As filed with the Securities and Exchange Commission on December 27, 1996
Registration Nos. 33-33479
811-6048
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. 11 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 13 [X]
(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)
GATEWAY CENTER THREE (GC3)
100 MULBERRY STREET, 9TH FLOOR
NEWARK, NEW JERSEY 07102-4077
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (201) 367-7530
S. Jane Rose, Esq.
Gateway Center Three (GC3)
100 Mulberry Street, 9th Floor
Newark, New Jersey 07102-4077
(Name and Address of Agent for Service)
Approximate date of proposed public offering:
As soon as practicable after the effective
date of the Registration Statement.
------------------
It is proposed that this filing will become effective (check appropriate box):
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on(date), pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Proposed Maximum Proposed Maximum
Title of Securities Amount Being Offering Price Aggregate Amount of
Being Registered Registered Per Share* Offering Price* Registration Fee
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Common Stock,
par value $0.001 per share Indefinite** N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------
Shares of Common Stock,
par value $0.001 per share 16,751,917* $8.85 $329,998.80 $100
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<FN>
*The calculation of the maximum aggregate offering price was made pursuant to
Rule 24e-2 and was based upon an offering price of $8.85 per share, equal to
the net asset value per share as of the close of business on December 19,
1996 pursuant to Rule 457(d). The total number of shares redeemed during the
fiscal year ended October 31, 1996 amounted to 22,514,284 shares. Of this
number, no shares have been used for reduction pursuant to paragraph (a) of
Rule 24e-2 in all previous filings of post-effective amendments during the
current year, and 5,799,655 shares have been used for reduction pursuant to
paragraph (c) of Rule 24f-2 in all previous filings during the current year.
16,714,629 ($43,671,943) of the redeemed shares for the fiscal year ended
October 31, 1996 are being used for the reductions in the post-effective
amendment being filed herein.
**Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant
has previously registered an Indefinite number of shares of its Common Stock
par value $.001 per share. The Registrant has filed a notice under such Rule
for its fiscal year ended October 31, 1996 within 60 days of such date.
</FN>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 495)
<TABLE>
<CAPTION>
N-1A Item No. Location
- ------------- --------
<S> <C>
Part A
Item 1. Cover Page .......................................................... Cover Page
Item 2. Synopsis ............................................................ Fund Expenses; Fund Highlights
Item 3. Condensed Financial Information ..................................... Fund Expenses; Financial Highlights; How
the Fund Calculates Performance
Item 4. General Description of Registrant ................................... Cover Page; Fund Highlights; How the
Fund Invests; General Information
Item 5. Management of the Fund .............................................. Financial Highlights; How The Fund Is
Managed
Item 5A. Management's Discussion of Fund Performance ......................... Financial Highlights
Item 6. Capital Stock and Other Securities .................................. Taxes, Dividends and Distributions;
General Information
Item 7. Purchase of Securities Being Offered ................................ Shareholder Guide; How the Fund
Values Its Shares
Item 8. Redemption or Repurchase ............................................ Shareholder Guide; How the Fund
Values Its Shares
Item 9. Pending Legal Proceedings ........................................... Not Applicable
Part B
Item 10. Cover Page .......................................................... Cover Page
Item 11. Table of Contents ................................................... Table of Contents
Item 12. General Information and History ..................................... General Information
Item 13. Investment Objectives and Policies .................................. Investment Objective and Policies;
Investment Restrictions;
Item 14. Management of the Fund .............................................. Directors and Officers; Manager;
Distributor
Item 15. Control Persons and Principal Holders of Securities ................. Not Applicable
Item 16. Investment Advisory and Other Services .............................. Manager; Distributor; Custodian,
Transfer and Dividend Disbursing
Agent and Independent Accountants
Item 17. Brokerage Allocation and Other Practices ............................ Portfolio Transactions and Brokerage
Item 18. Capital Stock and Other Securities .................................. Not Applicable
Item 19. Purchase, Redemption and Pricing of Securities Being Offered ........ Purchase and Redemption of Fund
Shares; Shareholder Investment
Account; Net Asset Value
Item 20. Tax Status .......................................................... Taxes
Item 21. Underwriters ........................................................ Distributor
Item 22. Calculation of Performance Data ..................................... Performance Information
Item 23. Financial Statements ................................................ Financial Statements
<FN>
Part C
Information required to be included in Part C is set forth under the appropriate Item, so numbered, in Part C to this
Post-Effective Amendment to the Registration Statement.
</FN>
</TABLE>
<PAGE>
Prudential Global Limited
Maturity Fund, Inc.
(Limited Maturity Portfolio)
- --------------------------------------------------------------------------------
Prospectus dated December 30, 1996
- --------------------------------------------------------------------------------
Prudential Global Limited Maturity Fund, Inc. (formerly, Prudential Short-Term
Global Income Fund, Inc.) is an open-end management investment company, or
mutual fund, which is currently comprised of one portfolio, the Limited Maturity
Portfolio (formerly, Short-Term Global Income Portfolio) (the Portfolio or the
Fund). 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,maintaining a weighted average maturity of more
than 2, but less than 5, years, with the maturity for any individual security
generally not exceeding 10 years. 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 20% of its total assets
in non-investment grade securities, which may entail additional risks. The
Portfolio may also engage in various hedging and return enhancement strategies,
including derivative transactions, such as those involving the purchase and sale
of put and call options and foreign currencies and futures contracts on foreign
currencies. 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 Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102-4077, and its telephone number is (800) 225-1852.
- --------------------------------------------------------------------------------
This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. Additional information about
the Fund has been filed with the Securities and Exchange Commission in a
Statement of Additional Information, dated December 30, 1996, 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 Global Limited Maturity Fund, Inc., Limited Maturity
Portfolio?
Prudential Global Limited Maturity Fund, Inc., Limited Maturity 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 Objective and Policies" at page 8.
Risk Factors and Special Characteristics
In seeking to achieve its investment objective, the Portfolio invests
primarily in a portfolio of investment grade debt securities, maintaining a
weighted average maturity of more than 2, but less than 5, years, with the
maturity for any individual security generally not exceeding 10 years. The
Portfolio 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 Objective and Policies" at page 8. The Portfolio may
invest in developing countries, and in countries with new or developing capital
markets. Companies in developing countries in which the Portfolio 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. 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 10. In addition, the
Portfolio may invest up to 20% 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 Services (S&P)
or by another nationally recognized statistical rating organization (NRSRO), or
if unrated, are deemed to be of equivalent quality by the Subadviser (defined
below). 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" at page 10. The Portfolio may also engage in various
hedging and return enhancement strategies, including derivative transactions,
such as those involving the purchase and sale of put and call options and
foreign currencies and futures contracts on foreign currencies. See "How the
Fund Invests-Other Investments and Investment Techniques-Hedging and Return
Enhancement Strategies-Risks of Hedging and Return Enhancement Strategies" at
page 14. 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 21.
Who Manages the Fund?
Prudential Mutual Fund Management LLC (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, 1996, PMF served as
manager or administrator to 62 investment companies, including 40 mutual funds,
with aggregate assets of approximately $53.4 billion. The Prudential Investment
Corporation (PIC, the Subadviser or the investment adviser) 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
16.
Who Distributes the Portfolio's 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 A, Class B, Class C and Class Z shares and
is paid an annual distribution and service fee which is currently being charged
at an annual rate of up to .15 of 1% of the average daily net assets of the
Class A shares, and at the annual rate of .75 of 1% of the average daily net
assets of each of the Class B and Class C shares. Prudential Securities incurs
the expenses of distributing the Class Z shares under a Distribution Agreement
with the Fund, none of which is reimbursed or paid for by the Portfolio. See
"How the Fund is Managed-Distributor" at page 17.
- --------------------------------------------------------------------------------
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. There is no minimum initial investment
requirement for investors who qualify to purchase Class Z shares. The minimum
subsequent investment is $100 for all classes, except for Class Z shares for
which there is no such minimum. 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 23 and "Shareholder Guide -
Shareholder Services" at page 33.
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). Class Z shares are
offered to a limited group of investors at net asset value without any sales
charge. See "How the Fund Values Its Shares" at page 20 and "Shareholder
Guide-How to Buy Shares of the Fund" at page 23.
What Are My Purchase Alternatives?
The Portfolio offers four classes of shares:
*Class A Shares: Sold with an initial sales charge of up to 3% of the
offering price.
*Class B Shares: Sold without an initial sales charge but are subject to
a contingent deferred sales charge or CDSC (declining
from 3% to zero of the lower of the amount invested or
the redemption proceeds) which will be imposed on
certain redemptions made within four years of purchase.
Although Class B shares are subject to higher ongoing
distribution-related expenses than Class A shares, Class
B shares will automatically convert to Class A shares
(which are subject to lower ongoing distribution-related
expenses) approximately five years after purchase.
*Class C Shares: Sold without an initial sales charge and for one year
after purchase, are subject to a 1% CDSC on redemptions.
Like Class B shares, Class C shares are subject to
higher ongoing distribution-related expenses than Class
A shares but do not convert to another class.
*Class Z Shares: Sold without either an initial or contingent deferred
sales charge to a limited group of investors. Class Z
shares are not subject to any ongoing service or
distribution-related expenses.
See "Shareholder Guide-Alternative Purchase Plan" at page 24.
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 28.
How Are Dividends and Distributions Paid?
The Portfolio expects to declare daily and pay monthly dividends of net
investment income 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 21.
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares Class Z Shares
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses+
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) ....... 3% None None None
Maximum Sales Load or Deferred Sales Load
Imposed on Reinvested Dividends ........... None 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 None
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 None
Exchange Fees ............................... None None None None
Annual Portfolio Operating Expenses
(as a percentage of average net assets)
Class A Shares Class B Shares Class C Shares Class Z Shares**
-------------- -------------- -------------- ----------------
Management Fees ............................. .55% .55% .55% .55%
12b-1 Fees (After Reduction)++ .............. .15% .75% .75% None
Other Expenses .............................. .62% .62% .62% .62%
---- ---- ---- ----
Total Portfolio Operating Expenses
(After Reduction) ......................... 1.32% 1.92% 1.92% 1.17%
===== ===== ===== =====
</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 .................................................................. $43 $71 $100 $184
Class B .................................................................. $49 $70 $104 $187
Class C .................................................................. $29 $60 $104 $224
Class Z** ................................................................ $12 $37 $ 64 $142
You would pay the following expenses on the same investment, assuming
no redemption:
Class A .................................................................. $43 $71 $100 $184
Class B .................................................................. $19 $60 $104 $187
Class C .................................................................. $19 $60 $104 $224
Class Z** ................................................................ $12 $37 $ 64 $142
The above example is based on data for the Portfolio's fiscal year ended October
31, 1996. 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 Z shares
had been in existence throughout the fiscal year ended October 31, 1996.
+ Pursuant to rules of the National Association of Securities Dealers, Inc.,
the aggregate initial sales charges, deferred sales charges and asset-based
sales charges on shares of the Portfolio may not exceed 6.25% of total gross
sales, subject to certain exclusions. This 6.25% limitation is imposed on the
Portfolio rather than on a per shareholder basis. Therefore, long-term
shareholders of the Portfolio may pay more in total sales charges than the
economic equivalent of 6.25% of such shareholders' investment in such shares.
See "How the Fund is Managed-Distributor."
++ Although the Class A, Class B and Class C Distribution and Service Plans
provide that the Portfolio may pay up to an annual rate of .30 of 1% of the
average daily net assets of the Class A shares and up to 1% per annum of the
average daily net assets of the Class B and Class C shares, the Distributor
has agreed to limit its distribution expenses with respect to the Class A
shares of the Portfolio to no more than .15 of 1% of the average daily net
asset value of the Class A shares, and to limit its distribution fees to no
more than .75 of 1% of the average daily net assets of each of the Class B
and Class C shares, for the fiscal year ending October 31, 1997. See "How the
Fund is Managed-Distributor." Total operating expenses without such
limitation would be 1.47% for the Class A shares and 2.17% for the Class B
and Class C shares.
- --------------------------------------------------------------------------------
</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, with respect to the five years ended
October 31, 1996, 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. Further performance information is contained in the
annual report, which may be obtained without charge. See "Shareholder
Guide-Shareholder Services-Reports to Shareholders."
- --------------------------------------------------------------------------------
Limited Maturity Portfolio
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------
Year ended October 31,
-----------------------------------------------------------
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year ..... $ 8.39 $ 8.56 $ 9.29 $ 9.16 $ 9.97 $ 10.00
------- ------- ------- ------- -------- --------
Income from investment operations
Net investment income .................. .60 .61 .70 .97 .96 1.03
Net realized and unrealized gain (loss)
on investment and foreign currency
transactions ......................... .40 (.21) (.86) (.26) (.95) (.02)
------- ------- ------- ------- -------- --------
Total from investment operations ....... 1.00 .40 (.16) .71 .01 1.01
------- ------- ------- ------- -------- --------
Less distributions
Dividends from net investment income ... (.57) (.48) - (.58) (.82) (1.03)
Tax return of capital distributions .... - (.09) (.57) - - -
------- ------- ------- ------- -------- --------
Total distributions .................... (.57) (.57) (.57) (.58) (.82) (1.04)
------- ------- ------- ------- -------- --------
Net asset value, end of year ........... $ 8.82 $ 8.39 $ 8.56 $ 9.29 $ 9.16 $ 9.97
======= ======= ======= ======= ======== ========
TOTAL RETURN(a): ....................... 12.35% 4.92% (1.89)% 7.96% (0.07)% 10.41%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) .......... $69,051 $18,216 $28,841 $59,458 $101,358 $105,148
Average net assets (000) ............... $53,284 $20,153 $38,000 $70,347 $119,171 $ 51,830
Ratios to average net assets:
Expenses, including distribution fees 1.32% 1.21% 1.17% 1.02% 1.08% 1.01%
Expenses, excluding distribution fees 1.17% 1.06% 1.02% .87% .93% .86%
Net investment income ................ 7.12% 7.25% 7.67% 10.81% 9.93% 10.23%
Portfolio turnover rate ................ 101% 199% 232% 307% 180% 66%
<FN>
(a) Total return does not consider the effects of sales loads. Total return is calculated assuming a
purchase of shares on the first day and a sale on the last day of each year reported and includes
reinvestment of dividends and distributions.
</FN>
- --------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(for a share outstanding throughout the indicated periods)
(Class B Shares)
- --------------------------------------------------------------------------------
The following financial highlights, with respect to the five years ended
October 31, 1996, 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 shares of common stock
outstanding, total return, ratios to average net asset and other supplemental
data for the periods indicated. The information is based on data contained in
the financial statements. Further performance information is contained in the
annual report which may be obtained without charge. See "Shareholder
Guide-Shareholder Services-Reports to Shareholders."
Limited Maturity Portfolio
<TABLE>
<CAPTION>
Class B
-----------------------------------------------------------
Year ended October 31,
-----------------------------------------------------------
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year ..... $ 8.42 $ 8.56 $ 9.29 $ 9.16 $ 9.97 $ 10.00
------- ------ ------ ------ ------ -------
Income from investment operations
Net investment income .................. .55 .56 .62 .88 .88 .95
Net realized and unrealized gain (loss)
on investment and foreign currency
transactions ......................... .40 (.19) (.86) (.26) (.95) (.02)
------- ------ ------ ------ ------ -------
Total from investment operations ....... .95 .37 (.24) .62 (.07) .93
------- ------ ------ ------ ------ -------
Less distributions
Dividends from net investment income ... (.52) (.43) - (.49) (.74) (.95)
Tax return of capital distributions .... - (.08) (.49) - - -
------- ------ ------ ------ ------ -------
Total distributions .................... (.52) (.51) (.49) (.49) (.74) (.96)
------- ------ ------ ------ ------ -------
Net asset value, end of year ........... $ 8.85 $ 8.42 $ 8.56 $ 9.29 $ 9.16 $ 9.97
======= ====== ====== ====== ====== ======
TOTAL RETURN(a): ....................... 11.61% 4.60% (2.62)% 7.00% (0.86)% 9.51%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) .......... $44,804 $108,454 $188,966 $375,013 $606,899 $669,086
Average net assets (000) ............... $70,794 $139,248 $281,143 $474,175 $814,734 $349,607
Ratios to average net assets:
Expenses, including distribution fees 1.92% 1.83% 1.97% 1.87% 1.93% 1.87%
Expenses, excluding distribution fees 1.17% 1.08% 1.02% .87% .93% .87%
Net investment income ................ 6.51% 6.61% 6.82% 9.42% 9.05% 9.46%
Portfolio turnover rate ................ 101% 199% 232% 307% 180% 66%
<FN>
(a) Total return does not consider the effects of sales loads. Total return is calculated assuming a
purchase of shares on the first day and a sale on the last day of each year reported and includes
reinvestment of dividends and distributions.
</FN>
- --------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(for a share outstanding throughout the indicated periods)
(Class 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 C shares of common stock
outstanding, total return, ratios to average net asset and other supplemental
data for the periods indicated. The information is based on data contained in
the financial statements. Further performance information is contained in the
annual report which may be obtained without charge. See "Shareholder
Guide-Shareholder Services-Reports to Shareholders."
- --------------------------------------------------------------------------------
Limited Maturity Portfolio
Class C
----------------------------------
August 1,
1994(c)
Year Ended through
October 31, October 31,
1996 1995 1994
---- ---- ----
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ........ $ 8.42 $ 8.56 $ 8.61
------- ------- -------
Income from investment operations
Net investment income ....................... .55 .54 .14
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions .............................. .40 (.17) (.06)
------- ------- -------
Total from investment operations ............ .95 .37 .08
------- ------- -------
Less distributions
Dividends from net investment income ........ (.52) (.43) -
Tax return of capital distributions ......... - (.08) (.13)
------- ------- -------
Total distributions ......................... (.52) (.51) (.13)
------- ------- -------
Net asset value, end of period .............. $ 8.85 $ 8.42 $ 8.56
======= ======= ========
TOTAL RETURN(a): ............................ 11.61% 4.60% 0.75%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ............. $ 54 $ 755(d) $200(d)
Average net assets (000) .................... $ 4 $ 1,461(d) $199(d)
Ratios to average net assets:
Expenses, including distribution fees ..... 1.92% 1.70% .93%(b)
Expenses, excluding distribution fees ..... 1.17% .95% .18%(b)
Net investment income ..................... 6.35% 6.43% 7.02%(b)
Portfolio turnover rate ..................... 101% 199% 232%
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(b) Annualized.
(c) Commencement of offering of Class C shares.
(d) Figures are actual and not rounded to the nearest thousand.
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
HOW THE FUND INVESTS
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE 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 debt
securities denominated in the U.S. dollar and a range of foreign currencies. The
Portfolio will maintain a weighted average maturity of more than 2, but less
than 5, years, with the maturity for any individual security generally not
exceeding 10 years. The Portfolio may also invest up to 20% 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 "Risk Factors--Medium and
Lower-Rated Securities" below. 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,
as amended (the Investment Company Act). Fund policies that are not fundamental
may be modified by the Board of Directors.
The Portfolio, under normal circumstances, will invest at least 65% of its
total assets in income-producing securities. Under normal circumstances, the
Portfolio will invest its assets in debt securities of issuers in at least five
different countries including the United States. The Portfolio may also engage
in various hedging and return enhancement strategies, including derivative
transactions such as the purchase and sale of put and call options, forward
foreign currency exchange contracts and futures contracts and related options.
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, however,
will invest at least 30% of its total assets in securities denominated in U.S.
Dollars (or in lieu thereof hold cash), and at least 50% of its total assets in
Dollar Bloc currencies (U.S., Canada, Australia or New Zealand). 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 invest up
to 100% of its assets in securities denominated in U.S. dollars or U.S. Treasury
securities or hold cash for temporary defensive purposes.
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
8
<PAGE>
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 rate 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.
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, Hungary, Greece, South Korea, Hong Kong, Malaysia, Indonesia,
Thailand, China, Israel, Chile, Colombia, Venezuela, Estonia, Turkey and
Argentina. Companies in these markets in which the Portfolio 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'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, (iii) corporate debt
securities, (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), (v) commercial paper, (vi) loan participations,
(viii) equity-related securities, including common stock, preferred stock and
convertible securities, and (ix) zero coupon securities.
The Portfolio will invest primarily in "investment grade" debt obligations.
Investment grade debt obligations are bonds and other obligations rated within
the four highest quality grades as determined by Moody's Investors Service
(Moody's) (currently Aaa, Aa, A and Baa for bonds and P-1 for commercial paper),
or Standard & Poor's Ratings Group (S&P) (currently AAA, AA, A and BBB for bonds
and A-1 for commercial paper), or by another nationally recognized statistical
rating organization (NRSR0) or, in unrated securities of equivalent quality.
Securities rated Baa by Moody's or BBB by S&P, although considered to be
investment grade, lack outstanding investment characteristics and, in fact, have
speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make interest
and principal payments than is the case with higher grade bonds. See the
"Description of Security Ratings" in the Appendix to the Prospectus. The
Portfolio is permitted to invest up to 20% of its total assets in lower quality
debt securities rated B or BB by S&P or B or Ba by Moody's or by any other
NRSRO, or in unrated securities of equivalent quality. Lower rated securities
are subject to a greater risk of loss of principal and interest. See "Risk
Factors-Medium and Lower-Rated Securities" below.
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. 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.
9
<PAGE>
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.
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. Fixed-income securities are subject to
the risk of an issuer's inability to meet principal and interest payments on the
obligations (credit risk) and may also be subject to price volatility due to
such factors as interest rate sensitivity, market perception of the
creditworthiness of the issuer and general market liquidity (market risk). The
markets in which medium and lower-rated securities (or unrated securities that
are equivalent to medium and lower-rated securities) are traded are generally
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 debt securities for the Portfolio to purchase
and may also have the effect of limiting the ability of the Portfolio to sell
debt securities at their fair value either to meet redemption requests or to
respond to changes in the economy or the financial markets. Lower rated or
unrated (i.e., high yield or high risk)
10
<PAGE>
securities (commonly referred to as junk bonds) are more likely to react to
developments affecting market and credit risk than are more highly rated
securities, which react primarily to movements in the general level of interest
rates. The investment adviser considers both credit risk and market risk in
making investment decisions for the Portfolio.
Under adverse economic conditions, there is a risk that highly leveraged
issuers may be unable to service their debt obligations or to repay their
obligations upon maturity. In addition, the secondary market for high yield
securities, which is concentrated in relatively few market makers, may not be as
liquid as the secondary market for more highly rated securities. Under adverse
market or economic conditions, the secondary market for high yield securities
could contract further, independent of any specific adverse changes in the
condition of a particular issuer. As a result, the investment adviser could find
it more difficult to sell these securities or may be able to sell the securities
only at prices lower than if such securities were widely traded. Prices realized
upon the sale of such lower rated or unrated securities, under these
circumstances, may be less than the prices in calculating the Portfolio's net
asset value.
Lower rated or unrated 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. If the Portfolio experiences unexpected net
redemptions, it may be forced to sell its higher rated securities, resulting in
a decline in the overall credit quality of the debt portion of the Portfolio's
portfolio and increasing the exposure of the Portfolio to the risks of high
yield securities.
Ratings of fixed-income securities represent the rating agency's opinion
regarding their credit quality and are not a guarantee of quality. Rating
agencies attempt to evaluate the safety of principal and interest payments and
do not evaluate the risks of fluctuations in market value. Also, rating agencies
may fail to make timely changes in credit ratings in response to subsequent
events, so that an issuer's current financial condition may be better or worse
than a rating indicates.
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, 1996, the year-end dollar weighted average ratings of the
debt obligations held by the Portfolio, expressed as a percentage of the
Portfolio's total investments, were as follows:
Percentage of Total
Ratings Investments
------- -----------
AAA/Aaa .......................... 52.46%
AA/Aa ............................ 9.33%
A/A .............................. 8.88%
BBB/Baa .......................... 9.32%
BB/Ba ............................ 10.81%
B/B .............................. .60%
Unrated .......................... 8.60%
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.
Equity-Related Securities
The Portfolio may invest up to 10% of its total assets in equity-related
securities (including up to 5% of its total assets in convertible securities).
Equity-related securities are common stock, preferred stock, rights and warrants
and debt securities or preferred stock which are convertible or exchangeable for
common stock or preferred stock. See "Convertible Securities" below.
11
<PAGE>
Convertible Securities
A convertible security is a 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 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.
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.
Zero Coupon Securities
The 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 interests at regular intervals.
HEDGING AND RETURN 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 return, but not for speculation. The Portfolio, and thus its
investors, may lose money through the unsuccessful use of these strategies.
These strategies currently include the use of options, forward foreign 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 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 attempt to enhance return 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 put and call options
to attempt 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
12
<PAGE>
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, as
long as the Portfolio is obligated under the option, it (i) owns an offsetting
position in the underlying security or currency or, (ii) maintains in a
segregated account cash or liquid assets in an amount equal to or greater than
its obligations under the option. Under the first circumstance, the Portfolio's
losses are limited because it owns the underlying security or currency; under
the second circumstance, in the case of a written call option, the Portfolio's
losses are potentially unlimited. 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 Foreign 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 (including cross
hedges) 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 being hedged. See "Additional Investment
Information-Forward Foreign 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 to reduce
certain risks of its investments and to attempt to enhance return in accordance
with regulations of the Commodity Futures Trading Commission (CFTC). The
Portfolio, and thus its investors, may lose money through the unsuccessful use
of these strategies. 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
to attempt to enhance return, if immediately thereafter the sum of the amount of
initial margin deposits on the Portfolio's existing futures and options on
13
<PAGE>
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 in accordance with regulations of the CFTC (i.e., to
reduce certain risks of its investments). 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 or close out 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 Return 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. The
Portfolio, and thus its investors, may lose money through the unsuccessful 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.
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 repurchase agreement. The Portfolio's repurchase agreements will at all
times be fully collateralized in an amount at least
14
<PAGE>
equal to the resale price. 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 PMF 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%, determined daily, of the market value of the securities loaned which
are maintained in a segregated account pursuant to applicable regulations.
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. The Portfolio may pay reasonable
administration and custodial fees in connection with a loan.
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 or liquid assets having a value equal to or
greater than the Portfolio's purchase commitments.
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 hold 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. See "Investment
Restrictions" in the Statement of Additional Information. The Portfolio's
investment in Rule 144A securities could have the effect of increasing the level
of Portfolio illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing Rule 144A securities. 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.
15
<PAGE>
Portfolio Turnover
The Portfolio's 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. See "Portfolio Transactions
and Brokerage" in the Statement of Additional Information. In addition, high
portfolio turnover may result in increased short-term capital gains which when
distributed to shareholders, are treated as ordinary income. See "Taxes,
Dividends and Distributions."
Securities of Other Investment Companies
The Portfolio may invest up to 5% of its total assets in shares of
closed-end investment companies or investment trusts. To the extent the
Portfolio invests in securities of other investment companies, shareholders of
the Portfolio may be subject to duplicate management and advisory fees.
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.
MANAGER
Prudential Mutual Fund Management LLC (PMF or the Manager), Gateway Center
Three, 100 Mulberry Street, Newark, New Jersey, 07102-4077, 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. PMF is organized in New York as a
limited liability company. It is the successor of Prudential Mutual Fund
Management, Inc., which transferred its assets to PMF in September 1996. See
"Manager" in the Statement of Additional Information. For the fiscal year ended
October 31, 1996, the Portfolio paid a management fee to PMF of .55 of 1% of the
average net assets of the Portfolio.
As of November 30, 1996, PMF served as the manager to 40 open-end investment
companies, constituting substantially all of the Prudential Mutual Funds, and as
manager or administrator to 22 closed-end investment companies with aggregate
assets of approximately $53.4 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, the Subadviser or the investment adviser), the Subadviser
furnishes investment advisory services in connection with the
16
<PAGE>
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 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 Portfolio. 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., The Global Total
Return Fund, Inc. and Prudential Intermediate Global Income Fund, Inc.
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 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 A,
Class B, Class C and Class Z 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 Fund under
Rule 12b-1 under the Investment Company Act and a distribution agreement (the
Distribution Agreement), Prudential Securities (the Distributor) incurs the
expenses of distributing the Portfolio's Class A, Class B and Class C shares.
Prudential Securities also incurs the expenses of distributing the Fund's Class
Z shares under the Distribution Agreement, none of which is reimbursed by or
paid for by the Portfolio. 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.
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.
17
<PAGE>
Under the Class A Plan, the Portfolio reimburses Prudential Securities 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. Prudential
Securities 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, 1997.
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, 1997.
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, 1996, the Portfolio paid distribution
expenses of .15%, .75% and .75% of the average net assets of the Class A, Class
B and Class C shares of the Portfolio, respectively. The Portfolio records all
payments made under the Plans as expenses in the calculation of net investment
income.
Distribution expenses attributable to the sale of Class A, Class B or Class
C shares of the Portfolio will be allocated to each class based upon the ratio
of sales of each class to the sales of Class A, Class B and Class C 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 Portfolio will not be obligated to pay expenses incurred under
any Plan if it is terminated or not continued.
In addition to distribution and service fees paid by the Portfolio under the
Class A, Class B and Class C Plans, the Manager (or one of its affiliates) may
make payments out of its own resources to dealers (including Prudential
Securities) and other persons which distribute shares of the Portfolio
(including Class Z shares). 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
18
<PAGE>
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 has agreed to provide
additional funds if necessary, for the purpose of the settlement fund. 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 calling 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.
Prudential Mutual Fund Services, Inc. (PMFS), 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.
19
<PAGE>
- --------------------------------------------------------------------------------
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. See "Net Asset Value" in the
Statement of Additional Information.
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.
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, Class C and Class Z shares will generally be the same. It
is expected, however, that the dividends will differ by approximately the amount
of the distribution and/or service fee 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, Class C and Class Z shares. These figures are
based on historical earnings and are not intended to indicate future
performance. The "total return" shows how much an investment in the Portfolio
would have increased (decreased) over a specified period of time (i.e., one,
five or ten years or since inception of the Portfolio) assuming that all
distributions and dividends by the Portfolio were reinvested on the reinvestment
dates during the period and less all recurring fees. The "aggregate" total
return reflects actual performance over a stated period of time. "Average
annual" total return is a hypothetical rate of return that, if achieved
annually, would have produced the same aggregate total return if performance had
been constant over the entire period. "Average annual" total return smooths out
variations in performance and takes into account any applicable initial or
contingent deferred sales charges. Neither "average annual" total return nor
"aggregate" total return takes into account any federal or state income taxes
which may be payable upon redemption. The "yield" refers to the income generated
by an investment in the Fund over a one-month or 30-day period. This income is
then "annualized;" that is, the amount of income generated by the investment
during that 30-day period is assumed to be generated each 30-day period for
twelve periods and is shown as a percentage of the investment. The income earned
on the investment is also assumed to be reinvested at the end of the sixth
30-day period. The Portfolio also may include comparative performance
information in advertising or marketing the Portfolio's shares. Such performance
information may include data from Lipper Analytical Services, Inc., Morningstar
Publications, Inc., other industry publications, business periodicals and market
indices. See "Performance Information" in the Statement of Additional
Information. 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."
20
<PAGE>
- --------------------------------------------------------------------------------
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
realized upon a sale or redemption of shares held for six months or less,
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.
Any loss realized on a sale, redemption or exchange of shares of the
Portfolio by a shareholder will be disallowed to the extent the shares are
replaced within a 61-day period (beginning 30 days before the disposition of
shares). Shares purchased pursuant to the reinvestment of a dividend will
constitute a replacement of shares.
A shareholder who acquires shares of the Portfolio and sells or otherwise
disposes of such shares within 90 days of acquisition may not be allowed to
include certain sales charges incurred in acquiring such shares for purposes of
calculating gain or loss realized upon a sale or exchange of shares of the
Portolio.
Distributions by the Portfolio to a shareholder that is a qualified
retirement plan would generally not be taxable to participants of the plan.
Distributions from a qualified retirement plan (or non-qualified arrangement) to
a participant or beneficiary are subject to special rules. These rules vary
greatly with individual situations, therefore potential investors are urged to
consult with their own tax advisers.
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 or Class Z shares or the exchange of Class A
shares
21
<PAGE>
for Class Z shares constitutes a taxable event for federal income tax purposes.
However, such opinions are not binding on the Internal Revenue Service.
Shareholders are advised to consult their own tax advisers regarding
specific questions as to federal, state or local taxes.
Withholding Taxes
Under U.S. Treasury Regulations, the Portfolio is required to withhold and
remit to the U.S. Treasury 31% of dividend, capital gain income and redemption
proceeds payable on your account if you fail to furnish your tax identification
numbers on IRS Form W-9 (or IRS Form W-8 in the case of certain foreign
shareholders) with the required certifications regarding your status under the
federal income tax law.
Dividends And Distributions
The Portfolio expects to declare daily and pay monthly dividends of all or
substantially all of the net investment income (if any) and make distributions
at least annually of any net capital gains. Dividends paid by the Portfolio with
respect to each class of shares, to the extent any dividends are paid, will be
calculated in the same manner, at the same time, on the same day and will be in
the same amount except that each class will bear its own distribution charges,
generally resulting in lower dividends for Class B and Class C shares in
relation to Class A and Class Z shares and lower dividends for Class A shares in
relation to Class Z 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.
For more information regarding taxes, dividends and distributions, see
"Taxes" in the Statement of Additional Information.
- --------------------------------------------------------------------------------
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 four classes designated Class A,
Class B, Class C and Class Z common stock. Each of the Class A, Class B, Class C
and Class Z 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 is subject to different sales charges and
distribution and/or service fees (except in Class Z shares which are not subject
to any sales charge or distribution and/or service fee), which may affect
performance, (ii) each class has exclusive voting rights on any matter submitted
to shareholders that relates solely to its arrangements and has separate voting
rights on any matter submitted to shareholders in which the interests of one
class differ from the interests of any other class, (iii) each class has a
different exchange privilege, (iv) only Class B shares have a conversion feature
and (v) Class Z shares are offered
22
<PAGE>
exclusively for sale to a limited group of investors. 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 (with the
exception of Class Z shares which are not subject to any distribution or service
fees) 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 and to Class Z shareholders whose shares are not subject to any
distribution and/or service fees. The Portfolio's shares do not have cumulative
voting rights for the election of Directors.
The Fund does not intend to hold annual meetings of shareholders unless
otherwise required by law. The Fund will not be required to hold meetings of
shareholders unless, for example, the election of Directors is required to be
acted on by shareholders under the Investment Company Act. Shareholders have
certain rights, including the right to call a meeting upon a vote of 10% of the
Fund's outstanding shares for the purpose of voting on the removal of one or
more Directors or to transact any other business.
ADDITIONAL INFORMATION
This Prospectus, including the Statement of Additional Information which has
been incorporated by reference herein, does not contain all the information set
forth in the Registration Statement filed by the Portfolio with the SEC under
the Securities Act of 1933. Copies of the Registration Statement may be obtained
at a reasonable charge from the SEC or may be examined, without charge, at the
office of the SEC in Washington, D.C.
- --------------------------------------------------------------------------------
SHAREHOLDER GUIDE
- --------------------------------------------------------------------------------
HOW TO BUY SHARES OF THE FUND
You may purchase shares of the Portfolio through Prudential Securities,
Prusec or directly from the Fund through its Transfer Agent, Prudential Mutual
Fund Services, Inc. (PMFS or the Transfer Agent), Attention: Investment
Services, P.O. Box 15020, New Brunswick, New Jersey 08906-5020. Participants in
programs sponsored by Prudential Retirement Services should contact their client
representative for more information about Class Z shares. 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). Class Z shares are to be offered
commencing on or about January 6, 1997 to a limited group of investors at net
asset value without any sales charge. See "Alternative Purchase Plan" below. See
also "How the Fund Values its Shares."
The minimum initial investment for Class A and Class B shares is $1,000 per
class and $5,000 for Class C shares, except that the minimum initial investment
for Class C shares may be waived from time to time. There is no minimum initial
investment requirement for investors who qualify to purchase Class Z shares. The
minimum subsequent
23
<PAGE>
investment is $100 for all classes, except for Class Z shares for which there is
no such minimum. 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.
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 third 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 Global Limited Maturity Fund, Inc.-Limited Maturity
Portfolio, specifying on the wire the account number assigned by PMFS and your
name and identifying the sales charge alternative (Class A, Class B, Class C or
Class Z shares).
If you arrange for receipt by State Street of federal funds prior to 4:15
P.M., New York time, on a business day, you may purchase shares of the Portfolio
as of that day. See "Net Asset Value" in the Statement of Additional
Information.
In making a subsequent purchase order by wire, you should wire State Street
directly and should be sure that the wire specifies Prudential Global Limited
Maturity Fund, Inc.-Limited Maturity Portfolio, Class A, Class B, Class C or
Class Z 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 Portfolio offers four classes of shares (Class A, Class B, Class C and
Class Z shares), which allows you to choose the most beneficial sales charge
structure for your individual circumstances given the amount of the purchase,
the length of time you expect to hold the shares and other relevant
circumstances (Alternative Purchase Plan).
<TABLE>
<CAPTION>
Annual 12b-1 Fees
(as a % of average daily
Sales Charge net assets) Other information
------------------------------------- ------------------------ --------------------------------------
<S> <C> <C> <C>
Class A Maximum initial sales charge of 3% of .30 of 1% (Currently Initial sales charge waived or reduced
the public offering price being charged at a rate for certain purchases
of .15 of 1%)
Class B Maximum contingent deferred sales 1% (Currently being Shares convert to Class A shares
charge or CDSC of 3% of the lesser of charged at a rate of .75 approximately five years after
the amount invested or the redemption of 1%) purchase
proceeds; declines to zero after four
years
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Annual 12b-1 Fees
(as a % of average daily
Sales Charge net assets) Other information
------------------------------------- ------------------------ --------------------------------------
<S> <C> <C> <C>
Class C Maximum CDSC of 1% of the lesser of 1% (Currently being Shares do not convert to another class
the amount invested or the redemp- charged at a rate of .75
tion proceeds on redemptions made of 1%)
within one year of purchase
Class Z None None Sold to a limited group of investors.
</TABLE>
Each class represents an interest in the same assets of the Fund and is
identical in all respects except that (i) each class is subject to different
sales charges and distribution and/or service fees (except for Class Z shares,
which are not subject to any sales charge or distribution and/or service fee),
which may affect performance, (ii) each class has exclusive voting rights on any
matter submitted to shareholders that relates solely to its arrangements and has
separate voting rights on any matter submitted to shareholders in which the
interests of one class differ from the interest of any other class, (iii) each
class has a different exchange privilege, (iv) only Class B shares have a
conversion feature and (v) Class Z shares are offered exclusively for sale to a
limited group of investors. 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 (if any) 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 and Class Z shares.
Financial advisers and other sales agents who sell shares of the Portfolio
will receive different compensation for selling Class A, Class B, Class C and
Class Z shares and will generally receive more compensation initially for
selling Class A and Class B shares than for selling Class C or Class Z shares.
In selecting a purchase alternative, you should consider, among other
things, (1) the length of time you expect to hold your investment, (2) the
amount of any applicable sales charge (whether imposed at the time of purchase
or redemption) and distribution-related fees, as noted above, (3) whether you
qualify for any reduction or waiver of any applicable sales charge, (4) the
various exchange privileges among the different classes of shares (see "How to
Exchange Your Shares" below) and (5) that Class B shares automatically convert
to Class A shares approximately five years after purchase (see "Conversion
Feature-Class B Shares" below).
The following is provided to assist you in determining which method of
purchase best suits your individual circumstances and is based on current fees
and expenses being charged to the Portfolio:
If you intend to hold your investment in the Portfolio 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
25
<PAGE>
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 when 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, unless the purchaser is eligible to purchase Class Z shares. See
"Reduction and Waiver of Initial Sales Charges" and "Class Z Shares" 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
Percentage of Percentage of as Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
------------------ -------------- --------------- --------------
<S> <C> <C> <C>
Less than $100,000 3.0% 3.09% 2.75%
$100,000 but less than $500,000 2.5 2.56 2.25
$500,000 but less than $1,000,000 2.0 2.04 1.75
$1,000,000 but less than $5,000,000 0.0 0.00 0.70
$5,000,000 but less than $10,000,000 0.0 0.00 0.50
$10,000,000 and above 0.0 0.00 0.25
</TABLE>
The Distributor may reallow the entire initial sales charge to dealers.
Selling dealers may be deemed to be underwriters, as that term is defined in the
Securities Act.
In connection with the sale of Class A shares at NAV (without payment of an
initial sales charge), the Manager, the Distributor or one of their affiliates
will pay dealers, financial advisers and other persons which distribute shares a
finders' fee based on a percentage of the net asset value of shares sold by such
persons.
Reduction and Waiver of Initial Sales Charges. Reduced sales charges are
available through Rights of Accumulation and Letters of Intent. Shares of the
Portfolio 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 (collectively, Benefit Plans), provided that the Benefit 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 250 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.
PruArray and SmartPath Plans. Class A shares may be purchased at NAV by
certain savings, retirement and deferred compensation plans, qualified or
non-qualified under the Internal Revenue Code, including pension,
profit-sharing, stock-bonus or other employee benefit plans under Section 401 of
the Internal Revenue Code and deferred
26
<PAGE>
compensation and annuity plans under Sections 457 and 403(b)(7) of the Internal
Revenue Code that participate in Prudential's PruArray or SmartPath Programs
(benefit plan recordkeeping services) (hereafter referred to as a PruArray or
SmartPath Plan); provided that the plan has at least $1 million in existing
assets or 250 eligible employees or participants. The term "existing assets" for
this purpose includes stock issued by a PruArray or SmartPath 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 or
SmartPath Program (Participating Funds). "Existing assets" also include shares
of money market funds acquired by exchange from a Participating Fund.
PruArray Association Benefit Plans. Class A shares are also offered at net
asset value to Benefit Plans or non-qualified plans sponsored by employers which
are members of a common trade, professional or membership association
("Association") that participate in the PruArray Program provided that the
Association enters into a written agreement with Prudential. Such Benefit Plans
or non-qualified plans may purchase Class A shares at net asset value without
regard to the assets or number of participants in the individual employer's
qualified Plan(s) or non-qualified plans so long as the employers in the
Association (i) have retirement plan assets in the aggregate of at least $1
million or 250 participants in the aggregate and (ii) maintain their accounts
with the Fund's transfer agent.
PruArray Savings Program. Class A shares are also offered at net asset value
to employees of companies that enter into a written agreement with Prudential
Retirement Services to participate in the PruArray Savings Program. Under this
Program, a limited number of Prudential Mutual Funds are available for purchase
at net asset value by Individual Retirement Accounts and Savings Accumulation
Plans of the company's employees. The Program is available only to (i) employees
who open an IRA or Savings Accumulation Plan account with the Fund's transfer
agent and (ii) spouses of employees who open an IRA account with the Fund's
transfer agent. The program is offered to companies that have at least 250
eligible employees.
Special Rules Applicable to Retirement Plans. After a Benefit Plan or
PruArray or SmartPath 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)
officers and current and former Directors/Trustees of the Prudential Mutual
Funds (including the Fund), (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 180 days of the commencement of the financial adviser's employment at
Prudential Securities, or within one year in the case of Benefit Plans, (ii) the
purchase is made with proceeds of a redemption of shares of any open-end fund
sponsored by the financial adviser's previous employer (other than a money
market fund or other no-load fund which imposes a distribution or service fee of
.25 of 1% or less) and (iii) the financial adviser served as the client's broker
on the previous purchases.
You must notify the Transfer Agent either directly or through Prudential
Securities or Prusec that you are entitled to the reduction or waiver of the
sales charge. The reduction or waiver will be granted subject to confirmation of
your entitlement. No initial sales charges are imposed upon Class A shares
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.
27
<PAGE>
Although there is no sales charge imposed at the time of purchase, redemptions
of Class B and Class C shares may be subject to a CDSC. See "How to Sell Your
Shares-Contingent Deferred Sales Charges." The Distributor will pay sales
commissions of up to 3% of the purchase price of Class B shares to dealers,
financial advisers and other persons who sell Class B shares at the time of sale
from its own resources. This facilitates the ability of the Fund to sell the
Class B shares without an initial sales charge being deducted at the time of
purchase. The Distributor anticipates that it will recoup its advancement of
sales commissions from the combination of the CDSC and the distribution fee. See
"Distributor." In connection with the sale of Class C shares, the Distributor
will pay dealers, financial advisers and other persons which distribute Class C
shares a sales commission of up to 1% of the purchase price at the time of the
sale.
Class Z Shares
Class Z shares are available for purchase by (i) pension, profit sharing or
other employee benefit plans qualified under Section 401 of the Internal Revenue
Code, deferred compensation and annuity plans under Sections 457 and 403(b)(7)
of the Internal Revenue Code, and non-qualified plans for which the Fund is an
available option (collectively, Benefit Plans), provided such Benefit Plans (in
combination with other plans sponsored by the same employer or group of related
employers) have at least $50 million in defined contribution assets; (ii)
participants in any fee-based program sponsored by Prudential Securities (or one
of its affiliates) which includes mutual funds as investment options and for
which the Fund is an available option; and (iii) investors who were, or had
executed a letter of intent to become, shareholders of any series of Prudential
Dryden Fund (Dryden Fund) on or before one or more series of Dryden Fund
reorganized or who on that date had investments in certain products for which
Dryden Fund provided exchangeability. After a Benefit Plan qualifies to purchase
Class Z shares, all subsequent purchases will be for Class Z shares.
In connection with the sale of Class Z shares, the Manager, the Distributor
or one of their affiliates may pay dealers, financial advisers and other persons
which distribute shares a finders' fee based on a percentage of the net asset
value of shares sold by such persons.
For more information about shares of the Fund contact your Prudential
Securities financial adviser or Prusec representative or telephone the Fund at
(800) 225-1852. Participants in programs sponsored by Prudential Retirement
Services should contact their client representative for more information about
Class Z 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 will be reduced by the
amount of any applicable contingent deferred sales charge, as described below.
See "Contingent Deferred Sales Charges" below.
If you hold shares through Prudential Securities, you must redeem your
shares by contacting your Prudential Securities Financial Adviser. If you hold
shares in non-certificate form, a written request for redemption signed by you
exactly as the account is registered is required. If you hold certificates, the
certificates signed in the name(s) shown on the face of the certificates, must
be received by the Transfer Agent in order for the redemption request to be
processed. If redemption is requested by a corporation, partnership, trust or
fiduciary, written evidence of authority acceptable to the Transfer Agent must
be submitted before such request will be accepted. All correspondence and
documents concerning redemptions should be sent to the Portfolio in care of the
Transfer Agent, Prudential Mutual Fund Services, Inc., Attention: Redemption
Services, P.O. Box 15010, New Brunswick, New Jersey 08906-5010.
If the proceeds of the redemption (a) exceed $50,000, (b) are to be paid to
a person other than the record owner, (c) are to be sent to an address other
than the address on the Transfer Agent's records, or (d) are to be paid to a
corporation, partnership, trust or fiduciary, the signature(s) on the redemption
request and on the certificates, if any, or stock power must be guaranteed by an
"eligible guarantor institution." An "eligible guarantor institution" includes
any bank, broker, dealer or credit union. The Transfer Agent reserves the right
to request additional information from, and make
28
<PAGE>
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. No CDSC will be imposed
on any such involuntary redemption.
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 Portfolio at the NAV
next determined after the order is received, which must be within 90 days after
the date of the redemption. Any CDSC paid in connection with such redemption
will be credited (in shares) to your account. If less than a full repurchase is
made, the credit will be on a pro rata basis. You must notify the Fund's
Transfer Agent, either directly or through Prudential Securities, at the time
the repurchase privilege is exercised to adjust your account for the CDSC you
previously paid. Thereafter, any redemptions will be subject to the CDSC
applicable at the time of the redemption. See "Contingent Deferred Sales Charge"
below. Exercise of the repurchase privilege may affect federal tax treatment of
any gain realized upon redemption. For more information on the rule which
disallows a loss on the sale or exchange of shares of the Portfolio which are
replaced, see "Taxes, Dividends and Distributions."
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
29
<PAGE>
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.
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
30
<PAGE>
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 a
Director 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-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. Conversions will be effected at
relative net asset value without the imposition of any additional sales charge.
The first conversion of Class B shares occurred in February 1995, when the
conversion feature was first implemented.
Since the Portfolio tracks amounts paid rather than the number of shares
bought on each purchase of Class B shares, the number of Class B shares eligible
to convert to Class A shares (excluding shares acquired through the automatic
reinvestment of dividends and other distributions) (the Eligible Shares) will be
determined on each conversion date in accordance with the following formula: (i)
the ratio of (a) the amounts paid for Class B shares purchased at least five
years prior to the conversion date to (b) the total amount paid for all Class B
shares purchased and then held in your account (ii) multiplied by the total
number of Class B shares purchased and then held in your account. Each time any
Eligible Shares in your account convert to Class A shares, all shares or amounts
representing Class B shares then in your account that were acquired through the
automatic reinvestment of dividends and other distributions will convert to
Class A shares.
For purposes of determining the number of Eligible Shares, if the Class B
shares in your account on any conversion date are the result of multiple
purchases at different net asset values per share, the number of Eligible Shares
calculated as described above will generally be either more or less than the
number of shares actually purchased approximately five years before such
conversion date. For example, if 100 shares were initially purchased at $10 per
share (for a total of $1,000) and a second purchase of 100 shares was
subsequently made at $11 per share (for a total of $1,100), 95.24 shares would
convert approximately five years from the initial purchase (i.e., $1,000 divided
by $2,100 (47.62%) multiplied by 200 shares equals 95.24 shares). The Manager
reserves the right to modify the formula for determining the number of Eligible
Shares in the future as it deems appropriate on notice to shareholders.
Since annual distribution-related fees are lower for Class A shares than
Class B shares, the per share net asset value of the Class A shares may be
higher than that of the Class B shares at the time of conversion. Thus, although
the
31
<PAGE>
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 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, Class C and Class Z shares of the Portfolio may be exchanged
for Class A, Class B, Class C and Class Z 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, Inc. For purposes of
calculating the holding period applicable to the Class B conversion feature, the
time period during which Class B shares were held in a money market fund will be
excluded. See "Conversion Feature-Class B Shares" above. An exchange will be
treated as a redemption and purchase for tax purposes. See "Shareholder
Investment Account-Exchange Privilege" in the Statement of Additional
Information.
In order to exchange shares by telephone, you must authorize the telephone
exchange privilege on your initial application form or by written notice to the
Transfer Agent and hold shares in non-certificate form. Thereafter, you may call
the Portfolio at (800) 225-1852 to execute a telephone exchange of shares,
weekdays, except holidays, between the hours of 8:00 A.M. and 6:00 P.M., New
York time. For your protection and to prevent fraudulent exchanges, your
telephone call will be recorded and you will be asked to provide your personal
identification number. A written confirmation of the exchange transaction will
be sent to you. Neither the Fund nor its agents will be liable for any loss,
liability or cost which results from acting upon instructions reasonably
believed to be genuine under the foregoing procedures. (The Fund or its agents
could be subject to liability if they fail to employ reasonable 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.
32
<PAGE>
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. 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), and for shareholders who qualify to purchase Class Z shares (see
"Alternative Purchase Plan-Class Z Shares" 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. 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.
Participants in any fee-based program for which the Fund is an available
option will have their Class A shares, if any, exchanged for Class Z shares when
they elect to have those assets become a part of the fee-based program. Upon
leaving the program (whether voluntarily or not), such Class Z shares (and, to
the extent provided for in the program, Class Z shares acquired through
participation in the program) will be exchanged for Class A shares at net asset
value. Similarly, participants in PSI's 401(k) Plan, an employee benefit plan
sponsored by Prudential Securities Incorporated (the PSI 401(k) Plan), for which
the Fund's Class Z shares are an available option and who wish to transfer their
Class Z shares out of the PSI 401(k) Plan following separation from service
(i.e., voluntary or involuntary termination of employment or retirement) will
have their Class Z shares exchanged for Class A shares at net asset value.
The Fund reserves the right to reject any exchange order including exchanges
(and market timing transactions) which are of a size and/or frequency engaged in
by one or more accounts acting in concert or otherwise, that have or may have an
adverse effect on the ability of the Subadviser to manage the Portfolio. The
determination that such exchanges or activity may have an adverse effect and the
determination to reject any exchange order shall be in the discretion of the
Manager and the Subadviser.
The Exchange Privilege is not a right and may be suspended, modified or
terminated on 60 days' notice to shareholders.
SHAREHOLDER SERVICES
In addition to the exchange privilege, as a shareholder in the Fund, you can
take advantage of the following additional services and privileges:
* Automatic Reinvestment of Dividends and/or Distributions Without a Sales
Charge. For your convenience, all dividends and distributions are automatically
reinvested in full and fractional shares of the Portfolio at NAV without a sales
charge. You may direct the Transfer Agent in writing not less than 5 full
business days prior to the record date to have subsequent dividends and/or
distributions sent in cash rather than reinvested. If you hold shares through
Prudential Securities, you should contact your financial adviser.
33
<PAGE>
* Automatic Savings Accumulation Plan (ASAP). Under ASAP you may make
regular purchases of the Portfolio's shares in amounts as little as $50 via an
automatic debit to a bank account or Prudential Securities account (including a
Command Account). For additional information about this service, you may contact
your Prudential Securities financial adviser, Prusec representative or the
Transfer Agent directly.
* Tax-Deferred Retirement Plans. Various tax-deferred retirement plans,
including a 401(k) plan, self-directed individual retirement accounts and
"tax-sheltered accounts" under Section 403(b)(7) of the Internal Revenue Code
are available through the Distributor. These plans are for use by both
self-employed individuals and corporate employers. These plans permit either
self-direction of accounts by participants, or a pooled account arrangement.
Information regarding the establishment of these plans, the administration,
custodial fees and other details is available from Prudential Securities or the
Transfer Agent. If you are considering adopting such a plan, you should consult
with your own legal or tax adviser with respect to the establishment and
maintenance of such a plan.
* Systematic Withdrawal Plan. A systematic withdrawal plan is available for
shareholders which provides for monthly or quarterly checks. Withdrawals of
Class B and Class C shares may be subject to a CDSC. See "How to Sell Your
Shares-Contingent Deferred Sales Charges." See also "Shareholder Investment
Account-Systematic Withdrawal Plan" in the Statement of Additional Information.
* 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 Gateway Center Three, 100 Mulberry Street, Newark, New Jersey
07102-4077. In addition, monthly unaudited financial data is available from the
Portfolio upon request.
* Shareholder Inquiries. Inquiries should be addressed to the Portfolio at
Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, 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.
34
<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 the best 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 the 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>
A: Debt rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
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 in higher-rated categories.
BB, B, CCC, CC: Debt rated BB, B, CCC and CC is regarded as having
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: This highest category indicates that the degree of safety regarding
timely payment is very strong.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
A-2
<PAGE>
- --------------------------------------------------------------------------------
THE PRUDENTIAL MUTUAL FUND FAMILY
- --------------------------------------------------------------------------------
Prudential Mutual Fund Management offers a broad range of mutual funds
designed to meet your individual needs. We welcome you to review the investment
options available through our family of funds. For more information on the
Prudential Mutual Funds, including charges and expenses, contact your Prudential
Securities financial adviser or Prusec representative or telephone the Fund at
(800) 225-1852 for a free prospectus. Read the prospectus carefully before you
invest or send money.
- --------------------------------------------------------------------------------
(left column)
Taxable Bond Funds
Prudential Diversified Bond Fund, Inc.
Prudential Government Income Fund Inc.
Prudential Government Securities Trust
Short-Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential Mortgage Income Fund, Inc.
Prudential Structured Maturity Fund, Inc.
Income Portfolio
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
Intermediate Series
Prudential Municipal Series Fund
Florida Series
Hawaii Income Series
Maryland Series
Massachusetts Series
Michigan Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
Global Funds
Prudential Europe Growth Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Global Limited Maturity Fund, Inc.
Limited Maturity Portfolio
Prudential Intermediate Global Income Fund, Inc.
Prudential Natural Resources Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Global Utility Fund, Inc.
Prudential World Fund, Inc.
Global Series
International Stock Series
The Global Government Plus Fund, Inc.
The Global Total Return Fund, Inc.
(right column)
Equity Funds
Prudential Allocation Fund
Balanced Portfolio
Strategy Portfolio
Prudential Distressed Securities Fund, Inc.
Prudential Dryden Fund
Prudential Active Balanced Fund
Prudential Stock Index Fund
Prudential Emerging Growth Fund, Inc.
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Prudential Jennison Series Fund, Inc.
Prudential Jennison Growth Fund
Prudential Jennison Growth & Income Fund
Prudential Multi-Sector Fund, Inc.
Prudential Small Companies 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, Inc.
Money Market Series
Prudential MoneyMart Assets, Inc.
* Tax-Free Money Market Funds
Prudential Tax-Free Money Fund, Inc.
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
* Command Funds
Command Money Fund
Command Government Fund
Command Tax-Free Fund
* Institutional Money Market Funds
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
- --------------------------------------------------------------------------------
B-1
<PAGE>
(left colunm)
No dealer, sales representative or any other person
has been authorized to give any information or to make
any representations, other than those contained in
this Prospectus, in connection with the offer
contained herein, and, if given or made, such other
information or representations must not be relied upon
as having been authorized by the Fund or the
Distributor. This Prospectus does not constitute an
offer by the Fund or by the Distributor to sell or a
solicitation of an offer to buy any of the securities
offered hereby in any jurisdiction to any person to
whom it is unlawful to make such offer in such
jurisdiction.
- ------------------------------------------------------
TABLE OF CONTENTS
Page
----
FUND HIGHLIGHTS.................................. 2
FUND EXPENSES.................................... 4
FINANCIAL HIGHLIGHTS............................. 5
HOW THE FUND INVESTS............................. 8
Investment Objective and Policies............. 8
Risk Factors.................................. 10
Other Investments and Investment Techniques... 11
Hedging and Return Enhancement Strategies .... 12
Investment Restrictions....................... 16
HOW THE FUND IS MANAGED.......................... 16
Manager....................................... 16
Fee Waivers and Subsidy....................... 17
Distributor .................................. 17
Portfolio Transactions........................ 19
Custodian and Transfer and
Dividend Disbursing Agent................. 19
HOW THE FUND VALUES ITS SHARES................... 20
HOW THE FUND CALCULATES PERFORMANCE.............. 20
TAXES, DIVIDENDS AND DISTRIBUTIONS............... 21
GENERAL INFORMATION.............................. 22
Description of Common Stock................... 22
Additional Information........................ 23
SHAREHOLDER GUIDE................................ 23
How to Buy Shares of the Fund................. 23
Alternative Purchase Plan..................... 24
How to Sell Your Shares....................... 28
Conversion Feature-- Class B Shares........... 31
How to Exchange Your Shares................... 32
Shareholder Services ......................... 33
APPENDIX......................................... A-1
THE PRUDENTIAL MUTUAL FUND FAMILY................ B-1
- -----------------------------------------------------
MF144A 444129Y
- -----------------------------------------------------
Class A: 74433F-10-8
CUSIP Nos.: Class B: 74433F-20-7
Class C: 74433F-50-4
Class Z: 74433F-60-3
- -----------------------------------------------------
(right column)
Prudential
Global
Limited
Maturity
Fund, Inc.
- -----------------------
Limited Maturity
Portfolio
LOGO Prudential
Investments
PROSPECTUS
December 30, 1996
<PAGE>
PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
Statement of Additional Information
dated December 30, 1996
Prudential Global Limited Maturity Fund, Inc. (the Fund) is an open-end,
non-diversified management investment company, or mutual fund comprised of one
portfolio-the Limited Maturity Portfolio (the Fund or Portfolio). The investment
objective of the Portfolio 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 debt securities denominated
in the U.S. dollar and a range of foreign currencies. The Portfolio will
maintain a weighted average maturity of more than 2, but less than 5, years,
with the maturity for any individual security generally not exceeding 10 years.
Under normal circumstances, the Portfolio will invest its assets in debt
securities of issuers in at least five different countries including the United
States. There can be no assurance that the Portfolio's objective will be
achieved.
The Fund's address is Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102-4077, and its telephone number is (800) 225-1852.
The Statement of Additional Information is not a prospectus and should be
read in conjunction with the Fund's Prospectus, dated December 30, 1996, a copy
of which may be obtained from the Fund at Gateway Center Three, 100 Mulberry
Street, Newark, New Jersey 07102-4077.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Cross-reference
to page in
Page Prospectus
------ ---------------
<S> <C> <C>
General Information .............................................................. B-2 -
Additional Investment Information ................................................ B-2 8
Investment Restrictions .......................................................... B-9 16
Directors and Officers ........................................................... B-10 16
Manager .......................................................................... B-12 16
Distributor ...................................................................... B-14 17
Portfolio Transactions and Brokerage ............................................. B-16 19
Purchase and Redemption of Fund Shares ........................................... B-17 23
Shareholder Investment Account ................................................... B-19 33
Net Asset Value .................................................................. B-23 20
Taxes ............................................................................ B-23 21
Performance Information .......................................................... B-25 20
Custodian, Transfer and Dividend Disbursing Agent and Independent Accountants .... B-27 19
Financial Statements ............................................................. B-28 -
Independent Auditors' Reports .................................................... B-40 -
Appendix-General Investment Information .......................................... App-1
Appendix-Historical Performance Data ............................................. App-2
Appendix-Information Relating to The Prudential .................................. App-5 -
- -----------------------------------------------------------------------------------------------------------
</TABLE>
MF1498
<PAGE>
GENERAL INFORMATION
In October 1995, Prudential Global Limited Maturity Fund, Inc. and The
Limited Maturity Portfolio each changed its name from Prudential Short-Term
Global Income Fund, Inc. and Short-Term Global Income Portfolio, respectively.
ADDITIONAL INVESTMENT INFORMATION
Investment Policies
U.S. Government Securities
"U.S. Government securities" shall include the following:
U.S. Treasury Securities. The 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. The 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, the
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 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. The Portfolio
may invest up to 10% of its total assets in zero coupon securities.
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 the Portfolio.
At a time when the 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, the 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
The Portfolio may invest up to 5% of its total assets in high quality
participation interests 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.
B-2
<PAGE>
The participation interests acquired by the 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 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 the Portfolio acts as co-lender in connection with a participation
interest or when it 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.
The 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. The Portfolio may
incur additional credit risk, however, when it 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 the Portfolio's requirement to maintain diversification for tax
purposes, the issuer of a loan participation will be the underlying borrower. In
cases where the 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 the Portfolio's fundamental investment restriction against
investing 25% or more of its total assets in any one industry, the 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
The 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,
the 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 the 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.
The 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 adviser believes 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.
The 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 adviser
believes 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.
The Portfolio may write options on securities in connection with
buy-and-write transactions; that is, it 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.
The 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 the Portfolio and its contra-party
with no clearing organization guarantee. Thus, when the 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 Portfolio
may engage in OTC options.
When the Portfolio writes an OTC option, it generally will be able to close
out the OTC options prior to its expiration only by entering into a closing
purchase transaction with the dealer to which the Portfolio originally wrote the
OTC option. While the
B-4
<PAGE>
Portfolio will enter into OTC options only with dealers which agree to, and
which are expected to be capable of, entering into closing transactions with the
Portfolio, there can be no assurance that the Portfolio will be able to
liquidate an OTC option at a favorable price at any time prior to expiration.
Until the Portfolio is able to effect a closing purchase transaction in a
covered OTC call option the Portfolio has written, it will not be able to
liquidate securities used as cover until the option expires or is exercised or
different cover is substituted. In the event of insolvency of the contra-party,
the Portfolio may be unable to liquidate an OTC option.
OTC options purchased by the 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 the 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.
The Portfolio may write only "covered" options. This means that so long as
the 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 or
liquid assets having a value equal to or greater than the fluctuating market
value of the optioned securities (the exercise price of the option). The
Portfolio may also write straddles (i.e., a combination of a call and a put
written on the same security at the same strike price). In such cases the same
segregated collateral is considered "cover" for both the put and the call and
the Portfolio will also segregate or deposit cash or liquid assets equivalent to
the amount, if any, by which the put is "in-the-money." "Liquid assets" as used
in the Fund's Prospectus and Statement of Additional Information include U.S.
Government Securities, equity securities, investment grade debt obligations or
other liquid unencumbered assets.
Options on Currencies
Instead of purchasing or selling futures, options on futures or forward
currency exchange contracts, the 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
The Portfolio will purchase or sell interest rate or currency futures
contracts to take advantage of or to protect the 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 Portfolio 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, the Portfolio must
allocate cash or securities as a deposit payment (initial margin). It is
expected that the initial margin on United States exchanges will vary from
one-half of 1% to 4% of the value of the securities or commodities underlying
the contract. Under certain circumstances, however, such as periods of high
volatility, the Portfolio may be required by an exchange to increase the level
of its initial margin payment. Thereafter, the futures contract is valued daily
and the payment of "variation margin" may be required, a process known as "mark
to the market." Each day the Portfolio is required to provide or is entitled to
receive variation margin in an amount equal to any decline (in the case of a
long futures position) or increase (in the case of a short futures position) in
the contract's value since the preceding day.
Certain futures contracts are settled on a net cash payment basis rather
than by the sale and delivery of the securities or currency underlying the
futures contracts. United States futures contracts are traded on exchanges that
have been designated as "contract markets" by the Commodity Futures Trading
Commission (the CFTC), an agency of the U.S. Government, and must be executed
through a futures commission merchant (i.e., a brokerage firm) which is a member
of the relevant contract market. Futures contracts trade on these contract
markets and the exchange's affiliated clearing organization guarantees
performance of the contracts as between the clearing members of the exchange.
B-5
<PAGE>
Although futures contracts by their terms may require the actual delivery or
acquisition of underlying assets, in most cases the contractual obligation is
extinguished by offset before the expiration of the contract without having to
make or take delivery of the assets. The offsetting of a contractual obligation
is accomplished by buying (to offset an earlier sale) or selling (to offset an
earlier purchase) an identical futures contract calling for delivery in the same
month.
The ordinary spreads between values in the cash and futures markets, due to
differences in the character of those markets, are subject to distortions. Due
to the possibility of distortion, a correct forecast of general interest rate or
currency trends by the investment adviser may still not result in a successful
transaction.
Although the Fund believes that use of futures contracts will benefit the
Portfolio, 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.
The Portfolio may only write "covered" put and call options on futures
contracts. The 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 or liquid assets equal to the
fluctuating value of the optioned future. The 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 Portfolio's assets which can be placed in the
segregated account.
Forward Foreign Currency Exchange Contracts
The 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 Portfolio generally arising
in connection with the purchase or sale of its portfolio securities and accruals
of interest receivable and Portfolio 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.
The Portfolio may not position hedge (including cross hedges) 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 being hedged. If the Portfolio enters into a position hedging
transaction, the transaction will be "covered" by the position being hedged or,
the Fund's Custodian or subcustodian will place cash or liquid assets in a
segregated account of the Portfolio (less the value of the "covering" positions,
if any) 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 net commitment with respect to
the forward contract.
At or before the maturity of a forward sale contract, the Portfolio may
either sell a portfolio security and make delivery of the currency, or retain
the security and offset its contractual obligations to deliver the currency by
purchasing a second contract pursuant to which the Portfolio will obtain, on the
same maturity date, the same amount of the currency which it is obligated to
deliver. If the Portfolio retains the portfolio security and engages in an
offsetting transaction, the Portfolio, at the time of execution of the
offsetting transaction, will incur a gain or a loss to the extent that movement
has occurred in forward contract prices. Should forward prices decline during
the period between the Portfolio entering into a forward contract for the sale
of a currency and the date it enters into an offsetting contract for the
purchase of the currency, the Portfolio will realize a gain to the extent the
price of the
B-6
<PAGE>
currency it has agreed to purchase is less than the price of the currency it has
agreed to sell. Should forward prices increase, the Portfolio will suffer a loss
to the extent the price of the currency it has agreed to purchase exceeds the
price of the currency it has agreed to sell. Closing out forward purchase
contracts involves similar offsetting transactions.
The use of foreign currency contracts does not eliminate fluctuations in the
underlying prices of the securities, but it does establish a rate of exchange
that can be achieved in the future. In addition, although forward currency
contracts limit the risk of loss due to a decline in the value of the hedged
currency, they also limit any potential gain that might result if the value of
the currency increases.
Additional Risks of Options on Securities and Currencies, Futures Contracts and
Options Thereon and Forward Contracts
Options, futures contracts, options on futures contracts and forward
contracts on securities and currencies may be traded on foreign exchanges. Such
transactions may not be regulated as effectively as similar transactions in the
United States, may not involve a clearing mechanism and related guarantees, and
are subject to the risk of governmental action affecting trading in, or the
prices of, foreign securities. The value of such positions also could be
adversely affected by (i) other complex foreign political, legal and economic
factors, (ii) lesser availability than in the United States of data on which to
make trading decisions, (iii) delays in the Portfolio'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 the
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 the 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.
The 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 the 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
The Portfolio will engage in transactions in interest rate and foreign
currency futures contracts and options thereon only to reduce certain risks of
its investments and to attempt to enhance return in each case in accordance with
the rules and regulations of the CFTC, and not for speculation.
B-7
<PAGE>
In accordance with CFTC regulations, the Portfolio may not purchase or sell
futures contracts or options thereon if the initial margin and premiums therefor
exceed 5% of the liquidation value of the Portfolio's total assets after taking
into account unrealized profits and unrealized losses on 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 within the
meaning of the CFTC regulations. In instances involving the purchase of futures
contracts or call options thereon or the writing of put options thereon by the
Portfolio, an amount of cash or liquid assets 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, the 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 the Portfolio's ability to engage
in certain yield enhancement and risk management strategies. There are no
limitations on the Portfolio's use of futures contracts and options on futures
contracts beyond the restrictions set forth above.
Borrowing
When the 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, the 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 the Portfolio to sell a portion of
its portfolio securities at a time when it is disadvantageous to do so.
Repurchase Agreements
The Portfolio will enter into repurchase transactions only with parties
meeting creditworthiness standards approved by the Fund's Board of Directors.
The Portfolio'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 Portfolio participates in a joint repurchase account with other
investment companies managed by Prudential Mutual Fund Management LLC (PMF)
pursuant to an order of the Securities and Exchange Commission (SEC). 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
The Portfolio may not hold 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 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.
B-8
<PAGE>
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.
The staff of the SEC has also taken the position, which the Fund will
follow, 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 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." See "How the Fund
Invests-Illiquid Securities" in the Prospectus.
INVESTMENT RESTRICTIONS
The following restrictions are fundamental policies. The Fund's fundamental
policies as they affect the Portfolio cannot be changed without the approval of
a majority of the Portfolio's outstanding voting securities. A "majority of the
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 the Portfolio represented at a meeting at which more than 50% of
the outstanding voting securities of the Portfolio are present in person or
represented by proxy or (ii) more than 50% of the outstanding voting securities
of the Portfolio.
The 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
the 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. The Portfolio may pledge up to 20% of the value
of its total assets to secure such borrowings. For purposes of this restriction,
the purchase or sale of securities on a when-issued or delayed delivery basis,
the purchase of securities subject to repurchase agreements, collateral
arrangements with respect to interest rate swap transactions, reverse repurchase
agreements or dollar roll transactions or the purchase or sale of options and
futures contracts or options thereon, are not deemed to be a pledge of assets or
the issuance of a senior security; and neither such arrangements, the purchase
or sale of options, futures contracts or related options nor obligations of the
Fund to the Directors pursuant to deferred compensation arrangements, are deemed
to be the issuance of a senior security.
(4) Buy or sell commodities, commodity contracts, real estate or interests
in real estate (including mineral leases or rights), except that the 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 the Portfolio to be
transactions in commodities or commodity contracts.
B-9
<PAGE>
(5) Make loans, except (i) through repurchase agreements, (ii) through loan
participations, and (iii) loans of portfolio securities (limited to 30% of the
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, the 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 the Portfolio's outstanding voting
securities.
Whenever any fundamental investment policy or investment restriction states
a maximum percentage of the 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 the
Portfolio's asset coverage for borrowings falls below 300%, the Portfolio will
take prompt action to reduce its borrowings, as required by applicable law.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
Position with Principal Occupations
Name, Address and Age* the Fund During Past 5 Years
- ---------------------- ------------- ---------------------
<S> <C> <C>
Edward D. Beach (71) Director President and Director of BMC Fund, Inc., a closed-end investment company;
prior thereto, Vice Chairman of Broyhill Furniture Industries, Inc.;
Certified Public Accountant; Secretary and Treasurer of Broyhill Family
Foundation, Inc.; and Member of the Board of Trustees of Mars Hill College.
Delayne Dedrick Gold (58) Director Marketing and Management Consultant.
*Robert F. Gunia (49) Director and Comptroller, Prudential Investments (since May 1996); Senior Vice
Vice President President (since March 1987) of Prudential Securities Incorporated
(Prudential Securities); Director (since June 1987), Prudential
Mutual Fund Services, Inc. (PMFS); formerly Chief Administrative
Officer (July 1990-September 1996), Director (January 1989-
September 1996), Executive Vice President, Treasurer and Chief
Financial Officer (June 1987-September 1996) of Prudential Mutual Fund
Management, Inc., Vice President and Director of The Asia Pacific Fund,
Inc. (since May 1989).
Donald D. Lennox (77) Director Chairman (since February 1990) and Director (since April 1989) of
International Imaging Materials, Inc. (thermal transfer ribbon
manufacturer); Retired Chairman, Chief Executive Officer and Director of
Schlegel Corporation (industrial manufacturing) (March 1987 - February
1989); and Director of Gleason Corporation, Personal Sound Technologies,
Inc.
Douglas H. McCorkindale (57) Director Vice Chairman, Gannett Co. Inc. (publishing and media) (since March 1984);
and Director of Gannett Co. Inc., Frontier Corporation, Continental
Airlines, Inc.
*Mendel A. Melzer (35) Director Chief Investment Officer of Prudential Mutual Funds; former Chief Financial
Officer (November 1995-October 1996) of the Prudential Investments;
formerly Senior Vice President and Chief Financial Officer of Prudential
Preferred Financial Services (April 1993 - November 1995); Managing
Director of Prudential Investment Advisors (April 1991 - April 1993);
Senior Vice President of Prudential Capital Corporation (July 1989 - April
1991).
Thomas T. Mooney (54) Director President of the Greater Rochester Metro Chamber of Commerce; former
Rochester City Manager; Trustee of Center for Governmental Research, Inc.;
Director of Blue Cross of Rochester, Monroe County Water Authority,
Rochester Jobs, Inc., Executive Service Corps of Rochester, Monroe County
Industrial Development Corporation, Northeast Midwest Institute, The
Business Council of New York State.
Stephen P. Munn (54) Director Chairman (since January 1994), Director and President (since 1988) and
Chief Executive Officer (1988 - December 1993) of Carlisle Companies
Incorporated (manufacturer of industrial products).
*Richard A. Redeker (53) Director and Employee of Prudential Investments; former President, Chief Executive Officer
President and Director (October 1993-September 1996) of PMF; former Executive Vice
President, Director and Member of the Operating Committee (October 1993-
September 1996), Prudential Securities; Director (since October 1993) of
Prudential Securities Group, Inc.; formerly Senior Executive Vice President
and Director of Kemper Financial Services, Inc.(September 1978 - September
1993).
</TABLE>
B-10
<PAGE>
<TABLE>
<CAPTION>
Position with Principal Occupations
Name, Address and Age* the Fund During Past 5 Years
- ---------------------- ------------- ---------------------
<S> <C> <C>
Robin B. Smith (57) Director Chairman (since August 1996) and Chief Executive Officer (since January
1988), formerly President (September 1981 - August 1996) of Publishers
Clearing House; Director of BellSouth Corporation, The Omnicom Group,
Inc., Texaco Inc., Spring Industries Inc.
Louis A. Weil, III (55) Director President and Chief Executive Officer (since January 1996) and Director
(since September 1991) of Central Newspapers, Inc.; Chairman of the Board
(since January 1996), Publisher and Chief Executive Officer (August 1991 -
December 1995) of Phoenix Newspapers, Inc.; formerly Publisher of Time
Magazine (May 1989 - March 1991); formerly President, Publisher & CEO of
The Detroit News (February 1986 - August 1989); formerly member of the
Advisory Board, Chase Manhattan Bank-Westchester.
Clay T. Whitehead (57) Director President of National Exchange Inc. (new business development firm) (since
May 1983).
S. Jane Rose (50) Secretary Senior Vice President and Senior Counsel of PMF; Senior Vice President and
Senior Counsel of Prudential Securities (since July 1992); formerly Vice
President and Associate General Counsel of Prudential Securities.
Ellyn C. Vogin (35) Assistant Vice President and Associate General Counsel of Prudential Securities
Secretary and PMF (since March 1995); prior thereto, associated with the law
firm of Fulbright & Jaworski L.L.P.
Grace C. Torres (37) Treasurer and First Vice President (since March 1994) of PMF; First Vice President
Principal (since March 1994) of Prudential Securities; Vice President of
Financial and Bankers Trust (July 1989-March 1994).
Accounting
Officer
Stephen M. Ungerman (43) Assistant First Vice President (since February 1993) of PMF; Tax Director of Prudential
Treasurer Investments and the Private Asset Group of the Prudential Insurance Company
of America (since March 1996); prior thereto, Senior Tax Manager of Price
Waterhouse LLP (1981-January 1993).
</TABLE>
- ---------------
Unless otherwise noted the address for each of the above persons is: c/o
Prudential Mutual Fund Management LLC, Gateway Center Three, 100 Mulberry
Street, 9th Floor, Newark, New Jersey 07102-4077.
*"Interested" director, as defined in the Investment Company Act, by reason of
his affiliation with Prudential Securities or PMF.
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.
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 the 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.
The Directors have adopted a retirement policy which calls for the
retirement of Directors on December 31 of the year in which they reach the age
of 72, except that retirement is being phased in for Directors who were age 68
or older as of December 31, 1993. Under this phase-in provision, Messrs. Beach
and Lennox are scheduled to retire on December 31, 1999 and December 31, 1998,
respectively.
B-11
<PAGE>
The Board of Directors has nominated a new slate of Directors for the Fund
which will be submitted to shareholders at a special meeting scheduled to be
held on or about October 1996.
Pursuant to the terms of the Management Agreement with the Fund, the Manager
pays all compensation of officers and employees of the Fund as well as the fees
and expenses of all Directors of the Fund who are affiliated persons of the
Manager.
On October 30, 1996, at an annual meeting of shareholders, shareholders of
record on August 9, 1996, voted to elect new Directors of the Fund and to
continue the services of Ms. Gold and Messrs. Redeker and Whitehead as Directors
of the Fund. The following table sets forth the aggregate compensation paid by
the Portfolio for the fiscal year ended October 31, 1996 to current Directors of
the Fund, as well as to Directors of the Fund who served during the Fund's 1996
fiscal year. The table also shows aggregate compensation paid to those Directors
for service on Boards of all funds managed by Prudential Mutual Fund
Management LLC, including the Fund, for the calendar year ended December 31,
1995.
<TABLE>
<CAPTION>
Compensation Table
Total 1995
Compensation
Pension or Paid to Board
Retirement Members
Aggregate Benefits Accrued Estimated Annual From Fund
Compensation As Part of Fund Benefits Upon and Fund
Name and Position From Fund Expenses Retirement Complex (2)
----------------- --------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Beach, Edward D.-Director ....................... - None N/A $183,500(22/43)*
Eyre, Stephen C.-Former Director ................ $10,000 None N/A $ 41,000(4/5)*
Gold, Delayne D.-Director ....................... $10,000 None N/A $183,250(24/45)*
Gunia, Robert F.(1)-Director and Vice President.. - None N/A $0
Hoff, Don G.-Former Director .................... $10,000 None N/A $150,625(5/6)*
Jacobs, Jr., Harry A.(1)-Former Director ........ - None N/A $0
Knafel, Sidney R.-Former Director ............... $10,000 None N/A $135,500(4/5)*
LaBlanc, Robert E.-Former Director .............. $10,000 None N/A $135,500(4/5)*
Lennox, Donald D.-Director ...................... - None N/A $186,250(10/22)*
McCorkindale, Douglas H.-Director ............... - None N/A $163,750(7/10)*
Melzer, Mendel A.(1)-Director ................... - None N/A $0
Mooney, Thomas T.-Director ...................... - None N/A $125,625(14/19)*
Munn, Stephen P.-Director ....................... - None N/A $139,375(6/8)*
Owens, Jr., Thomas A.-Former Director ........... $10,000 None N/A $187,000(12/13)*
Redeker, Richard A.(1)-Director and President ... - None N/A $0
Smith, Robin B.-Director ........................ - None N/A $100,741(10/19)*
Weil, III, Louis A.-Director .................... - None N/A $193,750(11/16)*
Whitehead, Clay T. -Director .................... $10,000 None N/A $135,500(4/5)*
</TABLE>
- --------------
*Indicates number of funds/portfolios in Fund Complex (including the Portfolio)
to which aggregate compensation relates.
(1)Directors who are "interested" do not receive compensation from the Fund
Complex (including the Fund).
As of December 6, 1996, the Directors and officers of the Fund, as a group,
owned beneficially less than 1% of the common stock of the Portfolio.
As of December 6, 1996, the only beneficial owners, directly or indirectly,
of more than 5% of any class of shares of the outstanding common stock of the
Portfolio were: Dino Battistini, Eleanor Battistini Ten Ent, 4803 SE Sunset
Court, Cape Coral, Florida held 1,352 Class C shares (or approximately 22% of
the outstanding Class C shares); and Frank Huan-Ming Tseng & Emily Shu-Min Tseng
Jt Ten, 1702 E. Utah Avenue, Fresno, California held 4,620 Class C shares (or
approximately 76% of the outstanding Class C shares).
As of December 6, 1996, Prudential Securities was the record holder for
other beneficial owners with respect to the Portfolio of 6,555,858 Class A
shares (or approximately 85% of the outstanding Class A shares), 3,928,355 Class
B shares (or approximately 77% of the outstanding Class B shares) and 4,689
Class C shares (or approximatley 77% of the outstanding Class C 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 LLC (PMF or the
Manager), Gateway Center Three, 100 Mulberry Street, Newark, New Jersey
07102-4077. PMF serves as manager to substantially all of the other investment
companies
B-12
<PAGE>
that, together with the Fund, comprise the "Prudential Mutual Funds." See "How
the Fund is Managed" in the Prospectus. As of November 30, 1996, PMF managed
and/or administered open-end and closed-end management investment companies with
assets of approximately $53.4 billion. According to the Investment Company
Institute, as of August 31, 1996, the Prudential Mutual Funds were the 17th
largest family of mutual funds in the United States.
PMF 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.
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 PMFS, 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 the Portfolio.
The fee is computed daily and payable monthly. The Management Agreement also
provides that, in the event the expenses of the 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
Portfolio'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 Portfolio. No such
reductions were required during the fiscal year ended October 31, 1996.
Currently, the Fund believes that there are no such expense limitations.
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 SEC, 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
B-13
<PAGE>
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, 1996, 1995 and 1994 PMF received
management fees of $682,450, $876,711 and $1,755,285, respectively, from the
Portfolio.
PMF has entered into the Subadvisory Agreement with PIC, a wholly-owned
subsidiary of 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. Investment advisory services are
provided to the Portfolio by a unit of the Subadviser, known as Prudential
Mutual Fund Investment Management.
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.
DISTRIBUTOR
Prudential Securities Incorporated (Prudential Securities), One Seaport
Plaza, New York, New York 10292, acts as the distributor of the Class A, Class
B, Class C and Class Z shares of the Portfolio. Prior to January 2, 1996,
Prudential Mutual Fund Distributors, Inc. (PMFD), One Seaport Plaza, New York,
New York 10292, acted as distributor of the Class A shares of the 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 a distribution agreement
(the Distribution Agreement), Prudential Securities (the Distributor) incurs the
expenses of distributing the Class A, Class B and Class C shares of the
Portfolio. Prudential Securities serves as Distributor of the Class Z shares and
incurs the expenses of distributing the Class Z shares under a Distribution
Agreement with the Fund, none of which are reimbursed by or paid for by the
Fund. See "How the Fund is Managed-Distributor" in the Prospectus.
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%. Each of the Class B and Class C Plans for the Portfolio provides that (i) up
to .25 of 1% of the average daily net assets of the Class B or Class C shares as
the case may be 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 or Class C shares as the case may be
(asset-based sales charge). Total distribution fees (including the service fee
of .25 of 1%) under each of the Class B and Class C Plans for the Portfolio may
not exceed 1.00%.
Class A Plan. For the fiscal year ended October 31, 1996, PMFD and
Prudential Securities received payments of $79,926 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, 1996, PMFD also received approximately $900 in initial sales
charges.
Class B Plan. For the fiscal year ended October 31, 1996, Prudential
Securities received $530,953 from the Portfolio under the Class B Plan and spent
approximately $91,600 in distributing the Portfolio's Class B shares. It is
estimated that of the latter amount, approximately $14,400 (15.7%) was spent on
printing and mailing of prospectuses to other than current shareholders; $2,000
(2.2%) 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 $75,200 (82.1%) on the aggregate of (i) payments of commissions
and account servicing fees to financial advisers ($71,300 or 77.8%) and (ii) an
allocation on account of overhead and other branch office distribution-related
expenses ($3,900 or 4.3%). 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
B-14
<PAGE>
Prospectus. For the fiscal year ended October 31, 1996, Prudential Securities
received approximately $38,000 in contingent deferred sales charges.
Class C Plan. For the fiscal year ended October 31, 1996, Prudential
Securities received $31 from the Portfolio under the Class C Plan and spent
approximately $385 in distributing the Portfolio's Class C shares. It is
estimated that of the latter amount approximately 96.4% ($371) was spent on
printing and mailing of prospectuses to other than current shareholders; 3.6%
($14) on the aggregate of (i) payments of commission and account servicing fees
to financial advisors 1.5% ($6) and (ii) an allocation of overhead and other
branch office distribution-related expenses 2.1% ($8). 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 Portfolio 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
Portfolio sales.
Prudential Securities also receives the proceeds of contingent deferred
sales charges paid by holders of Class C shares upon certain redemptions of
Class C shares. See "Shareholder Guide-How to Sell Your Shares-Contingent
Deferred Sales Charges" in the Prospectus. For the fiscal year ended October 31,
1996, Prudential Securities received 70 in contingent deferred sales charges.
The Plans continue in effect from year to year, provided that each such
continuance is approved at least annually by a vote of the Board of Directors,
including a majority vote of the Rule 12b-1 Directors, cast in person at a
meeting called for the purpose of voting on such continuance. The Plans may each
be terminated at any time, without penalty, by the vote of a majority of the
Rule 12b-1 Directors or by the vote of the holders of a majority of the
outstanding shares of the applicable class on not more than 30 days' written
notice to any other party to the Plans. The Plans may not be amended to increase
materially the amounts to be spent for the services described therein without
approval by the shareholders of the applicable class (by both Class A and Class
B shareholders of the Portfolio, voting separately, in the case of material
amendments to the Class A Plan for the 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 class
of shares of the Fund by the Distributor. The report will include an itemization
of the distribution expenses and the purposes of such expenditures. In addition,
as long as the Plans remain in effect, the selection and nomination of Rule
12b-1 Directors shall be committed to the Rule 12b-1 Directors. On November 3,
1995, the Directors approved the transfer of the Distribution Agreement for
Class A shares with PMFD to Prudential Securities.
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.
B-15
<PAGE>
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 also serves as an independent "ombudsman" whom PSI
employees can call anonymously with complaints about ethics and compliance.
Prudential Securities reports any allegations or instances of criminal conduct
and material improprieties to the new director. The new director submits
compliance reports which identify all such allegations or instances of criminal
conduct and material improprieties every three months and will continue to do so
for a three-year period.
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 Portfolio may not exceed .75 of 1% per class. The 6.25% limitation
applies to the Portfolio rather than on a per shareholder basis. If aggregate
sales charges were to exceed 6.25% of total gross sales of any class, all sales
charges on shares of that class would be suspended.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Manager is responsible for decisions to buy and sell securities, futures
contracts and options on such securities and futures for the Portfolio, 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 the Portfolio,
including options, futures, and options on futures transactions and the purchase
and sale of underlying securities upon the exercise of options. Orders may be
directed to any broker or futures commission merchant including, to the extent
and in the manner permitted by applicable law, Prudential Securities and its
affiliates.
Debt securities are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the price
of the security usually includes a profit to the dealer. In underwritten
offerings, securities are purchased at a fixed price which includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. On occasion, certain money market instruments and agency
securities may be purchased directly from the issuer, in which case no
commissions or discounts are paid. The 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 the Portfolio's ability to pursue its present investment
objective. However, in the future in other circumstances, the 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 Portfolio, 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 Portfolio, 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
Portfolio 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 Portfolio, and the services furnished
by such brokers, dealers or futures commission merchants may be used by the
Manager in providing investment management for the Portfolio. 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
B-16
<PAGE>
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 Portfolio 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 Portfolio. In order for Prudential
Securities (or any affiliate) to effect any portfolio transactions for the
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, 1996, 1995 and 1994, the
Portfolio did not pay any brokerage commissions to Prudential Securities.
PURCHASE AND REDEMPTION OF FUND SHARES
Shares of the Fund may be purchased at a price equal to the next determined
net asset value per share plus a sales charge which, at the election of the
investor, may be imposed either (i) at the time of purchase (Class A shares), or
(ii) on a deferred basis (Class B or Class C shares). Class Z shares of the Fund
are offered to a limited group of investors at net asset value without any sales
charges. See "Shareholder Guide-How to Buy Shares of the Fund" in the
Prospectus.
Each class represents an interest in the same assets of the Fund and is
identical in all respects except that (i) each class is subject to different
sale charges and distribution and/or service fees (except for Class Z shares,
which are not subject to any sales charge or distribution and/or service fee),
which may affect performance, (ii) each class has exclusive voting rights on any
matter submitted to shareholders that relates solely to its arrangements and has
separate voting rights on any matter submitted to shareholders in which the
interests of one class differ from the interests of any other class, (iii) each
class has a different exchange privilege, (iv) only Class B shares have a
conversion feature and (v) Class Z shares are offered exclusively for sale to a
limited group of investors. See "Distributor" and "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% and Class
B*, Class C* and Class Z** shares are sold at net asset value. Using the
Portfolio's net asset value at October 31, 1996, the maximum offering price of
the Portfolio's shares is as follows:
<TABLE>
<S> <C>
Class A
Net asset value and redemption price per Class A share ................................ $8.82
Maximum sales charge
(3% of offering price) .............................................................. .27
-----
Offering price to public .............................................................. $9.09
=====
Class B
Net asset value, redemption price and offering price to public per Class B share* ..... $8.85
=====
Class C
Net asset value, offering price and redemption price per Class C share* ............... $8.85
=====
Class Z
Net asset value, offering price and redemption price per Class Z share** .............. $8.82
=====
</TABLE>
- --------------
*Class B and 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.
**Value is estimated as Class Z shares are to be offered commencing on or about
January 6, 1997.
B-17
<PAGE>
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 Portfolio
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 Portfolio 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 Portfolio investors may include
the following: an employer (or group of related employers) and one or more
qualified retirement plans of such employer or employers (an employer
controlling, controlled by or under common control with another employer is
deemed related to that employer).
The Distributor must be notified at the time of purchase that the investor
is entitled to a reduced sales charge. The reduced sales charge will be granted
subject to confirmation of the investor's holdings. The Combined Purchase and
Cumulative Purchase Privilege does not apply to individual participants in any
retirement or group plans.
Rights of Accumulation. Reduced sales charges are also available through
Rights of Accumulation, under which an investor or an eligible group of related
investors, as described above under "Combined Purchase and Cumulative Purchase
Privilege," may aggregate the value of their existing holdings of the shares of
the Portfolio 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 also 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 Portfolio and shares of other Prudential
Mutual Funds (Investment Letter of Intent). Retirement and group plans may also
qualify to purchase Class A shares at net asset value by entering into a Letter
of Intent whereby they agree to enroll, within a thirteen-month period, a
specified number of eligible employees or participants (Participant Letter of
Intent).
For purposes of the investment Letter of Intent, all shares of each
Portfolio and shares of other Prudential Mutual Funds (excluding money market
funds other than those acquired pursuant to the exchange privilege) which 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.
A Letter of Intent permits a purchaser, in the case of an Investment Letter
of Intent, to establish a total investment goal to be achieved by any number of
investments over a thirteen-month period and, in the case of a Participant
Letter of Intent, to establish minimum eligible employee or participant goal
over a thirteen-month period. Each investment made during the period, in the
case of an Investment Letter of Intent, will receive the reduced sales charge
applicable to the amount represented by the goal, as if it were a single
investment. In the case of a Participant Letter of Intent, each investment made
during the period will be made at net asset value. 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 an Investment Letter
of Intent (except in the case of retirement and group plans) 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.
B-18
<PAGE>
The Investment Letter of Intent does not obligate the investor to purchase,
nor the Fund to sell, the indicated amount. Similarly, the Participant Letter of
Intent does not obligate the retirement or group plan to enroll the indicated
number of eligible employees or participants. 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. Investors
electing to purchase Class A shares of a Portfolio pursuant to a Letter of
Intent should carefully read such Letter of Intent.
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, in the
case of an Investment Letter of Intent, be granted subject to confirmation of
the investor's holdings or in the case of a Participant Letter of Intent,
subject to confirmation of the number of eligible employees or particpants in
the retirement or group plan. Letters of Intent are not available to individual
participants in any retirement or group plans.
Waiver of the Contingent Deferred Sales Charge-Class B Shares
The contingent deferred sales charge is waived under circumstances described
in the Prospectus for the 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.
Distribution from an IRA or 403(b) Custodial Account
Distribution from Retirement Plan
Excess Contributions
(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.
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.
Quantity Discount-Shares Purchased Prior to August 1, 1994
While a quantity discount is not available for Class B shares of the
Portfolio, 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
Portfolio. 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
Portfolio.
SHAREHOLDER INVESTMENT ACCOUNT
Upon the initial purchase of Portfolio 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
B-19
<PAGE>
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 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 the Portfolio 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
The Fund makes available to its shareholders the privilege of exchanging
their shares of the Portfolio for shares of certain other Prudential Mutual
Funds, including one or more specified money market funds, subject in each case
to the minimum investment requirements of such funds. Shares of such other
Prudential Mutual Funds may also be exchanged for shares of the Portfolio. All
exchanges are made on the basis of relative net asset value next determined
after receipt of an order in proper form. An exchange will be treated as a
redemption and purchase for tax purposes. Shares may be exchanged for shares of
another fund only if shares of such fund may legally be sold under applicable
state laws. For retirement and group plans having a limited menu of Prudential
Mutual Funds, the Exchange Privilege is available for those funds eligible for
investment in the particular program.
It is contemplated that the Exchange Privilege may be applicable to new
mutual funds whose shares may be distributed by the Distributor.
Class A. Shareholders of the 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
(Short-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, Inc.
Prudential Tax-Free Money Fund, Inc.
Class B and Class C. Shareholders of the 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, Inc., 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 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
B-20
<PAGE>
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 Portfolio from a money
market fund during the month (and are held in the Portfolio 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.
Class Z. Class Z shares may be exchanged for Class Z shares of other
Prudential Mutual Funds.
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
Portfolio, or the Distributor, has the right to reject any exchange application
relating to such fund's shares.
Dollar Cost Averaging
Dollar cost averaging is a method of accumulating shares by investing a
fixed amount of dollars in shares at set intervals. An investor buys more shares
when the price is low and fewer shares when the price is high. The average cost
per share is lower than it would be if a constant number of shares were bought
at set intervals.
Dollar cost averaging may be used, for example, to plan for retirement, to
save for a major expenditure, such as the purchase of a home, or to finance a
college education. The cost of a year's education at a four-year college today
averages around $14,000 at a private college and around $6,000 at a public
university. Assuming these costs increase at a rate of 7% a year, as has been
projected, for the freshman class of 2011, the cost of four years at a private
college could reach $210,000 and over $90,000 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 and private
universities is available from The College Board Annual Survey of Colleges,
1993. Average costs for private institutions include tuition, fees, room and
board for the 1993-1994 academic year.
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 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 Portfolio. The
investor's bank must be a member of the Automatic Clearing House System. Stock
certificates are not issued to ASAP participants.
B-21
<PAGE>
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. 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 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 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.
B-22
<PAGE>
Mutual Fund Programs
From time to time, the Portfolio 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 marketed collectively. Typically, these programs
are created with an investment theme, e.g., to seek greater diversification,
protection from interest rate movements or access to different management
styles. In the event such a program is instituted, there may be a mimmum
investment requirement for the program as a whole. The Portfolio 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 a 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.
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 the
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
the 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 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.
TAXES
General. The Portfolio has elected to qualify and intends to remain
qualified as a regulated investment company under Subchapter M of the Internal
Revenue Code for the taxable year. Accordingly, the 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 related
to the Portfolio's business of investing in securities or commodities,
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 the 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 or close out transactions involving options on securities, interest
rate futures and options thereon.
As a regulated investment company, the 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
B-23
<PAGE>
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 Portfolio
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 the Portfolio.
Dividends of net investment income and distributions of net short-term
capital gains paid to a shareholder (including a shareholder acting as a nominee
or fiduciary) who is a nonresident alien individual, a foreign corporation or a
foreign partnership (foreign shareholder) are subject to a 30% (or lower treaty
rate) withholding tax upon the gross amount of the dividends unless the
dividends are effectively connected with a U.S. trade or business conducted by
the foreign shareholder. Capital gain dividends paid to a foreign shareholder
are generally not subject to withholding tax. A foreign shareholder will,
however, be required to pay U.S. income tax on any dividends and capital gain
distributions which are effectively connected with a U.S. trade or business of
the foreign shareholder.
Dividends received by corporate shareholders are eligible for a
dividends-received deduction of 70% to the extent the Fund's income is derived
from qualified dividends received by the Fund from domestic corporations.
Interest income, capital gain net income, gain or loss from Section 1256
contracts (described above), dividend income from foreign corporations and
income from other sources will not constitute qualified dividends. Since the
Fund is likely to have a substantial portion of its assets invested in
non-equity securities, the amount of the Fund's dividends eligible for the
corporate dividends-received deduction will be minimal. Individual shareholders
are not eligible for the dividends-received deduction.
A 4% nondeductible excise tax will be imposed on the Portfolio to the extent
the Portfolio does not meet certain distribution requirements by the end of each
calendar year.
If the Portfolio is liable for foreign taxes, the Portfolio expects to meet
the requirements of the Internal Revenue Code for "passing-through" to its
shareholders foreign taxes paid, but there can be no assurance that the
Portfolio will be able to do so. Under the Internal Revenue Code, if more than
50% of the value of the Portfolio's total assets at the close of its taxable
year consists of stock or securities of foreign corporations, the Portfolio will
be eligible and may file an election with the Internal Revenue Service to
"pass-through" to the Portfolio's shareholders the amount of foreign taxes paid
by the Portfolio. Pursuant to this election shareholders will be required to:
(i) include in gross income (in addition to taxable dividends actually received)
their pro rata share of the foreign taxes paid by the Portfolio; (ii) treat
their pro rata share of foreign taxes as paid by them; and (iii) either deduct
their pro rata share of foreign taxes in computing their taxable income or,
subject to certain limitations, use it as a foreign tax credit against U.S.
income taxes. No deduction for foreign taxes may be claimed by a non-corporate
shareholder who does not itemize deductions. A shareholder that is a nonresident
alien individual or foreign corporation may be subject to U.S. withholding tax
on the income resulting from the election described in this paragraph, but may
not be able to claim a credit or deduction against such tax for the foreign
taxes treated as having been paid by such shareholder. A tax-exempt shareholder
will not ordinarily benefit from this election. The amount of foreign taxes for
which a shareholder may claim a credit in any year will generally be subject to
various limitations including a separate limitation for "passive income," which
includes, among other things, dividends, certain interest and certain foreign
currency gains.
Each shareholder will be notified within 60 days after the close of the
Portfolio's taxable year whether the foreign taxes paid by the Portfolio will
"pass-through" for that year and, if so, such notification will designate (a)
the shareholder's portion of the foreign taxes paid to each such country and (b)
the portion of the dividend which represents income derived from sources within
each such country.
A "passive foreign investment company" (PFIC) is a foreign corporation that,
in general, meets either of the following tests: (a) at least 75% of its gross
income is passive or (b) an average of at least 50% of its assets produce, or
are held for the production of, passive income. If the Portfolio acquires and
holds stock in a PFIC beyond the end of the year of its acquisition, the
Portfolio will be subject to federal income tax on a portion of any "excess
distribution" received on the stock or of any gain from disposition of the stock
(collectively, PFIC income), plus interest thereon, even if the Portfolio
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the Portfolio's investment
company taxable income and accordingly, will not be taxable to it to the extent
that income is distributed to its shareholders. Proposed Treasury regulations
provide that the Portfolio may make a "mark-to-market" election with respect to
any stock it holds of a PFIC. If the election is in effect, at the end of the
Portfolio's taxable year, the Portfolio will recognize the amount of gains, if
any, with respect to PFIC stock. No loss will be recognized on PFIC stock.
Alternatively, the Portfolio may elect to treat any PFIC in which it invests as
a "qualified electing fund," in which case, in lieu of the foregoing tax and
interest obligation, the Portfolio will be required to include in income each
year its pro rata share of the qualified electing fund's annual ordinary
earnings and net capital gain even if they are not distributed to the Portfolio;
those amounts would be subject to the distribution requirements applicable to
the Portfolio described above. It may be very difficult, if not impossible, to
make this election because of certain requirements thereof.
B-24
<PAGE>
The Portfolio may purchase debt securities (such as zero coupon bonds) that
contain original issue discount. Original issue discount that accrues in a
taxable year is treated as income earned by the Portfolio and therefore is
subject to the distribution requirements of the Internal Revenue Code. Because
the original issue discount income earned by the Portfolio in a taxable year may
not be represented by cash income, the Portfolio may have to dispose of other
securities and use the proceeds to make distributions to satisfy the Internal
Revenue Code's distribution requirements.
The per share dividends on Class B and Class C shares will typically be
lower than the per share dividends and distributions on Class A and Class Z
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, Class C and Class Z
shares. See "How the Fund Values its Shares" in the Prospectus.
For federal income tax purposes, the Portfolio had a capital loss
carryforward as of October 31, 1996, of approximately $40,500,400 of which
$26,697,000 expires in 2001, $12,011,000 expires in 2002, $1,466,200 expires in
2003 and $326,200 expires in 2004. 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.
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 Portfolio.
PERFORMANCE INFORMATION
Average Annual Total Return. The 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 Class C shares. See "How the Fund Calculates
Performance" in the Prospectus.
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 takes into account any applicable initial or
contingent deferred sales charges but does not take into account any federal or
state income taxes that may be payable upon redemption.
The average annual total return for Class A shares for the one year, five
year and since inception periods ended October 31, 1996 was 8.98%, 3.89% and
4.97%, respectively. The average annual total return for Class B shares for the
one, five year and since inception periods ended October 31, 1996 was 8.61%,
3.82% and 4.74%, respectively. The average annual total return for Class C
shares for the one year and since inception (August 1, 1994) periods ended
October 31, 1996 was 10.61% and 7.48%, respectively. No Class Z shares were
outstanding during the period.
Aggregate Total Return. The Portfolio may also advertise its aggregate total
return. Aggregate total return is determined separately for Class A, Class B and
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 Portfolio 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 return for Class A shares for the one year, five year
and since inception periods ended on October 31, 1996 was 12.35%, 24.79% and
37.91%, respectively. The aggregate total return for Class B shares for the one
year, five year and since inception periods ended on October 31, 1996 was
11.61%, 20.60% and 32.07%, respectively. The aggregate total return for Class C
shares for the one year and since inception (August 1, 1994) periods ended
October 31, 1996 was 11.61% and 17.62%, respectively. No Class Z shares were
outstanding during the period.
Yield. The 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 the
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 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.
Yield fluctuates and an annualized yield quotation is not a representation
by the Fund as to what an investment in the Fund will actually yield for any
given period. 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.
The yields for the 30 days ended October 31, 1996 were 5.87%, 5.38% and
5.38% for Class A, Class B and Class C shares, respectively. No Class Z shares
were outstanding during the period.
From time to time, the performance of the Portfolio may be measured against
various indices. Set forth below is a chart which compares the performance of
different types of investments over the long-term and the rate of inflation.1
[CHART]
(1)Source: Ibbotson Associates, Stocks, Bonds, Bills and Inflation-1995
Yearbook (annually updates the work of Roger G. Ibbotson and Rex A.
Sinquefield). All rights reserved. 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. Investors cannot invest directly in an index. Past performance is not a
guarantee of future results.
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,
1996, the Fund incurred fees of approximately $195,000 for the Portfolio, for
the services of PMFS. PMFS is also reimbursed for its out-of-pocket expenses,
including but not limited to postage, stationery, printing, allocable
communications expenses and other costs.
Deloitte & Touche LLP, Two World Financial Center, New York, N.Y. 10281,
serves as the Fund's independent accountants and in that capacity audits the
Fund's annual financial statements.
B-27
<PAGE>
PRUDENTIAL GLOBAL LIMITED
MATURITY FUND, INC.
Portfolio of Investments as of October 31, 1996 LIMITED MATURITY PORTFOLIO
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--78.2%
- ------------------------------------------------------------
Australia--8.6%
Queensland Treasury Corp.,
A$ 6,000 8.00%, 7/14/99 $ 4,905,242
6,000 8.00%, 5/14/03 4,905,241
------------
9,810,483
- ------------------------------------------------------------
Canada--7.6%
Canadian Gov't. Bonds,
C$ 7,500 7.50%, 3/1/01 6,041,837
3,000 9.00%, 12/1/04 2,631,516
------------
8,673,353
- ------------------------------------------------------------
Czech Republic--0.7%
CZK 10,000 International Finance Corp.,
10.50%, 11/30/98 369,579
10,370 Skoda Finance,
11.625%, 2/9/98 384,795
------------
754,374
- ------------------------------------------------------------
Denmark--4.2%
DKr 27,000 Kingdom of Denmark,
7.00%, 12/15/04 4,762,109
- ------------------------------------------------------------
Germany--4.2%
DM 1,000 Nacional Financiera SNC,
10.00%, 8/17/98 703,146
3,000 Republic of Columbia,
7.25%, 12/21/00 2,046,987
3,000 Tokyo Gas Co.,
7.00%, 7/27/05 2,071,768
------------
4,821,901
Ireland--4.0%
IEP 1,000 Euro Investor Bank,
7.75%, 8/5/03 $ 1,711,213
1,500 Irish Gov't. Bonds,
9.25%, 7/11/03 2,805,166
------------
4,516,379
- ------------------------------------------------------------
Italy--4.6%
Abbey National Treasury Svcs.,
L 1,000,000 Zero Coupon, 12/14/01 447,486
1,000,000 8.375%, 1/10/03 673,042
4,000,000 Pepsico, Inc.,
11.375%, 2/13/98 2,742,292
2,000,000 Republic of Italy,
8.50%, 1/1/04 1,356,636
------------
5,219,456
- ------------------------------------------------------------
Netherlands--3.8%
NLG 7,000 Dutch Gov't. Bonds,
6.50%, 4/15/03 4,367,003
- ------------------------------------------------------------
New Zealand--3.8%
NZ$ 6,000 New Zealand Gov't. Bonds,
8.00%, 2/15/01 4,361,439
- ------------------------------------------------------------
Poland--0.4%
PLN 750 General Electric Capital Corp.,
18.25%, 2/27/98 261,369
750 Government of Poland,
16.00%, 10/12/98 250,320
------------
511,689
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-28
<PAGE>
PRUDENTIAL GLOBAL LIMITED
MATURITY FUND, INC.
Portfolio of Investments as of October 31, 1996 LIMITED MATURITY PORTFOLIO
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Spain--6.6%
Pts180,000 Republic of Argentina,
12.80%, 12/9/97 $ 1,468,984
Spanish Gov't. Bonds,
300,000 11.45%, 8/30/98 2,538,471
300,000 10.30%, 6/15/02 2,672,421
100,000 8.00%, 5/30/04 802,762
------------
7,482,638
- ------------------------------------------------------------
United Kingdom--5.2%
BP 500 Banco Nacional de Comercio
Exterior SNC,
8.75%, 9/28/00 771,969
2,000 Kingdom of Denmark,
6.75%, 8/24/98 3,244,914
1,200 United Kingdom Treasury Bonds,
6.75%, 11/26/04 1,862,490
------------
5,879,373
- ------------------------------------------------------------
United States--24.5%
Central Banks--0.9%
US$ 214 Banco Central do Brasil,
6.46875%, 10/15/99 211,607
750 Banco del Estado Chile,
8.39%, 8/1/01 795,937
------------
1,007,544
Corporate Bonds--5.7%
1,000 Cadbury Schweppes,
6.25%, 10/4/99 1,003,000
2,500 Empresas Louisiana Modern,
10.25%, 11/12/97 2,556,250
2,000 Ford Motor Credit Co.,
6.25%, 11/8/00 1,979,000
1,000 Nacional Financiera SNC,
5.875%, 2/17/98 975,000
------------
6,513,250
Sovereign Bonds--11.7%
US$ 1,250 Bancomer S.A.,
8.00%, 7/7/98 $ 1,246,250
3,080 Empresa de Petroleos,
7.25%, 7/8/98 3,093,860
2,000 Madrid Comunidad,
5.75%, 7/8/98 1,992,000
1,750 National Bank of Romania,
9.75%, 6/25/99 1,740,156
490 Republic of Argentina,
Zero Coupon, 3/31/05 401,800
455 Republic of Brazil,
6.6875%, 1/1/01 436,800
1,750 Rio De Janeiro Municipality,
10.375%, 7/12/99 1,798,125
1,015 Trinidad & Tobago Republic,
9.75%, 11/3/00 1,073,363
1,500 United Mexican States,
7.6875%, 8/6/01 1,501,650
------------
13,284,004
Supranational Bonds--1.1%
1,300 Corporacion Andina de Formento,
7.25%, 4/30/98 1,317,875
------------
U.S. Government Obligations--5.1%
United States Treasury Notes,
1,250 5.875%, 8/15/98 1,252,925
4,500 6.125%, 9/30/00 4,514,040
------------
5,766,965
------------
27,889,638
------------
Total long-term investments
(cost US$86,538,440) 89,049,835
------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-29
<PAGE>
PRUDENTIAL GLOBAL LIMITED
MATURITY FUND, INC.
Portfolio of Investments as of October 31, 1996 LIMITED MATURITY PORTFOLIO
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
SHORT-TERM INVESTMENTS--17.2%
- ------------------------------------------------------------
Czech Republic--0.6%
CZK $20,000 ING Bank,
Zero Coupon, 11/25/96 $ 737,462
- ------------------------------------------------------------
European Community--1.7%
ECU 1,481 Nacional Financiera SNC,
10.25%, 3/11/97 1,915,572
- ------------------------------------------------------------
Hungarian--1.0%
Hungarian Treasury Bills,
HUF 119,800 Zero Coupon, 11/8/96 768,444
60,000 25.00%, 5/27/97 385,544
------------
1,153,988
- ------------------------------------------------------------
Netherlands--1.1%
NLG 2,000 Republic of Argentina,
8.00%, 8/9/97 1,205,112
- ------------------------------------------------------------
New Zealand--2.6%
NZD 4,250 New Zealand Gov't. Bonds,
9.00%, 11/15/96 3,003,403
- ------------------------------------------------------------
Poland--0.9%
Polish Treasury Bills,
PLZ 1,250 Zero Coupon, 11/20/96 440,608
750 Zero Coupon, 12/11/96 261,310
1,000 Zero Coupon, 1/22/97 341,063
------------
1,042,981
United Kingdom--2.2%
BP 500 General Electric Capital Corp.,
8.25%, 11/18/96 $ 814,076
1,000 Halifax Building Society,
8.75%, 10/17/97 1,657,445
------------
2,471,521
- ------------------------------------------------------------
United States--7.1%
US$ 2,000 Financiera Energetica Nacional,
6.625%, 12/13/96 2,000,000
3,000 Fomento Economico Mexicano S.A.,
9.50%, 7/22/97 3,036,000
1,446 Joint Repurchase Agreement
Account,
5.548%, 11/1/96 (Note 5) 1,446,000
600 Nafin Securities Ltd.,
6.00%, 12/19/96 600,000
1,000 United Mexican States,
11.25%, 7/21/97 1,030,000
------------
8,112,000
------------
Total short-term investments
(cost US$19,461,059) 19,642,039
------------
- ------------------------------------------------------------
Total Investments--95.4%
(cost $105,999,499; Note 4) 108,691,874
Other assets in excess of
liabilities--4.6% 5,216,079
------------
Net Assets--100% $113,907,953
------------
------------
</TABLE>
- ---------------
Portfolio securities are classified by country according to the
security's currency denomination.
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-30
<PAGE>
PRUDENTIAL GLOBAL LIMITED
MATURITY FUND, INC.
Statement of Assets and Liabilities LIMITED MATURITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets October 31, 1996
Investments, at value (cost $105,999,499)................................................................... $108,691,874
Foreign currency, at value (cost $518,967).................................................................. 522,056
Interest receivable......................................................................................... 3,491,790
Receivable for investments sold............................................................................. 3,120,839
Forward currency contracts - net amount receivable from counterparties...................................... 59,990
Receivable for Fund shares sold............................................................................. 1,512
Deferred expenses and other assets.......................................................................... 3,806
--------------
Total assets............................................................................................. 115,891,867
--------------
Liabilities
Payable for Fund shares reacquired.......................................................................... 935,062
Payable for investments purchased........................................................................... 404,159
Dividends payable........................................................................................... 191,953
Accrued expenses............................................................................................ 187,912
Forward currency contracts - net amount payable to counterparties........................................... 177,653
Due to Manager.............................................................................................. 49,532
Due to Distributor.......................................................................................... 37,643
--------------
Total liabilities........................................................................................ 1,983,914
--------------
Net Assets.................................................................................................. $113,907,953
--------------
--------------
Net assets were comprised of:
Common stock, at par..................................................................................... $ 12,900
Paid-in capital in excess of par......................................................................... 147,972,431
--------------
147,985,331
Undistributed net investment income...................................................................... 3,819,718
Accumulated net realized loss on investments............................................................. (40,500,436)
Net unrealized appreciation on investments and foreign currencies........................................ 2,603,340
--------------
Net assets, October 31, 1996................................................................................ $113,907,953
--------------
--------------
Class A:
Net asset value and redemption price per share
($69,050,866 / 7,830,926 shares of common stock issued and outstanding)............................... $8.82
Maximum sales charge (3.00% of offering price)........................................................... .27
--------------
Maximum offering price to public......................................................................... $9.09
--------------
--------------
Class B:
Net asset value, offering price and redemption price per share
($44,803,542 / 5,062,680 shares of common stock issued and outstanding)............................... $8.85
--------------
--------------
Class C:
Net asset value, offering price and redemption price per share
($53,545 / 6,050 shares of common stock issued and outstanding)....................................... $8.85
--------------
--------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-31
<PAGE>
PRUDENTIAL GLOBAL LIMITED
MATURITY FUND, INC.
LIMITED MATURITY PORTFOLIO
Statement of Operations
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income October 31, 1996
<S> <C>
Income
Interest................................ $ 10,475,193
----------------
Expenses
Management fee.......................... 682,450
Distribution fee--Class A............... 79,926
Distribution fee--Class B............... 530,953
Distribution fee--Class C............... 31
Transfer agent's fees and expenses...... 220,000
Reports to shareholders................. 188,000
Custodian's fees and expenses........... 164,000
Registration fees....................... 71,000
Directors' fees and expenses............ 61,000
Audit fees and expenses................. 41,000
Legal fees and expenses................. 21,000
Miscellaneous........................... 9,408
----------------
Total expenses....................... 2,068,768
----------------
Net investment income...................... 8,406,425
----------------
Realized and Unrealized
Gain (Loss) on Investments and
Foreign Currency Transactions
Net realized gain (loss) on:
Investment transactions................. (505,881)
Foreign currency transactions........... 4,153,494
----------------
3,647,613
----------------
Net change in unrealized appreciation/
depreciation of:
Investments............................. 2,555,884
Foreign currencies...................... (951,767)
----------------
1,604,117
----------------
Net gain on investments and foreign
currencies.............................. 5,251,730
----------------
Net Increase in Net Assets
Resulting from Operations.................. $ 13,658,155
----------------
----------------
</TABLE>
PRUDENTIAL GLOBAL LIMITED
MATURITY FUND, INC.
LIMITED MATURITY PORTFOLIO
Statement of Changes in Net Assets
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended October 31,
in Net Assets 1996 1995
<S> <C> <C>
Operations
Net investment income......... $ 8,406,425 $ 10,669,508
Net realized gain (loss) on
investment and foreign
currency transactions...... 3,647,613 (4,677,372)
Net change in unrealized
appreciation/depreciation
of investments and foreign
currencies................. 1,604,117 139,570
------------ -------------
Net increase in net assets
resulting from operations..... 13,658,155 6,131,706
------------ -------------
Net equalization debits.......... -- (165,706)
------------ -------------
Dividends and distributions (Note
1):
Dividends from net investment
income
Class A.................... (3,551,164) (1,153,940)
Class B.................... (4,273,201) (7,189,730)
Class C.................... (258) (76)
------------ -------------
(7,824,623) (8,343,746)
------------ -------------
Tax return of capital
distributions
Class A.................... -- (212,807)
Class B.................... -- (1,325,913)
Class C.................... -- (14)
------------ -------------
-- (1,538,734)
------------ -------------
Fund share transactions (net of
share conversions) (Note 6)
Net proceeds from shares
sold....................... 43,445,909 10,196,786
Net asset value of shares
issued in reinvestment of
dividends and
distributions.............. 4,419,538 5,727,225
Cost of shares reacquired..... (66,462,304) (103,144,120)
------------ -------------
Net decrease in net assets from
Fund share transactions....... (18,596,857) (87,220,109)
------------ -------------
Total decrease................... (12,763,325) (91,136,589)
Net Assets
Beginning of year................ 126,671,278 217,807,867
------------ -------------
End of year...................... $113,907,953 $ 126,671,278
------------ -------------
------------ -------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-32
<PAGE>
PRUDENTIAL GLOBAL LIMITED
MATURITY FUND, INC.
Notes to Financial Statements LIMITED MATURITY PORTFOLIO
- --------------------------------------------------------------------------------
Prudential Global Limited Maturity Fund, Inc. (the ``Fund'') is registered under
the Investment Company Act of 1940 as a non-diversified, open-end management
investment company. The Fund was incorporated in Maryland on February 21, 1990.
Prior to January 19, 1996 the Fund consisted of two series, namely: Limited
Maturity Portfolio and Global Assets Portfolio. On January 19, 1996, the Limited
Maturity Portfolio acquired the assets of the Global Assets Portfolio. The
Limited Maturity Portfolio (the ``Portfolio'') commenced investment operations
on November 1, 1990. The investment objective of the Portfolio 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. The ability of the issuers of the debt securities held by the Fund
to meet their obligations may be affected by economic developments in a specific
country or industry.
- ------------------------------------------------------------
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the
Fund, 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 year, the Fund does not isolate
that portion of the results of operations arising as a result of changes in the
foreign exchange rates from the fluctuations arising from changes in the market
prices of securities held at the end of the fiscal year. Similarly, the Fund
does not isolate the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of long-term debt
securities sold during the fiscal year. Accordingly, such realized foreign
currency gains and losses are included in the reported net realized gains
(losses) on investment transactions.
Net realized gain 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-33
<PAGE>
PRUDENTIAL GLOBAL LIMITED
MATURITY FUND, INC.
Notes to Financial Statements LIMITED MATURITY PORTFOLIO
- --------------------------------------------------------------------------------
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.
Securities Transactions and Net 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. Expenses are recorded on the accrual basis which
may require the use of certain estimates by management.
Net investment income (other than distribution fees) and unrealized and realized
gains or losses are allocated daily to each class of shares based upon the
relative proportion of net assets of each class at the beginning of the day.
Equalization: During the year ended October 31, 1996, the Fund discontinued the
accounting practice of equalization. Equalization is a practice whereby a
portion of the proceeds from sales and costs of repurchases of capital 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. The accumulated distributions in excess of net investment
income balance of $11,290,809 at October 31, 1995, resulting from equalization,
was transferred to paid-in capital in excess of par.
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 American Institute of Certified
Public Accountants (AICPA) Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. The effect of applying
this statement was to increase undistributed net investment income and increase
accumulated net realized loss on investments by $3,973,851. This was primarily
the result of net foreign currency gains incurred for the year ended October 31,
1996. Net investment income, net realized gains and net assets were not affected
by this change.
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 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.
- ------------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement with Prudential Mutual Fund Management LLC
(``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 had a distribution agreement with Prudential Mutual Fund
Distributors, Inc. (``PMFD''), which acted as the distributor of the Class A
shares of the Fund, through January 1, 1996. Effective January 2, 1996
Prudential Securities Incorporated (``PSI''), became the distributor of the
- --------------------------------------------------------------------------------
B-34
<PAGE>
PRUDENTIAL GLOBAL LIMITED
MATURITY FUND, INC.
Notes to Financial Statements LIMITED MATURITY PORTFOLIO
- --------------------------------------------------------------------------------
Class A shares of the Fund and is serving the Fund under the same terms and
conditions as under the arrangement with PMFD. PSI is also the distributor of
the Class B and Class C shares of the Fund. The Portfolio compensated PMFD and
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''),
regardless of expenses actually incurred by them. The distribution fees are
accrued daily and payable monthly.
Pursuant to the Class A, B and C Plans, the Fund compensates PSI, and PMFD for
the period November 1, 1995 through January 1, 1996 with respect to Class A
shares, for distribution-related activities at an annual rate of up to .30 of
1%, 1% and 1%, of the average daily net assets of the Class A, B and C shares,
respectively. Such expenses under the Plans were .15 of 1%, .75 of 1% and .75
of 1%, of the average daily net assets of the Class A, B and C shares,
respectively, for the year ended October 31, 1996.
PMFD and PSI has advised the Fund that they have received approximately $900 in
front-end sales charges resulting from sales of Class A shares during the year
ended October 31, 1996. From these fees, PMFD and PSI paid such sales charges to
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 October 31, 1996, it received
approximately $42,000 in contingent deferred sales charges imposed upon certain
redemptions by Class B shareholders.
PMFD is a wholly-owned subsidiary of PMF; PSI and PMF are indirect, wholly-owned
subsidiaries of The Prudential Insurance Company of America.
- ------------------------------------------------------------
Note 3. Other Transactions With Affiliates
Prudential Mutual Fund Services, Inc. (``PMFS'') a wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent and during the year ended October 31,
1996, the Portfolio incurred fees of approximately $195,000 for the services of
PMFS. As of October 31, 1996, approximately $14,300 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 Securities
Purchases and sales of investment securities, other than short-term investments
and options, for the year ended October 31, 1996 aggregated $95,903,231 and
$107,457,142, respectively.
The United States federal income tax basis of the Fund's investments at October
31, 1996 was substantially the same as for financial reporting purposes and,
accordingly, net unrealized appreciation of investments, for United States
federal income tax purposes was $2,692,375 (gross unrealized
appreciation--$3,302,975; gross unrealized depreciation--$610,600).
For federal income tax purposes, the Portfolio had a capital loss carryforward
as of October 31, 1996, of approximately $51,432,700 of which $4,580,300 expires
in 2000, $32,949,600 expires in 2001, $12,011,000 expires in 2002, $1,565,600
expires in 2003 and $326,200 expires in 2004. Approximately $10,932,300 of such
carryforward was assumed upon the merger of the Global Assets Portfolio (Note
7). Accordingly, no capital gains distributions are expected to be paid to
shareholders until future net gains have been realized in excess of such
carryforward.
At October 31, 1996, 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
Purchase Contracts Payable Value Appreciation
- -------------------------- --------------- ----------- -----------
<S> <C> <C> <C>
Canadian Dollars,
expiring 11/18/96....... $ 1,125,497 $ 1,127,534 $ 2,037
</TABLE>
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- -------------------------- --------------- ----------- -----------
<S> <C> <C> <C>
British Pounds,
expiring 11/26/96....... $ 362,391 $ 369,529 $ (7,138)
Canadian Dollars,
expiring 11/26/96....... 1,722,196 1,728,833 (6,637)
Deutschemarks,
expiring 11/26/96....... 2,644,955 2,660,263 (15,308)
European Currency Units,
expiring 11/26/96....... 1,711,999 1,717,743 (5,744)
French Francs,
expiring 3/17/97........ 3,130,993 3,154,916 (23,923)
</TABLE>
- --------------------------------------------------------------------------------
B-35
<PAGE>
PRUDENTIAL GLOBAL LIMITED
MATURITY FUND, INC.
Notes to Financial Statements LIMITED MATURITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- -------------------------- --------------- ----------- -----------
Irish Punts,
expiring 11/26/96....... $ 3,907,845 $ 3,948,595 $ (40,750)
<S> <C> <C> <C>
Japanese Yen,
expiring 11/26/96....... 4,118,610 4,070,328 48,282
Netherland Guilders,
expiring 11/26/96....... 17,933,038 18,006,302 (73,264)
New Zealand Dollars,
expiring 11/18/96....... 2,823,017 2,821,408 1,609
Spanish Pesetas,
expiring 11/26/96....... 402,874 404,697 (1,823)
Swiss Francs,
expiring 11/26/96....... 1,403,094 1,398,098 4,996
--------------- ----------- -----------
$40,161,012 $40,280,712 $(119,700)
--------------- ----------- -----------
--------------- ----------- -----------
</TABLE>
- ------------------------------------------------------------
Note 5. Joint Repurchase Agreement Account
The Portfolio, along with other affiliated registered investment companies,
transfers uninvested cash balances into a single joint account, the daily
aggregate balance of which is invested in one or more repurchase agreements
collateralized by U.S. Treasury or Federal agency obligations. As of October 31,
1996, the Portfolio has a 0.17% undivided interest in the repurchase agreements
in the joint account. The undivided interest for the Portfolio represents
$1,446,000 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. Inc., 5.53%, in the principal amount of $277,000,000,
repurchase price $277,042,550, due 11/1/96. The value of the collateral
including accrued interest was $282,667,606.
CS First Boston Corp., 5.56%, in the principal amount of $100,000,000,
repurchase price $100,015,444, due 11/1/96. The value of the collateral
including accrued interest was $102,000,453.
Deutsche Bank Securities Corp., 5.55%, in the principal amount of $175,000,000,
repurchase price $175,026,979, due 11/1/96. The value of the collateral
including accrued interest was $178,500,400.
Morgan Stanley & Co., Inc., 5.65%, in the principal amount of $26,585,000,
repurchase price $26,589,172, due 11/1/96. The value of the collateral including
accrued interest was $27,128,601.
Smith Barney, Inc., 5.55%, in the principal amount of $277,000,000, repurchase
price $277,042,704, due 11/1/96. The value of the collateral including accrued
interest was $282,541,278.
- ------------------------------------------------------------
Note 6. Capital
The Portfolio 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. A special exchange privilege is also available for
shareholders who qualified to purchase Class A shares at net asset value. The
Portfolio has authorized 1.5 billion shares of common stock at $.001 par value
per share equally divided into Class A, B and C shares.
Transactions in shares of common stock for the fiscal years ended October 31,
1996 and 1995 were as follows.
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------------ ---------- ------------
<S> <C> <C>
Year ended October 31, 1996:
Shares sold......................... 2,325,511 $ 19,588,772
Shares acquired in connection with
acquisition of Global Assets
Portfolio (Note 7)................ 2,681,423 22,872,535
Shares issued in reinvestment of
dividends......................... 229,876 1,972,625
Shares reacquired................... (2,553,129) (21,903,466)
---------- ------------
Net increase in shares outstanding
before conversion................. 2,683,681 22,530,466
Shares issued upon conversion from
Class B........................... 2,976,230 25,476,313
---------- ------------
Net increase in shares
outstanding....................... 5,659,911 $ 48,006,779
---------- ------------
---------- ------------
</TABLE>
- --------------------------------------------------------------------------------
B-36
<PAGE>
PRUDENTIAL GLOBAL LIMITED
MATURITY FUND, INC.
Notes to Financial Statements LIMITED MATURITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------------ ---------- ------------
<S> <C> <C>
Year ended October 31, 1995:
Shares sold......................... 1,053,579 $ 8,628,977
Shares issued in reinvestment of
dividends and distributions....... 92,661 767,975
Shares reacquired................... (3,098,461) (25,766,282)
---------- ------------
Net decrease in shares outstanding
before conversion................. (1,952,221) (16,369,330)
Shares issued upon conversion from
Class B........................... 753,377 6,258,466
---------- ------------
Net decrease in shares
outstanding....................... (1,198,844) $(10,110,864)
---------- ------------
---------- ------------
<CAPTION>
Class B
- ------------------------------------
<S> <C> <C>
Year ended October 31, 1996:
Shares sold......................... 109,083 $ 932,602
Shares issued in reinvestment of
dividends......................... 286,095 2,446,729
Shares reacquired................... (5,250,123) (44,558,838)
---------- ------------
Net decrease in shares outstanding
before conversion................. (4,854,945) (41,179,507)
Shares reacquired upon conversion
into Class A...................... (2,966,156) (25,476,313)
---------- ------------
Net decrease in shares
outstanding....................... (7,821,101) $(66,655,820)
---------- ------------
---------- ------------
Year ended October 31, 1995:
Shares sold......................... 185,701 $ 1,562,291
Shares issued in reinvestment of
dividends and distributions....... 592,358 4,959,179
Shares reacquired................... (9,224,908) (77,372,755)
---------- ------------
Net decrease in shares outstanding
before conversion................. (8,446,849) (70,851,285)
Shares reacquired upon conversion
into Class A...................... (751,567) (6,258,466)
---------- ------------
Net decrease in shares
outstanding....................... (9,198,416) $(77,109,751)
---------- ------------
---------- ------------
<CAPTION>
Class C Shares Amount
- ------------------------------------ ---------- ------------
<S> <C> <C>
Year ended October 31, 1996:
Shares sold......................... 5,939 $ 52,000
Shares issued in reinvestment of
dividends......................... 21 184
---------- ------------
Increase in shares outstanding...... 5,960 $ 52,184
---------- ------------
---------- ------------
Year ended October 31, 1995:
Shares sold......................... 664 $ 5,518
Shares issued in reinvestment of
dividends and distributions....... 9 71
Shares reacquired................... (606) (5,083)
---------- ------------
Net increase in shares
outstanding....................... 67 $ 506
---------- ------------
---------- ------------
</TABLE>
- ------------------------------------------------------------
Note 7. Acquisition of Global Assets Portfolio
On January 19, 1996, the Limited Maturity Portfolio acquired all the net assets
of the Global Assets Portfolio pursuant to a plan of reorganization approved by
the Global Assets Portfolio shareholders on January 12, 1996. The acquisition
was accomplished by a tax-free exchange of 2,681,423 Class A shares of the
Limited Maturity Portfolio valued at $22,872,534 on January 19, 1996. The net
assets of the Limited Maturity Portfolio and Global Assets Portfolio immediately
before the acquisition were $117,661,601 and $22,872,534 (including $1,001,747
of net unrealized appreciation), respectively.
- --------------------------------------------------------------------------------
B-37
<PAGE>
PRUDENTIAL GLOBAL LIMITED
MATURITY FUND, INC.
Financial Highlights LIMITED MATURITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------
Year Ended October 31,
--------------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year........ $ 8.39 $ 8.56 $ 9.29 $ 9.16 $ 9.97
------- ------- ------- ------- --------
Income from investment operations
Net investment income..................... .60 .61 .70 .97 .96
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions........................... .40 (.21) (.86) (.26) (.95)
------- ------- ------- ------- --------
Total from investment operations....... 1.00 .40 (.16) .71 .01
------- ------- ------- ------- --------
Less distributions
Dividends from net investment income...... (.57) (.48) -- (.58) (.82)
Tax return of capital distributions....... -- (.09) (.57) -- --
------- ------- ------- ------- --------
Total distributions.................... (.57) (.57) (.57) (.58) (.82)
------- ------- ------- ------- --------
Net asset value, end of year.............. $ 8.82 $ 8.39 $ 8.56 $ 9.29 $ 9.16
------- ------- ------- ------- --------
------- ------- ------- ------- --------
TOTAL RETURN(a):.......................... 12.35% 4.92% (1.89)% 7.96% (0.07)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)............. $69,051 $18,216 $28,841 $59,458 $101,358
Average net assets (000).................. $53,284 $20,153 $38,000 $70,347 $119,171
Ratios to average net assets:
Expenses, including distribution
fees................................ 1.32% 1.21% 1.17% 1.02% 1.08%
Expenses, excluding distribution
fees................................ 1.17% 1.06% 1.02% .87% .93%
Net investment income.................. 7.12% 7.25% 7.67% 10.81% 9.93%
Portfolio turnover rate................... 101% 199% 232% 307% 180%
</TABLE>
- ---------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each year reported and includes reinvestment of dividends and
distributions.
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-38
<PAGE>
PRUDENTIAL GLOBAL LIMITED
MATURITY FUND, INC.
Financial Highlights LIMITED MATURITY PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B Class C
----------------------------------------------------------- --------
<S> <C> <C> <C> <C> <C> <C>
Year
Ended
October
Year Ended October 31, 31,
----------------------------------------------------------- --------
1996 1995 1994 1993 1992 1996
------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...... $ 8.42 $ 8.56 $ 9.29 $ 9.16 $ 9.97 $ 8.42
------- -------- -------- -------- -------- --------
Income from investment operations
Net investment income..................... .55 .56 .62 .88 .88 .55
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions........................... .40 (.19) (.86) (.26) (.95) .40
------- -------- -------- -------- -------- --------
Total from investment operations....... .95 .37 (.24) .62 (.07) .95
------- -------- -------- -------- -------- --------
Less distributions
Dividends from net investment income...... (.52) (.43) -- (.49) (.74) (.52)
Tax return of capital distributions....... -- (.08) (.49) -- -- --
------- -------- -------- -------- -------- --------
Total distributions.................... (.52) (.51) (.49) (.49) (.74) (.52)
------- -------- -------- -------- -------- --------
Net asset value, end of period............ $ 8.85 $ 8.42 $ 8.56 $ 9.29 $ 9.16 $ 8.85
------- -------- -------- -------- -------- --------
------- -------- -------- -------- -------- --------
TOTAL RETURN(a):.......................... 11.61% 4.60% (2.62)% 7.00% (0.86)% 11.61%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........... $44,804 $108,454 $188,966 $375,013 $606,899 $ 54
Average net assets (000).................. $70,794 $139,248 $281,143 $474,175 $814,734 $ 4
Ratios to average net assets:
Expenses, including distribution
fees................................ 1.92% 1.83% 1.97% 1.87% 1.93% 1.92%
Expenses, excluding distribution
fees................................ 1.17% 1.08% 1.02% .87% .93% 1.17%
Net investment income.................. 6.51% 6.61% 6.82% 9.42% 9.05% 6.35%
Portfolio turnover rate................... 101% 199% 232% 307% 180% 101%
<CAPTION>
August 1,
1994(c)
Through
October 31,
1995 1994
----------- -----------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...... $ 8.56 $ 8.61
----------- -----------
Income from investment operations
Net investment income..................... .54 .14
Net realized and unrealized gain (loss) on
investment and foreign currency
transactions........................... (.17) (.06)
----------- -----------
Total from investment operations....... .37 .08
----------- -----------
Less distributions
Dividends from net investment income...... (.43) --
Tax return of capital distributions....... (.08) (.13)
----------- -----------
Total distributions.................... (.51) (.13)
----------- -----------
Net asset value, end of period............ $ 8.42 $ 8.56
----------- -----------
----------- -----------
TOTAL RETURN(a):.......................... 4.60% 0.75%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)........... $ 755(d) $ 200(d)
Average net assets (000).................. $ 1,461(d) $ 199(d)
Ratios to average net assets:
Expenses, including distribution
fees................................ 1.70% .93%(b)
Expenses, excluding distribution
fees................................ .95% .18%(b)
Net investment income.................. 6.43% 7.02%(b)
Portfolio turnover rate................... 199% 232%
</TABLE>
- ---------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(b) Annualized.
(c) Commencement of offering of Class C shares.
(d) Figures are actual and not rounded to the nearest thousand.
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
B-39
<PAGE>
PRUDENTIAL GLOBAL LIMITED
MATURITY FUND, INC.
Independent Auditors' Report LIMITED MATURITY PORTFOLIO
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors
Prudential Global Limited Maturity Fund, Inc.
Limited Maturity Portfolio
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Prudential Global Limited Maturity Fund, Inc.,
Limited Maturity Portfolio, as of October 31, 1996, 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
five 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, 1996 by correspondence with the custodian and brokers. 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 Global
Limited Maturity Fund, Inc., Limited Maturity Portfolio, as of October 31, 1996,
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 12, 1996
- --------------------------------------------------------------------------------
B-40
<PAGE>
PRUDENTIAL GLOBAL LIMITED
MATURITY FUND, INC.
Other Information LIMITED MATURITY PORTFOLIO
- --------------------------------------------------------------------------------
At an annual shareholder meeting held on October 30, 1996, shareholders elected
Edward D. Beach, Delayne D. Gold, Robert F. Gunia, Donald D. Lennox, Douglas H.
McCorkindale, Mendel A. Melzer, Thomas T. Mooney, Stephen P. Munn, Richard A.
Redeker, Robin B. Smith, Louis A. Weil, III, and Clay T. Whitehead as directors
of the Fund. Shareholders also approved the proposed elimination of the Fund's
fundamental investment restriction relating to investment in securities of
unseasoned issuers, as described in such Fund's proxy statement, and the
selection of independent accountants for the Fund conditioned upon the right by
vote of a majority of such Fund's outstanding voting shares at any meeting
called for the purpose to terminate such employment forthwith without penalties.
The results of the matters voted upon were as follows:
<TABLE>
<CAPTION>
Number of Shares(a)
------------------------------------------------------
For Against Abstain
---------- ------- -------
<S> <C> <C> <C>
Election of Edward D. Beach 6,781,020 -- 111,011
Election of Delayne D. Gold 6,781,020 -- 111,011
Election of Robert F. Gunia 6,781,020 -- 111,011
Election of Donald D. Lennox 6,781,020 -- 111,011
Election of Douglas H. McCorkindale 6,781,020 -- 111,011
Election of Mendel A. Melzer 6,781,020 -- 111,011
Election of Thomas T. Mooney 6,781,020 -- 111,011
Election of Stephen P. Munn 6,781,020 -- 111,011
Election of Richard A. Redeker 6,781,020 -- 111,011
Election of Robin B. Smith 6,781,020 -- 111,011
Election of Louis A. Weil, III 6,781,020 -- 111,011
Election of Clay T. Whitehead 6,781,020 -- 111,011
Selection of Independent Accountants* 6,781,020 1,909 109,102
</TABLE>
(a) The number of common shares issued outstanding and eligible to vote were
13,742,834. Quorum was 6,892,031 or 50.15% of eligible voting shares.
* Proposal requires the 1940 Act majority passage. This act requires the
affirmative vote of the lesser of: (1) 67% or more shares represented at
the meeting are in favor as long as quorum is present or (2) a majority of
a fund's outstanding.
- --------------------------------------------------------------------------------
B-41
<PAGE>
APPENDIX
GENERAL INVESTMENT INFORMATION
The following terms are used in mutual fund investing.
Asset Allocation
Asset allocation is a technique for reducing risk and 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 off-set
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.
App-1
<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: Prudential Investment Corporation based on data from Ibbotson
Associates' EnCORR Software. Chicago, Illinois. 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 500 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 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.
App-2
<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
through 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 the historical total
returns, including the compounded effect over time, could be substantial.
Historical Total Returns of Different Bond Market Sectors
- --------------------------------------------------------------------------------
[CHART]
1Lehman 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.
2Lehman Brothers Mortgage-Backed Securities Index is an unmanaged index that
includes over 600 15 and 30-year fixed-rate mortgaged-backed securities of the
Government National Mortgage Association (GNMA), Federal National Mortgage
Association (FNMA), and the Federal Home Loan Mortgage Corporation (FHLMC).
3Lehman 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.
4Lehman 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.
5Salomon Brothers World Government Index (Non U.S.) includes 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.
App-3
<PAGE>
The chart below shows the historical volatility of general interest rates as
measured by the long U.S. Treasury Bond.
Long U.S. Treasury Bond Yield in Percent (1925-1995)
[CHART]
Source: Stocks, Bonds, Bills and Inflation 1996 Yearbook, Ibbotson Associates,
Chicago (annually updates work by Roger G. Ibbotson and Rex A. Sinquefield).
Used with permission. All rights reserved. This chart illustrates the historical
yield of the long-term U.S. Treasury Bond from 1926-1995. 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.
App-4
<PAGE>
APPENDIX-INFORMATION RELATING TO THE PRUDENTIAL
Set forth below is information relating to The Prudential Insurance Company
of America (Prudential) and its subsidiaries as well as information relating to
the Prudential Mutual Funds. See "How the Fund is Managed-Manager" in the
Prospectus. The data will be used in sales materials relating to the Prudential
Mutual Funds. Unless otherwise indicated, the information is as of December 31,
1995 and is subject to change thereafter. All information relies on data
provided by The Prudential Investment Corporation (PIC) or from other sources
believed by the Manager to be reliable. Such information has not been verified
by the Fund.
Information about Prudential
The Manager and PIC(1) are subsidiaries of Prudential, which 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,
1995. 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 more
than 92,000 persons worldwide, and maintains a sales force of approximately
13,000 agents and 5,600 financial advisors. 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.
Prudential uses the rock of Gibraltar as its symbol. The Prudential rock is a
recognized brand name throughout the world.
Insurance. Prudential has been engaged in the insurance business since 1875.
It insures or provides financial services to more than 50 million people
worldwide-one of every five people in the United States. Long one of the largest
issuers of individual life insurance, the Prudential has 19 million life
insurance policies in force today with a face value of $1 trillion. Prudential
has the largest capital base ($11.4 billion) of any lfie insurance company in
the United States. The Prudential provides auto insurance for more than 1.7
million cars and insures more than 1.4 million homes.
Money Management. The Prudential is one of the largest pension fund managers
in the country, providing pension services to 1 in 3 Fortune 500 firms. It
manages $36 billion of individual retirement plan assets, such as 401(k) plans.
In July 1996, Institutional Investor ranked Prudential the fifth largest
institutional money manager of the 300 largest money management organizations in
the United States as of December 31, 1995. As of December 31, 1995, Prudential
had more than $314 billion in assets under management. Prudential Investments, a
business group of Prudential (of which Prudential Mutual Funds is a key part)
manages over $190 billion in assets of institutions and individuals.
Real Estate. 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.(2)
Healthcare. Over two decades ago, the Prudential introduced the first
federally-funded, for-profit HMO in the country. Today, almost 5 million
Americans receive healthcare from a Prudential managed care membership.
Financial Services. The Prudential Bank, a wholly-owned subsidiary of the
Prudential, has nearly $3 billion in assets and serves nearly 1.5 million
customers across 50 states.
Information about the Prudential Mutual Funds
Prudential Mutual Fund Management is one of the seventeen largest mutual
fund companies in the country, with over 2.5 million shareholders invested in
more than 50 mutual fund portfolios and variable annuities with more than 3.7
million shareholder accounts.
The Prudential Mutual Funds have over 30 portfolio managers who manage over
$55 billion in mutual fund and variable annuity assets. Some of Prudential's
portfolio managers have over 20 years of experience managing investment
portfolios.
- -----------------------
(1) Prudential Mutual Fund Investment Management, a unit of PIC, serves as the
Subadviser to substantially all of the Prudential Mutual Funds. Wellington
Management Company serves as the subadviser to Global Utility Fund, Inc.
Nicholas-Applegate Capital Management as subadviser to Nicholas-Applegate
Fund, Inc., Jennison Associates Capital Corp. as the subadviser to
Prudential Jennison Series Fund, Inc. and Prudential Active Balanced Fund
a portfolio of Prudential Dryden Fund, Mercator Asset Management, L.P. as
the subadviser to International Stock Series a portfolio of Prudential World
Fund, Inc. and BlackRock Financial Management, Inc. as subadviser to
The BlackRock Government Income Trust. There are multiple subadvisers
for The Target Portfolio Trust.
(2) As of December 31, 1994.
App-5
<PAGE>
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, on 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.
Equity Funds. Forbes magazines listed Prudential Equity Fund among twenty
mutual funds on its Honor Roll in its mutual fund issue of August 28, 1995.
Honorees are chosen annually among mutual funds (excluding sector funds) which
are open to new investors and have had the same management for at least five
years. Forbes considers, among other criteria, the total return of a mutual fund
in both bull and bear markets as well as a fund's risk profile. Prudential
Equity Fund is managed with a "value" investment style by PIC. In 1995,
Prudential Securities introduced Prudential Jennison Growth Fund, a growth-style
equity fund managed by Jennison Associates Capital Corp., a premier
institutional equity manager and a subsidiary of Prudential.
High Yield Funds. Investing in high yield bonds is a complex and research
intensive pursuit. A separate team of high yield bond analysts monitor the 167
issues held in the Prudential High Yield Fund (currently the largest fund of its
kind in the country) along with 100 or so other high yield bonds, which may be
considered for purchase.(3) Non-investment grade bonds, also known as junk bonds
or high yield bonds, are subject to a greater risk of loss of principal and
interest including default risk than higher-rated bonds. Prudential high yield
portfolio managers and analysts meet face-to-face with almost every bond issuer
in the High Yield Fund's portfolio annually, and have additional telephone
contact throughout the year.
Prudential's portfolio managers are supported by a large and sophisticated
research organization. Fourteen investment grade bond analysts monitor the
financial viability of approximately 1,750 different bond issuers in the
investment grade corporate and municipal bond markets-from IBM to small
municipalities, such as Rockaway Township, New Jersey. These analysts consider
among other things sinking fund provisions and interest coverage ratios.
Prudential's portfolio managers and analysts receive research services from
almost 200 brokers and market service vendors. They also receive nearly 100
trade publications and newspapers-from Pulp and Paper Forecaster to Women's Wear
Daily-to keep them informed of the industries they follow.
Prudential Mutual Funds' traders scan over 100 computer monitors to collect
detailed information on which to trade. From natural gas prices in the Rocky
Mountains to the results of local municipal elections, a Prudential portfolio
manager or trader is able to monitor it if it's important to a Prudential mutual
fund.
Prudential Mutual Funds trade approximately $31 billion in U.S. and foreign
government securities a year. PIC seeks information from government policy
makers. In 1995. Prudential's portfolio managers met with several senior U.S.
and foreign government officials, on issues ranging from economic conditions in
foreign countries to the viablity of index-linked securities in the United
States.
Prudential Mutual Funds' portfolio managers and analysts met with over 1,200
companies in 1995, often with the Chief Executive Officer (CEO) or Chief
Financial Officer (CFO). They also attended over 250 industry conferences.
Prudential Mutual Fund global equity managers conducted many of their visits
overseas, often holding private meetings with a company in a foreign language
(our global equity managers speak 7 different languages, including Mandarin
Chinese).
Trading Data.(4) On an average day, Prudential Mutual Funds' U.S. and foreign
equity trading desks traded $77 million in securities representing over 3.8
million shares with nearly 200 different firms. Prudential Mutual Funds' bond
trading desks traded $157 million in goverment and corporate bonds on an average
day. That represents more in daily trading than most bond funds tracked by
Lipper even have in assets(5). Prudential Mutual Funds' money market desk traded
$3.2 billion in money market securities on an average day, or over $800 billion
a year. They made a trade every 3 minutes of every trading day. In 1994, the
Prudential Mutual Funds effected more than 40,000 trades in money market
securities and held on average $20 billion of money market securities.(6)
- -----------------------
(3) As of December 31, 1995. The number of bonds and the size of the Fund are
subject to change.
(4) Trading data represents average daily transactions for portfolios of the
Prudential Mutual Funds for which PIC serves as the subadviser, portfolios
of the Prudential Series Fund and institutional and non-U.S. accounts
managed by Prudential Mutual Fund Investment Management, a division of PIC,
for the year ended December 31, 1995.
(5) Based on 669 funds in Lipper Analytical Services categories of Short U.S.
Treasury, Short U.S. Government, Intermediate U.S. Treasury, Intermediate
U.S. Government, Short Investment Grade Debt, Intermediate Grade Debt,
General U.S. Treasury, General U.S. Government and Mortgage funds.
(6) As of December 31, 1994.
App-6
<PAGE>
Based on complex-wide data, on an average day, over 7,250 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
answered.
Information about Prudential Securities
Prudential Securities is the fifth largest retail brokerage firm in the
United States with approximately 5,600 financial advisors. It offers to its
clients a wide range of products, including Prudential Mutual Funds and
annuities. As of December 31, 1995, assets held by Prudential Securities for its
clients approximated $168 billion. During 1994, over 28,000 new customer
accounts were opened each month at PSI.(7)
Prudential Securities has a two-year Financial Advisor training program plus
advanced education programs, including Prudential Securities "university," which
provides advanced education in a wide array of investment areas. Prudential
Securities is the only Wall Street firm to have its own in-house Certified
Financial Planner (CFP) program. In the December 1995 issue of Registered Rep,
an industry publication, Prudential Securities' Financial Advisor training
programs received a grade of A\'96 (compared to an industry average of B+).
In 1995, Prudential Securities' equity research team ranked 8th in
Institutional Investor magazine's 1995 "All America Research Team" survey. Five
Prudential Securities' analysts were ranked as first-team finishers.(8)
In addition to training, Prudential Securities provides its financial
advisors with access to firm economists and market analysts. It has also
developed proprietary tools for use by financial advisors, including the
Financial ArchitectSM, a state-of-the-art asset allocation software program
which helps Financial Advisors to evaluate a client's objectives and overall
financial plan, and a comprehensive mutual fund information and analysis system
that compares different mutual funds.
For more complete information about any of the Prudential Mutual Funds,
including charges and expenses, call your Prudential Securities advisor or
Pruco/Prudential representative for a free prospectus. Read it carefully before
you invest or send money.
- ----------------------
(7) As of December 31, 1994.
(8) In 1995, Institutional Investor magazine surveyed more than 700
institutional money managers, chief investment officers and research
directors, asking them to evaluate analysts in approximately 80 industry
sectors. Scores were produced by taking the number of votes awarded to an
individual analyst and weighting them based on the size of the voting
institution. In total, the magazine sent its survey to more than 2,000
institutions, including a group of European and Asian institutions. This
survey is conducted annually.
App-7
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
(1) The following financial statements are included in the Prospectus
constituting Part A of this Registration Statement:
Financial Highlights.
(2) The following financial statements are included in the Statement of
Additional Information, constituting Part B of this Registration Statement
on behalf of the Prudential Global Limited Maturity Fund, Inc. - Limited
Maturity Portfolio.
Portfolio of Investments at October 31, 1996
Statement of Assets and Liabilities at October 31, 1996
Statement of Operations for the fiscal year ended October 31, 1996
Statement of Changes in Net Assets for the fiscal years ended October 31, 1996
and October 31, 1995
Notes to Financial Statements
Financial Highlights
Independent Auditors' Report
C-1
<PAGE>
(b) Exhibits:
1. (a) Amended and Restated Articles of Incorporation incorporated by
reference to Exhibit No. 1 to Post-Effecitve Amendment No. 9 to the
Registration Statement on Form N-1A (File No. 33-33479) filed via
EDGAR on January 3, 1995.
(b) Articles of Amendment to the Articles of Incorporation effective
October 3, 1995, incorporated by reference to Exhibit 1(b) to the
Registration Statement on Form N-14 (File No. 33-63625) filed via
EDGAR on October 24, 1995.
(c) Articles of Amendment to the Articles of Incorporation effective
October 17, 1995, incorporated by reference to Exhibit 1(c) to the
Registration Statement on Form N-14 (File No. 33-63625) filed via
EDGAR on October 24, 1995.
(d) Articles Supplementary.*
2. By-Laws of the Registrant incorporated by reference to Exhibit No. 2
to Pre-Effective Amendment No. 3 to the Registration Statement on
Form N-1A (File No. 33-33479) filed by Registrant on October 22,
1990.
4. Instruments defining rights of shareholders. Incorporated by
reference to Exhibit 4 to Post-Effective Amendment No. 6 to the
Registration Statement on Form N-1A (File No. 33-33470) filed on
Edgar by Registrant on December 30, 1993.
5. (a) Management Agreement between the Registrant and Prudential
Mutual Fund Management, Inc., Incorporated by reference to Exhibit
5(a) to Pre-Effective Amendment No. 3 to the Registration Statement
on Form N-1A (File No. 33-33479) filed by Registrant on October 22,
1990.
(b) Subadvisory Agreement between Prudential Mutual Fund Management,
Inc. and The Prudential Investment Corporation, Incorporated by
reference to Exhibit No. 5(b) to Pre-Effective Amendment No. 3 to
the Registration Statement on Form N-1A (File No. 33-33479) filed by
Registrant on October 22, 1990.
6. (a) Subscription Offering Agreement among the Registrant,
Prudential-Bache Securities Inc. and Prudential Mutual Fund
Distributors, Inc. incorporated by reference to Exhibit No. 6(c) to
Pre-Effective Amendment No. 3 to the Registration Statement on Form
N-1A (File No. 33-33479) filed by Registrant on October 22, 1990.
(b) Subscription Offering Agreement among the Registrant,
Prudential-Bache Securities Inc. and Prudential Mutual Fund
Distributors, Inc. incorporated by reference to Exhibit No. 6(d) to
Post-Effective Amendment No. 1 to the Registration Statement on Form
N-1A (File No. 33-33479) filed by Registrant on December 18, 1990.
(c) Amendment to Distribution Agreement.*
(d) Restated Distribution Agreement between the Fund and Prudential
Securities Incorporated.*
8. (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, incorporated by reference
to Exhibit 9(b) to the Registration Statement on Form N-14 (File No.
33-63625) filed via EDGAR on October 24, 1995.
9. Transfer Agency and Dividend Disbursing Agreement between the
Registrant and Prudential Mutual Fund Services, Inc. Incorporated by
reference to Exhibit No. 9 to Pre-Effective Amendment No. 3 to the
Registration Statement on Form N-1A (File No. 33-33479) filed by
Registrant on October 22, 1990.
10. Opinion of Counsel.*
11. Consent of Independent Accountants.*
13. Purchase Agreement. Incorporated by reference to Exhibit 13 to
Pre-Effective Amendment No. 3 to the Registration Statement on Form
N-1A (File No. 33-33479) filed by Registrant on October 22, 1990.
14. Not Applicable.
C-2
<PAGE>
15. (a)(i) Distribution and Service Plan for Class A shares of
Short-Term Global Income Portfolio dated July 1, 1993, incorporated
by reference to Exhibit 15(a)(i) to Post-Effective Amendment No. 6
to the Registration Statement on Form N-1A (File No. 33-33479) filed
via EDGAR on December 30, 1993.
(b)(i) Distribution and Service Plan for Class B shares of the Fund
dated July 1, 1993, incorporated by reference to Exhibit 15(b)(ii)
to Post-Effective Amendment No. 6 to the Registration Statement on
Form N-1A (File No. 33-33479) filed via EDGAR on December 30, 1993.
(b)(ii) Distribution and Service Plan for Class A shares of Global
Assets Portfolio dated July 1, 1993, incorporated by reference to
Exhibit 15(b)(ii) to Post-Effective Amendment No. 6 to the
Registration Statement on Form N-1A (File No. 33-33479) filed via
EDGAR on December 30, 1993.
(c) Distribution and Service Plan for Class A shares of the
Short-Term Global Income Portfolio and Global Assets Portfolio
incorporated by reference to Exhibit No. 15(c) to Post-Effecitve
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 No. 15(d) to Post-Effecitve 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 No. 15(e) to Post-Effecitve Amendment No. 9 to the
Registration Statement on Form N-1A (File No. 33-33479) filed via
EDGAR on January 3, 1995.
16. Schedule of Computation of Performance Quotations incorporated by
reference to Exhibit No. 16 to Post-Effective Amendment No. 10 to
the Registration Statement on Form N-1A (File No. 33-34793) filed
via EDGAR on February 9, 1996.
17. Financial Data Schedules, filed as Exhibit 27 for electronic
purposes.*
18. Rule 18f-3 Plan.*
- ------------
* Filed herewith.
Item 25. Persons Controlled by or Under Common Control with Registrant.
No person is controlled by or under common control with the Registrant.
Item 26. Number of Holders of Securities.
As of December 6, 1996 there were 6,693 Class A shareholders, 5,203 Class B
shareholders, 6 Class C and 0 Class Z shareholders of the Limited Maturity
Portfolio of the Fund.
Item 27. Indemnification.
As permitted by Sections 17(h) and (i) of the Investment Company Act of 1940
(the "1940 Act") and pursuant to Article VI of the Fund's Articles of
Incorporation (Exhibit 1 to the Registration Statement) and Section 2-418 of the
Maryland General Law, officers and directors of the Registrant may be
indemnified against liabilities in connection with the Registrant unless it is
proved that (i) the act or omission of the director or officer was material to
the cause of action adjudicated in the proceeding and was committed in bad faith
or with active and deliberate dishonesty, (ii) the director actually received an
improper personal benefit in money, property or services, or (iii) in the case
of a criminal proceeding, the director had reasonable cause to believe
that the act or omission was unlawful. As permitted by Section 17(i) of the
1940 Act, pursuant to Section 10 of each Distribution Agreement (Exhibit 6(a)
and (b) to the Registration Statement), each Distributor of the Registrant may
be indemnified against liabilities which it may incur except liabilities arising
from bad faith, gross negligence, willful misfeasance or reckless disregard of
duties.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended ("Securities Act"), may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing provisions
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in connection with the successful defense
of any action, suit or proceeding) is asserted against the Registrant by such
director, officer or controlling person in connection with the shares being
registered, the
C-3
<PAGE>
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The Registrant intends to purchase an insurance policy insuring its officers
and directors against certain liabilities, and certain costs of defending claims
against such officers and directors, to the extent such officers and directors
are not found to have committed conduct constituting willful misfeasance, bad
faith, gross negligence or reckless disregard of their duties. The insurance
policy also insures the Registrant against the cost of indemnification payments
to officers and directors under certain circumstances.
Section 9 of the Management Agreement (Exhibit 5(a) to the Registration
Statement) and Section 4 of the Subadvisory Agreement (Exhibit 5(b) to the
Registration Statement) limit the liability of Prudential Mutual Fund
Management, Inc. (PMF) and The Prudential Investment Corporation (PIC),
respectively, to liabilities arising from willful misfeasance, bad faith or
gross negligence in the performance of their respective duties or from reckless
disregard by them of their respective obligations and duties under the
agreements.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its By-Laws, the Management Agreement and each Distribution
Agreement in a manner consistent with Release No. 11330 of the Securities and
Exchange Commission under the 1940 Act so long as the interpretation of Sections
17(h) and 17(i) of such Act remain, in effect.
Item 28. Business and other Connections of Investment Adviser
(a) Prudential Mutual Fund Management LLC.
See "How the Fund is Managed-Manager" in the Prospectus constituting Part A
of this Registration Statement and "Manager" in the Statement of Additional
Information constituting Part B of this Registration Statement.
The business and other connections of the officers of PMF are listed in
Schedules A and D of Form ADV of PMF as currently on file with the Securities
and Exchange Commission, the text of which is hereby incorporated by reference
(File No. 801-31104).
The business and other connections of PMF's directors and principal
executive officers are set forth below. Except as otherwise indicated, the
address of each person is Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102-4077.
<TABLE>
<CAPTION>
Name and Address Position with PMF Principal Occupations
- ---------------- ----------------- ---------------------
<S> <C> <C>
Brian Storms President President, PMF
</TABLE>
(b) The Prudential Investment Corporation (PIC)
See "How the Fund is Managed-Manager" in the Prospectus constituting Part A
of this Registration Statement and "Manager" in the Statement of Additional
Information constituting Part B of this Registration Statement.
The business and other connections of PIC's directors and executive officers
are set forth below. Except as otherwise indicated, the address of each person
is Prudential Plaza, Newark, NJ 07102.
<TABLE>
<CAPTION>
Name and Address Position with PIC Principal Occupations
- ---------------- ----------------- ---------------------
<S> <C> <C>
E. Michael Caulfield Chairman of the Chief Executive Officer of The Money Management Group of
Board, President and Prudential
Chief Executive
Officer and Director
Jonathan M. Greene Senior Vice President President-Investment Management of the Money Management
and Director Group of Prudential
John R. Strangfeld Vice President President of Private Assets Management
and Director
</TABLE>
C-4
<PAGE>
Item 29. Principal Underwriters
(a) Prudential Securities Incorporated
Prudential Securities is distributor for Command Government Fund, Command
Money Fund, Command Tax-Free Fund, Prudential Government Securities Trust
(Intermediate Term Series, Money Market Series and U.S. Treasury Money Market
Series), Prudential MoneyMart Assets, Inc., Prudential Institutional Liquidity
Portfolio, Inc., Prudential Special Money Market Fund, Inc., Prudential Tax-Free
Money Fund, Inc. Prudential Jennison Series Fund, Inc., The Target Portfolio
Trust, Prudential Allocation Fund, Prudential California Municipal Fund,
Prudential Distressed Securities Fund, Inc., Prudential Dryden Fund, Prudential
Diversified Bond Fund, Inc., Prudential Emerging Growth Fund, Inc., Prudential
Equity Fund, Inc., Prudential Equity Income Fund, Prudential Europe Growth Fund
Inc., Prudential Global Genesis Fund, Inc., Prudential Global Limited Maturity
Fund, Inc., Prudential Government Income Fund, Inc., Prudential Small Companies
Fund, Inc., Prudential High Yield Fund, Inc., Prudential Intermediate Global
Income Fund, Inc., Prudential Mortgage Income Fund, Inc., Prudential
Multi-Sector Fund, Inc., Prudential Municipal Bond Fund, Prudential Municipal
Series Fund, Prudential National Municipals Fund, Inc., Prudential Natural
Resources Fund, Inc., Prudential Pacific Growth Fund, Inc., Prudential
Structured Maturity Fund, Inc., Prudential Utility Fund, Inc., Prudential World
Fund, Inc., The Global Government Plus Fund, Inc., The Global Total Return Fund,
Inc., Global Utility Fund, Inc., Nicholas-Applegate Fund, Inc.
(Nicholas-Applegate Growth Equity Fund) and The BlackRock Government Income
Trust. Prudential Securities is also a depositor for the following unit
investment trusts:
Corporate Investment Trust Fund
Prudential Equity Trust Shares
National Equity Trust
Prudential Unit Trusts
Government Securities Equity Trust
National Municipal Trust
(b) Information concerning the directors and officers of Prudential
Securities Incorporated is set forth below.
<TABLE>
<CAPTION>
Positions and Positions and
Offices with Offices with
Name(1) Underwriter Registrant
- ------- ------------- -------------
<S> <C> <C>
Robert Golden .................... Executive Vice President and Director None
One New York Plaza
New York, NY
Alan D. Hogon .................... Executive Vice President, Chief Administrative None
Officer and Director
George A. Murray ................. Executive Vice President and Director None
Leland B. Paton .................. Executive Vice President and Director None
One New York Plaza
New York, NY
Martin Pfinsgraff ................ Executive Vice President, Chief Financial None
Officer and Director
Vincent T. Pica, II .............. Executive Vice President and Director None
One New York Plaza
New York, NY
Hardwick Simmons ................. Chief Executive Officer, President and Director None
Lee B. Spenser Jr. ............... General Counsel, Executive Vice President, None
Secretary and Director
</TABLE>
- -------------
(1) The address of each person named is One Seaport Plaza, New York, NY 10292
unless otherwise indicated.
(c) Registrant has no principal underwriter who is not an affiliated person
of the Registrant.
C-5
<PAGE>
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the Rules thereunder are maintained at the offices of
State Street Bank and Trust Company, 1776 Heritage Drive, North Quincy,
Massachusetts, The Prudential Investment Corporation, Prudential Plaza, 745
Broad Street, Newark, New Jersey 07102, the Registrant, Gateway Center Three,
100 Mulberry Street, Newark, New Jersey 07102-4077, and Prudential Mutual Fund
Services, Inc., Raritan Plaza One, Edison, New Jersey 08837. Documents required
by Rules 31a-1 (b)(5), (6), (7), (9), (10) and (11) and 31a-1(f) will be kept at
Two Gateway Center, documents required by Rules 31a-1(b)(4) and (11) and
31a-1(d) at One Seaport Plaza and the remaining accounts, books and other
documents required by such other pertinent provisions of Section 31(a) and the
Rules promulgated thereunder will be kept by State Street Bank and Trust Company
and Prudential Mutual Fund Services, Inc.
Item 31. Management Services
Other than as set forth under the captions "How the Fund is Managed-Manager"
and "How the Fund is Managed-Distributor" in the Prospectus and the captions
"Manager" and "Distributor" in the Statement of Additional Information,
constituting Parts A and B, respectively, of this Registration Statement,
Registrant is not a party to any management-related service contract.
Item 32. Undertakings
The Registrant hereby undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment to the Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized in the City of New York, and State of New
York, on the 26th day of December, 1996.
PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
By /s/ Richard A. Redeker
------------------------------------------
Richard A. Redeker
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Grace Torres Treasurer and December 26, 1996
- --------------------------------- Principal Financial and
Accounting Officer
/s/ Edward D. Beach Director December 26, 1996
- ---------------------------------
Edward D. Beach
/s/ Delayne Dedrick Gold Director December 26, 1996
- ---------------------------------
Delayne Dedrick Gold
/s/ Robert F. Gunia Vice President and December 26, 1996
- --------------------------------- Director
Robert F. Gunia
/s/ Donald D. Lennox Director December 26, 1996
- ---------------------------------
Donald D. Lennox
/s/ Douglas McCorkindale Director December 26, 1996
- ---------------------------------
Douglas McCorkindale
/s/ Mendel A. Melzer Director December 26, 1996
- ---------------------------------
Mendel A. Melzer
/s/ Thomas T. Mooney Director December 26, 1996
- ---------------------------------
Thomas T. Mooney
/s/ Stephen P.Munn Director December 26, 1996
- ---------------------------------
Stephen P.Munn
/s/ Richard A. Redeker President and Director December 26, 1996
- ---------------------------------
Richard A. Redeker
/s/ Robin B. Smith Director December 26, 1996
- ---------------------------------
Robin B. Smith
/s/ Louis A. Weill, III Director December 26, 1996
- ---------------------------------
Louis A. Weill, III
/s/ Clay T. Whitehead Director December 26, 1996
- ---------------------------------
Clay T. Whitehead
<PAGE>
EXHIBIT INDEX
(b)Exhibits:
1. (a) Amended and Restated Articles of Incorporation incorporated by reference
to Exhibit No. 1 to Post-Effecitve Amendment No. 9 to the Registration
Statement on Form N-1A (File No. 33-33479) filed via EDGAR on January 3,
1995.
(b) Articles of Amendment to the Articles of Incorporation effective October
3, 1995, incorporated by reference to Exhibit 1(b) to the Registration
Statement on Form N-14 (File No. 33-63625) filed via EDGAR on October 24,
1995.
(c) Articles of Amendment to the Articles of Incorporation effective October
17, 1995, incorporated by reference to Exhibit 1(c) to the Registration
Statement on Form N-14 (File No. 33-63625) filed via EDGAR on October 24,
1995.
(d) Articles Supplementary.*
2. By-Laws of the Registrant incorporated by reference to Exhibit No. 2 to
Pre-Effective Amendment No. 3 to the Registration Statement on Form N-1A
(File No. 33-33479) filed by Registrant on October 22, 1990.
4. Instruments defining rights of shareholders. Incorporated by reference to
Exhibit 4 to Post-Effective Amendment No. 6 to the Registration Statement on
Form N-1A (File No. 33-33470) filed on Edgar by Registrant on December 30,
1993.
5. (a) Management Agreement between the Registrant and Prudential Mutual Fund
Management, Inc., Incorporated by reference to Exhibit 5(a) to Pre-Effective
Amendment No. 3 to the Registration Statement on Form N-1A (File No.
33-33479) filed by Registrant on October 22, 1990.
(b) Subadvisory Agreement between Prudential Mutual Fund Management, Inc.
and The Prudential Investment Corporation, Incorporated by reference to
Exhibit No. 5(b) to Pre-Effective Amendment No. 3 to the Registration
Statement on Form N-1A (File No. 33-33479) filed by Registrant on October
22, 1990.
6. (a) Subscription Offering Agreement among the Registrant, Prudential-Bache
Securities Inc. and Prudential Mutual Fund Distributors, Inc. incorporated
by reference to Exhibit No. 6(c) to Pre-Effective Amendment No. 3 to the
Registration Statement on Form N-1A (File No. 33-33479) filed by Registrant
on October 22, 1990.
(b) Subscription Offering Agreement among the Registrant, Prudential-Bache
Securities Inc. and Prudential Mutual Fund Distributors, Inc. incorporated
by reference to Exhibit No. 6(d) to Post-Effective Amendment No. 1 to the
Registration Statement on Form N-1A (File No. 33-33479) filed by Registrant
on December 18, 1990.
(c) Amendment to Distribution Agreement.*
(d) Restated Distribution Agreement between the Fund and Prudential
Securities Incorporated.*
8. (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, incorporated by reference to Exhibit 9(b) to
the Registration Statement on Form N-14 (File No. 33-63625) filed via EDGAR
on October 24, 1995.
9. Transfer Agency and Dividend Disbursing Agreement between the Registrant and
Prudential Mutual Fund Services, Inc. Incorporated by reference to Exhibit
No. 9 to Pre-Effective Amendment No. 3 to the Registration Statement on Form
N-1A (File No. 33-33479) filed by Registrant on October 22, 1990.
10. Opinion of Counsel.*
11. Consent of Independent Accountants.*
13. Purchase Agreement. Incorporated by reference to Exhibit 13 to Pre-Effective
Amendment No. 3 to the Registration Statement on Form N-1A (File No.
33-33479) filed by Registrant on October 22, 1990.
14. Not Applicable.
15. (a)(i) Distribution and Service Plan for Class A shares of Short-Term Global
Income Portfolio dated July 1, 1993, incorporated by reference to Exhibit
15(a)(i) to Post-Effective Amendment No. 6 to the Registration Statement on
Form N-1A (File No. 33-33479) filed via EDGAR on December 30, 1993.
(b)(i) Distribution and Service Plan for Class B shares of the Fund dated
July 1, 1993, incorporated by reference to Exhibit 15(b)(ii) to
Post-Effective Amendment No. 6 to the Registration Statement on Form N-1A
(File No. 33-33479) filed via EDGAR on December 30, 1993.
<PAGE>
(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) Distribution and Service Plan for Class A shares of the Short-Term
Global Income Portfolio and Global Assets Portfolio incorporated by
reference to Exhibit No. 15(c) to Post-Effecitve 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 No. 15(d) to
Post-Effecitve 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 No. 15(e) to
Post-Effecitve Amendment No. 9 to the Registration Statement on Form N-1A
(File No. 33-33479) filed via EDGAR on January 3, 1995.
16. Schedule of Computation of Performance Quotations incorporated by reference
to Exhibit No. 16 to Post-Effective Amendment No. 10 to the Registration
Statement on Form N-1A (File No. 33-33479) filed via EDGAR on February 9,
1996.
17. Financial Data Schedules, filed as Exhibit 27 for electronic purposes.*
18. Rule 18f-3 Plan.*
- ------------
* Filed herewith.
EXHIBIT 1(d)
ARTICLES SUPPLEMENTARY
OF
PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
*****
Pursuant to Section 2-208.1
of the Maryland General Corporation Law
*****
Prudential Global Limited Maturity Fund, Inc., a Maryland
corporation having its principal offices in Baltimore, Maryland
(the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The Corporation is registered as an open-end
company under the Investment Company Act of 1940.
SECOND: The total number of shares of all classes of stock
which the Corporation has authority to issue is 2,000,000,000
shares of common stock, par value $.001 each, having an aggregate
par value of $2,000,000 and the total number of shares of common
stock that the Corporation has authority to issue is not being
increased or decreased.
THIRD: Of the 2,000,000,000 shares which the Corporation
has authority to issue, all authorized and unissued shares of the
Global Assets Portfolio of any class are hereby reclassified as
shares of the Limited Maturity Portfolio and all 2,000,000,000
shares shall be of the series designated Limited Maturity
Portfolio. The series shall be divided into four classes, as
follows: 500,000,000 shares of Class A common stock, 500,000,000
shares of Class B common stock, 500,000,000 Class C common stock
and 500,000,000 shares of Class Z common stock. The aggregate
par value of each class of shares within the series is $500,000.
FOURTH: The Class Z shares shall represent the same
interest in the Corporation and have identical voting, dividend,
liquidation and other rights as the Class A, Class B and Class C
shares (the differing rights of which are hereby repeated for
ease of reference), except that (i) expenses related to the
distribution of each class of shares shall be borne solely by
such class; (ii) the bearing of such expenses solely by shares of
each class shall be appropriately reflected (in the manner
determined by the Board of Directors) in the net asset value,
dividends, distribution and liquidation rights of the shares of
such class; (iii) the Class A common stock shall be subject to a
front-end sales load and a Rule 12b-1 distribution fee as
determined by the Board of Directors from time to time; (iv) the
Class B common stock shall be subject to a contingent deferred
sales charge and a Rule 12b-1 distribution fee as determined by
the Board of Directors from time to time; (v) the Class C common
stock shall be subject to a contingent deferred sales charge and
a Rule 12b-1 distribution fee as determined by the Board of
Directors from time to time; and (v) the Class Z common stock
<PAGE>
shall not be subject to a front-end sales load, a contingent
deferred sales charge nor a 12b-1 distribution fee. All shares
of each particular class shall represent an equal proportionate
interest in that class, and each shares of any particular class
shall be equal to each other share of that class.
FIFTH: In accordance with Section 2-105(c) of the
Maryland General Corporation Law and pursuant to a resolution
duly adopted by the Board of Directors of the Corporation at a
meeting held on April 11, 1996, the number of authorized shares
of which the Corporation has authority to issue is hereby divided
into four classes of shares, consisting of 500,000,000 Class A
shares, 500,000,000 Class B shares, 500,000,000 Class C shares
and 500,000,000 Class Z shares, consisting of one series.
SIXTH: These Articles Supplementary do not increase the
aggregate authorized capital stock of the Corporation.
IN WITNESS WHEREOF, PRUDENTIAL GLOBAL LIMITED MATURITY FUND,
INC., has caused these presents to be signed in its name and on
its behalf of its Vice President and attested by its Assistant
Secretary on October 21, 1996.
PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
By: /s/ Robert F. Gunia
------------------------------
Robert F. Gunia
Vice President
Attest: /s/ Ellyn C. Vogin
--------------------------
Ellyn C. Vogin
Assistant Secretary
THE UNDERSIGNED, Vice President of Prudential Global Limited
Maturity Fund, Inc., who executed on behalf of the Corporation
the foregoing Articles Supplementary of which this certificate is
made a part, hereby acknowledges in the name and on behalf of
said Corporation and hereby certifies that to the best of his
knowledge, information and belief the matters and facts set forth
therein with respect to the authorization and approval thereof
are true in all material respects under the penalties of perjury.
/s/ Robert F. Gunia
------------------------------
Robert F. Gunia
Vice President
EXHIBIT 6(c)
AMENDMENT TO DISTRIBUTION AGREEMENTS
The Distribution Agreements between Prudential Mutual Fund Distributors,
Inc. and each of the Funds listed below are hereby transferred to Prudential
Securities Incorporated effective January 1, 1996.
Name of Fund Date of Agreement
- ------------ -----------------
The BlackRock Government Income Trust August 30, 1991 and amended
(Class A) and restated on April 12, 1995
Command Government Fund September 15, 1988 and
amended and restated on
April 12, 1995
Command Money Fund September 15, 1988 and
amended and restated on
April 12, 1995
Command Tax-Free Money Fund September 15, 1988 and
amended and restated on
April 12, 1995
Global Utility Fund, Inc. February 4, 1991 and
(Class A) amended and restated on
July 1, 1993, August 1, 1994
and May 4, 1995
Nicholas-Applegate Fund, Inc. August 1, 1994 and amended
(Class A) and restated on May 12, 1995
Nicholas-Applegate Growth Equity Fund
Prudential Allocation Fund January 22, 1990 and
(Class A) amended and restated on
August 1, 1994 and
Strategy Portfolio May 3, 1995
Balanced Portfolio
1
<PAGE>
Prudential California Municipal Fund August 1, 1994 and amended
(Class A) and restated on May 5, 1995
California Income Series
California Series
Prudential California Municipal Fund February 10, 1989 and
amended and restated on
California Money Market Series July l, 1993 and May 5, 1995
Prudential Diversified Bond Fund, Inc. January 3, 1995 and amended
(Class A) and restated on June 13, 1995
Prudential Equity Fund, Inc. August 1, 1994 and amended
(Class A) and restated on May 5, 1995
Prudential Equity Income Fund August l, 1994 and amended
(Class A) and restated on May 3, 1995
Prudential Europe Growth Fund, Inc. July 11, 1994 and amended
(Class A) and restated on June 13, 1995
Prudential Global Fund, Inc. August 1, 1994 and amended
(Class A) and restated on June 5, 1995
Prudential Global Genesis Fund, Inc. August 1, 1994 and amended
(Class A) and restated on May 3, 1995
Prudential Global Natural Resources Fund, Inc. August l, 1994 and amended
(Class A) and restated on May 3, 1995
Prudential Government Income Fund, Inc. January 22, 1990 and
(Class A) amended and restated on
April 13, 1995
Prudential Government Securities Trust November 20, 1990 and
Money Market Series amended and restated on
U.S. Treasury Money Market Series July l, 1993, May 2, l995
and August l, 1995
Prudential Growth Opportunity Fund, Inc. January 22, 1990 and
(Class A) amended and restated on
July l, 1993, August 1, 1994
and May 2, 1995
2
<PAGE>
Prudential High Yield Fund, Inc. January 22, 1990 and
(Class A) amended and restated on
July 1, 1993, Augus~ 1, 1994
and May 2, 1995
Prudential Institutional Liquidity November 20, 1987 and
Portfolio, Inc. amended and restated on
Prudential Institutional Money Market Series July 1, 1993 and
April ll, 1995
Prudential Intermediate Global August 1, 1994 and amended
Income Fund, Inc. and restated on May 10, 1995
(Class A)
Prudential MoneyMart Assets May l, 1988 and amended
and restated on July 1, 1993
and May 10, 1995
Prudential Mortgage Income Fund, Inc. August 1, 1994 and amended
(Class A) and restated on May 5, 1995
Prudential Multi-Sector Fund, Inc. August 1, 1994 and amended
(Class A) and restated on May 3, 1995
Prudential Municipal Bond Fund August 1, 1994 and amended
(Class A) and restated on May 3, 1995
Insured Series
High Yield Series
Intermediate Series
Prudential Municipal Series Fund August 1, 1994 and amended
(Class A) and restated on May 5, 1995
Florida Series
Hawaii Income Series
Maryland Series
Massachusetts Series
Michigan Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
3
<PAGE>
Prudential Municipal Series Fund
Connecticut Money Market Series February 10, 1989 and
Massachusetts Money Market Series amended and restated on
New Jersey Money Market Series July 1, 1993 and May 5, 1995
New York Money Market Series
Prudential National Municipals Fund, Inc. January 22, 1990 and
(Class A) amended and restated or
July l, 1993, August 1, 1994
and May 2, 1995
Prudential Pacific Growth Fund, Inc. August l, 1994 and amended
(Class A) and restated on June 5, 1995
Prudential Global Limited Maturity August 1, 1994 and amended
Fund, Inc. and restated on June 5, 1995
(formerly Prudential Short-Term Global Income
Fund Inc.)
(Class A)
Global Assets Portfolio
Limited Maturity Portfolio
Prudential Special Money Market Fund January 12, 1990 and
amended and restated on
Money Market Series April 12, 1995
Prudential Structured Maturity Fund, Inc. August l, 1994 and amended
(Class A) and restated on June 14, 1995
Income Portfolio
Prudential Tax-Free Money Fund, Inc. May 2, 1988 and
amended and restated on
July l, 1993, May 2, 1995 and
August l, 1995
Prudential U. S. Government Fund August 1, 1994 and amended
(Class A) and restated on June 5, 1995
Prudential Utility Fund, Inc. August 1, 1994 and amended
(Class A) and restated on June 14, 1995
4
<PAGE>
EACH OF THE FUNDS LISTED ABOVE
By /s/ ROBERT F. GUNIA
--------------------------
Robert F. Gunia
Vice President
PRUDENTIAL MUTUAL FUND DISTRIBUTORS, INC.
By /s/ STEPHEN P. FISHER
--------------------------
Stephen P. Fisher
Vice President
AGREED TO AND ACCEPTED BY:
PRUDENTIAL SECURITIES INCORPORATED
By /s/ BRENDAN BOYLE
--------------------------
Brendan Boyle
Senior Vice President
EXHIBIT 6(d)
PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
Distribution Agreement
Agreement made as of April 11, 1996 between Prudential
Global Limited Maturity Fund, Inc., 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
non-diversified, open-end, management investment company and it is
in the interest of the Fund to offer its shares for sale
continuously;
WHEREAS, the shares of the Fund may be divided into
classes and/or series (all such shares being referred to herein as
Shares) and the Fund currently is authorized to offer Class A,
Class B, Class C and Class Z Shares;
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 Shares from and after the date hereof in
order to promote the growth of the Fund and facilitate the
distribution of its Shares; and
WHEREAS, upon approval by the holders of the respective
classes and/or series of Shares of the Fund it is contemplated that
the Fund will adopt a plan (or plans) of distribution pursuant to
Rule 12b-1 under the Investment Company Act with respect to certain
of its classes and/or series of Shares (the Plans) authorizing
payments by the Fund to the Distributor with respect to the
distribution of such classes and/or series of Shares and the
maintenance of related 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 Shares of the Fund to sell
Shares to the public on behalf of the Fund and the Distributor
<PAGE>
hereby accepts such appointment and agrees to act hereunder. The
Fund hereby agrees during the term of this Agreement to sell Shares
of the Fund through the Distributor on the terms and conditions set
forth below.
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 Shares, except that:
2.1 The exclusive rights granted to the Distributor to
sell Shares of the Fund shall not apply to 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 Shares
issued by the Fund pursuant to reinvestment of dividends or capital
gains distributions or through the exercise of any conversion
feature or exchange privilege.
2.3 Such exclusive rights shall not apply to 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 Shares from the Fund
3.1 The Distributor shall have the right to buy from the
Fund on behalf of investors the Shares needed, but not more than
the Shares needed (except for clerical errors in transmission) to
fill unconditional orders for Shares placed with the Distributor by
investors or registered and qualified securities dealers and other
financial institutions (selected dealers).
3.2 The Shares shall be sold by the Distributor on
behalf of the Fund and delivered by the Distributor or selected
2
<PAGE>
dealers, as described in Section 6.4 hereof, to investors at the
offering price as set forth in the Prospectus.
3.3 The Fund shall have the right to suspend the sale of
any or all classes and/or series of its 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 any or all classes and/or series of its 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 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 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 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 Shares by the Fund
4.1 Any of the outstanding Shares may be tendered for
redemption at any time, and the Fund agrees to repurchase or redeem
the 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 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 Shares shall be
paid by the Fund as follows: (i) in the case of Shares subject to
a contingent deferred sales charge, any applicable contingent
deferred sales charge shall be paid to the Distributor, and 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; and (ii) in the case of all other Shares,
proceeds shall be paid to or for the account of the redeeming
shareholder, in each case in accordance with applicable provisions
of the Prospectus.
3
<PAGE>
4.3 Redemption of any class and/or series of 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 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
Shares as provided herein, the Fund agrees to sell its Shares so
long as it has Shares of the respective class and/or series
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 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
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 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 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 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 Shares. Any such qualification
4
<PAGE>
may be withheld, terminated or withdrawn by the Fund at any time in
its discretion. As provided in Section 9 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.
Section 6. Duties of the Distributor
6.1 The Distributor shall devote reasonable time and
effort to effect sales of Shares, but shall not be obligated to
sell any specific number of Shares. Sales of the 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 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 Shares, provided that the Fund shall approve the forms of such
agreements. Within the United States, the Distributor shall offer
and sell Shares only to such selected dealers as are members in
good standing of the NASD. 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
7.1 With respect to classes and/or series of Shares
which impose a front-end sales charge, the Distributor shall
receive and may retain any portion of any front-end sales charge
which is imposed on such sales 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.
5
<PAGE>
Payment of these amounts to the Distributor is not contingent upon
the adoption or continuation of any applicable Plans.
7.2 With respect to classes and/or series of Shares
which impose a contingent deferred sales charge, the Distributor
shall receive and may retain any contingent deferred sales charge
which is imposed on such sales 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
any Plan.
Section 8. Payment of the Distributor under the Plan
8.1 The Fund shall pay to the Distributor as
compensation for services under any Plans adopted by the Fund and
this Agreement a distribution and service fee with respect to the
Fund's classes and/or series of Shares as described in each of the
Fund's respective Plans and this Agreement.
8.2 So long as a Plan or any amendment thereto is in
effect, the Distributor shall inform the Board of Directors of the
commissions and account servicing fees with respect to the relevant
class and/or series of Shares 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 a 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 with respect to the relevant class
and/or series of Shares.
Section 9. Allocation of Expenses
The Fund shall bear all costs and expenses of the
continuous offering of its Shares (except for those costs and
expenses borne by the Distributor pursuant to a Plan and subject to
the requirements of Rule 12b-1 under the Investment Company Act),
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 all amendments and
supplements thereto, 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 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
6
<PAGE>
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 any Plan, so long as such 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 reasonable 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
7
<PAGE>
its officers or directors in connection with the issue and sale of
any 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 reasonable 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 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 applicable class and/or series
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 any of the Fund's Plans or
in any agreement related thereto (Independent 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
Independent Directors or by vote of a majority of the outstanding
voting securities of the applicable class and/or series 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.
8
<PAGE>
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 applicable class and/or series of the Fund, and
(b) by the vote of a majority of the Independent Directors cast in
person at a meeting called for the purpose of voting on such
amendment.
Section 13. Separate Agreement as to Classes and/or Series
The amendment or termination of this Agreement with
respect to any class and/or series shall not result in the
amendment or termination of this Agreement with respect to any
other class and/or series unless explicitly so provided.
Section 14. 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.
9
<PAGE>
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 Global Limited Maturity Fund, Inc.
By: /s/ Richard A. Redeker
---------------------------
Richard A. Redeker
President
10
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022-9998
December 27, 1996
Prudential Global Limited Maturity Fund, Inc.
Gateway Center Three
100 Mulberry Street, 9th Floor
Newark, New Jersey 07102-4077
Gentlemen and Ladies:
Prudential Global Limited Maturity Fund, Inc. (the "Fund"), is filing with
the Securities and Exchange Commission Post-Effective Amendment No. 11 to its
Registration Statement under the Securities Act of 1933, as amended (the "1933
Act") on Form N-1A (File No. 33-33479), relating to the registration under the
1933 Act of 16,751,917 additional shares of its Common Stock, par value $.001
per share (the "Additional Shares"), which are to be offered and sold by the
Fund in the manner and on the terms set forth in the prospectus of the Fund
current and effective under the 1933 Act at the time of sale. Of the Additional
Shares, 16,714,629 are previously outstanding shares of the Fund's Common Stock,
par value $.001 per share, which were redeemed by the Fund during its fiscal
year ended October 31, 1996. According to Post-Effective Amendment No. 11 to the
Fund's Registration Statement, none of the Additional Shares have been used by
the Fund for reduction pursuant to paragraph (a) of Rule 24e-2 under the
Investment Company Act of 1940, as amended (the "1940 Act"), in previous filings
of post-effective amendments to the Fund's Registration Statement during the
current fiscal year, or for the reduction pursuant to paragraph (c) of Rule
24f-2 under the 1940 Act during the Fund's current fiscal year, of the
registration fee payable by the Fund for the registration of shares for sale
under the 1933 Act.
We have, as counsel, participated in various proceedings relating to the
Fund and to the proposed issuance of the Additional Shares. We have examined
copies, either certified or otherwise proven to our satisfaction to be genuine,
of the Fund's Articles of Incorporation and By-laws, as currently in effect, and
a certificate dated December 18, 1996, issued by the State Department of
Assessments and Taxation of the State of Maryland, certifying the existence and
good standing of the Fund. We are generally familiar with the corporate affairs
of the Fund.
Based upon the foregoing, it is our opinion that:
1. The Fund has been duly organized and is validly existing under the laws
of the State of Maryland.
2. The Fund is authorized to issue two billion (2,000,000,000) shares of
Common Stock, par value $.001 per share. Under Maryland law, (a) the number of
authorized shares may
<PAGE>
Prudential Global Limited Maturity Fund, Inc.
December 27, 1996
Page 2
be increased or decreased by action of the Board of Directors and (b) shares
which are issued and subsequently redeemed by the Fund are, by virtue of such
redemption, restored to the status of authorized and unissued shares.
3. Subject to the effectiveness of the above-mentioned Post-Effective
Amendment No. 11 to the Fund's Registration Statement and compliance with
applicable state securities laws, upon the issuance of the Additional Shares for
a consideration not less than the par value thereof as required by the laws of
Maryland, and not less than the net asset value thereof as required by the 1940
Act and in accordance with the terms of the Registration Statement, such shares
will be legally issued and outstanding and fully paid and non-assessable.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as a part of the above-mentioned Post-Effective Amendment
No. 11 to the Registration Statement and with any state securities commission
where such filing is required. In giving this consent we do not admit that we
come within the category of persons whose consent is required under Section 7 of
the 1933 Act.
We are members of the Bar of the State of New York and do not hold ourselves
out as being conversant with the laws of any jurisdiction other than those of
the United States of America and the State of New York. We note that we are not
licensed to practice law in the State of Maryland, and to the extent that any
opinion herein involves the laws of the State of Maryland, such opinion should
be understood to be based solely upon our review of the documents referred to
above, the published statutes of the State of Maryland and, where applicable,
published cases, rules or regulations of regulatory bodies of that State.
Very truly yours,
/s/ Shereff, Friedman, Hoffman & Goodman, LLP
Shereff, Friedman, Hoffman & Goodman, LLP
SFH&G:MKN:JLS:GNB:me
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in Post-Effective Amendment No. 11 to Registration
Statement No. 33-33479 of Prudential Global Limited Maturity Fund, Inc., Limited
Maturity Portfolio, of our report dated December 12, 1996, appearing in the
Statement of Additional Information, which is a part of such Registration
Statement, and to the references to us under the headings Financial Highlights
in the Prospectus, which are a part of such Registration Statement, and
Custodian, Transfer and Dividend Disbursing Agent and Independent Accountants in
the Statement of Additional Information.
Deloitte & Touche LLP
New York, New York
December 20, 1996
EXHIBIT 18
PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
(the Fund)
PLAN PURSUANT TO RULE 18F-3
The Fund hereby adopts this plan pursuant to Rule 18f-3 under
the Investment Company Act of 1940 (the 1940 Act), setting forth
the separate arrangement and expense allocation of each class of
shares. Any material amendment to this plan is subject to prior
approval of the Board of Directors, including a majority of the
independent Directors.
CLASS CHARACTERISTICS
CLASS A SHARES: Class A shares are subject to a high initial
sales charge and a distribution and/or service
fee pursuant to Rule 12b-1 under the 1940 Act
(Rule 12b-1 fee) not to exceed .30 of 1% per
annum of the average daily net assets of the
class. The initial sales charge is waived or
reduced for certain eligible investors.
CLASS B SHARES: Class B shares are not subject to an initial
sales charge but are subject to a high
contingent deferred sales charge (declining by
1% each year) which will be imposed on certain
redemptions and a Rule 12b-1 fee of not to
exceed 1% per annum of the average daily net
assets of the class. The contingent deferred
sales charge is waived for certain eligible
investors. Class B shares automatically
convert to Class A shares approximately seven
years after purchase.
CLASS C SHARES: Class C shares are not subject to an initial
sales charge but are subject to a low
contingent deferred sales charge (declining by
1% each year) which will be imposed on certain
redemptions and a Rule 12b-1 fee not to exceed
1% per annum of the average daily net assets
of the class.
CLASS Z SHARES: Class Z shares are not subject to either an
initial or contingent deferred sales charge
nor are they subject to any Rule 12b-1 fee.
INCOME AND EXPENSE ALLOCATIONS
Income, any realized and unrealized capital gains and losses,
and expenses not allocated to a particular class, will be
allocated to each class on the basis of the net asset value of
that class in relation to the net asset value of the Fund.
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Dividends and other distributions paid by the Fund to each
class of shares, to the extent paid, will be paid on the same
day and at the same time, and will be determined in the same
manner and will be in the same amount, except that the amount
of the dividends and other distributions declared and paid by
a particular class may be different from that paid by another
class because of Rule 12b-1 fees and other expenses borne
exclusively by that class.
EXCHANGE PRIVILEGE
Each class of shares is generally exchangeable for the same
class of shares (or the class of shares with similar
characteristics), if any, of the other Prudential Mutual Funds
(subject to certain minimum investment requirements) at
relative net asset value without the imposition of any sales
charge.
Class B and Class C shares (which are not subject to a
contingent deferred sales charge) of shareholders who qualify
to purchase Class A shares at net asset value will be
automatically exchanged for Class A shares on a quarterly
basis, unless the shareholder elects otherwise.
CONVERSION FEATURES
Class B shares will automatically convert to Class A shares on
a quarterly basis approximately seven years after purchase.
Conversions will be effected at relative net asset value
without the imposition of any additional sales charge.
GENERAL
A. Each class of shares shall have exclusive voting rights on any
matter submitted to shareholders that relates solely to its
arrangement and shall have separate voting rights on any
matter submitted to shareholders in which the interests of one
class differ from the interests of any other class.
B. On an ongoing basis, the Directors, pursuant to their
fiduciary responsibilities under the 1940 Act and otherwise,
will monitor the Fund for the existence of any material
conflicts among the interests of its several classes. The
Directors, including a majority of the independent Directors,
shall take such action as is reasonably necessary to eliminate
any such conflicts that may develop. Prudential Mutual Fund
Management, Inc., the Fund's Manager, will be responsible for
reporting any potential or existing conflicts to the
Directors.
<PAGE>
C. For purposes of expressing an opinion on the financial
statements of the Fund, the methodology and procedures for
calculating the net asset value and dividends/distributions of
the Fund's several classes and the proper allocation of income
and expenses among such classes will be examined annually by
the Fund's independent auditors who, in performing such
examination, shall consider the factors set forth in the
relevant auditing standards adopted, from time to time, by the
American Institute of Certified Public Accountants.
Dated: April 11, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000861002
<NAME> PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
<SERIES>
<NUMBER> 001
<NAME> LIMITED MATURITY PORTFOLIO (CLASS A)
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 105,999,499
<INVESTMENTS-AT-VALUE> 108,691,874
<RECEIVABLES> 6,674,131
<ASSETS-OTHER> 525,862
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 115,891,867
<PAYABLE-FOR-SECURITIES> 404,159
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,579,755
<TOTAL-LIABILITIES> 1,983,914
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 147,985,331
<SHARES-COMMON-STOCK> 12,899,656
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 3,819,718
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (40,500,436)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,603,340
<NET-ASSETS> 113,907,953
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,475,193
<OTHER-INCOME> 0
<EXPENSES-NET> 2,068,768
<NET-INVESTMENT-INCOME> 8,406,425
<REALIZED-GAINS-CURRENT> 3,647,613
<APPREC-INCREASE-CURRENT> 1,604,117
<NET-CHANGE-FROM-OPS> 13,658,155
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,824,623)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 43,445,909
<NUMBER-OF-SHARES-REDEEMED> (66,462,304)
<SHARES-REINVESTED> 4,419,538
<NET-CHANGE-IN-ASSETS> (12,763,325)
<ACCUMULATED-NII-PRIOR> (12,026,744)
<ACCUMULATED-GAINS-PRIOR> (40,174,198)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 682,450
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,068,768
<AVERAGE-NET-ASSETS> 53,284,000
<PER-SHARE-NAV-BEGIN> 8.39
<PER-SHARE-NII> 0.60
<PER-SHARE-GAIN-APPREC> 0.40
<PER-SHARE-DIVIDEND> (0.57)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.82
<EXPENSE-RATIO> 1.32
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
<PAGE>
<ARTICLE> 6
<CIK> 0000949512
<NAME> PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
<SERIES>
[NUMBER] 002
<NAME> LIMITED MATURITY PORTFOLIO (CLASS B)
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
[INVESTMENTS-AT-COST] 105,999,499
[INVESTMENTS-AT-VALUE] 108,691,874
[RECEIVABLES] 6,674,131
[ASSETS-OTHER] 525,862
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 115,891,867
[PAYABLE-FOR-SECURITIES] 404,159
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,579,755
[TOTAL-LIABILITIES] 1,983,914
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 147,985,331
[SHARES-COMMON-STOCK] 12,899,656
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 3,819,718
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (40,500,436)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 2,603,340
[NET-ASSETS] 113,907,953
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 10,475,193
[OTHER-INCOME] 0
[EXPENSES-NET] 2,068,768
[NET-INVESTMENT-INCOME] 8,406,425
[REALIZED-GAINS-CURRENT] 3,647,613
[APPREC-INCREASE-CURRENT] 1,604,117
[NET-CHANGE-FROM-OPS] 13,658,155
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (7,824,623)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 43,445,909
[NUMBER-OF-SHARES-REDEEMED] (66,462,304)
[SHARES-REINVESTED] 4,419,538
[NET-CHANGE-IN-ASSETS] (12,763,325)
[ACCUMULATED-NII-PRIOR] (12,026,744)
[ACCUMULATED-GAINS-PRIOR] (40,174,198)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 682,450
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,068,768
[AVERAGE-NET-ASSETS] 70,794,000
[PER-SHARE-NAV-BEGIN] 8.42
[PER-SHARE-NII] 0.55
[PER-SHARE-GAIN-APPREC] 0.40
[PER-SHARE-DIVIDEND] (0.52)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 8.85
[EXPENSE-RATIO] 1.92
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0.00
<PAGE>
<ARTICLE> 6
<CIK> 0000949512
<NAME> PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
<SERIES>
[NUMBER] 003
<NAME> LIMITED MATURITY PORTFOLIO (CLASS C)
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
[INVESTMENTS-AT-COST] 105,999,499
[INVESTMENTS-AT-VALUE] 108,691,874
[RECEIVABLES] 6,674,131
[ASSETS-OTHER] 525,862
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 115,891,867
[PAYABLE-FOR-SECURITIES] 404,159
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,579,755
[TOTAL-LIABILITIES] 1,983,914
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 147,985,331
[SHARES-COMMON-STOCK] 12,899,656
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 3,819,718
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (40,500,436)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 2,603,340
[NET-ASSETS] 113,907,953
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 10,475,193
[OTHER-INCOME] 0
[EXPENSES-NET] 2,068,768
[NET-INVESTMENT-INCOME] 8,406,425
[REALIZED-GAINS-CURRENT] 3,647,613
[APPREC-INCREASE-CURRENT] 1,604,117
[NET-CHANGE-FROM-OPS] 13,658,155
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (7,824,623)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 43,445,909
[NUMBER-OF-SHARES-REDEEMED] (66,462,304)
[SHARES-REINVESTED] 4,419,538
[NET-CHANGE-IN-ASSETS] (12,763,325)
[ACCUMULATED-NII-PRIOR] (12,026,744)
[ACCUMULATED-GAINS-PRIOR] (40,174,198)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 682,450
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,068,768
[AVERAGE-NET-ASSETS] 4,000
[PER-SHARE-NAV-BEGIN] 8.42
[PER-SHARE-NII] 0.55
[PER-SHARE-GAIN-APPREC] 0.40
[PER-SHARE-DIVIDEND] (0.52)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 8.85
[EXPENSE-RATIO] 1.92
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0.00
<PAGE>
<ARTICLE> 6
<CIK> 0000949512
<NAME> PRUDENTIAL GLOBAL LIMITED MATURITY FUND, INC.
<SERIES>
[NUMBER] 004
<NAME> LIMITED MATURITY PORTFOLIO (CLASS Z)
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
[INVESTMENTS-AT-COST] 105,999,499
[INVESTMENTS-AT-VALUE] 108,691,874
[RECEIVABLES] 6,674,131
[ASSETS-OTHER] 525,862
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 115,891,867
[PAYABLE-FOR-SECURITIES] 404,159
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,579,755
[TOTAL-LIABILITIES] 1,983,914
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 147,985,331
[SHARES-COMMON-STOCK] 12,899,656
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 3,819,718
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (40,500,436)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 2,603,340
[NET-ASSETS] 113,907,953
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 10,475,193
[OTHER-INCOME] 0
[EXPENSES-NET] 2,068,768
[NET-INVESTMENT-INCOME] 8,406,425
[REALIZED-GAINS-CURRENT] 3,647,613
[APPREC-INCREASE-CURRENT] 1,604,117
[NET-CHANGE-FROM-OPS] 13,658,155
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (7,824,623)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 43,445,909
[NUMBER-OF-SHARES-REDEEMED] (66,462,304)
[SHARES-REINVESTED] 4,419,538
[NET-CHANGE-IN-ASSETS] (12,763,325)
[ACCUMULATED-NII-PRIOR] (12,026,744)
[ACCUMULATED-GAINS-PRIOR] (40,174,198)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 682,450
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,068,768
[AVERAGE-NET-ASSETS] 0
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 0
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
