As filed with the Securities and Exchange Commission on October 24, 1995
Registration No. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
(Check appropriate box or boxes)
--------------------
PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
(Formerly, 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 on November 24, 1995
pursuant to Rule 488 or such earlier date as the Commission acting pursuant to
Rule 488 may determine.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant
has previously registered an indefinite number of shares of common stock, par
value $.001 per share pursuant to a registration statement on Form N-1A (File
No. 33-33479). Pursuant to Rule 429 under the Securities Act of 1933, the Proxy
Statement/Prospectus relates to shares previously registered on Form N-1A (File
No. 33-33479).
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 481(a) under the Securities Act of 1933)
<TABLE>
<CAPTION>
N-14 Item No. Prospectus/Proxy
and Caption Statement Caption
- ------------ -----------------
Part A
<S> <C> <C>
Item 1. Beginning of Registration Statement and
Outside Front Cover Page of Prospectus .............................. Cover Page
Item 2. Beginning and Outside Back Cover Page of Prospectus .................. Table of Contents
Item 3. Synopsis Information and Risk Factors ................................ Synopsis; Principal Risk Factors
Item 4. Information about the Transaction .................................... Synopsis; The Proposed Transaction
Item 5. Information about the Registrant ..................................... Information about The Limited Maturity
Portfolio
Item 6. Information about the Company Being Acquired ......................... Information about the Global
Assets Portfolio
Item 7. Voting Information ................................................... Voting Information
Item 8. Interest of Certain Persons and Experts .............................. Not Applicable
Item 9. Additional Information Required for Reoffering
by Persons Deemed to be Underwriters ................................ Not Applicable
Part B Statement of Additional .............................................. Information Caption
Item 10. Cover Page ........................................................... Cover Page
Item 11. Table of Contents .................................................... Cover Page
Item 12. Additional Information about the Registrant .......................... Statement of Additional Information
of Prudential Global Limited Maturity
Fund (formerly the Prudential
Short-Term Global Income Fund)
dated January 3, 1995
Item 13. Additional Information about the Company Being Acquired .............. Not Applicable
Item 14. Financial Statements ................................................. Statement of Additional Information
of Prudential Global Limited Maturity
Fund (formerly the Prudential Short-
Term Global Income Fund) dated
January 3, 1995; pro forma financial
statements included in the Statement of
Additional Information of Prudential
Global Limited Maturity Fund, Inc. dated
November , 1995 relating to the
acquisition of assets of the Global
Assets Portfolio by the Limited Maturity
Portfolio in exchange for shares of the
Limited Maturity Portfolio.
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement
</TABLE>
<PAGE>
PRELIMINARY COPY
PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
GLOBAL ASSETS PORTFOLIO
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292
--------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
--------------
To our Shareholders:
Notice is hereby given that a Special Meeting of Shareholders of the
Prudential Global Limited Maturity Fund, Inc. (the Fund) Global Assets Portfolio
will be held at 9:00 A.M. on January 12, 1996 at 199 Water Street, New York,
N.Y. 10292, for the following purposes:
1. To approve an Agreement and Plan of Reorganization whereby all of the
assets of the Global Assets Portfolio of the Fund will be transferred to the
Fund's Limited Maturity Portfolio and the liabilities of the Global Assets
Portfolio of the Fund, if any, will be assumed by the Limited Maturity Portfolio
of the Fund in exchange for Class A shares of equivalent value of the Limited
Maturity Portfolio.
2. To consider and act upon any other business as may properly come before
the Meeting or any adjournment thereof.
Only shares of capital stock of the Global Assets Portfolio of record at the
close of business on November 2, 1995 are entitled to notice of and to vote at
this Meeting or any adjournment thereof.
S. Jane Rose
Secretary
Dated: November , 1995
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WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND PROMPTLY
RETURN THE ENCLOSED PROXY IN THE ENCLOSED STAMPED SELF-ADDRESSED ENVELOPE.
IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE
ASK YOUR COOPERATION IN MAILING IN YOUR PROXY PROMPTLY.
- --------------------------------------------------------------------------------
<PAGE>
PRELIMINARY COPY
PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
(LIMITED MATURITY PORTFOLIO)
PROSPECTUS
and
(GLOBAL ASSETS PORTFOLIO)
PROXY STATEMENT
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292
(800) 225-1852
--------------
Prudential Global Limited Maturity Fund, Inc. (formerly, Prudential
Short-Term Global Income Fund, Inc.) (the Fund) has registered as an open-end,
non-diversified management investment company which consists of two portfolios:
the Limited Maturity Portfolio (formerly, Short-Term Global Income Portfolio);
and the Global Assets Portfolio (collectively, the Portfolios). Both Portfolios
are managed by Prudential Mutual Fund Management, Inc. (PMF or the Manager) and
have the same office address. The investment objective of Limited Maturity
Portfolio is to maximize total return, the components of which are current
income and capital appreciation. The investment objective of Global Assets
Portfolio is high current income with minimum risk to principal.
This Prospectus and Proxy Statement is being furnished to shareholders of
Global Assets Portfolio in connection with a proposed Agreement and Plan of
Reorganization and Liquidation (the Plan), whereby Limited Maturity Portfolio
will acquire all of the assets of Global Assets Portfolio and assume the
liabilities, if any, of Global Assets Portfolio. If the Plan is approved by
Global Assets Portfolio's shareholders, all such shareholders will be issued
Class A shares of Limited Maturity Portfolio in place of the shares of Global
Assets Portfolio held by that shareholder, and Global Assets Portfolio will be
liquidated. Shareholders of Limited Maturity Portfolio are not being asked to
vote on the Plan.
This Prospectus and Proxy Statement sets forth concisely information about
Limited Maturity Portfolio that prospective investors should know before
investing. This Prospectus and Proxy Statement is accompanied by the Prospectus
of Limited Maturity Portfolio, dated January 3, 1995, including April 17, 1995,
May 5, 1995, July 3, 1995, and October 17, 1995 Supplements thereto, and the
Prospectus of Global Assets Portfolio, dated January 3, 1995, including April
17, 1995, May 5, 1995, July 3, 1995, October 6, 1995 and October 17, 1995
Supplements thereto, which Prospectuses are incorporated by reference herein.
The Statement of Additional Information of the Fund, dated January 3, 1995,
including August 1, 1995 and September 29, 1995 Supplements thereto, has been
filed with the Securities and Exchange Commission (SEC), is incorporated herein
by reference and is available without charge upon written request to Prudential
Mutual Fund Services, Inc., Raritan Plaza One, Edison, New Jersey 08837 or by
calling the toll-free number shown above. Additional information, contained in a
Statement of Additional Information dated November , 1995, forming a part of the
Fund's Registration Statement on Form N-14, has been filed with the SEC, is
incorporated herein by reference and is available without charge upon request to
the address or telephone number shown above.
Investors are advised to read and retain this Prospectus 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
ACCURRACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE
The date of this Prospectus and Proxy Statement is November , 1995.
1
<PAGE>
PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
(LIMITED MATURITY PORTFOLIO)
(GLOBAL ASSETS PORTFOLIO)
ONE SEAPORT PLAZA
NEW YORK, N.Y. 10292
--------------
PROSPECTUS AND PROXY STATEMENT DATED NOVEMBER , 1995
--------------
SYNOPSIS
The following synopsis is a summary of certain information contained
elsewhere in this Prospectus and Proxy Statement and the Agreement and Plan of
Reorganization and Liquidation and is qualified by reference to the more
complete information contained herein as well as in the enclosed Prudential
Global Limited Maturity Fund, Inc. (formerly Prudential Short-Term Global Income
Fund, Inc.) (the Fund) Global Assets Portfolio Prospectus and the enclosed Fund
Limited Maturity Portfolio (formerly, Short-Term Global Income Portfolio)
Prospectus. Shareholders should read the entire Prospectus and Proxy Statement
carefully.
General
This Proxy is furnished by the Board of Directors of the Fund in connection
with the solicitation of Proxies for use at a Special Meeting of Shareholders of
Global Assets Portfolio (the Meeting) to be held at 9:00 A.M., on January 12,
1996 at 199 Water Street, New York, New York 10292, the Fund's principal
executive office. The purpose of the Meeting is to approve or disapprove an
Agreement and Plan of Reorganization and Liquidation (the Plan) whereby all of
the the assets of Global Assets Portfolio will be acquired by, and the
liabilities of Global Assets Portfolio, if any, will be assumed by, Limited
Maturity Portfolio, and such other business as may properly come before the
Meeting or any adjournment thereof. The Plan is attached to this Prospectus and
Proxy Statement as Appendix A. The transactions contemplated by the Plan are set
forth herein and in summary provide that Limited Maturity Portfolio will acquire
the assets, in exchange solely for Class A shares of Limited Maturity Portfolio,
and assume the liabilities, if any, of Global Assets Portfolio.
Approval of the Plan requires the affirmative vote of a majority of shares
of Global Assets Portfolio outstanding and entitled to vote. Approval of the
Plan by the shareholders of Limited Maturity Portfolio is not required and the
Plan is not being submitted for their approval.
The Proposed Reorganization and Liquidation
The Board of Directors of the Fund has approved the Plan, which provides for
the transfer of all of the assets of Global Assets Portfolio to Limited Maturity
Portfolio in exchange solely for Class A shares of Limited Maturity Portfolio
and the assumption by Limited Maturity Portfolio of the liabilities, if any, of
Global Assets Portfolio. Following
2
<PAGE>
shareholder approval, if obtained, Class A shares of Limited Maturity Portfolio
will be distributed to Class A shareholders of Global Assets Portfolio, and
Global Assets Portfolio will be liquidated. The reorganization will become
effective as soon as practicable after the Meeting. Each Global Assets Portfolio
Class A shareholder will receive the number of full and fractional shares of
Limited Maturity Portfolio equal in value (rounded to the third decimal place)
to such shareholder's Class A shares of Global Assets Portfolio as of the
closing date.
For the reasons set forth below under " -Reasons for the Proposed
Reorganization and Liquidation" and "The Proposed Transaction-Reasons for the
Reorganization and Liquidation," the Fund's Board of Directors, including those
Directors who are not "interested persons" (Independent Directors) as that term
is defined in the Investment Company Act of 1940, as amended (Investment Company
Act), have concluded that the reorganization would be in the best interests of
the shareholders of Global Assets Portfolio and Limited Maturity Portfolio and
that the interests of shareholders of each Portfolio will not be diluted as a
result of the proposed transaction. Accordingly, the Fund's Board of Directors
recommends approval of the Plan.
Reasons for the Proposed Reorganization and Liquidation
There are a number of similarities between the Portfolios that led to
consideration of the Plan. Each Portfolio operates as an open-end,
non-diversified management investment company primarily seeking high income.
Both Portfolios will invest at least 65% of their total assets in income
producing securities and may invest in: debt securities denominated in U.S.
dollar or a range of foreign currencies; debt securities issued by supernational
organizations; debt securities denominated in the ECU; and each Portfolio may
invest more than 5% of its total assets in the securities of one or more
issuers. In addition both Portfolios may engage in: hedging and income
enhancement strategies; options transactions; forward currency exchange
contracts; futures contracts and options thereon; short sales against-the-box;
repurchase agreements; securities lending; when issued and delayed delivery
securities; borrowing; and may invest up to 10% of its net assets in illiquid
securities.
The Portfolios are also similar in that: Prudential Mutual Fund Management,
Inc. (PMF or the Manager) serves as the Manager to both Portfolios; The
Prudential Investment Corporation (PIC) serves as subadviser to both Portfolios;
Prudential Mutual Fund Distributors, Inc. (PMFD) acts as the distributor for the
Class A shares distributed by both Portfolios; and Prudential Mutual Fund
Services, Inc. (PMFS) serves as Transfer Agent and Dividend Disbursing Agent to
both Portfolios. In addition, each Portfolio pays dividends of net investment
income, if any, monthly and makes distributions of any net capital gains at
least annually.
Each Portfolio is managed by J. Gabriel Irwin and Simon Wells who head a
Global Fixed Income Group of PIC. As a team, they have responsibility for the
day-to-day management of the Fund's portfolios. Messrs. Irwin and Wells have
been employed by PIC and Prudential-Bache Securities (U.K.) Inc. since April
1995. Messrs. Irwin and Wells were previously employed by Smith Barney Global
Capital Management Inc., where they worked together as Directors and Senior
members of the Investment Policy
3
<PAGE>
Committee and managed approximately $1.5 billion in institutional and mutual
fund assets. Messrs. Irwin and Wells also serve as the portfolio managers of The
Global Government Plus Fund, Inc. and The Global Total Return Fund, Inc.
There are also a number of differences between the Portfolios. See "-Certain
Differences Between Global Assets Portfolio and Limited Maturity Portfolio"
below.
The Fund believes that if the proposed reorganization is approved, Global
Assets Portfolio shareholders will benefit from the lower distribution and
service fee, as well as from the lower overall expenses of the Limited Maturity
Portfolio. For the fiscal year ended October 31, 1994, Global Assets Portfolio
had Total Portfolio Operating Expenses of 1.73% for its Class A shares, whereas
for that same time period, Limited Maturity Portfolio had Total Portfolio
Operating Expenses for its Class A shares of 1.17%. It is possible, although
there can be no assurance that, as a result of the reorganization, the expense
ratios with respect to the surviving portfolio may be reduced somewhat, total
return may be enhanced and diversification may be improved due to a larger base
of assets. Furthermore, Global Assets Portfolio shareholders would also benefit
from the more flexible shareholder exchange privileges provided by the Limited
Maturity Portfolio. The Global Assets Portfolio exchange privilege is a limited
privilege and permits Class A shareholders to exchange their shares for only
Class A shares of Prudential Adjustable Rate Securities Fund, Inc. (In May 1995,
Prudential Adjustable Rate Securities Fund, Inc. stopped offering its shares,
with limited exceptions, due to a proposed reorganization and plan to liquidate
such fund.) The Limited Maturity Portfolio has a more expansive exchange
privilege, and its shareholders may exchange their shares for shares of certain
other Prudential Mutual Funds, including one or more specified money market
funds. Specifically, Class A shareholders of Limited Maturity Portfolio may
exchange their shares for Class A shares of Prudential Structured Maturity Fund,
Inc., Prudential Government Securities Trust (Short-Intermediate Term Series)
and certain money market funds which are listed in the Fund's Statement of
Additional Information. In addition, the Manager believes that greater returns
may be achieved for shareholders by combining both Portfolios into the one
portfolio with a longer weighted average maturity, greater flexibility and more
expansive investment policies which permit the Manager to take advantage of
opportunities in today's international fixed income market. For more information
about Limited Maturity Portfolio's investment policies, see " -Certain
Differences Between Global Assets Portfolio and Limited Maturity Portfolio"
below.
Below is total return information for the Class A, Class B and Class C
shares of Limited Maturity Portfolio and for the Class A and Class B shares of
the Global Assets Portfolio for each of the fiscal years ended October 31, 1992,
1993 and 1994, and for the six-months ended April 30, 1995. The following tables
are derived from the "Financial Highlights" of each Portfolio. "Financial
Highlights" for the Limited Maturity Portfolio are set forth in such Portfolio's
Prospectus a copy of which accompanies this Prospectus and Proxy Statement and
is set forth in the Portfolio's annual and semi-annual reports included in
Appendix B. "Financial Highlights" for Global Assets Portfolio are set forth in
such Portfolio's Prospectus, a copy of which accompanies this Prospectus and
Proxy Statement and is set forth in the Portfolio's annual and semi-annual
reports included in Appendix C.
4
<PAGE>
Global Assets Portfolio
Class A Class B
---------------------------------- ------------------------
November
Six Months 1, 1993
Ended through Year Ended
April 30, Year Ended October 31, May 9, October 31,
1995 1994 1993 1992 1994* 1993 1992
---- ---- ---- ---- ---- ---- ----
TOTAL
RETURN** . 1.81% 0.47% 4.36% 1.46% 2.33% 5.47% 0.94%
**Last day of investment operations of Class B shares. On May 10, 1994, all
existing Class B shares were converted to Class A shares.
**Total return does not consider the effect 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 reinvestments of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
Limited Maturity Portfolio
<TABLE>
<CAPTION>
Class A Class B Class C
------------------------------------- ------------------------------------ -------------------
August
Six Six Six 1, 1994*
Months Months Months through
Ended Ended Ended October
April 30, Year Ended October 31, April 30, Year Ended October 31, April 30, 31,
1995 1994 1993 1992 1995 1994 1993 1992 1995 1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL
RETURN** .. 0.68% (1.89)% 7.96% (0.07)% 0.72% (2.62)% 7.00% (0.86)% 0.72% 0.75%
</TABLE>
**Commencement of offering of Class C shares.
**Total return does not consider the effect 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 reinvestments of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
The proposed transaction would give Limited Maturity Portfolio the
opportunity to increase its assets by acquiring securities consistent with its
investment objective and policies in exchange for the issuance of its shares.
The Board of Directors of the Fund has determined that approval of the Plan
would be in the best interests of each Portfolio and of its respective
shareholders for the reasons discussed above. See, also "The Proposed
Transaction-Reasons for the Reorganization and Liquidation" below.
Certain Differences Between Limited Maturity Portfolio and Global Assets
Portfolio
While the investment objective of both Portfolios are similar, there are a
few important differences between the Portfolios.
5
<PAGE>
The Limited Maturity Portfolio's investment objective is to maximize total
return, the components of which are current income and capital appreciation. The
Limited Maturity Portfolio seeks to achieve its objective by investing primarily
in a portfolio of investment grade debt securities. The Limited Maturity
Portfolio will maintain a weighted average maturity of more than 2, but less
than 5 years, and the maturity for any individual security will generally not
exceed 10 years. The Global Assets Portfolio's investment objective is high
current income with minimum risk to principal. 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 1 year. There is no
assurance that either Portfolio will achieve its investment objective.
Unlike the Global Assets Portfolio, Limited Maturity Portfolio may invest up
to 15% of its total assets in non-investment grade securities with a minimum
rating of B (as determined by the Standard & Poor's Ratings Group, Moody's
Investors Services, Inc. or by another nationally recognized statistical ratings
organization, or if unrated, deemed to be of equivalent quality by the
portfolio's investment adviser). The Limited Maturity Portfolio, unlike the
Global Assets Portfolio, also permits investment in debt securities denominated
in the currencies of certain "emerging market" nations (including Greece, Hong
Kong, Thailand, China and Israel). Investment in non-investment grade
securities, as well as investment in emerging markets, may entail additional
risks to the Portfolio. See "Principal Risk Factors" below.
Whereas the Global Assets Portfolio will, under normal circumstances,
maintain at least 35% of its net assets in U.S. dollar denominated securities
and will invest in debt securities of issuers in at least three different
countries; the Limited Maturity Portfolio will, under normal circumstances,
maintain at least 30% of its total assets in securities denominated in U.S.
Dollars and in cash, maintain at least 50% of its total assets in Dollar Bloc
currencies (U.S., Canada, Australia and New Zealand), and invest in a minimum of
five different countries. The Limited Maturity Portfolio may invest 100% of its
assets in securities denominated in U.S. Dollars or in cash for temporary,
extraordinary or emergency purposes.
Unlike the Global Assets Portfolio, the Limited Maturity Portfolio may
invest up to 10% of its total assets in zero coupon securities; may invest up to
5% of its total assets in convertible securities; and may invest up to 5% of its
total assets in shares of closed-end investment companies or investment trusts.
For a more detailed discussion of these types of investments and the risks
involved, see "Principal Risk Factors" below.
The Global Assets Portfolio exchange privilege is a limited privilege and
permits Class A shareholders to exchange their shares for only Class A shares of
Prudential Adjustable Rate Securities Fund, Inc. (In May 1995, Prudential
Adjustable Rate Securities Fund, Inc. stopped offering its shares, with limited
exceptions, due to a proposed reorganization and plan to liquidate such fund.)
The Limited Maturity Portfolio has a more expansive exchange privilege, and its
shareholders may exchange their shares for shares of certain other Prudential
Mutual Funds, including one or more specified money market funds. Specifically,
Class A shareholders of Limited Maturity Portfolio may exchange their shares for
Class A shares of Prudential Structured Maturity Fund, Inc.,
6
<PAGE>
Prudential Government Securities Trust (Short-Intermediate Term Series) and
certain money market funds which are listed in the Fund's Statement of
Additional Information.
Structure of Limited Maturity Portfolio and Global Assets Portfolio
Prudential Global Limited Maturity Fund, Inc. is a Maryland corporation and
each Portfolio operates as an open-end, non-diversified management investment
company. The Fund consists of two Portfolios; the Global Assets Portfolio and
the Limited Maturity Portfolio. The Global Assets Portfolio commenced investment
operations on February 15, 1991 and the Limited Maturity Portfolio commenced
investment operations on November 1, 1990. The Fund is authorized to issue
2,000,000,000 shares of capital stock (par value $.001 per share).
The Global Assets Portfolio consists of two classes of shares designated
Class A and Class B shares. On May 10, 1994, all existing Class B shares were
converted to Class A shares and since then Global Assets Portfolio offers only
one class of shares designated Class A shares. Limited Maturity Portfolio
consists of three classes of shares designated Class A, Class B and Class C
shares. Limited Maturity Portfolio is offering all three classes of shares. All
three classes of shares of Limited Maturity Portfolio represent an interest in
the same assets of such Portfolio and are identical in all respects except that
each class bears certain distribution expenses and has voting rights with
respect to certain distribution and service plans.
The Fund has received an order of the Securities and Exchange Commission
(SEC) permitting each Portfolio to issue and sell multiple classes of capital
stock. Each share of each class of capital 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 Limited Maturity Portfolio, there are no
conversion, preemptive or other subscription rights. In the event of
liquidation, each share of capital stock of Global Assets Portfolio and of
Limited Maturity Portfolio is entitled to its portion of all of its respective
Portfolio's assets after all debt and expenses of such Portfolio have been paid.
Since the Class B and Class C shares of Limited Maturity Portfolio generally
bear higher distribution expenses than Class A shares of Limited Maturity
Portfolio, the liquidation proceeds to such Class B and Class C shareholders are
likely to be lower than to such Class A shareholders.
The Fund's Articles of Incorporation permit the Fund's Board of Directors to
authorize the creation of additional portfolios and classes within such
portfolios, with such preferences, privileges, limitations and voting and
dividend rights as the Board of Directors may determine. The Board of Directors
may increase the number of authorized shares without the approval of
shareholders. Shares of each Portfolio, when issued as described in each
Portfolio's Prospectus, are fully paid, nonassessable, fully transferable and
redeemable at the option of the holders. Shares are also redeemable at the
option of each Portfolio under certain circumstances. Neither Portfolio's shares
have cumulative voting rights for the election of Fund Directors.
7
<PAGE>
Investment Objective and Policies -- Limited Maturity Portfolio
The Limited Maturity 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. The Portfolio will maintain a weighted
average maturity of more than 2, but less than 5 years, and the maturity for any
individual security will generally not exceed 10 years. The Portfolio may also
invest up to 15% of its total assets in non-investment grade securities with a
minimum rating of B (as determined by the Standard & Poor's Ratings Group,
Moody's Investors Services, Inc. or by another nationally recognized statistical
ratings organization, or if unrated, deemed to be of equivalent quality by the
Portfolio's investment adviser). Investment in non-investment grade securities
may entail additional risks to the Portfolio. See "Principal Risk Factors"
below. There is no assurance that the Portfolio will achieve its investment
objective.
The Limited Maturity Portfolio will under normal circumstances invest in a
minimum of five different countries, and will invest at least 30% of its total
assets in securities denominated in U.S. Dollars and in cash, and at least 50%
of its total assets in Dollar Bloc currencies (U.S., Canada, Australia and New
Zealand). The Portfolio may invest 100% of its assets in securities denominated
in U.S. Dollars or in cash for temporary, extraordinary or emergency purposes.
The Limited Maturity 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. Investment in securities denominated in the currencies of such
emerging markets may entail additional risks to the Limited Maturity Portfolio.
See "Principal Risk Factors" below.
Unlike the Global Assets Portfolio, the Limited Maturity Portfolio may
invest up to 10% of its total assets in zero coupon securities; may invest up to
5% of its total assets in convertible securities; and may invest up to 5% of its
total assets in shares of closed-end investment companies or investment trusts.
For a more detailed discussion of these types of investments and the risks
involved, see "Principal Risk Factors" below.
Other than stated above the investment policies of the Limited Maturity
Portfolio are substantially similar to the investment policies of Global Assets
Portfolio.
Fees and Expenses
Management Fees
PMF, the Manager of each Portfolio and a wholly-owned subsidiary of The
Prudential Insurance Company of America (Prudential), is compensated, pursuant
to a Management Agreement with each of the Portfolios, at an annual rate of .55
of 1% of the average daily net assets of the respective Portfolio.
Under Subadvisory Agreements between PMF and PIC with respect to both
Portfolios, PIC, as Subadviser, provides investment advisory services for the
management of each Fund. Pursuant to the Subadvisory Agreements, PMF will
reimburse PIC for its reasonable costs and expenses in providing subadvisory
services. PMF continues to
8
<PAGE>
have responsibility for all investment advisory services pursuant to the
Management Agreements for both Portfolios and supervises the Subadviser's
performance of its services on behalf of each Portfolio.
Distribution Fees
Each Fund has a plan of distribution adopted pursuant to Rule 12b-1 of the
Investment Company Act (12b-1 Plan) with respect to its Class A shares pursuant
to which each Fund pays PMFD for its distribution-related activities. The Global
Assets Portfolio pays PMFD an annual distribution and service fee at an annual
rate of up to .50 of 1% of the average daily net assets of the Class A shares.
The Class A 12b-1 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 up to .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 of $411,334 under the Global
Assets Portfolio Class A 12b-1 Plan. For the same period, PMFD received initial
sales charges of approximately $24,100.
Pursuant to its Class A 12b-1 Plan, the Limited Maturity 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 12b-1 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 up to .25 of 1%)
may not exceed .30 of 1% of the average daily net assets of the Class A shares.
PMFD has advised the Limited Maturity Portfolio that distribution-related
expenses under the Class A 12b-1 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,
[1996.] For the fiscal year ended October 31, 1994, PMFD received payments of
$57,000 under the Limited Maturity Portfolio Class A 12b-1 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.
The Global Assets Portfolio has a compensation type Class A 12b-1 Plan
whereby PMFD receives compensation for its distribution and service activities
undertaken in connection with the Class A shares, not as reimbursement for
specific expenses incurred. Therefore, if PMFD's expenses are less than such
distribution and service fees, it will retain its full fees and realize a
profit. Limited Maturity Portfolio has a reimbursement type Class A 12b-1 Plan
whereby PMFD is compensated for expenses actually incurred.
Prudential Securities Incorporated (PSI) is compensated for serving as the
Distributor of Limited Maturity Portfolio's Class B and Class C shares pursuant
to separate 12b-1 Plans. The Limited Maturity Portfolio may pay PSI 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. Each of the Class B and Class C 12b-1 Plans provide for
payments to PSI of (i) an asset-based sales charge of up to .75 of 1% of the
average daily net assets of the Class B and Class C shares, respectively, and
9
<PAGE>
(ii) a service fee of up to .25 of 1% of the average daily net assets of the
Class B and Class C shares, respectively. The service fee is used to pay for
personal service and/or the maintenance of shareholders accounts. PSI 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, respectively, for the fiscal year ending October 31, [1996.] For the
fiscal year ended October 31, 1994, PSI received $2,679,726 under the Limited
Maturity Portfolio Class B 12b-1 Plan and approximately $11,291,500 in
contingent deferred sales charges. For the fiscal year ended October 31, 1994,
PSI did not receive any remuneration under the Limited Maturity Portfolio Class
C 12b-1 Plan, nor did PSI incur any costs in distributing the Portfolio's Class
C shares.
Other Expenses
Each Portfolio also pays certain other expenses in connection with its
operation, including accounting, custodian, legal, audit, transfer agency and
registration expenses.
Fee Waivers and Subsidy
PMF may from time to time waive all or a portion of its management fee and
subsidize all or a portion of the operating expenses of each Portfolio. Fee
waivers and expense subsidies will increase a fund's yield and total return. The
distributors of the Portfolio's shares may also from time to time waive all or a
portion of the distribution expenses payable to them under the Portfolio's
respective 12b-1 Plans. Any fee waiver or subsidy may be terminated at any time
without notice after which a Portfolio's expenses will increase and its yield
and total return will be reduced.
Expense Ratios
For the fiscal year ended October 31, 1994, total expenses excluding
distribution fees stated as a percentage of average net assets of Global Assets
Portfolio were 1.23% for Class A shares. For the fiscal year ended October 31,
1994, total expenses excluding distribution fees stated as a percentage of
average net assets of Limited Maturity Portfolio were 1.02%, 1.02% and .18%
(annualized) for Class A, Class B and Class C shares, respectively.
Set forth below is a comparison of each Portfolio's operating expenses for
the fiscal year ended October 31, 1994. The ratios are also shown on a pro forma
(estimated) combined basis, giving effect to the reorganization.
<TABLE>
<CAPTION>
Global
Annual Fund Operating Assets Limited Maturity Portfolio Pro Forma Combined
Expenses (as a percengage of Portfolio --------------------------- ---------------------------
average net assets) Class A Class A Class B Class C Class A Class B Class C
------------------ ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fees ............ .55% .55% .55% .55% .55% .55% .55%
12b-1 Fees ................. .50 .15 .75 .75 .15 .75 .75
Other Expenses ............. .68 .47 .47 .47 .54 .54 .54
Total Fund Operating
Expenses .................. 1.73% 1.17% 1.77% 1.77% 1.24% 1.84% 1.84%
</TABLE>
Set forth below is an example which shows the expenses that an investor in
the combined portfolio would pay on a $1,000 investment, based upon the pro
forma ratios set forth above.
10
<PAGE>
Example 1 Year 3 Years 5 Years 10 Years
- ------- ------ ------- ------- --------
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 $68 $ 96 $175
Class B ............................ $49 $68 $100 $216
Class C ............................ $29 $58 $100 $216
You would pay the following expenses on the same investment, assuming no
redemption:
Class A ............................ $42 $68 $ 96 $175
Class B ............................ $19 $58 $100 $216
Class C ............................ $19 $58 $100 $216
The example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
Purchase and Redemptions
Purchases of shares of Limited Maturity Portfolio and Global Assets
Portfolio are made through PSI, Pruco Securities Corporation (Prusec), an
affiliated broker/dealer, or directly from the respective Portfolio through
their transfer agent, PMFS, at the net asset value per share next determined
after receipt of a purchase order by PMFS, Prusec or PSI plus a sales charge
which may be imposed either (i) at the time of purchase (Class A shares) or
(ii), in the case of the Limited Maturity Portfolio, on a deferred basis (Class
B and Class C shares).
With respect to the Global Assets Portfolio, the minimum initial investment
for Class A shares is $5,000 and the minimum subsequent investment is $1,000.
With respect to the Limited Maturity Portfolio, the minimum initial investment
for Class A and Class B shares is $1,000 per class and $5,000 for Class C
shares. In addition the minimum subsequent investment for all classes of the
Limited Maturity Portfolio is $100. With respect to both Portfolios, all minimum
investment requirements are waived for certain retirement and employee savings
plans or custodial accounts for the benefit of minors. For purchases of Class B
shares made through the Automatic Savings Accumulation Plan, the minimum initial
and subsequent investment is $50. Class A shares are sold with an initial sales
charge of up to .99% and 3% of the offering price of shares of the Global Assets
Portfolio and Limited Maturity Portfolio, respectively. If the proposed
reorganization is approved, there will not be any additional sales charge with
respect to the exchange of Class A shares of Global Assets Portfolio for Class A
shares of Limited Maturity Portfolio. The Class B shares of the Limited Maturity
Portfolio are sold without an initial sales charge but are subject to a
contingent deferred sales charge (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) after the contingent deferred
sales charge has expired. The Class C shares of the Limited Maturity Portfolio
are sold without an initial sales charge but are subject to a 1% CDSC on
redemptions made within one year of purchase.
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<PAGE>
Shares of each Portfolio may be redeemed at any time at the net asset value
next determined after PSI or PMFS receives the sell
order.
Exchange Privileges
Shareholders of both Portfolios have an exchange privilege with certain
other Prudential Mutual Funds, subject to the minimum investment requirements of
such funds. The Global Assets Portfolio exchange privilege is a limited
privilege and permits Class A shareholders to exchange their shares for only
Class A shares of Prudential Adjustable Rate Securities Fund, Inc. (In May 1995,
Prudential Adjustable Rate Securities Fund, Inc. stopped offering its shares,
with limited exceptions, due to a proposed reorganization and plan to liquidate
such fund.) The Limited Maturity Portfolio has a more expansive exchange
privilege, and its shareholders may exchange their shares for shares of certain
other Prudential Mutual Funds, including one or more specified money market
funds. Specifically, Class A shareholders of Limited Maturity Portfolio may
exchange their shares for Class A shares of Prudential Structured Maturity Fund,
Inc., Prudential Government Securities Trust (Short-Intermediate Term Series)
and certain money market funds which are listed in the Fund's Statement of
Additional Information.
Dividends and Distributions
Each Fund expects to declare daily and pay dividends of net investment
income, if any, monthly and make distributions of any net capital gains, if any,
at least annually. Shareholders of both Portfolios receive dividends and other
distributions in additional shares of such Portfolio unless they elect to
receive them in cash. A Global Assets Portfolio shareholder's election with
respect to reinvestment of dividends and distributions in Global Assets
Portfolio will be automatically applied with respect to Limited Maturity
Portfolio shares he or she receives pursuant to the reorganization.
Federal Tax Consequences of Proposed Reorganization
Prior to the consummation of the reorganization, the Fund shall have
received an opinion of Shereff, Friedman, Hoffman & Goodman, LLP, or a private
letter ruling from the Internal Revenue Service (IRS), to the effect that the
proposed reorganization will constitute a tax-free reorganization within the
meaning of Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended
(the Internal Revenue Code). Accordingly, no gain or loss will be recognized to
either Portfolio upon the transfer of assets and the assumption of liabilities,
if any, or to shareholders of Global Assets Portfolio upon their receipt of
shares of Limited Maturity Portfolio solely in return for shares of Global
Assets Portfolio. The tax basis for the shares of Limited Maturity Portfolio
received by Global Assets Portfolio shareholders will be the same as their tax
basis for the shares of Global Assets Portfolio to be constructively surrendered
in exchange therefor. In addition, the holding period of the shares of Limited
Maturity Portfolio to be received pursuant to the reorganization will include
the period during which the shares of Global Assets Portfolio to be
constructively surrendered in exchange therefor were held, provided the latter
shares were held as capital assets by the shareholders on the date of the
exchange. See "The Proposed Transaction-Tax Considerations."
12
<PAGE>
PRINCIPAL RISK FACTORS
Longer Weighted Average Maturity
The Global Assets Portfolio invests in debt securities having remaining
maturities of not more than 1 year; whereas the Limited Maturity Portfolio
invests in debt securities having remaining maturities of more than 2, but less
than 5 years. To the extent a portfolio invests in debt securities having longer
weighted average maturities, the greater the effect of changes in interest rates
on such portfolio's net asset value. Accordingly, the net asset value of the
Limited Maturity Portfolio can be expected to fluctuate more than that of the
Global Assets Portfolio.
Foreign Investment
Both Portfolios may invest in securities of foreign companies and countries.
Such investments involve certain considerations and risks not typically
associated with investing in U.S. Government Securities and securities of
domestic companies. The values of foreign investments are affected by 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.
Unlike the Global Assets Portfolio, the Limited Maturity Portfolio may
invest in debt securities denominated in the currencies of certain emerging
market nations. 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.
Non-Investment Grade Securities
Both Portfolios invest in investment grade securities, Limited Maturity
Portfolio, however, may invest up to 15% of its total assets in non-investment
grade securities with a minimum rating of B (as determined by the Standard &
Poor's Ratings Group, Moody's Investors Services, Inc. or by another nationally
recognized statistical ratings organization, or if unrated, deemed to be of
equivalent quality by the Portfolio's investment adviser). Generally,
lower-rated securities and unrated securities of comparable quality, sometimes
referred to as junk bonds, offer a higher current yield than is offered by
higher-rated securities, but also (i) will likely have some quality and
protective characteristics
13
<PAGE>
that, in the judgement 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 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 of comparable quality generally
are unsecured and frequently are subordinated to the prior payment of senior
indebtedness.
The investment adviser of Limited Maturity Portfolio, under the supervision
of the Manager and the Board of Directors, in evaluating the creditworthiness of
an issue whether rated or unrated, takes 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 Limited Maturity 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 Limited
Maturity 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 Limited Maturity 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.
14
<PAGE>
As of October 31, 1994, the year-end dollar weighted average ratings of the
debt obligations held by the Limited Maturity Portfolio, expressed as a
percentage of such Portfolio'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 -
B/B -
Unrated 13.70%
Other Investments and Investment Techniques
Both Portfolios 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. Below are those investments in
which Limited Maturity Portfolio may invest and in which Global Assets Portfolio
currently does not invest.
Zero Coupon Securities
The Limited Maturity Portfolio may invest up to 10% of its total assets in
zero coupon securities. Zero coupon securities are securities that are sold at a
discount to par value and on which interest payments are not made during the
life of the security. Upon maturity, the holder is entitled to receive the par
value of the security. While interest payments are not made on such securities,
holders of such securities are deemed to have received annually "phantom
income." The Portfolio accrues income with respect to these securities prior to
the receipt of cash payments. Zero coupon securities may be subject to greater
fluctuation in value and lesser liquidity in the event of adverse market
conditions than comparable rated securities paying cash interest at regular
intervals.
Convertible Securities
The Limited Maturity Portfolio may invest up to 5% of its total assets in
convertible securities. A convertible security is generally a corporate bond (or
preferred stock) which may be converted at a stated price within a specified
period of time into a certain quantity of the common stock of the same or
adifferent issuer. Convertible securities are senior to common stocks in a
corporation's capital structure, but are usually subordinated to similar
nonconvertible securities. While providing a fixed income stream (generally
higher in yield than the income derivable from a common stock but lower than
that afforded by a similar nonconvertible security), a convertible security also
affords an investor the opportunity, through its conversion feature, to
participate in the capital appreciation dependent upon a market price advance in
the convertible security's underlying common stock. The Portfolio may from time
to time hold common stock received upon the conversion of a convertible
security. The Portfolio does not intend to retain the common stock in its
portfolio and will sell it as soon as reasonably practicable. Convertible
securities also include preferred stock which technically is an equity security.
15
<PAGE>
In general, the market value of a convertible security is at least the
higher of its "investment value" (i.e., its value as a fixed-income security) or
its "conversion value" (i.e., its value upon conversion into its underlying
common stock). As a fixed-income security, a convertible security tends to
increase in market value when interest rates decline and tends to decrease in
value when interest rates rise. However, the price of a convertible security is
also influenced by the market value of the security's underlying stock. The
price of a convertible security tends to increase as the market value of the
underlying stock rises, whereas it tends to decrease as the market value of the
underlying stock declines.
Securities of Other Investment Companies
The Limited Maturity Portfolio may invest up to 5% of its total assets in
shares of closed-end investment companies or investment trusts. If the Portfolio
does invest in securities of other investment companies, shareholders of the
Portfolio may be subject to duplicate management and advisory fees.
For a more complete discussion of the risks attendant to Limited Maturity
Portfolio investments, please see pages 7 through 14 of the Limited Maturity
Portfolio (formerly, Short-Term Global Income Portfolio) Prospectus which
accompanies this Prospectus and Proxy Statement and is incorporated herein by
reference.
THE PROPOSED TRANSACTION
Agreement and Plan of Reorganization and Liquidation
The terms and conditions under which the proposed transaction may be
consummated are set forth in the Plan. Significant provisions of the Plan are
summarized below; however, this summary is qualified in its entirety by
reference to the Plan, a copy of which is attached as Appendix A to this
Prospectus and Proxy Statement.
The Plan contemplates (i) Limited Maturity Portfolio acquiring all of the
assets of Global Assets Portfolio in exchange solely for Class A shares of
Limited Maturity Portfolio and the assumption by Limited Maturity Portfolio of
Global Assets Portfolio's liabilities, if any, as of the Closing Date (hereafter
defined) and (ii) the constructive distribution on the date of the exchange,
expected to occur on or about January 19, 1996 (the "Closing Date") of such
Class A shares of Limited Maturity Portfolio to the Class A shareholders of
Global Assets Portfolio as provided for by the Plan.
The assets of Global Assets Portfolio to be acquired by Limited Maturity
Portfolio shall include, without limitation, all cash, cash equivalents,
securities, receivables (including interest and dividends receivable) and other
property of any kind owned by Global Assets Portfolio and any deferred or
prepaid assets shown as assets on the books of Global Assets Portfolio. Limited
Maturity Portfolio will assume from Global Assets Portfolio all debts,
liabilities, obligations and duties of Global Assets Portfolio of whatever kind
or name, if any; provided, however, that Global Assets Portfolio will utilize
its best efforts, to the extent practicable, to discharge all of its known
debts, liabilities,
16
<PAGE>
obligations and duties prior to the Closing Date. Limited Maturity Portfolio
will deliver to Global Assets Portfolio Class A shares of Limited Maturity
Portfolio, which Global Assets Portfolio will then distribute to its Class A
shareholders.
The value of Global Assets Portfolio assets to be acquired and liabilities
to be assumed by Limited Maturity Portfolio and the net asset value of a share
of Limited Maturity Portfolio will be determined as of 4:15 P.M., New York time,
on the Closing Date in accordance with the valuation procedures of the
respective Portfolio's then-current Prospectus and the Fund's Statement of
Additional Information.
As soon as practicable after the Closing Date, Global Assets Portfolio will
liquidate and distribute pro rata to its shareholders of record the Class A
shares of Limited Maturity Portfolio received by Global Assets Portfolio in
exchange for such shareholders' interest in Global Assets Portfolio evidenced by
their shares of capital stock of Global Assets Portfolio. Such liquidation and
distribution will be accomplished by opening accounts on the books of Limited
Maturity Portfolio in the names of Global Assets Portfolio shareholders and by
transferring thereto the shares of Limited Maturity Portfolio previously
credited to the account of Global Assets Portfolio on those books. Each
shareholder account shall represent the respective pro rata number of Limited
Maturity Portfolio shares due to such Global Assets Portfolio shareholder.
Fractional shares of Global Assets Portfolio will be rounded to the third
decimal place.
Accordingly, every participating shareholder of Global Assets Portfolio will
own Class A shares of Limited Maturity Portfolio immediately after the
reorganization that, except for rounding, will have a total value equal to the
total value of that shareholder's Class A shares of Global Assets Portfolio
immediately prior to the reorganization. Moreover, because shares of Limited
Maturity Portfolio will be issued at net asset value in exchange for net assets
of Global Assets Portfolio that, except for rounding, will equal the aggregate
value of those shares, the net asset value per share of Limited Maturity
Portfolio will be unchanged. Thus, the reorganization will not result in
dilution of the value of any shareholder account. However, in general, each
Global Assets Portfolio shareholder will have a percentage of ownership in
Limited Maturity Portfolio substantially less than such shareholder's current
percentage of ownership of Global Assets Portfolio because, while such
shareholder will have the same dollar amount invested initially in Limited
Maturity Portfolio that he or she had invested in Global Assets Portfolio, his
or her investment will represent a smaller percentage of the combined net assets
of Limited Maturity Portfolio and Global Assets Portfolio.
Any transfer taxes payable upon issuance of shares of Limited Maturity
Portfolio in a name other than that of the registered holder of the shares on
the books of Global Assets Portfolio as of that time shall be paid by the person
to whom such shares are to be used as a condition of such transfer. Any
reporting responsibility of Global Assets Portfolio will continue to be the
responsibility of Global Assets Portfolio up to and including the Closing Date
and such later date on which Global Assets Portfolio is liquidated.
The consummation of the proposed transaction is subject to a number of
conditions set forth in the Plan, some of which may be waived by the Board of
Directors of the Fund. The Plan may be terminated and the proposed transaction
abandoned at any time, before
17
<PAGE>
or after approval by the shareholders of Global Assets Portfolio, prior to the
Closing Date. In addition, the Plan may be amended in any mutually agreeable
manner, except that no amendment may be made subsequent to the Meeting of
shareholders of Global Assets Portfolio that would detrimentally affect the
value of Limited Maturity Portfolio shares to be distributed.
Reasons for the Reorganization and Liquidation
The Fund's Board of Directors, including a majority of the Independent
Directors, has determined that the interests of shareholders of both Portfolios
will not be diluted as a result of the proposed transaction and that the
proposed transaction is in the best interests of the shareholders of both
Portfolios.
The reasons for the proposed transaction are described above under
"Synopsis-Reasons for the Proposed Reorganization and Liquidation." The Fund's
Board of Directors based its decision to approve the Plan on an inquiry into a
number of factors, including the following:
(1) the relative past growth in assets and investment performance and
future prospects of the Portfolios.
(2) the effect of the proposed transaction on the expense ratios of each
Portfolio.
(3) the costs of the reorganization, which will be paid for by each
Portfolio in proportion to its respective asset levels;
(4) the tax-free nature of the reorganization to the Portfolios and
their shareholders;
(5) the potential benefits to PMF, PMFD and PSI (see "Synopsis-
Fees and Expenses" above); and
(6) the compatibility of the investment objectives, policies and
restrictions of the Portfolios.
If the Plan is not approved by Global Assets Portfolio shareholders, the
Fund's Board of Directors may consider other appropriate action, such as the
liquidation of Global Assets Portfolio or a merger or other business combination
with an investment company other than Limited Maturity Portfolio.
Description of Securities to be Issued
The Fund has issued shares of capital stock, par value $.001 per share.
Limited Maturity Portfolio offers three classes of shares designated Class A,
Class B and Class C shares. Class A shares of the Limited Maturity Portfolio
will be issued to Global Assets Portfolio Class A shareholders on the Closing
Date. Each Class A share represents an equal and proportional interest in
Limited Maturity Portfolio. The Fund's Articles of Incorporation authorize the
Fund to issue 2,000,000,000 shares. Shares entitle their holders to one vote per
full share and fractional votes for fractional shares held. Each share of
Limited Maturity Portfolio has equal voting, dividend and liquidation rights
with all other shares of Limited Maturity Portfolio except that each class bears
certain distribution expenses and has voting rights with respect to certain
distribution and service plans.
18
<PAGE>
Tax Considerations
Prior to the Closing, the Fund will receive an opinion from Shereff,
Friedman, Hoffman & Goodman, LLP, or a private letter ruling from the IRS, to
the effect that (1) the proposed transaction described above will constitute a
reorganization within the meaning of Section 368(a)(1)(C) of the Internal
Revenue Code; (2) no gain or loss will be recognized by shareholders of Limited
Maturity Portfolio upon their receipt of shares, including fractional shares, of
Limited Maturity Portfolio in exchange for their shares of Global Assets
Portfolio (Internal Revenue Code Section 354(a)(1)); (3) no gain or loss will be
recognized by Global Assets Portfolio upon the transfer of its assets to Limited
Maturity Portfolio in exchange solely for Class A shares of Limited Maturity
Portfolio and the assumption by Limited Maturity Portfolio of Global Assets
Portfolio's liabilities, if any, and the subsequent distribution of those shares
to its shareholders in liquidation thereof (Internal Revenue Code Sections
361(a) and 357(a)); (4) no gain or loss will be recognized by Limited Maturity
Portfolio upon the receipt of such assets in exchange solely for Limited
Maturity Portfolio shares and its assumption of Global Assets Portfolio's
liabilities, if any (Internal Revenue Code Section 1032(a)); (5) Limited
Maturity Portfolio's basis for the assets received pursuant to the
reorganization will be the same as the basis thereof in the hands of Global
Assets Portfolio immediately before the reorganization, and the holding period
of those assets in the hands of Limited Maturity Portfolio will include the
holding period thereof in Global Assets Portfolio hands (Internal Revenue Code
Sections 362(b) and 1223(2)); (6) Global Assets Portfolio shareholders' basis
for the shares of Limited Maturity Portfolio to be received by them pursuant to
the reorganization will be the same as their basis for the shares of Global
Assets Portfolio constructively surrendered in exchange therefor (Internal
Revenue Code Section 358(a)(1)); and (7) the holding period of the shares of
Limited Maturity Portfolio to be received by the shareholders of Global Assets
Portfolio pursuant to the reorganization will include the period during which
the shares of Global Assets Portfolio constructively surrendered in exchange
therefor were held, provided the latter shares were held as capital assets by
the shareholders on the date of the exchange (Internal Revenue Code Section
1223(1)).
Certain Information About the Fund and its Portfolios
Organization. The Fund is a Maryland corporation and the rights of its
shareholders are governed by its Articles of Incorporation, By-Laws and the
Maryland General Corporation Law.
Capitalization. The Fund has issued shares of capital stock, par value $.001
per share. The Fund's Articles of Incorporation authorize the Fund to issue
2,000,000,000 shares 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 Limited Maturity Portfolio, 500,000,000 shares of Class B
Capital Stock of the Limited Maturity Portfolio and 500,000,000 shares of Class
C Capital Stock of the Limited Maturity Portfolio.
19
<PAGE>
Shareholder Meetings and Voting Rights. Generally, neither Portfolio is
required to hold annual meetings of its shareholders. Each Portfolio is required
to call a meeting of shareholders for the purpose of voting upon the question of
removal of a Director when requested in writing to do so by the holders of at
least 10% of the Portfolio's outstanding shares. In addition, each Portfolio is
required to call a meeting of shareholders for the purpose of electing Directors
if, at any time, less than a majority of the Directors holding office were
elected by shareholders.
Shareholders of each Portfolio are entitled to one vote for each share on
all matters submitted to a vote of its shareholders under Maryland law. Approval
of certain matters, such as an amendment to the Articles of Incorporation, a
merger, consolidation or transfer of all or substantially all assets,
dissolution and removal of a Director, requires the affirmative vote of a
majority of the votes entitled to be cast. Other matters require the approval of
the affirmative vote of a majority of the votes cast at a meeting at which a
quorum is present.
The Fund's By-Laws provide that a majority of the outstanding shares shall
constitute a quorum for the transaction of business at a shareholders' meeting.
Matters requiring a larger vote by law or under the organizational documents for
the Fund are not affected by such quorum requirements.
Shareholder Liability. Under Maryland law, shareholders of each Portfolio
have no personal liability as such for either Portfolio's acts or obligations.
Liability and Indemnification of Directors. Under the Fund's Articles of
Incorporation and Maryland law, a Director or officer of the Fund is not liable
to the Fund or its shareholders for monetary damages for breach of fiduciary
duty as a Director or officer except to the extent such exemption from liability
or limitation thereof is not permitted by law, including the Investment Company
Act.
Under the Investment Company Act, a Director may not be protected against
liability to the Fund and its security holders to which he would otherwise be
subject as a result of his willful misfeasance, bad faith or gross negligence in
the performance of his duties, or by reason of reckless disregard of his
obligations and duties. The staff of the SEC interprets the Investment Company
Act to require additional limits on indemnification of Directors and officers.
Pro Forma Capitalization and Ratios
The following table shows the capitalization of each Portfolio as of
September 30, 1995 and the pro forma combined capitalization of both Portfolios
as if the reorganization had occured on that date.
<TABLE>
<CAPTION>
Global
Assets Limited Maturity Portfolio Pro Forma Combined
Portfolio ---------------------------------- ------------------------
Class A Class A Class B Class C Class A Class B Class C
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Assets ................ $26,715,657 $18,626,946 $111,767,241 $751 $45,339,868 $111,760,497 $751
Net Asset Value Per share . $1.77 $8.39 $8.42 $8.42 $8.39 $8.42 $8.42
Shares Outstanding ........ 15,080,091 2,220,351 13,280,191 89 5,404,577 13,280,191 89
</TABLE>
20
<PAGE>
The following table shows the ratio of expenses to average net assets and
the ratios of net investment income to average net assets of Global Assets
Portfolio and the Limited Maturity Portfolio for the fiscal year ended October
31, 1994. The ratios are also shown on a pro forma combined basis, assuming the
reorganization occurs on or about January 19, 1996.
<TABLE>
<CAPTION>
Global
Assets Limited Maturity Portfolio Pro Forma Combined
Portfolio -------------------------- --------------------------
Class A Class A Class B Class C Class A Class B Class C
------- ------- ------- ------- ------- ------- -------
Ratio of expenses to average
<S> <C> <C> <C> <C> <C> <C> <C>
net assets ................. 1.73% 1.17% 1.97% .93% 1.24% 1.84% 1.84%
Ratio of net investment
income to average net
assets ...................... 4.09% 7.67% 6.82% 7.02% 7.60% 6.95% 6.11%
</TABLE>
INFORMATION ABOUT LIMITED MATURITY PORTFOLIO
Financial Information
For condensed financial information for Limited Maturity Portfolio, see
"Financial Highlights" in the Limited Maturity Portfolio Prospectus which
accompanies this Prospectus and Proxy Statement. Also see Appendix B which
contains Limited Maturity Portfolio's annual and semi-annual reports to
shareholders for the fiscal year ended October 31, 1994 and the six months ended
April 30, 1995, respectively.
General
For a discussion of the organization, classification and sub-classification
of Limited Maturity Portfolio, see "General Information" and "Fund Highlights"
in the Limited Maturity Portfolio Prospectus.
Investment Objective and Policies
For a discussion of Limited Maturity Portfolio's investment objective and
policies and risk factors associated with an investment in The Limited Maturity
Portfolio, see "How the Fund Invests" in the Limited Maturity Portfolio
Prospectus.
Directors
For a discussion of the responsibilities of the Fund's Board of Directors,
see "How the Fund is Managed" in the Limited Maturity Portfolio Prospectus.
Manager and Portfolio Manager
For a discussion of Limited Maturity Portfolio's Manager, subadviser and
portfolio manager, see "How the Fund is Managed-Manager" in the Limited Maturity
Portfolio Prospectus.
21
<PAGE>
Performance
For a discussion of Limited Maturity Portfolio's performance during the
fiscal year ended October 31, 1994, see Limited Maturity Portfolio's Prospectus,
which accompanies this Prospectus and Proxy Statement. Also see Appendix B which
contains Limited Maturity Portfolio's annual and semi-annual reports to
shareholders for the fiscal year ended October 31, 1994 and the six months ended
April 30, 1995, respectively.
Limited Maturity Portfolio's Shares
For a discussion of Limited Maturity Portfolio's Class A, Class B and Class
C shares, including voting rights, exchange rights and the conversion feature of
Class B shares, and how the shares may be purchased and redeemed, see
"Shareholder Guide" and "How the Fund is Managed" in the Limited Maturity
Portfolio Prospectus.
Net Asset Value
For a discussion of how the offering price of Limited Maturity Portfolio
Class A, Class B and Class C shares is determined, see "How the Fund Values its
Shares" in the Limited Maturity Portfolio Prospectus.
Taxes, Dividends and Distributions
For a discussion of Limited Maturity Portfolio's policy with respect to
dividends and distributions and the tax consequences of an investment in Limited
Maturity Portfolio shares, see "Taxes, Dividends and Distributions" in the
Limited Maturity Portfolio Prospectus.
Additional Information
The Fund is subject to the informational requirements of the Investment
Company Act and in accordance therewith files reports and other information with
the Securities and Exchange Commission. Proxy material, reports and other
information filed by the Fund on behalf of either Portfolio can be inspected and
copied at the public reference facilities maintained by the SEC at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's regional offices
in New York (7 World Trade Center, Suite 1300, New York, New York 10048) and
Chicago (Citicorp Center, Suite 1400, 500 West Madison Street, Chicago, Illinois
60661-2511). Copies of such material can be obtained at prescribed rates from
the Public Reference Branch, Office of Consumer Affairs and Information
Services, Securities and Exchange Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
INFORMATION ABOUT GLOBAL ASSETS PORTFOLIO
Financial Information
For condensed financial information for Global Assets Portfolio, see
"Financial Highlights" in the Global Assets Portfolio Prospectus, which
accompanies this Prospectus and Proxy Statement. Also see Appendix C which
contains Global Assets Portfolio's annual and semi-annual reports to
shareholders for the fiscal year ended October 31, 1994 and the six months ended
April 30, 1995, respectively.
22
<PAGE>
General
For a discussion of the organization, classification and sub-classification
of Global Assets Portfolio, see "General Information" and "Fund Highlights" in
the Global Assets Portfolio Prospectus.
Investment Objective and Policies
For a discussion of Global Assets Portfolio's investment objective and
policies, see "How the Fund Invests" in the Global Assets Portfolio Prospectus.
Directors
For a discussion of the responsibilities of the Fund's Board of Directors,
see "How the Fund is Managed" in the Global Assets Portfolio Prospectus.
Manager and Portfolio Manager
For a discussion of Global Assets Portfolio's Manager, subadviser and
portfolio manager, see "How the Fund is Managed-Manager" in the Global Assets
Portfolio Prospectus.
Performance
For a discussion of Global Assets Portfolio's performance during the fiscal
year ended October 31, 1994, see the Global Assets Portfolio Prospectus, which
accompanies this Prospectus and Proxy Statement. Also see Appendix C which
contains Global Assets Portfolio's annual and semi-annual reports to
shareholders for the fiscal year ended October 31, 1994 and the six months ended
April 30, 1995, respectively.
Global Assets Portfolio's Shares
For a discussion of Global Assets Portfolio's Class A shares, including
voting rights and exchange rights, and how the shares may be purchased and
redeemed, see "Shareholder Guide" and "How the Fund is Managed" in the Global
Assets Portfolio Prospectus.
Net Asset Value
For a discussion of how the offering price of Global Assets Portfolio's
Class A shares is determined, see "How the Fund Values its Shares" in the Global
Assets Portfolio Prospectus.
Taxes, Dividends and Distributions
For a discussion of Global Assets Portfolio's policy with respect to
dividends and distributions and the tax consequences of an investment in Class A
shares, see "Taxes, Dividends and Distributions" in the Global Assets Portfolio
Prospectus.
Additional Information
The Fund is subject to the information requirements of the Investment
Company Act and in accordance therewith files reports and other information with
the Securities and
23
<PAGE>
Exchange Commission. Proxy material, reports and other information filed by the
Fund on behalf of either Portfolio can be inspected and copies at the public
reference facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the SEC's regional offices in New York (7 World
Trade Center, Suite 1300, New York, New York 10048) and Chicago (Citicorp
Center, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661-2511).
Copies of such material can be obtained at prescribed rates from the Public
Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C.
20549.
VOTING INFORMATION
If the accompanying form of Proxy is executed properly and returned, shares
represented by it will be voted at the Meeting in accordance with the
instructions on the Proxy. However, if no instructions are specified, shares
will be voted for the proposal. A Proxy may be revoked at any time prior to the
time it is voted by written notice to the Secretary of the Fund or by attendance
at the Meeting. If sufficient votes to approve the proposal are not received,
the persons named as proxies may propose one or more adjournments of the Meeting
to permit further solicitation of Proxies. Any such adjournment will require the
affirmative vote of a majority of those shares present at the Meeting or
represented by proxy. When voting on a proposed adjournment, the persons named
as proxies will vote all shares that they are entitled to vote, for the proposed
adjournment, unless directed to disapprove the proposal, in which case such
shares will be voted against the proposed adjournment. In the event that the
Meeting is adjourned, the same procedures will apply at a later Meeting date.
If a Proxy that is properly executed and returned, accompanied by
instructions to withhold authority to vote, represents a broker "non-vote" (that
is, a Proxy from a broker or nominee indicating that such person has not
received instructions from the beneficial owner or other person entitled to vote
shares on a particular matter with respect to which the broker or nominee does
not have discretionary power), the shares represented thereby will be considered
not to be present at the Meeting for purposes of determining the existence of a
quorum for the transaction of business and be deemed not cast with respect to
such proposal. If no instructions are received by the broker or nominee from the
shareholder with reference to routine matters, the shares represented thereby
may be considered for purposes of determining the existence of a quorum for the
transaction of business and will be deemed cast with respect to such proposal.
Also, a properly executed and returned Proxy marked with an abstention will be
considered present at the Meeting for purposes of determining the existence of a
quorum for the transaction of business. However, abstentions and broker
"non-votes" do not constitute a vote "for" or "against" the matter, but have the
effect of a negative vote on matters which require approval by a requisite
percentage of the outstanding shares.
The close of business on November 2, 1995 has been fixed as the record date
for the determination of shareholders entitled to notice of, and to vote at, the
Meeting. On that date, Global Assets Portfolio had Class A shares and no
Class B shares outstanding and entitled to vote.
24
<PAGE>
Each share of Global Assets Portfolio will be entitled to one vote at the
Meeting. It is expected that the Notice of Special Meeting, Prospectus and Proxy
Statement and form of Proxy will be mailed to shareholders on or about November
, 1995.
As of November 2, 1995, the Directors and Officers of the Fund, as a group,
owned [less than 1% of the outstanding shares of the Global Assets Portfolio].
As of November 2, 1995, the following shareholders owned beneficially or of
record 5% or more of Global Assets Portfolio's outstanding Class A shares: [ ]
The expenses of reorganization and solicitation will be borne by each
Portfolio in proportion to their respective assets and will include
reimbursement of brokerage firms and others for expenses in forwarding proxy
solicitation material to shareholders. The Fund's Board of Directors has
retained Shareholder Communications Corporation, a proxy solicitation firm, to
assist in the solicitation of proxies for the Meeting. The fees and expenses of
Shareholder Communications Corporation are not expected to exceed $6,600,
excluding mailing and printing costs. The solicitation of Proxies will be
largely by mail but may include telephonic, telegraphic or oral communication by
regular employees of Prudential Securities and its affiliates, including
Prudential Mutual Fund Management, Inc. This cost, including specified expenses,
also will be borne by each Portfolio in proportion to their respective assets.
OTHER MATTERS
No business other than as set forth herein is expected to come befor the
Meeting, but should any other matter requiring a vote of shareholders of Global
Assets Portfolio arise, including any question as to an adjournment of the
Meeting, the persons named in the enclosed Proxy will vote thereon according to
their best judgment in the interests of Global Assets Portfolio, taking into
account all relevant circumstances.
SHAREHOLDER'S PROPOSALS
A Global Assets Portfolio shareholder proposal intended to be presented at
any subsequent meeting of the shareholders of Global Assets Portfolio must be
received by Global Assets Portfolio a reasonable time before the Directors'
solicitation relating to such meeting is made in order to be included in Global
Assets Portfolio's Proxy Statement and form of Proxy relating to that meeting.
The mere submission of a proposal by a shareholder does not guarantee that such
proposal will be included in the proxy statement because certain rules under the
federal securities laws must be complied with before inclusion of the proposal
is required. In the event that the Plan is approved at this Meeting, it is not
expected that there will be any future shareholder meetings of Global Assets
Portfolio.
It is the present intent of the Fund's Board of Directors not to hold annual
meetings of shareholders unless the election of Directors is required under the
Investment Company Act nor to hold special meetings of shareholders unless
required by the Investment Company Act or state law.
S. Jane Rose,
Secretary
Dated: November , 1995
25
<PAGE>
APPENDIX A
Form of
Agreement and Plan of Reorganization and Liquidation
Agreement and Plan of Reorganization and Liquidation (Agreement) made as of
the day of , 199 , by and between Prudential Global Limited Maturity Fund,
Inc. (the Fund) Global Assets Portfolio and the Fund's Limited Maturity
Portfolio. The Fund is a corporation organized under the laws of the State of
Maryland and maintains its principal place of business at One Seaport Plaza, New
York, New York 10292. Shares of Limited Maturity Portfolio are divided into
three classes, designated Class A, Class B and Class C. The Global Assets
Portfolio offers one class of shares designated Class A.
This Agreement is intended to be, and is adopted as, a plan of
reorganization pursuant to Section 368(a)(1)(C) of the Internal Revenue Code of
1986, as amended (Internal Revenue Code). The reorganization will comprise the
transfer of all of the assets of Global Assets Portfolio to Limited Maturity
Portfolio, in exchange solely for Class A shares of the Limited Maturity
Portfolio and Limited Maturity Portfolio's assumption of Global Assets
Portfolio's liabilities, if any, and the constructive distribution, after the
Closing Date hereinafter referred to, of such Class A shares of the Limited
Maturity Portfolio to the shareholders of Global Assets Portfolio in liquidation
of Global Assets Portfolio as provided herein, all upon the terms and conditions
as hereinafter set forth.
In consideration of the premises and of the covenants and agreements set
forth herein, the parties covenant and agree as follows:
1. Transfer of Assets of Global Assets Portfolio in Exchange for Class A
shares of the Limited Maturity Portfolio and Assumption of Liabilities, if any,
and Liquidation of Global Assets Portfolio.
1.1 Subject to the terms and conditions herein set forth and on the
basis of the representations and warranties contained herein, the Fund, on
behalf of Global Assets Portfolio, agrees to sell, assign, transfer and
deliver Global Assets Portfolio's assets, as set forth in paragraph 1.2, to
Limited Maturity Portfolio, and the Fund, on behalf of Limited Maturity
Portfolio, agrees (a) to issue and deliver to Global Assets Portfolio in
exchange therefor the number of shares in Limited Maturity Portfolio
determined by dividing the net asset value of Global Assets Portfolio
(computed in the manner and as of the time and date set forth in paragraph
2.1) by the net asset value allocable to a share of the Limited Maturity
Portfolio (computed in the manner and as of the time and date set forth in
paragraph 2.2); and (b) to assume all of Global Assets Portfolio's
liabilities, if any, as set forth in paragraph 1.3. Such transactions shall
take place at the closing provided for in paragraph 3 (Closing).
1.2 The assets of Global Assets Portfolio to be acquired by Limited
Maturity Portfolio shall include without limitation all cash, cash
equivalents, securities, receivables (including interest and dividends
receivable) and other property of any kind owned by Global Assets Portfolio
and any deferred or prepaid expenses shown
A-1
<PAGE>
as assets on the books of Global Assets Portfolio on the closing date
provided in paragraph 3 (Closing Date). Limited Maturity Portfolio has no
plan or intent to sell or otherwise dispose of any assets of Global Assets
Portfolio.
1.3 Except as otherwise provided herein, Limited Maturity Portfolio will
assume from Global Assets Portfolio all debts, liabilities, obligations and
duties of Global Assets Portfolio of whatever kind or nature, whether
absolute, accrued, contingent or otherwise, whether or not determinable as
of the Closing Date and whether or not specifically referred to in this
Agreement; provided, however, that Global Assets Portfolio agrees to utilize
its best efforts to discharge all of its known debts, liabilities,
obligations and duties prior to the Closing Date.
1.4 On or immediately prior to the Closing Date, Global Assets Portfolio
will declare and pay to its shareholders of record dividends and/or other
distributions so that it will have distributed substantially all (and in any
event not less than ninety-eight percent) of its investment company taxable
income (computed without regard to any deduction for dividends paid), net
tax-exempt interest income, if any, and realized net capital gains, if any,
for all taxable years through its liquidation.
1.5 On a date (Liquidation Date), as soon after the Closing Date as is
conveniently practicable, Global Assets Portfolio will distribute pro rata
to its Class A shareholders of record, determined as of the close of
business on the Closing Date, the Class A shares of Limited Maturity
Portfolio received by Global Assets Portfolio pursuant to paragraph 1.1 in
exchange for their interest in Global Assets Portfolio. Such distribution
will be accomplished by opening accounts on the books of the Limited
Maturity Portfolio in the names of Global Assets Portfolio shareholders and
transferring thereto the shares credited to the account of Global Assets
Portfolio on the books of Limited Maturity Portfolio. Each account opened
shall be credited with the respective pro rata number of Limited Maturity
Portfolio Class A shares due each Global Assets Portfolio Class A
shareholder. Fractional shares of Limited Maturity Portfolio shall be
rounded to the third decimal place.
1.6 The Limited Maturity Portfolio shall not issue certificates
representing its shares in connection with such exchange. With respect to
any Global Assets Portfolio shareholder holding Global Assets Portfolio
stock certificates as of the Closing Date, until Limited Maturity Portfolio
is notified by Global Assets Portfolio's transfer agent that such
shareholder has surrendered his or her outstanding Global Assets Portfolio
stock certificates or, in the event of lost, stolen or destroyed stock
certificates, posted adequate bond or submitted a lost certificate form, as
the case may be, Limited Maturity Portfolio will not permit such shareholder
to (1) receive dividends or other distributions on Limited Maturity
Portfolio shares in cash (although such dividends and distributions shall be
credited to the account of such shareholder established on Limited Maturity
Portfolio's books pursuant to paragraph 1.5, as provided in the next
sentence), (2) exchange Limited Maturity Portfolio shares credited to such
shareholder's account for shares of other Prudential Mutual Funds, or (3)
pledge or redeem such shares. In the event that a shareholder is not
permitted to receive dividends or other distributions on Limited Maturity
Portfolio
A-2
<PAGE>
shares in cash as provided in the preceding sentence, Limited Maturity
Portfolio shall pay such dividends or other distributions in additional
Limited Maturity Portfolio shares, notwithstanding any election such
shareholder shall have made previously with respect to the payment of
dividends or other distributions on shares of Global Assets Portfolio.
Global Assets Portfolio will, at its expense, request its shareholders to
surrender their outstanding Global Assets Portfolio stock certificates,
post adequate bond or submit a lost certificate form, as the case may be.
1.7 Ownership of the Limited Maturity Portfolio shares will be shown on
the books of its transfer agent. Shares of Limited Maturity Portfolio will
be issued in the manner described in Limited Maturity Portfolio's
then-current prospectus and the Fund's then-current statement of additional
information.
1.8 Any transfer taxes payable upon issuance of shares of Limited
Maturity Portfolio in a name other than the registered holder of the shares
on the books of Global Assets Portfolio as of that time shall be paid by the
person to whom such shares are to be issued as a condition to the
registration of such transfer.
1.9 Any reporting responsibility with the Securities and Exchange
Commission or any state securities commission of Global Assets Portfolio is
and shall remain the responsibility of Global Assets Portfolio up to and
including the Liquidation Date.
1.10 All books and records of Global Assets Portfolio, including all
books and records required to be maintained under the Investment Company Act
of 1940 (Investment Company Act) and the rules and regulations thereunder,
shall be available to Limited Maturity Portfolio from and after the Closing
Date and shall be turned over to Limited Maturity Portfolio on or priorto
the Liquidation Date.
2. Valuation
2.1 The value of Global Assets Portfolio's assets and liabilities to be
acquired and assumed, respectively, by Limited Maturity Portfolio shall be
the net asset value computed as of 4:15 p.m., New York time, on the Closing
Date (such time and date being hereinafter called the Valuation Time), using
the valuation procedures set forth in Global Assets Portfolio's then-current
prospectus and the Fund's then-current statement of additional information.
2.2 The net asset value of a share of the Limited Maturity Portfolio
shall be the net asset value per such share computed as of the Valuation
Time, using the valuation procedures set forth in Limited Maturity
Portfolio's then-current prospectus and the Fund's then-current statement of
additional information.
2.3 The number of Limited Maturity Portfolio shares to be issued
(including fractional shares, if any) in exchange for Global Assets
Portfolio's net assets shall be calculated as set forth in paragraph 1.1.
2.4 All computations of net asset value shall be made by or under the
direction of Prudential Mutual Fund Management, Inc. (PMF) in accordance
with its regular practice as manager of the Funds.
A-3
<PAGE>
3. Closing and Closing Date
3.1 Except as provided in Section 3.3, the Closing Date shall be ,
199 ; or such later date as the parties may agree in writing. All acts
taking place at the Closing shall be deemed to take place simultaneously as
of the close of business on the Closing Date unless otherwise provided. The
Closing shall be at the office of the Fund or at such other place as the
parties may agree.
3.2 State Street Bank and Trust Company (State Street), as custodian for
Global Assets Portfolio, shall deliver to Limited Maturity Portfolio at the
Closing a certificate of an authorized officer of State Street stating that
(a) Global Assets Portfolio's portfolio securities, cash and any other
assets have been transferred in proper form to the Limited Maturity
Portfolio on the Closing Date and (b) all necessary taxes, if any, have been
paid, or provision for payment has been made, in conjunction with the
transfer of portfolio securities.
3.3 In the event that immediately prior to the Valuation Time (a) the
New York Stock Exchange (NYSE) or other primary exchange is closed to
trading (other than prior to, or following the close of, trading on such
exchange on a regular business day) or trading thereon is restricted or (b)
trading or the reporting of trading on the NYSE or other primary exchange or
elsewhere is disrupted so that accurate appraisal of the value of the net
assets of Global Assets Portfolio and of the net asset value per share of
Limited Maturity Portfolio is impracticable, the Closing Date shall be
postponed until the first business day after the date when such trading
shall have been fully resumed and such reporting shall have been restored.
3.4 Global Assets Portfolio shall deliver to Limited Maturity Portfolio
on or prior to the Liquidation Date the names and addresses of its
shareholders and the number of outstanding shares owned by each such
shareholder, all as of the close of business on the Closing Date, certified
by the Secretary or Assistant Secretary of the Fund on behalf of Global
Assets Portfolio. Limited Maturity Portfolio shall issue and deliver to
Global Assets Portfolio at the Closing a confirmation or other evidence
satisfactory to Global Assets Portfolio that shares of the Limited Maturity
Portfolio have been or will be credited to Global Assets Portfolio's account
on the books of Limited Maturity Portfolio. At the Closing each party shall
deliver to the other such bills of sale, checks, assignments,share
certificates, receipts and other documents as such other party or its
counsel may reasonably request to effect the transactions contemplated by
this Agreement.
4. Representations and Warranties
4.1 Global Assets Portfolio represents and warrants as follows:
4.1.1 Global Assets Portfolio is a portfolio of the Fund, a
corporation duly organized and validly existing under the laws of the
State of Maryland;
4.1.2 Global Assets Portfolio is a portfolio of an open-end
management investment company duly registered under the Investment
Company Act, and such registration is in full force and effect;
A-4
<PAGE>
4.1.3 Global Assets Portfolio is not, and the execution, delivery
and performance of this Agreement on behalf of Global Assets Portfolio
will not result, in violation of any provision of the Articles of
Incorporation or By-Laws of the Fund or of any material agreement,
indenture, instrument, contract, lease or other undertaking to which
Global Assets Portfolio is a party or by which Global Assets Portfolio
is bound;
4.1.4 All material contracts or other commitments of the Fund on
behalf of Global Assets Portfolio except this Agreement will be
terminated on or prior to the Closing Date without Global Assets
Portfolio or Limited Maturity Portfolio incurring any liability or
penalty with respect thereto;
4.1.5 No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against Global Assets Portfolio
or any of its properties or assets. Global Assets Portfolio knows of no
facts that might form the basis for the institution of such proceedings,
and Global Assets Portfolio is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body that materially and adversely affects its business or its ability
to consummate the transactions herein contemplated;
4.1.6 The Portfolio of Investments, Statement of Assets and
Liabilities, Statement of Operations, Statement of Changes in Net
Assets, and Financial Highlights of Global Assets Portfolio at , 199 and
for the year then ended (copies of which have been furnished to Limited
Maturity Portfolio) have been audited by Deloitte & Touche LLP,
independent accountants, in accordance with generally accepted auditing
standards. Such financial statements are prepared in accordance with
generally accepted accounting principles and present fairly, in all
material respects, the financial condition, results of operations,
changes in net assets and financial highlights of Global Assets
Portfolio as of and for the period ended on such date, and there are no
material known liabilities of Global Assets Portfolio (contingent or
otherwise) not disclosed therein;
4.1.7 Since , 199 , there has not been any material adverse change
in Global Assets Portfolio's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of
business, or any incurrence by Global Assets Portfolio of indebtedness
maturing more than one year from the date such indebtedness was
incurred, except as otherwise disclosed to and accepted by Limited
Maturity Portfolio. For the purposes of this paragraph 4.1.7, a decline
in net asset value, net asset value per share or change in the number of
shares outstanding shall not constitute a material adverse change;
4.1.8 At the date hereof and at the Closing Date, all federal and
other tax returns and reports of Global Assets Portfolio required by law
to have been filed on or before such dates shall have been timely filed,
and all federal and other taxes shown as due on said returns and reports
shall have been paid insofar as
A-5
<PAGE>
due, or provision shall have been made for the payment thereof, and, to
the best of Global Assets Portfolio's knowledge, all federal or other
taxes required to be shown on any such return or report have been shown
on such return or report, no such return is currently under audit and no
assessment has been asserted with respect to such returns;
4.1.9 For each past taxable year since it commenced operations,
Global Assets Portfolio has met the requirements of Subchapter M of the
Internal Revenue Code for qualification and treatment as a regulated
investment company and intends to meet those requirements for the
current taxable year; and, for each past calendar year since it
commenced operations, Global Assets Portfolio has made such
distributions as are necessary to avoid the imposition of federal excise
tax or has paid or provided for the payment of any excise tax imposed;
4.1.10 All issued and outstanding shares of Global Assets Portfolio
are, and at the Closing Date will be, duly and validly authorized,
issued and outstanding, fully paid and non-assessable. All issued and
outstanding shares of Global Assets Portfolio will, at the time of the
Closing, be held in the name of the persons and in the amounts set forth
in the list of shareholders submitted to Limited Maturity Portfolio in
accordance with the provisions of paragraph 3.4. Global Assets Portfolio
does not have outstanding any options, warrants or other rights to
subscribe for or purchase any of its shares, nor is there outstanding
any security convertible into any of its shares;
4.1.11 At the Closing Date, Global Assets Portfolio will have good
and marketable title to its assets to be transferred to Limited Maturity
Portfolio pursuant to paragraph 1.1, and full right, power and authority
to sell, assign, transfer and deliver such assets hereunder free of any
liens, claims, charges or other encumbrances, and, upon delivery and
payment for such assets, Limited Maturity Portfolio will acquire good
and marketable title thereto;
4.1.12 The execution, delivery and performance of this Agreement has
been duly authorized by the Board of Directors of the Fund on behalf of
Global Assets Portfolio and by all necessary corporate action, other
than shareholder approval, on the part of the Fund on behalf of Global
Assets Portfolio, and this Agreement constitutes a valid and binding
obligation of Global Assets Portfolio, subject to shareholder approval;
4.1.13 The information furnished and to be furnished by Global
Assets Portfolio for use in applications for orders, registration
statements, proxy materials and other documents that may be necessary in
connection with the transactions contemplated hereby is and shall be
accurate and complete in all material respects and is in compliance and
shall comply in all material respects with applicable federal securities
and other laws and regulations; and
4.1.14 On the effective date of the registration statement filed
with the Securities and Exchange Commission (SEC) by the Fund on Form
N-14
A-6
<PAGE>
relating to the shares of the Limited Maturity Portfolio issuable
hereunder, and any supplement or amendment thereto (Registration
Statement), at the time of the meeting of the shareholders of Global
Assets Portfolio and on the Closing Date, the Proxy Statement of Global
Assets Portfolio, the Prospectus of the Limited Maturity Portfolio and
the Statement of Additional Information of the Fund relating to both
Global Assets Portfolio and Limited Maturity Portfolio to be included in
the Registration Statement (collectively, Proxy Statement) (i) will
comply in all material respects with the provisions and regulations of
the Securities Act of 1933 (1933 Act), Securities Exchange Act of 1934
(1934 Act) and the Investment Company Act and the rules and regulations
thereunder and (ii) will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein in
light of the circumstances under which they were made or necessary to
make the statements therein not misleading; provided, however, that the
representations and warranties in this paragraph 4.1.14 shall not apply
to statements in or omissions from the Proxy Statement and Registration
Statement made in reliance upon and in conformity with information
furnished by Limited Maturity Portfolio for use therein.
4.2 Limited Maturity Portfolio represents and warrants as follows:
4.2.1 Limited Maturity Portfolio is a portfolio of the Fund, a
corporation duly organized and validly existing under the laws of the
State of Maryland;
4.2.2 Limited Maturity Portfolio is a portfolio of an open-end
management investment company duly registered under the Investment
Company Act, and such registration is in full force and effect;
4.2.3 Limited Maturity Portfolio is not, and the execution, delivery
and performance of this Agreement will not result, in violation of the
Fund of any provision of the Articles of Incorporation or By-Laws of the
Fund or of any material agreement, indenture, instrument, contract,
lease or other undertaking to which Limited Maturity Portfolio is a
party or by which Limited Maturity Portfolio is bound;
4.2.4 No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently
pending or threatened against Limited Maturity Portfolio or any of its
properties or assets, except as previously disclosed in writing to
Global Assets Portfolio. Limited Maturity Portfolio knows of no facts
that might form the basis for the institution of such proceedings, and
Limited Maturity Portfolio is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body that materially and adversely affects its business or its ability
to consummate the transactions herein contemplated;
4.2.5 The Portfolio of Investments, Statement of Assets and
Liabilities, Statement of Operations, Statement of Changes in Net
Assets, and Financial Highlights of Limited Maturity Portfolio at ,
199 and for the fiscal year then ended (copies of which have been
furnished to Global Assets
A-7
<PAGE>
Portfolio) have been audited by Deloitte & Touche LLP, independent
accountants, in accordance with generally accepted auditing standards.
Such financial statements are prepared in accordance with generally
accepted accounting principles and present fairly, in all material
respects, the financial condition, results of operations, changes in net
assets and financial highlights of Limited Maturity Portfolio as of and
for the period ended on such date, and there are no material known
liabilities of Limited Maturity Portfolio (contingent or otherwise) not
disclosed therein;
4.2.6 Since , 199 , there has not been any material adverse change
in Limited Maturity Portfolio's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of
business, or any incurrence by Limited Maturity Portfolio of
indebtedness maturing more than one year from the date such indebtedness
was incurred, except as otherwise disclosed to and accepted by Global
Assets Portfolio. For the purposes of this paragraph 4.2.6, a decline in
net asset value per share or a decrease in the number of shares
outstanding shall not constitute a material adverse change;
4.2.7 At the date hereof and at the Closing Date, all federal and
other tax returns and reports of Limited Maturity Portfolio required by
law to have been filed on or before such dates shall have been filed,
and all federal and other taxes shown as due on said returns and reports
shall have been paid insofar as due, or provision shall have been made
for the payment thereof, and, to the best of Limited Maturity
Portfolio's knowledge, all federal or other taxes required to be shown
on any such return or report are shown on such return or report, no such
return is currently under audit and no assessment has been asserted with
respect to such returns;
4.2.8 For each past taxable year since it commenced operations,
Limited Maturity Portfolio has met the requirements of Subchapter M of
the Internal Revenue Code for qualification and treatment as a regulated
investment company and intends to meet those requirements for the
current taxable year; and, for each past calendar year since it
commenced operations, Limited Maturity Portfolio has made such
distributions as are necessary to avoid the imposition of federal excise
tax or has paid or provided for the payment of any excise tax imposed;
4.2.9 All issued and outstanding shares of Limited Maturity
Portfolio are, and at the Closing Date will be, duly and validly
authorized, issued and outstanding, fully paid and non-assessable.
Except as contemplated by this Agreement, Limited Maturity Portfolio
does not have outstanding any options, warrants or other rights to
subscribe for or purchase any of its shares nor is there outstanding any
security convertible into any of its shares;
4.2.10 The execution, delivery and performance of this Agreement has
been duly authorized by the Board of Directors of the Fund, on behalf of
Limited Maturity Portfolio and by all necessary corporate action on the
part of the Fund, on behalf of Limited Maturity Portfolio, and this
Agreement
A-8
<PAGE>
constitutes a valid and binding obligation of the Fund, on behalf of
Limited Maturity Portfolio;
4.2.11 The shares of Limited Maturity Portfolio to be issued and
delivered to Global Assets Portfolio pursuant to this Agreement will, at
the Closing Date, have been duly authorized and, when issued and
delivered as provided in this Agreement, will be duly and validly issued
and outstanding shares of Limited Maturity Portfolio, fully paid and
non-assessable;
4.2.12 The information furnished and to be furnished by Limited
Maturity Portfolio for use in applications for orders, registration
statements, proxy materials and other documents which may be necessary
in connection with the transactions contemplated hereby is and shall be
accurate and complete in all material respects and is and shall comply
in all material respects with applicable federal securities and
otherlaws and regulations; and
4.2.13 On the effective date of the Registration Statement, at the
time of the meeting of the shareholders of Global Assets Portfolio and
on the Closing Date, the Proxy Statement and the Registration Statement
(i) will comply in all material respects with the provisions of the 1933
Act, the 1934 Act and the Investment Company Act and the rules and
regulations under such Acts, (ii) will not contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading and (iii) with respect to the Registration Statement, at the
time it becomes effective, it will not contain an untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein in the light of the circumstances under which they
were made, not misleading; provided, however, that the representations
and warranties in this paragraph 4.2.13 shall not apply to statements in
or omissions from the Proxy Statement and the Registration Statement
made in reliance upon and in conformity with information furnished by
Global Assets Portfolio for use therein.
5. Covenants of Limited Maturity Portfolio and Global Assets Portfolio
5.1 Global Assets Portfolio and Short-Term GlobalIncome Portfolio each
covenants to operate its respective business in the ordinary course between
the date hereof and the Closing Date, it being understood that the ordinary
course of business will include declaring and paying customary dividends and
other distributions and such changes in operations as are contemplated by
the normal operations of each of them, except as may otherwise be required
by paragraph 1.4 hereof.
5.2 Global Assets Portfolio covenants to call a shareholders' meeting to
consider and act upon this Agreement and to take all other action necessary
to obtain approval of the transactions contemplated hereby (including the
determinations of its Board of Directors of the Fund as set forth in Rule
17a-8(a) under the Investment Company Act).
5.3 Global Assets Portfolio covenants that the Limited Maturity
Portfolio shares to be received by Global Assets Portfolio in accordance
herewith are not being
A-9
<PAGE>
acquired for the purpose of making any distribution thereof other than in
accordance with the terms of this Agreement.
5.4 Global Assets Portfolio covenants that it will assist Limited
Maturity Portfolio in obtaining such information as Limited Maturity
Portfolio reasonably requests concerning the beneficial ownership of Global
Assets Portfolio's shares.
5.5 Subject to the provisions of this Agreement, each of Global Assets
Portfolio and Limited Maturity Portfolio will take, or cause to be taken,
all action, and will do, or cause to be done, all things, reasonably
necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement.
5.6 Global Assets Portfolio covenants to prepare the Proxy Statement in
compliance with the 1934 Act, the Investment Company Act and the rules and
regulations under each Act.
5.7 Global Assets Portfolio covenants that it will, from time to time,
as and when requested by Limited Maturity Portfolio, execute and deliver or
cause to be executed and delivered all such assignments and other
instruments, and will take or cause to be taken such further action, as
Limited Maturity Portfolio may deem necessary or desirable in order to vest
in and confirm to Limited Maturity Portfolio title to and possession of all
the assets of Global Assets Portfolio to be sold, assigned, transferred and
delivered hereunder and otherwise to carry out the intent and purpose of
this Agreement.
5.8 Limited Maturity Portfolio covenants to use all reasonable efforts
to obtain the approvals and authorizations required by the 1933 Act, the
Investment Company Act (including the determinations of the Funds Board of
Directors as set forth in Rule 17a-8(a) thereunder) and such of the state
Blue Sky or securities laws as it may deem appropriate in order to continue
its operations after the Closing Date.
5.9 Limited Maturity Portfolio covenants that it will, from time to
time, as and when requested by Global Assets Portfolio, execute and deliver
or cause to be executed and delivered all such assignments and other
instruments, and will take and cause to be taken such further action, as
Global Assets Portfolio may deem necessary or desirable in order to (i) vest
in and confirm to Global Assets Portfolio title to and possession of all the
shares of the Limited Maturity Portfolio to be transferred to Global Assets
Portfolio pursuant to this Agreement and (ii) assume all of Global Asset
Portfolio's liabilities in accordance with this Agreement.
6. Conditions Precedent to Obligations of Global Assets Portfolio
The obligations of Global Assets Portfolio to consummate the transactions
provided for herein shall be subject to the performance by Limited Maturity
Portfolio of all the obligations to be performed by it hereunder on or before
the Closing Date and the following further conditions:
6.1 All representations and warranties of Limited Maturity Portfolio
contained in this Agreement shall be true and correct in all material
respects as of the date
A-10
<PAGE>
hereof and, except as they may be affected by the transactions contemplated
by this Agreement, as of the Closing Date with the same force and effect as
if made on and as of the Closing Date.
6.2 Limited Maturity Portfolio shall have delivered to Global Assets
Portfolio on the Closing Date a certificate executed in its name by the
President or a Vice President of the Fund on behalf of Limited Maturity
Portfolio, in form and substance satisfactory to Global Assets Portfolio and
dated as of the Closing Date, to the effect that the representations and
warranties of Limited Maturity Portfolio in this Agreement are true and
correct at and as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, and as to such other matters as
Global Assets Portfolio shall reasonably request.
6.3 Global Assets Portfolio shall have received on the Closing Date a
favorable opinion from Shereff, Friedman, Hoffman & Goodman, LLP, counsel to
Limited Maturity Portfolio, dated as of the Closing Date, to the effect
that:
6.3.1 Limited Maturity Portfolio is a portfolio of the Fund, a
corporation which has been duly incorporated and is an existing
corporation in good standing in the State of Maryland;
6.3.2 This Agreement has been duly authorized, executed and
delivered by the Fund, on behalf of Limited Maturity Portfolio, and,
assuming due authorization, execution and delivery of the Agreement by
the Fund, on behalf of Limited Maturity Portfolio, is a valid and
binding obligation of Limited Maturity Portfolio enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles and further subject to the qualifications set forth in
the next succeeding sentence. Such counsel may state that they express
no opinion as to the validity or enforceability of any provision
regarding choice of New York Law to govern this Agreement;
6.3.3 The shares of the Limited Maturity Portfolio to be distributed
to Global Assets Portfolio shareholders under this Agreement, assuming
their due authorization and delivery as contemplated by this Agreement,
will be validly issued and outstanding and fully paid and
non-assessable, and no shareholder of Limited Maturity Portfolio has any
pre-emptive right to subscribe therefor or purchase such shares;
6.3.4 The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, (i)
conflict with the Fund's Articles of Incorporation or By-Laws or (ii)
result in a default or a breach of (a) the Management Agreement dated
October 25, 1990 between the Fund and Prudential Mutual Fund Management,
Inc., (b) the Custodian Contract dated October 25, 1990 between the Fund
and State Street Bank and Trust Company, (c) the Distribution Agreement
(relating to Class A shares) dated August 1, 1994 between the Fund and
Prudential Mutual Fund Distribu-
A-11
<PAGE>
tors, Inc., and (d) the Transfer Agency and Service Agreement dated
October 25, 1990 between the Fund and Prudential Mutual Fund Services,
Inc.; provided, however, that such counsel may state that they express
no opinion in their opinion pursuant to this paragraph 6.3.4 with
respect to federal or state securities laws, other antifraud laws and
fraudulent transfer laws; provided further that insofar as performance
by Limited Maturity Portfolio of its obligations under this Agreement is
concerned, such counsel may state that they express no opinion as to
bankruptcy, insolvency, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights;
6.3.5 To the knowledge of such counsel, no consent, approval,
authorization, filing or order of any court or governmental authority is
required for the consummation by Limited Maturity Portfolio of the
transactions contemplated herein, except such as have been obtained
under the 1933 Act, the 1934 Act and the Investment Company Act and such
as may be required under state Blue Sky or securities laws;
6.3.6 The Fund has been registered with the SEC as an investment
company, and, to the knowledge of such counsel, no order has been issued
or proceeding instituted to suspend such registration; and
6.3.7 Such counsel knows of no litigation or any governmental
proceeding instituted or threatened against Limited Maturity Portfolio
that would be required to be disclosed in the Registration Statement and
is not so disclosed;
In rendering such opinion, such counsel may state that insofar as such
opinion involves factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Fund and certificates of public
officials.
7. Conditions Precedent to Obligations of Limited Maturity Portfolio
The obligations of Limited Maturity Portfolio to complete the transactions
provided for herein shall be subject to the performance by Global Assets
Portfolio of all the obligations to be performed by it hereunder on or before
the Closing Date and the following further conditions:
7.1 All representations and warranties of Global Assets Portfolio
contained in this Agreement shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date with the
same force and effect as if made on and as of the Closing Date.
7.2 Global Assets Portfolio shall have delivered to Limited Maturity
Portfolio on the Closing Date a statement of its assets and liabilities,
which statement shall be prepared in accordance with generally accepted
accounting principles consistently applied, together with a list of its
portfolio securities showing the adjusted tax bases of such securities by
lot, as of the Closing Date, certified by the Treasurer of the Fund.
A-12
<PAGE>
7.3 Global Assets Portfolio shall have delivered to Limited Maturity
Portfolio on the Closing Date a certificate executed in its name by the
President or a Vice President of Global Assets Portfolio, in form and
substance satisfactory to Limited Maturity Portfolio and dated as of the
Closing Date, to the effect that the representations and warranties of
Global Assets Portfolio made in this Agreement are true and correct at and
as of the Closing Date except as they may be affected by the transactions
contemplated by this Agreement,and as to such other matters as Limited
Maturity Portfolio shall reasonably request.
7.4 On or immediately prior to the Closing Date, Global Assets Portfolio
shall have declared and paid to its shareholders of record one or more
dividends and/or other distributions so that it will have distributed
substantially all (and in any event not less than ninety-eight percent) of
its investment company taxable income (computed without regard to any
deduction for dividends paid), net tax-exempt interest income, if any, and
realized net capital gain, if any, for all taxable years through its
liquidation.
7.5 Limited Maturity Portfolio shall have received on the Closing Date a
favorable opinion from Shereff, Friedman, Hoffman & Goodman, LLP, counsel to
Global Assets Portfolio, dated as of the Closing Date, to the effect that:
7.5.1 Global Assets Portfolio is a portfolio of the Fund, a
corporation which has been duly incorporated and which is an existing
corporation in good standing under the laws of the State of Maryland;
7.5.2 This Agreement has been duly authorized, executed and
delivered by the Fund, on behalf of Global Assets Portfolio, and,
assuming due authorization, execution and delivery of the Agreement by
the Fund, on behalf of Global Assets Portfolio, is a valid and binding
obligation of Global Assets Portfolio enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles and further subject to the qualifications set forth in the
next succeeding sentence. Such counsel may state that they express no
opinion as to the validity or enforceability of any provision regarding
choice of New York Law to govern this Agreement;
7.5.3 The execution and delivery of the Agreement did not, and the
performance by Global Assets Portfolio of its obligations hereunder will
not, (i) violate the Fund's Articles of Incorporation or By-Laws or (ii)
result in a default or a breach of the Management Agreement, dated
October 25, 1990, between the Fund and Prudential Mutual Fund
Management, Inc., the Custodian Agreement, dated October 25, 1990,
between the Fund and State Street Bank and Trust Company, the
Distribution Agreement (Class A shares), dated August 1, 1994, between
the Fund, on behalf of the Global Assets Portfolio, and Prudential
Mutual Fund Distributors, Inc., the Fund and the Transfer Agency and
Service Agreement,dated October 25, 1990, between the Fund and
Prudential Mutual Fund Services, Inc.; provided, however, that such
counsel
A-13
<PAGE>
may state that they express no opinion in their opinion pursuant to this
paragraph 7.5.3 with respect to federal or state securities laws, other
antifraud laws and fraudulent transfer laws; provided further that
insofar as performance by Global Assets Portfolio of its obligations
under this Agreement is concerned, such counsel may state that they
express no opinion as to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles;
7.5.4 To the knowledge of such counsel, no consent, approval,
authorization, filing or order of any court or governmental authority is
required for the consummation by Global Assets Portfolio of the
transactions contemplated herein, except such as have been obtained
under the 1933 Act, the 1934 Act and the Investment Company Act and such
as may be required under state Blue Sky or securities laws;
7.5.5 Such counsel knows of no litigation or any governmental
proceeding instituted or threatened against Global Assets Portfolio that
would be required to be disclosed in the Registration Statement and is
not so disclosed; and
7.5.6 The Fund has been registered with the SEC as an investment
company, and, to the knowledge of such counsel, no order has been issued
or proceeding instituted to suspend such registration.
In rendering such opinion, such counsel may state that insofar as such
opinion involves factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Fund and certificates of public
officials.
8. Further Conditions Precedent to Obligations of Limited Maturity Portfolio
and Global Assets Portfolio
The obligations of each of Global Assets Portfolio and Limited Maturity
Portfolio hereunder are subject to the further conditions that on or before the
Closing Date:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of (a) the Board of Directors of the
Fund on behalf of each of Global Assets Portfolio and Limited Maturity
Portfolio, as to the determinations set forth in Rule 17a-8(a) under the
Investment Company Act, (b) the Board of Directors of the Fund on behalf of
Limited Maturity Portfolio as to the assumption by Short- Term Global Income
Portfolio of the liabilities of Global Assets Portfolio and (c) the holders
of the outstanding shares of Global Assets Portfolio in accordance with the
provisions of the Fund's Articles of Incorporation, and certified copies of
the resolutions evidencing such approvals shall have been delivered to
Limited Maturity Portfolio and Global Assets Portfolio.
8.2 Any proposed change to Limited Maturity Portfolio's operations that
may be approved by the Board of Directors of the Fund subsequent to the date
of this Agreement but in connection with and as a condition to implementing
the transac-
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<PAGE>
tions contemplated by this Agreement, for which the approval of Limited
Maturity Portfolio's shareholders is required pursuant to the Investment
Company Act or otherwise, shall have been approved by the requisite vote of
the holders of the outstanding shares of the Limited Maturity Portfolio in
accordance with the Investment Company Act and the provisions of the Fund's
Articles of Incorporation, and certified copies of the resolution
evidencing such approval shall have been delivered to Global Assets
Portfolio.
8.3 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.4 All consents of other parties and all consents, orders and permits
of federal, state and local regulatory authorities (including those of the
SEC and of state Blue Sky or securities authorities, including "no-action"
positions of such authorities) deemed necessary by Limited Maturity
Portfolio or Global Assets Portfolio to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of
Limited Maturity Portfolio or Global Assets Portfolio, provided that either
party hereto may for itself waive any part of this condition.
8.5 The Registration Statement shall have become effective under the
1933 Act, and no stop orders suspending the effectiveness thereof shall have
been issued, and to the best knowledge of the parties hereto, no
investigation or proceeding under the 1933 Act for that purpose shall have
been instituted or be pending, threatened or contemplated.
8.6 Global Assets Portfolio and Limited Maturity Portfolio shall have
received on or before the Closing Date a private letter ruling from the
Internal Revenue Service, or an opinion of Shereff, Friedman, Hoffman &
Goodman, LLP satisfactory to Global Assets Portfolio and to Limited Maturity
Portfolio, substantially to the effect that for federal income tax purposes:
8.6.1 The acquisition by Limited Maturity Portfolio of the assets of
Global Assets Portfolio in exchange solely for voting shares of Limited
Maturity Portfolio and the assumption by Limited Maturity Portfolio of
Global Assets Portfolio's liabilities, if any, followed by the
distribution of Limited Maturity Portfolio's voting shares by Global
Assets Portfolio pro rata to its shareholders, pursuant to its
liquidation and constructively in exchange for their Global Assets
Portfolio shares, will constitute a reorganization within the meaning of
Section 368(a)(1)(C) of the Internal Revenue Code, and Global Assets
Portfolio and Limited Maturity Portfolio each will be "a party to a
reorganization" within the meaning of Section 368(b) of the Internal
Revenue Code;
8.6.2 Global Assets Portfolio's shareholders will recognize no gain
or loss upon the constructive exchange of all of their shares of Global
Assets
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<PAGE>
Portfolio solely for shares of Limited Maturity Portfolio in complete
liquidation of Global Assets Portfolio;
8.6.3 No gain or loss will be recognized to Global Assets Portfolio
upon the transfer of its assets to Limited Maturity Portfolio in
exchange solely for shares of Limited Maturity Portfolio and the
assumption by Limited Maturity Portfolio of Global Assets Portfolio's
liabilities, if any, and the subsequent distribution of those shares to
Global Assets Portfolio shareholders in complete liquidation of Global
Assets Portfolio;
8.6.4 No gain or loss will be recognized to Limited Maturity
Portfolio upon the acquisition of Global Assets Portfolio's assets in
exchange solely for shares of Limited Maturity Portfolio and the
assumption of Global Assets Portfolio's liabilities, if any;
8.6.5 Limited Maturity Portfolio's basis for those assets will be
the same as the basis thereof when held by Global Assets Portfolio
immediately before the transfer, and the holding period of such assets
acquired by Limited Maturity Portfolio will include the holding period
thereof when held by Global Assets Portfolio;
8.6.6 Global Assets Portfolio shareholders' basis for the shares of
Limited Maturity Portfolio to be received by them pursuant to the
reorganization will be the same as their basis for the shares of Global
Assets Portfolio to be constructively surrendered in exchange thereof;
and
8.6.7 The holding period of Limited Maturity Portfolio shares to be
received by Global Assets Portfolio shareholders will include the period
during which Global Assets Portfolio shares to be constructively
surrendered in exchange therefore were held; provided such Global Assets
Portfolio shares were held as capital assets by those shareholders on
the date of the exchange.
9. Finder's Fees and Expenses
9.1 Each party hereto represents and warrants to the other that there
are no finder's fees payable in connection with the transactions provided
for herein.
9.2 The expenses incurred in connection with the entering into and
carrying out of the provisions of this Agreement shall be allocated to
Global Assets Portfolio and Limited Maturity Portfolio pro rata in a fair
and equitable manner in proportion to their respective assets.
10. Entire Agreement; Survival of Warranties
10.1 This Agreement constitutes the entire agreement between the parties
hereto.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection
herewith shall survive the consummation of the transactions contemplated
hereunder.
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<PAGE>
11. Termination
Either party hereto may at its option terminate this Agreement at or prior
to the Closing Date because of:
11.1 A material breach by the other of any representation, warranty or
covenant contained herein to be performed at or prior to the Closing Date;
or
11.2 A condition herein expressed to be precedent to the obligations of
either party not having been met and it reasonably appearing that it will
not or cannot be met; or
11.3 A mutual written agreement of the Fund on behalf of each of Global
Assets Portfolio and Limited Maturity Portfolio.
In the event of any such termination, there shall be no liability for
damages on the part of either party hereto (other than the liability of each of
them to pay their allocated expenses pursuant to paragraph 9.2) or any Director,
or officer of the Fund.
12. Amendment
This Agreement may be amended, modified or supplemented only in writing by
the parties; provided, however, that following the shareholders' meeting called
by Global Assets Portfolio pursuant to paragraph 5.2, no such amendment may have
the effect of changing the provisions for determining the number of shares of
Limited Maturity Portfolio to be distributed to Global Assets Portfolio
shareholders under this Agreement to the detriment of such shareholders without
their further approval.
13. Notices
Any notice, report, demand or other communication required or permitted by
any provision of this Agreement shall be in writing and shall be given by hand
delivery, or prepaid certified mail or overnight service addressed to Prudential
Mutual Fund Management, Inc., One Seaport Plaza, New York, New York 10292,
Attention: S. Jane Rose.
14. Headings; Counterparts; Governing Law; Assignment
14.1 The paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each
of which will be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
14.4 This Agreement shall bind and inure to the benefit of the parties
and their respective successors and assigns, and no assignment or transfer
hereof or of any rights or obligations hereunder shall be made by either
party without the written
A-17
<PAGE>
consent of the other party. Nothing herein expressed or implied is intended
or shall be construed to confer upon or give any person, firm or
corporation other than the parties and their respective successors and
assigns any rights or remedies under or by reason of this Agreement.
15. Miscellaneous
The Directors of the Fund, on behalf of each of Global Assets Portfolio and
Limited Maturity Portfolio, have authorized the execution of this Agreement in
their capacity as Directors and not individually, and Global Assets Portfolio
agrees that neither the shareholders nor the Directors nor any officer,
employee, representative or agent of the Fund shall be personally liable upon,
nor shall resort be had to their private property for the satisfaction of,
obligations given, executed or delivered on behalf of or by Limited Maturity
Portfolio, that the shareholders shall not be personally liable hereunder, and
that Global Assets Portfolio shall look solely to the property of Limited
Maturity Portfolio for the satisfaction of any claim hereunder.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed by the President or Vice President of the Fund.
Prudential Global Limited Maturity Fund, Inc.
On behalf of its Limited Maturity Portfolio
By:_________________________________________
President
Prudential Global Limited Maturity Fund, Inc.
On behalf of its Global Assets Portfolio
By:_________________________________________
Vice President
A-18
<PAGE>
APPENDIX B
Letter to Shareholders
June 9, 1995
Dear Shareholder:
Although the U.S. dollar showed continued weakness through much of the first
quarter of 1995, global bond markets are recovering from their dismal
performance in 1994. Given this environment, we are pleased to report that
the Prudential Short-Term Global Income Fund/Short-Term Global Income Portfolio
produced higher returns than the Lipper Short-Term World Multi-Market Average
for the six-month period ending April 30, 1995.
Fund Performance.
The Short-Term Global Income Portfolio's net asset value (NAV) began the
reporting period with an NAV of $8.56 for Class A, B and C shares. It finished
with NAVs of $8.33 for Class A shares and $8.36 for both Class B and C shares.
Dividends totaling $0.28 for Class A shares and $0.26 for Class B and C shares
were also paid during the period.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURNS1
As of 4/30/95
6 Mos. One Year Since Inception2
<S> <C> <C> <C>
Class A 0.7% -0.7% 17.8%
Class B 0.7% -1.0% 13.9%
Class C 0.7% N/A 1.5%
Lipper ST World -1.2% 0.5% 3.5%
Fund Average3
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS1
As of3/31/95
One Year Since Inception2
<S> <C> <C>
Class A -4.0% 2.8%
Class B -4.4% 2.8%
Class C N/A -0.5%
</TABLE>
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
1 Source: Prudential Mutual Fund Management Inc. and Lipper Analytical Services,
Inc. Cumulative total returns do not take into account sales charges. The
average annual returns do take into account applicable sales charges. The Fund
charges a maximum front-end sales load of 3% for Class A shares. Class B shares
are subject to a declining contingent deferred sales charge (CDSC) of 3%, 2%,
1% and 1%, for four years. Class C shares have a 1% CDSC for one year. Class
B shares will automatically convert to Class A shares on a quarterly basis,
after approximately five years.
2 Inception of Class A and B 11/01/90; Class C 8/1/94.
3 This figure is the average of 44 funds in the Short-Term World Multi-Market
Average for six-months; 40 funds for one year; and 14 funds since inception
for the period ending April 30, 1995, as measured by Lipper Analytical
Services, Inc.
-1-
<PAGE>
The Fund's Objective.
The Prudential Short-Term Global Income Fund/Short-Term Global Income Portfolio
seeks to maximize total return, the components of which are current income and
capital appreciation by primarily investing in debt securities having remaining
maturities of not more than three years. The Portfolio invests in debt
securities denominated in the U.S. dollar and a range of foreign currencies.
There can be no assurance that the Fund's investment objective will be achieved.
The Portfolio is permitted to invest up to 10% of its total assets in securities
rated below investment grade with a minimum rating of "B" as determined
by Moodys' Investor Services, Standard & Poor's Ratings Group or similar
ratings agency, and in unrated securities of equivalent quality. Investments
in lower rated or unrated securities carry special risks. The Short-Term Global
Income Portfolio is non-diversified, meaning it may invest more than 5% of its
total assets in securities of one or more issuers. Investment in a
non-diversified fund carries greater risk than investment in a diversified
portfolio.
A Global View of World Markets.
Bond markets are beginning to recover from 1994's poor showing. For the
four-month period ending on April 30, 1995, the Lipper Short-Term World
Multi-Market Average posted a gain of 1.4%. Performance was generally positive
across the board in local currency terms and was further bolstered by currency
performance.
Investor perception has clearly changed with signs that the U.S. economy is
indeed slowing and responding to the aggressive interest rate policy of the
U.S. Federal Reserve. Fewer housing starts, sluggish car sales, higher
unemployment numbers and other signs pointed to a so-called "soft landing" for
the U.S. economy, and not to a recession as some had feared.
The U.S. dollar took center stage for much of the reporting period, especially
during March. Failure to pass a balanced budget amendment in Congress coupled
with slim prospects for higher U.S. interest rates served to undermine
confidence in the U.S. currency. The German central bank responded by cutting
its discount rate by 50 basis points and the Japanese followed suit by reducing
their rate by the same amount. The result: the German mark rose 6% DM and the
Japanese yen a stunning 10% -- against the U.S. dollar.
What We Did.
We strongly favored hard currencies of the major, stable economies of central
Europe, such as the German mark or Swiss franc, as strains within the European
currency mechanism developed. During the reporting period the Spanish peseta
and Portuguese escudo were devalued against the mark. This resulted in a
premium being attached to core currency holdings with strong
-2-
<PAGE>
fundamentals (marks or francs). Conversely, Sweden, Italy and Spain had
additional risk assigned to their currencies. These three nations offer some of
the highest yielding bonds in Europe and have made up some ground lost earlier
in the year. We will be carefully monitoring developments here and how they may
affect our investment positions.
The Fund's bond holdings were heavily invested in markets that tended to
perform better on the basis of currency strength and a "flight to quality" by
many investors. For instance, we were drawn to Canada and New Zealand where
significant central bank tightening and undervalued currencies made investments
especially attractive. Attractive yields, a proactive British central bank
plus a strong currency also drew us to bonds from the United Kingdom.
The Outlook.
There are indications that the current global bond rally may have run its
course. Nevertheless foreign markets will remain an attractive investment
choice for U.S. investors, because they offer the potential for better long-term
performance and add an element of diversification to most portfolios.
Please understand that there are special risks involved with foreign investing.
Foreign securities are not guaranteed and may be influenced by currency
fluctuations, political and social developments. Foreign businesses are also
not subject to the same level of risk disclosure as they would be in the United
States. These risks are described fully in the Fund prospectus.
For further insight into what may be in store for global markets, we invite you
to read the following "Portfolio Q & A" feature with new portfolio managers
Simon Wells and Gabriel Irwin.
As always, it is a pleasure to have you as a shareholder of the Prudential
Short-Term Global Income Fund/Short-Term Global Income Portfolio, where we are
committed to managing the Fund for your benefit.
Sincerely,
Simon Wells Gabriel Irwin
Portfolio Manager Portfolio Manager
Richard A. Redeker
President
-3-
<PAGE>
PORTFOLIO Q&A
We are proud to announce that Simon Wells and Gabriel Irwin have joined
Prudential Mutual Funds. They will be managing the Prudential Short-Term
Global Income Fund/Short-Term Global Income Portfolio. We talked to them
about their outlook for the global bond markets in 1995.
Q. Why have global bonds performed so well this year? How long
can it last?
A. You have to view the first quarter rally in the context of
what happened in 1994. Last year was not good for bonds anywhere
in the world. By year-end, short-term investors had been
frightened out of the market and portfolio maturities were
generally low. A number of market participants had shortened
maturities expecting rising interest rates. So when interest
rates started falling, they were forced to buy longer term bonds,
which in turn has fueled bond price increases. Such is life in
the investment world. Our belief is that there isn't much steam
left in this rally, because although world inflation is low, we
are in an economic upturn usually the most bullish environment
for bonds.
Q. Why not just buy U.S. bonds and avoid foreign risk altogether?
A. Foreign bonds do not necessarily follow the U.S.
market. One of the attractions of the foreign bond market for
risk-tolerant U.S. investors is that there are almost invariably
better return opportunities in a number of foreign countries.
Since the 1970s, the U.S. has been the best-performing market in
only one year . This year alone, the Japanese bond market has
returned nearly 25% to U.S. investors. Also, there is always a
strong case for adding foreign bonds to a domestic portfolio for
purposes of diversification.
-4-
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC. Portfolio of Invvestments
SHORT-TERM GLOBAL INCOME PORTFOLIO April 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--41.1%
Australia--12.6%
Queensland Treasury
Corp.,
A$ 8,975 8.00%, 5/14/97........... $ 6,416,458
South Australia Fin.
Auth.,
7,815 12.50%, 3/15/98.......... 6,158,327
Victorian Treasury Corp.,
8,500 12.50%, 9/15/97.......... 6,654,026
------------
19,228,811
------------
Denmark--7.2%
Kingdom of Denmark,
DKr 60,100 7.00%, 8/15/97........... 10,962,281
------------
Italy--3.1%
Export Finance of Norway,
Lira 8,000,000 12.25%, 8/5/96........... 4,783,095
------------
United Kingdom--17.9%
Bayerische Hypothelsen
Bank,
(BR PD)5,000 11.125%, 6/24/96......... 8,325,679
United Kingdom Treasury
Bonds,
4,350 13.25%, 1/22/97.......... 7,616,706
5,000 8.75%, 9/1/97............ 8,188,300
2,000 7.25%, 3/30/98........... 3,148,417
------------
27,279,102
------------
United States--0.3%
Cedulas Hipotecarias
Rurales,
US$ 600 7.9%, 9/1/00............. 483,000
------------
Total long-term
investments
(cost US$63,032,550)..... 62,736,289
------------
SHORT-TERM INVESTMENTS--58.7%
Canada--11.9%
Canadian Treasury Bills,*
C$ 10,000 8.25%, 5/18/95........... $ 7,320,477
15,000 8.37%, 8/3/95............ 10,801,125
------------
18,121,602
------------
Mexico--0.1%
Mexican Tesobonos,*
US$ 114 8.40%, 8/17/95........... 108,961
------------
New Zealand--10.6%
New Zealand Treasury
Bills,*
NZ$ 11,075 8.47%, 6/21/95........... 7,347,178
13,400 9.36%, 8/2/95............ 8,815,365
------------
16,162,543
------------
Spain--0.8%
Nordic Investment Bank,
Pts 150,000 13.80%, 11/30/95......... 1,243,819
------------
United Kingdom--3.1%
United Kingdom, C.D.,
Bank of Scotland,
(BR PD)2,500 7.59%, 12/15/95.......... 4,030,526
500 7.50%, 12/19/95.......... 804,875
------------
4,835,401
------------
United States--32.2%
Joint Repurchase
Agreement Account,
US$ 7,371 5.90%, 5/1/95, (Note
5)..................... 7,371,000
United States Treasury
Bills,*
36,000 5.83%, 5/25/95........... 35,847,986
6,000 6.35%, 8/10/95........... 5,901,721
------------
49,120,707
------------
Total short-term
investments
(cost US$87,984,205)..... 89,593,033
------------
</TABLE>
-5- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
SHORT-TERM GLOBAL INCOME PORTFOLIO
<TABLE>
<CAPTION>
US$
Value
Description (Note 1)
<C> <S> <C>
Total Investments--99.8%
(cost US$151,016,755;
Note 4)................ $152,329,322
Other assets in excess of
liabilities--0.2%........ 310,760
------------
Net Assets--100%......... $152,640,082
------------
------------
</TABLE>
- ---------------
Portfolio securities are classified according to the security's
currency denomination.
* Percentage quoted represents yield to maturity as
of purchase date.
C.D.--Certificates of Deposit.
-6- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
SHORT-TERM GLOBAL INCOME PORTFOLIO
Statement of Assets and Liabilities
(Unaudited)
<TABLE>
<CAPTION>
Assets April 30, 1995
--------------
<S> <C>
Investments, at value (cost $151,016,755)................................................. $ 152,329,322
Foreign currency, at value (cost $3,232).................................................. 3,457
Receivable for investments sold........................................................... 6,664,602
Forward currency contracts--net amount receivable from counterparties..................... 3,872,066
Interest receivable....................................................................... 2,833,563
Receivable for Fund shares sold........................................................... 3,019
Deferred expenses and other assets........................................................ 31,187
--------------
Total assets.......................................................................... 165,737,216
--------------
Liabilities
Payable for investments purchased......................................................... 6,409,241
Forward currency contracts--net amount payable to counterparties.......................... 4,635,652
Payable for Fund shares reacquired........................................................ 1,295,708
Accrued expenses.......................................................................... 313,872
Dividends payable......................................................................... 259,879
Due to Distributors....................................................................... 86,549
Due to Manager............................................................................ 70,785
Withholding taxes payable................................................................. 25,448
--------------
Total liabilities..................................................................... 13,097,134
--------------
Net Assets................................................................................ $ 152,640,082
--------------
--------------
Net assets were comprised of:
Common stock, at par.................................................................... $ 18,270
Paid-in capital in excess of par........................................................ 206,344,469
--------------
206,362,739
Accumulated distributions in excess of net investment income............................ (13,456,092)
Accumulated net realized loss on investments............................................ (40,822,609)
Net unrealized appreciation on investments and foreign currencies....................... 556,044
--------------
Net assets, April 30, 1995................................................................ $ 152,640,082
--------------
--------------
Class A:
Net asset value and redemption price per share
($19,664,988 / 2,359,752 shares of common stock issued and outstanding)............... $8.33
Maximum sales charge (3.00% of offering price).......................................... .26
--------------
Maximum offering price to public........................................................ $8.59
--------------
--------------
Class B:
Net asset value, offering price and redemption price per share
($132,969,327 / 15,909,377 shares of common stock issued and outstanding)............. $8.36
--------------
--------------
Class C:
Net asset value, offering price and redemption price per share
($5,767 / 690 shares of common stock issued and outstanding).......................... $8.36
--------------
--------------
</TABLE>
See Notes to Financial Statements.
-7-
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
SHORT-TERM GLOBAL INCOME PORTFOLIO
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
April 30,
Net Investment Income 1995
-----------
<S> <C>
Income
Interest........................... $ 7,554,560
-----------
Expenses
Distribution fee--Class A.......... 15,832
Distribution fee--Class B.......... 589,813
Management fee..................... 490,580
Custodian's fees and expenses...... 265,000
Transfer agent's fees and
expenses......................... 171,000
Reports to shareholders............ 40,000
Registration fees.................. 34,000
Amortization of organization
expenses......................... 20,000
Audit fee.......................... 17,500
Directors' fees.................... 17,500
Legal.............................. 15,000
Miscellaneous...................... 8,080
-----------
Total expenses................... 1,684,305
-----------
Net investment income................ 5,870,255
-----------
Realized and Unrealized
Gain (Loss) on Investments and
Foreign Currency Transactions
Net realized gain (loss) on:
Investment transactions............ (5,033,664)
Foreign currency transactions...... 1,092,586
Written option transactions........ (800,657)
-----------
(4,741,735)
-----------
Net change in unrealized
appreciation/
depreciation of:
Investments........................ (1,968,785)
Foreign currencies................. 1,665,176
-----------
(303,609)
-----------
Net loss on investments and foreign
currencies......................... (5,045,344)
-----------
Net Increase in Net Assets
Resulting from Operations............ $ 824,911
-----------
-----------
</TABLE>
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
SHORT-TERM GLOBAL INCOME PORTFOLIO
Statement of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) April 30, October 31,
in Net Assets 1995 1994
------------ ------------
<S> <C> <C>
Operations
Net investment
income................. $ 5,870,255 $ 22,096,655
Net realized loss on
investments and
foreign currency
transactions......... (4,741,735) (35,450,639)
Net change in
unrealized
appreciation/depreciation
of investments and
foreign currencies... (303,609) 5,768,258
------------ ------------
Net increase (decrease)
in net assets resulting
from operations........ 824,911 (7,585,726)
------------ ------------
Net equalization
debits................. (165,706) --
------------ ------------
Dividends and distributions (Note 1)
Dividends from net
investment income
Class A.............. (493,233) --
Class B.............. (3,309,846) --
Class C.............. (25) --
------------ ------------
(3,803,104) --
------------ ------------
Distributions in excess
of net investment
income
Class A.............. (227,582) --
Class B.............. (1,527,191) --
Class C.............. (12) --
------------ ------------
(1,754,785) --
------------ ------------
Tax return of capital
distributions
Class A.............. -- (2,411,703)
Class B.............. -- (15,406,444)
------------ ------------
-- (17,818,147)
------------ ------------
Fund share transactions
(net of share
conversions) (Note 6)
Proceeds from shares
subscribed........... 7,275,020 11,205,281
Net asset value of
shares issued in
reinvestment of
dividends and
distributions........ 3,264,912 10,703,295
Cost of shares
reacquired........... (70,809,033) (213,168,513)
------------ ------------
Net decrease in net
assets from Fund share
transactions........... (60,269,101) (191,259,937)
------------ ------------
Total decrease........... (65,167,785) (216,663,810)
Net Assets
Beginning of period...... 217,807,867 434,471,677
------------ ------------
End of period............ $152,640,082 $217,807,867
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
-8-
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
SHORT-TERM GLOBAL INCOME PORTFOLIO
Notes to Financial Statements
(Unaudited)
Prudential Short-Term Global Income Fund, Inc. (the ``Fund'') is registered
under the Investment Company Act of 1940 as a non-diversified, open-end
management investment company. The Fund consists of two series, namely:
Short-Term Global Income Portfolio and Global Assets Portfolio. The Fund was
incorporated in Maryland on February 21, 1990 and had no significant operations
other than the issuance of 5,000 shares each of Class A and Class B common stock
of the Short-Term Global Income Portfolio for $100,000 on September 21, 1990 to
Prudential Mutual Fund Management, Inc. (``PMF''). The Short-Term Global Income
Portfolio (the ``Portfolio'') commenced investment operations on November 1,
1990. The investment objective of the Portfolio is to 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, take
possession of the underlying collateral securities, the value of which exceeds
the principal amount of the repurchase transaction including accrued interest.
If the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
Foreign Currency Translation: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(i) market value of investment securities, other assets and liabilities--at
the closing daily rate of exchange;
(ii) purchases and sales of investment securities, income and expenses--at
the rate of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange
rates and market values at the close of the fiscal period, the Fund does not
isolate that portion of the results of operations arising as a result of changes
in the foreign exchange rates from the fluctuations arising from changes in the
market prices of securities held at the end of the fiscal period. Similarly, the
Fund does not isolate the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of long-term debt
securities sold during the fiscal period.
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 period end exchange rates are reflected as a component of
net unrealized appreciation/depreciation on investments and foreign currencies.
-9-
<PAGE>
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. companies as a result of,
among other factors, the possibility of political and economic instability and
the level of governmental supervision and regulation of foreign securities
markets.
Forward Currency Contracts: A forward currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. 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 or on specific receivables and payables denominated in a foreign
currency. The contracts are valued daily at current exchange rates and any
unrealized gain or loss is included in net unrealized appreciation or
depreciation on investments. Gain or loss is realized on the settlement date of
the contract equal to the difference between the settlement value of the
original and renegotiated forward contracts. This gain or loss, if any, is
included in net realized gain (loss) on 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.
Options: The Fund may either purchase or write options in order to hedge against
adverse market movements or fluctuations in value caused by changes in
prevailing interest rates or foreign currency exchange rates with respect to
securities or currencies which the Fund currently owns or intends to purchase.
When the Fund purchases an option, it pays a premium and an amount equal to that
premium is recorded as an investment. When the Fund writes an option, it
receives a premium and an amount equal to that premium is recorded as a
liability. The investment or liability is adjusted daily to reflect the current
market value of the option. If an option expires unexercised, the Fund realizes
a gain or loss to the extent of the premium received or paid. If an option is
exercised, the premium received or paid is an adjustment to the proceeds from
the sale or the cost basis of the purchase in determining whether the Fund has
realized a gain or loss. The difference between the premium and the amount
received or paid on effecting a closing purchase or sale transaction is also
treated as a realized gain or loss. Gain or loss on purchased options is
included in net realized gain (loss) on investment transactions. Gain or loss on
written options is presented separately as net realized gain (loss) on written
option transactions.
The Fund, as writer of an option, has no control over whether the underlying
securities or currencies may be sold (called) or purchased (put). As a result,
the Fund bears the market risk of an unfavorable change in the price of the
security or currency underlying the written option. The Fund, as purchaser of an
option, bears the risk of the potential inability of the counterparties to meet
the terms of their contracts.
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 and decrease accumulated net realized loss on
investments by $2,627,110. This was primarily the result of net foreign currency
losses incurred for the six months ended April 30, 1995. 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 April 30,
1995 is $11,290,809 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
-10-
<PAGE>
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.
Note 2. Agreements The Fund has a management
agreement with Prudential Mutual Fund Management
(``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 management 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 six months ended April 30, 1995. PMFD pays various broker-dealers, including
PSI and Pruco Securities Corporation (``Prusec''), affiliated broker-dealers,
for account servicing fees and other expenses incurred by such broker-dealers.
Pursuant to the Class B 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 and Class C Plans were both charged at .75 of 1% of the average daily net
assets of the Class B and Class C shares for the six months ended April 30,
1995.
PMFD has advised the Portfolio that it has received approximately $2,100 in
front-end sales charges resulting from sales of Class A shares during the six
months ended April 30, 1995. 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 six months ended April 30, 1995,
it received approximately $278,800 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 six months ended April 30, 1995, the Portfolio incurred fees of
approximately $130,800 for the services of PMFS. As of April 30, 1995,
approximately $20,600 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 six
months ended April 30, 1995 aggregated $103,456,830 and $181,991,600,
respectively.
The United States federal income tax basis of the Fund's investments at April
30, 1995 was substantially the same as for financial reporting purposes and,
accordingly, net unrealized appreciation of investments, for United States
federal income tax purposes was $1,312,567 (gross unrealized
appreciation--$2,304,151; gross unrealized depreciation--$991,584).
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.
-11-
<PAGE>
Transactions in options written during the six months ended April 30, 1995
were as follows:
<TABLE>
<CAPTION>
Number of
Contracts Premiums
(000) Received
---------- ---------
<S> <C> <C>
Options outstanding at October 31,
1994................................. -- --
Options written........................ 24,626 $ 168,894
Options terminated in closing purchase
transactions......................... (24,626) (168,894)
---------- ---------
Options outstanding at April 30,
1995................................. -- --
---------- ---------
---------- ---------
</TABLE>
At April 30, 1995, the Portfolio had outstanding forward currency contracts,
both to purchase and sell foreign currencies, as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Purchase Contracts Payable Value (Depreciation)
- ------------------ --------------- ------------ -----------
<S> <C> <C> <C>
Australian
Dollars,
expiring
5/10/95......... $ 26,489,322 $ 25,968,304 $ (521,018)
British Pounds,
expiring
5/10-6/12/95.... 3,712,652 3,750,292 37,640
Deutschemarks,
expiring
5/2-11/1/95..... 145,262,639 147,001,481 1,738,842
French Francs,
expiring
10/10/95........ 3,946,325 3,870,606 (75,719)
Japanese Yen,
expiring
6/6-6/12/95..... 10,375,235 10,405,356 30,121
Spanish Pesetas,
expiring
9/11-11/2/95.... 25,156,046 26,679,412 1,523,366
Swedish Krona,
expiring
9/29/95......... 3,120,000 3,172,701 52,701
--------------- ------------ -----------
$ 218,062,219 $220,848,152 $ 2,785,933
--------------- ------------ -----------
--------------- ------------ -----------
</TABLE>
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- ------------------ --------------- ------------ -----------
<S> <C> <C> <C>
Australian
Dollars,
expiring
5/10-6/13/95.... $ 45,026,076 $ 44,624,706 $ 401,370
British Pounds,
expiring
5/10-6/12/95.... 15,990,500 16,127,270 (136,770)
Canadian Dollars,
expiring
5/18/95......... 7,648,094 7,745,769 (97,675)
Deutschemarks,
expiring
5/2-11/1/95..... 163,950,682 165,880,839 (1,930,157)
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- ------------------ --------------- ------------ -----------
<S> <C> <C> <C>
French Francs,
expiring
10/10/95........ $ 3,965,903 $ 3,989,382 $ (23,479)
Italian Lira,
expiring
5/18/95......... 2,901,114 2,950,273 (49,159)
Japanese Yen,
expiring
6/6/95.......... 10,000,000 10,112,847 (112,847)
Spanish Pesetas,
expiring
9/11-11/2/95.... 26,538,702 28,103,482 (1,564,780)
Swedish Krona,
expiring
9/29/95......... 3,140,000 3,176,022 (36,022)
--------------- ------------ -----------
$ 279,161,071 $282,710,590 $(3,549,519)
--------------- ------------ -----------
--------------- ------------ -----------
</TABLE>
Note 5. Joint The Portfolio, along with
Repurchase other affiliated registered
Agreement investment companies,
Account transfers uninvested cash
balances into a single joint account, the daily
aggregate balance of which is invested in one or more repurchase agreements
collateralized by U.S. Treasury or Federal agency obligations. As of April 30,
1995, the Portfolio has a 1.09% undivided interest in the repurchase agreements
in the joint account. The undivided interest for the Portfolio represents
$7,371,000 in principal amount. As of such date, each repurchase agreement in
the joint account and the value of the collateral therefor were as follows:
Bear, Stearns & Co., 5.92%, in the principal amount of $125,000,000,
repurchase price $125,061,667, due 5/1/95. The value of the collateral including
accrued interest is $127,647,875.
UBS Securities Inc., 5.93%, in the principal amount of $100,000,000,
repurchase price $100,049,417, due 5/1/95. The value of the collateral including
accrued interest is $102,062,500.
Morgan Stanley and Co., Inc., 5.93%, in the principal amount of $225,000,000,
repurchase price $225,111,188, due 5/1/95. The value of the collateral including
accrued interest is $229,640,625.
CS First Boston Corp., 5.93%, in the principal amount of $225,000,000,
repurchase price $225,111,188, due 5/1/95. The value of the collateral including
accrued interest is $229,640,625.
-12-
<PAGE>
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.
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 18,269,819 shares
of common stock issued and outstanding at April 30, 1995, PMF owned 10,000
shares.
Transactions in shares of common stock for the six months ended April 30,
1995 and the year ended October 31, 1994 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------ ----------- -------------
<S> <C> <C>
Six months ended
April 30, 1995:
Shares sold................... 754,368 $ 6,127,022
Shares issued in reinvestment
of
dividends and
distributions............... 52,804 435,218
Shares reacquired............. (2,433,145) (20,204,154)
----------- -------------
Net decrease in shares
outstanding before
conversion.................. (1,625,973) (13,641,914)
Shares issued upon conversion
from Class B................ 615,866 5,109,638
----------- -------------
Net decrease in shares
outstanding................. (1,010,107) $ (8,532,276)
----------- -------------
----------- -------------
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)
----------- -------------
----------- -------------
<CAPTION>
Class B Shares Amount
- ------------------------------ ----------- -------------
<S> <C> <C>
Six months ended
April 30, 1995:
Shares sold................... 135,676 $ 1,142,480
Shares issued in reinvestment
of
dividends and
distributions............... 338,189 2,829,669
Shares reacquired............. (6,032,300) (50,604,879)
----------- -------------
Net decrease in shares
outstanding before
conversion.................. (5,558,435) (46,632,730)
Shares reacquired upon
conversion into Class A..... (614,385) (5,109,638)
----------- -------------
Net decrease in shares
outstanding................. (6,172,820) $ (51,742,368)
----------- -------------
----------- -------------
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)
----------- -------------
----------- -------------
<CAPTION>
Class C
- ------------------------------
<S> <C> <C>
Six months ended
April 30, 1995:
Shares sold................... 664 $ 5,518
Shares issued in reinvestment
of dividends and
distributions............... 3 25
----------- -------------
Net increase in shares
outstanding................. 667 $ 5,543
----------- -------------
----------- -------------
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.
-13-
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
SHORT-TERM GLOBAL INCOME PORTFOLIO
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------
Six
Months
Ended Year Ended October 31,
April 30, ---------------------------------------------
1995 1994 1993 1992 1991
--------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period....................... $ 8.56 $ 9.29 $ 9.16 $ 9.97 $ 10.00
--------- ------- ------- -------- --------
Income from investment
operations
Net investment income.......... .30 .70 .97 .96 1.03
Net realized and unrealized
gain (loss) on investment and
foreign currency
transactions................. (.25) (.86) (.26) (.95) (.02)
--------- ------- ------- -------- --------
Total from investment
operations................. .05 (.16) .71 .01 1.01
--------- ------- ------- -------- --------
Less distributions
Dividends from net investment
income....................... (.28) -- (.58) (.82) (1.03)
Tax return of capital
distributions................ -- (.57) -- -- --
Distributions from net capital
gains........................ -- -- -- -- (.01)
--------- ------- ------- -------- --------
Total distributions.......... (.28) (.57) (.58) (.82) (1.04)
--------- ------- ------- -------- --------
Net asset value, end of
period....................... $ 8.33 $ 8.56 $ 9.29 $ 9.16 $ 9.97
--------- ------- ------- -------- --------
--------- ------- ------- -------- --------
TOTAL RETURN#:................. 0.68% (1.89)% 7.96% (0.07)% 10.41%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000)........................ $19,665 $28,841 $59,458 $101,358 $105,148
Average net assets (000)....... $21,284 $38,000 $70,347 $119,171 $51,830
Ratios to average net assets:
Expenses, including
distribution fees.......... 1.36%* 1.17% 1.02% 1.08% 1.01%
Expenses, excluding
distribution fees.......... 1.21%* 1.02% .87% .93% .86%
Net investment income........ 7.14%* 7.67% 10.81% 9.93% 10.23%
Portfolio turnover rate........ 110% 232% 307% 180% 66%
</TABLE>
- ---------------
* Annualized.
# Total return does not consider the effects of sales loads. Total
return is calculated assuming a purchase of shares on the first
day and a sale on the last day of each period reported and
includes reinvestment of dividends and distributions. Total
returns for periods of less than a full year are not annualized.
See Notes to Financial Statements.
-14-
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
SHORT-TERM GLOBAL INCOME PORTFOLIO
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Class B Class C
---------------------------------------------------------------- --------------------
Six August 1,
Six Months Months 1994D
Ended Year Ended October 31, Ended Through
April 30, ----------------------------------------------- April 30, October 31,
1995 1994 1993 1992 1991 1995 1994
------------ -------- -------- -------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period.... $ 8.56 $ 9.29 $ 9.16 $ 9.97 $ 10.00 $ 8.56 $ 8.61
------------ -------- -------- -------- -------- ------ --------
Income from investment
operations
Net investment income.... .27 .62 .88 .88 .95 .27 .14
Net realized and
unrealized gain (loss)
on investment and
foreign currency
transactions........... (.21) (.86) (.26) (.95) (.02) (.21) (.06)
------------ -------- -------- -------- -------- ------ --------
Total from investment
operations........... .06 (.24) .62 (.07) .93 .06 .08
------------ -------- -------- -------- -------- ------ --------
Less distributions
Dividends from net
investment
income................. (.26) -- (.49) (.74) (.95) (.26) --
Tax return of capital
distributions.......... -- (.49) -- -- -- -- (.13)
Distributions from net
capital gains.......... -- -- -- -- (.01) -- --
------------ -------- -------- -------- -------- ------ --------
Total distributions.... (.26) (.49) (.49) (.74) (.96) (.26) (.13)
------------ -------- -------- -------- -------- ------ --------
Net asset value, end of
period................. $ 8.36 $ 8.56 $ 9.29 $ 9.16 $ 9.97 $ 8.36 $ 8.56
------------ -------- -------- -------- -------- ------ --------
------------ -------- -------- -------- -------- ------ --------
TOTAL RETURN#:........... 0.72% (2.62)% 7.00% (0.86)% 9.51% 0.72% 0.75%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000).................. $132,969 $188,966 $375,013 $606,899 $669,086 $5,767@ $200@
Average net assets
(000).................. $158,586 $281,143 $474,175 $814,734 $349,607 $1,161@ $199@
Ratios to average net
assets:
Expenses, including
distribution fees.... 1.96%* 1.97% 1.87% 1.93% 1.87% 1.78%* .93%*
Expenses, excluding
distribution fees.... 1.21%* 1.02% .87% .93% .87% 1.03%* .18%*
Net investment
income............... 6.51%* 6.82% 9.42% 9.05% 9.46% 6.72%* 7.02%*
Portfolio turnover
rate................... 110% 232% 307% 180% 66% 110% 232%
<FN>
- ---------------
* Annualized.
D Commencement of offering of Class C shares.
@ 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.
</FN>
</TABLE>
See Notes to Financial Statements.
-15-
<PAGE>
Directors
Stephen C. Eyre
Delayne Dedrick Gold
Don G. Hoff
Harry A. Jacobs, Jr.
Sidney R. Knafel
Robert E. La Blanc
Lawrence C. McQuade
Thomas A. Owens, Jr.
Richard A. Redeker
Clay T. Whitehead
Officers
Lawrence C. McQuade, President
Robert F. Gunia, Vice President
Susan C. Cote, Treasurer
S. Jane Rose, Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributors
Prudential Mutual Fund Distributors, Inc.
Prudential Securities Incorporated
One Seaport PlazaNew York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
Legal Counsel
Shereff, Friedman, Hoffman & Goodman
919 Third Avenue
New York, NY 10022
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852, Collect (908) 417-7555
The accompanying financial statements as of April 30, 1995 were
not audited and, accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective
investors unless preceded or accompanied by a current prospectus.
74436H101
74436H200 MF 144E2
74436H507 (LOGO) Cat #4443640
<PAGE>
SEMI-ANNUAL REPORT April 30, 1995
Prudential
Short-Term Global Income Fund, Inc.
(ICON)
Short-Term
Global Income
Portfolio
(LOGO)
<PAGE>
Letter to Shareholders
December 19, 1994
Dear Shareholder:
Difficult is a kind word for the market environment that faced global fixed
income funds over the past 12 months, affecting the Prudential Short-Term
Global Income Fund / Short-Term Global Income Portfolio and the entire asset
group. The volatile interest rate and currency market conditions in 1994 were
to global fixed income instruments what 1987 was to equities -- extremely
unfavorable. Nevertheless, we are pleased to have this opportunity to update
you on your Fund's activities. Performance, although negative, and weaker
against the universe over the latter part of the year, was slightly below other
similar funds of this type for the 12-month period covered by this report, as
reflected in the Lipper Short-Term Multi-Market Average shown below.
<TABLE>
HISTORICAL TOTAL RETURNS1
As of October 31, 1994
<CAPTION>
One Year Since Inception2
<S> <C> <C>
Class A -1.9% +17.0%
Class B -2.6 +13.1
Class C N/A +0.8
Lipper ST World
Multi-Mkt Avg.3 0.7 N/A
</TABLE>
<TABLE>
HISTORICAL TOTAL RETURNS4
As of September 30, 1994
<CAPTION>
One Year Since Inception2
<S> <C> <C>
Class A -4.4% +3.1%
Class B -5.3 +2.7
Class C N/A N/A
</TABLE>
1 Source: Prudential Mutual Fund Management. Past performance is not a
guarantee of future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost. These figures do not take into account sales
charges.
2 Inception dates: 11/01/90 Class A and Class B; 8/1/94 Class C.
3 This is the average of 63 funds for one year in the Short-Term World
Multi-Market Average, according to Lipper Analytical Services, Inc.
4 Source: Prudential Mutual Fund Management. These figures take into account
applicable sales charges. The Fund charges a maximum sales load of 3% for Class
A shares. Class B shares are subject to a declining contingent deferred sales
charge of 3%, 2%, 1% and 1% during the first four years. Class C shares are
subject to a 1% contingent deferred sales charge on shares redeemed during the
first year. Class C performance is not yet applicable since the share class has
only been in existence since August.
-1-
<PAGE>
Fund Overview
The Fund invests primarily in short-term, worldwide debt securities with
remaining maturities of not more than three years. The Fund's net asset value
as of October 31, 1994 was $8.56 for Class A, Class B and Class C shares. The
Fund also paid dividends of $0.57 per Class A share, $0.49 per Class B shares
and $0.13 per Class C shares for the 12-month period ended October 31, 1994.
Bond Markets
In sharp contrast to the positive market environment of 1993 that offered
strong opportunities in bond and currency markets, 1994 was hard on both
fronts. Led by dollar bloc countries (US, Canada, Australia and New Zealand),
world growth surged in 1994. Unfortunately, strong growth, while hailed
positively on most fronts, is NOT a scenario that generally behooves bond
investors. Inflation concerns, accompanied by upward interest rate pressures,
weighed very heavily on bond prices this year. The result was negative return
in almost every bond market around the world, including the United States. This
environment impacted global fixed income funds and your Fund.
The US Federal Reserve's tightening moves were followed by hikes in other
dollar bloc bond markets. European bond holdings, which dramatically helped the
Fund in 1993, produced much more mixed results in 1994. During the first half
of the year, as European economies began to recover and Central Banks
stimulated with short-term rate cuts, short-term bonds outperformed the long
end of most markets. Subsequently, the depth and speed with which the same
economies rebounded resulted in sharp reversals of monetary policy, and their
bond markets gave back significant ground.
The dramatic rise in market interest rates in many countries far exceeded
official interest rate hikes, affecting the performance of the portfolio. We
have moved to shorter-dated maturities to reduce price volatility and, in the
process, have locked in quite attractive yields. We are poised to take
advantage of some limited emerging market opportunities which should add value
in a static or rising interest rate environment. These include attractively
priced securities in Argentina and Brazil (most dollar-denominated, including
some floating rate notes).
Currency Markets
Further confounding the environment for global funds was the volatile trading
pattern exhibited by the U.S. dollar. While rising interest rates in the US
(accompanied by a cumulative hike of 225 basis points engineered by the Federal
Reserve) would in most periods have pushed the US dollar higher, concerns about
trade policy with Japan, our chronic (and rising) current account deficit, and
general lack of confidence about US policy in general instead weighed the
dollar down -- certainly relative to the Japanese yen, and even compared to
some of the slower-growing countries of Europe.
-2-
<PAGE>
US interest rates in combination with flat European rates did not strengthen
the dollar as we had anticipated. During the first and second quarters of 1994,
we hedged a significant portion of the Fund's assets back into US dollars and
missed some opportunities in the Yen and Deutschemark when the US dollar
recovery failed to materialize. During the third quarter, we captured some
positive currency movement when we repositioned the Fund by removing some
hedges, but were unable to offset the losses completely.
Outlook
While this year has been a tough one, there has been a positive aspect for
funds such as this Fund. In the process of seeking to protect the portfolio,
we have been able to capture some higher yielding coupons that will increase
the income stream to the Fund. Looking forward, we believe there will be relief
from the volatility experienced in the global bond environment over the past
year, and that the current level of interest rates worldwide will provide some
opportunity for a more positive performance in the coming year.
As always, it is a pleasure to have you as a shareholder of the Prudential
Short-Term Global Income Fund / Short-Term Global Income Portfolio and to take
this opportunity to report our activities to you.
Sincerely,
Lawrence C. McQuade
President
Jeffrey E. Brummette
Portfolio Manager
-3-
<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>
-4- See Notes to Financial Statements.
<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.
(D) Expressed in thousands of local currency units.
-5- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
SHORT-TERM GLOBAL INCOME PORTFOLIO
<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.
-6-
<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.
-7-
<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
-8-
<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.
-9-
<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.
-10-
<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.
-11-
<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.
-12-
<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%
<FN>
- ---------------
* 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.
</FN>
</TABLE>
See Notes to Financial Statements.
-13-
<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
-14-
<PAGE>
Past performance is not predictive of future performance and an investor's
shares may be worth more or less than their original cost.
These graphs are furnished to you in accordance with SEC regulations. They
compare a $10,000 investment in Prudential Short-Term Global Income Fund, Inc.
Short-Term Global Income Portfolio (Class A, Class B and Class C) with a similar
investment in the J.P. Morgan Global Short-Term Index (GSTI) by portraying the
initial account values at the commencement of operations of each class and
subsequent account values at the end of each fiscal year (October 31) beginning
in 1990 for Class A and Class B shares and 1994 for Class C shares. For purposes
of the graphs and, unless otherwise indicated, the accompanying tables, it has
been assumed that (a) the current maximum sales charge was deducted from the
initial $10,000 investment in Class A shares; (b) the maximum applicable
contingent deferred sales charge was deducted from the value of the investment
in Class B shares and Class C shares, assuming full redemption on October 31,
1994; (c) all recurring fees (including management fees) were deducted; and (d)
all dividends and distributions were reinvested. Class B shares will
automatically convert to Class A shares on a quarterly basis approximately five
years after purchase. This conversion feature is expected to be implemented on
or about February 1995 and is not reflected in the graph.
The GSTI is a weighted index of liquid, short-term government bonds of the
following countries: Belgium, Sweden, Germany, Australia, Canada, Denmark,
France, Italy, Japan, Netherlands, Spain, U.S. and U.K. The GSTI is an unmanaged
index and changes in market capitalization in the GSTI are revised monthly. The
GSTI does not reflect the payment of transaction costs and advisory fees
associated with an investment in the Fund. The securities which comprise the
GSTI may differ substantially from the securities in the Fund's portfolio. The
GSTI is not the only index that may be used to characterize performance of
global income funds and other indices may portray different comparative
performance.
-15-
<PAGE>
Directors
Stephen C. Eyre
Delayne Dedrick Goldx
Don G. Hoff
Harry A. Jacobs, Jr.
Sidney R. Knafel
Robert E. La Blanc
Thomas A. Owens, Jr.
Richard A. Redeker
Clay T. Whitehead
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Grace Torres, Treasurer
S. Jane Rose, Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributors
Prudential Mutual Fund Distributors, Inc.
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
Legal Counsel
Shereff, Friedman, Hoffman & Goodman
919 Third Avenue
New York, NY 10022
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll free (800) 225-1852, Collect (908) 417-7555
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
74436H101
74436H200 MF 144E2
74436H507 (LOGO) Cat #44436320
<PAGE>
ANNUAL REPORT October 31, 1994
Prudential
Short-Term
Global Income
Fund, Inc.
(ICON)
Short-Term
Global Income
Portfolio
(LOGO)
<PAGE>
APPENDIX C
Letter to Shareholders
June 9, 1995
Dear Shareholder:
Although the U.S. dollar showed continued weakness through much of the
first quarter of 1995, global bond markets began to recover from their dismal
performance in 1994. Given this environment, we are pleased to report that
the Prudential Short-Term Global Income Fund/Global Assets Portfolio produced
returns exceeding those of the Lipper Short-Term World Multi-Market Average
for the six months ending April 30, 1995.
Fund Performance.
The Global Assets Portfolio began the reporting period with an NAV of $1.80 and
ended it with an NAV of $1.79.
CUMULATIVE TOTAL RETURNS1
<TABLE>
<CAPTION>
As of 4/30/95
6 Mos. One Year Since Inception2
<S> <C> <C> <C>
Class A* 1.8% 1.5% 14.7%
Lipper ST World -1.2% -0.5% 3.5%
Fund Average3
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS1
As of 3/31/95
One Year Since Inception2
<S> <C> <C>
Class A 0.5% 2.9%
</TABLE>
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
1 Source: Prudential Mutual Fund Management Inc. and Lipper Analytical Services,
Inc. Cumulative total returns do not take into account sales charges. The
average annual returns do take into account applicable sales charges.
The Fund charges a maximum front-end sales load of 0.99% for Class A shares.
2 Inception of Class A shares 2/15/91.
3 This figure is the average of 44 funds in the Short-Term World
Multi-Market Average for six-months; 40 funds for one year; and
14 funds since inception for the period ending April 30, 1995, as
measured by Lipper Analytical Services, Inc.
* Class B shares are no longer offered and ceased operations on May 9, 1994.
-1-
<PAGE>
The Fund's Objective.
The Prudential Short-Term Global Income Fund/Global Assets Portfolio
seeks high current income with minimum risk to principal by investing in a
portfolio of high-quality debt securities having remaining maturities of not
more than one year. The Fund also seeks high current yields by investing in
debt securities denominated in the U.S. dollar and a range of foreign
currencies. There can be no assurance that the Fund's investment
objective will be achieved.
The Global Assets Portfolio is non-diversified, meaning it may invest more
than 5% of its total assets in securities of one or more issuers. Investment
in a non-diversified fund carries greater risk than investment in a
diversified portfolio.
A Global View of World Markets.
Bond markets are beginning to recover from 1994's poor showing. For the
four-month period ending on April 30, 1995, the Lipper Short-Term World
Multi-Market Average posted a gain of 1.4%. Performance was generally
positive across the board in local currency terms and was further bolstered
by currency performance.
Investor perception has clearly changed with signs that the U.S. economy
is indeed slowing and responding to the aggressive interest rate policy of
the U.S. Federal Reserve. Fewer housing starts, sluggish car sales,
higher unemployment numbers and other signs pointed to a so-called "soft
landing" for the U.S. economy and not the recession as some had feared.
The U.S. dollar took center stage for much of the reporting period, especially
during March. Failure to pass a balanced budget amendment in Congress
coupled with slim prospects for higher U.S. interest rates served to undermine
confidence in the U.S. currency. The German central bank responded by cutting
its discount rate by 50 basis points and the Japanese followed suit by reducing
their money rate by the same amount. The result: the German mark rose 6% and
the Japanese yen a stunning 10% against the U.S. dollar.
What We Did.
Your Fund held a strong bias toward hard currencies in Europe, such as
the German mark or Swiss franc, as strains within the European currency
mechanism developed. During the reporting period the Spanish peseta and
Portuguese escudo were devalued against the mark. This resulted in a premium
being attached to core currency holdings with stronger fundamentals (e.g.
marks or francs). Conversely, peripheral markets, such as Sweden, Italy and
Spain had additional risk assigned to their currencies. Although these three
-2-
<PAGE>
nations offer some of the highest yielding issues in Europe and have made up
some of the lost ground from earlier in the year, they remain highly
volatile environments and we are avoiding them.
The Fund's bond holdings were heavily invested in core bond markets, which
tended to perform better on the basis of currency strength and a "flight to
quality" by many investors. For instance, we were drawn to Canada and
New Zealand where significant central bank/tightening and undervalued
currencies made investments especially attractive. Attractive
yields, a proactive British central bank plus a strong currency
also drew us to bonds from the United Kingdom.
The Outlook.
There are indications that the current global bond rally may have
run its course. Nevertheless foreign markets will remain an
attractive investment choice for U.S. investors, because they
offer the potential for better long-term performance and add an
element of diversification to most portfolios.
Please understand that there are special risks involved with foreign
investing. Foreign securities are not guaranteed and may be influenced
by currency fluctuations, political and social developments. These
risks are described fully in the Fund prospectus.
For further insight into what may be in store for global markets, we
invite you to read the following "Portfolio Q & A" feature with new
portfolio managers Simon Wells and Gabriel Irwin.
As always, it is a pleasure to have you as a shareholder of the Prudential
Short-Term Global Income Fund/Global Assets Portfolio, where we
are committed to managing the Fund for your benefit.
Sincerely,
Simon Wells Gabriel Irwin
Portfolio Manager Portfolio Manager
Richard A. Redeker
President
<PAGE>
-3-
PORTFOLIO Q&A
We are proud to announce that Simon Wells and
Gabriel Irwin have joined Prudential Mutual Funds. They will be
managing the Prudential Short-Term Global Income Fund/Global
Assets Portfolio. We talked to them about their outlook for the
global bond markets in 1995.
Q. Why have global bonds performed so well this year? How long can it last?
A. You have to view the first quarter rally in the context of what happened
in 1994. Last year was not good for bonds anywhere in the world. By year-end,
short-term investors had been frightened out of the market and portfolio
maturities were generally low. A number of market participants had shortened
maturities expecting rising interest rates. So when interest rates started
falling, they were forced to buy longer term bonds, which in turn has fueled
bond price increases. Such is life in the investment world. Our belief is
that there isn't much steam left in this rally, because although world
inflation is low, we are in an economic upturn usually the most bullish
environment for bonds.
Q. Why not just buy U.S. bonds and avoid foreign risk altogether?
A. Foreign bonds do not necessarily follow the U.S. market. One of the
attractions of the foreign bond market for risk-tolerant U.S. investors is
that there are almost invariably better return opportunities in a number
of foreign countries. Since the 1970s, the U.S. has been the best-performing
market in only one year -- 1984. This year alone, the Japanese bond market has
returned nearly 25% to U.S. investors. Also, there is always a strong case for
adding foreign bonds to a domestic portfolio for purposes of diversification.
-4-
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC. Portfolio of Investments
GLOBAL ASSETS PORTFOLIO April 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
Australia--8.6%
Australian Government
Treasury Notes,*
A$ 3,900 8.60%, 5/24/95........... $ 2,821,325
-----------
Canada--11.8%
Canadian Treasury Bills,*
C$ 1,960 8.16%, 6/22/95........... 1,423,584
1,000 7.88%, 6/29/95........... 725,393
1,350 8.37%, 8/3/95............ 972,101
1,000 6.88%, 8/10/95........... 718,956
-----------
3,840,034
-----------
New Zealand--14.2%
New Zealand Treasury
Bills,*
NZ$ 7,000 9.65%, 7/5/95............ 4,636,427
-----------
United Kingdom--4.9%
United Kingdom, C.D.,
BP 1,000 7.59%, 12/15/95.......... 1,612,210
-----------
United States--61.6%
Joint Repurchase
Agreement Account,
5.93%, 5/1/95, (Note
US$ 760 5)..................... $ 760,000
United States Treasury
Bills,*
18,500 5.83%, 5/25/95........... 18,425,699
1,000 6.36%, 8/10/95........... 983,620
-----------
20,169,319
-----------
Total Investments--101.1%
(cost US$32,879,834; Note
4)..................... 33,079,315
Liabilities in excess of
other
assets--(1.1%)........... (352,816)
-----------
Net Assets--100%......... $32,726,499
-----------
-----------
</TABLE>
- ------------------
Portfolio securities are classified by country according to the
security's currency denomination.
C.D.--Certificates of Deposit.
* Percentage quoted represents yield to maturity as of purchase date.
See Notes to Financial Statements.
-5-
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Statement of Assets and Liabilities
(Unaudited)
<TABLE>
<CAPTION>
Assets April 30, 1995
--------------
<S> <C>
Investments, at value (cost $32,879,834).................................................. $ 33,079,315
Cash...................................................................................... 42,209
Foreign currency, at value (cost $1,577).................................................. 1,704
Receivable for Fund shares sold........................................................... 893,924
Forward currency contracts--net amount receivable from counterparties..................... 815,697
Interest receivable....................................................................... 46,308
Deferred expenses and other assets........................................................ 13,159
--------------
Total assets............................................................................ 34,892,316
--------------
Liabilities
Payable for Fund shares reacquired........................................................ 1,010,348
Forward currency contracts--net amount payable to counterparties.......................... 960,661
Accrued expenses.......................................................................... 122,892
Dividends payable......................................................................... 42,087
Management fee payable.................................................................... 15,625
Distribution fee payable.................................................................. 14,204
--------------
Total liabilities....................................................................... 2,165,817
--------------
Net Assets................................................................................ $ 32,726,499
--------------
--------------
Net assets were comprised of:
Common stock, at par.................................................................... $ 18,311
Paid-in capital in excess of par........................................................ 48,662,533
--------------
48,680,844
Accumulated distribution in excess of net investment income............................. (5,072,919)
Accumulated net realized loss on investments............................................ (10,936,814)
Net unrealized appreciation on investments and foreign currencies....................... 55,388
--------------
Net assets, April 30, 1995................................................................ $ 32,726,499
--------------
--------------
Class A:
Net asset value and redemption price per share ($32,726,499 / 18,310,543 shares of
common stock
issued and outstanding)............................................................... $1.79
Maximum sales charge (.99% of offering price)........................................... .02
--------------
Maximum offering price to public........................................................ $1.81
--------------
--------------
</TABLE>
See Notes to Financial Statements.
-6-
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income April 30, 1995
--------------
<S> <C>
Income
Interest........................... $ 1,482,747
--------------
Expenses
Management fee..................... 111,146
Distribution fee--Class A.......... 101,042
Custodian's fees and expenses...... 115,000
Transfer agent's fees and
expenses........................... 29,000
Reports to shareholders............ 18,000
Directors' fees.................... 17,500
Legal fees......................... 14,000
Audit fee.......................... 12,500
Registration fees.................. 10,000
Amortization of organization
expenses........................... 6,000
Miscellaneous...................... 2,359
--------------
Total expenses................... 436,547
--------------
Net investment income................ 1,046,200
--------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign
Currency Transactions
Net realized loss on:
Investment transactions............ (352,728)
Foreign currency transactions...... (188,157)
Written option transactions........ (116,184)
--------------
(657,069)
--------------
Net change in unrealized
appreciation/ depreciation of:
Investments........................ 285,612
Foreign currencies................. (156,764)
--------------
128,848
--------------
Net loss on investments, foreign
currencies and written options..... (528,221)
--------------
Net Increase in Net Assets
Resulting from Operations............ $ 517,979
--------------
--------------
</TABLE>
PRUDENTIAL SHORT-TERM GLOBAL
INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Statement of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
Six Months Year
Net Increase (Decrease) Ended Ended
in Net Assets April 30, 1995 October 31, 1994
-------------- ----------------
<S> <C> <C>
Operations
Net investment income... $ 1,046,200 $ 3,377,861
Net realized loss on
investments and
foreign currency
transactions.......... (657,069) (3,538,581)
Net change in unrealized
appreciation/depreciation
of investments and
foreign currencies.... 128,848 540,308
-------------- ----------------
Net increase in net
assets resulting from
operations............ 517,979 379,588
-------------- ----------------
Contingent deferred sales
charges collected....... -- 8,161
-------------- ----------------
Dividends and
distributions
(Note 1)
Dividends from net
investment income
Class A............... (451,861) --
-------------- ----------------
Dividends in excess of
net investment income
Class A............... (497,874) (117,091)
Class B............... -- (411)
-------------- ----------------
(497,874) (117,502)
-------------- ----------------
Tax return of capital
distributions
Class A............... -- (3,826,815)
Class B............... -- (13,439)
-------------- ----------------
-- (3,840,254)
-------------- ----------------
Fund share transactions
(Note 6)
Net proceeds from shares
subscribed............ 1,136,130 4,822,020
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends and
distributions......... 703,121 2,685,643
Cost of shares
reacquired.............. (19,218,376) (82,912,800)
-------------- ----------------
Net decrease in net
assets from Fund share
transactions.......... (17,379,125) (75,405,137)
-------------- ----------------
Total decrease............ (17,810,881) (78,975,144)
Net Assets
Beginning of period....... 50,537,380 129,512,524
-------------- ----------------
End of period............. $ 32,726,499 $ 50,537,380
-------------- ----------------
-------------- ----------------
</TABLE>
See Notes to Financial Statements.
-7-
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Notes to Financial Statements
(Unaudited)
Prudential Short-Term Global Income Fund, Inc. (the ``Fund''), registered
under the Investment Company Act of 1940 as a non-diversified, open-end
management investment company, was incorporated in Maryland on February 21,
1990. The Fund consists of two series, namely: Short-Term Global Income
Portfolio and Global Assets Portfolio. The Global Assets Portfolio (the
``Portfolio'') commenced investment operations on February 15, 1991. The
investment objective of the Portfolio is to seek high current income with
minimum risk to principal, by investing primarily in high-quality debt
securities in the U.S. and abroad having remaining maturities of not more than
one year. The ability of the issuers of the debt securities held by the Fund to
meet their obligations may be affected by economic developments in a specific
country or industry.
Note 1. Accounting The following is a summary
Policies of significant accounting poli-
cies followed by the Fund, and the Portfolio in
the preparation of its financial statements.
Securities Valuation: In valuing the Fund's assets, quotations of foreign
securities in a foreign currency are converted to U.S. dollar equivalents at the
then current exchange rate. Government securities for which quotations are
available will be based on prices provided by an independent pricing service or
principal market makers. Other portfolio securities that are actively traded in
the over-the-counter market, including listed securities for which the primary
market is believed to be over-the-counter, will be valued at the average of the
quoted bid and asked prices provided by an independent pricing service or by
principal market makers. Any security for which the primary market is on an
exchange is valued at the last sale price on such exchange on the day of
valuation or, if there was no sale on such day, the last bid price quoted on
such day. Securities for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Board of Directors.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost which approximates market value.
In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Fund's policy that its custodian or designated
subcustodians, as the case may be under triparty repurchase agreements, take
possession of the underlying collateral securities, the value of which exceeds
the principal amount of the repurchase transaction including accrued interest.
If the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
Foreign Currency Translation: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(i) market value of investment securities, other assets and liabilities--at
the closing 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 period, the Fund does not isolate
that portion of the results of operations arising as a result of changes in the
foreign exchange rates from the fluctuations arising from changes in the market
prices of securities held at period end. Similarly, the Fund does not isolate
the effect of changes in foreign exchange rates from the fluctuations arising
from changes in the market prices of debt securities sold during the period.
Accordingly, such realized foreign currency gains and losses are included in the
reported net realized gains/losses on investment transactions.
Net realized losses on foreign currency transactions represents net foreign
exchange gains and losses from sales and maturities of short-term securities and
forward currency contracts, holding of foreign currencies, currency gains or
losses realized between the trade and settlement dates on securities
transactions, and the difference between the amounts of interest and foreign
taxes recorded on the Fund's books and the U.S. dollar equivalent amounts
actually received or paid. Net currency gains and losses from valuing foreign
currency denominated assets (excluding investments) and liabilities at period
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
-8-
<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: A forward currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. 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 or on specific receivables and payables denominated in a foreign
currency. The contracts are valued daily at current exchange rates and any
unrealized gain or loss is included in net unrealized appreciation or
depreciation on investments. Gain or loss is realized on the settlement date of
the contract equal to the difference between the settlement value of the
original and renegotiated forward contracts. This gain or loss, 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.
Options: The Fund may either purchase or write options in order to hedge against
adverse market movements or fluctuations in value caused by changes in
prevailing interest rates or foreign currency exchange rates with respect to
securities or currencies which the Fund currently owns or intends to purchase.
When the Fund purchases an option, it pays a premium and an amount equal to that
premium is recorded as an investment. When the Fund writes an option, it
receives a premium and an amount equal to that premium is recorded as a
liability. The investment or liability is adjusted daily to reflect the current
market value of the option. If an option expires unexercised, the Fund realizes
a gain or loss to the extent of the premium received or paid. If an option is
exercised, the premium received or paid is an adjustment to the proceeds from
the sale or the cost basis of the purchase in determining whether the Fund has
realized a gain or loss. The difference between the premium and the amount
received or paid on effecting a closing purchase or sale transaction is also
treated as a realized gain or loss. Gain or loss on purchased options is
included in net realized gain (loss) on investment transactions. Gain or loss on
written options is presented separately as net realized gain (loss) on written
option transactions.
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.
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 and decrease accumulated net realized loss on
investments by $556,802. This was primarily the result of net foreign currency
losses incurred for the six months ended April 30, 1995. 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 April 30,
1995 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.
-9-
<PAGE>
Note 2. Agreements The Fund has a management
agreement with Prudential Mutual Fund Management,
Inc. (``PMF''). Pursuant to this agreement, PMF has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PMF has entered into a subadvisory agreement with The Prudential
Investment Corporation (``PIC''); PIC furnishes investment advisory services in
connection with the management 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.
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 $1,300 in
front-end sales charges resulting from sales of Class A shares during the six
months ended April 30, 1995. From these fees, PMFD paid such sales charges to
Prudential Securities Incorporated (``PSI'') and Pruco Securities Corporation,
affiliated broker-dealers, which in turn paid commissions to salespersons and
incurred other distribution costs.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are indirect,
wholly-owned subsidiaries of The Prudential Insurance Company of America.
Note 3. Other Prudential Mutual Fund Ser-
Transactions vices, Inc. (``PMFS''), a
With Affiliates wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent and
during the six months ended April 30, 1995, the Portfolio incurred fees of
approximately $24,300 for the services of PMFS. As of April 30, 1995,
approximately $3,800 of such fees were due to PMFS for its services. Transfer
Agent fees and expenses in the Statement of Operations include certain
out-of-pocket expenses paid to non-affiliates.
Note 4. Portfolio The federal income tax basis
Securities of the Portfolio's investments
at April 30, 1995 was substantially the same as
the basis for financial reporting purposes and, accordingly, net unrealized
appreciation for federal income tax purposes was $199,481 (gross unrealized
appreciation--$388,846; gross unrealized depreciation--$189,365).
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. Accordingly, no
capital gains distributions are expected to be paid to shareholders until future
net gains have been realized in excess of such carryforward.
Transactions in options written during the six months ended April 30, 1995
were as follows:
<TABLE>
<CAPTION>
Number of
Contracts Premiums
(000) Received
---------- --------
<S> <C> <C>
Options outstanding at
October 31, 1994................. -- --
Options written.................... 1,149,145 $ 44,248
Options terminated in closing
purchase transactions............ (1,149,145) (44,248)
---------- --------
Options outstanding at
April 30, 1995................... -- --
---------- --------
---------- --------
</TABLE>
At April 30, 1995, the Portfolio had outstanding forward currency contracts,
both to purchase and sell foreign currencies, as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Purchase Contracts Payable Value (Depreciation)
- ----------------------- --------------- ----------- --------------
<S> <C> <C> <C>
Australian Dollars,
expiring 5/10/95..... $ 4,496,101 $ 4,409,254 $ (86,847)
British Pounds,
expiring
5/12-6/12/95......... 5,813,210 5,867,747 54,537
Deutschemarks,
expiring
5/2-11/1/95.......... 29,293,197 29,642,644 349,447
Japanese Yen,
expiring
6/6-6/12/95.......... 2,190,624 2,199,346 8,722
New Zealand Dollars,
expiring 5/3/95...... 1,031,690 1,045,945 14,255
Spanish Pesetas,
expiring
9/11-11/2/95......... 4,844,396 5,142,239 297,843
Swedish Krona,
expiring 9/29/95..... 710,000 721,993 11,993
--------------- ----------- --------------
$ 48,379,218 $49,029,168 $ 649,950
--------------- ----------- --------------
--------------- ----------- --------------
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- ----------------------- --------------- ----------- --------------
<S> <C> <C> <C>
Australian Dollars,
expiring
5/10-6/13/95......... $ 7,272,709 $ 7,212,464 $ 60,245
British Pounds,
expiring 5/12/95..... 1,594,530 1,611,474 (16,944)
Canadian Dollars,
expiring 5/18/95..... 1,710,865 1,732,715 (21,850)
Deutschemarks,
expiring
5/2-11/1/95.......... 31,062,462 31,472,097 (409,635)
Italian Lira,
expiring 5/18/95..... 631,496 642,197 (10,701)
Japanese Yen,
expiring 6/6/95...... 2,200,000 2,224,826 (24,826)
New Zealand Dollars,
expiring 5/3-6/2/95.. 2,034,859 2,089,449 (54,590)
Spanish Pesetas
expiring
9/11-11/2/95......... 4,838,960 5,147,429 (308,469)
Swedish Krona,
expiring 9/29/95..... 710,000 718,144 (8,144)
--------------- ----------- --------------
$ 52,055,881 $52,850,795 $ (794,914)
--------------- ----------- --------------
--------------- ----------- --------------
</TABLE>
Note 5. Joint The Portfolio, along with
Repurchase other affiliated registered
Agreement investment companies, trans-
Account fers uninvested cash balances
into a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements collateralized
by U.S. Treasury or Federal agency obligations. At April 30, 1995, the Fund had
a .11% undivided interest in the repurchase agreements in the joint account. The
undivided interest for the Fund represented $760,000 in principal amount. As of
such date, each repurchase agreement in the joint account and the value of the
collateral therefor were as follows:
Bear, Stearns & Co., 5.92%, in the principal amount of $125,000,000,
repurchase price $125,061,667, due 5/1/95. The value of the collateral including
accrued interest is $127,647,875.
UBS Securities Inc., 5.93%, in the principal amount of $100,000,000,
repurchase price $100,049,417, due 5/1/95. The value of the collateral including
accrued interest is $102,062,500.
Morgan Stanley and Co., Inc., 5.93%, in the principal amount of $225,000,000,
repurchase price $225,111,188, due 5/1/95. The value of the collateral including
accrued interest is $229,640,625.
CS First Boston Corp., 5.93%, in the principal amount of $225,000,000,
repurchase price $225,111,188, due 5/1/95. The value of the collateral including
accrued interest is $229,640,625.
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.
Transactions in shares of common stock for the six months ended April 30,
1995 and the fiscal year ended October 31, 1994 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------- ----------- ------------
<S> <C> <C>
Six months ended April 30,
1995:
Shares sold.................... 637,013 $ 1,136,130
Shares issued in reinvestment
of dividends................. 394,653 703,121
Shares reacquired.............. (10,760,411) (19,218,376)
----------- ------------
Net decrease in shares
outstanding.................. (9,728,745) $(17,379,125)
----------- ------------
----------- ------------
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)
----------- ------------
----------- ------------
<CAPTION>
Class B
- -------------------------------
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)
----------- ------------
----------- ------------
</TABLE>
-11-
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Class A Class B
------------------------------------------------------------- ---------------------------------------------------
February 15, November 1, February 15,
Six Months Year Ended 1991* 1993 Year Ended 1991*
Ended October 31, through through October 31, through
April 30, ------------------------------- October 31, May 9, ------------------- October 31,
1995 1994 1993 1992 1991 1994@ 1993 1992 1991
---------- ------- -------- -------- ------------ ----------- ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE
OPERATING
PERFORMANCE:
Net asset
value,
beginning
of period.. $ 1.80 $ 1.88 $ 1.89 $ 2.00 $ 2.00 $1.90 $ 1.89 $ 2.00 $ 2.00
---------- ------- -------- -------- ------------ ----- ------- -------- ------------
Income
from
investment
operations
Net
investment
income... .04 .08 .12 .16 .12D .04 .12 .15 .11D
Net
realized
and
unrealized
gain (loss)
on
investment
and foreign
currency
transactions.... (.01) (.07) (.04) (.13) -- (.03) (.04) (.13) --
---------- ------- -------- -------- ------------ ----- ------- -------- ------------
Total
from
investment
operations... .03 .01 .08 .03 .12 .01 .08 .02 .11
------- ----- -------- -------- ------------ ----- ------- -------- ------------
Less
distributions
Dividends
from net
investment
income... (04) -- (.04) (.14) (.12) -- (.04) (.13) (.11)
Tax return
of capital
distributions. -- (.09) (.05) -- -- (.05) (.05) -- --
------- ------- -------- -------- ------------ ----- ------- -------- ------------
Total
distributions. (.04) (.09) (.09) (.14) (.12) (.05) (.09) (.13) (.11)
-------- ------- -------- -------- ---------- ----- ------- -------- ------------
Contingent
deferred
sales
charges
collected... -- -- -- -- -- .03 .02 -- --
---------- ------- -------- -------- ------------ ----- ------- -------- ------------
Net asset
value,
end of
period... $ 1.79 $ 1.80 $ 1.88 $ 1.89 $ 2.00 $1.89 $ 1.90 $ 1.89 $ 2.00
---------- ------- -------- -------- ------------ ----- ------- -------- ------------
---------- ------- -------- -------- ------------ ----- ------- -------- ------------
TOTAL
RETURN#:... 1.81% 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)... $ 32,726 $50,537 $127,490 $113,412 $ 86,443 $0 $ 2,023 $199,890 $ 134,015
Average
net
assets
(000)... $ 40,752 $82,267 $153,339 $138,331 $ 23,224 $ 525 $52,653 $248,941 $ 42,449
Ratios to
average
net assets:
Expenses,
including
distribution
fees...... 2.11%** 1.73% 1.48% 1.33% 1.25%D** 1.21%** 1.61% 1.83% 1.75%D**
Expenses,
excluding
distribution
fees..... 1.61%** 1.23% .98% .83% .75%D** 1.21%** .98% .83% .75%D**
Net
investment
income... 5.18%** 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.
</FN>
</TABLE>
See Notes to Financial Statements.
-12-
<PAGE>
Directors
Stephen C. Eyre
Delayne Dedrick Gold
Don G. Hoff
Harry A. Jacobs, Jr.
Sidney R. Knafel
Robert E. La Blanc
Lawrence C. McQuade
Thomas A. Owens, Jr.
Richard A. Redeker
Clay T. Whitehead
Officers
Lawrence C. McQuade, President
Robert F. Gunia, Vice President
Susan C. Cote, Treasurer
S. Jane Rose, Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributors
Prudential Mutual Fund Distributors, Inc.
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
Legal Counsel
Shereff, Friedman, Hoffman & Goodman
919 Third Avenue
New York, NY 10022
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852, Collect (908) 417-7555
The accompanying financial statements as of April 30, 1995 were not
audited and, accordingly, no opinion is expressed on them. This report
is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
MF149E2
74436H309 (LOGO) Cat. #4443624
<PAGE>
SEMI-ANNUAL REPORT April 30, 1995
Prudential
Short-Term Global Income Fund, Inc.
(ICON)
Global Assets
Portfolio
(LOGO)
<PAGE>
Letter to Shareholders
December 19, 1994
Dear Shareholder:
The market environment facing global fixed income funds over the past 12
months was extremely difficult. The volatile interest rate and currency
market conditions in 1994 were to global fixed income instruments what
1987 was to equities -- extraordinarily unfavorable. Nevertheless, we
are pleased to have this opportunity to update you on your Fund's
activities. Because of the limited maturity profile of the Global
Assets Portfolio, this Fund was able to avoid some of the problems
of a rising interest rate climate, and the Fund's performance over
the year, was less volatile than most of the global short-term income
funds. For the year, your Fund performed in line with the Lipper
Short-Term Multi-Market Average.
<TABLE>
HISTORICAL TOTAL RETURNS1
As of October 31, 1994
<CAPTION>
One Year Since Inception2
<S> <C> <C>
Class A +0.5% +12.7%
Lipper ST World
Multi-Mkt Avg.3 +0.7 N/A
</TABLE>
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS4
As of September 30, 1994
<CAPTION>
One Year Since Inception2
<S> <C> <C>
Class A -0.5% +2.9%
</TABLE>
1 Source: Prudential Mutual Fund Management. Past performance is not a
guarantee of future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more
or less than their original cost. These figures do not take into account
sales charges.
2 Inception dates: 2/15/91 Class A.
3 This is the average of 63 funds in the Short-Term World Multi-Market
Average, according to Lipper Analytical Services, Inc.
4 Source: Prudential Mutual Fund Management. These figures take into
account applicable sales charges. The Fund charges a maximum sales load
of .99% for Class A shares.
-1-
<PAGE>
Fund Overview
The Global Assets Portfolio invests in short-term, worldwide debt
securities with remaining maturities of not more than one year.
The Fund's net asset value as of October 31, 1994 was $1.80 for Class
A. The Fund also paid dividends of $0.09 per Class A share for the
12-month period ended October 31, 1994.
Bond Markets
The market climate of falling interest rates that were so favorable
for global fixed income funds essentially disappeared during 1994.
The dollar bloc countries led a backup in interest rates (US, Canada,
Australia, and New Zealand). With surging economic growth, inflation
fears and upward interest rate pressures, this weighed heavily on
bond prices. The result, even at the short end of nearly every bond
market around the world, was negative return. Interest rate hikes by
the US Federal Reserve were followed by, and in some cases (like Australia)
exceeded, hikes in other dollar bloc bond markets.
The dramatic rise in market interest rates in many countries far exceeded
official interest rate hikes. At the beginning of the year, the Fund held
securities in the US, Mexico, Canada, Australia, and New Zealand. Bond
prices in the portfolio fell as interest rates rose, although the relatively
short maturity structure offered some shelter. However, we sold securities
at lower prices to meet redemption requests. Subsequently, the depth and
speed with which the same economies rebounded resulted in sharp reversals
of monetary policy, and short-term rates shot up. Additionally, the cross
hedges we had put in place for the currency exposure in the Italian,
Swedish, and Spanish markets lost ground.
Over the last few months, we positioned the Fund in Mexico in both
peso-denominated Cetes and dollar-denominated Tesobonos. Now, we
continue to favor New Zealand among the dollar-block markets, and are
holding positions there, as well as in Canada, Australia and the U.S.
As rates have risen, we have been able to lock in quite attractive yields.
Currency Markets
Further confounding the environment over the period was a volatile trading
pattern exhibited by the U.S. dollar. While rising interest rates in the
US (accompanied by a cumulative hike of 225 basis points engineered by the
Federal Reserve) would in most periods have pushed the US dollar higher,
concerns about trade policy with Japan, our chronic (and rising) current
account deficit, and general lack of confidence about US policy in general
instead weighed the dollar down -- certainly relative to the Japanese yen,
and even compared to some of the slower-growing countries of Europe.
-2-
<PAGE>
We had anticipated that rising US interest rates in combination with
flat European rates would strengthen the dollar, and during the first
and second quarters of 1994, hedged a significant portion of the Fund's
assets back into US dollars. We hedged non-core European bond exposure
by cross hedging with Deutschemarks and Yen. When the anticipated US
dollar recovery failed to materialize, these positions lost ground.
During the third quarter, we recaptured some positive currency movement
by lifting some of the hedges, and then repositioning. We are now holding
primarily dollar bloc currencies, and hedging our UK exposure through
Deutschemarks.
Outlook
This year has unquestionably been a tough one for global fixed income.
However, there has been a positive aspect for funds such as yours. As
rates have risen, we have been able to capture some higher yielding
coupons that will increase the income stream to the Fund. We believe,
looking forward, that there will be relief from the volatility experienced
in the global bond environment over the past year, and that the current
level of interest rates worldwide will provide some opportunity for more
positive performance in the coming year.
As always, it is a pleasure to have you as a shareholder of the Prudential
Short-Term Global Income Fund / Global Assets Portfolio and to take this
opportunity to report our activities to you.
Sincerely,
Lawrence C. McQuade
President
Jeffrey Brummette
Portfolio Manager
-3-
<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$0.7413............. 37,722
Japanese Yen,
(YEN) 3,600 expiring 5/5/95
@ (YEN)105.50.......... 9,720
Currency Put Options
Japanese Yen,
(YEN) 2,900 expiring 1/26/95
@ (YEN)93.70........... 23,490
Cross-Currency Put
Options
Deutschemarks,
expiring 1/12/95
@ DM 972.30 per Italian
DM 2,700 Lira................... 1,620
@ DM 974.16 per Italian
3,700 Lira................... 737
</TABLE>
-4- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
GLOBAL ASSETS PORTFOLIO
<TABLE>
<CAPTION>
US$
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.
-5- See Notes to Financial Statements.
<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.
-6-
<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.
-7-
<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.
-8-
<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
-9-
<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>
-10-
<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.
-11-
<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>
-12-
<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.
</FN>
</TABLE>
See Notes to Financial Statements.
-13-
<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
-14-
<PAGE>
Past performance is not predictive of future performance and an investor's
shares may be worth more or less than their original cost.
These graphs are furnished to you in accordance with SEC regulations. They
compare a $10,000 investment in Prudential Short-Term Global Income Fund: Global
Assets Portfolio (Class A) with a similar investment in the J.P. Morgan Global
Short-Term Index (GSTI) by portraying the initial account values at the
commencement of operations and subsequent account values at the end of each
fiscal year (October 31), as measured on a quarterly basis, beginning in 1991
for Class A shares. For purposes of the graph and, unless otherwise indicated,
the accompanying table, it has been assumed that (a) the maximum sales charge
was deducted from the initial $10,000 investment in Class A shares; (b) all
recurring fees (including management fees) were deducted; and (c) all dividends
and distributions were reinvested.
The GSTI is a weighted index of liquid, short-term government bonds of the
following countries: Belgium, Sweden, Germany, Australia, Canada, Denmark,
France, Italy, Japan, Netherlands, Spain, U.S. and U.K. The GSTI is an unmanaged
index and changes in market capitalization in the GSTI are revised monthly. The
GSTI does not reflect the payment of transaction costs and advisory fees
associated with an investment in the Fund. The securities which comprise the
GSTI may differ substantially from the securities in the Fund's portfolio. The
GSTI is not the only index that may be used to characterize performance of
global income funds and other indices may portray different comparative
performance.
-15-
<PAGE>
Directors
Stephen C. Eyre
Delayne Dedrick Gold
Don G. Hoff
Harry A. Jacobs, Jr.
Sidney R. Knafel
Robert E. La Blanc
Lawrence C. McQuade
Thomas A. Owens, Jr.
Richard A. Redeker
Clay T. Whitehead
Officers
Lawrence C. McQuade, President
Robert F. Gunia, Vice President
Susan C. Cote, Treasurer
S. Jane Rose, Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributors
Prudential Mutual Fund Distributors, Inc.
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
Legal Counsel
Shereff, Friedman, Hoffman & Goodman
919 Third Avenue
New York, NY 10022
Prudential Mutual FundsOne Seaport Plaza
New York, NY 10292
Toll free (800) 225-1852, Collect (908) 417-7555
This report is not authorized for distribution to prospective investors
unless preceded or accompanied by a current prospectus.
MF 149E
74436H309 (LOGO) Cat #4443616
ANNUAL REPORT October 31,1994
Prudential Short-Term Global
Income Fund, Inc.
(ICON)
Global Assets
Portfolio
(LOGO)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SYNOPSIS ................................................................................ 2
General ............................................................................. 2
The Proposed Reorganization and Liquidation ......................................... 2
Reasons for the Proposed Reorganization and Liquidation ............................. 3
Certain Differences Between Limited Maturity Portfolio and Global Assets Portfolio .. 5
Structure of Limited Maturity Portfolio and Global Assets Portfolio.................. 7
Investment Objective and Policies--Limited Maturity Portfolio........................ 8
Fees and Expenses ................................................................... 8
Management Fees ................................................................. 8
Distribution Fees ............................................................... 9
Other Expenses .................................................................. 10
Fee Waivers and Subsidy ......................................................... 10
Expense Ratios .................................................................. 10
Purchases and Redemptions ........................................................... 11
Exchange Privileges ................................................................. 12
Dividends and Distributions ......................................................... 12
Federal Tax Consequences of Proposed Reorganization ................................. 12
PRINCIPAL RISK FACTORS .................................................................. 13
Longer Weighted Average Maturity..................................................... 13
Foreign Investment .................................................................. 13
Non-Investment Grade Securities ..................................................... 13
Other Investments and Investment Techniques ......................................... 15
Zero Coupon Securities .......................................................... 15
Convertible Securities........................................................... 15
Securities of Other Investment Companies ........................................ 16
THE PROPOSED TRANSACTION ................................................................ 16
Agreement and Plan of Reorganization and Liquidation ................................ 16
Reasons for the Reorganization and Liquidation ...................................... 18
Description of Securities to be Issued .............................................. 18
Tax Considerations .................................................................. 19
Certain Comparative Information About the Fund and its Portfolios ................... 19
Organization .................................................................... 19
Capitalization .................................................................. 19
Shareholder Meetings and Voting Rights .......................................... 20
Shareholder Liability ........................................................... 20
Liability and Indemnification of Directors ...................................... 20
Pro Forma Capitalization and Ratios ................................................. 20
INFORMATION ABOUT LIMITED MATURITY PORTFOLIO ............................................ 21
INFORMATION ABOUT GLOBAL ASSETS PORTFOLIO ............................................... 22
VOTING INFORMATION ...................................................................... 24
OTHER MATTERS ........................................................................... 25
SHAREHOLDERS' PROPOSALS ................................................................. 25
APPENDIX A--Agreement and Plan of Reorganization and Liquidation ......................... A-1
APPENDIX B--Semi-Annual and Annual Reports to Shareholders-Limited
Maturity Portfolio ........................................................... B-1
APPENDIX C--Semi-Annual and Annual Reports to Shareholders-Global
Assets Portfolio ............................................................. C-1
TABLE OF CONTENTS
ENCLOSURES
Prospectus of Limited Maturity Portfolio (formerly Short-Term Global Income
Portfolio) dated January 3, 1995, including April 17, 1995, May 5, 1995, July 3, 1995 and
October 17, 1995 Supplements thereto.
Prospectus of Global Assets Portfolio dated January 3, 1995, including April 17,
1995, May 5, 1995, July 3, 1995, October 6, 1995 and October 17, 1995 Supplements
thereto.
</TABLE>
<PAGE>
PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
(LIMITED MATURITY PORTFOLIO)
STATEMENT OF ADDITIONAL INFORMATION
dated November , 1995
ACQUISITION OF ASSETS OF
PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
(GLOBAL ASSETS PORTFOLIO)
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292
(800) 225-1852
----------------
BY AND IN EXCHANGE FOR THE SHARES OF
PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
ONE SEAPORT PLAZA
NEW YORK, NEW YORK 10292
(800) 225-1852
This Statement of Additional Information, relating specifically to the
proposed transfer of all the assets and the assumption of all the liabilities,
if any, of Prudential Global Limited Maturity Fund, Inc.-Global Assets Portfolio
(the Acquired Portfolio) by Prudential Limited Maturity Fund, Inc.-Limited
Maturity Portfolio (the Acquiring Portfolio) consists of this cover page, the
attached pro forma financial statements and the Statement of Additional
Information of the Acquiring Portfolio dated January 3, 1995 and Supplements
thereto, which document is attached hereto and incorporated herein by reference.
The Statement of Additional Information is not a prospectus. A Prospectus
and Proxy Statement dated November , 1995 relating to the above referenced
matter may be obtained from the Acquiring Portfolio without charge by writing or
calling Prudential Global Limited Maturity Fund, Inc., at the address or
telephone number listed above. This Statement of Additional Information relates
to, and should be read in conjunction with, the Prospectus and Proxy Statement.
1
<PAGE>
FINANCIAL STATEMENTS
The following are pro forma financial statements which give effect to the
proposed transaction whereby all the assets of Prudential Global Limited
Maturity Fund, Inc.: Global Assets Portfolio will be exchanged for shares of
Prudential Global Limited Maturity Fund, Inc.: Limited Maturity Portfolio and
Prudential Global Limited Maturity Fund, Inc.: Limited Maturity Portfolio will
assume the liabilities, if any, of Prudential Global Limited Maturity Fund,
Inc.: Global Assets Portfolio. Immediately thereafter, the shares of Prudential
Global Limited Maturity Fund, Inc.: Limited Maturity Portfolio will be
distributed to the shareholders of Prudential Global Limited Maturity Fund,
Inc.: Global Assets Portfolio in a total liquidation of Prudential Global
Limited Maturity Fund, Inc.: Global Assets Portfolio which will subsequently be
terminated. The following pro forma financial statements include a pro forma
Portfolio of Investments at April 30, 1995, a pro forma Statement of Assets and
Liabilities at April 30, 1995 and a pro forma Statement of Operations for the
year ended April 30, 1995.
<PAGE>
PROFORMA FINANCIAL STATEMENTS
Pro-Forma Portfolio of Investments
April 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Principal Amount (000) Value
- --------------------------------------------- ------------------------------------------------
Prudential Global Limited Maturity Fund, Inc. Prudential Global Limited Maturity Fund, Inc.
- --------------------------------------------- ------------------------------------------------
Limited Global Limited Global
Maturity Assets Maturity Assets Pro Forma Pro Forma
Portfolio Portfolio Total Description Portfolio Portfolio Adjustments Combined
<S> <C> <C> <C> <C> <C> <C> <C>
LONG-TERM INVESTMENTS-33.8%
Australia 10.4%
$ 8,975 $ 8,975 Queensland Treasury Corp., 8.00%,
5/14/97 ............................ $ 6,416,458 $ 6,416,458
7,815 7,815 South Australia Fin. Auth., 12.50%,
3/15/98 ............................ 6,158,327 6,158,327
8,500 8,500 Victorian Treasury Corp.,
12.50%,9/15/97 ..................... 6,654,026 6,654,026
------------ ----------- ----------- ------------
19,228,811 0 0 19,228,811
------------ ----------- ----------- ------------
Denmark-5.9%
60,100 60,100 Kingdom of Denmark, 7.00%, 8/15/97 ... 10,962,281 0 0 10,962,281
------------ ----------- ----------- ------------
Italy-2.6%
8,000,000 8,000,000 Export Finance of Norway, 12.25%,
8/5/96 ............................. 4,783,095 0 0 4,783,095
------------ ----------- ----------- ------------
United Kingdom-14.7%
5,000 5,000 Bayerische Hypothelsen Bank,
11.125%, 6/24/96 ................... 8,325,679 8,325,679
4,350 4,350 United Kingdom Treasury Bonds,
13.25%, 1/22/97 .................... 7,616,706 7,616,706
5,000 5,000 United Kingdom Treasury Bonds,
8.75%, 9/1/97 ...................... 8,188,300 8,188,300
2,000 2,000 United Kingdom Treasury Bonds,
7.25%, 3/30/98 ..................... 3,148,417 3,148,417
------------ ----------- ----------- ------------
27,279,102 0 0 27,279,102
------------ ----------- ----------- ------------
United States-0.2%
600 600 Cedulas Hipotecarias Rurales, 7.90%,
9/1/00 ............................. 483,000 0 0 483,000
------------ ----------- ----------- ------------
Total long-term investments
(cost $63,032,550) ................. 62,736,289 0 0 62,736,289
------------ ----------- ----------- ------------
SHORT-TERM INVESTMENTS-66.2%
Australia-1.5%
$3,900 3,900 Australian Government Treasury Notes,
8.60%, 5/24/95 ..................... 0 $ 2,821,325 0 2,821,325
------------ ----------- ----------- ------------
Canada-11.8%
10,000 10,000 Canadian Treasury Bills, 8.25%,
5/18/95 ............................ 7,320,477 7,320,477
1,960 1,960 Canadian Treasury Bills, 8.16%, 6/22/95 1,423,584 1,423,584
1,000 1,000 Canadian Treasury Bills, 7.88%, 6/29/95 725,393 725,393
15,000 1,350 16,350 Canadian Treasury Bills, 8.37%, 8/3/95 10,801,125 972,101 11,773,226
1,000 1,000 Canadian Treasury Bills, 6.88%, 8/10/95 718,956 718,956
------------ ----------- ----------- ------------
18,121,602 3,840,034 0 21,961,636
------------ ----------- ----------- ------------
Mexico-0.1%
114 114 Mexican Tesobonos, 8.40%, 8/17/95 .... 108,961 0 0 108,961
------------ ----------- ----------- ------------
New Zealand-11.2%
11,075 11,075 New Zealand Treasury Bills, 8.47%,
6/21/95 ............................ 7,347,178 7,347,178
7,000 7,000 New Zealand Treasury Bills, 9.65%,
7/5/95 ............................. 4,636,427 4,636,427
13,400 13,400 New Zealand Treasury Bills, 9.36%,
8/2/95 ............................. 8,815,365 8,815,365
------------ ----------- ----------- ------------
16,162,543 4,636,427 0 20,798,970
------------ ----------- ----------- ------------
Spain-0.7%
150,000 150,000 Nordic Investment Bank, 13.80%, 11/30/95 1,243,819 0 0 1,243,819
------------ ----------- ----------- ------------
1
<PAGE>
PROFORMA FINANCIAL STATEMENTS
Pro-Forma Portfolio of Investments
April 30, 1995
(Unaudited)
Principal Amount (000) Value
- -------------------------------------------- ---------------------------------------------
Prudential Global Limited Maturity Fund, Inc. Prudential Global Limited Maturity Fund, Inc.
- -------------------------------------------- ---------------------------------------------
Limited Global Limited Global
Maturity Assets Maturity Assets Pro Forma Pro Forma
Portfolio Portfolio Total Description Portfolio Portfolio Adjustments Combined
--------- --------- ----- ------------------------------------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
United Kingdom-3.5%
$ 2,500 $ 1,000 $ 3,500 United Kingdom, C.D., Bank of
Scottland, 7.59%, 12/15/95 ........ $ 4,030,526 $ 1,612,210 $ 5,642,736
500 500 United Kingdom, C.D., Bank of
Scottland, 7.50%, 12/19/95 ........ 804,875 804,875
------------ ----------- -------- ------------
4,835,401 1,612,210 0 6,447,611
------------ ----------- -------- ------------
United States-37.4%
7,371 760 8,131 Joint Repurchase Agreement Account,
5.93%, 5/1/95 ..................... 7,371,000 760,000 8,131,000
36,000 18,500 54,500 United States Treasury Bills, 5.83%,
5/25/95 ........................... 35,847,986 18,425,699 54,273,685
6,000 6,000 United States Treasury Bills, 6.35%,
8/10/95 ........................... 5,901,721 5,901,721
1,000 1,000 United States Treasury Bills, 6.36%,
8/10/95 ........................... 983,620 983,620
------------ ----------- -------- ------------
49,120,707 20,169,319 0 69,290,026
------------ ----------- -------- ------------
Total short-term investments (cost
$120,864,039) ..................... 89,593,033 33,079,315 0 122,672,348
------------ ----------- -------- ------------
Total Investments-100.0%
(cost $183,896,589) ............... 152,329,322 33,079,315 0 185,408,637
Liabilities in excess of other assets 310,760 (352,816) ($11,937) (53,993)
------------ ----------- -------- ------------
Net Assets-100% ..................... $152,640,082 $32,726,499 ($11,937) $185,354,644
============ =========== ======== ============
<FN>
- -----------
Portfolio securities are classified by country according to the securities currency denomination.
*Percentage quoted represents yield-to-maturity as of purchase date.
C.D.-Certificates of Deposit.
</FN>
</TABLE>
2
<PAGE>
Pro-Forma Statement of Assets and Liabilities
April 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Prudential Global Limited Maturity Fund Inc.
--------------------------------------------------------
Limited Global
Maturity Assets Pro Forma Pro Forma
Portfolio Portfolio Adjustments Combined
--------- --------- ----------- --------
<S> <C> <C> <C> <C>
Assets
Investments, at value (cost $151,016,755 and
$32,879,834, respectively) ................. $152,329,322 $33,079,315 $185,408,637
Cash - 42,209 42,209
Foreign currency, at value (cost $3,232
and $1,577, respectively) .................. 3,457 1,704 5,161
Receivable for investments sold .............. 6,664,602 - 6,664,602
Forward currency contracts-net amount
receivable from counterparties ............... 3,872,066 815,697 4,687,763
Interest receivable .......................... 2,833,563 46,308 2,879,871
Receivable for Fund shares sold .............. 3,019 893,924 896,943
Deferred expenses and other assets ........... 31,187 13,159 (11,937)* 32,409
------------ ----------- --------- ------------
Total assets 165,737,216 34,892,316 (11,937) 200,617,595
------------ ----------- --------- ------------
Liabilities
Payable for investments purchased ............ 6,409,241 - 6,409,241
Forward currency contracts-net amount
payable to counterparties .................. 4,635,652 960,661 5,596,313
Payable for Fund shares reacquired ........... 1,295,708 1,010,348 2,306,056
Accrued expenses ............................. 313,872 122,892 436,764
Dividends payable ............................ 259,879 42,087 301,966
Distribution fee payable ..................... 86,549 14,204 100,753
Management fee payable ....................... 70,785 15,625 86,410
Withholding taxes payable .................... 25,448 - 25,448
------------ ----------- --------- ------------
Total liabilities 13,097,134 2,165,817 - 15,262,951
------------ ----------- --------- ------------
Net Assets .......................... $152,640,082 $32,726,499 ($11,937) $185,354,644
============ =========== ======== ============
Net assets were comprised of:
Common stock at par ...................... $18,270 $18,311 ($14,382)** $22,199
Paid in capital in excess of par ......... 206,344,469 48,662,533 2,445*/** 255,009,447
------------ ----------- --------- ------------
206,362,739 48,680,844 (11,937) 255,031,646
Accumulated distributions in excess of
net investment income ...................... (13,456,092) (5,072,919) (18,529,011)
Accumulated net realized loss on investment .. (40,822,609) 10,936,814) (51,759,423)
Net unrealized appreciation on
investments and foreign currencies ......... 556,044 55,388 611,432
------------ ----------- --------- ------------
Net assets, April 30, 1995 ................... $152,640,082 $32,726,499 ($11,937) 185,354,644
============ =========== ======== ============
Class A:
Net asset value and redemption price
per share .............................. $8.33 $1.79 $8.33
Maximum sales charge (3.00% and 0.99% of
offering price, respectively) .......... 0.26 0.02 0.26
------------ ----------- ------------
Maximum offering price ................... $8.59 $1.81 $8.59
============ =========== ============
Class B:
Net asset value, offering price and
redemption price per share ............. $8.36 $8.36
============ ============
Class C
Net asset value, offering price and
redemption price per share ............. $8.36 $8.36
============ ============
<FN>
- ------------
**Adjustment to reflect the write off of unamortized deferred organization costs of Global Assets Portfolio.
**Adjustment to reflect the exchange of common stock of Global Assets Portfolio for common stock of Limited Maturity
Portfolio.
</FN>
</TABLE>
3
<PAGE>
Pro-Forma Statement of Operations
Year Ended April 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Prudential Global Limited Maturity Fund, Inc.
---------------------------------------------------------
Limited Global
Maturity Assets Pro Forma Pro Forma
Portfolio Portfolio Adjustments Combined
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net Investment Income
Income
Interest ........................... $19,560,069 $3,430,019 $22,990,088
----------- ---------- --------- -----------
Expenses
Distribution Fee Class A ........... 39,709 260,205 ($182,460)(a) 117,454
Distribution Fee Class B ........... 1,630,629 - 1,630,629
Management fee ..................... 1,223,014 286,234 1,509,248
Custodian's fees & expenses ........ 520,000 247,000 (172,900)(b) 594,100
Transfer agents fees & expenses .... 340,000 58,000 398,000
Reports to shareholders ............ 180,000 27,000 (9,000)(b) 198,000
Registration fees .................. 64,000 9,000 (9,000)(b) 64,000
Amortization of organization expenses 40,000 12,000 11,937(c) 63,937
Directors' fees .................... 35,000 35,000 70,000
Legal fees ......................... 30,000 29,000 (29,000)(b) 30,000
Audit fee .......................... 33,500 22,500 (16,000)(b) 40,000
Miscellaneous ...................... 21,055 9,122 (8,177)(b) 22,000
----------- ---------- --------- -----------
Total expenses .............. 4,156,907 995,061 (414,600) 4,737,368
----------- ---------- --------- -----------
Net investment income ................ 15,403,162 2,434,958 414,600 18,252,720
----------- ---------- --------- -----------
Realized and Unrealized
Gain (Loss) on Investments and
Foreign Currency Transactions
Net realized gain (loss) on:
Investment transactions ............ (17,488,654) (1,221,874) (18,710,528)
Foreign currency transactions ...... (7,798,393) (1,478,171) (9,276,564)
Written option transactions ........ 101,880 98,346 200,226
Futures transactions ............... (8,570) - (8,570)
----------- ---------- -----------
(25,193,737) (2,601,699) (27,795,436)
Net change in unrealized appreciation/
depreciation of:
Investments ...................... (455,221) 235,442 (219,779)
Foreign currencies ............... 5,092,243 3,424 5,095,667
Written options .................. 636,041 197,878 833,919
----------- ---------- -----------
5,273,063 436,744 5,709,807
----------- ---------- -----------
Net gain (loss) on investments ....... (19,920,674) (2,164,955) (22,085,629)
----------- ---------- --------- -----------
Net Increase (Decrease) in Net Assets
Resulting from Operations ............ ($4,517,512) $270,003 $414,600 ($3,832,909)
----------- ---------- -------- -----------
<FN>
- --------------
(a) Adjustment to reflect reduction in distribution fees of Limited Maturity Portfolio.
(b) Adjustment to reflect reduction of duplicative expenses.
(c) Adjustment to reflect the write off of unamortized deferred organization costs of Global Assets Portfolio.
</FN>
</TABLE>
4
<PAGE>
Notes to Pro Forma Financial Statements
Prudential Global Limited Maturity Fund, Inc.: Limited Maturity Portfolio
(the "Fund"), is registered under the Investment Company Act of 1940 as a
non-diversified, open-end management investment company. The investment
objective of the Fund is to maximize 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.
The following are pro forma financial statements which give effect to the
proposed transaction whereby all the assets of Prudential Global Limited
Maturity Fund, Inc: Global Assets Portfolio will be exchanged for shares of
Prudential Global Limited Maturity Fund, Inc.: Limited Maturity Portfolio and
Prudential Global Limited Maturity Fund, Inc.: Limited Maturity Portfolio will
assume the liabilities, if any, of Prudential Global Limited Maturity Fund,
Inc.: Global Assets Portfolio. Immediately thereafter, the shares of Prudential
Global Limited Maturity Fund, Inc.: Limited Maturity Portfolio will be
distributed to the shareholders of Prudential Global Limited Maturity Fund,
Inc.: Global Assets Portfolio in a total liquidation of Prudential Global
Limited Maturity Fund, Inc.: Global Assets Portfolio which will subsequently be
terminated. The following pro forma financial statements include a pro forma
Portfolio of Investments at April 30, 1995, a pro forma Statement of Assets and
Liabilities at April 30, 1995 and a pro forma Statement of Operations for the
year ended April 30, 1995.
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements.
Securities Valuations: 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 sales price in 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 transaction 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, take
possession of the underlying collateral securities, the value of which exceeds
the principal amount of the repurchase transaction including accrued interest.
If the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the security, realization of the
collateral by the Fund may be delayed or limited.
Foreign Currency Translation: The books and records of the 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 foreign exchange rates and market
values at the close of the fiscal period, the Fund does not isolate that portion
of the results of operation arising as a result of changes in the foreign
exchange rates from the fluctuations arising from changes in the market price of
securities held at the end of the fiscal period. Similarly, the Fund does not
isolate the effect of changes in foreign exchange rates from the fluctuations
arising from changes in the market prices of long-term debt securities sold
during the fiscal period.
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 period 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.
5
<PAGE>
Forward Currency Contracts: A forward currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. 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 or on specific receivables and payables denominated in a foreign
currency. The contracts are valued daily at current exchange rates and any
unrealized gain or loss is included in net unrealized appreciation or
depreciation on investments. Gain or loss is realized on the settlement date of
the contract equal to the difference between the settlement value of the
original and renegotiated forward contracts. This gain or loss, if any, is
included in net realized gain (loss) on foreign currency transactions. Risk may
arise upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts.
Options: The Fund may either purchase or write options in order to hedge
against adverse market movements or fluctuation in value caused by changes in
prevailing interest rates or foreign currency exchange rates with respect to
securities or currencies which the Fund currently owns or intends to purchase.
When the Fund purchases an option, it pays a premium and an amount equal to that
premium in recorded as an investment. When the Fund writes an option, it
receives a premium and an amount equal to that premium is recorded as a
liability. The investment or liability is adjusted daily to reflect the current
market value of the option. If an option expires unexercised, the Fund realizes
a gain or loss to the extent of the premium received or paid . If an option is
exercised, the premium received or paid is an adjustment to the proceeds from
the sale or the cost basis of the purchases in determining whether the Fund has
realized a gain or loss. The difference between the premium and the amount
received or paid on effecting a closing purchase or sale transaction is also
treated as a realized gain or loss. Gain or loss on purchased options is
included in net realized gain (loss) on investment transactions. Gain or loss on
written options is presented separately as net realized gain (loss) on written
option transactions.
The Fund, as writer of an option, has no control over whether the underlying
securities or currencies may be sold (called) or purchased (put). As a result,
the Fund bears the market risk of an unfavorable change in the price of the
security or currency underlying the written option. The Fund, as purchaser of an
option, bears the risk of the potential inability of the counterparties to meet
the terms of their contracts.
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 an 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. Theses differences are primarily due to differing
treatments for foreign currency transactions.
Federal Income Taxes: It is the intent of the Fund to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its net income to its 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 Fund commenced investment operations. PMF has agreed not to redeem the
10,000 shares purchased until all organization expenses have been amortized.
Reorganization and Solicitation Expenses: Expenses of reorganization and
solicitation will be borne by the Fund and will include reimbursement of
brokerage firms and others for expenses in forwarding proxy solicitation
material to shareholders.
Note 2. Agreements
The Fund has a management agreement with Prudential Mutual Fund Management,
Inc. ("PMF"). Pursuant to this agreement, PMF has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PMF has entered into a subadvisory agreement with The Prudential
Investment Corporation ("PIC"); PIC furnishes
6
<PAGE>
investment advisory services in connection with the management 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 Fund's average daily net assets.
The Fund has distribution agreements with Prudential Mutual Fund
Distributors, Inc. ("PMFD"), which acts as the distributor of the Class A shares
of the Fund, and with Prudential Securities Incorporated ("PSI"), which acts as
distributor of the Class B and Class C shares of the Fund. The Fund 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 Fund 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
year ended April 30, 1995. PMFD pay various broker-dealers, including PSI and
Pruco Securities Corporation ("Prusec"), affiliated broker-dealers, for account
servicing fees and other expenses incurred by such broker-dealers.
Pursuant to the Class B and C Plans, the Fund compensates PSI for
distribution-related activities at an annual rate of up to 1% of average daily
net assets of both the Class B and C shares. Such expenses under the Class B and
Class C Plans were both charged at .75 of 1% of the average daily net assets of
the Class B and Class C shares for the year ended April 30, 1995.
PMFD has advised the Fund that it has received approximately $8,400 in
front-end sales charges resulting from sales of Class A shares during the year
ended April 30, 1995. 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.
PSI has advised the Fund that for the year ended April 30, 1995, it received
approximately $1,004,500 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.
7
<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 OF CONTENTS
<TABLE>
<CAPTION>
Cross-reference
to page in
Prospectus
------------------------------
Short-Term
Global Income Global Assets
Page Portfolio Portfolio
---- ------------- -------------
<S> <C> <C> <C>
Additional Investment Information ............................................ B-2 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-70 - -
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
MF1498
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
Investment Policies
U.S. Government Securities
"U.S. Government securities" shall include the following:
U.S. Treasury Securities. Each Portfolio may invest in U.S. Treasury
securities, including bills, notes and bonds issued by the U.S. Treasury. These
instruments are direct obligations of the U.S. Government and, as such, are
backed by the "full faith and credit" of the United States. They differ
primarily in their interest rates, the lengths of their maturities and the dates
of their issuances.
Obligations Issued or Guaranteed by U.S. Government Agencies and
Instrumentalities. Each Portfolio may invest in obligations issued by agencies
of the U.S. Government or instrumentalities established or sponsored by the U.S.
Government. These obligations, including those that are guaranteed by federal
agencies or instrumentalities, may or may not be backed by the "full faith and
credit" of the United States. Obligations of the Government National Mortgage
Association (GNMA), the Farmers Home Administration and the Export-Import Bank
are backed by the full faith and credit of the U.S. Government. Securities in
which a Portfolio may invest that are not backed by the full faith and credit of
the U.S. Government include obligations issued by the Tennessee Valley
Authority, the Federal National Mortgage Association (FNMA), the Federal Home
Loan Mortgage Corporation (FHLMC), the Resolution Funding Corporation and the
United States Postal Service, each of which has the right to borrow from the
United States Treasury to meet its obligations, and obligations of the Federal
Farm Credit Bank and the Federal Home Loan Bank, the obligations of which may be
satisfied only by the individual credit of the issuing agency. In the case of
securities not backed by the full faith and credit of the United States, a
Portfolio must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment and may not be able to assert a claim against
the United States if the agency or instrumentality does not meet its
commitments.
The Short-Term Global Income Portfolio may invest in U.S. Government
securities that are zero-coupon securities. Zero-coupon securities pay no cash
income but are purchased at a discount from their value at maturity. When held
to maturity, their entire return, which consists of the amortization of the
discount, equals the difference between their purchase price and their maturity
value. At no time will the aggregate market value of the Portfolio's investments
in zero-coupon securities exceed 5% of the Portfolio's total assets.
Special Considerations. U.S. Government securities are considered among the
most creditworthy of fixed income investments. The yields available from U.S.
Government securities are generally lower than the yields available from
corporate debt securities. The values of U.S. Government securities (like those
of fixed-income securities generally) will change as interest rates fluctuate.
During periods of falling U.S. interest rates, the values of outstanding
long-term U.S. Government securities generally rise. Conversely, during periods
of rising interest rates, the values of such securities generally decline. The
magnitude of those fluctuations will generally be greater for securities with
longer maturities. Although changes in the value of U.S. Government securities
will not affect investment income from those securities, they will affect the
net asset value of each Portfolio.
At a time when a Portfolio has written call options on a portion of its U.S.
Government securities, its ability to profit from declining interest rates will
be limited. Any appreciation in the value of the securities held in the
portfolio above the strike price would likely be partially or wholly offset by
unrealized losses on call options written by the Portfolio. The termination of
option positions under these conditions would generally result in the
realization of capital losses, which would reduce the Portfolio's capital gains
distributions. Accordingly, a Portfolio would generally seek to realize capital
gains to offset realized losses by selling portfolio securities. In such
circumstances, however, it is likely that the proceeds of such sales would be
reinvested in lower yielding securities. See "Additional Risks-Options
Transactions and Related Risks."
Loan Participations
Each Portfolio may invest up to 5% of its total assets in high quality
participation interests having remaining maturities not exceeding one year in
loans extended by banks to United States and foreign companies. In a typical
corporate loan syndication, a number of lenders, usually banks (co-lenders),
lend a corporate borrower a specified sum pursuant to the terms and conditions
of a loan agreement. One of the co-lenders usually agrees to act as the agent
bank with respect to the loan. The loan agreement among the corporate borrower
and the co-lenders identifies the agent bank as well as sets forth the rights
and duties of the parties. The agreement often (but not always) provides for the
collateralization of the corporate borrower's obligations thereunder and
includes various types of restrictive covenants which must be met by the
borrower.
The participation interests acquired by a Portfolio may, depending on the
transaction, take the form of a direct or co-lending relationship with the
corporate borrower, an assignment of an interest in the loan by a co-lender or
another participant, or a
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" when used in this
Statement of Additional Information means the lesser of (i) 67% or more of the
voting securities of such Portfolio represented at a meeting at which more than
50% of the outstanding voting securities of such Portfolio are present in person
or represented by proxy or (ii) more than 50% of the outstanding voting
securities of such Portfolio. With respect to the submission of a change in
fundamental policy or investment objective to a particular Portfolio, such
matters shall be deemed to have been effectively acted upon with respect to all
Portfolios of the Fund if a majority of the outstanding voting securities of the
particular Portfolio votes for the approval of such matters as provided above,
notwithstanding (1) that such matter has not been approved by a majority of the
outstanding voting securities of any other Portfolio affected by such matter and
(2) that such matter has not been approved by a majority of the outstanding
voting securities of the Fund.
Each Portfolio may not:
(1) Invest 25% or more of its total assets in any one industry. For this
purpose "industry" does not include the U.S. Government and agencies and
instrumentalities of the U.S. Government.
(2) Make short sales of securities or maintain a short position, except
short sales "against the box."
(3) Issue senior securities, borrow money or pledge its assets, except that
a Portfolio may borrow up to 20% of the value of its total assets (calculated
when the loan is made) for temporary, extraordinary or emergency purposes or for
the clearance of transactions. Each Portfolio may pledge up to 20% of the value
of its total assets to secure such borrowings. For purposes of this restriction,
the purchase or sale of securities on a when-issued or delayed delivery basis,
the purchase of securities subject to repurchase agreements, collateral
arrangements with respect to interest rate swap transactions, reverse repurchase
agreements or dollar roll transactions or the purchase or sale of options and
futures contracts or options thereon, are not deemed to be a pledge of assets or
the issuance of a senior security; and neither such arrangements, the purchase
or sale of options, futures contracts or related options nor obligations of the
Fund to the Directors pursuant to deferred compensation arrangements, are deemed
to be the issuance of a senior security.
B-9
<PAGE>
(4) Buy or sell commodities, commodity contracts, real estate or interests
in real estate (including mineral leases or rights), except that a Portfolio may
purchase and sell futures contracts, options on futures contracts and securities
secured by real estate or interests therein or issued by companies that invest
therein. Transactions in foreign currencies and forward contracts and options on
foreign currencies are not considered by a Portfolio to be transactions in
commodities or commodity contracts.
(5) Make loans, except (i) through repurchase agreements, (ii) through loan
participations, and (iii) loans of portfolio securities (limited to 30% of a
Portfolio's total assets).
(6) Make investments for the purpose of exercising control or management
over the issuers of any security.
(7) Act as an underwriter except to the extent that, in connection with the
disposition of portfolio securities, a Portfolio may be deemed to be an
underwriter under certain federal securities laws.
The foregoing restrictions are fundamental policies that may not be changed
without the approval of a majority of each Portfolio's outstanding voting
securities.
Whenever any fundamental investment policy or investment restriction states
a maximum percentage of a Portfolio's assets, it is intended that if the
percentage limitation is met at the time the investment is made, a later change
in percentage resulting from changing total or net asset values will not be
considered a violation of such policy. However, in the event that a Portfolio's
asset coverage for borrowings falls below 300%, the Portfolio will take prompt
action to reduce its borrowings, as required by applicable law.
In order to comply with certain state "blue sky" restrictions, each
Portfolio will not as a matter of operating policy:
1. Invest in oil, gas and mineral leases or programs.
2. Purchase any interests in real estate including real estate limited
partnerships which are not readily marketable.
3. Invest in securities of any issuer if, to the knowledge of the Fund, any
officer or director of the Fund or the Fund's Manager or Subadviser owns more
than 1/2 of 1% of the outstanding securities of such issuer, and such officers
and directors who own more than 1/2 of 1% own in the aggregate more than 5% of
the outstanding securities of such issuer.
4. Purchase warrants if as a result a Portfolio would then have more than 5%
of its net assets (determined at the time of investment) invested in warrants.
Warrants will be valued at the lower of cost or market and investment in
warrants which are not listed on the New York Stock Exchange or American Stock
Exchange will be limited to 2% of the Portfolio's net assets determined at the
time of investment). For the purpose of this limitation, warrants acquired in
units or attached to securities are deemed to be without value.
5. Purchase more than 10% of the voting securities or more than 10% of any
class of securities of any issuer. For purposes of this restriction, all
outstanding debt securities of an issuer are considered as one class, and all
preferred stocks of an issuer are considered as one class.
6. Invest more than 5% of its total assets in securities of companies having
a record, together with predecessors, of less than three years of continuous
operation. This limitation shall not apply to direct obligations of the U.S.
Government and obligations issued by agencies of the U.S. Government or
instrumentalities established or sponsored by the U.S. Government.
7. Purchase securities of other registered investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
8. Invest more than 50% of its total assets in the securities of any one
issuer. This limitation will not apply to securities which are direct
obligations of the U.S. Government, its agencies or instrumentalities or to
obligations of the government of Canada.
9. Purchase securities on margin, except for such short-term credits as are
necessary for the clearance of purchases and sales of portfolio securities.
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
</TABLE>
B-10
<PAGE>
<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 Total Return 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 Total Return 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.,
The Global Total Return Fund 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.
</FN>
</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.
</FN>
</TABLE>
Directors and officers of the Fund are also trustees, directors and officers
of some or all of the other investment companies distributed by Prudential
Securities or Prudential Mutual Fund Distributors, Inc. (PMFD).
The officers conduct and supervise the daily business operations of the
Fund, while the directors, in addition to their functions set forth under
"Manager" and "Distributor," review such actions and decide on general policy.
The Fund pays each of its Directors who is not an affiliated person of the
Manager annual compensation of $10,000, in addition to certain out-of-pocket
expenses.
Directors may receive their Directors' fees pursuant to a deferred fee
agreement with the Fund. Under the terms of the agreement, the Fund accrues
daily the amount of Directors' fees which accrue interest at a rate equivalent
to the prevailing rate applicable to 90-day U.S. Treasury Bills at the beginning
of each calendar quarter or at the daily rate of return of a Portfolio of the
Fund (the Fund rate). Payment of the interest so accrued is also deferred and
accruals become payable at the option of the Director. The Fund's obligation to
make payments of deferred Directors' fees, together with interest thereon, is a
general obligation of the Fund.
As of 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 1994, Institutional Investor ranked The Prudential
the second largest institutional money manager of the 300 largest money
management organizations in the United States as of December 31, 1993.
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 respect to the
Global Assets Portfolio and Class B* and, in the case of the Short-Term Global
Income Portfolio, Class C* shares are sold at net asset value. Using the Fund's
net asset value at October 31, 1994, the maximum offering price of the
Portfolio's shares is as follows:
<TABLE>
<CAPTION>
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.
</FN>
</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 or group plans.
Rights of Accumulation. Reduced sales charges are also available through
Rights of Accumulation, under which an investor or an eligible group of related
investors, as described above under "Combined Purchase and Cumulative Purchase
Privilege," may aggregate the value of their existing holdings of the shares of
the Fund and shares of other Prudential Mutual Funds (excluding money market
funds other than those acquired pursuant to the exchange privilege) to determine
the reduced sales charge. However, the value of shares held directly with the
Transfer Agent and through Prudential Securities will not be aggregated to
determine the reduced sales charge. All shares must be held either directly with
the Transfer Agent or through Prudential Securities. The value of existing
holdings for purposes of determining the reduced sales charge is calculated
using the maximum offering or price (net asset value plus maximum sales charge)
as of the previous business day. See "How the Fund Values Its Shares" in the
Prospectus. The Distributor must be notified at the time of purchase that the
investor is entitled to a reduced sales charge. The reduced sales charges will
be granted subject to confirmation of the investor's holdings. Rights of
Accumulation are not available to individual participants in any retirement or
group plans.
Letters of Intent. Reduced sales charges are available to investors (or an
eligible group of related investors), 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.
(Left Column)
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.
(Right Column)
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>
(Left Column)
Distribution from an IRA or 403(b) Custodial Account
Distribution from Retirement Plan
Excess Contributions
(Right Column)
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.
(End Column)
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 the
shareholders the following privileges and plans.
Equity Participation Program
Under the Equity Participation Program, an investor may arrange to have a
specified number of Class A or Class B shares of the Short-Term Global Income
Portfolio automatically exchanged into either one or two Prudential equity funds
on a monthly basis (subject to minimum initial and subsequent investment of
$1,000 and $100, respectively). Further details about this service and an
application form are available from the Transfer Agent, Prudential Securities or
Prusec.
Automatic Reinvestment of Dividends and/or Distributions. For the
convenience of investors, all dividends and distributions are automatically
reinvested in full and fractional shares of a Portfolio of the Fund at net asset
value. An investor may direct the Transfer Agent in writing not less than 5 full
business days prior to the payment date to have subsequent dividends and/or
distributions sent in cash rather than reinvested. In the case of recently
purchased shares for which registration instructions have not been received on
the payment date, cash payment will be made directly to the dealer. Any
shareholder who receives a cash payment representing a dividend or distribution
may reinvest such distribution at net asset value by returning the check or the
proceeds to the Transfer Agent within 30 days after the payment date. Such
investment will be made at the net asset value per share next determined after
receipt of the check or proceeds by the Transfer Agent. Exchange Privilege
Global Assets Portfolio. Class A and Class B shareholders of the Global
Assets Portfolio each have an exchange privilege with the Class A and Class B
shares, respectively, of Prudential Adjustable Rate Securities Fund, Inc.
subject to the minimum investment requirements of that Fund. Class B shares of
the Global Assets Portfolio may also be exchanged into shares of the Prudential
Government Securities Trust, Intermediate Term Series. Class A and Class B
shareholders of the Global Assets Portfolio may exchange their shares for Class
A and Class B shares, respectively, of Prudential Adjustable Rate Securities
Fund, Inc., and Class B shares of the Global Assets Portfolio may be exchanged
into shares of the Prudential Government Securities Trust, Intermediate Term
Series, on the basis of the relative net asset value per share. Any applicable
contingent deferred sales charge payable upon the redemption of shares exchanged
will be calculated from the date of the initial purchase of such shares, rather
than the date of the exchange. An exchange will be treated as a redemption and
purchase for tax purposes.
Short-Term Global Income Portfolio. The Fund makes available to its
shareholders the privilege of exchanging their shares of the Short-Term Global
Income Portfolio for shares of certain other Prudential Mutual Funds, including
one or more specified money market funds, subject in each case to the minimum
investment requirements of such funds. Shares of such other Prudential Mutual
Funds may also be exchanged for shares of the Portfolio. All exchanges are made
on the basis of relative net
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
Period of
Monthly Investments: $100,000 $150,000 $200,000 $250,000
-------------------- -------- -------- -------- --------
25 years $ 110 $ 165 $ 220 $ 275
20 years 176 264 352 440
15 years 296 444 592 740
10 years 555 833 1,110 1,388
5 years 1,371 2,057 2,742 3,428
See "Automatic Savings Accumulation Plan".
- ------------
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.
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
- --------------
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 31, 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
[INSERT 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>
</TABLE>
(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>
<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.
</FN>
</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>
Prudential Mutual Funds
Supplement dated August 1, 1995
The following information supplements the Statement of Additional
Information of each of the Funds listed below.
MANAGER
Prudential Mutual Fund Management, Inc. (PMF or the Manager), the Manager of
the Fund, is a subsidiary of Prudential Securities Incorporated and The
Prudential Insurance Company of America (Prudential). PMF has three wholly-owned
subsidiaries: Prudential Mutual Fund Distributors, Inc., Prudential Mutual Fund
Services, Inc. (PMFS or the Transfer Agent) and Prudential Mutual Fund
Investment Management, Inc. PMFS serves as the transfer agent for the Prudential
Mutual Funds and, in addition, provides customer service, record keeping and
management and administration services to qualified plans.
Prudential is one of the largest diversified financial services institutions
in the world and, based on total assets, the largest insurance company in North
America as of December 31, 1994. Its primary business is to offer a full range
of products and services in three areas: insurance, investments and home
ownership for individuals and families; health-care management and other benefit
programs for employees of companies and members of groups; and asset management
for institutional clients and their associates. Prudential (together with its
subsidiaries) employs nearly 100,000 persons worldwide, and maintains a sales
force of approximately 19,000 agents, 3,400 insurance brokers and 6,000
financial advisors. It insures or provides other financial services to more than
50 million people worldwide. Prudential is a major issuer of annuities,
including variable annuities. Prudential seeks to develop innovative products
and services to meet consumer needs in each of its business areas.
Investment advisory services are provided to the Fund by a unit of The
Prudential Investment Corporation (PIC or the Subadviser), a subsidiary of
Prudential.
The Subadviser maintains a credit unit which provides credit analysis and
research on both tax-exempt and taxable fixed-income securities. The portfolio
manager routinely consults with the credit unit in managing the Fund's
portfolio. The credit unit reviews on an ongoing basis issuers of tax-exempt and
taxable fixed-income obligations, including prospective purchases and portfolio
holdings of the Fund. Credit analysts have broad access to research and
financial reports, data retrieval services and industry analysts.
With respect to taxable fixed-income obligations, credit analysts review
financial statements published by corporate (and governmental) issuers to
examine income statements, balance sheets and cash flow numbers. They evaluate
this data against their expectations of sales, earnings growth and trends in
credit ratios. They study the impact of economic, regulatory and political
developments on companies and industries and look at the relative value of
companies. They are in regular communication both in person and by telephone
with company management, Wall Street analysts and rating agencies.
With respect to tax-exempt issuers, credit analysts review financial and
operating statements supplied by state and local governments and other issuers
of municipal securities to evaluate revenue projections and the financial
soundness of municipal issuers. They study the impact of economic and political
developments on state and local governments, evaluate industry sectors and meet
periodically with public officials and other representatives of state and local
governments and other tax-exempt issuers to discuss such matters as budget
projections, debt policy, the strength of the regional economy and, in the case
of revenue bonds, the demand for facilities. They also make site inspections to
review specific projects and to evaluate the progress of construction or the
operation of a facility.
Peter Allegrini oversees the municipal bond team at the Subadviser. He also
serves as the portfolio manager of the High Yield Series of Prudential Municipal
Bond Fund and the Pennsylvania Series of Prudential Municipal Series Fund. He
has been in the investment business since 1978.
From time to time, there may be media coverage of portfolio managers and
other investment professionals associated with the Manager and the Subadviser in
national and regional publications, or television and in other media.
Additionally, individual mutual fund portfolios are frequently cited in surveys
conducted by national and regional publications and media organizations such as
The Wall Street Journal, The New York Times, Barron's and USA Today.
SHAREHOLDER INVESTMENT ACCOUNT
Mutual Fund Programs
From time to time, the Fund (or a portfolio of the Fund, if applicable) may
be included in a mutual fund program with other Prudential Mutual Funds. Under
such a program, a group of portfolios will be selected and thereafter promoted
collectively. Typically, these programs are created with an investment theme,
e.g., to seek greater diversification, protection
<PAGE>
from interest rate movements or access to different management styles. In the
event such a program is instituted, there may be a minimum investment
requirement for the program as a whole. The Fund may waive or reduce the minimum
initial investment requirements in connection with such a program.
The mutual funds in the program may be purchased individually or as a part
of the program. Since the allocation of portfolios included in the program may
not be appropriate for all investors, investors should consult their Prudential
Securities Financial Advisor or Prudential/Pruco Securities Representative
concerning the appropriate blend of portfolios for them. If investors elect to
purchase the individual mutual funds that constitute the program in an
investment ratio different from that offered by the program, the standard
minimum investment requirements for the individual mutual funds will apply.
<PAGE>
APPENDIX--GENERAL INVESTMENT INFORMATION
The following terms are used in mutual fund investing.
Asset Allocation
Asset allocation is a technique for reducing risk, providing balance. Asset
allocation among different types of securities within an overall investment
portfolio helps to reduce risk and to potentially provide stable returns, while
enabling investors to work toward their financial goal(s). Asset allocation is
also a strategy to gain exposure to better performing asset classes while
maintaining investment in other asset classes.
Diversification
Diversification is a time-honored technique for reducing risk, providing
``balance'' to an overall portfolio and potentially achieving more stable
returns. Owning a portfolio of securities mitigates the individual risks (and
returns) of any one security. Additionally, diversification among types of
securities reduces the risks and (general returns) of any one type of security.
Duration
Debt securities have varying levels of sensitivity to interest rates. As
interest rates fluctuate, the value of a bond (or a bond portfolio) will
increase or decrease. Longer term bonds are generally more sensitive to changes
in interest rates. When interest rates fall, bond prices generally rise.
Conversely, when interest rates rise, bond prices generally fall.
Duration is an approximation of the price sensitivity of a bond (or a bond
portfolio) to interest rate changes. It measures the weighted average maturity
of a bond's (or a bond portfolio's) cash flows, i.e., principal and interest
rate payments. Duration is expressed as a measure of time in years--the longer
the duration of a bond (or a bond portfolio), the greater the impact of interest
rate changes on the bond's (or the bond portfolio's) price. Duration differs
from effective maturity in that duration takes into account call provisions,
coupon rates and other factors. Duration measures interest rate risk only and
not other risks, such as credit risk and, in the case of non-U.S. dollar
denominated securities, currency risk. Effective maturity measures the final
maturity dates of a bond (or a bond portfolio).
Market Timing
Market timing--buying securities when prices are low and selling them when
prices are relatively higher--may not work for many investors because it is
impossible to predict with certainty how the price of a security will fluctuate.
However, owning a security for a long period of time may help investors offset
short-term price volatility and realize positive returns.
Power of Compounding
Over time, the compounding of returns can significantly impact investment
returns. Compounding is the effect of continuous investment on long-term
investment results, by which the proceeds of capital appreciation (and income
distributions, if elected) are reinvested to contribute to the overall growth of
assets. The long-term investment results of compounding may be greater than that
of an equivalent initial investment in which the proceeds of capital
appreciation and income distributions are taken in cash.
<PAGE>
APPENDIX--PORTFOLIO MANAGERS
The following information supplements only the Statement of Additional
Information of the captioned Fund.
Prudential High Yield Fund, Inc.
According to data provided by Lipper Analytical Services, Inc., Prudential
High Yield Fund, Inc. is among the oldest and largest U.S. mutual funds in the
high current yield category of taxable fixed-income funds. Lars Berkman has
served as the Fund's portfolio manager since 1991. In managing the Fund, he
seeks to identify well priced, high yield securities consistent with the Fund's
investment objective. Mr. Berkman is assisted by a team of credit analysts who
analyze corporate cash flows, sales, earnings and management trends.
Prudential Diversified Bond Fund, Inc.
Prudential Government Income Fund, Inc.
Barbara Kenworthy serves as the portfolio manager of Prudential Diversified
Bond Fund, Inc. and Prudential Government Income Fund, Inc. and has 20 years of
investment management experience in both U.S. and foreign securities and
investment grade and high yield quality bonds. Ms. Kenworthy actively manages
each Fund's portfolio according to the investment adviser's interest rate
outlook. Consistent with each Fund's investment objective and policies, she
will, at times, invest in different sectors of the fixed-income markets seeking
price discrepancies and more favorable interest rates. The investment adviser
conducts extensive analysis of U.S. and overseas markets in an attempt to
identify trends in interest rates, supply and demand and economic growth. The
portfolio manager then selects the sectors, maturities and individual bonds she
believes provide the best value under those conditions. The portfolio manager is
assisted by two credit analysis teams, one that specializes in investment grade
bonds and one that specializes in high yield bonds.
Prudential Municipal Series Fund
(Arizona Series) (Ohio Series) and (Hawaii Income Series)
Prudential California Municipal Fund
(California Series) and (California Income Series)
Christian Smith serves as the portfolio manager of the Arizona Series, Ohio
Series and Hawaii Income Series of Prudential Municipal Series Fund and the
California Series and California Income Series of Prudential California
Municipal Fund. Consistent with each Series' investment objective and policies,
Mr. Smith seeks to invest in bonds with attractive yields and good relative
value in the municipal market. He makes use of Prudential's quantitative and
market analysis tools to structure the portfolios and seeks to achieve an
allocation among different sectors, coupons and maturities to achieve each
Series' investment goals. The portfolio manager also seeks bonds with a high
level of call protection.
<PAGE>
APPENDIX--HISTORICAL PERFORMANCE DATA
The historical performance data contained in this Appendix relies on data
obtained from statistical services, reports and other services believed by the
Manager to be reliable. The information has not been independently verified by
the Manager.
This chart shows the long-term performance of various asset classes and the rate
of inflation.
(CHART)
Source: Stocks, Bonds, Bills, and Inflation 1995 Yearbook, Ibbotson Associates,
Chicago (annually updates work by Roger G. Ibbotson and Rex A. Sinquefield).
Used with permission. All rights reserved. This chart is for illustrative
purposes only and is not indicative of the past, present, or future performance
of any asset class or any Prudential Mutual Fund.
Generally, stock returns are attributable to capital appreciation and the
reinvestment of distributions. Bond returns are attributable mainly to the
reinvestment of distributions. Also, stock prices are usually more volatile than
bond prices over the long term.
Small stock returns for 1926-1989 are those of stocks comprising the 5th
quintile of the New York Stock Exchange. Thereafter, returns are those of the
Dimensional Fund Advisors (DFA) Small Company Fund. Common stock returns are
based on the S&P Composite Index, a market-weighted, unmanaged index of 500
stocks (currently) in a variety of industries. It is often used as a broad
measure of stock market performance.
Long-term government bond returns are represented by a portfolio that contains
only one bond with a maturity of roughly 20 years. At the beginning of each year
a new bond with a then-current coupon replaces the old bond. Treasury bill
returns are for a one-month bill. Treasuries are guaranteed by the government as
to the timely payment of principal and interest; equities are not. Inflation is
measured by the consumer price index (CPI).
Impact of Inflation. The "real" rate of investment return is that which exceeds
the rate of inflation, the percentage change in the value of consumer goods and
the general cost of living. A common goal of long-term investors is to outpace
the erosive impact of inflation on investment returns.
<PAGE>
Set forth below is historical performance data relating to various sectors
of the fixed-income securities markets. The chart shows the historical total
returns of U.S. Treasury bonds, U.S. mortgage securities, U.S. corporate bonds,
U.S. high yield bonds and world government bonds on an annual basis from 1987 to
May 1995. The total returns of the indices include accrued interest, plus the
price changes (gains or losses) of the underlying securities during the period
mentioned. The data is provided to illustrate the varying historical total
returns and investors should not consider this performance data as an indication
of the future performance of the Fund or of any sector in which the Fund
invests.
All information relies on data obtained from statistical services, reports
and other services believed by the Manager to be reliable. Such information has
not been verified. The figures do not reflect the operating expenses and fees of
a mutual fund. See "Fund Expenses" in the prospectus. The net effect of the
deduction of the operating expenses of a mutual fund on these historical total
returns, including the compounded effect over time, could be substantial.
Historical Total Returns of Different Bond Market Sectors
(CHART)
1 Lehman Brothers Treasury Bond Index is an unmanaged index made up of over 150
public issues of the U.S. Treasury having maturities of at least one year.
2 Lehman Brothers Mortgage-Backed Securities Index is an unmanaged index that
includes over 600 15- and 30-year fixed-rate mortgage-backed securities of the
Government National Mortgage Association (GNMA), Federal National Mortgage
Association (FNMA), and the Federal Home Loan Mortgage Corporation (FHLMC).
3 Lehman Brothers Corporate Bond Index includes over 3,000 public fixed-rate,
nonconvertible investment-grade bonds. All bonds are U.S. dollar-denominated
issues and include debt issued or guaranteed by foreign sovereign governments,
municipalities, governmental agencies or international agencies. All bonds in
the index have maturities of at least one year.
4 Lehman Brothers High Yield Bond Index is an unmanaged index comprising over
750 public, fixed-rate nonconvertible bonds that are rated Ba1 or lower by
Moody's Investors Service (or rated BB+ or lower by Standard & Poor's or Fitch
Investors Service). All bonds in the index have maturities of at least one
year.
5 Salomon Brothers World Government Index (Non U.S.) includes over 800 bonds
issued by various foreign governments or agencies, excluding those in the
U.S., but including those in Japan, Germany, France, the U.K., Canada, Italy,
Australia, Belgium, Denmark, the Netherlands, Spain, Sweden, and Austria. All
bonds in the index have maturities of at least one year.
<PAGE>
This chart below shows the historical volatility of general interest rates as
measured by the long U.S. Treasury Bond.
(CHART)
Source: Stocks, Bonds, Bills, and Inflation 1995 Yearbook, Ibbotson Associates,
Chicago (annually updates work by Roger G. Ibbotson and Rex A. Sinquefield).
Used with permission. All rights reserved. The chart illustrates the historical
yield of the long-term U.S. Treasury Bond from 1926-1994. Yields represent that
of an annually renewed one-bond portfolio with a remaining maturity of
approximately 20 years. This chart is for illustrative purposes only and should
not be construed to represent the yields of any Prudential Mutual Fund.
<PAGE>
Listed below are the names of the Prudential Mutual Funds and the dates of
the Statements of Additional Information to which this supplement relates.
<TABLE>
<S> <C>
Name of Fund Statement Date
Prudential California Municipal Fund
California Income Series December 30, 1994
California Series December 30, 1994
Prudential Diversified Bond Fund, Inc. January 3, 1995
(as supplemented on June 20, 1995)
Prudential GNMA Fund, Inc. March 2, 1995
Prudential Government Income Fund, Inc. May 1, 1995
Prudential High Yield Fund, Inc. February 28, 1995
Prudential Intermediate Global Income Fund, Inc. March 2, 1995
Prudential Municipal Bond Fund June 30, 1995
Insured Series
High Yield Series
Intermediate Series
Prudential Municipal Series Fund
Arizona Series December 30, 1994
Florida Series December 30, 1994
Georgia Series December 30, 1994
Hawaii Income Series December 30, 1994
Maryland Series December 30, 1994
Massachusetts Series December 30, 1994
Michigan Series December 30, 1994
Minnesota Series December 30, 1994
New Jersey Series December 30, 1994
New York Series December 30, 1994
North Carolina Series December 30, 1994
Ohio Series December 30, 1994
Pennsylvania Series December 30, 1994
Prudential National Municipals Fund, Inc. February 28, 1995
Prudential Short Term Global Income Fund, Inc.
Global Assets Portfolio January 3, 1995
Short-Term Global Income Portfolio January 3, 1995
Prudential Structured Maturity Fund, Inc. March 1, 1995
Income Portfolio
Prudential U. S. Government Fund January 3, 1995
</TABLE>
MF 950C-10
<PAGE>
Prudential Mutual Funds
Supplement dated September 29, 1995
The following information supplements the Statement of Additional Information of
each of the Funds listed below.
MANAGER
Prudential Mutual Fund Management, Inc. (PMF or the Manager) serves as the
manager of all of the investment companies that comprise the Prudential Mutual
Funds. As of August 31, 1995, assets of the Prudential Mutual Funds were
approximately $50 billion. The Prudential Investment Corporation (PIC) serves as
the investment adviser for each of the Funds listed below. The unit of PIC which
provides investment advisory services to the Funds is known as Prudential Mutual
Fund Investment Management.
Based on data for the year ended December 31, 1994 for the Prudential Mutual
Funds, on an average day, there are approximately $80 million in common stock
transactions, over $100 million in bond transactions and over $4.1 billion in
money market transactions. In 1994, the Prudential Mutual Funds effected more
than 57,000 trades in money market securities and held on average $21 billion of
money market securities. Based on complex-wide data for the year ended December
31, 1994, on an average day, 7,168 shareholders telephoned Prudential Mutual
Fund Services, Inc., the Transfer Agent of the Prudential Mutual Funds, on the
Prudential Mutual Funds' toll-free number. On an annual basis, that represents
approximately 1.8 million telephone calls and approximately 1.1 million fund
transactions.
PMF is a subsidiary of The Prudential Insurance Company of America
(Prudential), one of the largest diversified financial services institutions in
the world. For the year ended December 31, 1994, Prudential through its
subsidiaries provided financial services to more than 50 million people
worldwide --more than one of every five people in the United States. As of
December 31, 1994, Prudential through its subsidiaries provided automobile
insurance for more than 1.8 million cars and insured more than 1.5 million
homes. For the year ended December 31, 1994, The Prudential Bank, a subsidiary
of Prudential, served 940,000 customers in 50 states providing credit card
services and loans totaling more than $1.2 billion. Assets held by Prudential
Securities Incorporated (PSI) for its clients totaled approximately $150 billion
at December 31, 1994. During 1994, over 28,000 new customer accounts were opened
each month at PSI. The Prudential Real Estate Affiliates, the fourth largest
real estate brokerage network in the United States, has more than 34,000 brokers
and agents and more than 1,100 offices in the United States.
(over)
<PAGE>
Listed below are the names of the Prudential Mutual Funds and the dates of
the Statements of Additional Information to which this supplement relates.
<TABLE>
<CAPTION>
Name of Fund Statement Date
<S> <C>
Prudential Allocation Fund September 29, 1995
Strategy Portfolio
Balanced Portfolio
Prudential California Municipal Fund
California Income Series December 30, 1994
California Series December 30, 1994
Prudential Diversified Bond Fund, Inc. January 3, 1995
Prudential Equity Fund, Inc. February 28, 1995
Prudential Equity Income Fund December 30, 1994
Prudential Europe Growth Fund, Inc. June 30, 1995
Prudential Global Fund, Inc. January 3, 1995
Prudential Global Genesis Fund, Inc. July 31, 1995
Prudential Global Natural Resources Fund, Inc. July 31, 1995
Prudential Government Income Fund, Inc. May 1, 1995
Prudential Government Securities Trust
Short-Intermediate Term Series August 1, 1995
Prudential Growth Opportunity Fund, Inc. February 1, 1995
Prudential High Yield Fund, Inc. February 28, 1995
Prudential Intermediate Global Income Fund, Inc. March 2, 1995
Prudential Mortgage Income Fund, Inc. August 25, 1995
Prudential Multi-Sector Fund, Inc. June 30, 1995
Prudential Municipal Bond Fund June 30, 1995
Insured Series
High Yield Series
Intermediate Series
Prudential Municipal Series Fund
Arizona Series December 30, 1994
Florida Series December 30, 1994
Georgia Series December 30, 1994
Hawaii Income Series March 30, 1995
Maryland Series December 30, 1994
Massachusetts Series December 30, 1994
Michigan Series December 30, 1994
Minnesota Series December 30, 1994
New Jersey Series December 30, 1994
New York Series December 30, 1994
North Carolina Series December 30, 1994
Ohio Series December 30, 1994
Pennsylvania Series December 30, 1994
Prudential National Municipals Fund, Inc. February 28, 1995
Prudential Pacific Growth Fund, Inc. January 3, 1995
Prudential Short Term Global Income Fund, Inc.
Global Assets Portfolio January 3, 1995
Short-Term Global Income Portfolio January 3, 1995
Prudential Structured Maturity Fund, Inc. March 1, 1995
Income Portfolio
Prudential U. S. Government Fund January 3, 1995
Prudential Utility Fund, Inc. March 1, 1995
</TABLE>
MF950C-14
<PAGE>
PART C
OTHER INFORMATION
Item 15. 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 misfeasances 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 is 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
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 6(a) to the Registration
Statement) and Section 4 of the Subadvisory Agreement (Exhibit 6(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
C-1
<PAGE>
misfeasance, bad faith or gross negligence in the performance of their
respective duties or from reckless disregard by them of their respective
obligations and duties under the agreements.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its By-Laws, the Management Agreement and each Distribution
Agreement in a manner consistent with Release No. 11330 of the Securities and
Exchange Commission under the 1940 Act so long as the interpretation of Sections
17(h) and 17(i) of such Act remain, in effect.
Item 16. Exhibits
1. (a) Amended and Restated Articles of Incorporation, incorporated by
reference to Exhibit No. 1 to Post-Effective Amendment No. 9 to the
Registration Statement on Form N-1A (File No. 33-33470) filed via Edgar on
January 3, 1995.
(b) Articles of Amendment to the Articles of Incorporation effective October
3, 1995.*
(c) Articles of Amendment to the Articles of Incorporation effective October
17, 1995.*
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.
3. Not applicable.
4. Plan of Reorganization filed herewith as Appendix A to the Prospectus and
Proxy Statement.*
5. 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.
6. (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.
7. (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.
C-2
<PAGE>
(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,
incorporated by reference to Exhibit 6(c)(iii) to Post-Effective Amendment
No. 9 to the Registration Statement on Form N-1A (File No. 33-33470) filed
via Edgar on January 3, 1995.
(c)(iv) Distribution Agreement for Class B shares of the Short-Term Global
Income Portfolio, incorporated by reference to Exhibit 6(c)(iv) to
Post-Effective Amendment No. 9 to the Registration Statement on Form N-1A
(File No. 33-33470) filed via Edgar on January 3, 1995.
(c)(v) Distribution Agreement for Class C shares of the Short-Term Global
Income Portfolio, incorporated by reference to Exhibit 6(c)(v) to
Post-Effective Amendment No. 9 to the Registration Statement on Form N-1A
(File No. 33-33470) filed via Edgar on January 3, 1995.
(d)(i) Distribution Agreement for Class A shares of both Portfolios between
the Fund and Prudential Mutual Fund Distributors, Inc. amended and restated
as of June 5, 1995.*
(d)(ii) Distribution Agreement for Class C shares of both Portfolios
between the Fund and Prudential Mutual Fund Distributors, Inc. amended and
restated as of June 5, 1995.
(d)(iii) Distribution Agreement for Class C shares of both Portfolios
between the Fund and Prudential Mutual Fund Distributors, Inc. amended and
restated as of June 5, 1995.
8. Not applicable.
9. (a) 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.
(b) Form of Amendment to Custodian Contract between the Registrant and
State Street Bank and Trust Company.*
10. (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-3
<PAGE>
(c) Distribution and Service Plan for Class A shares of the Short-Term
Global Income Portfolio and Global Assets Portfolio incorporated by
reference to Exhibit 15(c) to Post-Effective Amendment No. 9 to the
Registration Statement on Form N-1A (File No. 33-33479) filed via EDGAR on
January 3, 1995.
(d) Distribution and Service Plan for Class B shares of the Short-Term
Global Income Portfolio incorporated by reference to Exhibit 15(d) to
Post-Effective Amendment No. 9 to the Registration Statement on Form N-1A
(File No. 33-33479) filed via EDGAR on January 3, 1995.
(e) Distribution and Service Plan for Class C shares of the Short-Term
Global Income Portfolio incorporated by reference to Exhibit 15(e) to
Post-Effective Amendment No. 9 to the Registration Statement on Form N-1A
(File No. 33-33479) filed via EDGAR on January 3, 1995.
11. Opinion and Consent of Counsel.*
12. Opinion and Consent of Tax Counsel.*
13. (a) 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.
(b) 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.
14. Consent of Independent Accountants.*
15. Not applicable.
16. Not applicable.
17. (a) Proxy.*
(b) Proxy Insert Card.*
(c) Letter to Shareholders.*
(d) Copy of Registrant's declaration pursuant to Rule 24f-2 under the 1940
Act.*
(e) Prospectus of Global Assets Portfolio dated January 3, 1995, as
supplemented.*
(f) Prospectus of Limited Maturity Portfolio dated January 3, 1995, as
supplemented.*
(g) Semi-Annual Report of Global Assets Portfolio for the six months ended
April 30, 1995, filed herewith as Appendix C to the Prospectus and
Proxy Statement.*
(h) Annual Report of Global Assets Portfolio for the fiscal year ended
October 31, 1994, filed herewith as Appendix C to the Prospectus and
Proxy Statement.*
(i) Semi-Annual Report of Limited Maturity Portfolio for the six months
ended April 30, 1995, filed herewith as Appendix B to the Prospectus
and Proxy Statement.*
(j) Annual Report of Limited Maturity Portfolio for the fiscal year ended
October 31, 1994, filed herewith as Appendix B to the Prospectus and
Proxy Statement.*
- ------------
* Filed herewith.
C-4
<PAGE>
Item 17. Undertakings
1. The undersigned registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is a part
of this registration statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act, the
reoffering prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
2. The undersigned registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act, each
post-effective amendment will be deemed to be a new registration statement
for the securities offered therein, and the offering of the securities at
that time shall be deemed to be the initial bona fide offering of them.
C-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on behalf of the Registrant by the
undersigned, thereto duly authorized, in the City of New York, and State of New
York, on the 23rd day of October, 1995.
PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
(formerly PRUDENTIAL SHORT-TERM GLOBAL INCOME
FUND, INC.)
By: /s/ Richard A. Redeker
-----------------------------------------
Richard A. Redeker, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Stephen C. Eyre Director October 23, 1995
- --------------------------------
Stephen C. Eyre
/s/ Delayne D. Gold Director October 23, 1995
- --------------------------------
Delayne D. Gold
/s/ Don G. Hoff Director October 23, 1995
- --------------------------------
Don G. Hoff
/s/ Harry A. Jacobs, Jr. Director October 23, 1995
- --------------------------------
Harry A. Jacobs, Jr.
/s/ Sidney R. Knafel Director October 23, 1995
- --------------------------------
Sidney R. Knafel
/s/ Robert E. LaBlanc Director October 23, 1995
- --------------------------------
Robert E. LaBlanc
/s/ Thomas A. Owens, Jr. Director October 23, 1995
- --------------------------------
Thomas A. Owens, Jr.
/s/ Richard A. Redeker President and Director October 23, 1995
- --------------------------------
Richard A. Redeker
/s/ Clay T. Whitehead Director October 23, 1995
- --------------------------------
Clay T. Whitehead
/s/ Grace C. Torres Treasurer and October 23, 1995
- -------------------------------- Principal Financial and
Grace C. Torres Accounting Officer
<PAGE>
EXHIBIT INDEX
1. (a) Amended and Restated Articles of Incorporation, incorporated by
reference to Exhibit No. 1 to Post-Effective Amendment No. 9 to the
Registration Statement on Form N-1A (File No. 33-33470) filed via Edgar on
January 3, 1995.
(b) Articles of Amendment to the Articles of Incorporation effective October
3, 1995.*
(c) Articles of Amendment to the Articles of Incorporation effective October
17, 1995.*
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.
3. Not applicable.
4. Plan of Reorganization filed herewith as Appendix A to the Prospectus and
Proxy Statement.*
5. 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.
6. (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.
7. (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.
<PAGE>
(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,
incorporated by reference to Exhibit 6(c)(iii) to Post-Effective Amendment
No. 9 to the Registration Statement on Form N-1A (File No. 33-33470) filed
via Edgar on January 3, 1995.
(c)(iv) Distribution Agreement for Class B shares of the Short-Term Global
Income Portfolio, incorporated by reference to Exhibit 6(c)(iv) to
Post-Effective Amendment No. 9 to the Registration Statement on Form N-1A
(File No. 33-33470) filed via Edgar on January 3, 1995.
(c)(v) Distribution Agreement for Class C shares of the Short-Term Global
Income Portfolio, incorporated by reference to Exhibit 6(c)(v) to
Post-Effective Amendment No. 9 to the Registration Statement on Form N-1A
(File No. 33-33470) filed via Edgar on January 3, 1995.
(d)(i) Distribution Agreement for Class A shares of both Portfolios between
the Fund and Prudential Mutual Fund Distributors, Inc. amended and restated
as of June 5, 1995.*
(d)(ii) Distribution Agreement for Class C shares of both Portfolios
between the Fund and Prudential Mutual Fund Distributors, Inc. amended and
restated as of June 5, 1995.
(d)(iii) Distribution Agreement for Class C shares of both Portfolios
between the Fund and Prudential Mutual Fund Distributors, Inc. amended and
restated as of June 5, 1995.
8. Not applicable.
9. (a) 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.
(b) Form of Amendment to Custodian Contract between the Registrant and
State Street Bank and Trust Company.*
10. (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
<PAGE>
Amendment No. 6 to the Registration Statement on Form N-1A (File No. 33-
33479) filed via EDGAR on December 30, 1993.
(c) Distribution and Service Plan for Class A shares of the Short-Term
Global Income Portfolio and Global Assets Portfolio incorporated by
reference to Exhibit 15(c) to Post-Effective Amendment No. 9 to the
Registration Statement on Form N-1A (File No. 33-33479) filed via EDGAR on
January 3, 1995.
(d) Distribution and Service Plan for Class B shares of the Short-Term
Global Income Portfolio incorporated by reference to Exhibit 15(d) to
Post-Effective Amendment No. 9 to the Registration Statement on Form N-1A
(File No. 33-33479) filed via EDGAR on January 3, 1995.
(e) Distribution and Service Plan for Class C shares of the Short-Term
Global Income Portfolio incorporated by reference to Exhibit 15(e) to
Post-Effective Amendment No. 9 to the Registration Statement on Form N-1A
(File No. 33-33479) filed via EDGAR on January 3, 1995.
11. Opinion and Consent of Counsel.*
12. Opinion and Consent of Tax Counsel.*
13. (a) 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.
(b) 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.
14. Consent of Independent Accountants.*
15. Not applicable.
16. Not applicable.
17. (a) Proxy.*
(b) Proxy Insert Card.*
(c) Letter to Shareholders.*
(d) Copy of Registrant's declaration pursuant to Rule 24f-2 under the 1940
Act.*
(e) Prospectus of Global Assets Portfolio dated January 3, 1995, as
supplemented.*
(f) Prospectus of Limited Maturity Portfolio dated January 3, 1995, as
supplemented.*
(g) Semi-Annual Report of Global Assets Portfolio for the six months ended
April 30, 1995, filed herewith as Appendix C to the Prospectus and
Proxy Statement.*
(h) Annual Report of Global Assets Portfolio for the fiscal year ended
October 31, 1994, filed herewith as Appendix C to the Prospectus and
Proxy Statement.*
(i) Semi-Annual Report of Limited Maturity Portfolio for the six months
ended April 30, 1995, filed herewith as Appendix B to the Prospectus
and Proxy Statement.*
(j) Annual Report of Limited Maturity Portfolio for the fiscal year ended
October 31, 1994, filed herewith as Appendix B to the Prospectus and
Proxy Statement.*
- ------------
* Filed herewith.
EXHIBIT 1(b)
ARTICLES OF AMENDMENT
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 first paragraph of Section 1, Article IV is amended in its
entirety to read as follows:
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-Intermediate Term Global Income Portfolio, 500,000,000 shares of Class B
Capital Stock of the Short-Intermediate Term Global Income Portfolio and
500,000,000 shares of the Class C Capital Stock of the Short-Intermediate Term
Global Income Portfolio.
SECOND: The foregoing amendment to the Charter of the Corporation has
been advised and approved by the Board of Directors of the Corporation.
THIRD: The foregoing amendment to the Charter of the Corporation shall
become effective at 1:00 p.m. on October 3, 1995.
<PAGE>
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 Secretary on October 2, 1995.
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
By /s/ S. Jane Rose
--------------------------
Richard A. Redeker
President
Attest: /s/ S. Jane Rose
------------------------
S. Jane Rose
Secretary
<PAGE>
The undersigned, President of PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND,
INC., who executed on behalf of said corporation the foregoing amendment to the
Charter of which this certificate is made a part, hereby acknowledges in the
name and on behalf of said corporation, the foregoing amendment to the Charter
to be the corporate act of said corporation and further certifies that, to the
best of his knowledge, information and belief, the matters and facts set forth
therein with respect to the approval thereof are true in all material respects,
under the penalties of perjury.
/s/ Richard A. Redeker
-------------------------
Richard A. Redeker
EXHIBIT 1(c)
ARTICLES OF AMENDMENT
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: Article I of the Corporation's Charter is hereby amended in its
entirety to read as follows:
The name of the corporation (hereinafter called the "Corporation") is
Prudential Global Limited Maturity Fund, Inc.
SECOND: The first paragraph of Section 1, Article IV is amended in its
entirety to read as follows:
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 Limited
Maturity Portfolio, 500,000,000 shares of Class B Capital Stock of the Limited
Maturity Portfolio and 500,000,000 shares of the Class C Capital Stock of the
Limited Maturity Portfolio.
THIRD: The foregoing amendments to the Charter of the Corporation have
been advised and approved by the Board of Directors of the Corporation and are
limited to changes expressly permitted by Section 2-605 of the business
corporation laws of Maryland. The Corporation is registered as an open-end
investment company under the Investment Company Act of 1940.
FOURTH: The foregoing amendments to the Charter of the Corporation shall
become effective at 10:00 A.M. on October 17, 1995.
<PAGE>
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 Secretary on October 12, 1995.
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
By /s/ S. Jane Rose
--------------------------
Richard A. Redeker
President
Attest: /s/ S. Jane Rose
------------------------
S. Jane Rose
Secretary
<PAGE>
The undersigned, President of PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND,
INC., who executed on behalf of said corporation the foregoing amendments to the
Charter of which this certificate is made a part, hereby acknowledges in the
name and on behalf of said corporation, the foregoing amendments to the Charter
to be the corporate act of said corporation and further certifies that, to the
best of his knowledge, information and belief, the matters and facts set forth
therein with respect to the approval thereof are true in all material respects,
under the penalties of perjury.
/s/ Richard A. Redeker
-------------------------
Richard A. Redeker
Exhibit 7.(d)(i)
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
Distribution Agreement
(Class A Shares)
Agreement made as of August 1, 1994 and amended and
restated as of June 5, 1995, between Prudential Short-Term Global
Income Fund, Inc. 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 on behalf of the Fund 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 through 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
sell Class A shares of 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 on behalf of investors 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).
3.2 The Class A shares shall be sold by the Distributor
on behalf of the Fund and delivered 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 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
<PAGE>
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
<PAGE>
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
<PAGE>
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/ Robert F. Gunia
Robert F. Gunia
Executive Vice President
Prudential Short-Term Global Income
Fund, Inc.
By: /s/ Richard A. Redeker
Richard A. Redeker
President
10
Exhibit 7.(d)(ii)
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
Short-Term Global Income Portfolio
Distribution Agreement
(Class B Shares)
Agreement made as of August 1, 1994 and amended and
restated as of June 5, 1995, between Prudential Short-Term Global
Income Fund, Inc., 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 on behalf of the Fund 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 through 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
sell Class B shares of 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 on behalf of investors 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).
3.2 The Class B shares shall be sold by the Distributor
on behalf of the Fund and delivered 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
reasonably practicable or it is not reasonably practicable for the
3
<PAGE>
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
qualifications.
4
<PAGE>
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
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
5
<PAGE>
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
broker-dealers or financial institutions for
6
<PAGE>
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
may incur under the Securities Act, or under common law or
otherwise, arising out of or based upon any untrue statement of a
7
<PAGE>
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
a material fact in connection with such information required to be
stated in the Registration Statement or Prospectus or necessary to
8
<PAGE>
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
Investment Company Act. To the extent that the applicable law of
the State of New York, or any of the provisions herein, conflict
9
<PAGE>
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, Inc.
By: /s/ Richard A. Redeker
Richard A. Redeker
President
10
Exhibit 7.(d)(iii)
PRUDENTIAL SHORT-TERM GLOBAL INCOME FUND, INC.
Short-Term Global Income Portfolio
Distribution Agreement
(Class C Shares)
Agreement made as of August 1, 1994 and amended and
restated as of June 5, 1995, between Prudential Short-Term Global
Income Fund, Inc., 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 on behalf of the Fund 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 through 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
sell Class C shares of 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 on behalf of investors 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).
3.2 The Class C shares shall be sold by the Distributor
on behalf of the Fund and delivered 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
reasonably practicable or it is not reasonably practicable for the
3
<PAGE>
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
qualifications.
4
<PAGE>
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
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
5
<PAGE>
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
broker-dealers or financial institutions for
6
<PAGE>
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
may incur under the Securities Act, or under common law or
otherwise, arising out of or based upon any untrue statement of a
7
<PAGE>
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
a material fact in connection with such information required to be
stated in the Registration Statement or Prospectus or necessary to
8
<PAGE>
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
Investment Company Act. To the extent that the applicable law of
the State of New York, or any of the provisions herein, conflict
9
<PAGE>
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, Inc.
By: /s/ Richard A. Redeker
Richard A. Redeker
President
10
Exhibit 9(b)
AMENDMENT TO CUSTODIAL CONTRACT
Agreement made by and between State Street Bank and Trust Company (the
"Custodian") and (the "Fund").
WHEREAS, the Custodian and the Fund are parties to a custodian contract
dated (the "Custodian Contract") governing the terms and conditions under which
the Custodian maintains custody of the securities and other assets of the Fund;
and
WHEREAS, the Custodian and the Fund desire to amend the terms and conditions
under which the Custodian maintains the Fund's securities and other non-cash
property in the custody of certain foreign sub-custodians in conformity with the
requirements of Rule 17f-5 under the Investment Company Act of 1940, as amended;
NOW THEREFORE, in consideration of the premises and covenants contained
herein, the Custodian and the Fund hereby amend the Custodian Contract by the
addition of the following terms and provisions;
1. Notwithstanding any provisions to the contrary set forth in the Custodian
Contract, the Custodian may hold securities and other non-cash property for all
of its customers, including the Fund, with a foreign sub-custodian in a single
account that is identified as belonging to the Custodian for the benefit of its
customers, provided however, that (i) the records of the Custodian with respect
to securities and other non-cash property of the Fund which are maintained in
such account shall identify by book-entry those securities and other non-cash
property belonging to the Fund and (ii) the Custodian shall require that
securities and other non-cash property so held by the foreign sub-custodian be
held separately from any assets of the foreign sub-custodian or of others.
2. Except as specifically superseded or modified herein, the terms and
provisions of the Custodian Contract shall continue to apply with full force and
effect.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed as a sealed instrument in its name and behalf by its duly authorized
representative this day of , 1995.
By:__________________________________________
Title:_______________________________________
STATE STREET BANK AND TRUST COMPANY
By:__________________________________________
Title:_______________________________________
SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN, LLP
919 Third Avenue
New York, New York 10022-9998
October 20, 1995
Prudential Global Limited Maturity Fund, Inc.
One Seaport Plaza
New York, New York 10292
Ladies and Gentlemen:
We have acted as counsel to Prudential Global Limited Maturity Fund, Inc.
(the "Fund") in connection with the proposed reorganization (the
"Reorganization") of the two investment portfolios of the Fund. Pursuant to the
proposed Reorganization, substantially all of the assets and liabilities of the
Global Assets Portfolio of the Fund will be transferred to the Limited Maturity
Portfolio of the Fund in exchange for shares of the Limited Maturity Portfolio.
The shares of the Limited Maturity Portfolio being issued in connection with
the Reorganization are being registered with the Securities and Exchange
Commission pursuant to a registration statement on Form N-14 (the "Registration
Statement").
In connection with the foregoing, we have examined, among other things, the
Articles of Incorporation, as amended, and By-Laws of the Fund; the draft of the
Prospectus/Proxy Statement that is contained in the Registration Statement; and
such other records and documents as we have deemed necessary in order to enable
us to express the opinion set forth below. In our examination, we have assumed
the genuineness of all signatures, the authority of all signatories other than
on behalf of the Fund, the authenticity of all documents submitted to us as
originals and the conformity to original documents of all documents submitted to
us as certified or photostatic copies.
Subject to the effectiveness of the Registration Statement and compliance
with the applicable provisions of the Articles of Incorporation and By-Laws of
the Fund as well as applicable state securities laws, and based on and subject
to the foregoing examination and assumptions and assuming that the sale and
issuance thereof is made in the manner
<PAGE>
Prudential Global Limited Maturity Fund, Inc.
October 20, 1995
Page 2
contemplated in the Prospectus/Proxy Statement contained in the Registration
Statement, it is our opinion that upon payment of a consideration therefor not
less than the greater of net asset value or par value per share, the shares of
the Limited Maturity Portfolio of the Fund which are being registered in the
Registration Statement and will be issued to the Global Assets Portfolio of the
Fund in the Reorganization, will be, when sold, legally issued, fully paid and
non-assessable.
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 law of Maryland, such opinion should be understood
to be based solely upon our review of the documents referred to above, the
published statutes of that State and, where applicable, published cases, rules
or regulations of regulatory bodies of that State.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as part of the Registration Statement and with any state
securities commission where such filing is required.
Very truly yours,
/s/ Shereff, Friedman, Hoffman & Goodman, LLP
Shereff, Friedman, Hoffman & Goodman, LLP
SFHG:JHG:MKN:KLJ:jmr
SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN, LLP
919 Third Avenue
New York, New York 10022-9998
October 20, 1995
Prudential Global Limited Maturity Fund, Inc.
(Global Assets Portfolio)
199 Water Street
New York, New York 10292
Prudential Global Limited Maturity Fund, Inc.
(Limited Maturity Portfolio)
199 Water Street
New York, New York 10292
Dear Sirs:
We are acting as counsel to the Global Asset Portfolio ("Global Asset
Portfolio") and the Limited Maturity Portfolio ("Limited Maturity Portfolio") of
Prudential Global Limited Maturity Fund, Inc., a Maryland corporation (the
"Fund"), in connection with the proposed transfer of all of the assets of Global
Assets Portfolio to Limited Maturity Portfolio and the assumption by Limited
Maturity Portfolio of Global Assets Portfolio's liabilities, if any, solely in
exchange for shares of Limited Maturity Portfolio (the "Shares") pursuant to an
Agreement and Plan of Reorganization and Liquidation (the "Agreement"). The
transactions provided for in the Agreement are sometimes referred to herein as
the "Reorganization."
In connection with rendering the opinions expressed herein, we have examined
the Fund's Registration Statement on Form N-14 (the "Registration Statement")
relating to the Shares of Limited Maturity Portfolio to be offered in exchange
for the assets of Global Assets Portfolio, and containing the prospectus and
proxy statement relating to the transaction (collectively, the "Prospectus"), to
be filed with the Securities and Exchange Commission (the "Commission") pursuant
to the provisions of the Securities Act of 1933, as amended (the "Securities
Act"), and the Investment Company Act of 1940, as amended, and the rules and
regulations of the Commission thereunder. In addition, we have examined
originals or copies, certified or otherwise identified to our satisfaction, of
such other
<PAGE>
Prudential Global Limited Maturity Fund, Inc.
October 20, 1995
Page 2
documents, records and other instruments as we have deemed necessary or
appropriate for the purpose of rendering this opinion, including the form of the
Agreement included as Appendix A to the Prospectus.
In our examination of the foregoing documents we have assumed the
genuineness of all signatures, the authority of each signatory, the due
execution and delivery of all documents by all parties, the authenticity of all
agreements, documents, certificates and instruments submitted to us as
originals, the conformity of the Agreement as executed and delivered by the
parties with the form of the Agreement contained in the Prospectus, and the
conformity with originals of all agreements, documents, certificates and
instruments submitted to us as copies.
In rendering the opinions expressed herein, we have assumed that the
transactions contemplated by the Agreement will be consummated in accordance
therewith and as described in the Prospectus. As to other questions of fact
material to this opinion, we have assumed, with your approval and without
independent investigation or verification, that the following facts will be
accurate and complete as of the consummation of the Reorganization (the "Closing
Date").
1. The fair market value of the Shares to be received by each Global Assets
Portfolio shareholder will be equal to the fair market value of the Global
Assets Portfolio shares surrendered in exchange therefor upon the liquidation of
Global Assets Portfolio.
2. There will be no plan or intention by any shareholder of Global Assets
Portfolio who owns 5 percent or more of the outstanding shares of Global Assets
Portfolio, and to the best of the knowledge of management of Global Assets
Portfolio, there will be no plan or intention on the part of the remaining
shareholders of Global Assets Portfolio, to sell, exchange, or otherwise dispose
of a number of Shares received in the Reorganization that would reduce Global
Assets Portfolio shareholders' ownership of Shares of Limited Maturity Portfolio
to a number of Shares having a value, as of the Closing Date, of less than 50
percent of the value of all formerly outstanding shares of Global Assets
Portfolio as of the same date. For purposes hereof, shares of Global Assets
Portfolio exchanged for cash or other property, surrendered by dissenters, or
exchanged for cash in lieu of fractional Shares of Limited Maturity Portfolio
will be treated as outstanding shares of Global Assets Portfolio at the Closing
Date of the Reorganization. Moreover, shares of Global Assets Portfolio and
Shares of Limited Maturity Portfolio held by Global Assets Portfolio
shareholders and otherwise sold, redeemed, or disposed of prior or subsequent to
the Reorganization and as part of the Reorganization will be considered in
making this assumption.
Prudential Global Limited Maturity Fund, Inc.
October 20, 1995
Page 3
3. Pursuant to the Agreement, Global Assets Portfolio will distribute in
liquidation of Global Assets Portfolio, the Shares of Limited Maturity Portfolio
received by Global Assets Portfolio in the Reorganization.
4. The liabilities of Global Assets Portfolio assumed by Limited Maturity
Portfolio pursuant to the Reorganization, plus the liabilities, if any, to which
assets transferred pursuant to the Reorganization will be subject will
constitute less than 20% of the total consideration for the Reorganization, all
such liabilities will have been incurred by Global Assets Portfolio in the
ordinary course of its business, and Limited Maturity Portfolio will pay no
other consideration, except for the Shares, in connection with the
Reorganization.
5. All expenses incurred by Global Assets Portfolio with respect to the
Reorganization will be borne by each Portfolio on a pro rata basis (in
accordance with the relative net asset values of the Portfolios). Each
shareholder of Global Assets Portfolio will pay its share of the expenses, if
any, incurred in connection with the Reorganization.
6. No intercorporate indebtedness will exist between Limited Maturity
Portfolio and Global Assets Portfolio that was issued, acquired, or will be
settled at a discount.
7. Global Assets Portfolio will not own, directly or indirectly, nor will it
have owned during the five years preceding the Closing Date, directly or
indirectly, any shares of stock of Limited Maturity Portfolio.
8. The assets of Global Assets Portfolio transferred to Limited Maturity
Portfolio will include all assets owned by Global Assets Portfolio at fair
market value on the Closing Date subject to all known liabilities of Global
Assets Portfolio at such time.
9. In accordance with the terms of the Agreement, Global Assets Portfolio
will transfer all of its business and will transfer assets to Limited Maturity
Portfolio representing at least 90% of the fair market value of the net assets,
and at least 70% of the fair market value of the gross assets, held by Global
Assets Portfolio immediately prior to the Reorganization. For purposes of this
assumption, amounts paid by Global Assets Portfolio to shareholders who receive
cash or other property, amounts paid to dissenters, amounts used by Global
Assets Portfolio to pay its reorganization expenses and all redemptions and
distributions (other than regular, normal redemptions and dividends) made by
Global Assets Portfolio immediately preceding the Reorganization will be
included as assets of Global Assets Portfolio held immediately prior to the
Reorganization.
<PAGE>
Prudential Global Limited Maturity Fund, Inc.
October 20, 1995
Page 4
10. The fair market value of the assets of Global Assets Portfolio
transferred to Limited Maturity Portfolio will equal or exceed the sum of
liabilities assumed by Limited Maturity Portfolio, plus the amount of
liabilities, if any, to which the transferred assets will be subject.
11. Global Assets Portfolio will not be under the jurisdiction of a court in
a Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the
Internal Revenue Code of 1986, as amended (the "Code").
12. No cash will be paid to the shareholders of Global Assets Portfolio in
lieu of fractional shares.
13. For federal income tax purposes, Global Assets Portfolio will qualify as
a regulated investment company (as defined in Code Section-851) and will have so
qualified since its formation. The provisions of Code Sections 851 through 855
will apply to Global Assets Portfolio and will continue to apply through the
Closing Date.
14. As of the Closing Date, Global Assets Portfolio will have declared to
its shareholders of record a dividend or dividends payable prior to closing,
which together with all previous such dividends will have the effect of
distributing all of Global Assets Portfolio's investment company taxable income
plus the excess of its interest income, if any, excludable from gross income
under Code Section 103(a) over its deductions disallowed under Sections 265 and
171(a)(2) for the taxable year of Global Assets Portfolio ending on the Closing
Date and all its net capital gain realized in such taxable year.
15. Except to the extent necessary to comply with its legal obligation to
redeem its own shares, Limited Maturity Portfolio will have no plan or intention
to reacquire any of the Shares issued in the Reorganization.
16. Limited Maturity Portfolio will have no plan or intention to sell or
otherwise dispose of any of the assets of Global Assets Portfolio acquired in
the Reorganization, except for dispositions made in the ordinary course of
business.
17. Following the Reorganization, Limited Maturity Portfolio will continue
the historic business of Global Assets Portfolio or use a significant portion of
Global Assets Portfolio's historic business assets in its business.
<PAGE>
Prudential Global Limited Maturity Fund, Inc.
October 20, 1995
Page 5
18. Limited Maturity Portfolio will not own, directly or indirectly, nor
will it have owned during the five years preceding the Closing Date, directly or
indirectly, any shares of Global Assets Portfolio.
19. Limited Maturity Portfolio will not be under the jurisdiction of a court
in a Title 11 or similar case within the meaning of Code Section 368(a)(3)(A).
20. At the Closing Date, Limited Maturity Portfolio will qualify as a
regulated investment company (as defined in Code Section-851) and will have so
qualified since its formation. The provisions of Code Sections 851 through 855
will apply to Limited Maturity Portfolio prior to the Reorganization and will
continue to apply after the Closing Date.
Based on the foregoing and subject to the assumptions and limitations set
forth above and such examination of law as we have deemed necessary, we are of
the opinion that:
1. The Reorganization will constitute a reorganization within the meaning
of Section 368(a)(1)(C) of the Code;
2. Global Assets Portfolio and Limited Maturity Portfolio will each be a
"party to a reorganization" within the meaning of Section 368(b) of the
Code;
3. Pursuant to Sections 361(a) and 357(a) of the Code, no gain or loss will
be recognized by Global Assets Portfolio upon the transfer of its assets to
Limited Maturity Portfolio in exchange solely for Shares of Limited
Maturity Portfolio as a result of the Reorganization and the assumption by
Limited Maturity Portfolio of Global Assets Portfolio's liabilities, if
any, or upon the distribution (whether actual or constructive) of the
Shares of Limited Maturity Portfolio in complete liquidation of Global
Assets Portfolio;
4. Pursuant to Section 1032(a) of the Code, no gain or loss will be
recognized by Limited Maturity Portfolio upon its acquisition of Global
Assets Portfolio's assets solely in exchange for Shares of Limited Maturity
Portfolio and the assumption by Limited Maturity Portfolio of the
liabilities of Global Assets Portfolio;
5. Pursuant to Section 362(b) of the Code, the basis of the assets of
Global Assets Portfolio acquired by Limited Maturity Portfolio will be the
same as the basis of such assets when held by Global Assets Portfolio
immediately prior to the Reorganization;
<PAGE>
Prudential Global Limited Maturity Fund, Inc.
October 20, 1995
Page 6
6. Pursuant to Section 1223(2) of the Code, the holding period of the
assets of Global Assets Portfolio acquired by Limited Maturity Portfolio
will include the period during which such assets were held by Global Assets
Portfolio;
7. Pursuant to Section 354(a)(1) of the Code, no gain or loss will be
recognized by a shareholder of Global Assets Portfolio upon the exchange of
his or her shares for Shares of Limited Maturity Portfolio, including
fractional shares, in liquidation of Global Assets Portfolio;
8. Pursuant to Section 358(a)(1) of the Code, the basis of the Shares of
Limited Maturity Portfolio received by former Global Assets Portfolio
shareholders will be the same as the basis of Global Assets Portfolio
shares surrendered in exchange therefor; and
9. Pursuant to Section 1223(1) of the Code, the holding period for Shares
of Limited Maturity Portfolio received by each shareholder of Global Assets
Portfolio in exchange for his or her shares of Global Assets Portfolio will
include the period during which such shareholder held shares of Global
Assets Portfolio (provided Global Assets Portfolio shares were held as
capital assets on the date of the exchange).
We note that we are members of the Bar of the State of New York and are not
members of the Bar of, or authorized to practice law in, any other jurisdiction,
and that our opinion is expressly limited to the federal laws of the United
States.
The opinions expressed herein are based upon currently applicable statutes
and regulations and existing interpretations. We can provide no assurance that
such statutes or regulations, or existing judicial or administrative
interpretations thereof, will not be amended, revoked or modified (possibly
prior to the Closing Date) in a manner which would affect our conclusions.
Finally, we note that this opinion is solely for the benefit of the addressees
hereof in connection with the transaction described herein and, except as
otherwise provided herein, should not be referred to, used, relied upon or
quoted (with or without specific reference to our firm) in any documents,
reports, financial statements or otherwise, without our prior written consent.
<PAGE>
Prudential Global Limited Maturity Fund, Inc.
October 20, 1995
Page 7
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name and to any reference to our
firm in the Registration Statement or in the Prospectus constituting part
thereof.
Very truly yours,
/s/ Shereff, Friedman, Hoffman & Goodman, LLP
Shereff, Friedman, Hoffman & Goodman, LLP
SFH&G:JHN:MKN:SDB:KLJ:dmw
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this Registration Statement on Form N-14 of Prudential
Global Limited Maturity Fund, Inc. (the "Fund") of our reports on the financial
statements of the Prudential Short-Term Global Income Fund, Inc. - Short-Term
Global Income Portfolio and Global Assets Portfolio (the "Portfolios") dated
December 16, 1994, which are incorporated by reference in and are a part of such
Registration Statement, and to the references to us under the headings
"Financial Highlights" in the Prospectus of each Portfolio, which are
incorporated by reference in and are a part of such Registration Statement, and
"Custodian, Transfer and Dividend Disbursing Agent and Independent Accountants"
in the Statement of Additional Information of the Fund, which is incorporated by
reference in and is a part of such Registration Statement.
Deloitte & Touche LLP
New York, New York
October 20, 1995
Exhibit 17(a)
PROXY
Prudential Global Limited Maturity Fund, Inc.
(Global Assets Portfolio)
One Seaport Plaza
New York, New York 10292
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints S. Jane Rose, Ellyn C. Acker and Grace C.
Torres as Proxies, each with the power of substitution, and hereby authorizes
each of them to represent and to vote, as designated below, all the shares of
capital stock of the Prudential Global Limited Maturity Fund, Inc.-Global Assets
Portfolio held of record by the undersigned on November 2, 1995 at the Special
Meeting of Shareholders to be held on Jaunary 12, 1996, or any adjournment
thereof.
The Board of Directors recommends a vote "FOR" the following proposal.
1. Approval or disapproval of the Agreement and Plan of Reorganization and
Liquidation
[ ] APPROVE [ ] DISAPPROVE [ ] ABSTAIN
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting. (over)
<PAGE>
(Continued from other side)
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE.
This proxy when executed will be voted in the manner described herein by the
undersigned shareholder. If executed and no direction is made, this proxy will
be voted FOR Proposal 1.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
Dated ____________________________, 199
----------------------------------------
Signature
----------------------------------------
Signature if held jointly
Exhibit 17(b)
Prudential Securities
- --------------------------------------------------------------------------------
To Our
Clients:
Your vote is important!
Prudential Securities Incorporated, One Seaport Plaza, New York, NY 10292
- --------------------------------------------------------------------------------
We have been requested to forward to you the enclosed proxy material
relative to shares carried by us in your account but not registered
in your name. Such shares can be voted only by us as the holder of
record.
We shall be pleased to vote your shares in accordance with your
wishes. If you will execute the enclosed form and return it to us
promptly in the self-addressed stamped envelope, also enclosed. It is
understood that, if you sign without otherwise marking the form, the
shares will be voted as recommended by the management on all matters
to be considered at the meeting.
We urge you to send in your proxy so that we may vote your shares in
accordance with your wishes.
The rules of the New York Stock Exchange provide that if instructions
are not received by the tenth day before the meeting, the proxy may
be given at discretion by the holder of record of the shares. If you
are unable to communicate with us by such date, we will,
nevertheless, follow your instructions even if our discretionary vote
has already been given, provided your instuctions are received prior
to the stockholders' meeting.
Should you wish to attend the meeting in person or have a proxy
covering your dhares, we shall be pleased to issue the same to you.
Prudential Securities Incorporated Form 2502 (Rev 3-83)
Exhibit 17(c)
Prudential Global Limited Maturity Fund, Inc.
(Global Assets Portfolio)
November , 1995
Dear Shareholder of
Prudential Global Limited Maturity Fund, Inc. (Global Assets Portfolio):*
You may be aware that the Board of Directors of Prudential Global Limited
Maturity Fund, Inc. (Global Assets Portfolio) has recently approved a proposal
to transfer the assets and liabilities of your portfolio in exchange for shares
of Prudential Global Limited Maturity Fund, Inc. (Limited Maturity Portfolio).**
The enclosed proxy materials describe this proposal in detail. If the proposal
is approved and implemented, you will automatically become a shareholder of the
Limited Maturity Portfolio.
The Board of Directors and I strongly recommend that you vote FOR the
proposal. We believe that this transaction serves your interests in the
following ways:
* SIMILAR STRATEGIES. The portfolios' investment objectives and strategies,
while not identical, are similar.
* SAME PORTFOLIO MANAGERS. Simon Wells and Gabriel Irwin, portfolio managers of
the Global Assets Portfolio, also manage the Limited Maturity Portfolio. Mr.
Wells and Mr. Irwin are experienced portfolio managers of all types of global
fixed income securities. They are based in London, England.
* INVESTMENT OPPORTUNITY. The Manager believes that greater returns may be
achieved for shareholders by combining both Portfolios into the one portfolio
with a longer weighted average maturity, greater flexibility and more
expansive investment policies which permit the Manager to take advantage of
opportunities in today's international fixed income market.
* REDUCED EXPENSES. Combining the portfolios may benefit you in the form of
reduced expenses as a percentage of net assets.
Please read the enclosed materials carefillly for more complete information.
Your vote is important, no matter how many shares you own. Voting your
shares early may permit your Portfolio to avoid costly follow-up mail and
telephone solicitation. After you have reviewed the enclosed materials, please
complete, date and sign your proxy card and mail it in the enclosed postagepaid
return envelope today.
<PAGE>
Thank you for the confidence you've placed in the Prudential Mutual Funds.
We hope to continue to earn it in the years to come.
Sincerely,
Richard A. Redeker
President, Prudential Global
Limited Maturity Fund, Inc.
(Global Assets Portfolio)
*formerly Prudential Short-Term Global Income Fund, Inc. (Global Assets
Portfolio)
*formerly Prudential Short-Term Global Income Fund, Inc. (Short-Term Global
Income Portfolio)
As filed with the Securities and Exchange Commission on February 13, 1990
Registration No. 33-33479
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. ____
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. ____
(Check appropriate box or boxes)
__________________
Prudential-Bache Canadian-U.S Government Securities 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)
copy to:
Victoria Schonfeld, Esq.
Shereff Friedman Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
Approximate date of proposed public offering: As soon as practicable after
the effective date of this registration statement.
It is proposed that this filing will become effective: (check appropriate box)
|_| Immediately upon filing pursuant to paragraph (b)
|_| on (date) pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)
|_| on (date) pursuant to paragraph (a) of Rule 485.
_____________________
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<S> <C> <C> <C> <C>
Title of Securities Amount Being Maximum Offering Maximum Aggregate Amount of
Being Registered Registered Price Per Unit Offering Price Registration Fee
Shares of Common
Stock ($.001 par Indefinite Number of * * $500
</TABLE>
*Registrant hereby elects,apursuant to Rule 24f-2 under the Investment
Company Act of 1940, to register an indefinite number of shares by this
Registration Statement. In accordance with Rule 24f-2, a registration fee, in
the amount of $500, is being paid herewith.
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Prudential Short-Term
Global Income Fund, Inc.
(Global Assets Portfolio)
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Prospectus dated January 3, 1995
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Prudential Short-Term Global Income Fund, Inc. (the Fund)--Global Assets
Portfolio (the Portfolio) is one of two separate portfolios of an open-end,
management investment company. Only shares of the Global Assets Portfolio are
offered by means of this Prospectus. The Global Assets Portfolio's investment
objective is high current income with minimum risk to principal. The Portfolio
seeks to achieve its objective by investing in a portfolio of high-quality debt
securities having remaining maturities of not more than one year. The Portfolio
seeks high current yields by investing in debt securities denominated in the
U.S. dollar and a range of foreign currencies. The Portfolio is non-diversified
and may invest more than 5% of its total assets in the securities of one or more
issuers. Investment in a non-diversified portfolio involves greater risk than
investment in a diversified portfolio. The Global Assets Portfolio, which is not
a money market fund, is designed for the investor who seeks a higher yield than
a money market fund and less fluctuation in net asset value than a longer-term
bond fund. There can be no assurance that the Portfolio's investment objective
will be achieved. See "How the Fund Invests-Investment Objective and Policies."
The Portfolio is currently not accepting purchase orders for its Class B shares.
The Portfolio continues to accept purchase orders for its Class A shares. The
Fund's address is One Seaport Plaza, New York, New York 10292, and its telephone
number is (800) 225-1852.
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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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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.
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2
<PAGE>
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What is the Minimum Investment?
The minimum initial investment is $5,000. Thereafter, the minimum investment
is $1,000. There is no minimum investment requirement for certain retirement
plans or custodial accounts for the benefit of minors. For purchases made
through the Automatic Savings Accumulation Plan the minimum initial and
subsequent investment is $50. See "Shareholder Guide-How to Buy Shares of the
Fund" at page 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.
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3
<PAGE>
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FUND EXPENSES-GLOBAL ASSETS PORTFOLIO
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<TABLE>
<CAPTION>
Class A Shares Class B Shares
(Initial Sales Charge (Deferred Sales Charge
Alternative) Alternative)
------------ ------------
<S> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage of offering .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
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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).
* 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.
</FN>
</TABLE>
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4
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FINANCIAL HIGHLIGHTS
(for a share of common stock outstanding throughout each of the
periods indicated)
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The following financial highlights 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.
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<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.
</FN>
</TABLE>
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5
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HOW THE FUND INVESTS
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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.
7
<PAGE>
The Portfolio may invest in debt securities denominated in the ECU, which is
a "basket" consisting of specified amounts of currencies of certain of the
twelve member states of the European Community. The specific amounts of
currencies comprising the ECU may be adjusted by the Council of Ministers of the
European Community to reflect changes in relative values of the underlying
currencies. The Fund's investment adviser does not believe that such adjustments
will adversely affect holders of ECU-denominated obligations or the
marketability of such securities. European supranationals, in particular, issue
ECU-denominated obligations.
The Portfolio is "non-diversified" so that the Portfolio may invest more
than 5% of its total assets in the securities of one or more issuers. Investment
in a non-diversified portfolio involves greater risk than investment in a
diversified portfolio because a loss resulting from the default of a single
issuer may represent a greater portion of the total assets of a non-diversified
portfolio.
RISK FACTORS
Risk Factors on Foreign Investments
Investing in securities issued by foreign governments and corporations
involves considerations and possible risks not typically associated with
investing in obligations issued by the U.S. government and domestic
corporations. The values of foreign investments are affected by changes in
currency rates or exchange control regulations, application of foreign tax laws,
including withholding taxes, changes in governmental administration or economic
or monetary policy (in this country or abroad) or changed circumstances in
dealings between nations. Costs are incurred in connection with conversions
between various currencies. In addition, foreign brokerage commissions are
generally higher than in the United States, and foreign securities markets may
be less liquid, more volatile and less subject to governmental supervision than
in the United States. Investments in foreign countries could be affected by
other factors not present in the United States, including expropriation,
confiscatory taxation, lack of uniform accounting and auditing standards and
potential difficulties in enforcing contractual obligations and could be subject
to extended settlement periods.
OTHER INVESTMENTS AND INVESTMENT TECHNIQUES
In addition, the Portfolio is permitted to make the investments and engage
in the investment techniques described below. Under normal circumstances, these
investments will represent no more than 35% of the total assets of the
Portfolio.
Hedging and Income Enhancement Strategies
The Portfolio may engage in various portfolio strategies, 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
8
<PAGE>
security that it owns against a decline in market value and purchase call
options in an effort to protect against an increase in price of securities (or
currencies) it intends to purchase. The Portfolio may also purchase put and call
options to offset previously written put and call options of the same series.
See "Additional Investment Information-Additional Risks-Options on Securities"
in the Statement of Additional Information.
A call option gives the purchaser, in exchange for a premium paid, the right
for a specified period of time to purchase the securities or currency subject to
the option at a specified price (the exercise price or strike price). The writer
of a call option, in return for the premium, has the obligation, upon exercise
of the option, to deliver, depending upon the terms of the option contract, the
underlying securities or a specified amount of cash to the purchaser upon
receipt of the exercise price. When the Portfolio writes a call option, it gives
up the potential for gain on the underlying securities or currency in excess of
the exercise price of the option during the period that the option is open.
A put option gives the purchaser, in return for a premium, the right, for a
specified period of time, to sell the securities or currency subject to the
option to the writer of the put at the specified exercise price. The writer of
the put option, in return for the premium, has the obligation, upon exercise of
the option, to acquire the securities or currency underlying the option at the
exercise price. The Portfolio might, therefore, be obligated to purchase the
underlying securities or currency for more than their current market price.
The Portfolio will write only "covered" options. An option is covered if, so
long as the Portfolio is obligated under the option, it owns an offsetting
position in the underlying security or currency or maintains cash, U.S.
Government securities or other liquid high-grade debt obligations with a value
sufficient at all times to cover its obligations in a segregated account. See
"Additional Investment Information-Additional Risks" in the Statement of
Additional Information.
There is no limitation on the amount of call options the Portfolio may
write. The Portfolio may only write covered put options to the extent that cover
for such options does not exceed 25% of its net assets. The Portfolio will not
purchase an option if, as a result of such purchase, more than 20% of its total
assets would be invested in premiums for options and options on futures.
Forward Currency Exchange Contracts
The Portfolio may enter into forward foreign currency exchange contracts to
protect the value of its portfolio against future changes in the level of
currency exchange rates. The Portfolio may enter into such contracts on a spot,
i.e., cash, basis at the rate then prevailing in the currency exchange market or
on a forward basis, by entering into a forward contract to purchase or sell
currency. A forward contract on foreign currency is an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
agreed upon by the parties from the date of the contract at a price set on the
date of the contract.
The Portfolio's dealings in forward contracts will be limited to hedging
involving either specific transactions or portfolio positions. Transaction
hedging is the purchase or sale of a forward contract with respect to specific
receivables or payables of the Portfolio generally arising in connection with
the purchase or sale of its portfolio securities and accruals of interest or
dividends receivable and Portfolio expenses. Position hedging is the sale of a
foreign currency with respect to portfolio security positions denominated or
quoted in that currency or in a different currency (cross-hedge). Although there
are no limits on the number of forward contracts which the Portfolio may enter
into, the Portfolio may not position hedge with respect to a particular currency
for an amount greater than the aggregate market value (determined at the time of
making any sale of forward currency) of the securities held in its portfolio
denominated or quoted in, or currently convertible into or bearing substantial
correlation to, such currency. See "Additional Investment Information-Additional
Risks-Forward Currency Exchange Contracts" in the Statement of Additional
Information.
Futures Contracts and Options Thereon
The Portfolio may purchase and sell financial futures contracts and options
thereon which are traded on a commodities exchange or board of trade for certain
hedging, return enhancement and risk management purposes
9
<PAGE>
in accordance with regulations of the Commodity Futures Trading Commission.
These futures contracts and related options will be on debt securities,
financial indices, U.S. Government securities, foreign government securities and
foreign currencies. A financial futures contract is an agreement to purchase or
sell an agreed amount of securities or currencies at a set price for delivery in
the future.
The Portfolio may not purchase or sell futures contracts and related options
for return enhancement or risk management purposes, if immediately thereafter
the sum of the amount of initial margin deposits on the Fund's existing futures
and options on futures and premiums paid for such related options would exceed
5% of the liquidation value of the 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.
10
<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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<PAGE>
The staff of the Commission has taken the position that purchased OTC
options and the assets used as "cover" for written OTC options are illiquid
securities. However, the Portfolio may treat the securities it uses as cover for
written OTC options as liquid provided it follows a specified procedure. The
Portfolio may sell OTC options only to qualified dealers who agree that the
Portfolio may repurchase any OTC options it writes for a maximum price to be
calculated by a predetermined formula. In such cases, the OTC option would be
considered illiquid only to the extent that the maximum repurchase price under
the formula exceeds the intrinsic value of the option.
Portfolio Turnover
Portfolio turnover rate is typically defined as the lesser of the amount of
the securities purchased or securities sold, excluding all securities whose
maturity or expiration date at the time of acquisition was one year or less,
divided by the average monthly value of such securities owned during the year.
Because the Portfolio will invest in securities having remaining maturities of
not more than one year, the Portfolio does not expect to have a turnover rate as
so defined. However, because of the short-term nature of the Portfolio's
investments, it expects to have substantial amounts of portfolio transactions.
High portfolio turnover may involve correspondingly greater brokerage
commissions and other transaction costs which will be borne directly by the
Portfolio. See "Portfolio Transactions and Brokerage" in the Statement of
Additional Information.
INVESTMENT RESTRICTIONS
The Portfolio is subject to certain investment restrictions which, like its
investment objective, constitute fundamental policies. Fundamental policies
cannot be changed without the approval of the holders of a majority of the
Portfolio's outstanding voting securities, as defined in the Investment Company
Act. See "Investment Restrictions" in the Statement of Additional Information.
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HOW THE FUND IS MANAGED
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The Fund has a Board of Directors which, in addition to overseeing the
actions of the Portfolio's Manager, Subadviser and Distributor, as set forth
below, decides upon matters of general policy. The Portfolio's Manager conducts
and supervises the daily business operations of the Portfolio. The Fund's
Subadviser furnishes daily investment advisory services.
For the year ended October 31, 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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<PAGE>
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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<PAGE>
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.
15
<PAGE>
PORTFOLIO TRANSACTIONS
Prudential Securities may act as a broker or futures commission merchant for
the Portfolio provided that the commissions, fees or other remuneration received
by Prudential Securities are fair and reasonable. See "Portfolio Transactions
and Brokerage" in the Statement of Additional Information.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for the Portfolio's investment
securities and cash and, in that capacity, maintains certain financial and
accounting books and records pursuant to an agreement with the Fund. Its mailing
address is P.O. Box 1713, Boston, Massachusetts 02105.
Prudential Mutual Fund Services, Inc., Raritan Plaza One, Edison, New
Jersey 08837, serves as Transfer Agent and Dividend Disbursing Agent and in
those capacities maintains certain books and records for the Fund. PMFS is a
wholly-owned subsidiary of PMF. Its mailing address is P.O. Box 15005, New
Brunswick, New Jersey 08906-5005.
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HOW THE FUND VALUES ITS SHARES
- -------------------------------------------------------------------------------
The Portfolio's net asset value per share or NAV is determined by
subtracting its liabilities from the value of its assets and dividing the
remainder by the number of outstanding shares of the Portfolio. NAV is
calculated separately for each class. For valuation purposes, quotations of
foreign securities in a foreign currency are converted to U.S. dollar
equivalents. The Board of Directors has fixed the specific time of day for the
computation of the Portfolio's net asset value to be as of 4:15 p.m., New York
time.
Portfolio securities are valued based on market quotations or, if not
readily available, at fair value as determined in good faith under procedures
established by the Fund's Board of Directors.
The Portfolio will compute its NAV once daily on days that the New York
Stock Exchange is open for trading except on days on which no orders to
purchase, sell or redeem shares have been received by the Fund or days on which
changes 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.
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HOW THE FUND CALCULATES PERFORMANCE
- -------------------------------------------------------------------------------
From time to time the Portfolio may advertise its total return (including
"average annual" total return and "aggregate" total return) in advertisements or
sales literature. Total return is calculated separately for Class A and Class B
shares. These figures are based on historical earnings and are not intended to
indicate future performance. The "total return" shows how much an investment in
the Portfolio would have increased (decreased) over a specified period of time
(i.e., one, five or ten years or since inception of the Portfolio) assuming that
all distributions and dividends by the Portfolio were reinvested on the
reinvestment dates during the period and less all recurring fees. The
"aggregate" total return reflects actual performance over a stated period of
time. "Average annual" total return is a hypothetical rate of return that, if
achieved annually, would have produced the same aggregate total return if
performance had been constant
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."
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TAXES, DIVIDENDS AND DISTRIBUTIONS
- -------------------------------------------------------------------------------
Taxation of the Portfolio
The Portfolio has elected to qualify and intends to remain qualified as a
regulated investment company under the Internal Revenue Code. Accordingly, the
Portfolio will not be subject to federal income taxes on its net investment
income and capital gains, if any, that it distributes to its shareholders.
Gains or losses on disposition of debt securities denominated in a foreign
currency attributable to fluctuations in the value of foreign currency between
the date of acquisition of the security and the date of disposition also are
treated as ordinary gain or loss. These gains or losses increase or decrease the
amount of the Portfolio's investment company taxable income available to be
distributed to you as ordinary income, rather than increasing or decreasing the
amount of the Portfolio's net capital gain. If currency fluctuation losses
exceed other investment company taxable income during a taxable year,
distributions made by a Portfolio during the year would be characterized as a
return of capital to you, reducing your basis in your Portfolio shares.
In addition, under the Internal Revenue Code, special rules apply to the
treatment of certain options and futures contracts (Section 1256 contracts). At
the end of each year, such investments held by the Portfolio will be required to
be "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
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<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
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<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).
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<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.
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<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.
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<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
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<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.
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<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 MUTUAL FUNDS
Supplement dated April 17, 1995
HOW THE FUND IS MANAGED
Manager
The portfolios of each of the Funds listed below are managed by J. Gabriel
Irwin and Simon Wells who head a Global Fixed Income Group of Prudential
Investment Corporation (PIC). As a team, they have responsibility for the
day-to-day management of the Funds' portfolios. Messrs. Irwin and Wells have
been employed by PIC and Prudential-Bache Securities (U.K.) Inc. since April
1995, Messrs. Irwin and Wells were previously employed by Smith Barney Global
Capital Management Inc., where they worked together as Directors and senior
members of the Investment Policy Committee and managed approximately $1.5
billion in institutional and mutual fund assets. Messrs. Irwin and Wells also
serve as the portfolio managers of The Global Government Plus Fund, Inc. and The
Global Total Return Fund, Inc.
Listed below are the names of the Prudential Mutual Funds and the dates of
the prospectus to which this supplement relates.
Name of Fund Prospectus Date
------------ ---------------
Prudential Intermediate Global Income Fund, Inc. March 2, 1995
Prudential Short-Term Global Income Fund, Inc.
Short-Term Global income Portfolio January 3, 1995
Global Assets Portfolio January 3, 1995
<PAGE>
PRUDENTIAL MUTUAL FUNDS
Supplement dated May 5, 1995
The following information supplements the Prospectus of each of the Funds
listed below.
SHAREHOLDER GUIDE
ALTERNATIVE PURCHASE PLAN
Class A Share--Reduction and Waiver of Initial Sales Charges
Other Waivers. Class A shares may be purchased at NAV, through Prudential
Securities or the Transfer Agent, by 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 .25 of
1% or less) and (iii) the financial adviser served as the client's broker on the
previous purchase.
HOW TO SELL YOUR SHARES
90-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 Fund at the NAV next
determined after the order is received, which must be within 90 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
Fund'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 effect federal tax treatment of any
gain realized upon redemption. If the redemption resulted in a loss, some or all
of the loss, depending on thhe amount reinvested, will generally not be allowed
for federal income tax purposes.
<PAGE>
Listed below are the names of the Prudential Mutual Funds and the dates of
the Prospectuses to which this supplement relates.
Name of Fund Prospectus Date
------------ ---------------
Prudential Adjustable Rate Securities Fund, Inc. May 1, 1994
Prudential Allocation Fund September 29, 1994
Prudential California Municipal Fund
California Income Series December 30, 1994
California Series December 30, 1994
Prudential Equity Income Fund December 30, 1994
Prudential Global Fund, Inc. January 3, 1995
Prudential Global Genesis Fund, Inc. August 1, 1994
Prudential Global Natural Resources Fund, Inc. August 1, 1994
Prudential Multi-Sector Fund, Inc. August 1, 1994
Prudential Municipal Bond Fund August 1, 1994
Prudential Municipal Series Fund
Arizona Series December 30, 1994
Florida Series December 30, 1994
Georgia Series December 30, 1994
Maryland Series December 30, 1994
Massachusetts Series December 30, 1994
Michigan Series December 30, 1994
Minnesota Series December 30, 1994
New Jersey Series December 30, 1994
New York Series December 30, 1994
North Carolina Series December 30, 1994
Ohio Series December 30, 1994
Pennsylvania Series December 30, 1994
Prudential Pacific Growth Fund, Inc. January 3, 1995
Prudential Short-Term Global Income Fund, Inc.
Global Assets Portfolio January 3, 1995
Short-Term Global Income Fund January 3, 1995
Prudential Strategist Fund, Inc. August 1, 1994
Prudential U.S. Government Fund January 3, 1995
The BlackRock Government Income Trust November 1, 1994
(as supplemented
December 30, 1994)
<PAGE>
PRUDENTIAL MUTUAL FUNDS
Supplement dated July 3, 1995
The following information supplements the prospectuses of each of the Funds
listed on the reverse.
SHAREHOLDER GUIDE
HOW TO BUY SHARES OF THE FUND
Reduction and Waiver of Initial Sales Charges.
PruArray Plans. Class A shares may be purchased at NAV by certain retirement
and deferred compensation plans, qualified or non-qualified under the Internal
Revenue Code of 1986, as amended, (the Code), including pension, profit-sharing,
stock-bonus or other employee benefit plans under Section 401 of the Code and
deferred compensation and annuity plans under Sections 457 and 403(b)(7) of the
code that participate in the Transfer Agent's PruArray Program (a benefit plan
record keeping service) (hereinafter referred to as a PruArray Plan); provided
(i) that the plan has at least $1 million in existing assets or 1,000 eligible
employees or participants and (ii) that Prudential Mutual Funds constitute at
least one-half of the plan's investment options. The term "existing assets" for
this purpose includes stock issued by a PruArray Plan sponsor and shares of
non-money market Prudential Mutual Funds and shares of certain unaffiliated
non-money market mutual funds that participate in the PruArray Program
(Participating Funds). "Existing assets" also include shares of money market
funds acquired by exchange from a Participating Fund. After a PruArray Plan
qualifies to purchase Class A shares at NAV, all subsequent purchases will be
made at NAV.
<PAGE>
Listed below are the names of the Prudential Mutual Funds and the dates of
the Prospectuses to which this supplement relates.
Name of Fund Prospectus Date
------------ ---------------
Prudential Adjustable Rate Securities Fund, Inc. June 26, 1995
Prudential Allocation Fund September 29, 1994
Prudential Diversified Bond Fund, Inc. January 3, 1995
(as supplemented
June 20, 1995)
Prudential Equity Fund, Inc. February 28, 1995
Prudential Equity Income Fund December 30, 1994
Prudential Global Fund, Inc. January 3, 1995
Prudential Global Genesis Fund, Inc. August 1, 1994
Prudential Global Natural Resources Fund, Inc. August 1, 1994
Prudential GNMA Fund, Inc. March 2, 1995
Prudential Government Income Fund, Inc. May 1, 1995
Prudential Growth Opportunity Fund, Inc. February 1, 1995
Prudential High Yield Fund, Inc. February 28, 1995
Prudential IncomeVertible Fund, Inc. March 1, 1995
Prudential Intermediate Global Income Fund, Inc. March 2, 1995
Prudential Multi-Sector Fund, Inc. June 30, 1995
Prudential Pacific Growth Fund, Inc. January 3, 1995
Prudential Short-Term Global Income Fund, Inc.
Global Assets Portfolio January 3, 1995
Short-Term Global Income Fund January 3, 1995
Prudential Structured Maturity Fund, Inc. March 1, 1995
Prudential U.S. Government Fund January 3, 1995
Prudential Utility Fund, Inc. March 1, 1995
The BlackRock Government Income Trust November 1, 1994
(as supplemented
December 30, 1994)
Global Utility Fund, Inc. February 1, 1995
Nicholas-Applegate Fund, Inc. March 6, 1995
<PAGE>
Prudential Short-Term Global Income Fund, Inc.
(Global Assets Portfolio)
Supplement dated October 6, 1995
to Prospectus dated January 3, 1995
Proposed Reorganization
The Board of Directors of Prudential short-Term Global Income Fund, Inc.
(the Fund) has recently approved a proposal to sell the assets and liabilities
of the Fund's Global Assets Portfolio for shares of the Fund's Short-Term Global
Income Portfolio. Class A shares of the Global Assets Portfolio would be
exchanged at net asset value for Class A shares of equivalent value of
Short-Term Global Income Portfolio.
The transaction has been approved by the Fund's Board of Directors and is
subject to approval by the shareholders of the Global Assets Portfolio. It is
anticipated that the proxy statement/prospectus relating to the proposed
transaction will be mailed to Global Assets Portfolio shareholders in November
1995.
Under the terms of the proposal, shareholders of Global Assets Portfolio
would become shareholders of the Short-Term Global Income Portfolio. No sales
charges would be imposed on the proposed transfer. The Fund anticipates
obtaining an opinion of counsel that no gain or loss for federal income tax
purposes would be recognized by shareholders of either portfolio as a result of
the proposed transaction.
Global Assets Portfolio no longer accepts purchase orders of its Class A
shares, except for purchases by certain Retirement and Employee Plans (excluding
IRA accounts). Exisitng shareholders may continue to acquire shares through
dividend reinvestment. The current exchange privilege of obtaining shares of
other Prudential Mutual Funds and the current redemption privilege for Global
Assets Portfolio shareholders will remain in effect. Notwithstanding the above
exceptions, no shares may be acquired by any means beginning four days prior to
the date of closing of the proposed reorganization.
<PAGE>
Prudential Global Limited Maturity Fund, Inc.
(formerly Prudential Short-Term Global Income Fund, Inc.)
(Limited Maturity Portfolio formerly Short-Term global Income Portfolio)
(Global Assets Portfolio)
Supplement dated October 17, 1995
to Prospectus dated January 3, 1995
New Fund Name
The Board of Directors of Prudential Short-Term Global Income Fund, Inc. has
approved shanges in certain investment policies of the Short-Term Global Income
Portfolio, such changes which are more fully described below. In connection with
these investment policy modifications, the Fund and such Portfolio have changed
their name to Prudential Global Limited Maturity Fund, Inc. and Limited Maturity
Portfolio, respectively.
Proposed Reorganization
The Board of Directors of Prudential Global Limited Maturity Fund, Inc. (the
Fund) has recently approved a proposal to sell the assets and liabilities of the
Fund's Global Assets Portfolio for shares of the Fund's Limited Maturity
Portfolio. Class A shares of the Global Assets Portfolio would be exchanged at
net asset value for Class A shares of equivalent value of Limited Maturity
Portfolio.
The transaction has been approved by the Fund's Board of Directors and is
subject to approval by the shareholders of the Global Assets Portfolio. It is
anticipated that the proxy statement/prospectus relating to the proposed
transaction will be mailed to Global Assets Portfolio shareholders in November
1995.
Under the terms of the proposal, shareholders of Global Assets Portfolio
would become shareholders of the Limited Maturity Portfolio. No sales charges
would be imposed on the proposed transfer. The Fund anticipates obtaining an
opinion of counsel that no gain or loss for federal income tax purposes would be
recognized by shareholders of either portfolio as a result of the proposed
transaction.
Global Assets Portfolio no longer accepts purchase orders of its Class A
shares, except for purchases by certain Retirement and Employee Plans (excluding
IRA accounts). Exisitng shareholders may continue to acquire shares through
dividend reinvestment. The current exchange privilege of obtaining shares of
other Prudential Mutual Funds and the current redemption privilege for Global
Assets Portfolio shareholders will remain in effect. Notwithstanding the above
exceptions, no shares may be acquired by any means beginning four days prior to
the date of closing of the proposed reorganization.
The Board of Directors has approved changes in certain investment policies
which are effective immediately. In connection with such changes the Portfolio
has changed its name to Limited Maturity Portfolio. This name change reflects
the lengthening of the portfolio's weighted average maturity from not more than
3 years, to more than 2, but less than 5 years. Other changes approved by the
Fund's Board of Directors are reflected below.
The following replaces the first paragraph under and supplements the
information in "How the Fund Invests--Investment Objectives and Policies."
The Limited Maturity 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. The Portfolio will maintain a weighted
average maturity of more than 2, but less than 5 years, and the maturity for any
individual security will generally not exceed 10
<PAGE>
years. The Portfolio may also invest up to 15% of its total assets in
non-investment grade securities with a minimum rating of B (as determined by the
Standard & Poor's Rating Group, Moody's Investors Services, inc. or by another
nationally recognized statistical rating organization, or if unrated, deemed to
be of equivalent quality by the Portfolio's investment adviser). Investment in
non-investment grade securities may entail additional risks to the Portfolio.
See "How the Fund Invests--Risk Factors--Medium and Lower-Rated Securities."
There is no assurance that the Portfolio will achieve its investment objective.
The Limited Maturity Portfolio will under normal circumstances invest in a
minimum of five different countries, and will invest at least 30% of its total
assets in securities denominated in U.S. Dollars and in cash, and at least 50%
of its total assets in Dollar Bloc currencies (U.S., Canada, Australia or New
Zealand). The Portfolio may invest 100% of its assets in securities denominated
in U.S. Dollars or in cash for temporary extraordinary or emergency purposes.
The following supplements "How the Fund Invests--Other Investments and
Investment Techniques."
Zero Coupon Securities
The Limited Maturity Portfolio may invest up to 10% of its total assets in
zero coupon securities. Zero coupon securities are securities that are sold at a
discount to par value and on which interest payments are not made during the
life of the security. Upon maturity, the holder is entitled to receive the par
value of the security. While interest payments are not made on such securities,
holders of such securities are deemed to have received annually "phantom
income." The Portfolio accrues income with respect to these securities prior to
the receipt of cash payments. Zero coupon securities may be subject to greater
fluctuation in value and lesser liquidity in the event of adverse market
conditions than comparable rated securities paying cash interest at regular
intervals.
Convertible Securities
The Limited Maturity Portfolio may invest up to 5% of its total assets in
convertible securities. A convertible security is generally a corporate bond (or
preferred stock) which may be converted at a stated price within a specified
period of time into a certain quantity of the common stock of the same or a
different issuer. Convertible securities are senior to common stocks in a
corporation's capital structure, but are usually subordinated to similar
nonconvertible securities. While providing a fixed income stream (generally
higher in yield than the income derivable from a common stock but lower than
that afforder by a similar nonconvertible security), a convertible security also
affords an investor the opportunity, through its conversion feature, to
participate in the capital appreciation dependent upon a market price advance in
the convertible security's underlying common stock. The Portfolio may from time
to time hold common stock received upon the conversion of a convertible
security. The Portfolio does not intend to retain the common stock in its
portfolio and will sell it as soon as reasonably practicable. Convertible
securities also include preferred stock which technically is an equity security.
In general, the market value of a convertible security is at least the
higher of its "investment value" (i.e., its value as a fixed-income security) or
its "conversion value" (i.e., its value upon conversion into its underlying
common stock). As a fixed-income security, a convertible security tends to
increase in market value when interest rates decline and tends to decrease in
value when interest rates rise. However, the price of a convertible security is
also influenced by the market value of the security's underlying stock. The
price of a convertible security tends to increase as the market value of the
underlying stock rises, whereas it tends to decrease as the market value of the
underlying stock declines.
Securities of Other Investment Companies
The Limited Maturity Portfolio may invest up to 50% of its total assets in
shares of closed-end investment companies or investment trusts. If the Portfolio
does invest in securities of other investment companies, shareholders of the
Portfolio may be subject to duplicate management and advisory fees.
Prudential Short-Term
Global Income Fund, Inc.
(Short-Term Global Income Portfolio)
- --------------------------------------------------------------------------------
Prospectus dated January 3, 1995
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
3
<PAGE>
- -------------------------------------------------------------------------------
FUND EXPENSES-SHORT-TERM GLOBAL INCOME PORTFOLIO
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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.
</FN>
</TABLE>
- -------------------------------------------------------------------------------
4
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(for a share of common stock outstanding throughout each of the
periods indicated)
(Class A Shares)
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
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>
- -------------------------------------------------------------------------------
5
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(for a share outstanding throughout the indicated periods)
(Class B and C Shares)
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
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>
- -------------------------------------------------------------------------------
6
<PAGE>
- -------------------------------------------------------------------------------
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.
7
<PAGE>
The Portfolio invests in debt securities denominated in the currencies of
countries whose governments are considered stable by the Portfolio's investment
adviser. In addition to the U.S. Dollar, such currencies include, among others,
the Australian Dollar, Austrian Schilling, British Pound Sterling, Canadian
Dollar, Dutch Guilder, European Currency Unit (ECU), French Franc, German Mark,
Italian Lira, Japanese Yen, New Zealand Dollar, Spanish Peseta, Finnish Marka,
Mexican Peso, Danish Kroner, Norwegian Kroner, Swedish Krona and Swiss Franc. An
issuer of debt securities purchased by the Portfolio may be domiciled in a
country other than the country in whose currency the instrument is denominated.
The Portfolio may also invest in debt securities denominated in the currencies
of certain "emerging market" nations, such as, but not limited to, the Czech
Republic, Greece, South Korea, Hong Kong, Malaysia, Indonesia, Thailand, China,
Israel, Chile, 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
8
<PAGE>
an economic union of various European nations' steel and coal industries; and
the Asian Development Bank, which is an international development bank
established to lend funds, promote investment and provide technical assistance
to member nations in the Asian and Pacific regions.
The Portfolio may invest in debt securities denominated in the ECU, which is
a "basket" consisting of specified amounts of currencies of certain of the
twelve member states of the European Community. The specific amounts of
currencies comprising the ECU may be adjusted by the Council of Ministers of the
European Community to reflect changes in relative values of the underlying
currencies. The Portfolio's investment adviser does not believe that such
adjustments will adversely affect holders of ECU-denominated obligations or the
marketability of such securities. European supranationals, in particular, issue
ECU-denominated obligations.
The Portfolio is "non-diversified" so that the Portfolio may invest more
than 5% of its total assets in the securities of one or more issuers. Investment
in a non-diversified portfolio involves greater risk than investment in a
diversified portfolio because a loss resulting from the default of a single
issuer may represent a greater portion of the total assets of a non-diversified
portfolio.
RISK FACTORS
Risk Factors on Foreign Investments
Investing in securities issued by foreign governments and corporations
involves considerations and possible risks not typically associated with
investing in obligations issued by the U.S. government and domestic
corporations. The values of foreign investments are affected by changes in
currency rates or exchange control regulations, application of foreign tax laws,
including withholding taxes, changes in governmental administration or economic
or monetary policy (in this country or abroad) or changed circumstances in
dealings between nations. Costs are incurred in connection with conversions
between various currencies. In addition, foreign brokerage commissions are
generally higher than in the United States, and foreign securities markets may
be less liquid, more volatile and less subject to governmental supervision than
in the United States. Investments in foreign countries could be affected by
other factors not present in the United States, including expropriation,
confiscatory taxation, lack of uniform accounting and auditing standards and
potential difficulties in enforcing contractual obligations and could be subject
to extended settlement periods.
Shareholders should be aware that investing in the fixed-income markets of
developing countries involves exposure to economies that are generally less
diverse and mature, and to political systems which can be expected to have less
stability than those of developed countries. Historical experience indicates
that the markets of developing countries have been more volatile than the
markets of developed countries. The risks associated with investments in foreign
securities, described above, may be greater with respect to investments in
developing countries.
Medium and Lower-Rated Securities. The Portfolio may invest in medium (i.e.,
rated Baa by Moody's or BBB by S&P) and lower-rated securities (i.e., rated
lower than Baa by Moody's or lower than BBB by S&P). However, the Portfolio will
not purchase a security rated lower than B by Moody's or S&P. Securities rated
Baa by Moody's or BBB by S&P, although considered investment grade, possess
speculative characteristics, and changes in economic or other conditions are
more likely to impair the ability of issuers of these securities to make
interest and principal payments than is the case with respect to issuers of
higher-grade bonds.
Generally, lower-rated securities and unrated securities of comparable
quality, sometimes referred to as junk bonds (i.e., securities rated lower than
Baa by Moody's or BBB by S&P) offer a higher current yield than is offered by
higher-rated securities, but also (i) will likely have some quality and
protective characteristics that, in the judgment of the rating organizations,
are outweighed by large uncertainties or major risk exposures to adverse
conditions and (ii) are predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the terms of the
obligation. The market values of certain of these securities also tend to be
more sensitive to individual corporate developments and changes in economic
conditions than higher-quality bonds. In addition, medium and lower-rated
securities and comparable unrated securities generally present a higher degree
of credit risk. The risk of loss due to default by these issuers is
significantly greater because medium and lower-rated securities and unrated
securities
9
<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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<PAGE>
Policies" in the Statement of Additional Information. New financial products and
risk management techniques continue to be developed and the Portfolio may use
these new investments and techniques to the extent consistent with its
investment objective and policies.
Options Transactions
The Portfolio may purchase and write (i.e., sell) put and call options on
securities and currencies that are traded on national securities exchanges or in
the over-the-counter market to enhance income or to hedge the Portfolio's
investments. These options will be on debt securities, financial indices (e.g.,
S&P 500), U.S. Government securities, foreign government securities and foreign
currencies. The Portfolio may write covered put and call options to generate
additional income through the receipt of premiums, purchase put options in an
effort to protect the value of a security that it owns against a decline in
market value and purchase call options in an effort to protect against an
increase in price of securities (or currencies) it intends to purchase. The
Portfolio may also purchase put and call options to offset previously written
put and call options of the same series. See "Additional Investment
Information-Additional Risks-Options on Securities" in the Statement of
Additional Information.
A call option gives the purchaser, in exchange for a premium paid, the right
for a specified period of time to purchase the securities or currency subject to
the option at a specified price (the exercise price or strike price). The writer
of a call option, in return for the premium, has the obligation, upon exercise
of the option, to deliver, depending upon the terms of the option contract, the
underlying securities or a specified amount of cash to the purchaser upon
receipt of the exercise price. When the Portfolio writes a call option, the
Portfolio gives up the potential for gain on the underlying securities or
currency in excess of the exercise price of the option during the period that
the option is open.
A put option gives the purchaser, in return for a premium, the right, for a
specified period of time, to sell the securities or currency subject to the
option to the writer of the put at the specified exercise price. The writer of
the put option, in return for the premium, has the obligation, upon exercise of
the option, to acquire the securities or currency underlying the option at the
exercise price. The Portfolio might, therefore, be obligated to purchase the
underlying securities or currency for more than their current market price.
The Portfolio will write only "covered" options. An option is covered if, so
long as the Portfolio is obligated under the option, it owns an offsetting
position in the underlying security or currency or maintains cash, U.S.
Government securities or other liquid high-grade debt obligations with a value
sufficient at all times to cover its obligations in a segregated account. See
"Additional Investment Information-Additional Risks" in the Statement of
Additional Information.
There is no limitation on the amount of call options the Portfolio may
write. The Portfolio may only write covered put options to the extent that cover
for such options does not exceed 25% of the Portfolio's net assets. The
Portfolio will not purchase an option if, as a result of such purchase, more
than 20% of its total assets would be invested in premiums for options and
options for futures.
Forward Currency Exchange Contracts
The Portfolio may enter into forward foreign currency exchange contracts to
protect the value of its portfolio against future changes in the level of
currency exchange rates. The Portfolio may enter into such contracts on a spot,
i.e., cash, basis at the rate then prevailing in the currency exchange market or
on a forward basis, by entering into a forward contract to purchase or sell
currency. A forward contract on foreign currency is an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
agreed upon by the parties from the date of the contract at a price set on the
date of the contract.
The Portfolio's dealings in forward contracts will be limited to hedging
involving either specific transactions or portfolio positions. Transaction
hedging is the purchase or sale of a forward contract with respect to specific
receivables or payables of the Portfolio generally arising in connection with
the purchase or sale of its portfolio securities and accruals of interest or
dividends receivable and Portfolio expenses. Position hedging is the sale of a
foreign currency with respect to portfolio security positions denominated or
quoted in that currency or in a different foreign currency (cross-hedge).
Although there are no limits on the number of forward contracts which the
Portfolio may enter into, the Portfolio may not position hedge with respect to a
particular currency for an amount greater than the aggregate market
11
<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.
12
<PAGE>
Repurchase Agreements
The Portfolio may enter into repurchase agreements, whereby the seller of a
security agrees to repurchase that security from the Portfolio at a mutually
agreed-upon time and price. The repurchase date is usually within a day or two
of the original purchase, although it may extend over a number of months. The
resale price is in excess of the purchase price, reflecting an agreed-upon rate
of return effective for the period of time the Portfolio's money is invested in
the security. The Portfolio's repurchase agreements will at all times be fully
collateralized in an amount at least equal to the purchase price including
accrued interest earned on the underlying securities. The instruments held as
collateral are valued daily, and as the value of instruments declines, the
Portfolio will require additional collateral. If the seller defaults and the
value of the collateral securing the repurchase agreement declines, the
Portfolio may incur a loss. The Portfolio participates in a joint repurchase
account with other investment companies managed by Prudential Mutual Fund
Management, Inc. pursuant to an order of the Securities and Exchange Commission
(SEC or Commission). See "Additional Investment Information-Repurchase
Agreements" in the Statement of Additional Information.
Securities Lending
The Portfolio may lend its portfolio securities to brokers or dealers, banks
or other recognized institutional borrowers of securities, provided that the
borrower at all times maintains cash or equivalent collateral or secures an
irrevocable letter of credit in favor of the Portfolio in an amount equal to at
least 100% of the market value of the securities loaned. During the time
portfolio securities are on loan, the borrower will pay the Portfolio an amount
equivalent to any dividend or interest paid on such securities and the Portfolio
may invest the cash collateral and earn additional income, or it may receive an
agreed-upon amount of interest income from the borrower. As a matter of
fundamental policy, the Portfolio cannot lend more than 30% of the value of its
total assets.
When-Issued and Delayed Delivery Securities
The Portfolio may purchase or sell securities on a when-issued or delayed
delivery basis. When-issued or delayed delivery transactions arise when
securities are purchased or sold by the Portfolio with payment and delivery
taking place a month or more in the future in order to secure what is considered
to be an advantageous price and yield to the Portfolio at the time of entering
into the transaction. The Fund's Custodian will maintain, in a segregated
account of the Portfolio, cash, U.S. Government securities or other liquid
high-grade debt obligations having a value equal to or greater than the
Portfolio's purchase commitments; the Custodian will likewise segregate
securities sold on a delayed delivery basis.
Borrowing
The Portfolio may borrow an amount equal to no more than 20% of the value of
its total assets (computed at the time the loan is made) from banks for
temporary, extraordinary or emergency purposes or for the clearance of
transactions. During periods when the Portfolio has borrowed for temporary,
extraordinary or emergency purposes or for the clearance of transactions, the
Portfolio may pursue its investment objective by purchasing additional
securities which can result in increased volatility of the Portfolio's net asset
value. The Portfolio will not borrow to take advantage of investment
opportunities. See "Additional Investment Information-Borrowing" in the
Statement of Additional Information. The Portfolio may pledge up to 20% of its
total assets to secure these borrowings.
Illiquid Securities
The Portfolio may invest up to 10% of its net assets in illiquid securities
including repurchase agreements which have a maturity of longer than seven days,
securities with legal or contractual restrictions on resale and securities that
are not readily marketable. Restricted securities eligible for resale pursuant
to Rule 144A under the Securities Act of 1933, as amended (the Securities Act)
and privately placed commercial paper that have a readily available market are
not considered illiquid for purposes of this limitation. The investment adviser
will monitor the liquidity of restricted securities under the supervision of the
Board of Directors. Repurchase agreements subject to demand are deemed to have a
maturity equal to the applicable notice period.
The staff of the SEC has also taken the position that purchased
over-the-counter options and the assets used as "cover" for written
over-the-counter options are illiquid securities unless the Fund and the
counterparty have provided for the Fund, at the Fund's election, to unwind the
over-the-counter option. The exercise of such an option ordinarily
13
<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
14
<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.
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<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.
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HOW THE FUND VALUES ITS SHARES
- --------------------------------------------------------------------------------
The Portfolio's net asset value per share or NAV is determined by
subtracting its liabilities from the value of its assets and dividing the
remainder by the number of outstanding shares. 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
________________________________________________
<PAGE>
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 MUTUAL FUNDS
Supplement dated April 17, 1995
HOW THE FUND IS MANAGED
Manager
The portfolios of each of the Funds listed below are managed by J. Gabriel
Irwin and Simon Wells who head a Global Fixed Income Group of Prudential
Investment Corporation (PIC). As a team, they have responsibility for the
day-to-day management of the Funds' portfolios. Messrs. Irwin and Wells have
been employed by PIC and Prudential-Bache Securities (U.K.) Inc. since April
1995, Messrs. Irwin and Wells were previously employed by Smith Barney Global
Capital Management Inc., where they worked together as Directors and senior
members of the Investment Policy Committee and managed approximately $1.5
billion in institutional and mutual fund assets. Messrs. Irwin and Wells also
serve as the portfolio managers of The Global Government Plus Fund, Inc. and The
Global Total Return Fund, Inc.
Listed below are the names of the Prudential Mutual Funds and the dates of
the prospectus to which this supplement relates.
Name of Fund Prospectus Date
------------ ---------------
Prudential Intermediate Global Income Fund, Inc. March 2, 1995
Prudential Short-Term Global Income Fund, Inc.
Short-Term Global income Portfolio January 3, 1995
Global Assets Portfolio January 3, 1995
<PAGE>
PRUDENTIAL MUTUAL FUNDS
Supplement dated May 5, 1995
The following information supplements the Prospectus of each of the Funds
listed below.
SHAREHOLDER GUIDE
ALTERNATIVE PURCHASE PLAN
Class A Share--Reduction and Waiver of Initial Sales Charges
Other Waivers. Class A shares may be purchased at NAV, through Prudential
Securities or the Transfer Agent, by 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 .25 of
1% or less) and (iii) the financial adviser served as the client's broker on the
previous purchase.
HOW TO SELL YOUR SHARES
90-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 Fund at the NAV next
determined after the order is received, which must be within 90 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
Fund'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 effect federal tax treatment of any
gain realized upon redemption. If the redemption resulted in a loss, some or all
of the loss, depending on thhe amount reinvested, will generally not be allowed
for federal income tax purposes.
<PAGE>
Listed below are the names of the Prudential Mutual Funds and the dates of
the Prospectuses to which this supplement relates.
Name of Fund Prospectus Date
------------ ---------------
Prudential Adjustable Rate Securities Fund, Inc. May 1, 1994
Prudential Allocation Fund September 29, 1994
Prudential California Municipal Fund
California Income Series December 30, 1994
California Series December 30, 1994
Prudential Equity Income Fund December 30, 1994
Prudential Global Fund, Inc. January 3, 1995
Prudential Global Genesis Fund, Inc. August 1, 1994
Prudential Global Natural Resources Fund, Inc. August 1, 1994
Prudential Multi-Sector Fund, Inc. August 1, 1994
Prudential Municipal Bond Fund August 1, 1994
Prudential Municipal Series Fund
Arizona Series December 30, 1994
Florida Series December 30, 1994
Georgia Series December 30, 1994
Maryland Series December 30, 1994
Massachusetts Series December 30, 1994
Michigan Series December 30, 1994
Minnesota Series December 30, 1994
New Jersey Series December 30, 1994
New York Series December 30, 1994
North Carolina Series December 30, 1994
Ohio Series December 30, 1994
Pennsylvania Series December 30, 1994
Prudential Pacific Growth Fund, Inc. January 3, 1995
Prudential Short-Term Global Income Fund, Inc.
Global Assets Portfolio January 3, 1995
Short-Term Global Income Fund January 3, 1995
Prudential Strategist Fund, Inc. August 1, 1994
Prudential U.S. Government Fund January 3, 1995
The BlackRock Government Income Trust November 1, 1994
(as supplemented
December 30, 1994)
<PAGE>
PRUDENTIAL MUTUAL FUNDS
Supplement dated July 3, 1995
The following information supplements the prospectuses of each of the Funds
listed on the reverse.
SHAREHOLDER GUIDE
HOW TO BUY SHARES OF THE FUND
Reduction and Waiver of Initial Sales Charges.
PruArray Plans. Class A shares may be purchased at NAV by certain retirement
and deferred compensation plans, qualified or non-qualified under the Internal
Revenue Code of 1986, as amended, (the Code), including pension, profit-sharing,
stock-bonus or other employee benefit plans under Section 401 of the Code and
deferred compensation and annuity plans under Sections 457 and 403(b)(7) of the
code that participate in the Transfer Agent's PruArray Program (a benefit plan
record keeping service) (hereinafter referred to as a PruArray Plan); provided
(i) that the plan has at least $1 million in existing assets or 1,000 eligible
employees or participants and (ii) that Prudential Mutual Funds constitute at
least one-half of the plan's investment options. The term "existing assets" for
this purpose includes stock issued by a PruArray Plan sponsor and shares of
non-money market Prudential Mutual Funds and shares of certain unaffiliated
non-money market mutual funds that participate in the PruArray Program
(Participating Funds). "Existing assets" also include shares of money market
funds acquired by exchange from a Participating Fund. After a PruArray Plan
qualifies to purchase Class A shares at NAV, all subsequent purchases will be
made at NAV.
<PAGE>
Listed below are the names of the Prudential Mutual Funds and the dates of
the Prospectuses to which this supplement relates.
Name of Fund Prospectus Date
------------ ---------------
Prudential Adjustable Rate Securities Fund, Inc. June 26, 1995
Prudential Allocation Fund September 29, 1994
Prudential Diversified Bond Fund, Inc. January 3, 1995
(as supplemented
June 20, 1995)
Prudential Equity Fund, Inc. February 28, 1995
Prudential Equity Income Fund December 30, 1994
Prudential Global Fund, Inc. January 3, 1995
Prudential Global Genesis Fund, Inc. August 1, 1994
Prudential Global Natural Resources Fund, Inc. August 1, 1994
Prudential GNMA Fund, Inc. March 2, 1995
Prudential Government Income Fund, Inc. May 1, 1995
Prudential Growth Opportunity Fund, Inc. February 1, 1995
Prudential High Yield Fund, Inc. February 28, 1995
Prudential IncomeVertible Fund, Inc. March 1, 1995
Prudential Intermediate Global Income Fund, Inc. March 2, 1995
Prudential Multi-Sector Fund, Inc. June 30, 1995
Prudential Pacific Growth Fund, Inc. January 3, 1995
Prudential Short-Term Global Income Fund, Inc.
Global Assets Portfolio January 3, 1995
Short-Term Global Income Fund January 3, 1995
Prudential Structured Maturity Fund, Inc. March 1, 1995
Prudential U.S. Government Fund January 3, 1995
Prudential Utility Fund, Inc. March 1, 1995
The BlackRock Government Income Trust November 1, 1994
(as supplemented
December 30, 1994)
Global Utility Fund, Inc. February 1, 1995
Nicholas-Applegate Fund, Inc. March 6, 1995
<PAGE>
Prudential Global Limited Maturity Fund, Inc.
(formerly Prudential Short-Term Global Income Fund, Inc.)
(Limited Maturity Portfolio formerly Short-Term global Income Portfolio)
(Global Assets Portfolio)
Supplement dated October 17, 1995
to Prospectus dated January 3, 1995
New Fund Name
The Board of Directors of Prudential Short-Term Global Income Fund, Inc. has
approved shanges in certain investment policies of the Short-Term Global Income
Portfolio, such changes which are more fully described below. In connection with
these investment policy modifications, the Fund and such Portfolio have changed
their name to Prudential Global Limited Maturity Fund, Inc. and Limited Maturity
Portfolio, respectively.
Proposed Reorganization
The Board of Directors of Prudential Global Limited Maturity Fund, Inc. (the
Fund) has recently approved a proposal to sell the assets and liabilities of the
Fund's Global Assets Portfolio for shares of the Fund's Limited Maturity
Portfolio. Class A shares of the Global Assets Portfolio would be exchanged at
net asset value for Class A shares of equivalent value of Limited Maturity
Portfolio.
The transaction has been approved by the Fund's Board of Directors and is
subject to approval by the shareholders of the Global Assets Portfolio. It is
anticipated that the proxy statement/prospectus relating to the proposed
transaction will be mailed to Global Assets Portfolio shareholders in November
1995.
Under the terms of the proposal, shareholders of Global Assets Portfolio
would become shareholders of the Limited Maturity Portfolio. No sales charges
would be imposed on the proposed transfer. The Fund anticipates obtaining an
opinion of counsel that no gain or loss for federal income tax purposes would be
recognized by shareholders of either portfolio as a result of the proposed
transaction.
Global Assets Portfolio no longer accepts purchase orders of its Class A
shares, except for purchases by certain Retirement and Employee Plans (excluding
IRA accounts). Exisitng shareholders may continue to acquire shares through
dividend reinvestment. The current exchange privilege of obtaining shares of
other Prudential Mutual Funds and the current redemption privilege for Global
Assets Portfolio shareholders will remain in effect. Notwithstanding the above
exceptions, no shares may be acquired by any means beginning four days prior to
the date of closing of the proposed reorganization.
The Board of Directors has approved changes in certain investment policies
which are effective immediately. In connection with such changes the Portfolio
has changed its name to Limited Maturity Portfolio. This name change reflects
the lengthening of the portfolio's weighted average maturity from not more than
3 years, to more than 2, but less than 5 years. Other changes approved by the
Fund's Board of Directors are reflected below.
The following replaces the first paragraph under and supplements the
information in "How the Fund Invests--Investment Objectives and Policies."
The Limited Maturity 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. The Portfolio will maintain a weighted
average maturity of more than 2, but less than 5 years, and the maturity for any
individual security will generally not exceed 10
<PAGE>
years. The Portfolio may also invest up to 15% of its total assets in
non-investment grade securities with a minimum rating of B (as determined by the
Standard & Poor's Rating Group, Moody's Investors Services, inc. or by another
nationally recognized statistical rating organization, or if unrated, deemed to
be of equivalent quality by the Portfolio's investment adviser). Investment in
non-investment grade securities may entail additional risks to the Portfolio.
See "How the Fund Invests--Risk Factors--Medium and Lower-Rated Securities."
There is no assurance that the Portfolio will achieve its investment objective.
The Limited Maturity Portfolio will under normal circumstances invest in a
minimum of five different countries, and will invest at least 30% of its total
assets in securities denominated in U.S. Dollars and in cash, and at least 50%
of its total assets in Dollar Bloc currencies (U.S., Canada, Australia or New
Zealand). The Portfolio may invest 100% of its assets in securities denominated
in U.S. Dollars or in cash for temporary extraordinary or emergency purposes.
The following supplements "How the Fund Invests--Other Investments and
Investment Techniques."
Zero Coupon Securities
The Limited Maturity Portfolio may invest up to 10% of its total assets in
zero coupon securities. Zero coupon securities are securities that are sold at a
discount to par value and on which interest payments are not made during the
life of the security. Upon maturity, the holder is entitled to receive the par
value of the security. While interest payments are not made on such securities,
holders of such securities are deemed to have received annually "phantom
income." The Portfolio accrues income with respect to these securities prior to
the receipt of cash payments. Zero coupon securities may be subject to greater
fluctuation in value and lesser liquidity in the event of adverse market
conditions than comparable rated securities paying cash interest at regular
intervals.
Convertible Securities
The Limited Maturity Portfolio may invest up to 5% of its total assets in
convertible securities. A convertible security is generally a corporate bond (or
preferred stock) which may be converted at a stated price within a specified
period of time into a certain quantity of the common stock of the same or a
different issuer. Convertible securities are senior to common stocks in a
corporation's capital structure, but are usually subordinated to similar
nonconvertible securities. While providing a fixed income stream (generally
higher in yield than the income derivable from a common stock but lower than
that afforder by a similar nonconvertible security), a convertible security also
affords an investor the opportunity, through its conversion feature, to
participate in the capital appreciation dependent upon a market price advance in
the convertible security's underlying common stock. The Portfolio may from time
to time hold common stock received upon the conversion of a convertible
security. The Portfolio does not intend to retain the common stock in its
portfolio and will sell it as soon as reasonably practicable. Convertible
securities also include preferred stock which technically is an equity security.
In general, the market value of a convertible security is at least the
higher of its "investment value" (i.e., its value as a fixed-income security) or
its "conversion value" (i.e., its value upon conversion into its underlying
common stock). As a fixed-income security, a convertible security tends to
increase in market value when interest rates decline and tends to decrease in
value when interest rates rise. However, the price of a convertible security is
also influenced by the market value of the security's underlying stock. The
price of a convertible security tends to increase as the market value of the
underlying stock rises, whereas it tends to decrease as the market value of the
underlying stock declines.
Securities of Other Investment Companies
The Limited Maturity Portfolio may invest up to 50% of its total assets in
shares of closed-end investment companies or investment trusts. If the Portfolio
does invest in securities of other investment companies, shareholders of the
Portfolio may be subject to duplicate management and advisory fees.
