corporation.
Section 11. Notwithstanding any provision of law requiring
action to be taken or authorized by the affirmative vote of the
holders of a designated proportion greater than a majority of the
outstanding shares of all classes or series or of the outstanding
shares of a particular class or classes or series, as the case may
be, such action shall be valid and effective if taken or authorized
by the affirmative vote of the holders of a majority of the total
number of shares of all classes or series or of the total number of
shares of such class or classes or series, as the case may be,
outstanding and entitled to vote thereupon pursuant to the
provisions of these Articles of Incorporation.
17
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ARTICLE V.
Directors
The By-Laws of the Corporation may fix the number of directors
at no less than three and may authorize the Board of Directors, by
the vote of a majority of the entire Board of Directors, to
increase or decrease the number of directors within a limit
specified in the By-Laws (provided that, if there are no shares
outstanding, the number of directors may be less than three but not
less than one), and to fill the vacancies created by any such
increase in the number of directors. Unless otherwise provided by
the By-Laws of the Corporation, the directors of the Corporation
need not be stockholders.
The By-Laws of the Corporation may divide the directors of the
Corporation into classes and prescribe the tenure of office of the
several classes; but no class shall be elected for a period shorter
than one year or for a period longer than five years, and the term
of office of at least one class shall expire each year.
ARTICLE VI.
Indemnification of Directors and Officers
The Corporation shall indemnify to the fullest extent
permitted by law (including the Investment Company Act), as
currently in effect or as the same may hereafter be amended, any
person made or threatened to be made a party to any action, suit or
proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that such person or such
person's testator or intestate is or was a director of officer of
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the Corporation or serves or served at the request of the
Corporation any other enterprise as a director or officer. To the
fullest extent permitted by law (including the Investment Company
Act), as currently in effect or as the same may hereafter be
amended, expenses incurred by any such person in defending any such
action, suit or proceeding shall be paid or reimbursed by the
Corporation promptly upon receipt by it of an undertaking of such
person to repay such expenses if it shall ultimately be determined
that such person is not entitled to be indemnified by the
Corporation. The rights provided to any person by this Article VI
shall be enforceable against the Corporation by such person who
shall be presumed to have relied upon it in serving or continuing
to serve as a director or officer as provided above. No amendment
of this Article VI shall impair the rights of any person arising at
any time with respect to events occurring prior to such amendment.
For purposes of this Article VI, the term "Corporation" shall
include any predecessor of the Corporation and any constituent
corporation (including any constituent of a constituent) absorbed
by the Corporation in a consolidation or merger; the term "other
enterprise" shall include any corporation, partnership, joint
venture, trust or employee benefit plan; service "at the request of
the Corporation" shall include service as a director or officer of
the Corporation which imposes duties on, or involves services by,
such director or officer with respect to an employee benefit plan,
its participants or beneficiaries; any excise taxes assessed on a
person with respect to an employee benefit plan shall be deemed to
19
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be indemnifiable expenses; and action by a person with respect to
any employee benefit plan which such person reasonably believes to
be in the interest of the participants and beneficiaries of such
plan shall be deemed to be action not opposed to the best interests
of the Corporation.
ARTICLE VII.
Miscellaneous
The following provisions are inserted for the management of
the business and for the conduct of the affairs of the Corporation,
and for creating, defining, limiting and regulating the powers of
the Corporation, the directors and the stockholders.
Section 1. The Board of Directors shall have the management
and control of the property, business and affairs of the
Corporation and is hereby vested with all the powers possessed by
the Corporation itself so far as is not inconsistent with law or
these Articles of Incorporation. In furtherance and without
limitation of the foregoing provisions, it is expressly declared
that, subject to these Articles of Incorporation, the Board of
Directors shall have power:
(a) To make, alter, amend or repeal from time to
time the By-Laws of the Corporation except as such power
may otherwise be limited in the By-Laws.
(b) To issue shares of any class or series of the
capital stock of the Corporation.
(c) To authorize the purchase of shares of any
class or series in the open market or otherwise, at
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prices not in excess of their net asset value for shares
of that class, series or class within such series
determined in accordance with subsections (a) and (b) of
Section 6 of Article IV hereof, provided that the
Corporation has assets legally available for such
purpose, and to pay for such shares in cash, securities
or other assets then held or owned by the Corporation.
(d) To declare and pay dividends and distributions
from funds legally available therefor on shares of such
class or series, in such amounts, if any, and in such
manner (including declaration by means of a formula or
other similar method of determination whether or not the
amount of the dividend or distribution so declared can be
calculated at the time of such declaration) and to the
holders of record as of such date, as the Board of
Directors may determine.
(e) To take any and all action necessary or
appropriate to maintain a constant net asset value per
share for shares of any class, series or class within
such series.
Section 2. Any determination made in good faith and, so far
as accounting matters are involved, in accordance with generally
accepted accounting principles applied by or pursuant to the
direction of the Board of Directors or as otherwise required or
permitted by the Securities and Exchange Commission, shall be final
and conclusive, and shall be binding upon the Corporation and all
21
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holders of shares, past, present and future, of each class or
series, and shares are issued and sold on the condition and
undertaking, evidenced by acceptance of certificates for such
shares by, or confirmation of such shares being held for the
account of, any stockholder, that any and all such determinations
shall be binding as aforesaid.
Nothing in this Section 2 shall be construed to protect any
director or officer of the Corporation against liability to the
Corporation or its stockholders to which such director or officer
would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office.
Section 3. The directors of the Corporation may receive
compensation for their services, subject, however, to such
limitations with respect thereto as may be determined from time to
time by the holders of shares of capital stock of the Corporation.
Section 4. Except as required by law, the holders of shares
of capital stock of the Corporation shall have only such right to
inspect the records, documents, accounts and books of the
Corporation as may be granted by the Board of Directors of the
Corporation.
Section 5. Any vote of the holders of shares of capital stock
of the Corporation authorizing liquidation of the Corporation or
proceedings for its dissolution may authorize the Board of
Directors to determine, as provided herein, or if provision is not
made herein, in accordance with generally accepted accounting
22
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principles, which assets are the assets belonging to the
Corporation or any series thereof available for distribution to the
holders of the Corporation or any series thereof (pursuant to the
provisions of Section 7 of Article IV hereof) and may divide, or
authorize the Board of Directors to divide, such assets among the
stockholders of the shares of capital stock of the Corporation or
any series thereof in such manner as to ensure that each such
holder receives an amount from the proceeds of such liquidation or
dissolution that such holder is entitled to, as determined pursuant
to the provisions of Sections 3 and 7 of Article IV hereof.
ARTICLE VIII.
Amendments
The Corporation reserves the right from time to time to amend,
alter or repeal any of the provisions of these Articles of
Incorporation (including any amendment that changes the terms of
any of the outstanding shares by classification, reclassification
or otherwise), and to add or insert any other provisions that may,
under the statutes of the State of Maryland at the time in force,
be lawfully contained in articles of incorporation, and all rights
at any time conferred upon the stockholders of the Corporation by
these Articles of Incorporation are subject to the provisions of
this Article VIII.
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_____________________
The term "Articles of Incorporation" as used herein and in the
By-Laws of the Corporation shall be deemed to mean these Articles
of Incorporation as from time to time amended and restated.
_____________________
SECOND: The provisions set forth in these Articles of
Restatement constitute all of the provisions of the Charter as
currently in effect. These Articles do not amend the Charter of
the Corporation.
THIRD: The restatement of the Charter of the Corporation has
been approved by the affirmative vote of a majority of the
Directors of the Corporation at a meeting duly called and held on
September 27, 1994. The Corporation currently has ten directors.
The names of the directors currently in office are as follows:
Stephen C. Eyre
Delayne D. Gold
Don G. Hoff
Harry A. Jacobs, Jr.
Sidney R. Knafel
Robert E. LaBlanc
Lawrence C. McQuade
Thomas A. Owens, Jr.
Richard A. Redeker
Clay T. Whitehead
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IN WITNESS WHEREOF, Prudential Short-Term Global Income Fund,
Inc., has caused these presents to be signed in its name and on its
behalf by its President and attested by its Assistant Secretary on
September 27, 1994.
Prudential Short-Term Global Income Fund, Inc.
By /s/ Lawrence C. McQuade
--------------------------------------
Lawrence C. McQuade
President
Attest: /s/ Domenick Pugliese
----------------------------
Domenick Pugliese
Assistant Secretary
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THE UNDERSIGNED, President of Prudential Short-Term Global
Income Fund, Inc., who executed on behalf of the Corporation the
foregoing Articles of Restatement of which this certificate is made
a part, hereby acknowledges in the name and on behalf of said
Corporation the foregoing Articles of Restatement to be the
corporate act of said Corporation and hereby certifies that to the
best of his knowledge, information, and belief the matters and
facts set forth therein with respect to the authorization and
approval thereof are true in all material respects under the
penalties of perjury.
/s/ Lawrence C. McQuade
--------------------------------
Lawrence C. McQuade
President
26
EXHIBIT 6(c)(iii)
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND
Distribution Agreement
(Class A Shares)
Agreement made as of August 1, 1994, between Prudential
Short-Term Global Income Fund a Maryland Corporation (the Fund) and
Prudential Mutual Fund Distributors, Inc., a Delaware Corporation
(the Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment
Company Act of 1940, as amended (the Investment Company Act), as a
diversified, open-end, management investment company and it is in
the interest of the Fund to offer its Class A shares for the Short-
Term Global Income Portfolio and the Global Assets Portfolio (each.
a Portfolio) for sale continuously;
WHEREAS, the Distributor is a broker-dealer registered
under the Securities Exchange Act of 1934, as amended, and is
engaged in the business of selling shares of registered investment
companies either directly or through other broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into
an agreement with each other, with respect to the continuous
offering of the Fund's Class A shares from and after the date
hereof in order to promote the growth of the Fund and facilitate
the distribution of its Class A shares; and
WHEREAS, upon approval by the Class A shareholders of the
Fund it is contemplated that the Fund will adopt a plan of
distribution pursuant to Rule 12b-1 under the Investment Company
Act (the Plans) with respect to each Portfolio authorizing payments
by the Fund to the Distributor with respect to the distribution of
Class A shares of the Fund and the maintenance of Class A
shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor
The Fund hereby appoints the Distributor as the principal
underwriter and distributor of the Class A shares of the Fund to
sell Class A shares to the public and the Distributor hereby
accepts such appointment and agrees to act hereunder. The Fund
hereby agrees during the term of this Agreement to sell Class A
shares of the Fund to the Distributor on the terms and conditions
set forth below.
<PAGE>
Section 2. Exclusive Nature of Duties
The Distributor shall be the exclusive representative of
the Fund to act as principal underwriter and distributor of the
Fund's Class A shares, except that:
2.1 The exclusive rights granted to the Distributor to
purchase Class A shares from the Fund shall not apply to Class A
shares of the Fund issued in connection with the merger or
consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise
of all (or substantially all) the assets or the outstanding shares
of any such company by the Fund.
2.2 Such exclusive rights shall not apply to Class A
shares issued by the Fund pursuant to reinvestment of dividends or
capital gains distributions.
2.3 Such exclusive rights shall not apply to Class A
shares issued by the Fund pursuant to the reinstatement privilege
afforded redeeming shareholders.
2.4 Such exclusive rights shall not apply to purchases
made through the Fund's transfer and dividend disbursing agent in
the manner set forth in the currently effective Prospectus of the
Fund. The term "Prospectus" shall mean the Prospectus and
Statement of Additional Information included as part of the Fund's
Registration Statement, as such Prospectus and Statement of
Additional Information may be amended or supplemented from time to
time, and the term "Registration Statement" shall mean the
Registration Statement filed by the Fund with the Securities and
Exchange Commission and effective under the Securities Act of 1933,
as amended (Securities Act), and the Investment Company Act, as
such Registration Statement is amended from time to time.
Section 3. Purchase of Class A Shares from the Fund
3.1 The Distributor shall have the right to buy from the
Fund the Class A shares needed, but not more than the Class A
shares needed (except for clerical errors in transmission) to fill
unconditional orders for Class A shares placed with the Distributor
by investors or registered and qualified securities dealers and
other financial institutions (selected dealers). The price which
the Distributor shall pay for the Class A shares so purchased from
the Fund shall be the net asset value, determined as set forth in
the Prospectus.
3.2 The Class A shares are to be resold by the
Distributor or selected dealers, as described in Section 6.4
hereof, to investors at the offering price as set forth in the
Prospectus.
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3.3 The Fund shall have the right to suspend the sale of
its Class A shares at times when redemption is suspended pursuant
to the conditions in Section 4.3 hereof or at such other times as
may be determined by the Board of Directors. The Fund shall also
have the right to suspend the sale of its Class A shares if a
banking moratorium shall have been declared by federal or New York
authorities.
3.4 The Fund, or any agent of the Fund designated in
writing by the Fund, shall be promptly advised of all purchase
orders for Class A shares received by the Distributor. Any order
may be rejected by the Fund; provided, however, that the Fund will
not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class A shares. The Fund (or
its agent) will confirm orders upon their receipt, will make
appropriate book entries and upon receipt by the Fund (or its
agent) of payment therefor, will deliver deposit receipts for such
Class A shares pursuant to the instructions of the Distributor.
Payment shall be made to the Fund in New York Clearing House funds
or federal funds. The Distributor agrees to cause such payment and
such instructions to be delivered promptly to the Fund (or its
agent).
Section 4. Repurchase or Redemption of Class A Shares by the Fund
4.1 Any of the outstanding Class A shares may be
tendered for redemption at any time, and the Fund agrees to
repurchase or redeem the Class A shares so tendered in accordance
with its Articles of Incorporation as amended from time to time,
and in accordance with the applicable provisions of the Prospectus.
The price to be paid to redeem or repurchase the Class A shares
shall be equal to the net asset value determined as set forth in
the Prospectus. All payments by the Fund hereunder shall be made
in the manner set forth in Section 4.2 below.
4.2 The Fund shall pay the total amount of the
redemption price as defined in the above paragraph pursuant to the
instructions of the Distributor on or before the seventh calendar
day subsequent to its having received the notice of redemption in
proper form. The proceeds of any redemption of Class A shares
shall be paid by the Fund to or for the account of the redeeming
shareholder, in each case in accordance with applicable provisions
of the Prospectus.
4.3 Redemption of Class A shares or payment may be
suspended at times when the New York Stock Exchange is closed for
other than customary weekends and holidays, when trading on said
Exchange is restricted, 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 during any
3
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other period when the Securities and Exchange Commission, by order,
so permits.
Section 5. Duties of the Fund
5.1 Subject to the possible suspension of the sale of
Class A shares as provided herein, the Fund agrees to sell its
Class A shares so long as it has Class A shares available.
5.2 The Fund shall furnish the Distributor copies of all
information, financial statements and other papers which the
Distributor may reasonably request for use in connection with the
distribution of Class A shares, and this shall include one
certified copy, upon request by the Distributor, of all financial
statements prepared for the Fund by independent public accountants.
The Fund shall make available to the Distributor such number of
copies of its Prospectus and annual and interim reports as the
Distributor shall reasonably request.
5.3 The Fund shall take, from time to time, but subject
to the necessary approval of the Board of Directors and the
shareholders, all necessary action to fix the number of authorized
Class A shares and such steps as may be necessary to register the
same under the Securities Act, to the end that there will be
available for sale such number of Class A shares as the Distributor
reasonably may expect to sell. The Fund agrees to file from time
to time such amendments, reports and other documents as may be
necessary in order that there will be no untrue statement of a
material fact in the Registration Statement, or necessary in order
that there will be no omission to state a material fact in the
Registration Statement which omission would make the statements
therein misleading.
5.4 The Fund shall use its best efforts to qualify and
maintain the qualification of any appropriate number of its Class
A shares for sales under the securities laws of such states as the
Distributor and the Fund may approve; provided that the Fund shall
not be required to amend its Articles of Incorporation or By-Laws
to comply with the laws of any state, to maintain an office in any
state, to change the terms of the offering of its Class A shares in
any state from the terms set forth in its Registration Statement,
to qualify as a foreign corporation in any state or to consent to
service of process in any state other than with respect to claims
arising out of the offering of its Class A shares. Any such
qualification may be withheld, terminated or withdrawn by the Fund
at any time in its discretion. As provided in Section 9.1 hereof,
the expense of qualification and maintenance of qualification shall
be borne by the Fund. The Distributor shall furnish such
information and other material relating to its affairs and
activities as may be required by the Fund in connection with such
qualifications.
4
<PAGE>
Section 6. Duties of the Distributor
6.1 The Distributor shall devote reasonable time and
effort to effect sales of Class A shares of the Fund, but shall not
be obligated to sell any specific number of Class A shares. Sales
of the Class A shares shall be on the terms described in the
Prospectus. The Distributor may enter into like arrangements with
other investment companies. The Distributor shall compensate the
selected dealers as set forth in the Prospectus.
6.2 In selling the Class A shares, the Distributor shall
use its best efforts in all respects duly to conform with the
requirements of all federal and state laws relating to the sale of
such securities. Neither the Distributor nor any selected dealer
nor any other person is authorized by the Fund to give any
information or to make any representations, other than those
contained in the Registration Statement or Prospectus and any sales
literature approved by appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures
for the confirmation of sales to investors and selected dealers,
the collection of amounts payable by investors and selected dealers
on such sales and the cancellation of unsettled transactions, as
may be necessary to comply with the requirements of the National
Association of Securities Dealers, Inc. (NASD).
6.4 The Distributor shall have the right to enter into
selected dealer agreements with registered and qualified securities
dealers and other financial institutions of its choice for the sale
of Class A shares, provided that the Fund shall approve the forms
of such agreements. Within the United States, the Distributor
shall offer and sell Class A shares only to such selected dealers
as are members in good standing of the NASD. Class A shares sold
to selected dealers shall be for resale by such dealers only at the
offering price determined as set forth in the Prospectus.
Section 7. Payments to the Distributor
The Distributor shall receive and may retain any portion
of any front-end sales charge which is imposed on sales of Class A
shares and not reallocated to selected dealers as set forth in the
Prospectus, subject to the limitations of Article III, Section 26
of the NASD Rules of Fair Practice. Payment of these amounts to
the Distributor is not contingent upon the adoption or continuation
of the Plans.
Section 8. Payment of the Distributor under the Plans
8.1 The Fund shall pay to the Distributor for services
under the Distribution and Service Plans and this Agreement a fee,
(i) with respect to the Short-Term Global Income Portfolio, of .30
of 1% (including an asset-based sales charge of .05 of 1% and a
5
<PAGE>
service fee of .25 of 1%) per annum of the average daily net assets
of the Class A shares of that Portfolio, and (ii) with respect to
the Global Assets Portfolio, of .50 of 1% (including an asset-based
sales charge of .25 of 1% and a service fee of .25 of 1%) per annum
of the average daily net assets of the Class A shares of that
Portfolio. Amounts payable under the Plans shall be accrued daily
and paid monthly or at such other intervals as the Directors may
determine. Amounts payable under the Plans shall be subject to the
limitations of Article III, Section 26 of the NASD Rules of Fair
Practice.
8.2 So long as the Plans or any amendment thereto are in
effect, the Distributor shall inform the Board of Directors of the
commissions and account servicing fees to be paid by the
Distributor to account executives of the Distributor and to
broker-dealers and financial institutions which have dealer
agreements with the Distributor. So long as the Plans (or any
amendment thereto) are in effect, at the request of the Board of
Directors or any agent or representative of the Fund, the
Distributor shall provide such additional information as may
reasonably be requested concerning the activities of the
Distributor hereunder and the costs incurred in performing such
activities.
8.3 Expenses of distribution with respect to the Class
A shares of the Fund include, among others:
(a) amounts paid to Prudential Securities for
performing services under a selected dealer
agreement between Prudential Securities and
the Distributor for sale of Class A shares of
the Fund, including sales commissions and
trailer commissions paid to, or on account of,
account executives and indirect and overhead
costs associated with distribution activities,
including central office and branch expenses;
(b) amounts paid to Prusec for performing services
under a selected dealer agreement between
Prusec and the Distributor for sale of Class A
shares of the Fund, including sales
commissions and trailer commissions paid to,
or on account of, agents and indirect and
overhead costs associated with distribution
activities;
(c) sales commissions and trailer commissions paid
to, or on account of, broker-dealers and
financial institutions (other than Prudential
Securities and Prusec) which have entered into
selected dealer agreements with the
6
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Distributor with respect to Class A shares of
the Fund.
(d) amounts paid to, or an account of, account
executives of Prudential Securities, Prusec,
or of other broker-dealers or financial
institutions for personal service and/or the
maintenance of shareholder accounts; and
(e) advertising for the Fund in various forms
through any available medium, including the
cost of printing and mailing Fund
Prospectuses, and periodic financial reports
and sales literature to persons other than
current shareholders of the Fund.
Indirect and overhead costs referred to in clauses (a)
and (b) of the foregoing sentence include (i) lease expenses, (ii)
salaries and benefits of personnel including operations and sales
support personnel, (iii) utility expenses, (iv) communications
expenses, (v) sales promotion expenses, (vi) expenses of postage,
stationery and supplies and (vii) general overhead.
Section 9. Allocation of Expenses
9.1 The Fund shall bear all costs and expenses of the
continuous offering of its Class A shares, including fees and
disbursements of its counsel and auditors, in connection with the
preparation and filing of any required Registration Statements
and/or Prospectuses under the Investment Company Act or the
Securities Act, and preparing and mailing annual and periodic
reports and proxy materials to shareholders (including but not
limited to the expense of setting in type any such Registration
Statements, Prospectuses, annual or periodic reports or proxy
materials). The Fund shall also bear the cost of expenses of
qualification of the Class A shares for sale, and, if necessary or
advisable in connection therewith, of qualifying the Fund as a
broker or dealer, in such states of the United States or other
jurisdictions as shall be selected by the Fund and the Distributor
pursuant to Section 5.4 hereof and the cost and expense payable to
each such state for continuing qualification therein until the Fund
decides to discontinue such qualification pursuant to Section 5.4
hereof. As set forth in Section 8 above, the Fund shall also bear
the expenses it assumes pursuant to the Plans with respect to Class
A shares, so long as the Plans are in effect.
Section 10. Indemnification
10.1 The Fund agrees to indemnify, defend and hold the
Distributor, its officers and directors and any person who controls
the Distributor within the meaning of Section 15 of the Securities
Act, free and harmless from and against any and all claims,
7
<PAGE>
demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and
any counsel fees incurred in connection therewith) which the
Distributor, its officers, directors or any such controlling person
may incur under the Securities Act, or under common law or
otherwise, arising out of or based upon any untrue statement of a
material fact contained in the Registration Statement or Prospectus
or arising out of or based upon any alleged omission to state a
material fact required to be stated in either thereof or necessary
to make the statements in either thereof not misleading, except
insofar as such claims, demands, liabilities or expenses arise out
of or are based upon any such untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in
conformity with information furnished in writing by the Distributor
to the Fund for use in the Registration Statement or Prospectus;
provided, however, that this indemnity agreement shall not inure to
the benefit of any such officer, director, trustee or controlling
person unless a court of competent jurisdiction shall determine in
a final decision on the merits, that the person to be indemnified
was not liable by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of its
reckless disregard of its obligations under this Agreement
(disabling conduct), or, in the absence of such a decision, a
reasonable determination, based upon a review of the facts, that
the indemnified person was not liable by reason of disabling
conduct, by (a) a vote of a majority of a quorum of directors or
trustees who are neither "interested persons" of the Fund as
defined in Section 2(a)(19) of the Investment Company Act nor
parties to the proceeding, or (b) an independent legal counsel in
a written opinion. The Fund's agreement to indemnify the
Distributor, its officers and directors or trustees and any such
controlling person as aforesaid is expressly conditioned upon the
Fund's being promptly notified of any action brought against the
Distributor, its officers or directors or trustees, or any such
controlling person, such notification to be given by letter or
telegram addressed to the Fund at its principal business office.
The Fund agrees promptly to notify the Distributor of the
commencement of any litigation or proceedings against it or any of
its officers or directors in connection with the issue and sale of
any Class A shares.
10.2 The Distributor agrees to indemnify, defend and
hold the Fund, its officers and Directors and any person who
controls the Fund, if any, within the meaning of Section 15 of the
Securities Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or
liabilities and any counsel fees incurred in connection therewith)
which the Fund, its officers and Directors or any such controlling
person may incur under the Securities Act or under common law or
otherwise, but only to the extent that such liability or expense
incurred by the Fund, its Directors or officers or such controlling
8
<PAGE>
person resulting from such claims or demands shall arise out of or
be based upon any alleged untrue statement of a material fact
contained in information furnished in writing by the Distributor to
the Fund for use in the Registration Statement or Prospectus or
shall arise out of or be based upon any alleged omission to state
a material fact in connection with such information required to be
stated in the Registration Statement or Prospectus or necessary to
make such information not misleading. The Distributor's agreement
to indemnify the Fund, its officers and Directors and any such
controlling person as aforesaid, is expressly conditioned upon the
Distributor's being promptly notified of any action brought against
the Fund, its officers and Directors or any such controlling
person, such notification being given to the Distributor at its
principal business office.
Section 11. Duration and Termination of this Agreement
11.1 This Agreement shall become effective as of the date
first above written and shall remain in force for two years from
the date hereof and thereafter, but only so long as such
continuance is specifically approved at least annually by (a) the
Board of Directors of the Fund, or by the vote of a majority of the
outstanding voting securities of the Class A shares of the Fund,
and (b) by the vote of a majority of those Directors who are not
parties to this Agreement or interested persons of any such parties
and who have no direct or indirect financial interest in this
Agreement or in the operation of the Fund's Plans or in any
agreement related thereto (Rule 12b-1 Directors), cast in person at
a meeting called for the purpose of voting upon such approval.
11.2 This Agreement may be terminated at any time,
without the payment of any penalty, by a majority of the Rule 12b-1
Directors or by vote of a majority of the outstanding voting
securities of the Class A shares of the Fund, or by the
Distributor, on sixty (60) days' written notice to the other party.
This Agreement shall automatically terminate in the event of its
assignment.
11.3 The terms "affiliated person," "assignment,"
"interested person" and "vote of a majority of the outstanding
voting securities", when used in this Agreement, shall have the
respective meanings specified in the Investment Company Act.
Section 12. Amendments to this Agreement
This Agreement may be amended by the parties only if such
amendment is specifically approved by (a) the Board of Directors of
the Fund, or by the vote of a majority of the outstanding voting
securities of the Class A shares of the Fund, and (b) by the vote
of a majority of the Rule 12b-1 Directors cast in person at a
meeting called for the purpose of voting on such amendment.
9
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Section 13. Governing Law
The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York as
at the time in effect and the applicable provisions of the
Investment Company Act. To the extent that the applicable law of
the State of New York, or any of the provisions herein, conflict
with the applicable provisions of the Investment Company Act, the
latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year above written.
Prudential Mutual Fund
Distributors, Inc.
By: /s/ Anita L. Whelan
-------------------------------
Anita L. Whelan
Vice President
Prudential Short-Term Global Income
Fund
By: /s/ Lawrence C. McQuade
-------------------------------
Lawrence C. McQuade
President
10
EXHIBIT 6(c)(v)
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND
Short-Term Global Income Portfolio
Distribution Agreement
(Class B Shares)
Agreement made as of August 1, 1994, between Prudential
Short-Term Global Income Fund, Short-Term Global Income Portfolio,
a Maryland Corporation (the Fund) and Prudential Securities
Incorporated, a Delaware Corporation (the Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment
Company Act of 1940, as amended (the Investment Company Act), as a
diversified, open-end, management investment company and it is in
the interest of the Fund to offer its Class B shares for sale
continuously;
WHEREAS, the Distributor is a broker-dealer registered
under the Securities Exchange Act of 1934, as amended, and is
engaged in the business of selling shares of registered investment
companies either directly or through other broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into
an agreement with each other, with respect to the continuous
offering of the Fund's Class B shares from and after the date
hereof in order to promote the growth of the Fund and facilitate
the distribution of its Class B shares; and
WHEREAS, the Fund has adopted a distribution and service
plan pursuant to Rule 12b-1 under the Investment Company Act (the
Plan) authorizing payments by the Fund to the Distributor with
respect to the distribution of Class B shares of the Fund and the
maintenance of Class B shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor
The Fund hereby appoints the Distributor as the principal
underwriter and distributor of the Class B shares of the Fund to
sell Class B shares to the public and the Distributor hereby
accepts such appointment and agrees to act hereunder. The Fund
hereby agrees during the term of this Agreement to sell Class B
shares of the Fund to the Distributor on the terms and conditions
set forth below.
<PAGE>
Section 2. Exclusive Nature of Duties
The Distributor shall be the exclusive representative of
the Fund to act as principal underwriter and distributor of the
Fund's Class B shares, except that:
2.1 The exclusive rights granted to the Distributor to
purchase Class B shares from the Fund shall not apply to Class B
shares of the Fund issued in connection with the merger or
consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise
of all (or substantially all) the assets or the outstanding shares
of any such company by the Fund.
2.2 Such exclusive rights shall not apply to Class B
shares issued by the Fund pursuant to reinvestment of dividends or
capital gains distributions.
2.3 Such exclusive rights shall not apply to Class B
shares issued by the Fund pursuant to the reinstatement privilege
afforded redeeming shareholders.
2.4 Such exclusive rights shall not apply to purchases
made through the Fund's transfer and dividend disbursing agent in
the manner set forth in the currently effective Prospectus of the
Fund. The term "Prospectus" shall mean the Prospectus and
Statement of Additional Information included as part of the Fund's
Registration Statement, as such Prospectus and Statement of
Additional Information may be amended or supplemented from time to
time, and the term "Registration Statement" shall mean the
Registration Statement filed by the Fund with the Securities and
Exchange Commission and effective under the Securities Act of 1933,
as amended (the Securities Act), and the Investment Company Act, as
such Registration Statement is amended from time to time.
Section 3. Purchase of Class B Shares from the Fund
3.1 The Distributor shall have the right to buy from the
Fund the Class B shares needed, but not more than the Class B
shares needed (except for clerical errors in transmission) to fill
unconditional orders for Class B shares placed with the Distributor
by investors or registered and qualified securities dealers and
other financial institutions (selected dealers). The price which
the Distributor shall pay for the Class B shares so purchased from
the Fund shall be the net asset value, determined as set forth in
the Prospectus.
3.2 The Class B shares are to be resold by the
Distributor or selected dealers, as described in Section 6.4
hereof, to investors at the offering price as set forth in the
Prospectus.
2
<PAGE>
3.3 The Fund shall have the right to suspend the sale of
its Class B shares at times when redemption is suspended pursuant
to the conditions in Section 4.3 hereof or at such other times as
may be determined by the Board of Directors. The Fund shall also
have the right to suspend the sale of its Class B shares if a
banking moratorium shall have been declared by federal or New York
authorities.
3.4 The Fund, or any agent of the Fund designated in
writing by the Fund, shall be promptly advised of all purchase
orders for Class B shares received by the Distributor. Any order
may be rejected by the Fund; provided, however, that the Fund will
not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class B shares. The Fund (or
its agent) will confirm orders upon their receipt, will make
appropriate book entries and upon receipt by the Fund (or its
agent) of payment therefor, will deliver deposit receipts for such
Class B shares pursuant to the instructions of the Distributor.
Payment shall be made to the Fund in New York Clearing House funds
or federal funds. The Distributor agrees to cause such payment and
such instructions to be delivered promptly to the Fund (or its
agent).
Section 4. Repurchase or Redemption of Class B Shares by the Fund
4.1 Any of the outstanding Class B shares may be
tendered for redemption at any time, and the Fund agrees to
repurchase or redeem the Class B shares so tendered in accordance
with its Articles of Incorporation as amended from time to time,
and in accordance with the applicable provisions of the Prospectus.
The price to be paid to redeem or repurchase the Class B shares
shall be equal to the net asset value determined as set forth in
the Prospectus. All payments by the Fund hereunder shall be made
in the manner set forth in Section 4.2 below.
4.2 The Fund shall pay the total amount of the
redemption price as defined in the above paragraph pursuant to the
instructions of the Distributor on or before the seventh day
subsequent to its having received the notice of redemption in
proper form. The proceeds of any redemption of Class B shares
shall be paid by the Fund as follows: (a) any applicable
contingent deferred sales charge shall be paid to the Distributor
and (b) the balance shall be paid to or for the account of the
redeeming shareholder, in each case in accordance with applicable
provisions of the Prospectus.
4.3 Redemption of Class B shares or payment may be
suspended at times when the New York Stock Exchange is closed for
other than customary weekends and holidays, when trading on said
Exchange is restricted, when an emergency exists as a result of
which disposal by the Fund of securities owned by it is not
3
<PAGE>
reasonably practicable or it is not reasonably practicable for the
Fund fairly to determine the value of its net assets, or during any
other period when the Securities and Exchange Commission, by order,
so permits.
Section 5. Duties of the Fund
5.1 Subject to the possible suspension of the sale of
Class B shares as provided herein, the Fund agrees to sell its
Class B shares so long as it has Class B shares available.
5.2 The Fund shall furnish the Distributor copies of all
information, financial statements and other papers which the
Distributor may reasonably request for use in connection with the
distribution of Class B shares, and this shall include one
certified copy, upon request by the Distributor, of all financial
statements prepared for the Fund by independent public accountants.
The Fund shall make available to the Distributor such number of
copies of its Prospectus and annual and interim reports as the
Distributor shall reasonably request.
5.3 The Fund shall take, from time to time, but subject
to the necessary approval of the Board of Directors and the
shareholders, all necessary action to fix the number of authorized
Class B shares and such steps as may be necessary to register the
same under the Securities Act, to the end that there will be
available for sale such number of Class B shares as the Distributor
reasonably may expect to sell. The Fund agrees to file from time
to time such amendments, reports and other documents as may be
necessary in order that there will be no untrue statement of a
material fact in the Registration Statement, or necessary in order
that there will be no omission to state a material fact in the
Registration Statement which omission would make the statements
therein misleading.
5.4 The Fund shall use its best efforts to qualify and
maintain the qualification of any appropriate number of its Class
B shares for sales under the securities laws of such states as the
Distributor and the Fund may approve; provided that the Fund shall
not be required to amend its Articles of Incorporation or By-Laws
to comply with the laws of any state, to maintain an office in any
state, to change the terms of the offering of its Class B shares in
any state from the terms set forth in its Registration Statement,
to qualify as a foreign corporation in any state or to consent to
service of process in any state other than with respect to claims
arising out of the offering of its Class B shares. Any such
qualification may be withheld, terminated or withdrawn by the Fund
at any time in its discretion. As provided in Section 9.1 hereof,
the expense of qualification and maintenance of qualification shall
be borne by the Fund. The Distributor shall furnish such
information and other material relating to its affairs and
activities as may be required by the Fund in connection with such
4
<PAGE>
qualifications.
Section 6. Duties of the Distributor
6.1 The Distributor shall devote reasonable time and
effort to effect sales of Class B shares of the Fund, but shall not
be obligated to sell any specific number of Class B shares. Sales
of the Class B shares shall be on the terms described in the
Prospectus. The Distributor may enter into like arrangements with
other investment companies. The Distributor shall compensate the
selected dealers as set forth in the Prospectus.
6.2 In selling the Class B shares, the Distributor shall
use its best efforts in all respects duly to conform with the
requirements of all federal and state laws relating to the sale of
such securities. Neither the Distributor nor any selected dealer
nor any other person is authorized by the Fund to give any
information or to make any representations, other than those
contained in the Registration Statement or Prospectus and any sales
literature approved by appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures
for the confirmation of sales to investors and selected dealers,
the collection of amounts payable by investors and selected dealers
on such sales and the cancellation of unsettled transactions, as
may be necessary to comply with the requirements of the National
Association of Securities Dealers, Inc. (NASD).
6.4 The Distributor shall have the right to enter into
selected dealer agreements with registered and qualified securities
dealers and other financial institutions of its choice for the sale
of Class B shares, provided that the Fund shall approve the forms
of such agreements. Within the United States, the Distributor
shall offer and sell Class B shares only to such selected dealers
as are members in good standing of the NASD. Class B shares sold
to selected dealers shall be for resale by such dealers only at the
offering price determined as set forth in the Prospectus.
Section 7. Payments to the Distributor
The Distributor shall receive and may retain any
contingent deferred sales charge which is imposed with respect to
repurchases and redemptions of Class B shares as set forth in the
Prospectus, subject to the limitations of Article III, Section 26
of the NASD Rules of Fair Practice. Payment of these amounts to the
Distributor is not contingent upon the adoption or continuation of
the Plan.
Section 8. Payment of the Distributor under the Plan
8.1 The Fund shall pay to the Distributor as
compensation for services under the Distribution and Service Plan
5
<PAGE>
and this Agreement a fee of 1% (including an asset-based sales
charge of .75 of 1% and a service fee of .25 of 1%) per annum of
the average daily net assets of the Class B shares of the Fund.
Amounts payable under the Plan shall be accrued daily and paid
monthly or at such other intervals as the Directors may determine.
Amounts payable under the Plan shall be subject to the limitations
of Article III, Section 26 of the NASD Rules of Fair Practice.
8.2 So long as the Plan or any amendment thereto is in
effect, the Distributor shall inform the Board of Directors of the
commissions (including trailer commissions) and account servicing
fees to be paid by the Distributor to account executives of the
Distributor and to broker-dealers and financial institutions which
have selected dealer agreements with the Distributor. So long as
the Plan (or any amendment thereto) is in effect, at the request of
the Board of Directors or any agent or representative of the Fund,
the Distributor shall provide such additional information as may
reasonably be requested concerning the activities of the
Distributor hereunder and the costs incurred in performing such
activities.
8.3 Expenses of distribution with respect to the Class
B shares of the Fund include, among others:
(a) sales commissions (including trailer
commissions) paid to, or on account of,
account executives of the Distributor;
(b) indirect and overhead costs of the Distributor
associated with performance of distribution
activities, including central office and
branch expenses;
(c) amounts paid to Prusec for performing services
under a selected dealer agreement between
Prusec and the Distributor for sale of Class B
shares of the Fund, including sales
commissions and trailer commissions paid to,
or on account of, agents and indirect and
overhead costs associated with distribution
activities;
(d) sales commissions (including trailer
commissions) paid to, or on account of,
broker-dealers and financial institutions
(other than Prusec) which have entered into
selected dealer agreements with the
Distributor with respect to Class B shares of
the Fund;
(e) amounts paid to, or an account of, account
executives of the Distributor or of other
6
<PAGE>
broker-dealers or financial institutions for
personal service and/or the maintenance of
shareholder accounts; and
(f) advertising for the Fund in various forms
through any available medium, including the
cost of printing and mailing Fund
Prospectuses, and periodic financial reports
and sales literature to persons other than
current shareholders of the Fund.
Indirect and overhead costs referred to in clauses (b)
and (c) of the foregoing sentence include (i) lease expenses, (ii)
salaries and benefits of personnel including operations and sales
support personnel, (iii) utility expenses, (iv) communications
expenses, (v) sales promotion expenses, (vi) expenses of postage,
stationery and supplies and (vii) general overhead.
Section 9. Allocation of Expenses
9.1 The Fund shall bear all costs and expenses of the
continuous offering of its Class B shares, including fees and
disbursements of its counsel and auditors, in connection with the
preparation and filing of any required Registration Statements
and/or Prospectuses under the Investment Company Act or the
Securities Act, and preparing and mailing annual and periodic
reports and proxy materials to shareholders (including but not
limited to the expense of setting in type any such Registration
Statements, Prospectuses, annual or periodic reports or proxy
materials). The Fund shall also bear the cost of expenses of
qualification of the Class B shares for sale, and, if necessary or
advisable in connection therewith, of qualifying the Fund as a
broker or dealer, in such states of the United States or other
jurisdictions as shall be selected by the Fund and the Distributor
pursuant to Section 5.4 hereof and the cost and expense payable to
each such state for continuing qualification therein until the Fund
decides to discontinue such qualification pursuant to Section 5.4
hereof. As set forth in Section 8 above, the Fund shall also bear
the expenses it assumes pursuant to the Plan with respect to Class
B shares, so long as the Plan is in effect.
Section 10. Indemnification
10.1 The Fund agrees to indemnify, defend and hold the
Distributor, its officers and Directors and any person who controls
the Distributor within the meaning of Section 15 of the Securities
Act, free and harmless from and against any and all claims,
demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and
any counsel fees incurred in connection therewith) which the
Distributor, its officers, Directors or any such controlling person
7
<PAGE>
may incur under the Securities Act, or under common law or
otherwise, arising out of or based upon any untrue statement of a
material fact contained in the Registration Statement or Prospectus
or arising out of or based upon any alleged omission to state a
material fact required to be stated in either thereof or necessary
to make the statements in either thereof not misleading, except
insofar as such claims, demands, liabilities or expenses arise out
of or are based upon any such untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in
conformity with information furnished in writing by the Distributor
to the Fund for use in the Registration Statement or Prospectus;
provided, however, that this indemnity agreement shall not inure to
the benefit of any such officer, Director or controlling person
unless a court of competent jurisdiction shall determine in a final
decision on the merits, that the person to be indemnified was not
liable by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of its
reckless disregard of its obligations under this Agreement
(disabling conduct), or, in the absence of such a decision, a
reasonable determination, based upon a review of the facts, that
the indemnified person was not liable by reason of disabling
conduct, by (a) a vote of a majority of a quorum of Directors who
are neither "interested persons" of the Fund as defined in Section
2(a)(19) of the Investment Company Act nor parties to the
proceeding, or (b) an independent legal counsel in a written
opinion. The Fund's agreement to indemnify the Distributor, its
officers and Directors and any such controlling person as aforesaid
is expressly conditioned upon the Fund's being promptly notified of
any action brought against the Distributor, its officers or
Directors, or any such controlling person, such notification to be
given in writing addressed to the Fund at its principal business
office. The Fund agrees promptly to notify the Distributor of the
commencement of any litigation or proceedings against it or any of
its officers or Directors in connection with the issue and sale of
any Class B shares.
10.2 The Distributor agrees to indemnify, defend and
hold the Fund, its officers and Directors and any person who
controls the Fund, if any, within the meaning of Section 15 of the
Securities Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or
liabilities and any counsel fees incurred in connection therewith)
which the Fund, its officers and Directors or any such controlling
person may incur under the Securities Act or under common law or
otherwise, but only to the extent that such liability or expense
incurred by the Fund, its Directors or officers or such controlling
person resulting from such claims or demands shall arise out of or
be based upon any alleged untrue statement of a material fact
contained in information furnished in writing by the Distributor to
the Fund for use in the Registration Statement or Prospectus or
shall arise out of or be based upon any alleged omission to state
8
<PAGE>
a material fact in connection with such information required to be
stated in the Registration Statement or Prospectus or necessary to
make such information not misleading. The Distributor's agreement
to indemnify the Fund, its officers and Directors and any such
controlling person as aforesaid, is expressly conditioned upon the
Distributor's being promptly notified of any action brought against
the Fund, its officers and Directors or any such controlling
person, such notification to be given to the Distributor in writing
at its principal business office.
Section 11. Duration and Termination of this Agreement
11.1 This Agreement shall become effective as of the
date first above written and shall remain in force for two years
from the date hereof and thereafter, but only so long as such
continuance is specifically approved at least annually by (a) the
Board of Directors of the Fund, or by the vote of a majority of the
outstanding voting securities of the Class B shares of the Fund,
and (b) by the vote of a majority of those Directors who are not
parties to this Agreement or interested persons of any such parties
and who have no direct or indirect financial interest in this
Agreement or in the operation of the Fund's Plan or in any
agreement related thereto (Rule 12b-1 Directors), cast in person at
a meeting called for the purpose of voting upon such approval.
11.2 This Agreement may be terminated at any time,
without the payment of any penalty, by a majority of the Rule 12b-1
Directors or by vote of a majority of the outstanding voting
securities of the Class B shares of the Fund, or by the
Distributor, on sixty (60) days' written notice to the other party.
This Agreement shall automatically terminate in the event of its
assignment.
11.3 The terms "affiliated person," "assignment,"
"interested person" and "vote of a majority of the outstanding
voting securities," when used in this Agreement, shall have the
respective meanings specified in the Investment Company Act.
Section 12. Amendments to this Agreement
This Agreement may be amended by the parties only if such
amendment is specifically approved by (a) the Board of Directors of
the Fund, or by the vote of a majority of the outstanding voting
securities of the Class B shares of the Fund, and (b) by the vote
of a majority of the Rule 12b-1 Board of Directors cast in person
at a meeting called for the purpose of voting on such amendment.
Section 13. Governing Law
The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York as
at the time in effect and the applicable provisions of the
9
<PAGE>
Investment Company Act. To the extent that the applicable law of
the State of New York, or any of the provisions herein, conflict
with the applicable provisions of the Investment Company Act, the
latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year above written.
Prudential Securities
Incorporated
By: /s/ Robert F. Gunia
------------------------
Robert F. Gunia
Senior Vice President
Prudential Short-Term Global
Fund
By: /s/ Lawrence C. McQuade
------------------------
Lawrence C. McQuade
President
10
EXHIBIT 6(c)(vi)
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND
Short-Term Global Income Portfolio
Distribution Agreement
(Class C Shares)
Agreement made as of August 1, 1994, between Prudential
Short-Term Global Income Fund, Short-Term Global Income Portfolio
a Maryland Corporation (the Fund) and Prudential Securities
Incorporated, a Delaware Corporation (the Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment
Company Act of 1940, as amended (the Investment Company Act), as a
diversified, open-end, management investment company and it is in
the interest of the Fund to offer its Class C shares for sale
continuously;
WHEREAS, the Distributor is a broker-dealer registered
under the Securities Exchange Act of 1934, as amended, and is
engaged in the business of selling shares of registered investment
companies either directly or through other broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into
an agreement with each other, with respect to the continuous
offering of the Fund's Class C shares from and after the date
hereof in order to promote the growth of the Fund and facilitate
the distribution of its Class C shares; and
WHEREAS, the Fund has adopted a distribution and service
plan pursuant to Rule 12b-1 under the Investment Company Act (the
Plan) authorizing payments by the Fund to the Distributor with
respect to the distribution of Class C shares of the Fund and the
maintenance of Class C shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor
The Fund hereby appoints the Distributor as the principal
underwriter and distributor of the Class C shares of the Fund to
sell Class C shares to the public and the Distributor hereby
accepts such appointment and agrees to act hereunder. The Fund
hereby agrees during the term of this Agreement to sell Class C
shares of the Fund to the Distributor on the terms and conditions
set forth below.
<PAGE>
Section 2. Exclusive Nature of Duties
The Distributor shall be the exclusive representative of
the Fund to act as principal underwriter and distributor of the
Fund's Class C shares, except that:
2.1 The exclusive rights granted to the Distributor to
purchase Class C shares from the Fund shall not apply to Class C
shares of the Fund issued in connection with the merger or
consolidation of any other investment company or personal holding
company with the Fund or the acquisition by purchase or otherwise
of all (or substantially all) the assets or the outstanding shares
of any such company by the Fund.
2.2 Such exclusive rights shall not apply to Class C
shares issued by the Fund pursuant to reinvestment of dividends or
capital gains distributions.
2.3 Such exclusive rights shall not apply to Class C
shares issued by the Fund pursuant to the reinstatement privilege
afforded redeeming shareholders.
2.4 Such exclusive rights shall not apply to purchases
made through the Fund's transfer and dividend disbursing agent in
the manner set forth in the currently effective Prospectus of the
Fund. The term "Prospectus" shall mean the Prospectus and
Statement of Additional Information included as part of the Fund's
Registration Statement, as such Prospectus and Statement of
Additional Information may be amended or supplemented from time to
time, and the term "Registration Statement" shall mean the
Registration Statement filed by the Fund with the Securities and
Exchange Commission and effective under the Securities Act of 1933,
as amended (the Securities Act), and the Investment Company Act, as
such Registration Statement is amended from time to time.
Section 3. Purchase of Class C Shares from the Fund
3.1 The Distributor shall have the right to buy from the
Fund the Class C shares needed, but not more than the Class C
shares needed (except for clerical errors in transmission) to fill
unconditional orders for Class C shares placed with the Distributor
by investors or registered and qualified securities dealers and
other financial institutions (selected dealers). The price which
the Distributor shall pay for the Class C shares so purchased from
the Fund shall be the net asset value, determined as set forth in
the Prospectus.
3.2 The Class C shares are to be resold by the
Distributor or selected dealers, as described in Section 6.4
hereof, to investors at the offering price as set forth in the
Prospectus.
2
<PAGE>
3.3 The Fund shall have the right to suspend the sale of
its Class C shares at times when redemption is suspended pursuant
to the conditions in Section 4.3 hereof or at such other times as
may be determined by the Board of Directors. The Fund shall also
have the right to suspend the sale of its Class C shares if a
banking moratorium shall have been declared by federal or New York
authorities.
3.4 The Fund, or any agent of the Fund designated in
writing by the Fund, shall be promptly advised of all purchase
orders for Class C shares received by the Distributor. Any order
may be rejected by the Fund; provided, however, that the Fund will
not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Class C shares. The Fund (or
its agent) will confirm orders upon their receipt, will make
appropriate book entries and upon receipt by the Fund (or its
agent) of payment therefor, will deliver deposit receipts for such
Class C shares pursuant to the instructions of the Distributor.
Payment shall be made to the Fund in New York Clearing House funds
or federal funds. The Distributor agrees to cause such payment and
such instructions to be delivered promptly to the Fund (or its
agent).
Section 4. Repurchase or Redemption of Class C Shares by the Fund
4.1 Any of the outstanding Class C shares may be
tendered for redemption at any time, and the Fund agrees to
repurchase or redeem the Class C shares so tendered in accordance
with its Articles of Incorporation as amended from time to time,
and in accordance with the applicable provisions of the Prospectus.
The price to be paid to redeem or repurchase the Class C shares
shall be equal to the net asset value determined as set forth in
the Prospectus. All payments by the Fund hereunder shall be made
in the manner set forth in Section 4.2 below.
4.2 The Fund shall pay the total amount of the
redemption price as defined in the above paragraph pursuant to the
instructions of the Distributor on or before the seventh day
subsequent to its having received the notice of redemption in
proper form. The proceeds of any redemption of Class C shares
shall be paid by the Fund as follows: (a) any applicable
contingent deferred sales charge shall be paid to the Distributor
and (b) the balance shall be paid to or for the account of the
redeeming shareholder, in each case in accordance with applicable
provisions of the Prospectus.
4.3 Redemption of Class C shares or payment may be
suspended at times when the New York Stock Exchange is closed for
other than customary weekends and holidays, when trading on said
Exchange is restricted, when an emergency exists as a result of
which disposal by the Fund of securities owned by it is not
3
<PAGE>
reasonably practicable or it is not reasonably practicable for the
Fund fairly to determine the value of its net assets, or during any
other period when the Securities and Exchange Commission, by order,
so permits.
Section 5. Duties of the Fund
5.1 Subject to the possible suspension of the sale of
Class C shares as provided herein, the Fund agrees to sell its
Class C shares so long as it has Class C shares available.
5.2 The Fund shall furnish the Distributor copies of all
information, financial statements and other papers which the
Distributor may reasonably request for use in connection with the
distribution of Class C shares, and this shall include one
certified copy, upon request by the Distributor, of all financial
statements prepared for the Fund by independent public accountants.
The Fund shall make available to the Distributor such number of
copies of its Prospectus and annual and interim reports as the
Distributor shall reasonably request.
5.3 The Fund shall take, from time to time, but subject
to the necessary approval of the Board of Directors and the
shareholders, all necessary action to fix the number of authorized
Class C shares and such steps as may be necessary to register the
same under the Securities Act, to the end that there will be
available for sale such number of Class C shares as the Distributor
reasonably may expect to sell. The Fund agrees to file from time
to time such amendments, reports and other documents as may be
necessary in order that there will be no untrue statement of a
material fact in the Registration Statement, or necessary in order
that there will be no omission to state a material fact in the
Registration Statement which omission would make the statements
therein misleading.
5.4 The Fund shall use its best efforts to qualify and
maintain the qualification of any appropriate number of its Class
C shares for sales under the securities laws of such states as the
Distributor and the Fund may approve; provided that the Fund shall
not be required to amend its Articles of Incorporation or By-Laws
to comply with the laws of any state, to maintain an office in any
state, to change the terms of the offering of its Class C shares in
any state from the terms set forth in its Registration Statement,
to qualify as a foreign corporation in any state or to consent to
service of process in any state other than with respect to claims
arising out of the offering of its Class C shares. Any such
qualification may be withheld, terminated or withdrawn by the Fund
at any time in its discretion. As provided in Section 9.1 hereof,
the expense of qualification and maintenance of qualification shall
be borne by the Fund. The Distributor shall furnish such
information and other material relating to its affairs and
activities as may be required by the Fund in connection with such
4
<PAGE>
qualifications.
Section 6. Duties of the Distributor
6.1 The Distributor shall devote reasonable time and
effort to effect sales of Class C shares of the Fund, but shall not
be obligated to sell any specific number of Class C shares. Sales
of the Class C shares shall be on the terms described in the
Prospectus. The Distributor may enter into like arrangements with
other investment companies. The Distributor shall compensate the
selected dealers as set forth in the Prospectus.
6.2 In selling the Class C shares, the Distributor shall
use its best efforts in all respects duly to conform with the
requirements of all federal and state laws relating to the sale of
such securities. Neither the Distributor nor any selected dealer
nor any other person is authorized by the Fund to give any
information or to make any representations, other than those
contained in the Registration Statement or Prospectus and any sales
literature approved by appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures
for the confirmation of sales to investors and selected dealers,
the collection of amounts payable by investors and selected dealers
on such sales and the cancellation of unsettled transactions, as
may be necessary to comply with the requirements of the National
Association of Securities Dealers, Inc. (NASD).
6.4 The Distributor shall have the right to enter into
selected dealer agreements with registered and qualified securities
dealers and other financial institutions of its choice for the sale
of Class C shares, provided that the Fund shall approve the forms
of such agreements. Within the United States, the Distributor
shall offer and sell Class C shares only to such selected dealers
as are members in good standing of the NASD. Class C shares sold
to selected dealers shall be for resale by such dealers only at the
offering price determined as set forth in the Prospectus.
Section 7. Payments to the Distributor
The Distributor shall receive and may retain any
contingent deferred sales charge which is imposed with respect to
repurchases and redemptions of Class C shares as set forth in the
Prospectus, subject to the limitations of Article III, Section 26
of the NASD Rules of Fair Practice. Payment of these amounts to the
Distributor is not contingent upon the adoption or continuation of
the Plan.
Section 8. Payment of the Distributor under the Plan
8.1 The Fund shall pay to the Distributor as
compensation for services under the Distribution and Service Plan
5
<PAGE>
and this Agreement a fee of 1% (including an asset-based sales
charge of .75 of 1% and a service fee of .25 of 1%) per annum of
the average daily net assets of the Class C shares of the Fund.
Amounts payable under the Plan shall be accrued daily and paid
monthly or at such other intervals as the Directors may determine.
Amounts payable under the Plan shall be subject to the limitations
of Article III, Section 26 of the NASD Rules of Fair Practice.
8.2 So long as the Plan or any amendment thereto is in
effect, the Distributor shall inform the Board of Directors of the
commissions (including trailer commissions) and account servicing
fees to be paid by the Distributor to account executives of the
Distributor and to broker-dealers and financial institutions which
have selected dealer agreements with the Distributor. So long as
the Plan (or any amendment thereto) is in effect, at the request of
the Board of Directors or any agent or representative of the Fund,
the Distributor shall provide such additional information as may
reasonably be requested concerning the activities of the
Distributor hereunder and the costs incurred in performing such
activities.
8.3 Expenses of distribution with respect to the Class
C shares of the Fund include, among others:
(a) sales commissions (including trailer
commissions) paid to, or on account of,
account executives of the Distributor;
(b) indirect and overhead costs of the Distributor
associated with performance of distribution
activities, including central office and
branch expenses;
(c) amounts paid to Prusec for performing services
under a selected dealer agreement between
Prusec and the Distributor for sale of Class C
shares of the Fund, including sales
commissions and trailer commissions paid to,
or on account of, agents and indirect and
overhead costs associated with distribution
activities;
(d) sales commissions (including trailer
commissions) paid to, or on account of,
broker-dealers and financial institutions
(other than Prusec) which have entered into
selected dealer agreements with the
Distributor with respect to Class C shares of
the Fund;
(e) amounts paid to, or an account of, account
executives of the Distributor or of other
6
<PAGE>
broker-dealers or financial institutions for
personal service and/or the maintenance of
shareholder accounts; and
(f) advertising for the Fund in various forms
through any available medium, including the
cost of printing and mailing Fund
Prospectuses, and periodic financial reports
and sales literature to persons other than
current shareholders of the Fund.
Indirect and overhead costs referred to in clauses (b)
and (c) of the foregoing sentence include (i) lease expenses, (ii)
salaries and benefits of personnel including operations and sales
support personnel, (iii) utility expenses, (iv) communications
expenses, (v) sales promotion expenses, (vi) expenses of postage,
stationery and supplies and (vii) general overhead.
Section 9. Allocation of Expenses
9.1 The Fund shall bear all costs and expenses of the
continuous offering of its Class C shares, including fees and
disbursements of its counsel and auditors, in connection with the
preparation and filing of any required Registration Statements
and/or Prospectuses under the Investment Company Act or the
Securities Act, and preparing and mailing annual and periodic
reports and proxy materials to shareholders (including but not
limited to the expense of setting in type any such Registration
Statements, Prospectuses, annual or periodic reports or proxy
materials). The Fund shall also bear the cost of expenses of
qualification of the Class C shares for sale, and, if necessary or
advisable in connection therewith, of qualifying the Fund as a
broker or dealer, in such states of the United States or other
jurisdictions as shall be selected by the Fund and the Distributor
pursuant to Section 5.4 hereof and the cost and expense payable to
each such state for continuing qualification therein until the Fund
decides to discontinue such qualification pursuant to Section 5.4
hereof. As set forth in Section 8 above, the Fund shall also bear
the expenses it assumes pursuant to the Plan with respect to Class
C shares, so long as the Plan is in effect.
Section 10. Indemnification
10.1 The Fund agrees to indemnify, defend and hold the
Distributor, its officers and Directors and any person who controls
the Distributor within the meaning of Section 15 of the Securities
Act, free and harmless from and against any and all claims,
demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and
any counsel fees incurred in connection therewith) which the
Distributor, its officers, Directors or any such controlling person
7
<PAGE>
may incur under the Securities Act, or under common law or
otherwise, arising out of or based upon any untrue statement of a
material fact contained in the Registration Statement or Prospectus
or arising out of or based upon any alleged omission to state a
material fact required to be stated in either thereof or necessary
to make the statements in either thereof not misleading, except
insofar as such claims, demands, liabilities or expenses arise out
of or are based upon any such untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in
conformity with information furnished in writing by the Distributor
to the Fund for use in the Registration Statement or Prospectus;
provided, however, that this indemnity agreement shall not inure to
the benefit of any such officer, Director or controlling person
unless a court of competent jurisdiction shall determine in a final
decision on the merits, that the person to be indemnified was not
liable by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of its
reckless disregard of its obligations under this Agreement
(disabling conduct), or, in the absence of such a decision, a
reasonable determination, based upon a review of the facts, that
the indemnified person was not liable by reason of disabling
conduct, by (a) a vote of a majority of a quorum of Directors who
are neither "interested persons" of the Fund as defined in Section
2(a)(19) of the Investment Company Act nor parties to the
proceeding, or (b) an independent legal counsel in a written
opinion. The Fund's agreement to indemnify the Distributor, its
officers and Directors and any such controlling person as aforesaid
is expressly conditioned upon the Fund's being promptly notified of
any action brought against the Distributor, its officers or
Directors, or any such controlling person, such notification to be
given in writing addressed to the Fund at its principal business
office. The Fund agrees promptly to notify the Distributor of the
commencement of any litigation or proceedings against it or any of
its officers or Directors in connection with the issue and sale of
any Class C shares.
10.2 The Distributor agrees to indemnify, defend and
hold the Fund, its officers and Directors and any person who
controls the Fund, if any, within the meaning of Section 15 of the
Securities Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or
liabilities and any counsel fees incurred in connection therewith)
which the Fund, its officers and Directors or any such controlling
person may incur under the Securities Act or under common law or
otherwise, but only to the extent that such liability or expense
incurred by the Fund, its Directors or officers or such controlling
person resulting from such claims or demands shall arise out of or
be based upon any alleged untrue statement of a material fact
contained in information furnished in writing by the Distributor to
the Fund for use in the Registration Statement or Prospectus or
shall arise out of or be based upon any alleged omission to state
8
<PAGE>
a material fact in connection with such information required to be
stated in the Registration Statement or Prospectus or necessary to
make such information not misleading. The Distributor's agreement
to indemnify the Fund, its officers and Directors and any such
controlling person as aforesaid, is expressly conditioned upon the
Distributor's being promptly notified of any action brought against
the Fund, its officers and Directors or any such controlling
person, such notification to be given to the Distributor in writing
at its principal business office.
Section 11. Duration and Termination of this Agreement
11.1 This Agreement shall become effective as of the
date first above written and shall remain in force for two years
from the date hereof and thereafter, but only so long as such
continuance is specifically approved at least annually by (a) the
Board of Directors of the Fund, or by the vote of a majority of the
outstanding voting securities of the Class C shares of the Fund,
and (b) by the vote of a majority of those Directors who are not
parties to this Agreement or interested persons of any such parties
and who have no direct or indirect financial interest in this
Agreement or in the operation of the Fund's Plan or in any
agreement related thereto (Rule 12b-1 Directors), cast in person at
a meeting called for the purpose of voting upon such approval.
11.2 This Agreement may be terminated at any time,
without the payment of any penalty, by a majority of the Rule 12b-1
Directors or by vote of a majority of the outstanding voting
securities of the Class C shares of the Fund, or by the
Distributor, on sixty (60) days' written notice to the other party.
This Agreement shall automatically terminate in the event of its
assignment.
11.3 The terms "affiliated person," "assignment,"
"interested person" and "vote of a majority of the outstanding
voting securities," when used in this Agreement, shall have the
respective meanings specified in the Investment Company Act.
Section 12. Amendments to this Agreement
This Agreement may be amended by the parties only if such
amendment is specifically approved by (a) the Board of Directors of
the Fund, or by the vote of a majority of the outstanding voting
securities of the Class C shares of the Fund, and (b) by the vote
of a majority of the Rule 12b-1 Board of Directors cast in person
at a meeting called for the purpose of voting on such amendment.
Section 13. Governing Law
The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York as
at the time in effect and the applicable provisions of the
9
<PAGE>
Investment Company Act. To the extent that the applicable law of
the State of New York, or any of the provisions herein, conflict
with the applicable provisions of the Investment Company Act, the
latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year above written.
Prudential Securities
Incorporated
By: /s/ Robert F. Gunia
-------------------------------
Robert F. Gunia
Senior Vice President
Prudential Short-Term Global Income
Fund
By: /s/ Lawrence C. McQuade
-------------------------------
Lawrence C. McQuade
President
10
SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN, LLP
919 Third Avenue
New York, New York 10022
December 28, 1994
Prudential Short-Term Global Income
Fund, Inc.
One Seaport Plaza
New York, New York 10292
Gentlemen and Ladies:
Prudential Short-Term Global Income Fund, Inc. (the "Fund"), is filing with
Registration Statement under the Securities Act of 1933, as amended (the "1933
Act") on Form N-1A (File No. 33-33479), relating to the registration under the
1933 Act of 69,067,576 additional shares of its Common Stock, par value $.001
per share (the "Additional Shares"), which are to be offered and sold by the
Fund in the manner and on the terms set forth in the prospectus of the Fund
current and effective under the 1933 Act at the time of sale. According to
Post-Effective Amendment No. 9 to the Fund's Registration Statement, of the
Additional Shares, 69,012,339 are previously outstanding shares of the Fund's
Common Stock, par value $.001 per share, which were redeemed by the Fund during
its fiscal year ended October 31, 1994. According to Post-Effective Amendment
No. 9 to the Fund's Registration Statement, none of the Additional Shares have
previously been used by the Fund for reduction pursuant to paragraph (a) of Rule
24e-2 under the Investment Company Act of 1940, as amended (the "1940 Act") in
previous filings of post-effective amendments to the Fund's Registration
Statement during the current year, or for reduction pursuant to paragraph (c) of
Rule 24f-2 under the 1940 Act during the Fund's current fiscal year, of the
registration fee payable by the Fund for the registration of shares for sale
under the 1933 Act.
We have, as counsel, participated in various proceedings relating to the
Fund and to the proposed issuance of the Additional Shares. We have examined
copies, either certified or otherwise proven to our satisfaction to be genuine,
of the Fund's Articles of Incorporation and By-laws, as currently in effect,
and a certificate issued by the State Department of Assessments and Taxation
of the State of Maryland, certifying the existence and good standing of the
Fund. We are generally familiar with the corporate affairs of the Fund.
Based upon the foregoing, it is our opinion that:
1. The Fund has been duly organized and is validly existing under the laws
of the State of Maryland.
2. The Fund is authorized to issue two billion (2,000,000,000) shares of
Common Stock, par value $.001 per share. Under Maryland law, (a) the number of
authorized shares may be increased or decreased by action of the Board of
Directors and (b) shares which are issued and subsequently redeemed by the
Fund are, by virtue of such redemption, restored to the status of authorized
and unissued shares.
3. Subject to the effectiveness of the above-mentioned Post-Effective
Amendment No. 9 to the Fund's Registration Statement and compliance with
applicable state securities laws, upon the issuance of the Additional Shares
for a consideration not less than the par value thereof as required by the laws
of Maryland, and not less than the net asset value thereof as required by the
1940 Act and in accordance with the terms of the Registration Statement, such
shares will be legally issued and outstanding and fully paid and non-assessable.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as a part of the above-mentioned Post-Effective Amendment
No. 9 to the Registration Statement and with any state securities commission
where such filing is required. In giving this consent we do not admit that we
come within the category of persons whose consent is required under Section 7
of the 1933 Act.
We are members of the Bar of the State of New York and do not hold
ourselves out as being conversant with the laws of any jurisdiction other than
those of the United States of America and the State of New York. We note that
we are not licensed to practice law in the State of Maryland, and to the extent
that any opinion herein involves the laws of the State of Maryland, such
opinion should be understood to be based solely upon our review of the
documents referred to above, the published statutes of the State of Maryland
and, where applicable, published cases, rules or regulations of regulatory
bodies of that State.
Very truly yours,
/s/ Shereff, Friedman, Hoffman & Goodman, LLP
---------------------------------------------
Shereff, Friedman, Hoffman & Goodman, LLP
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in Post-Effective Amendment No. 9 to Registration
Statement No. 33-33479 of Prudential Short-Term Global Income Fund, Inc. of our
reports dated December 16, 1994, appearing in the Statement of Additional
Information, which is a part of such Registration Statement, and to the
references to us under the headings "Financial Highlights" in the Prospectuses,
which are a part of such Registration Statement, and "Custodian, Transfer and
Dividend Disbursing Agent and Independent Accountants" in the Statement of
Additional Information.
Deloitte & Touche LLP
New York, New York
December 23, 1994
EXHIBIT 15(c)
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
(Global Assets Portfolio)
Distribution and Service Plan
(Class A Shares)
Introduction
The Distribution and Service Plan (the Plan) set forth below
which is designed to conform to the requirements of Rule 12b-1
under the Investment Company Act of 1940 (the Investment Company
Act) and Article III, Section 26 of the Rules of Fair Practice of
the National Association of Securities Dealers, Inc. (NASD) has
been adopted by Prudential Short-Term Global Income Fund, Global
Assets Portfolio (the Fund), and by Prudential Mutual Fund
Distributors, Inc., the Fund's distributor (the Distributor).
The Fund has entered into a distribution agreement (the
Distribution Agreement) pursuant to which the Fund will employ the
Distributor to distribute Class A shares issued by the Fund (Class
A shares). Under the Plan, the Fund intends to pay to the
Distributor as compensation for its services, a distribution and
service fee with respect to Class A shares.
A majority of the Board of Directors of the Fund, including a
majority of those 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 this Plan
or any agreements related to it (the Rule 12b-1 Directors), have
determined by votes cast in person at a meeting called for the
purpose of voting on this Plan that there is a reasonable
<PAGE>
likelihood that adoption of this Plan will benefit the Fund and its
shareholders. Expenditures under this Plan by the Fund for
Distribution Activities (defined below) are primarily intended to
result in the sale of Class A shares of the Fund within the meaning
of paragraph (a)(2) of Rule 12b-1 promulgated under the Investment
Company Act.
The purpose of the Plan is to create incentives to the
Distributor and/or other qualified broker-dealers and their account
executives to provide distribution assistance to their customers
who are investors in the Fund, to defray the costs and expenses
associated with the preparation, printing and distribution of
prospectuses and sales literature and other promotional and
distribution activities and to provide for the servicing and
maintenance of shareholder accounts.
The Plan
The material aspects of the Plan are as follows:
1. Distribution Activities
The Fund shall engage the Distributor to distribute Class A
shares of the Fund and to service shareholder accounts using all of
the facilities of the distribution networks of Prudential
Securities Incorporated (Prudential Securities) and Pruco
Securities Corporation (Prusec), including sales personnel and
branch office and central support systems, and also using such
other qualified broker-dealers and financial institutions as the
Distributor may select. Services provided and activities
2
<PAGE>
undertaken to distribute Class A shares of the Fund are referred to
herein as "Distribution Activities."
2. Payment of Service Fee
The Fund shall pay to the Distributor as compensation for
providing personal service and/or maintaining shareholder accounts
a service fee of .25 of 1% per annum of the average daily net
assets of the Class A shares (service fee). The Fund shall
calculate and accrue daily amounts payable by the Class A shares of
the Fund hereunder and shall apply such amounts monthly or at such
other intervals as the Board of Directors may determine.
3. Payment for Distribution Activities
The Fund shall pay to the Distributor as compensation for its
services a distribution fee, together with the service fee
(described in Section 2 hereof), of .50 of 1% per annum of the
average daily net assets of the Class A shares of the Fund for the
performance of Distribution Activities. The Fund shall calculate
and accrue daily amounts payable by the Class A shares of the Fund
hereunder and shall pay such amounts monthly or at such other
intervals as the Board of Directors may determine. Amounts payable
under the Plan shall be subject to the limitations of Article III,
Section 26 of the NASD Rules of Fair Practice.
Amounts paid to the Distributor by the Class A shares of the
Fund will not be used to pay the distribution expenses incurred
with respect to any other class of shares of the Fund except that
distribution expenses attributable to the Fund as a whole will be
allocated to the Class A shares according to the ratio of the sales
3
<PAGE>
of Class A shares to the total sales of the Fund's shares over the
Fund's fiscal year or such other allocation method approved by the
Board of Directors. The allocation of distribution expenses among
classes will be subject to the review of the Board of Directors.
The Distributor shall spend such amounts as it deems
appropriate on Distribution Activities which include, among others:
(a) amounts paid to Prudential Securities for
performing services under a selected dealer
agreement between Prudential Securities and
the Distributor for sale of Class A shares of
the Fund, including sales commissions and
trailer commissions paid to, or on account of,
account executives and indirect and overhead
costs associated with Distribution Activities,
including central office and branch expenses;
(b) amounts paid to Prusec for performing services
under a selected dealer agreement between
Prusec and the Distributor for sale of Class A
shares of the Fund, including sales
commissions and trailer commissions paid to,
or on account of, agents and indirect and
overhead costs associated with Distribution
Activities;
(c) advertising for the Fund in various forms
through any available medium, including the
cost of printing and mailing Fund
prospectuses, statements of additional
information and periodic financial reports and
sales literature to persons other than current
shareholders of the Fund; and
(d) sales commissions (including trailer
commissions) paid to, or on account of,
broker-dealers and financial institutions
(other than Prudential Securities and Prusec)
which have entered into selected dealer
agreements with the Distributor with respect
to shares of the Fund.
4
<PAGE>
4. Quarterly Reports; Additional Information
An appropriate officer of the Fund will provide to the Board
of Directors of the Fund for review, at least quarterly, a written
report specifying in reasonable detail the amounts expended for
Distribution Activities (including payment of the service fee) and
the purposes for which such expenditures were made in compliance
with the requirements of Rule 12b-1. The Distributor will provide
to the Board of Directors of the Fund such additional information
as the Board shall from time to time reasonably request, including
information about Distribution Activities undertaken or to be
undertaken by the Distributor.
The Distributor will inform the Board of Directors of the Fund
of the commissions and account servicing fees to be paid by the
Distributor to account executives of the Distributor and to
broker-dealers and financial institutions which have selected
dealer agreements with the Distributor.
5. Effectiveness; Continuation
The Plan shall not take effect until it has been approved by
a vote of a majority of the outstanding voting securities (as
defined in the Investment Company Act) of the Class A shares of the
Fund.
If approved by a vote of a majority of the outstanding voting
securities of the Class A shares of the Fund, the Plan shall,
unless earlier terminated in accordance with its terms, continue in
full force and effect thereafter for so long as such continuance is
specifically approved at least annually by a majority of the Board
5
<PAGE>
of Directors of the Fund and a majority of the Rule 12b-1 Directors
by votes cast in person at a meeting called for the purpose of
voting on the continuation of the Plan.
6. Termination
This Plan may be terminated at any time by vote of a majority
of the Rule 12b-1 Directors, or by vote of a majority of the
outstanding voting securities (as defined in the Investment Company
Act) of the Class A shares of the Fund.
7. Amendments
The Plan may not be amended to change the combined service and
distribution expenses to be paid as provided for in Sections 2 and
3 hereof so as to increase materially the amounts payable under
this Plan unless such amendment shall be approved by the vote of a
majority of the outstanding voting securities (as defined in the
Investment Company Act) of the Class A shares of the Fund. All
material amendments of the Plan shall be approved by a majority of
the Board of Directors of the Fund and a majority of the Rule 12b-1
Directors by votes cast in person at a meeting called for the
purpose of voting on the Plan.
8. Rule 12b-1 Directors
While the Plan is in effect, the selection and nomination of
the Rule 12b-1 Directors shall be committed to the discretion of
the Rule 12b-1 Directors.
6
<PAGE>
9. Records
The Fund shall preserve copies of the Plan and any related
agreements and all reports made pursuant to Section 4 hereof, for
a period of not less than six years from the date of effectiveness
of the Plan, such agreements or reports, and for at least the first
two years in an easily accessible place.
Dated: 8/1/94
7
EXHIBIT 15(d)
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND
Short-Term Global Income Portfolio
Distribution and Service Plan
(Class B Shares)
INTRODUCTION
The Distribution and Service Plan (the Plan) set forth below
which is designed to conform to the requirements of Rule 12b-1
under the Investment Company Act of 1940 (the Investment Company
Act) and Article III, Section 26 of the Rules of Fair Practice of
the National Association of Securities Dealers, Inc. (NASD) has
been adopted by Prudential Short-Term Global Income Fund, Short-
Term Global Income portfolio (the Fund) and by Prudential
Securities Incorporated (Prudential Securities), the Fund's
distributor (the Distributor).
The Fund has entered into a distribution agreement pursuant to
which the Fund will employ the Distributor to distribute Class B
shares issued by the Fund (Class B shares). Under the Plan, the
Fund wishes to pay to the Distributor, as compensation for its
services, a distribution and service fee with respect to Class B
shares.
A majority of the Board of Directors of the Fund, including a
majority 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 this Plan or any agreements
related to it (the Rule 12b-1 Directors), have determined by votes
cast in person at a meeting called for the purpose of voting on
this Plan that there is a reasonable likelihood that adoption of
<PAGE>
this Plan will benefit the Fund and its shareholders. Expenditures
under this Plan by the Fund for Distribution Activities (defined
below) are primarily intended to result in the sale of Class B
shares of the Fund within the meaning of paragraph (a)(2) of
Rule 12b-1 promulgated under the Investment Company Act.
The purpose of the Plan is to create incentives to the
Distributor and/or other qualified broker-dealers and their account
executives to provide distribution assistance to their customers
who are investors in the Fund, to defray the costs and expenses
associated with the preparation, printing and distribution of
prospectuses and sales literature and other promotional and
distribution activities and to provide for the servicing and
maintenance of shareholder accounts.
THE PLAN
The material aspects of the Plan are as follows:
1. Distribution Activities
The Fund shall engage the Distributor to distribute Class B
shares of the Fund and to service shareholder accounts using all of
the facilities of the Prudential Securities distribution network
including sales personnel and branch office and central support
systems, and also using such other qualified broker-dealers and
financial institutions as the Distributor may select, including
Pruco Securities Corporation (Prusec). Services provided and
activities undertaken to distribute Class B shares of the Fund are
referred to herein as "Distribution Activities."
2
<PAGE>
2. Payment of Service Fee
The Fund shall pay to the Distributor as compensation for
providing personal service and/or maintaining shareholder accounts
a service fee of .25 of 1% per annum of the average daily net
assets of the Class B shares (service fee). The Fund shall
calculate and accrue daily amounts payable by the Class B shares of
the Fund hereunder and shall pay such amounts monthly or at such
other intervals as the Board of Directors may determine.
3. Payment for Distribution Activities
The Fund shall pay to the Distributor as compensation for its
services a distribution fee of .75 of 1% per annum of the average
daily net assets of the Class B shares of the Fund for the
performance of Distribution Activities. The Fund shall calculate
and accrue daily amounts payable by the Class B shares of the Fund
hereunder and shall pay such amounts monthly or at such other
intervals as the Board of Directors may determine. Amounts payable
under the Plan shall be subject to the limitations of Article III,
Section 26 of the NASD Rules of Fair Practice.
Amounts paid to the Distributor by the Class B shares of the
Fund will not be used to pay the distribution expenses incurred
with respect to any other class of shares of the Fund except that
distribution expenses attributable to the Fund as a whole will be
allocated to the Class B shares according to the ratio of the sale
of Class B shares to the total sales of the Fund's shares over the
Fund's fiscal year or such other allocation method approved by the
3
<PAGE>
Board of Directors. The allocation of distribution expenses among
classes will be subject to the review of the Board of Directors.
The Distributor shall spend such amounts as it deems
appropriate on Distribution Activities which include, among others:
(a) sales commissions (including trailer commissions) paid
to, or on account of, account executives of the
Distributor;
(b) indirect and overhead costs of the Distributor associated
with performance of Distribution Activities including
central office and branch expenses;
(c) amounts paid to Prusec for performing services under a
selected dealer agreement between Prusec and the
Distributor for sale of Class B shares of the Fund,
including sales commissions and trailer commissions paid
to, or on account of, agents and indirect and overhead
costs associated with Distribution Activities;
(d) advertising for the Fund in various forms through any
available medium, including the cost of printing and
mailing Fund prospectuses, statements of additional
information and periodic financial reports and sales
literature to persons other than current shareholders of
the Fund; and
(e) sales commissions (including trailer commissions) paid
to, or on account of, broker-dealers and other financial
institutions (other than Prusec) which have entered into
selected dealer agreements with the Distributor with
respect to Class B shares of the Fund.
4. Quarterly Reports; Additional Information
An appropriate officer of the Fund will provide to the Board of
Directors of the Fund for review, at least quarterly, a written
report specifying in reasonable detail the amounts expended for
Distribution Activities (including payment of the service fee) and
the purposes for which such expenditures were made in compliance
with the requirements of the Rule 12b-1. The Distributor will
provide to the Board of Directors of the Fund such additional
4
<PAGE>
information as they shall from time to time reasonably request,
including information about Distribution Activities undertaken or
to be undertaken by the Distributor.
The Distributor will inform the Board of Directors of the Fund
of the commissions and account servicing fees to be paid by the
Distributor to account executives of the Distributor and to
broker-dealers and other financial institutions which have selected
dealer agreements with the Distributor.
5. Effectiveness; Continuation
The Plan shall not take effect until it has been approved by a
vote of a majority of the outstanding voting securities (as defined
in the Investment Company Act) of the Class B shares of the Fund.
If approved by a vote of a majority of the outstanding voting
securities of the Class B shares of the Fund, the Plan shall,
unless earlier terminated in accordance with its terms, continue in
full force and effect thereafter for so long as such continuance is
specifically approved at least annually by a majority of the Board
of Directors of the Fund and a majority of the Rule 12b-1 Directors
by votes cast in person at a meeting called for the purpose of
voting on the continuation of the Plan.
6. Termination
This Plan may be terminated at any time by vote of a majority
of the Rule 12b-1 Directors, or by vote of a majority of the
outstanding voting securities (as defined in the Investment Company
Act) of the Class B shares of the Fund.
5
<PAGE>
7. Amendments
The Plan may not be amended to change the combined service and
distribution expenses to be paid as provided for in Sections 2 and
3 hereof so as to increase materially the amounts payable under
this Plan unless such amendment shall be approved by the vote of a
majority of the outstanding voting securities (as defined in the
Investment Company Act) of the Class B shares of the Fund. All
material amendments of the Plan shall be approved by a majority of
the Board of Directors of the Fund and a majority of the Rule 12b-1
Directors by votes cast in person at a meeting called for the
purpose of voting on the Plan.
8. Rule 12b-1 Directors
While the Plan is in effect, the selection and nomination of
the Rule 12b-1 Directors shall be committed to the discretion of
the Rule 12b-1 Directors.
9. Records
The Fund shall preserve copies of the Plan and any related
agreements and all reports made pursuant to Section 4 hereof, for
a period of not less than six years from the date of effectiveness
of the Plan, such agreements or reports, and for at least the first
two years in an easily accessible place.
Dated: 8/1/94
6
EXHIBIT 15(e)
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND
Short-Term Global Income Portfolio
Distribution and Service Plan
(Class C Shares)
INTRODUCTION
The Distribution and Service Plan (the Plan) set forth below
which is designed to conform to the requirements of Rule 12b-1
under the Investment Company Act of 1940 (the Investment Company
Act) and Article III, Section 26 of the Rules of Fair Practice of
the National Association of Securities Dealers, Inc. (NASD) has
been adopted by Prudential Short-Term Global Income Fund, Short-
Term Global Income Portfolio (the Fund) and by Prudential
Securities Incorporated (Prudential Securities), the Fund's
distributor (the Distributor).
The Fund has entered into a distribution agreement pursuant to
which the Fund will employ the Distributor to distribute Class C
shares issued by the Fund (Class C shares). Under the Plan, the
Fund wishes to pay to the Distributor, as compensation for its
services, a distribution and service fee with respect to Class C
shares.
A majority of the Board of Directors of the Fund, including a
majority 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 this Plan or any agreements
related to it (the Rule 12b-1 Directors), have determined by votes
cast in person at a meeting called for the purpose of voting on
this Plan that there is a reasonable likelihood that adoption of
<PAGE>
this Plan will benefit the Fund and its shareholders. Expenditures
under this Plan by the Fund for Distribution Activities (defined
below) are primarily intended to result in the sale of Class C
shares of the Fund within the meaning of paragraph (a)(2) of
Rule 12b-1 promulgated under the Investment Company Act.
The purpose of the Plan is to create incentives to the
Distributor and/or other qualified broker-dealers and their account
executives to provide distribution assistance to their customers
who are investors in the Fund, to defray the costs and expenses
associated with the preparation, printing and distribution of
prospectuses and sales literature and other promotional and
distribution activities and to provide for the servicing and
maintenance of shareholder accounts.
THE PLAN
The material aspects of the Plan are as follows:
1. Distribution Activities
The Fund shall engage the Distributor to distribute Class C
shares of the Fund and to service shareholder accounts using all of
the facilities of the Prudential Securities distribution network
including sales personnel and branch office and central support
systems, and also using such other qualified broker-dealers and
financial institutions as the Distributor may select, including
Pruco Securities Corporation (Prusec). Services provided and
activities undertaken to distribute Class C shares of the Fund are
referred to herein as "Distribution Activities."
2
<PAGE>
2. Payment of Service Fee
The Fund shall pay to the Distributor as compensation for
providing personal service and/or maintaining shareholder accounts
a service fee of .25 of 1% per annum of the average daily net
assets of the Class C shares (service fee). The Fund shall
calculate and accrue daily amounts payable by the Class C shares of
the Fund hereunder and shall pay such amounts monthly or at such
other intervals as the Board of Directors may determine.
3. Payment for Distribution Activities
The Fund shall pay to the Distributor as compensation for its
services a distribution fee of .75 of 1% per annum of the average
daily net assets of the Class C shares for the performance of
Distribution Activities. The Fund shall calculate and accrue daily
amounts payable by the Class C shares of the Fund hereunder and
shall pay such amounts monthly or at such other intervals as the
Board of Directors may determine. Amounts payable under the Plan
shall be subject to the limitations of Article III, Section 26 of
the NASD Rules of Fair Practice.
Amounts paid to the Distributor by the Class C shares of the
Fund will not be used to pay the distribution expenses incurred
with respect to any other class of shares of the Fund except that
distribution expenses attributable to the Fund as a whole will be
allocated to the Class C shares according to the ratio of the sale
of Class C shares to the total sales of the Fund's shares over the
Fund's fiscal year or such other allocation method approved by the
3
<PAGE>
Board of Directors. The allocation of distribution expenses among
classes will be subject to the review of the Board of Directors.
The Distributor shall spend such amounts as it deems
appropriate on Distribution Activities which include, among others:
(a) sales commissions (including trailer commissions) paid
to, or on account of, account executives of the
Distributor;
(b) indirect and overhead costs of the Distributor associated
with performance of Distribution Activities including
central office and branch expenses;
(c) amounts paid to Prusec for performing services under a
selected dealer agreement between Prusec and the
Distributor for sale of Class C shares of the Fund,
including sales commissions and trailer commissions paid
to, or on account of, agents and indirect and overhead
costs associated with Distribution Activities;
(d) advertising for the Fund in various forms through any
available medium, including the cost of printing and
mailing Fund prospectuses, statements of additional
information and periodic financial reports and sales
literature to persons other than current shareholders of
the Fund; and
(e) sales commissions (including trailer commissions) paid
to, or on account of, broker-dealers and other financial
institutions (other than Prusec) which have entered into
selected dealer agreements with the Distributor with
respect to Class C shares of the Fund.
4. Quarterly Reports; Additional Information
An appropriate officer of the Fund will provide to the Board of
Directors of the Fund for review, at least quarterly, a written
report specifying in reasonable detail the amounts expended for
Distribution Activities (including payment of the service fee) and
the purposes for which such expenditures were made in compliance
with the requirements of the Rule 12b-1. The Distributor will
provide to the Board of Directors of the Fund such additional
4
<PAGE>
information as they shall from time to time reasonably request,
including information about Distribution Activities undertaken or
to be undertaken by the Distributor.
The Distributor will inform the Board of Directors of the Fund
of the commissions and account servicing fees to be paid by the
Distributor to account executives of the Distributor and to
broker-dealers and other financial institutions which have selected
dealer agreements with the Distributor.
5. Effectiveness; Continuation
The Plan shall not take effect until it has been approved by a
vote of a majority of the outstanding voting securities (as defined
in the Investment Company Act) of the Class C shares of the Fund.
If approved by a vote of a majority of the outstanding voting
securities of the Class C shares of the Fund, the Plan shall,
unless earlier terminated in accordance with its terms, continue in
full force and effect thereafter for so long as such continuance is
specifically approved at least annually by a majority of the Board
of Directors of the Fund and a majority of the Rule 12b-1 Directors
by votes cast in person at a meeting called for the purpose of
voting on the continuation of the Plan.
6. Termination
This Plan may be terminated at any time by vote of a majority
of the Rule 12b-1 Directors, or by vote of a majority of the
outstanding voting securities (as defined in the Investment Company
Act) of the Class C shares of the Fund.
5
<PAGE>
7. Amendments
The Plan may not be amended to change the combined service and
distribution expenses to be paid as provided for in Sections 2 and
3 hereof so as to increase materially the amounts payable under
this Plan unless such amendment shall be approved by the vote of a
majority of the outstanding voting securities (as defined in the
Investment Company Act) of the Class C shares of the Fund. All
material amendments of the Plan shall be approved by a majority of
the Board of Directors of the Fund and a majority of the Rule 12b-1
Directors by votes cast in person at a meeting called for the
purpose of voting on the Plan.
8. Rule 12b-1 Directors
While the Plan is in effect, the selection and nomination of
the Rule 12b-1 Directors shall be committed to the discretion of
the Rule 12b-1 Directors.
9. Records
The Fund shall preserve copies of the Plan and any related
agreements and all reports made pursuant to Section 4 hereof, for
a period of not less than six years from the date of effectiveness
of the Plan, such agreements or reports, and for at least the first
two years in an easily accessible place.
Dated: 8/1/94
6
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000861002
<NAME> PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
<SERIES>
<NUMBER> 001
<NAME> SHORT-TERM GLOBAL INCOME PORTFOLIO (CLASS A)
<S> <C>
<PERIOD-TYPE> ANNUAL
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 217,167,178
<INVESTMENTS-AT-VALUE> 218,878,995
<RECEIVABLES> 6,813,549
<ASSETS-OTHER> 98,031
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 225,790,575
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,982,708
<TOTAL-LIABILITIES> 7,982,708
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 266,631,840
<SHARES-COMMON-STOCK> 25,452,079
<SHARES-COMMON-PRIOR> 46,785,058
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (11,603,191)
<ACCUMULATED-NET-GAINS> (38,080,435)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 859,653
<NET-ASSETS> 217,807,867
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 28,076,745
<OTHER-INCOME> 0
<EXPENSES-NET> 5,980,090
<NET-INVESTMENT-INCOME> 22,096,655
<REALIZED-GAINS-CURRENT> (35,450,639)
<APPREC-INCREASE-CURRENT> 5,768,258
<NET-CHANGE-FROM-OPS> (7,585,726)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (17,818,147)
<NUMBER-OF-SHARES-SOLD> 11,205,281
<NUMBER-OF-SHARES-REDEEMED> (213,168,513)
<SHARES-REINVESTED> 10,703,295
<NET-CHANGE-IN-ASSETS> (216,663,810)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (26,697,014)
<OVERDISTRIB-NII-PRIOR> (5,978,475)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,755,285
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,980,090
<AVERAGE-NET-ASSETS> 38,000,000
<PER-SHARE-NAV-BEGIN> 9.29
<PER-SHARE-NII> 0.69
<PER-SHARE-GAIN-APPREC> (0.85)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> (0.57)
<PER-SHARE-NAV-END> 8.56
<EXPENSE-RATIO> 1.17
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
<PAGE>
<ARTICLE> 6
<CIK> 0000861002
<NAME> PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
<SERIES>
[NUMBER] 002
<NAME> SHORT-TERM GLOBAL INCOME PORTFOLIO (CLASS B)
<S> <C>
<PERIOD-TYPE> ANNUAL
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> OCT-31-1994
[INVESTMENTS-AT-COST] 217,167,178
[INVESTMENTS-AT-VALUE] 218,878,995
[RECEIVABLES] 6,813,549
[ASSETS-OTHER] 98,031
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 225,790,575
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 7,982,708
[TOTAL-LIABILITIES] 7,982,708
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 266,631,840
[SHARES-COMMON-STOCK] 25,452,079
[SHARES-COMMON-PRIOR] 46,785,058
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] (11,603,191)
[ACCUMULATED-NET-GAINS] (38,080,435)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 859,653
[NET-ASSETS] 217,807,867
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 28,076,745
[OTHER-INCOME] 0
[EXPENSES-NET] 5,980,090
[NET-INVESTMENT-INCOME] 22,096,655
[REALIZED-GAINS-CURRENT] (35,450,639)
[APPREC-INCREASE-CURRENT] 5,768,258
[NET-CHANGE-FROM-OPS] (7,585,726)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] (17,818,147)
[NUMBER-OF-SHARES-SOLD] 11,205,281
[NUMBER-OF-SHARES-REDEEMED] (213,168,513)
[SHARES-REINVESTED] 10,703,295
[NET-CHANGE-IN-ASSETS] (216,663,810)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (26,697,014)
[OVERDISTRIB-NII-PRIOR] (5,978,475)
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,755,285
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 5,980,090
[AVERAGE-NET-ASSETS] 281,143,000
[PER-SHARE-NAV-BEGIN] 9.29
[PER-SHARE-NII] 0.61
[PER-SHARE-GAIN-APPREC] (0.85)
[PER-SHARE-DIVIDEND] 0.00
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] (0.49)
[PER-SHARE-NAV-END] 8.56
[EXPENSE-RATIO] 1.97
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0.00
<PAGE>
<ARTICLE> 6
<CIK> 0000861002
<NAME> PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
<SERIES>
[NUMBER] 003
<NAME> SHORT-TERM GLOBAL INCOME PORTFOLIO (CLASS C)
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> OCT-31-1994
[INVESTMENTS-AT-COST] 217,167,178
[INVESTMENTS-AT-VALUE] 218,878,995
[RECEIVABLES] 6,813,549
[ASSETS-OTHER] 98,031
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 225,790,575
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 7,982,708
[TOTAL-LIABILITIES] 7,982,708
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 266,631,840
[SHARES-COMMON-STOCK] 25,452,079
[SHARES-COMMON-PRIOR] 46,785,058
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] (11,603,191)
[ACCUMULATED-NET-GAINS] (38,080,435)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 859,653
[NET-ASSETS] 217,807,867
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 28,076,745
[OTHER-INCOME] 0
[EXPENSES-NET] 5,980,090
[NET-INVESTMENT-INCOME] 22,096,655
[REALIZED-GAINS-CURRENT] (35,450,639)
[APPREC-INCREASE-CURRENT] 5,768,258
[NET-CHANGE-FROM-OPS] (7,585,726)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] (17,818,147)
[NUMBER-OF-SHARES-SOLD] 11,205,281
[NUMBER-OF-SHARES-REDEEMED] (213,168,513)
[SHARES-REINVESTED] 10,703,295
[NET-CHANGE-IN-ASSETS] (216,663,810)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (26,697,014)
[OVERDISTRIB-NII-PRIOR] (5,978,475)
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,755,285
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 5,980,090
[AVERAGE-NET-ASSETS] 199
[PER-SHARE-NAV-BEGIN] 8.61
[PER-SHARE-NII] 0.14
[PER-SHARE-GAIN-APPREC] (0.06)
[PER-SHARE-DIVIDEND] 0.00
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] (0.13)
[PER-SHARE-NAV-END] 8.56
[EXPENSE-RATIO] 0.93
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0.00
<PAGE>
<ARTICLE> 6
<CIK> 0000861002
<NAME> PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
<SERIES>
[NUMBER] 004
<NAME> SHORT-TERM GLOBAL INCOME PORTFOLIO (CLASS A)
<S> <C>
<PERIOD-TYPE> ANNUAL
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> OCT-31-1994
[INVESTMENTS-AT-COST] 51,473,620
[INVESTMENTS-AT-VALUE] 51,453,401
[RECEIVABLES] 985,554
[ASSETS-OTHER] 46,437
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 52,485,392
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,948,012
[TOTAL-LIABILITIES] 1,948,012
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 66,059,969
[SHARES-COMMON-STOCK] 28,039,288
[SHARES-COMMON-PRIOR] 68,816,287
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] (4,575,045)
[ACCUMULATED-NET-GAINS] (10,874,084)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (73,460)
[NET-ASSETS] 50,537,380
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 4,813,682
[OTHER-INCOME] 8,161
[EXPENSES-NET] 1,435,821
[NET-INVESTMENT-INCOME] 3,386,022
[REALIZED-GAINS-CURRENT] (3,538,581)
[APPREC-INCREASE-CURRENT] 540,308
[NET-CHANGE-FROM-OPS] 387,749
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (117,502)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] (3,840,254)
[NUMBER-OF-SHARES-SOLD] 4,822,020
[NUMBER-OF-SHARES-REDEEMED] (82,912,800)
[SHARES-REINVESTED] 2,685,643
[NET-CHANGE-IN-ASSETS] (78,975,144)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (10,954,049)
[OVERDISTRIB-NII-PRIOR] (4,673,778)
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 453,970
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,435,821
[AVERAGE-NET-ASSETS] 82,267,000
[PER-SHARE-NAV-BEGIN] 1.88
[PER-SHARE-NII] 0.08
[PER-SHARE-GAIN-APPREC] (0.07)
[PER-SHARE-DIVIDEND] 0.00
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] (0.09)
[PER-SHARE-NAV-END] 1.80
[EXPENSE-RATIO] 1.73
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0.00
</TABLE>
