(ICON)
Prudential
Intermediate
Global
Income
Fund, Inc.
SEMI
ANNUAL
REPORT
June 30, 1996
(LOGO)
<PAGE>
Prudential Intermediate Global
Income Fund, Inc.
Performance At A Glance.
For the six-month reporting period ended June 30, 1996, the Prudential
Intermediate Global Income Fund produced total returns that were ahead
of similar funds tracked by Lipper Analytical Services. Fund returns,
although modest, stood in sharp contrast to world bond markets, which
generally were sluggish during the reporting period.
<TABLE>
Cumulative Total Returns1 As of 6/30/96
<CAPTION>
Six One Five Since
Months Year Years Inception2
<S> <C> <C> <C> <C>
Class A 2.9% 11.0% 52.7% 86.1%
Class B 2.6 10.4 N/A 39.0
Class C 2.6 10.4 N/A 23.4
Lipper Gen. World Inc. Avg3 1.7 8.7 49.4 81.9
</TABLE>
<TABLE>
Average Annual Total Returns1 As of 6/30/96
<CAPTION>
One Five Since
Year Years Inception2
<S> <C> <C> <C>
Class A 7.7% 8.2% 7.6%
Class B 7.4 N/A 7.7
Class C 9.4 N/A 11.7
</TABLE>
<TABLE>
<CAPTION>
Total Dividends 30-Day
Paid for Six Mos. SEC Yield
<S> <C> <C> <C>
Dividends
& Yields Class A $0.26 6.20%
As of Class B $0.23 5.79
6/30/96 Class C $0.23 5.79
</TABLE>
Past performance is not indicative of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
1Source: Prudential Mutual Fund Management and Lipper Analytical Services.
The cumulative total returns do not take into account applicable sales
charges. The average annual total returns do take into account applicable
sales charges. The Fund charges a maximum front end sales load of 3% for
Class A shares. Class B shares are subject to a declining contingent
deferred sales charge (CDSC) of 3%, 2%, 1% and 1% for four years. Class
C shares have a 1% CDSC for one year. Class B shares will automatically
convert to Class A shares on a quarterly basis, after approximately
five years. The Fund commenced operations on May 26, 1988 as a
closed-end investment company. Effective October 7, 1991, the Fund
commenced operations as an open-end investment company.
2Inception dates: 5/26/88 Class A; 1/15/92 Class B; 8/1/94 Class C.
3These are the average returns of 170 funds in the Lipper General World
Income Fund category for six months; 158 funds for one year; 37 funds
for five years; and 20 funds since inception of Class A shares on
May 26, 1988, as determined by Lipper Analytical Services.
How Investments Compared.
(As of 6/30/96)
(CHART)
Source: Lipper Analytical Services. Financial markets change, so a
mutual fund's past performance should never be used to predict future
results. The risks to each of the investments listed above are
different -- we provide 12-month total returns for several Lipper mutual
fund categories to show you that reaching for higher yields means
tolerating more risk. The greater the risk, the larger the potential
reward or loss. In addition, we've included historical 20-year average
annual returns. These returns assume the reinvestment of dividends.
U.S. Growth Funds will fluctuate a great deal. Investors have received
higher historical total returns from stocks than from most other
investments. Smaller capitalization stocks offer greater potential
for long-term growth but may be more volatile than larger capitalization
stocks.
General Bond Funds provide more income than stock funds, which can help
smooth out their total returns year by year. But their prices still
fluctuate (sometimes significantly) and their returns have been historically
lower than those of stock funds.
General Municipal Debt Funds invest in bonds issued by state governments,
state agencies and/or municipalities. This investment provides income
that is usually exempt from federal and state income taxes.
Money Market Funds attempt to preserve a constant share value; they
don't fluctuate much in price but, historically, their returns have
been generally among the lowest of the major investment categories.
<PAGE>
Gabriel Irwin and Simon Wells, Fund Managers
(PICURE) (PICTURE)
Portfolio
Managers'
Report
Your Fund seeks to maximize total return, which is its current income
plus any capital appreciation of its underlying bonds. The Fund invests
primarily in intermediate-term, investment grade government bonds
issued throughout the world. The Fund may invest up to 10% of total
net assets in bonds rated below investment grade with a minimum rating
of "B" by S&P or Moody's or of comparable quality in our view. Lower
rated securities are subject to a greater risk of loss of principal
and interest than higher rated securities. There are special risks
associated with foreign investing including social, political and
currency risks. There can be no assurance that the Fund's investment
objective will be achieved.
Understand
Hedging.
One of the ways your Fund seeks to enhance return
is to buy (or have the option to buy) "forward
contracts" which predict how one country's
currency may rise or fall in value compared
to other currencies. These contracts state
the price we are willing to pay for the currency
(or will sell it for) at a future date. If our
predictions are correct, we make money on the
contract and these profits are passed along to
the Fund. If we're wrong, the reverse occurs.
This investment practice is sometimes called
"hedging" and is often done by funds which invest
in securities denominated in foreign currencies.
Strategy Session.
We follow a "top down" investment philosophy in our pursuit of total
return. This means we set our strategy by making broad country and
currency allocations. We look for countries with well-managed
economies and well-established currencies. Both are critical in
determining a bond's value and prospects for price appreciation.
Only then do we look at the specific types of bonds and issuers
within a particular country.
As might be expected, the U.S. and the larger countries of Western
Europe dominate issuance in the world's bond markets. As such,
most global bond funds have a significant percentage of assets
in bonds from these countries and ours is no exception. On June
30, 1996, 31% of the Fund's total net assets were invested in the
U.S. bond market, while 63% were invested in non-U.S. bond markets.
Often times though, the most attractive bond market opportunities
surface in lesser known markets such as in Eastern Europe. This
was certainly the case during the past six months.
U.S. Bonds Tumbled.
After a strong start in January, the U.S. bond market tumbled. A
series of economic reports -- more jobs created, increased home and
auto sales plus rising energy costs -- indicated that the U.S. economy
was strong. Investors interpreted these reports to suggest future
inflation, and began expecting the U.S. Federal Reserve to soon
raise short-term interest rates in the U.S. We then shifted some
of our U.S. holdings to non-U.S. bond markets, where slower growing
economies and low inflation were more hospitable to bonds.
Geographic Breakdown.
Expressed as a percentage of
total net assets as of 6/30/96.
(CHART)
<PAGE>
What Went Well.
The U.S. Dollar
Was King.
With the world's major bond markets generally sluggish, we had to look
for other ways to earn money. One of these was by hedging currencies.
The U.S. dollar continued to strengthen against the German mark and
Japanese yen -- two of the world's most-dominant currencies -- during
the past six months. While intuitively a strong dollar seems beneficial
for the U.S., it actually hurts U.S. investors in foreign bonds, since
it requires more marks and yen to equal the value of a single U.S.
dollar. To help protect our Fund from the strong dollar, we purchased
currency contracts that performed well as the dollar rose. It turned
out to be a good strategy, and was the primary reason for the Fund's
above-average return during the past six months.
Emerging Markets Looked Good.
Emerging market countries in Eastern Europe were especially attractive to
us. The Czech Republic, Hungary and Poland were three of our favorites,
thanks to their well-managed economies. Ratings of government and corporate
bonds sold in these countries by Moody's or Standard & Poor's continued
to improve and many offered very attractive yields. A General Electric
bond we bought in Poland, for instance, was AAA rated, yielded 18%,
and won't mature until February 27, 1998. Although these emerging
market countries comprised only about 3% of total net assets on
June 30, 1996, they continued to contribute nicely to the Fund's
total return.
And Not So Well.
More Dollars, Please.
Our currency hedging strategy greatly enhanced performance during the
past six months.
Looking back, we should have purchased even more contracts tied to a
rising U.S. dollar.
Five Largest Issuers.
19.6% U.S. Treasury Note
7.6% Dutch Gov't Bonds
7.1% Danish Gov't Bonds
5.9% Italian Gov't Bonds
5.7% German Gov't Bonds
Expressed as a percentage of total net assets as of 6/30/96.
Looking Ahead.
The world's economies, excluding the U.S.,
continue to grow slowly with low levels of
inflation. In the U.S., the economy appears
to be growing too fast, and higher interest
rates may be on the way making bonds a less
attractive investment. Normally, slow growth
and low inflation would favor bonds, but the
U.S. bond market is so large and influential
that negative sentiment in the U.S. can easily
spill over to bond markets worldwide.
For these reasons we see bond markets remaining
sluggish for the remainder of 1996. We hope
to provide attractive Fund returns by continuing
our currency hedging strategy and by looking
for select opportunities in smaller, lesser-known
markets.
1
<PAGE>
President's Letter August 1, 1996
(PICTURE)
Dear Shareholder:
Last year, U.S. stocks and bonds generally posted extraordinary returns.
Investors celebrated this performance by putting record amounts of new
money into mutual funds in the first few months of 1996. According
to figures released by the Investment Company Institute, a mutual
fund industry trade group, new investments in mutual funds reached
an all-time monthly high of $33 billion in January of 1996. An
additional $66 billion was invested in the following three months,
although this rapid inflow subsided somewhat in late spring.
While we are pleased that mutual funds are attracting new investors,
we're concerned that some of them may be "buying last year's
returns." Few expect 1995's virtual non-stop returns from the
stock and bond markets. In fact, 1996's markets have been
volatile so far (stock and bond prices go down just as they
go up). There's no better time than now to be talking with
your Financial Advisor or Registered Representative. She or
he can help you determine reasonable expectations about both
the potential performance and risks associated with your investments.
Board of Directors Election.
In addition to this report, we are including a notice about a special
shareholder meeting to elect new Prudential mutual fund boards of
directors. Your Board of Directors has approved a proposal to
place a common board of experienced directors across many of
Prudential's mutual funds to improve business efficiency. The
enclosed material contains more complete information about this proposal.
Changes at Prudential.
Finally, there have been some important changes recently at Prudential
that were made with you in mind. Prudential Mutual Funds has moved
under the umbrella of Prudential's newly created "Money Management
Group." This group manages and administers nearly $190 billion in
client assets and provides mutual funds, annuities, defined benefit
and defined contribution plans to our individual and institutional
investors. We plan to improve the range and quality of investment
products and services that we can provide you by better leveraging
Prudential's strengths. There will, however, be no change in the
service you receive from your Financial Advisor, Registered
Representative or our Customer Service unit.
We're excited about our future and hope that you are, too. Thank
you for your continued support and confidence in Prudential Mutual Funds.
Sincerely,
Richard A. Redeker
President
2
<PAGE>
Portfolio of Investments PRUDENTIAL INTERMEDIATE GLOBAL
as of June 30, 1996 (Unaudited) INCOME FUND, INC.
- - ------------------------------------------------------------
- - ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
- - ------------------------------------------------------------
LONG-TERM INVESTMENTS--89.5%
- - ------------------------------------------------------------
Australia--2.5%
A$ 2,900 New South Wales Treasury
Corporation,
6.50%, 5/1/06 $ 1,902,202
4,000 Queensland Treasury
Corporation,
6.50%, 6/14/05 2,663,194
------------
4,565,396
- - ------------------------------------------------------------
Canada--5.0%
C$ 3,000 British Columbia Provincial
Bond,
7.75%, 6/16/03 2,235,307
Canadian Government Bonds,
7,500 9.00%, 12/1/04 5,995,488(a)
1,000 9.00%, 6/1/25 804,901(a)
------------
9,035,696
- - ------------------------------------------------------------
Czech Republic--0.5%
CZK 10,000 International Finance
Corporation,
10.50%, 11/30/98 361,964
15,000 Skoda Finance,
11.625%, 2/9/98 539,952
------------
901,916
- - ------------------------------------------------------------
Denmark--7.1%
Danish Government Bonds,
DKr 22,400 8.00%, 5/15/03 4,042,564
35,000 7.00%, 12/15/04 5,905,337(a)
16,500 8.00%, 3/15/06 2,921,597(a)
------------
12,869,498
- - ------------------------------------------------------------
France--1.2%
FF 10,500 National Bank of Hungary,
8.00%, 11/12/99 2,117,313
Germany--11.0%
DM 4,035 DSL Finance BV,
7.375%, 2/15/00 $ 2,808,222
German Government Bonds,
4,500 6.75%, 4/22/03 3,050,672(a)
8,500 7.375%, 1/3/05 5,910,134(a)
2,500 6.25%, 1/4/24 1,451,296(a)
2,000 Nacional Financier,
10.00%, 8/17/98 1,382,093
4,000 Republic of Columbia,
7.25%, 12/21/00 2,667,104
4,000 Tokyo Gas Co.,
7.00%, 7/27/05 2,667,104
------------
19,936,625
- - ------------------------------------------------------------
Ireland--3.6%
Irish Government Bonds,
IEP 2,700 9.25%, 7/11/03 4,781,160
1,100 8.00%, 8/18/06 1,795,346(a)
------------
6,576,506
- - ------------------------------------------------------------
Italy--6.5%
Lira 1,500,000 Bayerische Landesanstalt Bank,
10.625%, 5/12/00 1,037,381(a)
Italian Government Bonds,
12,750,000 8.50%, 8/1/99 8,324,310(a)
3,500,000 10.00%, 8/1/03 2,395,016
------------
11,756,707
- - ------------------------------------------------------------
Netherlands--7.6%
Dutch Government Bonds,
NLG 5,000 7.50%, 6/15/99 3,146,935
3,100 9.00%, 7/1/00 2,059,897(a)
11,500 7.00%, 6/15/05 7,012,605(a)
2,600 7.50%, 1/15/23 1,602,188(a)
------------
13,821,625
</TABLE>
- - --------------------------------------------------------------------------------
See Notes to Financial Statements. 3 -----
<PAGE>
<PAGE>
Portfolio of Investments PRUDENTIAL INTERMEDIATE GLOBAL
as of June 30, 1996 (Unaudited) INCOME FUND, INC.
- - ------------------------------------------------------------
- - ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
- - ------------------------------------------------------------
New Zealand--3.0%
NZ$ 8,200 New Zealand Government Bond,
8.00%, 2/15/01 $ 5,400,726
- - ------------------------------------------------------------
Poland--0.2%
PLZ 1,250 General Electric Capital
Corporation,
18.25%, 2/27/98 454,065
- - ------------------------------------------------------------
Spain--6.0%
Pts 300,000 Republic of Argentina,
12.80%, 12/9/97 2,410,474
Spanish Government Bonds,
750,000 10.30%, 6/15/02 6,350,583(a)
300,000 8.20%, 2/28/09 2,214,550
------------
10,975,607
- - ------------------------------------------------------------
United Kingdom--4.4%
BP 1,500 Guaranteed Export Finance
Corporation,
7.25%, 12/15/98 2,355,814
2,400 United Kingdom Treasury Bond,
7.75%, 9/8/06 3,673,265(a)
1,350 United Kingdom Treasury Note,
8.00%, 9/27/13 2,053,779
------------
8,082,858
- - ------------------------------------------------------------
United States--30.9%
Corporate Bonds--3.2%
US$ 750 Banco Nacional de Commercial
Exterior (Mexico),
7.50%, 7/1/00 693,000
1,250 Bancomer SA (Mexico),
8.00%, 7/7/98 1,236,875
1,850 Cemex SA (Mexico),
8.875%, 6/10/98 1,842,600
US$ 600 Empresas La Moderna SA
(Mexico),
11.375%, 1/25/99 $ 607,500
1,450 Financiera Energetica Nacional
(Colombia),
9.00%, 11/8/99 1,490,600
------------
5,870,575
------------
Sovereign Bonds--7.4%
500 Argentina Government Bond,
6.3125%, 3/31/05, FRN 386,719
1,500 National Bank of Romania,
9.75%, 6/25/99 1,521,563
1,200 Republic of Brazil,
6.375%, 1/1/01, FRB/IDU 1,044,855
Republic of Colombia,
2,185 7.125%, 5/11/98 2,172,982
1,500 7.25%, 2/23/04 1,430,250
3,500 Republic of Poland,
6.4375%, 10/27/24, FRN 3,263,750
500 Republic of Trinidad & Tobago,
9.75%, 11/3/00 502,000
United Mexican States,
2,000 10.8125%, 7/21/97 2,080,500
1,000 9.75%, 2/6/01 996,500
------------
13,399,119
------------
Supranational Bonds--0.7%
1,350 Corporacion Andina de Fomento,
7.375%, 7/21/00 1,350,000
------------
U.S. Government Obligations--19.6%
United States Treasury Notes,
15,000 6.75%, 6/30/99 15,173,400(a)
6,500 6.125%, 9/30/00 6,423,820(a)
6,000 5.75%, 8/15/03 5,714,040(a)
7,800 7.875%, 11/15/04 8,383,752(a)
------------
35,695,012
------------
56,314,706
------------
Total long-term investments
(cost US$159,075,244) 162,809,244
------------
</TABLE>
- - --------------------------------------------------------------------------------
- - -----4 See Notes to Financial Statements.
<PAGE>
Portfolio of Investments PRUDENTIAL INTERMEDIATE GLOBAL
as of June 30, 1996 (Unaudited) INCOME FUND, INC.
- - ------------------------------------------------------------
- - ------------------------------------------------------------
<TABLE>
<CAPTION>
Principal US$
Amount Value
(000) Description (Note 1)
<C> <S> <C>
- - ------------------------------------------------------------
SHORT-TERM INVESTMENTS--8.9%
- - ------------------------------------------------------------
Australia--1.0%
A$ 2,300 Mellon Bank Time Deposit,
7.25%, 7/3/96 $ 1,815,455
- - ------------------------------------------------------------
Czech Republic--0.5%
CZK 25,000 Unilever, Euro Commercial
Paper,
10.95%(b), 7/22/96 901,022
- - ------------------------------------------------------------
Hungary--0.8%
HUF 75,000 Hungarian Treasury Bill,
24.20%(b), 9/27/96 471,693
150,000 ING Bank, Euro Commercial
Paper,
24.25%, 8/5/96 997,805
------------
1,469,498
- - ------------------------------------------------------------
New Zealand--1.4%
NZ$ 3,700 New Zealand Government Bond,
9.00%, 11/15/96 2,526,681
- - ------------------------------------------------------------
Poland--1.0%
Polish Treasury Bills,
PLZ 1,250 21.202%(b), 7/11/96 457,192
1,250 21.25%(b), 7/24/96 452,773
1,250 21.20%(b), 8/28/96 443,857
1,250 21.00%(b), 9/18/96 438,670
------------
1,792,492
United States--4.2%
Corporate Bonds--0.3%
US$ 685 Financiera Energetica Nacional
(Colombia),
6.625%, 12/13/96 $ 686,712
------------
Repurchase Agreement--3.9%
7,085 Joint Repurchase Agreement
Account,
5.46%, 7/1/96, (Note 5) 7,085,000
------------
7,771,712
------------
Total short-term investments
(cost US$16,329,522) 16,276,860
------------
- - ------------------------------------------------------------
Total Investments--98.4%
(cost $175,404,766; Note 4) 179,086,104
Other assets in excess of
liabilities--1.6% 2,906,702
------------
Net Assets--100% $181,992,806
------------
------------
</TABLE>
- - ---------------
Portfolio securities are classified according to the securities
currency denomination.
(a) Principal amount segregated as collateral for forward currency contracts.
Aggregate value of segregated securities-US$93,590,012.
(b) Percentages quoted represent yield-to-maturity as of purchase date.
FRB-Floating Rate Bond.
FRN-Floating Rate Note.
IDU-Interest Due and Unpaid Bonds.
- - --------------------------------------------------------------------------------
See Notes to Financial Statements. 5 -----
<PAGE>
Statement of Assets PRUDENTIAL INTERMEDIATE GLOBAL
and Liabilities (Unaudited) INCOME FUND, INC.
- - --------------------------------------------------------------------------------
<TABLE>
<S>
<C>
Assets
June 30, 1996
Investments, at value (cost
$175,404,766)...................................................................
$179,086,104
Foreign currency (cost
$466,090)....................................................................
........ 465,942
Cash.........................................................................
............................... 454
Interest
receivable...................................................................
...................... 4,341,549
Receivable for Fund shares
sold.........................................................................
.... 91,997
Forward currency contracts-net amount receivable from
counterparties........................................ 35,506
Other
assets.......................................................................
......................... 6,536
-------------
Total
assets.......................................................................
...................... 184,028,088
-------------
Liabilities
Payable for investments
purchased....................................................................
....... 443,112
Forward currency contracts--net amount payable to
counterparties............................................ 423,766
Accrued
expenses.....................................................................
....................... 422,003
Payable for Fund shares
reacquired...................................................................
....... 303,420
Dividends
payable......................................................................
..................... 300,738
Management fee
payable......................................................................
................ 112,139
Distribution fee
payable......................................................................
.............. 30,104
-------------
Total
liabilities..................................................................
...................... 2,035,282
-------------
Net
Assets.......................................................................
........................... $181,992,806
-------------
-------------
Net assets were comprised of:
Common stock, at
par..........................................................................
........... $ 21,954
Paid-in capital in excess of
par.........................................................................
254,140,366
-------------
254,162,320
Undistributed net investment
income......................................................................
7,438,369
Accumulated net realized loss on
investments.............................................................
(82,873,111)
Net unrealized appreciation on investments and foreign
currencies........................................ 3,265,228
-------------
Net assets, June 30,
1996.........................................................................
.......... $181,992,806
-------------
-------------
Class A:
Net asset value and redemption price per share
($166,657,625 / 20,105,870 shares of common stock issued and
outstanding)............................. $8.29
Maximum sales charge (3.00% of offering
price)...........................................................
.26
Maximum offering price to
public.........................................................................
$8.55
Class B:
Net asset value, offering price and redemption price per share
($15,165,351 / 1,827,886 shares of common stock issued and
outstanding)............................... $8.30
Class C:
Net asset value, offering price and redemption price per share
($169,830 / 20,470 shares of common stock issued and
outstanding)..................................... $8.30
</TABLE>
- - --------------------------------------------------------------------------------
- - -----6 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
INCOME FUND, INC.
Statement of Operations (Unaudited)
- - ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income June 30, 1996
<S> <C>
Income
Interest and discount earned (net of
foreign withholding taxes of $12,892)... $ 7,496,332
-------------
Expenses
Management fee............................. 711,109
Distribution fee--Class A.................. 129,822
Distribution fee--Class B.................. 61,711
Distribution fee--Class C.................. 289
Transfer agent's fees and expenses......... 201,000
Custodian's fees and expenses.............. 117,000
Reports to shareholders.................... 63,000
Registration fees.......................... 40,000
Audit fees and expenses.................... 36,000
Directors' fees and expenses............... 17,000
Legal fees and expenses.................... 16,000
Insurance expense.......................... 2,000
Miscellaneous.............................. 2,774
-------------
Total expenses.......................... 1,397,705
-------------
Net investment income......................... 6,098,627
-------------
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign
Currency Transactions
Net realized gain on:
Investment transactions.................... 704,171
Foreign currency transactions.............. 5,498,867
-------------
6,203,038
-------------
Net change in unrealized depreciation of:
Investments................................ (6,725,190)
Foreign currencies......................... (34,598)
-------------
(6,759,788)
-------------
Net loss on investments and foreign
currencies................................. (556,750)
-------------
Net Increase in Net Assets
Resulting from Operations..................... $ 5,541,877
-------------
-------------
</TABLE>
PRUDENTIAL INTERMEDIATE GLOBAL
INCOME FUND, INC.
Statement of Changes in Net Assets (Unaudited)
- - ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) June 30, December 31,
in Net Assets 1996 1995
<S> <C> <C>
Operations
Net investment income.......... $ 6,098,627 $ 13,288,621
Net realized gain on investment
and
foreign currency
transactions................ 6,203,038 18,708,769
Net change in net unrealized
appreciation/depreciation on
investments and foreign
currencies.................. (6,759,788) 15,737,917
------------ ------------
Net increase in net assets
resulting from operations... 5,541,877 47,735,307
------------ ------------
Net equalization debits........... -- (68,241)
------------ ------------
Dividends and distributions (Note 1)
Dividends from net investment
income
Class A..................... (5,437,663) (12,197,948)
Class B..................... (469,674) (1,089,996)
Class C..................... (2,230) (677)
------------ ------------
(5,909,567) (13,288,621)
------------ ------------
Distributions in excess of net
investment income
Class A..................... -- (5,263,793)
Class B..................... -- (470,367)
Class C..................... -- (293)
------------ ------------
-- (5,734,453)
------------ ------------
Fund share transactions (net of
share conversions) (Note 6)
Net proceeds from shares
sold........................ 1,749,850 16,586,187
Net asset value of shares
issued in reinvestment of
dividends and
distributions............... 1,730,328 5,341,402
Cost of shares reacquired...... (20,434,342) (81,316,129)
------------ ------------
Net decrease in net assets from
Fund share transactions..... (16,954,164) (59,388,540)
------------ ------------
Total decrease.................... (17,321,854) (30,744,548)
Net Assets
Beginning of period............... 199,314,660 230,059,208
------------ ------------
End of period..................... $181,992,806 $199,314,660
------------ ------------
------------ ------------
</TABLE>
- - --------------------------------------------------------------------------------
See Notes to Financial Statements. 7 -----
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Notes to Financial Statements (Unaudited) INCOME FUND, INC.
- - --------------------------------------------------------------------------------
Prudential Intermediate Global Income Fund, Inc., (the ``Fund'') was organized
in Maryland as a closed-end, non-diversified management investment company and
commenced investment operations on May 26, 1988. On October 4, 1991 the Fund
concluded operations as a closed-end investment company and effective October
7,
1991, commenced operations as an open-end, non-diversified investment company.
The Fund's investment objective is to maximize total return, the components of
which are current income and capital appreciation, by investing in a portfolio
consisting primarily of U.S. and foreign government securities. The Fund will
also engage in certain hedging strategies to meet its investment objective. The
ability of issuers of debt securities held by the Fund to meet their obligations
may be affected by economic and political developments in a specific country or
region.
- - ------------------------------------------------------------
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Security 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 rate. Portfolio securities (including options) are valued
at their current market value as determined by an independent pricing service,
principal market maker or by reference to the applicable exchange price. Forward
currency exchange contracts are valued at the current cost of covering or
offsetting the contract on the day of valuation. Securities and assets 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 of
the Fund.
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
current rates of exchange;
(ii) purchases and sales of investment securities, income and expenses--at the
rates of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates
and market values at the close of the period, the Fund does not isolate that
portion of the results of operations arising as a result of changes in the
foreign exchange rates from the fluctuations arising from changes in the market
prices of the securities held at period end. Similarly, the Fund does not
isolate the effect of changes in foreign exchange rates from the fluctuations
arising from changes in the market prices of long-term debt securities sold
during the period. Accordingly, such realized foreign currency gains and losses
are included in the reported net realized gains/losses on investment
transactions.
Net realized gains on foreign currency transactions represent net foreign
exchange gains and losses from sales and maturities of short-term securities and
forward currency contracts, holding of foreign currencies, currency gains or
losses realized between the trade and settlement dates on securities
transactions, and the difference between the amounts of interest and foreign
taxes recorded on the Fund's books and the U.S. dollar equivalent amounts
actually received or paid. Net currency gains and losses from valuing foreign
currency denominated assets (excluding investments) and liabilities at period
end exchange rates are reflected as a component of net unrealized
appreciation/depreciation on investments and foreign currencies.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. companies as a result of,
among other factors, the possibility of political or economic instability and
the level of governmental supervision and regulation of foreign securities
markets.
Forward Currency Contracts: A forward currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. The Fund enters into forward currency contracts in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign portfolio
holdings or on specific receivables and payables denominated in a foreign
currency. The contracts are valued daily at current exchange rates and any
- - --------------------------------------------------------------------------------
- - -----8
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Notes to Financial Statements (Unaudited) INCOME FUND, INC.
- - --------------------------------------------------------------------------------
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.
Security Transactions and Net Investment Income: Security 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.
Taxes: It is the Fund's policy 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.
Equalization: Effective January 1, 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 portion of the undistributed net investment income balance of
$402,412 at December 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 of net
investment income monthly and makes distributions at least annually of any net
capital gains. Dividends and distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
foreign currency transactions.
Reclassification of Capital Accounts: The Fund accounts for and reports
distributions to shareholders in accordance with 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 of Position was to reclassify $5,195,466 of
foreign currency gains to undistributed net investment income from accumulated
net realized loss on investments. Net investment income, net realized gains and
net assets were not affected by this change.
- - ------------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement with Prudential Mutual Fund Management, Inc.
(``PMF''). Pursuant to this agreement, PMF has responsibility for all investment
advisory services and supervises the subadviser's performance of such services.
PMF has entered into a subadvisory agreement with The Prudential Investment
Corporation (``PIC''); PIC furnishes investment advisory services in connection
with the management of the Fund. PMF pays for the cost of the subadviser's
services, the compensation of officers of the Fund, occupancy and certain
clerical and bookkeeping costs of the Fund. The Fund bears all other costs and
expenses.
The management fee paid PMF is computed daily and payable monthly at an annual
rate of .75% of the Fund's average daily net assets.
The Fund has a distribution agreement with Prudential Securities Incorporated
(``PSI''), which acts as the distributor of the Class A, Class B and Class C
shares of the Fund. The Fund compensates PSI for distributing and servicing the
Fund's Class A, Class B and Class C shares, pursuant to plans of distribution
(the ``Class A, B and C Plans''), 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 with respect
to
Class A, B and C shares, for distribution-related activities at an annual rate
of up to .30 of 1%, .75 of 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 six months ended June 30, 1996.
PSI has advised the Fund that it has received approximately $9,600 in front-end
sales charges resulting from sales of Class A shares during the six months ended
June 30, 1996. From these fees, PSI paid such sales charges to Pruco Securities
Corporation, an affiliated broker-dealer, which in turn paid commissions to
salespersons and incurred other distribution costs.
- - --------------------------------------------------------------------------------
9 -----
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Notes to Financial Statements (Unaudited) INCOME FUND, INC.
- - --------------------------------------------------------------------------------
PSI has advised the Fund that for the six months ended June 30, 1996, it
received approximately $22,700 and $100 in contingent deferred sales charges
imposed upon certain redemptions by Class B and C shareholders, respectively.
PSI, PMF and PIC are indirect, wholly-owned subsidiaries of The Prudential
Insurance Company of America.
- - ------------------------------------------------------------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services, Inc. (``PMFS''), a wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent and during the six months ended June
30, 1996, the Fund incurred fees of approximately $168,000 for the services of
PMFS. As of June 30, 1996, fees of approximately $28,000 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 written options, for the six months ended June 30, 1996, aggregated
$39,070,576 and $50,766,737, respectively.
At June 30, 1996, the Fund had outstanding forward currency contracts to sell
foreign currencies as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Payable Value (Depreciaton)
- - ------------------------------- --------------- ----------- --------------
<S> <C> <C> <C>
Canadian Dollars,
expiring 7/29/96.............. $ 5,289,092 $ 5,274,343 $ 14,749
Deutschemarks,
expiring 7/29/96.............. 37,738,453 37,943,746 (205,293)
French Francs,
expiring 7/29-9/16/96......... 6,046,383 6,067,613 (21,230)
Japanese Yen,
expiring 7/29/96.............. 2,534,562 2,513,805 20,757
New Zealand Dollars,
expiring 7/29/96.............. 23,300,914 23,426,887 (125,973)
Swiss Francs,
expiring 7/29/96.............. 7,671,628 7,742,898 (71,270)
--------------- ----------- --------------
$82,581,032 $82,969,292 $ (388,260)
--------------- ----------- --------------
--------------- ----------- --------------
</TABLE>
The federal income tax basis of the Portfolio's investments at June 30, 1996 was
$175,428,387 and, accordingly, net unrealized appreciation for federal income
tax purposes was $3,657,717 (gross unrealized appreciation--$6,346,241 gross
unrealized depreciation--$2,688,524).
For federal income tax purposes, the Fund has a capital loss carryforward as of
December 31, 1995, of approximately $83,764,100 of which $41,890,000 expires in
1997, $23,240,000 expires in 1998 and $18,634,100 expires in 2002. Accordingly,
no capital gains distribution is expected to be paid to shareholders until net
gains have been realized in excess of the aggregate of such amounts.
- - ------------------------------------------------------------
Note 5. Joint Repurchase Agreement Account
The Fund, 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 June 30, 1996, the Fund
has a 0.6% undivided interest in the joint account. The undivided interest for
the Fund represents $7,085,000 in the principal amount. As of such date, each
repurchase agreement in the joint account and the collateral therefor were as
follows:
Bear, Stearns & Co., 5.40%, in the principal amount of $369,000,000, repurchase
price $369,166,050, due 7/1/96. The value of the collateral including accrued
interest is $377,194,429.
Goldman, Sachs & Co. Inc., 5.47%, in the principal amount of $369,000,000,
repurchase price $369,168,203, due 7/1/96. The value of the collateral including
accrued interest is $376,380,556.
Smith Barney, Inc., 5.50%, in the principal amount of $369,000,000, repurchase
price $369,169,125, due 7/1/96. The value of the collateral including accrued
interest is $376,380,118.
- - ------------------------------------------------------------
Note 6. Capital
The Fund 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 qualify to purchase Class A shares at net asset value.
There are 2 billion authorized shares of $.001 par value common stock divided
equally into Class A, B and C shares. Of the 21,954,226 shares of
- - --------------------------------------------------------------------------------
- - -----10
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Notes to Financial Statements (Unaudited) INCOME FUND, INC.
- - --------------------------------------------------------------------------------
common stock issued and outstanding at June 30, 1996, PMF owned 12,717 Class A
shares.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- - ---------------------------------- ----------- ------------
<S> <C> <C>
Six months ended June 30, 1996:
Shares sold....................... 71,464 $ 591,715
Shares issued in reinvestment of
dividends....................... 177,920 1,468,921
Shares reacquired................. (2,108,481) (17,419,075)
----------- ------------
Net decrease in shares outstanding
before conversion............... (1,859,097) (15,358,439)
Shares issued upon conversion from
Class B......................... 43,517 355,662
----------- ------------
Net decrease in shares
outstanding..................... (1,815,580) $(15,002,777)
----------- ------------
----------- ------------
Year ended December 31, 1995:
Shares sold....................... 1,850,612 $15,008,482
Shares issued in reinvestment of
dividends....................... 550,526 4,466,762
Shares reacquired................. (8,945,391) (72,011,740)
----------- ------------
Net decrease in shares outstanding
before conversion............... (6,544,253) (52,536,496)
Shares issued upon conversion from
Class B......................... 169,839 1,290,841
----------- ------------
Net decrease in shares
outstanding..................... (6,374,414) $(51,245,655)
----------- ------------
----------- ------------
<CAPTION>
Class B
- - ----------------------------------
<S> <C> <C>
Six months ended June 30, 1996:
Shares sold....................... 120,173 $ 998,234
Shares issued in reinvestment of
dividends....................... 31,391 259,399
Shares reacquired................. (363,965) (3,008,416)
----------- ------------
Net decrease in shares outstanding
before conversion............... (212,401) (1,750,783)
Shares reacquired upon conversion
into Class A.................... (43,464) (355,662)
----------- ------------
Net decrease in shares
outstanding..................... (255,865) $(2,106,445)
----------- ------------
----------- ------------
<CAPTION>
Class B Shares Amount
- - ---------------------------------- ----------- ------------
<S> <C> <C>
Year ended December 31, 1995:
Shares sold....................... 195,759 $ 1,567,104
Shares issued in reinvestment of
dividends....................... 107,743 873,686
Shares reacquired................. (1,173,472) (9,304,389)
----------- ------------
Net decrease in shares outstanding
before conversion............... (869,970) (6,863,599)
Shares reacquired upon conversion
into Class A.................... (169,615) (1,290,841)
----------- ------------
Net decrease in shares
outstanding..................... (1,039,585) $(8,154,440)
----------- ------------
----------- ------------
Class C
- - ----------------------------------
Six months ended June 30, 1996:
Shares sold....................... 19,482 $ 159,901
Shares issued in reinvestment of
dividends....................... 243 2,008
Shares reacquired................. (836) (6,851)
----------- ------------
Increase in shares outstanding.... 18,889 $ 155,058
----------- ------------
----------- ------------
Year ended December 31, 1995:
Shares sold....................... 1,439 $ 10,601
Shares issued in reinvestment of
dividends....................... 116 954
----------- ------------
Increase in shares outstanding.... 1,555 $ 11,555
----------- ------------
----------- ------------
</TABLE>
- - --------------------------------------------------------------------------------
11 -----
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Financial Highlights (Unaudited) INCOME FUND, INC.
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A(e)
- - -----------------------------------------------------------------------------
- - -----
Six Months
Ten Months
Ended Year Ended December
31, Ended Year Ended
June 30,
- - ---------------------------------- December 31, February 29,
1996 1995 1994
1993 1992(b) 1992
---------- -------- --------
-------- ------------ ------------
<S> <C> <C> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period........................... $ 8.30 $ 7.32 $ 8.43
$ 7.77 $ 8.39 $ 8.79
---------- -------- --------
-------- ------------ ------------
Income from investment operations
Net investment income............... .27(d) .52(d) .50
.59 .61 .71
Net realized and unrealized gain
(loss) on investment and foreign
currency transactions............ (.02)(d) 1.20(d) (1.09)
.63 (.36) (.36)
---------- -------- --------
-------- ------------ ------------
Total from investment
operations.................... .25 1.72 (.59)
1.22 .25 .35
---------- -------- --------
-------- ------------ ------------
Less distributions
Dividends from net investment
income........................... (.26) (.52)(d) (.29)
(.48) (.59) (.71)
Distributions in excess of net
investment income................ -- (.22)(d) --
-- -- --
Distributions from capital gains.... -- -- (.01)
(.08) (.28) --
Tax return of capital
distributions.................... -- -- (.22)
-- -- (.04)
---------- -------- --------
-------- ------------ ------------
Total distributions.............. (.26) (.74) (.52)
(.56) (.87) (.75)
---------- -------- --------
-------- ------------ ------------
Net asset value, end of period...... $ 8.29 $ 8.30 $ 7.32
$ 8.43 $ 7.77 $ 8.39
---------- -------- --------
-------- ------------ ------------
---------- -------- --------
-------- ------------ ------------
TOTAL RETURN(c):.................... 2.92% 24.01% (7.02)%
16.12% 3.09% 4.24%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..... $166,658 $181,985 $207,153
$320,406 $378,865 $271,714
Average net assets (000)............ $174,047 $200,759 $262,882
$355,018 $331,339 $399,714
Ratios to average net assets:
Expenses, including distribution
fees.......................... 1.42%(a) 1.40% 1.46%
1.41% 1.30%(a) 1.20%
Expenses, excluding distribution
fees.......................... 1.27%(a) 1.25% 1.31%
1.26% 1.15%(a) 1.15%
Net investment income............ 6.48%(a) 6.09% 6.04%
7.42% 9.08%(a) 8.43%
Portfolio turnover rate............. 23% 220% 554%
361% 201% 170%
</TABLE>
- - ---------------
(a) Annualized.
(b) The Fund changed its fiscal year end to December 31.
(c) Total return does not consider the effect of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(d) Calculated based upon average shares outstanding during the fiscal period.
(e) Prior to October 7, 1991, the Fund was organized as a closed-end fund.
- - --------------------------------------------------------------------------------
- - -----12 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL INTERMEDIATE GLOBAL
Financial Highlights (Unaudited) INCOME FUND, INC.
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class
B Class C
- - ------------------------------------------------------------------------------
--------
Six
January 15, Six
Months
Ten Months 1992(f) Months
Ended Year Ended December 31,
Ended Through Ended
June 30,
- - ------------------------------- December 31, February 29, June 30,
1996 1995 1994
1993 1992(b) 1992 1996
-------- ------- -------
- - ------- ------------ ------------ --------
<S> <C> <C> <C> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period........................... $ 8.31 $ 7.33 $ 8.44 $
7.79 $ 8.40 $ 8.43 $ 8.31
-------- ------- -------
- - ------- ------------ ----- --------
Income from investment operations
Net investment income............... .24(d) .47(d) .45
.54 .57 .08 .24(d)
Net realized and unrealized gain
(loss) on investment and foreign
currency transactions............ (.02)(d) 1.20(d) (1.09)
.63 (.35) (.03) (.02)(d)
-------- ------- -------
- - ------- ------------ ----- --------
Total from investment
operations.................... .22 1.67 (.64)
1.17 .22 .05 .22
-------- ------- -------
- - ------- ------------ ----- --------
Less distributions
Dividends from net investment
income........................... (.23) (.47)(d) (.26)
(.44) (.55) (.08) (.23)
Distributions in excess of net
investment income................ -- (.22)(d) --
- - -- -- -- --
Distributions from capital gains.... -- -- (.01)
(.08) (.28) -- --
Tax return of capital
distributions.................... -- -- (.20)
- - -- -- -- --
-------- ------- -------
- - ------- ------------ ----- --------
Total distributions.............. (.23) (.69) (.47)
(.52) (.83) (.08) (.23)
-------- ------- -------
- - ------- ------------ ----- --------
Net asset value, end of period...... $ 8.30 $ 8.31 $ 7.33 $
8.44 $ 7.79 $ 8.40 $ 8.30
-------- ------- -------
- - ------- ------------ ----- --------
-------- ------- -------
- - ------- ------------ ----- --------
TOTAL RETURN(c):.................... 2.63% 23.25% (7.69)%
15.29% 2.70% 0.58% 2.63%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..... $15,165 $17,317 $22,906
$39,440 $ 33,500 $1,049 $ 170
Average net assets (000)............ $16,547 $19,336 $31,835
$36,197 $ 18,358 $ 456 $ 77
Ratios to average net assets:
Expenses, including distribution
fees.......................... 2.02%(a) 2.00% 2.07%
2.01% 1.90%(a) 1.03%(a) 2.02%(a)
Expenses, excluding distribution
fees.......................... 1.27%(a) 1.25% 1.31%
1.26% 1.15%(a) .28%(a) 1.27%(a)
Net investment income............ 5.88%(a) 5.49% 5.44%
6.67% 8.54%(a) 9.43%(a) 5.88%(a)
Portfolio turnover rate............. 23% 220% 554%
361% 201% 170% 23%
<CAPTION>
August 1,
1994(g)
Year Ended Through
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period........................... $ 7.33 $ 7.69
----- -----
Income from investment operations
Net investment income............... .47(d) .14
Net realized and unrealized gain
(loss) on investment and foreign
currency transactions............ 1.20(d) (.32)
----- -----
Total from investment
operations.................... 1.67 (.18)
----- -----
Less distributions
Dividends from net investment
income........................... (.47)(d) (.10)
Distributions in excess of net
investment income................ (.22)(d) --
Distributions from capital gains.... -- --
Tax return of capital
distributions.................... -- (.08)
----- -----
Total distributions.............. (.69) (.18)
----- -----
Net asset value, end of period...... $ 8.31 $ 7.33
----- -----
----- -----
TOTAL RETURN(c):.................... 23.25% (2.44)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..... $ 13 $ 193(e)
Average net assets (000)............ $ 11 $ 197(e)
Ratios to average net assets:
Expenses, including distribution
fees.......................... 2.00% 1.05%(a)
Expenses, excluding distribution
fees.......................... 1.25% .30%(a)
Net investment income............ 5.49% 3.30%(a)
Portfolio turnover rate............. 220% 554%
</TABLE>
- - ---------------
(a) Annualized.
(b) The Fund changed its fiscal year end to December 31.
(c) Total return does not consider the effect of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(d) Calculated based upon average shares outstanding during the fiscal period.
(e) Figures are actual and not rounded to the nearest thousand.
(f) Commencement of offering of Class B shares.
(g) Commencement of offering of Class C shares.
- - --------------------------------------------------------------------------------
See Notes to Financial Statements. 13 -----
<PAGE>
<PAGE>
Getting
The Most
From Your
Prudential
Mutual
Fund.
Some mutual fund shareholders won't ever read this -- they don't read
annual and semi-annual reports. It's quite understandable. These annual
and semi-annual reports are prepared to comply with Federal regulations.
They are often written in language that is difficult to understand. So
when most people run into those particularly daunting sections of these
reports, they don't read them.
We think that's a mistake.
At Prudential Mutual Funds, we've made some changes to our report to make
it easier to understand and more pleasant to read, in hopes you'll find
it profitable to spend a few minutes familiarizing yourself with your
investment. Here's what you'll find in the report:
At A Glance
Since an investment's performance is often a shareholder's primary concern,
we present performance information in two different formats. You'll find
it first on the "At A Glance" page where we compare the Fund and the
comparable average calculated by Lipper Analytical Services, a nationally
recognized mutual fund rating agency. We report both the cumulative
total returns and the average annual total returns. The cumulative
total return is the total amount of income and appreciation the Fund
has achieved in various time periods. The average annual total return
is an annualized representation of the Fund's performance -- it generally
smoothes out returns and gives you an idea how much the Fund has
earned in an average year, for a given time period. Under the
performance box, you'll see legends that explain the performance
information, whether fees and sales charges have been included in
returns, and the inception dates for the Fund's share classes.
See the performance comparison charts at the back of the report for
more performance information. And keep in mind that past performance
is not indicative of future results.
Portfolio Manager's Report
The portfolio manager who invests your money for you reports on
successful -- and not-so-successful -- strategies in this section
of your report. Look for recent purchases and sales here, as well
as information about the sectors the portfolio manager favors and
any changes that are on the drawing board.
Portfolio Of Investments
This is where the report begins to look technical, but it's really just a
listing of each security held at the end of the reporting period, along
with valuations and other information. Please note that sometimes we
discuss a security in the Portfolio Manager's Report that doesn't
appear in this listing because it was sold before the close of the
reporting period.
<PAGE>
Statement Of Assets
And Liabilities
The balance sheet shows the assets (the value of the Fund's holdings),
liabilities (how much the Fund owes) and net assets (the Fund's equity,
or holdings after the Fund pays its debts) as of the end of the
reporting period. It also shows how we calculate the net asset value
per share for each class of shares. The net asset value is reduced by
payment of your dividend, capital gain, or other distribution, but
remember that the money or new shares are being paid or issued to you.
The net asset value fluctuates daily along with the value of every
security in the portfolio.
Statement Of
Operations
This is the income statement, which details income (mostly interest
and dividends earned) and expenses (including what you pay us to manage
your money). You'll also see capital gains here -- both realized and
unrealized.
Statement Of Changes
In Net Assets
This schedule shows how income and expenses translate into changes in
net assets. The Fund is required to pay out the bulk of its income to
shareholders every year, and this statement shows you how we do it --
through dividends and distributions -- and how that affects the net
assets. This statement also shows how money from investors flowed into
and out of the Fund.
Notes To Financial
Statements
This is the kind of technical material that can intimidate readers,
but it does contain useful information. The Notes provide a brief
history and explanation of your Fund's objectives. In addition, they
also outline how Prudential Mutual Funds prices securities. The Notes
also explain who manages and distributes the Fund's shares, and more
importantly, how much they are paid for doing so. Finally, the Notes
explain how many shares are outstanding and the number issued and
redeemed over the period.
Financial Highlights
This information contains many elements from prior pages, but on a per
share basis. It is designed to help you understand how the Fund
performed and to compare this year's performance and expenses to
those of prior years.
Independent
Auditor's Report
Once a year, an outside auditor looks over our books and certifies
that the information is fairly presented and complies with generally
accepted accounting principles.
Tax Information
This is information which we report annually about how much of your
total return is taxable. Should you have any questions, you may want
to consult a tax advisor.
Performance
Comparison
These charts are included in the annual report and are required by
the Securities Exchange Commission. Performance is presented here as
a hypothetical $10,000 investment in the Fund since its inception or
for 10 years (whichever is shorter). To help you put that return in
context, we are required to include the performance of an unmanaged,
broad based securities index, as well. The index does not reflect
the cost of buying the securities it contains or the cost of managing
a mutual fund. Of course, the index holdings do not mirror those of
the fund -- the index is a broadly based reference point commonly
used by investors to measure how well they are doing. A definition
of the selected index is also provided. Investors generally cannot
invest directly in an index.
<PAGE>
Getting
The Most
From Your
Prudential
Mutual Fund.
How many times have you read these letters -- or other financial
materials -- and stumbled across a word that you don't understand?
Many shareholders have run into the same problem. We'd like to help.
So we'll use this space from time to time to explain some of the
words you might have read, but not understood. And if you have a
favorite word that no one can explain to your satisfaction, please
write to us.
Basis Point: One 1/100th of 1%. For example, one half of one percentage
point is 50 basis points.
Call Option: A contract giving the holder a right to buy stocks or
bonds at a predetermined price (called the strike price) before a
predetermined expiration date. A buyer of a call option generally
expects to benefit from a rise in the price of the stock or bond.
Capital Gain/Capital Loss: The difference between the cost of a
capital asset (for example, a stock, bond or mutual fund share)
and its selling price. Under current law the federal income tax
rate for individuals on a long-term capital gain is up to 28%.
Collateralized Mortgage Obligations (CMOs): Pools of mortgage-backed
securities sliced in maturity ranges that bear differing interest
rates. These instruments are sensitive to changes in interest rates
and homeowner refinancing activity. They are subject to prepayment
and maturity extension risk.
Derivatives: Securities that derive their value from another security.
The rate of return of these financial products rises and falls -- sometimes
very suddenly -- in response to changes in some specific interest rate,
currency, stock or other variable.
Discount Rate: The interest rate charged by the Federal Reserve on
loans to banks and other depository institutions.
Federal Funds Rate: The interest rate charged by one bank to another
on overnight loans.
Futures Contract: An agreement to deliver a specific amount of a
commodity or financial instrument at a set price at a stipulated
time in the future.
Leverage: The use of borrowed assets to enhance return on equity.
The expectation is that the interest rate charged will be lower than
the return on the investment. While leverage can increase profits,
it can also magnify losses.
Liquidity: The ease with which a financial instrument (or mutual fund)
can be bought or sold (converted into cash) in the financial markets.
Price/Earnings Ratio: The price of a share of stock divided by the
earnings per share for a 12-month period.
Option: An agreement to sell something, such as shares of stock, by
a certain time for a specified price. An option need not be exercised.
Spread: The difference between two values; most often used to describe
the difference between prices bid and asked for a security.
Yankee Bond: A bond denominated in U.S. dollars but sold by a foreign
company or government in the U.S. market.
<PAGE>
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
(800) 225-1852
http:\\www.prudential.com
Directors
Thomas A. Owens, Jr.
Richard A. Redeker
Gerald A. Stahl
Stephen Stoneburn
Robert H. Wellington
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Deborah A. Docs, Assistant Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributor
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, NY 10022
The views expressed in this report and information about the Fund's
portfolio holdings are for the period covered by this report and
are subject to change thereafter.
The accompanying financial statements as of June 30, 1996 were not
audited and, accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective
investors unless preceded or accompanied by a current prospectus.
<PAGE>
(LOGO)
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
(800) 225-1852
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