AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 2, 2001
REGISTRATION NO. 333-______
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/ / Pre-Effective Amendment No. _____ / / Post-Effective Amendment No. _____
(Check appropriate box or boxes)
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Exact Name of Registrant as Specified in Charter: Area Code and Telephone Number
Prudential Global Total Return Fund, Inc. (973) 367-7525
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Address of Principal Executive Offices: (Number, Street, City, State, Zip Code)
Gateway Center Three, 100 Mulberry Street, 4th Floor, Newark, New Jersey 07102-4077
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Name and Address of Agent for Service: Approximate Date of Proposed Public Offering:
Marguerite E.H. Morrison, Esq.
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(Number and Street) (City) (State) (Zip Code) AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THE
Gateway Center Three, 100 Mulberry Street, 4th Floor
Newark, New Jersey 07102-4077 REGISTRATION STATEMENT.
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Title of Securities Being Registered.............................................Shares of Common Stock, par value $.01 per share
No filing fee is required because of reliance on section 24(f) of the
Investment Company Act of 1940. Pursuant to Rule 429 under the Securities Act of
1933, the Prospectus and Proxy Statement relates to shares previously registered
on Form N-1A (File No. 33-63943).
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may
determine.
PRUDENTIAL INTERNATIONAL BOND FUND, INC.
Gateway Center Three
100 Mulberry Street, 4th Floor
Newark, New Jersey 07102-4077
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IMPORTANT PROXY MATERIALS
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PLEASE VOTE NOW!
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March ___, 2001
Dear Shareholder:
I am inviting you to vote on an important proposal to reorganize Prudential
International Bond Fund, Inc. into Prudential Global Total Return Fund, Inc. A
shareholder meeting of Prudential International Bond Fund, Inc. is scheduled for
April __, 2001. This package contains information about the proposal and
includes materials you will need to vote by mail, through the internet or by
telephone.
The Board of Directors of Prudential International Bond Fund, Inc. has
reviewed the reorganization proposal and has recommended that it be presented to
shareholders for their consideration. Although the Directors have determined
that a reorganization is in the shareholders' best interest, the final decision
is yours.
If approved, the reorganization would give you the opportunity to
participate in a larger fund with similar investment policies and identical
investment objectives and class structures. The combined fund would have a
better long-term performance record and benefit from increased economies of
scale. To help you understand the proposal, we are including a section that
answers commonly asked questions about these transactions. The accompanying
proxy statement includes a detailed description of the proposed reorganization.
Please read the enclosed materials carefully and cast your vote. Remember,
your vote is extremely important, no matter how large or small your holdings. By
voting now, you can help avoid additional costs that are incurred with follow-up
letters and calls.
TO VOTE, YOU MAY USE ANY OF THE FOLLOWING METHODS:
- BY MAIL. Please complete, date and sign your proxy card before mailing
it in the enclosed postage-paid envelope.
- BY INTERNET. Have your proxy card available. Go to the web site:
www.proxyvote.com. Enter your 12-digit control number from your proxy
card. Follow the simple instructions found on the web site.
- BY TELEPHONE. Call 1-800-690-6903 toll free. Enter your 12-digit
control number from your proxy card. Follow the simple instructions.
SPECIAL NOTE FOR SYSTEMATIC INVESTMENT PLANS AND THOSE WITH OUTSTANDING
CERTIFICATES (E.G., AUTOMATIC INVESTMENT PLAN, SYSTEMATIC EXCHANGE, ETC.)
Shareholders on systematic investment plans must contact their Financial Advisor
or call our customer service division, toll free, at 1-800-225-1852 to change
their options. Otherwise, starting April __, 2001, future purchases shall be
made in shares of the Prudential Global Total Return Fund, Inc. if the
reorganization is approved.
Shareholders with outstanding certificates are also urged to contact their
Financial Advisors or call our customer service division to deposit their
certificates.
If you have any questions before you vote, please call us at
1-800-225-1852. We're glad to help you understand the proposal and assist you in
voting. Thank you for your participation.
Sincerely,
David R. Odenath, Jr.
PRESIDENT
PRUDENTIAL INTERNATIONAL BOND FUND, INC.
Gateway Center Three
100 Mulberry Street, 4th Floor
Newark, New Jersey 07102-4077
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
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To our Shareholders:
Notice is hereby given that a Special Meeting of Shareholders (the Meeting)
of Prudential International Bond Fund, Inc. (International Fund) will be held at
Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102, on April
__, 2001, at 9:00 a.m. Eastern time, for the following purposes:
1. To approve an Agreement and Plan of Reorganization between
International Fund and Prudential Global Total Return Fund, Inc. (Total Return
Fund), providing for the transfer of all of the assets of International Fund to
Total Return Fund in exchange solely for Class A, Class B, Class C and Class Z
shares of common stock of Total Return Fund and the assumption by Total Return
Fund of International Fund's liabilities, followed by the distribution of Total
Return Fund Class A, Class B, Class C and Class Z shares to shareholders of
International Fund in termination of International Fund.
2. To transact such other business as may properly come before the
Meeting or any adjournments of the Meeting.
The Board of Directors has fixed the close of business on February 16, 2001
as the record date for the determination of the shareholders of International
Fund entitled to notice of, and to vote at, this Meeting and any adjournments.
Marguerite E. H. Morrison
SECRETARY
Dated: March ___, 2001
PROXY CARDS FOR YOUR FUND ARE ENCLOSED ALONG WITH THE PROXY STATEMENT. PLEASE
VOTE YOUR SHARES TODAY BY SIGNING AND RETURNING THE ENCLOSED PROXY CARD IN THE
POSTAGE PREPAID ENVELOPE PROVIDED. YOU CAN ALSO VOTE YOUR SHARES THROUGH THE
INTERNET OR BY TELEPHONE USING THE 12-DIGIT "CONTROL" NUMBER THAT APPEARS ON THE
ENCLOSED PROXY CARD AND FOLLOWING THE SIMPLE INSTRUCTIONS. THE BOARD OF YOUR
FUND RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL.
IMPORTANT INFORMATION TO HELP YOU UNDERSTAND
AND VOTE ON THE PROPOSAL
Please read the enclosed proxy statement for a complete description of the
reorganization proposal. As a quick reference, the following provides a brief
overview of the proposal.
WHAT PROPOSAL AM I BEING ASKED TO VOTE ON?
You are being asked to approve a reorganization of Prudential International
Bond Fund, Inc. (International Fund) into Prudential Global Total Return Fund,
Inc. (Total Return Fund).
WHAT IS THE REASON FOR THIS REORGANIZATION?
The proposed reorganization is intended to combine two similarly managed
funds with the goal of increased economies of scale and a better long-term total
return performance record. The reorganization is also desirable because of the
inability of International Fund to keep its net outflows to a minimum, increase
its net asset base, keep investors and build an investment portfolio that can
effectively pursue the Fund's objective. Total Return Fund has built an
investment portfolio that can more fully implement its objective of total
return, made up of current income and capital appreciation.
DO THE FUNDS HAVE SIMILAR INVESTMENT POLICIES?
Yes. Both Funds are classified as "global income funds" by Lipper Inc.,
which means they invest primarily in [U.S. dollar debt securities of issuers
located in at least three countries, one of which may be the United States]. The
Funds have the same investment objectives and very similar principal strategies.
Both Funds seek total return, made up of current income and capital
appreciation. International Fund normally invests at least 65% of its total
assets in income-producing debt securities of issuers in at least three
different countries excluding the United States. Total Return Fund normally
invests 65% of its assets in income-producing debt securities of the United
States and foreign countries.
WHO ARE THE PORTFOLIO MANAGERS FOR THESE FUNDS?
The Global Bond Team, headed by David Bessey and Steve Koomar, currently
manages both the Total Return Fund and International Fund.
HOW DO THE EXPENSE STRUCTURES OF THE FUNDS COMPARE?
ANNUAL FUND OPERATING EXPENSES
(AS A % OF AVERAGE NET
ASSETS) INTERNATIONAL FUND* TOTAL RETURN FUND* PRO FORMA COMBINED*
---------------------- ------------------- ------------------ -------------------
Class A...................................... 2.04% 1.62% 1.59%
Class B...................................... 2.36% 2.12% 2.09%
Class C...................................... 2.36% 2.12% 2.09%
Class Z...................................... 1.79% 1.37% 1.34%
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* Ratios are for the fiscal year ended December 31, 2000. For the fiscal year
ended December 31, 2000, the Distributor contractually agreed to reduce its
distribution and service (12b-1) fees to .25 of 1% of the average daily net
assets of Class A shares and to .75 of 1% of the average daily net assets
of both the Class B and Class C shares.
IS THE REORGANIZATION A TAXABLE EVENT FOR FEDERAL INCOME TAX PURPOSES?
Typically, the exchange of shares pursuant to a reorganization does not
result in a gain or loss for federal income tax purposes. A description of the
conditions necessary to avoid tax recognition is included in the proxy
statement.
WHAT WILL BE THE SIZE OF TOTAL RETURN FUND AFTER THE REORGANIZATION?
If the proposal is approved, the combined fund is estimated to have over
$281 million in assets, based on the size of the Funds at December 31, 2000.
WHAT HAS BEEN THE COMPARATIVE PERFORMANCE OF THE FUNDS?
The table below shows average annual total returns (which include the
deduction of sales charges) for Total Return Fund and International Fund,
their Lipper peer group and two relevant indexes over the 1 and 5 year and
since inception periods. Please keep in mind that past performance is no
guarantee of future results and you may have a gain or loss when you sell
your shares.
AVERAGE ANNUAL TOTAL RETURN(1) AS OF DECEMBER 31, 2000
PRUDENTIAL GLOBAL TOTAL RETURN FUND, INC.
1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
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Class A shares........................................... -.65% 4.22% 6.46% 8.56% (7-7-86)(4)
Class B shares........................................... -2.18% N/A N/A 4.23% (1-15-96)
Class C shares........................................... .79% N/A N/A 4.19% (1-15-96)
Class Z shares........................................... 3.78% N/A N/A 3.76% (3-17-97)
PRUDENTIAL INTERNATIONAL BOND FUND, INC.
1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION
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Class A shares............................................ -1.29% 3.81% 6.41% 7.11% (7-31-87)(4)
Class B shares............................................ -2.46% N/A N/A 3.94% (1-15-96)
Class C shares............................................ .52% N/A N/A 3.90% (1-15-96)
Class Z shares............................................ 3.27% N/A N/A 3.13% (3-17-97)
Morgan GBI(2)............................................... 2.34% 3.47% 6.86%
Lipper Average(3)........................................... 3.63% 4.08% 6.09%
1. THE FUNDS' RETURNS ARE AFTER DEDUCTION OF SALES CHARGES AND EXPENSES.
WITHOUT THE DISTRIBUTION AND SERVICE (12b-1) FEE WAIVERS, THE RETURNS
WOULD HAVE BEEN LOWER.
2. THE J.P. MORGAN GOVERNMENT BOND INDEX - GLOBAL (MORGAN GBI) IS A
WEIGHTED INDEX OF THE TOTAL RETURN OF GOVERNMENT BONDS IN THE
FOLLOWING NATIONS: AUSTRALIA, BELGIUM, CANADA, DENMARK, FRANCE,
GERMANY, ITALY, JAPAN, THE NETHERLANDS, SPAIN, SWEDEN, THE UNITED
KINGDOM AND THE UNITED STATES. THE MORGAN GBI IS AN UNMANAGED INDEX
AND IS TRADED, UNHEDGED AND MEASURED IN U.S. DOLLARS. THESE RETURNS DO
NOT INCLUDE THE EFFECT OF ANY SALES CHARGES OR OPERATING EXPENSES OF A
MUTUAL FUND. THE SECURITIES IN THE MORGAN GBI MAY BE VERY DIFFERENT
THAN THOSE IN THE FUND. THESE RETURNS DO NOT INCLUDE THE EFFECT OF ANY
SALES CHARGES OR OPERATING EXPENSES OF A MUTUAL FUND. THESE RETURNS
WOULD BE LOWER IF THEY INCLUDED THE EFFECT OF SALES CHARGES AND
OPERATING EXPENSES. MORGAN GBI RETURNS SINCE THE INCEPTION OF EACH
CLASS ARE 7.62% FOR CLASS A, 3.74% FOR CLASS B AND CLASS C SHARES AND
4.56% FOR CLASS Z SHARES OF TOTAL RETURN FUND AND 7.65% FOR CLASS A,
3.74% FOR CLASS B AND CLASS C SHARES AND 4.56% FOR CLASS Z SHARES OF
INTERNATIONAL FUND. SOURCE: LIPPER INC.
3. THE LIPPER AVERAGE IS BASED ON THE AVERAGE RETURN OF ALL MUTUAL FUNDS
IN THE LIPPER GLOBAL INCOME FUNDS CATEGORY AND DOES NOT INCLUDE THE
EFFECT OF ANY SALES CHARGES. AGAIN, THESE RETURNS WOULD BE LOWER IF
THEY INCLUDED THE EFFECT OF SALES CHARGES. LIPPER RETURNS SINCE THE
INCEPTION OF EACH CLASS ARE 7.46% FOR CLASS A, 3.86% FOR CLASS B AND
CLASS C SHARES AND 3.28% FOR CLASS Z SHARES OF TOTAL RETURN FUND AND
7.10% FOR CLASS A, 3.86% FOR CLASS B AND CLASS C SHARES AND 3.28% FOR
CLASS Z SHARES OF INTERNATIONAL FUND. SOURCE: LIPPER INC.
4. PRIOR TO 1-15-96, THE FUND OPERATED AS A CLOSED-END INVESTMENT
COMPANY.
HOW WILL YOU DETERMINE THE NUMBER OF SHARES OF PRUDENTIAL GLOBAL TOTAL RETURN
FUND, INC. THAT I WILL RECEIVE?
As of the close of business of the New York Stock Exchange on the Closing
Date of the reorganization, shareholders will receive the number of full and
fractional Class A, Class B, Class C or Class Z shares of Total Return Fund,
respectively, that is equal in value to the net asset value of their Class A,
Class B, Class C or Class Z shares of International Fund on that date. The
anticipated closing date is April __ , 2001.
WHAT IF THERE ARE NOT ENOUGH VOTES TO REACH QUORUM BY THE SCHEDULED SHAREHOLDER
MEETING DATE?
If we do not receive sufficient votes to hold the meeting, we or Georgeson
Shareholder Communications Inc., a proxy solicitation firm, may contact you by
mail or telephone to encourage you to vote. Shareholders should review the proxy
materials and cast their vote to avoid additional mailings or telephone calls.
If there are not sufficient votes to approve the proposal by the time of the
Shareholder Meeting (April __, 2001), the meeting may be adjourned to permit
further solicitation of proxy votes.
HAS EACH FUND'S BOARD OF DIRECTORS APPROVED THE PROPOSAL?
Yes. Each Board has approved the proposal and recommends that you vote to
approve it.
HOW MANY VOTES AM I ENTITLED TO CAST?
As a shareholder, you are entitled to one vote for each share you own of
International Fund on the record date. The record date is February 16, 2001.
HOW DO I VOTE MY SHARES?
You can vote your shares by completing and signing the enclosed proxy card,
and mailing it in the enclosed postage paid envelope. You can also vote your
shares by calling 1-800-690-6903, entering your 12-digit control number from
your proxy card and following the simple instructions. Lastly, you can vote your
shares by going to the Internet web site: www.proxyvote.com, entering your
12-digit control number from your proxy card and following the simple
instructions found on the web site. If you need any assistance, or have any
questions regarding the proposal or how to vote your shares, please call
Prudential at (800) 225-1852.
HOW DO I SIGN THE PROXY CARD?
INDIVIDUAL ACCOUNTS: Shareholders should sign exactly as their names appear
on the account registration shown on the card.
JOINT ACCOUNTS: Both owners must sign and the signatures should conform
exactly to the names shown on the account registration.
ALL OTHER ACCOUNTS: The person signing must indicate his or her capacity.
For example, a trustee for a trust should include his/her title, such as "Jane
Doe, Trustee"; or an authorized officer of a company should indicate his/her
position with the company, such as "John Smith, President."
PRUDENTIAL GLOBAL TOTAL RETURN FUND, INC.
PROSPECTUS
PRUDENTIAL INTERNATIONAL BOND FUND, INC.
PROXY STATEMENT
GATEWAY CENTER THREE
100 MULBERRY STREET, 4TH FLOOR
NEWARK NEW JERSEY 07102-4077
(800) 225-1852
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March __, 2001
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This Proxy Statement and Prospectus (Proxy Statement) is being furnished to
shareholders of Prudential International Bond Fund, Inc. (International Fund) in
connection with the solicitation of proxies by the International Fund's Board of
Directors for use at the Special Meeting of Shareholders of International Fund
and at any adjournments of the meeting (the Meeting). The Meeting will be held
on ________, April ___, 2001, at 9:00 a.m. Eastern time at Gateway Center Three,
100 Mulberry Street, 14th Floor, Newark, New Jersey 07102.
The purpose of the Meeting is to vote on a proposed reorganization
(Reorganization) between International Fund and Prudential Global Total Return
Fund, Inc. (Total Return Fund). Under an Agreement and Plan of Reorganization
and Liquidation (the Agreement), International Fund would transfer all of its
assets to Total Return Fund in exchange solely for Class A, Class B, Class C and
Class Z shares of common stock of Total Return Fund and the assumption by Total
Return Fund of International Fund's liabilities. The number of shares issued to
shareholders of International Fund in the proposed Reorganization would be based
upon the relative net asset values per share of the two Funds at the time of the
exchange. International Fund would distribute Class A, Class B, Class C and
Class Z shares of Total Return Fund to its shareholders in liquidation of
International Fund on April ___, 2001, or a later date as the parties may agree
(the Closing Date).
Total Return Fund is a nondiversified fund registered as an open-end
management investment company that is organized as a Maryland corporation. Total
Return Fund's investment objective is to seek total return, made up of current
income and capital appreciation. Total Return Fund seeks to achieve its
investment objective by investing at least 65% of its total assets in
income-producing debt securities of the U.S. and foreign governments,
supranational organizations, semi-governmental entities or government agencies,
authorities or instrumentalities and short-term bank debt securities or bank
deposits. Total Return Fund will invest in issuers from at least three
countries, including the United States, and in at least three currencies. Total
Return Fund invests primarily in securities that are "investment grade"
securities, or securities that major rating services have rated within one of
their four highest quality grades. The Fund has a dollar-weighted average
maturity of not more than 10 years. Total Return Fund also may use
cross-currency hedges and derivatives for "hedging" to help protect the value of
the Fund's securities or enhance return.
International Fund is a nondiversified fund registered as an open-end
management investment company and is organized as a Maryland corporation.
International Fund's investment objective is identical to Total Return Fund's:
to seek total return, made up of current income and capital appreciation.
International Fund
seeks to achieve its investment objective by investing at least 65% of its total
assets in income-producing debt securities of issuers in at least three
countries, excluding the United States. International Fund may invest up to 30%
of its total assets in securities denominated in a particular currency. It may
invest up to 65% of its total assets in securities denominated in the euro and
up to 50% of its total assets in securities denominated in Japanese or British
currencies. International Fund invests primarily in "investment grade"
securities. The Fund has a dollar-weighted average maturity of between 3 and 15
years. International Fund also may use derivatives for hedging or to enhance its
returns.
This Proxy Statement should be retained for your future reference. It sets
forth concisely the information about the Reorganization and Total Return Fund
that a shareholder should know before voting on the proposed Reorganization. A
Statement of Additional Information dated March __, 2001, which relates to this
Proxy Statement, has been filed with the Securities and Exchange Commission
(Commission) and is incorporated into this Proxy Statement by reference. This
Proxy Statement is accompanied by the Prospectus, dated March 8, 2000, and
supplemented on March 27, 2000 and August 30, 2000, which offers shares of Total
Return Fund. The Statement of Additional Information for the Total Return Fund,
dated March 8, 2000, is available upon request. The Prospectus, Prospectus
Supplements and Statement of Additional Information for Total Return Fund have
been filed with the Commission and are incorporated into this Proxy Statement by
reference. The Prospectus dated March 8, 2000 and Prospectus Supplements dated
March 27, 2000, August 28 and August 30, 2000 and the Statement of Additional
Information dated March 8, 2000 for International Fund have been filed with the
Commission and are incorporated into this Proxy Statement by reference. Copies
of the documents referred to above may be obtained without charge by contacting
Prudential Mutual Fund Services LLC at Post Office Box _____, Philadelphia, PA,
or by calling (800) 225-1852.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE TOTAL
RETURN FUND'S SHARES, NOR HAS THE COMMISSION DETERMINED THAT THIS PROXY
STATEMENT AND PROSPECTUS IS COMPLETE OR ACCURATE. IT IS A CRIMINAL OFFENSE TO
STATE OTHERWISE.
ii
SPECIAL MEETING OF SHAREHOLDERS OF
PRUDENTIAL INTERNATIONAL BOND FUND, INC.
TO BE HELD ON APRIL ____, 2001 AT:
GATEWAY CENTER THREE
14TH FLOOR
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
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PROXY STATEMENT AND PROSPECTUS
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VOTING INFORMATION
This Proxy Statement and Prospectus (Proxy Statement) is furnished in
connection with a solicitation of proxies made by, and on behalf of, the Board
of Directors of Prudential International Bond Fund, Inc. (International Fund) to
be used at the Special Meeting of Shareholders of International Fund and at any
adjournments of the Special Meeting (the Meeting), to be held on _________,
April __, 2001 at 9:00 a.m. Eastern time at Gateway Center Three, 14th Floor,
100 Mulberry Street, Newark, New Jersey 07102.
The purpose of the Meeting is described in the accompanying Notice. The
solicitation is made primarily by first mailing this Proxy Statement and the
accompanying proxy card on or about February __, 2001. Supplementary
solicitations may be made by mail, telephone, telegraph, facsimile, electronic
means or by personal interview by representatives of International Fund. In
addition, Georgeson Shareholder Communications Inc., a proxy solicitation firm,
may be retained to solicit shareholders on behalf of International Fund.
Solicitation fees and expenses are estimated to be $ ________. The expenses of
the Reorganization and the solicitation of proxies will be borne by Prudential
Global Total Return Fund, Inc. (Total Return Fund) and International Fund (each,
a Fund, and collectively, the Funds) in proportion to their respective assets
and will include reimbursement of brokerage firms and others for expenses in
forwarding proxy solicitation materials to the shareholders of International
Fund.
Even if you sign and return the enclosed proxy card, you may revoke your
proxy at any time prior to its use by written notification received by the
International Fund, by submitting a later-dated proxy card, or by attending the
Meeting and voting in person.
All proxy cards that are properly completed and received by the Secretary
of International Fund before the Meeting, and which are not revoked, will be
voted at the Meeting. Shares represented by proxies will be voted in accordance
with the instructions you provide. If no instruction is made on a proxy card, it
will be voted FOR Proposal No. 1. Only proxies that are actually voted will be
counted toward establishing a quorum, which is the minimum number of shares
necessary to transact business at the Meeting. One-third of International Fund's
outstanding shares constitutes a quorum for the transaction of business.
If a proxy that is properly signed and returned is accompanied by
instructions to withhold authority to vote (an abstention) or represents a
broker "non-vote" (that is, a proxy from a broker or nominee indicating that
they have not received instructions from the beneficial owner or other person
entitled to vote shares on this matter for which the broker or nominee does not
have discretionary power), the shares represented by the proxy will be
considered present for purposes of determining the existence of a quorum for the
transaction of business, but will have the effect of a vote against Proposal No.
1.
International Fund also may arrange to have votes recorded by telephone.
The expenses associated with telephone voting will be borne by International
Fund and Total Return Fund in proportion to their respective assets. If
International Fund takes votes by telephone, it will use procedures designed to
authenticate shareholders' identities, to allow shareholders to authorize the
voting of their shares in accordance with their instructions, and to confirm
that their instructions have been properly recorded. Proxies given by telephone
or via the internet may be revoked at any time before they are voted in the same
manner that proxies voted by mail may be revoked.
If a quorum is not present at the Meeting, or if a quorum is present at the
Meeting but sufficient votes to approve Proposal No. 1 are not received, or if
other matters arise requiring shareholder attention, the persons named as proxy
agents may propose one or more adjournments of the Meeting to permit the further
solicitation of proxies. An adjournment will require the affirmative vote of a
majority of shares present at the Meeting or represented by proxy. When voting
on a proposed adjournment, the persons named as proxy agents will vote FOR the
proposed adjournment all shares that they are entitled to vote with respect to
Proposal No. 1, unless directed to vote AGAINST the Proposal, in which case such
shares will be voted against the proposed adjournment. A shareholder vote may be
taken on the Reorganization described in this Proxy Statement or on any other
business properly presented at the Meeting prior to adjournment if sufficient
votes have been received.
On January 18, 2001, there were 8,338,171 Class A shares, 283,313 Class B
shares, 23,460 Class C shares and 445,821 Class Z shares issued and outstanding
for International Fund. Shareholders of record at the close of business on
January __, 2001, will be entitled to vote at the Meeting. Each such shareholder
will be entitled to one vote for each share (each fractional share is entitled
to a proportionate fractional vote) held on that date. The following
shareholders held 5% or more of the class of shares indicated of International
Fund on January __, 2001:
On January 18, 2001, there were 29,146,878 Class A shares, 870,579 Class B
shares, 57,138 Class C shares and 1,500,634 Class Z shares issued and
outstanding for Total Return Fund. Shareholders of Total Return Fund are not
entitled to vote on this matter. The following shareholders held 5% or more of
the class of shares of Total Return Fund indicated on January __, 2001:
As of January __, 2001, the Directors and officers of both International
Fund and Total Return Fund owned, in the aggregate, less than 1% of each class
of each Fund's total outstanding shares. Prudential intends to vote any shares
for which it has direct voting authority FOR the Proposal.
VOTE REQUIRED
APPROVAL OF THE REORGANIZATION REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF
THE SHARES PRESENT IN PERSON OR BY PROXY OF THE COMMON STOCK OF INTERNATIONAL
FUND. APPROVAL OF THE REORGANIZATION BY THE SHAREHOLDERS OF TOTAL RETURN FUND IS
NOT REQUIRED, AND THE AGREEMENT IS NOT BEING SUBMITTED FOR THEIR APPROVAL.
SYNOPSIS
The following is a summary of information contained elsewhere in this Proxy
Statement, in the Agreement, and in the Prospectuses of International Fund and
Total Return Fund, which are incorporated into this Proxy Statement by
reference. Shareholders should read the Proxy Statement and the Prospectus of
Total Return Fund for more complete information.
The Reorganization would transfer the assets and liabilities of
International Fund to Total Return Fund, a mutual fund also managed by
Prudential Investments Fund Management LLC (PIFM). If the Reorganization is
2
approved, International Fund will be liquidated and current shareholders of
International Fund will become shareholders of Total Return Fund instead.
INVESTMENT OBJECTIVES AND POLICIES
International Fund and Total Return Fund have the same investment objective
and substantially similar investment policies. Both Fund's objectives are "to
seek total return, made up of current income and capital appreciation". Both
Funds have the same Manager (PIFM) and the same investment adviser, The
Prudential Investment Corporation (PIC). The portfolio managers of both Funds
are the Global Bond Team, led by David Bessey and Steve Koomar (both having
begun managing each Fund as of March 2000). The address of PIFM is Gateway
Center Three, 14th Floor, 100 Mulberry Street, Newark, New Jersey 07102-4077.
One benchmark for both International Fund and Total Return Fund is the
Lipper Global Income Funds average (the Lipper average). Both Funds also compare
their performance to that of the J.P. Morgan Government Bond Index.
International Fund pays any dividends from net investment income typically
every month. Total Return Fund pays any dividends from net investment income
typically every quarter. Net realized capital gains for both Funds, if any, are
distributed annually.
The investment objective of each Fund is a fundamental policy. This means
that the objective cannot be changed without the approval of shareholders of the
Fund. There can be no assurance that either International Fund or Total Return
Fund will achieve its objective. With the exception of fundamental policies,
investment policies (other than specified investment restrictions) of the Funds
can be changed without shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
International Fund and Total Return Fund have similar investment
strategies. International Fund normally invests at least 65% of its total assets
in income-producing debt securities of issuers in at least 3 different
countries, excluding the United States. Total Return Fund normally invests at
least 65% of its total assets in income-producing debt securities of the U.S.
and foreign governments, supranational organizations, semi-governmental entities
or government agencies, authorities or instrumentalities and short-term bank
debt securities or bank deposits. International Fund invests up to 30% of its
assets in securities denominated in a particular currency. Total Return Fund
generally invests up to 40% of its assets in a particular currency (except for
the euro, in which the Total Return Fund may invest up to 65%). The Board of
Total Return Fund has approved the elimination of any specific limit on the
Fund's investment in foreign currencies, to take effect by April 30, 2001.
Total Return Fund currently maintains dollar-weighted average maturity of
not more than 10 years. International Fund's debt obligations have a
dollar-weighted average maturity of between 3 and 15 years, but may go below 3
years for temporary defensive purposes. Total Return Fund's Board has approved a
change to an average duration to be within a range of 2-7 years. Currently, each
Fund can invest up to 15% of its total assets in non-investment grade debt (none
rated lower than B). However, the Board of Total Return Fund has approved an
increase in that limit to 35% of that Fund's total assets and to allow
investment in with a minimum rating of C. This change will not occur until the
Total Return Fund's Registration Statement is updated.
The investment restrictions of the Funds are substantially similar.
COMPARISON OF OTHER POLICIES OF THE FUNDS
DIVERSIFICATION
International Fund and Total Return Fund are both nondiversified funds.
This means that each Fund may invest more than 5% of its total assets in the
securities of a single issuer.
3
BORROWING
Each Fund may borrow money for temporary, extraordinary or emergency
purposes, for the clearance of transactions or for investment purposes. Neither
Fund may borrow money in an amount exceeding 20% of its total assets.
LENDING
Neither Fund may make loans, except through repurchase agreements and the
purchase of debt obligations and bank deposits.
ILLIQUID SECURITIES
Each Fund may invest in illiquid securities, including those without a
readily available market and repurchase agreements with maturities longer than
seven days. Each Fund may hold up to 15% of its net assets in illiquid
securities.
TEMPORARY DEFENSIVE INVESTMENTS
Although PIC normally invests each Fund's assets according to the Fund's
investment strategy, there are times when each Fund may temporarily invest up to
100% of its assets in U.S. Treasury or other U.S. dollar-denominated securities
or money market instruments in response to adverse market, economic or political
conditions.
For more information about the risks and restrictions associated with these
policies, see each Fund's Prospectus, and for a more detailed discussion of the
Funds' investments, see their Statements of Additional Information, all of which
are incorporated into this Proxy Statement by reference.
EXPENSE STRUCTURES
Currently, International Fund and Total Return Fund each pay a monthly
management fee to PIFM at an annual rate of 0.75% of average daily net assets.
The management fee covers PIFM's oversight of the Fund's respective investment
portfolios. PIFM also administers each Fund's business affairs and furnishes the
Funds with office facilities, together with those ordinary clerical and
bookkeeping services that are not furnished by the Funds' custodian or transfer
and dividend disbursing agent. Officers of PIFM serve as officers and Directors
of the Funds without compensation by the Funds.
The Funds' distribution expense structures are the same. Prudential
Investment Management Services LLC (PIMS), the Funds' Distributor, has
contractually agreed to waive a portion of the distribution and service (12b-1)
fee to limit fees for the current fiscal year payable by Class A shares of both
Funds to .25 of 1% and has contractually agreed to waive a portion of the
distribution and service (12b-1) fee of the Class and Class C shares of both
Funds to .75 of 1%. The contractual waivers for International Fund and Total
Return Fund extend through December 31, 2001. The Funds also have the same
purchase procedures, exchange rights and redemption procedures.
Overall, the proposed Reorganization would provide International Fund
shareholders with the following benefits:
- the opportunity to participate in a fund with a better long-term
performance record;
- investment in a fund with an investment objective and policies similar
to International Fund's investment objective and policies;
- increased economies of scale; and
4
- annual operating expenses that are estimated to be lower than those of
International Fund.
THE BOARD OF DIRECTORS BELIEVES THAT THE REORGANIZATION WILL BENEFIT
INTERNATIONAL FUND SHAREHOLDERS AND RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR
OF THE REORGANIZATION.
THE PROPOSED REORGANIZATION
Shareholders of International Fund will be asked at the Meeting to vote
upon and approve the Reorganization and the Agreement, which provide for the
acquisition by Total Return Fund of all of the assets of International Fund in
exchange solely for Class A, Class B, Class C and Class Z shares of Total Return
Fund and the assumption by Total Return Fund of the liabilities of International
Fund. Class A, Class B, Class C and Class Z shares of Total Return Fund will be
distributed to International Fund Class A, Class B, Class C and Class Z
shareholders, so that each shareholder will receive the number of full and
fractional shares of Total Return Fund equal in value to the aggregate net asset
value of the shareholder's shares of International Fund on or about ________,
April __, 2001 (the Closing Date). The exchange of International Fund's assets,
subject to its liabilities, for Total Return Fund's shares will occur as of the
close of business of the New York Stock Exchange (NYSE) on the Closing Date or
such other time and date as the parties may agree. International Fund will then
be liquidated as soon as practicable after the Closing Date. Approval of the
Reorganization will be determined solely by approval of the shareholders of
International Fund. No vote by shareholders of Total Return Fund is required.
The Funds have received an opinion of counsel that the Reorganization will
not result in any gain or loss for federal income tax purposes to either
International Fund, Total Return Fund, or the shareholders of each Fund. The
rights and privileges of the former shareholders of International Fund will be
effectively unchanged by the Reorganization.
FUND OPERATING EXPENSES
Each Fund pays a management fee to PIFM for managing its investments and
business affairs which is calculated and paid to PIFM every month. International
Fund's Management Agreement provides for payment to PIFM at an annual rate of
.75% of average daily net assets up to $1 billion and .70% of such assets in
excess of $1 billion. Total Return Fund's Management Agreement provides for
payment to PIFM at an annual rate of .75% of average daily net assets up to $500
million, .70% of such assets between $500 million and $1 billion and .65% of
such assets in excess of $1 billion. PIFM, in turn, pays the investment adviser,
PIC, at the annual rate of .375% of average daily net assets up to $1 billion
and .333% of such assets over $1 billion for International Fund, and .375% of
average daily net assets up to $500 million, .333% of such assets between $500
million and $1 billion and .293% of such assets over $1 billion for Total Return
Fund for providing advisory services to Total Return Fund.
In addition to the management fee, each Fund incurs other expenses for
services such as maintaining shareholder records and furnishing shareholder
statements and financial reports. If shareholders approve the Reorganization,
the combined fund will retain Total Return Fund's expense structure. ASSUMING
CONTINUATION OF TOTAL RETURN FUND'S CURRENT EXPENSE STRUCTURE, FEE WAIVERS AND
REDUCED ANNUAL OPERATING EXPENSES FOR A LARGER TOTAL RETURN FUND, IT IS
ESTIMATED THAT SHAREHOLDERS OF ALL SHARE CLASSES WOULD ENJOY LOWER NET OPERATING
EXPENSES. THIS EXPENSE STRUCTURE IS EXPECTED TO DECREASE THE TOTAL OPERATING
EXPENSES CURRENTLY INCURRED BY CLASS A SHAREHOLDERS OF INTERNATIONAL FUND FROM
2.04% TO 1.59% OF AVERAGE NET ASSETS, FROM 2.36% TO 2.09% OF AVERAGE NET ASSETS
FOR CLASS B AND CLASS C SHAREHOLDERS AND FROM 1.79% TO 1.34% OF AVERAGE NET
ASSETS FOR CLASS Z SHAREHOLDERS, BASED ON EXPENSES INCURRED FOR THE YEAR ENDED
DECEMBER 31, 2000. However, if the proposed Reorganization is not approved,
International Fund is expected to maintain its current fee structure, although
there can be no assurance that waivers of a portion of the distribution and
service fees would continue beyond December 31, 2000. For more information about
the Funds' current fees, refer to their Prospectuses. See the Pro Forma
Capitalization and Ratios below for estimates of expenses if the Reorganization
is approved.
5
COMPARATIVE FEE TABLES
The following table shows the fees and expenses of Class A, Class B, Class
C and Class Z shares of International Fund and Total Return Fund for the fiscal
years ended December 31, 1999 and pro forma fees for the combined fund based on
the same time periods after giving effect to the Reorganization, including the
effect of PIMS's expense waivers previously described and the increased size of
the combined fund.
Fund operating expenses are paid out of each Fund's assets. Expenses are
factored into each Fund's share price or dividends and are not charged directly
to shareholder accounts. The following figures are based on historical expenses
of each Fund for the 12-month periods ended December 31, 2000 for each Fund, and
are calculated as a percentage of average net assets of each Fund.
CLASS A SHARES
PRO FORMA
INTERNATIONAL FUND TOTAL RETURN FUND COMBINED FUND
SHAREHOLDER FEES CLASS A SHARES CLASS A SHARES CLASS A SHARES
-------------- -------------- --------------
Maximum sales charge (load) imposed on purchases (as a 4% 4% 4%
percentage of offering price)
Maximum deferred sales charge (load) (as a percentage None None None
of the lower of original purchase price or sale
proceeds)
Maximum sales charge (load) imposed on reinvested None None None
dividends and other distributions
Redemption fees None None None
Exchange fee None None None
PRO FORMA
INTERNATIONAL FUND TOTAL RETURN FUND COMBINED FUND
ANNUAL FUND OPERATING EXPENSES CLASS A SHARES CLASS A SHARES CLASS A SHARES
-------------- -------------- --------------
Management fees............................................... .75% .75% .75%
+ Distribution and service (12b-1) fees....................... .30% .30% .30%
+ Other expenses.............................................. 1.04% .62% .59%
= Total annual operating expenses............................. 2.09% 1.67% 1.64%
Fee waiver................................................. .05% .05% .05%
= NET ANNUAL OPERATING EXPENSES............................... 2.04% 1.62% 1.59%
CLASS B SHARES
PRO FORMA
INTERNATIONAL FUND TOTAL RETURN FUND COMBINED FUND
SHAREHOLDER FEES CLASS B SHARES CLASS B SHARES CLASS B SHARES
-------------- -------------- --------------
Maximum sales charge (load) imposed on purchases (as a None None None
percentage of offering price)
Maximum deferred sales charge (load) (as a percentage 5% 5% 5%
of the lower of original purchase price or sale
proceeds)
Maximum sales charge (load) imposed on reinvested None None None
dividends and other distributions
Redemption fees None None None
Exchange fee None None None
6
PRO FORMA
INTERNATIONAL FUND TOTAL RETURN FUND COMBINED FUND
ANNUAL FUND OPERATING EXPENSES CLASS B SHARES CLASS B SHARES CLASS B SHARES
-------------- -------------- --------------
Management fees............................................... .75% .75% .75%
+ Distribution and service (12b-1) fees....................... .82% 1.00% 1.00%
+ Other expenses.............................................. 1.04% .62% .59%
= Total annual operating expenses............................. 2.61% 2.37% 2.34%
- Fee waiver................................................. .25% .25% .25%
= NET ANNUAL OPERATING EXPENSES............................... 2.36% 2.12% 2.09%
CLASS C SHARES
PRO FORMA
INTERNATIONAL FUND TOTAL RETURN FUND COMBINED FUND
SHAREHOLDER FEES CLASS C SHARES CLASS C SHARES CLASS C SHARES
-------------- -------------- --------------
Maximum sales charge (load) imposed on purchases (as a 1% 1% 1%
percentage of offering price)
Maximum deferred sales charge (load) (as a percentage 1% 1% 1%
of the lower of original purchase price or sale
proceeds)
Maximum sales charge (load) imposed on reinvested None None None
dividends and other distributions
Redemption fees None None None
Exchange fee None None None
PRO FORMA
INTERNATIONAL FUND TOTAL RETURN FUND COMBINED FUND
ANNUAL FUND OPERATING EXPENSES CLASS C SHARES CLASS C SHARES CLASS C SHARES
-------------- -------------- --------------
Management fees............................................... .75% .75% .75%
+ Distribution and service (12b-1) fees....................... .82% 1.00% 1.00%
+ Other expenses.............................................. 1.04% .62% .59%
= Total annual operating expenses............................. 2.61% 2.37% 2.34%
- Fee waiver................................................. .25% .25% .25%
= NET ANNUAL OPERATING EXPENSES............................... 2.36% 2.12% 2.09%
CLASS Z SHARES
PRO FORMA
INTERNATIONAL FUND TOTAL RETURN FUND COMBINED FUND
SHAREHOLDER FEES CLASS Z SHARES CLASS Z SHARES CLASS Z SHARES
-------------- -------------- --------------
Maximum sales charge(load) imposed on purchases (as a None None None
percentage of offering price)
Maximum deferred sales charge (load) (as a percentage None None None
of the lower of original purchase price or sale
proceeds)
Maximum sales charge (load) imposed on reinvested None None None
dividends and other distributions
Redemption fees None None None
Exchange fee None None None
7
PRO FORMA
INTERNATIONAL FUND TOTAL RETURN FUND COMBINED FUND
ANNUAL FUND OPERATING EXPENSES CLASS Z SHARES CLASS Z SHARES CLASS Z SHARES
-------------- -------------- --------------
Management fees............................................... .75% .75% .75%
+ Distribution and service (12b-1) fees....................... None None None
+ Other expenses.............................................. 1.04% .62% .59%
= Total annual operating expenses............................. 1.79% 1.37% 1.34%
- Fee waiver................................................. None None None
= NET ANNUAL OPERATING EXPENSES............................... 1.79% 1.37% 1.34%
EXAMPLES OF THE EFFECT OF FUND EXPENSES
The following table illustrates the expenses on a hypothetical $10,000
investment in each Fund under the current and pro forma (Combined Fund)
expenses calculated at the rates stated above for the first year, and
thereafter using gross expenses with no fee waivers, assuming a 5% annual
return, and assuming that you sell your shares at the end of each period.
CLASS A SHARES
PRO FORMA
INTERNATIONAL FUND TOTAL RETURN FUND COMBINED FUND
CLASS A SHARES CLASS A SHARES CLASS A SHARES
-------------- -------------- -------------
1 Year........................................................ $599 $558 $555
3 Years....................................................... $1,024 $901 $892
5 Years....................................................... $1,474 $1,267 $1,252
10 Years...................................................... $2,720 $2,293 $2,262
CLASS B SHARES
PRO FORMA
INTERNATIONAL FUND TOTAL RETURN FUND COMBINED FUND
CLASS B SHARES CLASS B SHARES CLASS B SHARES
-------------- -------------- -------------
1 Year........................................................ $739 $715 $712
3 Years....................................................... $1,088 $1,016 $1,007
5 Years....................................................... $1,463 $1,343 $1,328
10 Years...................................................... $2,740 $2,431 $2,400
CLASS C SHARES
PRO FORMA
INTERNATIONAL FUND TOTAL RETURN FUND COMBINED FUND
CLASS C SHARES CLASS C SHARES CLASS C SHARES
-------------- -------------- -------------
1 Year........................................................ $437 $413 $410
3 Years....................................................... $880 $808 $799
5 Years....................................................... $1,449 $1,330 $1,315
10 Years...................................................... $2,996 $2,760 $2,730
8
CLASS Z SHARES
PRO FORMA
INTERNATIONAL FUND TOTAL RETURN FUND COMBINED FUND
CLASS Z SHARES CLASS Z SHARES CLASS C SHARES
-------------- -------------- -------------
1 Year........................................................ $182 $139 $136
3 Years....................................................... $563 $434 $425
5 Years....................................................... $970 $750 $734
10 Years...................................................... $2,105 $1,646 $1,613
These examples assume that all dividends and other distributions are
reinvested. These examples illustrate the effect of expenses, but are not meant
to suggest actual or expected expenses, which may vary. The assumed return of
5% is not a prediction of, and does not represent, actual or expected
performance of any Fund.
PRO FORMA CAPITALIZATION AND RATIOS
The following table shows the capitalization of International Fund and the
Total Return Fund as of December 31, 2000 and the pro forma combined
capitalization as if the Reorganization had occurred on December 31, 2000.
INTERNATIONAL TOTAL RETURN PRO FORMA
FUND FUND COMBINED
Net Assets (000s)
Class A.................................................................... $51,239 $208,101 $259,340
Class B.................................................................... $1,736 $6,145 $7,881
Class C.................................................................... $144 $424 $568
Class Z.................................................................... $2,760 $10,551 $13,311
Net Asset Value per share
Class A.................................................................... $6.10 $7.10 $7.10
Class B.................................................................... $6.14 $7.10 $7.10
Class C.................................................................... $6.14 $7.10 $7.10
Class Z.................................................................... $6.12 $7.10 $7.10
Shares Outstanding (000s)
Class A.................................................................... 8,395 29,326 36,543
Class B.................................................................... 283 865 1,109
Class C.................................................................... 23 60 80
Class Z.................................................................... 451 1,485 1,874
The following table shows the ratio of expenses to average net assets and
the ratio of net investment income to average net assets of International Fund
and Total Return Fund for the fiscal year ended December 31, 2000. The ratios
also are shown on a pro forma combined basis as of December 31, 2000.
INTERNATIONAL TOTAL RETURN PRO FORMA
FUND FUND COMBINED
Ratio of expenses to average net assets
Class A.................................................................... 2.04% 1.62% 1.59%
Class B.................................................................... 2.36% 2.12% 2.09%
Class C.................................................................... 2.36% 2.12% 2.09%
Class Z.................................................................... 1.79% 1.37% 1.34%
Ratio of net investment income to average net assets
Class A.................................................................... 5.25% 4.36% 5.64%
Class B.................................................................... 4.90% 5.24% 5.17%
Class C.................................................................... 4.94% 5.29% 5.20%
9
INTERNATIONAL TOTAL RETURN PRO FORMA
FUND FUND COMBINED
------------- ------------ ---------
Class Z.................................................................... 5.49% 5.98% 5.88%
PERFORMANCE COMPARISONS OF THE FUNDS
The following table compares each Fund's average annual total returns for
the one, five and ten years ended December 31, 2000. Average annual total
returns include the deduction of applicable sales charges, are based on past
results and are not an indication of future performance.
AVERAGE ANNUAL TOTAL RETURNS (CLASS A SHARES)
(PERIODS ENDED DECEMBER 31, 2000)
1 YEAR* 5 YEARS* 10 YEARS* SINCE INCEPTION*
------ ------- -------- ---------------
International Fund...................... -1.29% 3.81% 6.41% 7.11%(7-31-87)
Total Return Fund....................... -.65% 4.22% 6.46% 8.56%(7-07-86)
- ----------
* If the Fund's Distributor had not waived a portion of its fees during the
periods shown, total returns would have been lower.
AVERAGE ANNUAL TOTAL RETURNS (CLASS B SHARES)
(PERIODS ENDED DECEMBER 31, 2000)
1 YEAR* 5 YEARS* SINCE INCEPTION*
------ ------- ---------------
International Fund...................... -2.46% N/A 3.94%(1-15-96)
Total Return Fund....................... -2.18% N/A 4.23%(1-15-96)
- ----------
* If the Fund's Distributor had not waived a portion of its fees during the
periods shown, total returns would have been lower.
AVERAGE ANNUAL TOTAL RETURNS (CLASS C SHARES)
(PERIODS ENDED DECEMBER 31, 2000)
1 YEAR* 5 YEARS* SINCE INCEPTION*
------- ------- ---------------
International Fund...................... .52% N/A 3.90%(1-15-96)
Total Return Fund....................... .79% N/A 4.19%(1-15-96)
- ----------
* If the Fund's Distributor had not waived a portion of its fees during the
periods shown, total returns would have been lower.
10
AVERAGE ANNUAL TOTAL RETURNS (CLASS Z SHARES)
(DECEMBER 31, 2000)
1 YEAR SINCE INCEPTION
------ ---------------
International Fund...................... 3.27% 3.13%(3-17-97)
Total Return Fund....................... 3.78% 3.76%(3-17-97)
COMPARISON OF PRINCIPAL RISK FACTORS
As described more fully above, each Fund has the same investment objectives
and substantially similar investment policies and permissible investments.
Because each Fund normally invests in similarly-rated income-producing debt
securities, the Funds have substantially similar levels of risk. These risks
include market risk, credit risk and interest rate risk.
Both Funds may also use investment strategies such as derivatives that
involve above average risks. The Funds may use these risk management techniques
to try to preserve assets or enhance return. Derivatives may not fully offset
the underlying positions and this could result in losses to the Fund that would
not otherwise have occurred. Both Funds may borrow for investment purposes,
i.e., use "leverage". Leverage risk is the risk associated with investments or
trading strategies that relatively small market movements may result in large
changes in the value of an investment.
Like any mutual fund, an investment in either International Fund or Total
Return Fund could lose value. For a more complete discussion of the risks
associated with either Fund, please refer to the "Risk/Return Summary" or the
section entitled "Investment Risks" of each Fund's Prospectus.
OPERATIONS OF TOTAL RETURN FUND
FOLLOWING THE REORGANIZATION
PIFM and PIC do not expect Total Return Fund to revise its investment
policies, management or general investment approach as a result of the
Reorganization. The Board of Total Return Fund has approved certain changes to
that Fund's investment policies summarized in "Principal Investment Strategies"
above. However, these changes will be implemented regardless of whether the
Reorganization is approved. In addition, David Bessey and Steve Koomar, together
with a global team of professionals, will continue to serve as co-portfolio
managers of Total Return Fund following the Reorganization. The agents that
provide Total Return Fund with services, such as its Custodian and Transfer
Agent, which also provide these services to International Fund, are not expected
to change. The Directors and Officers of the respective Funds are the same.
All of the current investments of International Fund are permissible
investments for Total Return Fund. Nevertheless, PIC may sell securities held by
International Fund or Total Return Fund between shareholder approval and the
Closing Date of the Reorganization as may be necessary or desirable in the
ongoing management of each Fund and the adjustment of each Fund's portfolio in
anticipation of the Reorganization. Transaction costs associated with such
adjustments will be borne by the Fund that incurred them. Transaction costs
associated with such adjustments that occur after the Closing Date will be borne
by Total Return Fund.
11
PURCHASES, REDEMPTIONS AND EXCHANGES
PURCHASING SHARES
The price to buy one share of each Fund is each Fund's net asset value, or
NAV, plus, in the case of Class A and Class C shares, a front-end sales charge.
Each Fund offers Class A, Class B, Class C and Class Z shares.
The Class A shares you receive in the Reorganization are not subject to a
front-end sales charge although additional purchases after the Reorganization
will be subject to the Total Return Fund Class A sales charge schedule (which is
the same as that for International Fund Class A shares).
The contingent deferred sales charge (CDSC) imposed on Class B shares of
International Fund is identical to that charged by Total Return Fund. Class B
shares are sold with a 5% CDSC that declines over seven years. Each CDSC
declines by 1% every year with Class B shares automatically converting to Class
A shares (which have a lower 12b-1 fee) approximately seven years after they are
purchased.
The sales charge imposed on Class C shares of Total Return Fund is
identical to that charged by International Fund. Class C shares are sold with a
1% front-end load and a 1% CDSC for shares redeemed within 18 months of
purchase.
The Class B or Class C shares you receive in the Reorganization will be
subject to the identical CDSC that is applicable to your International Fund
investment. In other words, the contingent deferred sales charge will be
calculated from the first day of the month after your purchase of shares of
International Fund, exclusive of any time during which you may have been
invested in a money market fund.
Both Funds also offer Class Z shares, which are sold without either a
front-end load or a CDSC and are available only to a limited group of investors.
You will receive the same class of shares in Total Return Fund that you own in
International Fund.
Shares in both Funds are purchased at the next NAV calculated after your
investment is received and accepted. Each Fund's NAV is normally calculated each
business day at 4:15 p.m., New York time. Refer to each Fund's Prospectus for
more information regarding how to buy shares.
REDEEMING SHARES
The redemption policies for each Fund are identical. Your shares will be
sold at the next NAV, less any applicable CDSC imposed on Class B and Class C
shares, calculated after your order is received and accepted. Refer to each
Fund's Prospectus for more information regarding how to sell shares.
MINIMUM INVESTMENT REQUIREMENTS
For both Funds, the minimum initial investment amount is $1,000 for Class A
and Class B shares and $2,500 for Class C shares. The minimum additional
investment amount is $100. There is no minimum investment for Class Z shares.
PURCHASES AND REDEMPTIONS OF INTERNATIONAL FUND
On August 28, 2000, International Fund stopped accepting orders to purchase
or exchange into its shares of any class, except for purchases by certain
automatic investment, retirement and savings programs and plans (excluding IRA
accounts). International Fund shareholders may continue to acquire shares
through dividend reinvestment.
12
Shareholders of International Fund may redeem shares of International Fund
through the Closing Date of the Reorganization. If the Reorganization is
approved, the purchase and redemption policies of the combined fund will be the
same as the current policies of Total Return Fund.
EXCHANGES OF FUND SHARES
The exchange privilege currently offered by each Fund is the same and is
not expected to change after the Reorganization. Shareholders of the Funds may
exchange their shares for shares of the same class of any other Prudential
Mutual Fund. If you wish to exchange into a money market fund, you must exchange
into Special Money Market Fund, Inc. During the time you are invested in Special
Money Market Fund, Inc., the period of time during which your contingent
deferred sales charge is calculated is frozen. Refer to each Fund's Prospectus
for restrictions governing exchanges.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund distributes substantially all of its net investment income and
capital gains to shareholders each year. International Fund pays any dividends
from net investment income typically every month. Total Return Fund pays any
dividends from net investment income typically every quarter. Net realized
capital gains for both Funds, if any, are distributed annually. On or before the
Closing Date, International Fund may declare additional dividends or other
distributions in order to distribute substantially all of its investment company
taxable income and net realized capital gains.
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
Each Fund will receive an opinion of outside counsel that the
Reorganization will constitute a tax-free reorganization within the meaning of
Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended (the
Internal Revenue Code). Accordingly, no gain or loss will be recognized by the
Funds or their shareholders as a result of the Reorganization. Please see the
section entitled "The Proposed Transaction -- Federal Income Tax Considerations"
for more information.
During the period between shareholder approval and the Closing Date, PIC
may sell certain securities to make portfolio adjustments to International Fund
and Total Return Fund in connection with the Reorganization. Selling these
securities may result in realization of capital gains, which, when distributed,
would be taxable to the selling Fund's shareholders.
THE PROPOSED TRANSACTION
REORGANIZATION PLAN
The Agreement and Plan of Reorganization describes the terms and conditions
under which the proposed transaction may be completed. Significant provisions of
the Agreement are summarized below; however, this summary is qualified in its
entirety by reference to the Agreement, a copy of which is attached as Appendix
A to this Proxy Statement.
The Agreement contemplates (a) Total Return Fund acquiring as of the
Closing Date all of the assets of International Fund in exchange solely for
shares of Total Return Fund and the assumption by Total Return Fund of
International Fund's liabilities; and (b) the distribution of shares of Total
Return Fund to the shareholders of International Fund as provided for in the
Agreement.
The assets of International Fund to be acquired by Total Return Fund
include all cash, cash equivalents, securities, receivables (including interest
or dividends receivable), claims and other property owned by International Fund,
and any deferred or prepaid expenses shown as an asset on the books of
International Fund on the Closing Date. Total Return Fund will assume from
International Fund all liabilities, debts and obligations of
13
International Fund of whatever kind or nature, whether absolute, accrued,
contingent or otherwise, whether or not arising in the ordinary course of
business, whether or not determinable on the Closing Date and whether or not
specifically referred to in the Agreement; provided, however, that International
Fund will use its best efforts, to the extent practicable, to discharge all of
its known liabilities prior to the Closing Date, other than liabilities incurred
in the ordinary course of business.
Total Return Fund will deliver to International Fund the number of full and
fractional shares of Total Return Fund having an aggregate net asset value equal
to the value of the assets of International Fund less the liabilities of
International Fund as of the Closing Date. International Fund will then
distribute the Total Return Fund shares PRO RATA to its shareholders, Class A
shares for Class A shares, Class B shares for Class B shares, Class C shares for
Class C shares and Class Z shares for Class Z shares.
The value of International Fund's assets to be acquired by Total Return
Fund and the amount of its liabilities to be assumed by Total Return Fund will
be determined as of the close of business on the Closing Date, using the
valuation procedures set forth in International Fund's Prospectus and Statement
of Additional Information. The net asset value of a share of Total Return Fund
will be determined as of the same time using the valuation procedures set forth
in its Prospectus and Statement of Additional Information.
As of the Closing Date, International Fund will distribute to its
shareholders of record the shares of Total Return Fund it receives, so that each
International Fund shareholder will receive the number of full and fractional
shares of Total Return Fund equal in value to the aggregate net asset value of
shares of International Fund held by such shareholder on the Closing Date.
International Fund will then be terminated as soon as practicable. The
distribution of shares of Total Return Fund will be accomplished by opening
accounts on the books of Total Return Fund in the names of the International
Fund shareholders and by transferring to such accounts shares of Total Return
Fund. Each International Fund shareholder's account will be credited with the
respective PRO RATA number of full and fractional shares of Total Return Fund
due that shareholder. If requested, Total Return Fund will issue certificates
representing its shares only upon surrender of shares of International Fund.
Immediately after the Reorganization, each former International Fund
shareholder will own shares of Total Return Fund equal to the aggregate net
asset value of that shareholder's shares of International Fund immediately prior
to the Reorganization. The net asset value per share of Total Return Fund will
not be affected by the transaction. Thus, the Reorganization will not result in
a dilution of any shareholder's interest.
Any transfer taxes payable upon issuance of shares of Total Return Fund in
a name other than that of the registered holder of the shares on the books of
International Fund as of that time will be payable by the person to whom such
shares are to be issued as a condition of such transfer. Any reporting
responsibility of International Fund is and will continue to be its
responsibility up to and including the Closing Date and such later date on which
International Fund is terminated.
The completion of the Reorganization is subject to a number of conditions
set forth in the Agreement, some of which may be waived by a Fund. In addition,
the Agreement may be amended in any mutually agreeable manner, except that no
amendment that may have a materially adverse effect on the shareholders'
interests may be made subsequent to the Meeting.
REASONS FOR THE REORGANIZATION
The Board of Directors (the Boards) of each Fund have each determined that
the Reorganization is in the best interests of the shareholders of their
respective Fund and that the Reorganization will not result in a dilution of the
interests of shareholders of either Fund.
In considering the Reorganization, the Boards each considered a number of
factors, including the following:
-- the compatibility of the Funds' investment objectives, policies and
restrictions;
14
-- the relative past and current growth in assets and investment
performance of the Funds and future prospects for Total Return Fund;
-- expense structures and expense ratios;
-- portfolio composition;
-- the estimated costs of the Reorganization;
-- affiliation issues;
-- the tax consequences of the Reorganization; and
-- the benefits to the shareholders of the Funds.
PIFM and PIC recommended the Reorganization to the Boards at the meeting of
the Boards held on August 23, 2000. In recommending the Reorganization, PIFM and
PIC advised the Boards that the Funds have similar investment objectives,
policies and investment portfolios. PIFM and PIC informed the Boards that the
Funds differed primarily with respect to the Funds' net asset sizes. The Boards
of the two Funds are comprised of the same individuals.
The Board considered that, if the Reorganization is approved, shareholders
of International Fund would likely incur lower total combined fund operating
expenses. It is expected that if the Reorganization is consummated, total
operating expenses would be lowered from 2.04% to 1.59% of average daily net
assets for Class A shares, from 2.36% to 2.09% of average daily net assets for
Class B and Class C shares, and from 1.79% to 1.34% of average daily net assets
for Class Z shares, based on results for the fiscal year ended December 31,
2000.
DESCRIPTION OF THE SECURITIES TO BE ISSUED
Total Return Fund was incorporated in Maryland on May 6, 1986 originally as
a nondiversified and closed-end management investment company. The Fund is
authorized to issue 2 billion shares of common stock, $.01 par value per share,
divided equally into four classes of shares, designated as Class A, Class B,
Class C and Class Z common stock. Each class of common stock represents an
interest in the same assets of Total Return Fund and is identical in all
respects except that:
-- each class is subject to different sales charges and distribution
and/or service (12b-1) fees, except for Class Z shares, which are not
subject to any sales charges or distribution and/or service fees;
-- each class has exclusive voting rights on any matter submitted to
shareholders that relates solely to its arrangement 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;
-- each class has a different exchange privilege;
-- only Class B shares have a conversion feature whereby Class B shares
held for at least 6 years will automatically convert to Class A
shares, on a quarterly basis, approximately seven years after
purchase; and
-- Class Z shares are offered exclusively for sale to a limited group of
investors.
Shares of Total Return Fund, when issued, are fully paid, nonassessable,
fully transferable and redeemable at the option of the shareholder. Except for
the conversion feature applicable to Class B shares, there
15
are no conversion, preemptive or other subscription rights. The voting and
dividend rights, the right of redemption and the privilege of exchange are
described in Total Return Fund's Prospectus.
Total Return Fund does not hold annual meetings of shareholders. There will
normally be no meetings of shareholders for the purpose of electing Directors
unless less than a majority of the Directors holding office have been elected by
shareholders, at which time the Directors then in office will call a shareholder
meeting for the election of Directors. Under the Investment Company Act of 1940
(the 1940 Act), shareholders of record of at least two-thirds of the outstanding
shares of an investment company may remove a Director by votes cast in person or
by proxy at a meeting called for that purpose. The Directors are required to
call a meeting of shareholders for the purpose of voting upon the question of
removal of any Director, or to transact any other business, when requested in
writing to do so by the shareholders of record holding at least 10% of the
Fund's outstanding shares.
FORMS OF ORGANIZATION
International Fund was originally a nondiversified, closed-end management
investment company, which was organized as a Maryland corporation on April 20,
1987. It operated as a closed-end fund prior to January 15, 1996. On December 6,
1995, shareholders approved open-ending the Fund, and since January 15, 1996,
International Fund has operated as an open-end fund. International Fund is
authorized to issue 2 billion shares of common stock, $.01 per share, divided
equally into four classes.
Total Return Fund also was originally a nondiversified, closed-end
management investment company, which was organized as a Maryland corporation on
May 6, 1986. It operated as a closed-end fund prior to January 15,1996. On
December 6, 1995, shareholders approved open-ending the Fund, and since January
15, 1996, Total Return Fund has operated as an open-end fund. Total Return Fund
is authorized to issue 2 billion shares of common stock, par value $.01 per
share divided equally into four classes.
Both International Fund and Total Return Fund are Maryland corporations and
the rights of their shareholders are governed by their Articles of
Incorporation, By-Laws and the Maryland General Corporation Law. Because the
Funds are both organized as Maryland corporations under substantially similar
Articles of Incorporation, and because each Fund has adopted substantially
similar Bylaws, the rights of security holders of each Fund under state law and
the governing documents would be expected to remain unchanged after the
Reorganization.
FEDERAL INCOME TAX CONSIDERATIONS
The exchange of International Fund's assets for Total Return Fund's shares
and the assumption of the liabilities of International Fund by Total Return Fund
is intended to qualify for federal income tax purposes as a tax-free
reorganization under the Internal Revenue Code. The Reorganization will not
occur unless the Funds receive an opinion from Gardner, Carton & Douglas,
counsel to International Fund and Total Return Fund, based upon representations
made by both International Fund and Total Return Fund, substantially to the
effect that, for federal income tax purposes:
(1) The acquisition by Total Return Fund of all of the assets of
International Fund in exchange solely for voting shares of Total
Return Fund and the assumption by Total Return Fund of International
Fund's liabilities, if any, followed by the distribution of Total
Return Fund's voting shares by International Fund PRO RATA to its
shareholders, as a liquidating distribution, and the liquidation of
International Fund pursuant to the Agreement and constructively in
exchange for their International Fund shares will constitute a
reorganization within the meaning of section 368(a)(1)(C) of the
Internal Revenue Code, and International Fund and Total Return Fund
each will be "a party to a reorganization" within the meaning of
section 368(b) of the Code;
(2) No gain or loss will be recognized by International Fund upon the
transfer of all of its assets to Total Return Fund in exchange solely
for Class A, Class B, Class C and Class Z shares of Total
16
Return Fund and the assumption by Total Return Fund of International
Fund's liabilities, if any. In addition, no gain or loss will be
recognized by International Fund on the distribution of such shares to
the International Fund shareholders in liquidation of International
Fund;
(3) No gain or loss will be recognized by Total Return Fund upon the
acquisition of International Fund's assets in exchange solely for
Class A, Class B, Class C and Class Z shares of Total Return Fund and
the assumption of International Fund's liabilities, if any;
(4) International Fund's shareholders will recognize no gain or loss upon
the receipt of Class A, Class B, Class C and Class Z shares of Total
Return Fund solely in exchange for and in cancellation of
International Fund shares of common stock, as described above and in
the Agreement;
(5) Total Return Fund's basis in the assets acquired from International
Fund will be the same as the basis of such assets in the hands of
International Fund immediately before the Reorganization, and the
holding period of such assets acquired by Total Return Fund will
include the holding period thereof when held by International Fund
immediately before the Reorganization;
(6) International Fund shareholders' basis in the Class A, Class B, Class
C and Class Z shares of Total Return Fund to be received by them
pursuant to the Reorganization will be the same as their respective
basis in the Class A, Class B, Class C and Class Z shares of
International Fund to be constructively surrendered in exchange
therefor; and
(7) The holding period of Total Return Fund shares to be received by
International Fund shareholders will include the period during which
International Fund shares to be constructively surrendered in exchange
therefor were held; provided such International Fund shares were held
as capital assets by those shareholders on the date of the
Reorganization.
Shareholders of International Fund should consult their tax advisers
regarding the effect, if any, of the proposed Reorganization in light of their
individual circumstances. Because the foregoing discussion relates only to the
federal income tax consequences of the Reorganization, shareholders also should
consult their tax advisers as to state and local tax consequences, if any, of
the Reorganization.
CONCLUSION
The Agreement and Plan of Reorganization was approved by the Board of
Directors of International Fund and Total Return Fund, at meetings held on
August 23, 2000. The Boards of both Funds determined that the proposed
Reorganization is in the best interests of shareholders of each Fund and that
the interests of existing shareholders of International Fund and Total Return
Fund would not be diluted as a result of the Reorganization. If the
Reorganization is not completed, International Fund will continue to engage in
business as a registered investment company and the Board of Directors of
International Fund will consider other proposals for the Fund, including
proposals for the reorganization or liquidation of the Fund.
ADDITIONAL INFORMATION ABOUT TOTAL RETURN FUND
Total Return Fund's Prospectus dated March 8, 2000, is enclosed with this
Proxy Statement and is incorporated into this Proxy Statement by reference. The
Prospectus contains additional information about Total Return Fund, including
its investment objective and policies, Manager, investment adviser, advisory
fees and expenses and procedures for purchasing and redeeming shares. The
Prospectus also contains Total Return Fund's financial highlights for the fiscal
years ended December 31, 1999. The performance overview is incorporated by
reference from Total Return Fund's Annual Report for the year ended December 31,
2000, which is enclosed with this Proxy Statement.
17
MISCELLANEOUS
LEGAL MATTERS
Certain legal matters in connection with the issuance of Total Return Fund
shares have been passed upon by Piper Marbury Rudnick & Wolfe LLP, special
Maryland counsel to Total Return Fund. Certain legal and tax matters in
connection with the reorganization will be passed upon by Gardner, Carton &
Douglas, counsel to Total Return Fund and International Fund.
INDEPENDENT ACCOUNTANTS
The audited financial statements of International Fund and Total Return
Fund, incorporated by reference into the Statement of Additional Information,
have been examined by PricewaterhouseCoopers LLP, independent accountants, whose
reports thereon are included in the Annual Report to Shareholders for
International Fund's fiscal year ended December 31, 2000 and Total Return Fund's
fiscal year ended December 31, 2000. The financial statements audited by
PricewaterhouseCoopers LLP have been incorporated by reference in reliance on
their reports given on their authority as experts in auditing and accounting.
AVAILABLE INFORMATION
International Fund and Total Return Fund are each subject to the
informational requirements of the Securities Exchange Act of 1934 and the 1940
Act, and in accordance with these laws, they each file reports, proxy material
and other information with the Commission. Such reports, proxy material and
other information can be inspected and copied at the Public Reference Room
maintained by the Commission at 450 Fifth Street, N.W., Washington D.C. 20549
and 7 World Trade Center, New York, NY 10048. Copies of such material can also
be obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services, Securities and Exchange Commission, Washington D.C. 20549,
at prescribed rates.
NOTICE TO BANKS, BROKER-DEALERS AND VOTING DIRECTORS AND THEIR NOMINEES
Please advise Total Return Fund, in care of Prudential Investment
Management Services LLC, Gateway Center Three, 100 Mulberry Street, 4th Floor,
Newark, New Jersey 07102-4077, whether other persons are beneficial owners of
shares for which proxies are being solicited and, if so, the number of copies of
the Proxy Statement you wish to receive in order to supply copies to the
beneficial owners of the shares.
SHAREHOLDER PROPOSALS
Any shareholder of International Fund who wishes to submit a proposal to be
considered by the Fund's shareholders at the next meeting of shareholders should
send the proposal to International Fund at Gateway Center Three, 100 Mulberry
Street, 4th Floor, Newark, New Jersey 07102-4077, so as to be received within a
reasonable time before the Board of Directors of International Fund makes the
solicitation relating to such meeting. Shareholder proposals that are submitted
in a timely manner will not necessarily be included in the International Fund's
proxy materials. Including shareholder proposals in proxy materials is subject
to limitations under federal securities laws. If the Reorganization is approved,
it is unlikely that International Fund will hold any more shareholders'
meetings.
The International Fund's By-Laws provide that the Fund will not be required
to hold annual meetings of shareholders if the election of Directors is not
required under the 1940 Act. It is the present intention of the Board of
Directors not to hold annual meetings of shareholders unless required to do so
by the 1940 Act.
18
OTHER BUSINESS
Management of International Fund knows of no business to be presented at
the Meeting other than the Proposal described in this Proxy Statement. However,
if any other matter requiring a shareholder vote should arise, the proxies will
vote according to their best judgment in the interest of International Fund.
By order of the Board of Directors,
MARGUERITE E. H. MORRISON
SECRETARY
March __, 2001
IT IS IMPORTANT THAT YOU EXECUTE AND RETURN YOUR PROXY PROMPTLY.
19
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION
Agreement and Plan of Reorganization and Liquidation (Agreement) made as of
the _____th day of __________, 2000, by and between Prudential International
Bond Fund, Inc. (International Bond Fund) and Prudential Global Total Return
Fund, Inc. (Global Total Return Fund) (collectively, the Funds and each
individually, a Fund). International Bond Fund and Global Total Return Fund are
both corporations organized under the laws of the State of Maryland.
International Bond Fund and Global Total Return Fund each maintains its
principal place of business at Gateway Center Three, 100 Mulberry Street,
Newark, New Jersey 07102-4077. Shares of each Fund are divided into four
classes, designated Class A, Class B, Class C and Class Z.
This Agreement is intended to be, and is adopted as, a plan of
reorganization pursuant to Section 368(a)(1)(C) of the Internal Revenue Code of
1986, as amended (Internal Revenue Code). Upon receipt of such representations
from each of the Funds as Gardner, Carton & Douglas may require, Gardner, Carton
& Douglas will deliver the opinion referenced in paragraph 8.6 herein. The
reorganization will comprise the transfer of all of the assets of International
Bond Fund, in exchange solely for shares of common stock of Global Total Return
Fund, and Global Total Return Fund's assumption of International Bond Fund's
liabilities, if any, and the constructive distribution, after the Closing Date
hereinafter referred to, of such shares of Global Total Return Fund to the
shareholders of International Bond Fund, in termination of International Bond
Fund as provided herein, all upon the terms and conditions as hereinafter set
forth.
In consideration of the premises and of the covenants and agreements set
forth herein, the parties covenant and agree as follows:
1. TRANSFER OF ASSETS OF INTERNATIONAL BOND FUND IN EXCHANGE FOR SHARES OF
GLOBAL TOTAL RETURN FUND AND ASSUMPTION OF LIABILITIES, IF ANY, AND
LIQUIDATION OF INTERNATIONAL BOND FUND.
1.1 Subject to the terms and conditions herein set forth and on the basis of
the representations and warranties contained herein, International Bond Fund
agrees to sell, assign, transfer and deliver its assets, as set forth in
paragraph 1.2, to Global Total Return Fund, and Global Total Return Fund agrees
(a) to issue and deliver to International Bond Fund in exchange therefor the
number of shares in Global Total Return Fund determined by dividing the net
asset value of International Bond Fund allocable to Class A, Class B, Class C
and Class Z shares of common stock (computed in the manner and as of the time
and date set forth in paragraph 2.1) by the net asset value allocable to a Class
A, Class B, Class C and Class Z share of Global Total Return Fund (rounded to
the third decimal place) (computed in the manner and as of the time and date set
forth in paragraph 2.2); and (b) to assume all of International Bond Fund's
liabilities, if any, as set forth in paragraph 1.3. Such transactions shall take
place at the closing provided for in paragraph 3 (Closing).
1.2 The assets of International Bond Fund to be acquired by Global Total Return
Fund shall include without limitation all cash, cash equivalents, securities,
receivables (including interest and dividends receivable) and other property of
any kind owned by International Bond Fund and any deferred or prepaid expenses
shown as assets on the books of International Bond Fund on the closing date
provided in paragraph 3 (Closing Date). Global Total Return Fund has no plan or
intent to sell or otherwise dispose of any assets of International Bond Fund,
other than in the ordinary course of business.
1.3 Except as otherwise provided herein, Global Total Return Fund will assume
from International Bond Fund all debts, liabilities, obligations and duties of
International Bond Fund of whatever kind or nature, whether absolute, accrued,
contingent or otherwise, whether or not determinable as of the Closing Date and
whether or not specifically referred to in this Agreement; provided, however,
that International Bond Fund agrees to utilize its best efforts to discharge all
of its known debts, liabilities, obligations and duties prior to the Closing
Date.
1.4 On or immediately prior to the Closing Date, International Bond Fund will
declare and pay to its shareholders of record dividends and/or other
distributions so that it will have distributed substantially all (and in any
event not less than ninety-eight percent) of its investment company taxable
income (computed without regard to any deduction for dividends paid), and
realized net capital gains, if any, for all taxable years through the Closing
Date so as to retain its qualification as a regulated investment company
pursuant to Section 851 of the Internal Revenue Code.
1.5 On a date (Liquidation Date) as soon after the Closing Date as is
conveniently practicable but in any event within 30 days of the Closing Date,
International Bond Fund will distribute PRO RATA to its Class A, Class B, Class
C and Class Z shareholders of record, determined as of the close of business on
the Closing Date, the Class A, Class B, Class C and Class Z shares of Global
Total Return Fund received by International Bond Fund pursuant to paragraph 1.1
in exchange for their interest in International Bond Fund. Such distribution
will be accomplished by opening accounts on the books of Global Total Return
Fund in the names of International Bond Fund shareholders and transferring
thereto the shares credited to the account of International Bond Fund on the
books of Global Total Return Fund. Each account opened shall be credited with
the respective PRO RATA number of Global Total Return Fund Class A, Class B,
Class C and Class Z shares due International Bond Fund's Class A, Class B, Class
C and Class Z shareholders, respectively. Fractional shares of Global Total
Return Fund shall be rounded to the third decimal place. On or about the Closing
Date, if appropriate, Global Total Return Fund will file Articles of Transfer
with the State Department of Assessments and Taxation of the State of Maryland.
Upon the receipt of an order from the Securities and Exchange Commission (SEC)
indicating acceptance of the Form N-8F that International Bond Fund must file
pursuant to the Investment Company Act of 1940, as amended (Investment Company
Act) to deregister as an investment company, International Bond Fund will file
with the State of Maryland Articles of Dissolution, but in any event such
Liquidation will be completed within twelve months following the Closing Date.
A-2
1.6 Global Total Return Fund shall not issue stock certificates in connection
with such exchange. With respect to any International Bond Fund shareholder
holding International Bond Fund stock certificates as of the Closing Date, until
Global Total Return Fund is notified by International Bond Fund's transfer agent
that such shareholder has surrendered his or her outstanding International Bond
Fund stock certificates or, in the event of lost, stolen or destroyed stock
certificates, posted adequate bond or submitted a lost certificate form, as the
case may be, Global Total Return Fund will not permit such shareholder to (1)
receive dividends or other distributions on Global Total Return Fund shares in
cash (although such dividends and distributions shall be credited to the account
of such shareholder established on Global Total Return Fund's books pursuant to
paragraph 1.5, as provided in the next sentence), (2) exchange Global Total
Return Fund shares credited to such shareholder's account for shares of other
Prudential Mutual Funds, or (3) pledge or redeem such shares. In the event that
a shareholder is not permitted to receive dividends or other distributions on
Global Total Return Fund shares in cash as provided in the preceding sentence,
Global Total Return Fund shall pay such dividends or other distributions in
additional Global Total Return Fund shares, notwithstanding any election such
shareholder shall have made previously with respect to the payment of dividends
or other distributions on shares of International Bond Fund. International Bond
Fund will, at its expense, request its shareholders to surrender their
outstanding International Bond Fund stock certificates, post adequate bond or
submit a lost certificate form, as the case may be.
1.7 Ownership of Global Total Return Fund shares will be shown on the books of
Global Total Return Fund transfer agent. Shares of Global Total Return Fund will
be issued in the manner described in Global Total Return Fund's then-current
prospectus and statement of additional information.
1.8 Any transfer taxes payable upon issuance of shares of Global Total Return
Fund in a name other than the registered holder of the shares being exchanged on
the books of International Bond Fund as of that time shall be paid by the person
to whom such shares are to be issued as a condition to the registration of such
transfer.
1.9. Any reporting responsibility with the SEC or any state securities
commission of International Bond Fund is, and shall remain, the responsibility
of International Bond Fund up to and including the Liquidation Date.
1.10 All books and records of International Bond Fund, including all books and
records required to be maintained under the Investment Company Act and the rules
and regulations thereunder, shall be available to Global Total Return Fund from
and after the Closing Date and shall be turned over to Global Total Return Fund
on or prior to the Liquidation Date.
2. Valuation
2.1 The value of International Bond Fund's assets and liabilities to be
acquired and assumed, respectively, by Global Total Return Fund shall be the net
asset value computed as of 4:15 p.m., New York time, on the Closing Date (such
time and date being hereinafter called the Valuation Time), using the valuation
procedures set forth in International Bond Fund's then-current prospectus and
statement
A-3
of additional information.
2.2 The net asset value of Class A, Class B, Class C and Class Z shares of
Global Total Return Fund shall be the net asset value for Class A, Class B,
Class C and Class Z shares computed as of the Valuation Time, using the
valuation procedures set forth in Global Total Return Fund's then-current
prospectus and statement of additional information.
2.3 The number of Global Total Return Fund shares to be issued (including
fractional shares, if any) in exchange for International Bond Fund's net assets
shall be calculated as set forth in paragraph 1.1.
2.4 All computations of net asset value shall be made by or under the direction
of Prudential Investments Fund Management LLC (PIFM) in accordance with its
regular practice as manager of the Funds.
3. Closing and Closing Date
3.1 The Closing Date shall be December , 2000 or such later date as the parties
may agree. All acts taking place at the Closing shall be deemed to take place
simultaneously as of the close of business on the Closing Date unless otherwise
provided. The Closing shall be at the office of Global Total Return Fund or at
such other place as the parties may agree.
3.2 State Street Bank and Trust Company (State Street), as custodian for
International Bond Fund, shall deliver to Global Total Return Fund at the
Closing a certificate of an authorized officer of State Street stating that (a)
International Bond Fund's portfolio securities, cash and any other assets have
been transferred in proper form to Global Total Return Fund on the Closing Date
and (b) all necessary taxes, if any, have been paid, or provision for payment
has been made, in conjunction with the transfer of portfolio securities.
3.3 In the event that immediately prior to the Valuation Time (a) the New York
Stock Exchange (NYSE) or other primary exchange is closed to trading or trading
thereon is restricted or (b) trading or the reporting of trading on the NYSE or
other primary exchange or elsewhere is disrupted so that accurate appraisal of
the value of the net assets of International Bond Fund and of the net asset
value per share of Global Total Return Fund is impracticable, the Closing Date
shall be postponed until the first business day after the date when such trading
shall have been fully resumed and such reporting shall have been restored.
3.4 International Bond Fund shall deliver to Global Total Return Fund on or
prior to the Liquidation Date the names and addresses of its shareholders and
the number of outstanding shares owned by each such shareholder, all as of the
close of business on the Closing Date, certified by the Transfer Agent of
International Bond Fund. Global Total Return Fund shall issue and deliver to
International Bond Fund at the Closing a confirmation or other evidence
satisfactory to International Bond Fund that shares of Global Total Return Fund
have been or will be credited to International Bond
A-4
Fund's account on the books of the Global Total Return Fund. At the Closing each
party shall deliver to the other such bills of sale, checks, assignments, stock
certificates, receipts and other documents as such other party or its counsel
may reasonably request to effect the transactions contemplated by this
Agreement.
4. Representations and Warranties
4.1 International Bond Fund represents and warrants as follows:
4.1.1 International Bond Fund is a corporation duly organized and validly
existing under the laws of the State of Maryland;
4.1.2 International Bond Fund is an open-end management investment company
duly registered under the Investment Company Act, and such
registration is in full force and effect;
4.1.3 International Bond Fund is not, and the execution, delivery and
performance of this Agreement will not result, in violation of any
provision of the Articles of Incorporation or By-Laws of International Bond
Fund or of any material agreement, indenture, instrument, contract, lease
or other undertaking to which International Bond Fund is a party or by
which International Bond Fund is bound;
4.1.4 All material contracts or other commitments to which International
Bond Fund, or the properties or assets of International Bond Fund, is
subject, or by which International Bond Fund is bound, except this
Agreement, will be terminated on or prior to the Closing Date without
International Bond Fund or Global Total Return Fund incurring any liability
or penalty with respect thereto;
4.1.5 No material litigation or administrative proceeding or investigation
of or before any court or governmental body is presently pending or to its
knowledge threatened against International Bond Fund or any of its
properties or assets. International Bond Fund knows of no facts that might
form the basis for the institution of such proceedings, and International
Bond Fund is not a party to or subject to the provisions of any order,
decree or judgment of any court or governmental body that materially and
adversely affects its business or its ability to consummate the
transactions herein contemplated;
4.1.6 The Portfolio of Investments, Statement of Assets and Liabilities,
Statement of Operations, Statement of Cash Flows, Statement of Changes in
Net Assets, and Financial Highlights of International Bond Fund at December
31, 1999 and for the year then ended (copies of which have been furnished
to Global Total Return Fund) have been audited by PricewaterhouseCoopers
LLP, independent accountants, in accordance with generally accepted
auditing standards. Such financial statements are prepared in accordance
with generally accepted accounting principles and present fairly, in all
material respects, the financial condition, results of operations, changes
in net assets and financial highlights of International
A-5
Bond Fund as of and for the period ended on such date, and there are no
material known liabilities of International Bond Fund (contingent or
otherwise) not disclosed therein;
4.1.7 Since December 31, 1999, there has not been any material adverse
change in International Bond Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course
of business, or any incurrence by International Bond Fund of indebtedness
maturing more than one year from the date such indebtedness was incurred,
except as otherwise disclosed to and accepted by Global Total Return Fund.
For the purposes of this paragraph 4.1.7, a decline in net asset value, net
asset value per share or change in the number of shares outstanding shall
not constitute a material adverse change;
4.1.8 At the date hereof and at the Closing Date, all federal and other tax
returns and reports of International Bond Fund required by law to have been
filed on or before such dates shall have been timely filed, and all federal
and other taxes shown as due on said returns and reports shall have been
paid insofar as due, or provision shall have been made for the payment
thereof, and, to the best of International Bond Fund's knowledge, all
federal or other taxes required to be shown on any such return or report
have been shown on such return or report, no such return is currently under
audit and no assessment has been asserted with respect to such returns;
4.1.9 For each past taxable year since it commenced operations,
International Bond Fund has met the requirements of Subchapter M of the
Internal Revenue Code for qualification and treatment as a regulated
investment company and intends to meet those requirements for the current
taxable year; and, for each past calendar year since it commenced
operations, International Bond Fund has made such distributions as are
necessary to avoid the imposition of federal excise tax or has paid or
provided for the payment of any excise tax imposed;
4.1.10 All issued and outstanding shares of International Bond Fund are,
and at the Closing Date will be, duly and validly authorized, issued and
outstanding, fully paid and non-assessable. All issued and outstanding
shares of International Bond Fund will, at the time of the Closing, be held
in the name of the persons and in the amounts set forth in the list of
shareholders submitted to Global Total Return Fund in accordance with the
provisions of paragraph 3.4. International Bond Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of its shares, nor is there outstanding any security
convertible into any of its shares, except for the Class B shares which
have the conversion feature described in International Bond Fund's current
prospectus;
4.1.11 At the Closing Date, International Bond Fund will have good and
marketable title to its assets to be transferred to Global Total Return
Fund pursuant to paragraph 1.1, and full right, power and authority to
sell, assign, transfer and deliver such assets hereunder free of any liens,
claims, charges or other encumbrances, and, upon delivery and payment for
such assets, Global Total Return Fund will acquire good and marketable
title thereto;
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4.1.12 The execution, delivery and performance of this Agreement have been
duly authorized by the Board of Directors of International Bond Fund and by
all necessary corporate action, other than shareholder approval, on the
part of International Bond Fund, and this Agreement constitutes a valid and
binding obligation of International Bond Fund, subject to shareholder
approval;
4.1.13 The information furnished and to be furnished by International Bond
Fund for use in applications for orders, registration statements, proxy
materials and other documents that may be necessary in connection with the
transactions contemplated hereby is and shall be accurate and complete in
all material respects and is in compliance and shall comply in all material
respects with applicable federal securities and other laws and regulations;
and
4.1.14 On the effective date of the registration statement filed with the
SEC by Global Total Return Fund on Form N-14 relating to the shares of
Global Total Return Fund issuable thereunder, and any supplement or
amendment thereto (Registration Statement), at the time of the meeting of
the shareholders of International Bond Fund and on the Closing Date, the
Proxy Statement of International Bond Fund, the Prospectus of Global Total
Return Fund and the Statements of Additional Information of both Funds to
be included in the Registration Statement (collectively, Proxy Statement)
(i) will comply in all material respects with the provisions and
regulations of the Securities Act of 1933 (1933 Act), the Securities
Exchange Act of 1934 (1934 Act) and the Investment Company Act and (ii)
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein in light of the circumstances
under which they were made or necessary to make the statements therein not
misleading; provided, however, that the representations and warranties in
this paragraph 4.1.14 shall not apply to statements in or omissions from
the Proxy Statement and Registration Statement made in reliance upon and in
conformity with information furnished by Global Total Return Fund for use
therein.
4.2 Global Total Return Fund represents and warrants as follows:
4.2.1 Global Total Return Fund is a corporation duly organized and validly
existing under the laws of the State of Maryland;
4.2.2 Global Total Return Fund is an open-end management investment company
duly registered under the Investment Company Act, and such registration is
in full force and effect;
4.2.3 Global Total Return Fund is not, and the execution, delivery and
performance of this Agreement will not result, in violation of any
provision of the Articles of Incorporation or By-Laws of Global Total
Return Fund or of any material agreement, indenture, instrument, contract,
lease or other undertaking to which Global Total Return Fund is a party or
by which Global Total Return Fund is bound;
4.2.4 No material litigation or administrative proceeding or investigation
of or before any
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court or governmental body is presently pending or threatened against
Global Total Return Fund or any of its properties or assets, except as
previously disclosed in writing to International Bond Fund. Global Total
Return Fund knows of no facts that might form the basis for the institution
of such proceedings, and the Company on behalf of Global Total Return Fund
is not a party to or subject to the provisions of any order, decree or
judgment of any court or governmental body that materially and adversely
affects its business or its ability to consummate the transactions herein
contemplated;
4.2.5 The Portfolio of Investments, Statement of Assets and Liabilities,
Statement of Operations, Statement of Changes in Net Assets, and Financial
Highlights of Global Total Return Fund at December 31, 1999 and for the
fiscal year then ended (copies of which have been furnished to
International Bond Fund) have been audited by PricewaterhouseCoopers LLP,
independent accountants, in accordance with generally accepted auditing
standards. Such financial statements are prepared in accordance with
generally accepted accounting principles and present fairly, in all
material respects, the financial condition, results of operations, changes
in net assets and financial highlights of Global Total Return Fund as of
and for the period ended on such date, and there are no known material
liabilities of Global Total Return Fund (contingent or otherwise) not
disclosed therein;
4.2.6 Since December 31, 1999, there has not been any material adverse
change in Global Total Return Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course
of business, or any incurrence by Global Total Return Fund of indebtedness
maturing more than one year from the date such indebtedness was incurred,
except as otherwise disclosed to and accepted by International Bond Fund.
For the purposes of this paragraph, a decline in net asset value, net asset
value per share or a decrease in the number of shares outstanding shall not
constitute a material adverse change;
4.2.7 At the date hereof and at the Closing Date, all federal and other tax
returns and reports of Global Total Return Fund required by law to have
been filed on or before such dates shall have been filed, and all federal
and other taxes shown as due on said returns and reports shall have been
paid insofar as due, or provision shall have been made for the payment
thereof, and, to the best of Global Total Return Fund's knowledge, all
federal or other taxes required to be shown on any such return or report
are shown on such return or report, no such return is currently under audit
and no assessment has been asserted with respect to such returns;
4.2.8 For each past taxable year since it commenced operations, Global
Total Return Fund has met the requirements of Subchapter M of the Internal
Revenue Code for qualification and treatment as a regulated investment
company and intends to meet those requirements for the current taxable
year; and, for each past calendar year since it commenced operations,
Global Total Return Fund has made such distributions as are necessary to
avoid the imposition of federal excise tax or has paid or provided for the
payment of any excise tax imposed;
4.2.9 All issued and outstanding shares of Global Total Return Fund are,
and at the Closing
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Date will be, duly and validly authorized, issued and outstanding, fully
paid and non-assessable. Except as contemplated by this Agreement, Global
Total Return Fund does not have outstanding any options, warrants or other
rights to subscribe for or purchase any of its shares nor is there
outstanding any security convertible into any of its shares, except for
Class B shares which have a conversion feature described in Global Total
Return Fund's current prospectus;
4.2.10 The execution, delivery and performance of this Agreement have been
duly authorized by the Board of Directors of Global Total Return Fund and
by all necessary corporate action on the part of Global Total Return Fund,
and this Agreement constitutes a valid and binding obligation of Global
Total Return Fund;
4.2.11 The shares of Global Total Return Fund to be issued and delivered to
International Bond Fund pursuant to this Agreement will, at the Closing
Date, have been duly authorized and, when issued and delivered as provided
in this Agreement, will be duly and validly issued and outstanding shares
of Global Total Return Fund, fully paid and non-assessable;
4.2.12 The information furnished and to be furnished by Global Total Return
Fund for use in applications for orders, registration statements, proxy
materials and other documents which may be necessary in connection with the
transactions contemplated hereby is and shall be accurate and complete in
all material respects and is and shall comply in all material respects with
applicable federal securities and other laws and regulations; and
4.2.13 On the effective date of the Registration Statement, at the time of
the meeting of the shareholders of International Bond Fund and on the
Closing Date, the Proxy Statement and the Registration Statement (i) will
comply in all material respects with the provisions and regulations of the
1933 Act, the 1934 Act and the Investment Company Act, (ii) will not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) with respect to the Registration
Statement, at the time it becomes effective, it will not contain an untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein in the light of the circumstances under which
they were made, not misleading; provided, however, that the representations
and warranties in this paragraph 4.2.13 shall not apply to statements in or
omissions from the Proxy Statement and the Registration Statement made in
reliance upon and in conformity with information furnished by International
Bond Fund for use therein.
5. Covenants of Global Total Return Fund and International Bond Fund
5.1 International Bond Fund and Global Total Return Fund each covenants to
operate its respective business in the ordinary course between the date
hereof and the Closing Date, it being understood that the ordinary course
of business will include declaring and paying customary dividends and other
distributions and such changes in operations as are contemplated by the
normal operations of
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the Funds, except as may otherwise be required by paragraph 1.4 hereof.
5.2 International Bond Fund covenants to call a shareholders' meeting to
consider and act upon this Agreement and to take all other action necessary to
obtain approval of the transactions contemplated hereby (including the
determinations of its Board of Directors as set forth in Rule 17a-8(a) under the
Investment Company Act).
5.3 International Bond Fund covenants that Global Total Return Fund shares to
be received by International Bond Fund in accordance herewith are not being
acquired for the purpose of making any distribution thereof other than in
accordance with the terms of this Agreement.
5.4 International Bond Fund covenants that it will assist Global Total Return
Fund in obtaining such information as Global Total Return Fund reasonably
requests concerning the beneficial ownership of International Bond Fund's
shares.
5.5 Subject to the provisions of this Agreement, each Fund will take, or cause
to be taken, all action, and will do, or cause to be done, all things reasonably
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement.
5.6 International Bond Fund covenants to prepare the Proxy Statement in
compliance with the 1934 Act, the Investment Company Act and the rules and
regulations under each such Act.
5.7 International Bond Fund covenants that it will, from time to time, as and
when requested by Global Total Return Fund, execute and deliver or cause to be
executed and delivered all such assignments and other instruments, and will take
or cause to be taken such further action, as Global Total Return Fund may deem
necessary or desirable in order to vest in and confirm to Global Total Return
Fund title to and possession of all the assets of International Bond Fund to be
sold, assigned, transferred and delivered hereunder and otherwise to carry out
the intent and purpose of this Agreement.
5.8 Global Total Return Fund covenants to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the Investment
Company Act (including the determinations of Global Total Return Fund's Board of
Directors as set forth in Rule 17a-8(a) thereunder) and such of the state Blue
Sky or securities laws as it may deem appropriate in order to continue its
operations after the Closing Date.
5.9 Global Total Return Fund covenants that it will, from time to time, as and
when requested by International Bond Fund, execute and deliver or cause to be
executed and delivered all such assignments and other instruments, and will take
and cause to be taken such further action, as International Bond Fund may deem
necessary or desirable in order to (i) vest in and confirm to International Bond
Fund title to and possession of all the shares of Global Total Return Fund to be
transferred to International Bond Fund pursuant to this Agreement and (ii)
assume all of International Bond Fund's liabilities in accordance with this
Agreement.
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6. Conditions Precedent to Obligations of International Bond Fund
The obligations of International Bond Fund to consummate the transactions
provided for herein shall be subject to the performance by Global Total Return
Fund of all the obligations to be performed by it hereunder on or before the
Closing Date and the following further conditions:
6.1 All representations and warranties of Global Total Return Fund contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date.
6.2 Global Total Return Fund shall have delivered to International Bond Fund on
the Closing Date a certificate executed in Global Total Return Fund's name by
its President or a Vice President in form and substance satisfactory to
International Bond Fund and dated as of the Closing Date, to the effect that the
representations and warranties of Global Total Return Fund in this Agreement are
true and correct at and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement, and as to such other matters
as International Bond Fund shall reasonably request.
6.3 International Bond Fund shall have received on the Closing Date a favorable
opinion from Piper Marbury Rudnick & Wolfe LLP, special Maryland counsel to
Global Total Return Fund, dated as of the Closing Date, to the effect that:
6.3.1 Global Total Return Fund is duly incorporated and validly existing as
a Maryland corporation, with power under its charter to own all of its
properties and assets and, to the knowledge of such counsel, to carry on
its business as presently conducted;
6.3.2 This Agreement has been duly authorized, executed and delivered by an
authorized officer of Global Total Return Fund and, assuming due
authorization, execution and delivery of the Agreement by International
Bond Fund, is a valid and binding obligation of Global Total Return Fund
enforceable in accordance with its terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity), and further subject to the qualification
that no opinion is expressed as to the validity or enforceability of any
provision regarding the choice of New York law to govern the Agreement;
6.3.3 The shares of Global Total Return Fund to be distributed to
International Bond Fund shareholders under this Agreement, assuming their
due authorization and delivery as contemplated by this Agreement, will be
validly issued and outstanding and fully paid and non-assessable, and no
shareholder of Global Total Return Fund has any statutory pre-emptive right
under Maryland law to subscribe for or purchase such shares;
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6.3.4 The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, (i)
conflict with Global Total Return Fund's charter or By-Laws or (ii)
result in a default or a breach of (a) the Management Agreement dated
_______________________ between Global Total Return Fund and Prudential
Investments Fund Management LLC, (b) the Custodian Contract dated
_______________________ between Global Total Return Fund and State
Street Bank and Trust Company, (c) the Distribution Agreement dated June
1, 1998, between Global Total Return Fund and Prudential Investment
Management Services LLC, and (d) the Transfer Agency and Service
Agreement dated _______________________ between Global Total Return Fund
and Prudential Mutual Fund Services, Inc.; provided, however, that such
counsel may state that they express no opinion with respect to federal
or state securities laws, other antifraud laws and fraudulent transfer
laws; and provided further that insofar as performance by Global Total
Return Fund of its obligations under this Agreement is concerned, such
counsel may state that they express no opinion as to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors rights
and to general equity principles;
6.3.5 To the knowledge of such counsel and without independent inquiry or
investigation, no consent, approval, authorization, filing or order of any
court or governmental authority is required for the consummation by Global
Total Return Fund of the transactions contemplated herein, except such as
have been obtained under the 1933 Act, the 1934 Act and the Investment
Company Act and such as may be required under state Blue Sky or securities
laws;
6.3.6 Global Total Return Fund has been registered with the SEC as an
investment company, and, to the knowledge of such counsel, no order has
been issued or proceeding instituted to suspend such registration; and
6.3.7 Such counsel knows of none and has not made independent inquiry or
investigation to ascertain the existence of any litigation or government
proceeding instituted or threatened against Global Total Return Fund that
could be required to be disclosed in its registration statement on Form
N-1A and is not so disclosed.
7. Conditions Precedent to Obligations of Global Total Return Fund
The obligations of Global Total Return Fund to complete the
transactions provided for herein shall be subject to the performance by
International Bond Fund of all the obligations to be performed by it hereunder
on or before the Closing Date and the following further conditions:
7.1 All representations and warranties of International Bond Fund contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date.
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7.2 International Bond Fund shall have delivered to Global Total Return Fund on
the Closing Date a statement of its assets and liabilities, which statement
shall be prepared in accordance with generally accepted accounting principles
consistently applied, together with a list of its portfolio securities showing
the adjusted tax bases of such securities by lot, as of the Closing Date,
certified by the Treasurer or Assistant Treasurer of International Bond Fund.
7.3 International Bond Fund shall have delivered to Global Total Return Fund on
the Closing Date a certificate executed in its name by the President or a Vice
President of International Bond Fund, in form and substance satisfactory to
Global Total Return Fund and dated as of the Closing Date, to the effect that
the representations and warranties of International Bond Fund made in this
Agreement are true and correct at and as of the Closing Date except as they may
be affected by the transactions contemplated by this Agreement, and as to such
other matters as Global Total Return Fund shall reasonably request.
7.4 On or immediately prior to the Closing Date, International Bond Fund shall
have declared and paid to its shareholders of record one or more dividends
and/or other distributions so that it will have distributed substantially all
(and in any event not less than ninety-eight percent) of such Fund's investment
company taxable income (computed without regard to any deduction for dividends
paid), and realized net capital gain, if any, of International Bond Fund for all
completed taxable years from the inception of the Fund through the Closing Date.
7.5 Global Total Return Fund shall have received on the Closing Date a
favorable opinion from Gardner, Carton & Douglas, counsel to International Bond
Fund, dated as of the Closing Date, to the effect that:
7.5.1 International Bond Fund is duly incorporated and validly existing as
a Maryland corporation with power under its Articles of Incorporation to
own all of its properties and assets and, to the knowledge of such counsel,
to carry on its business as described in its prospectus;
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7.5.2 This Agreement has been duly authorized for execution and delivery by
an authorized officer of International Bond Fund and constitutes a valid
and legally binding obligation of International Bond Fund enforceable
against International Bond Fund in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles, provided that such counsel may
state that they express no opinion as to the validity or enforceability of
any provision regarding New York law to govern this agreement;
7.5.3 The execution and delivery of the Agreement did not, and the
performance by International Bond Fund of its obligations hereunder will
not, (i) violate International Bond Fund's Articles of Incorporation or
By-Laws or (ii) result in a default or a breach of (a) the Management
Agreement, dated _______________________, between International Bond
Fund and Prudential Investments Fund Management LLC as successor to
Prudential Mutual Fund Management, Inc., (b) the Custodian Contract,
dated _______________________, between International Bond Fund and State
Street Bank and Trust Company, (c) the Distribution Agreement dated June
1, 1998 between International Bond Fund and Prudential Investment
Management Services LLC, and (d) the Transfer Agency and Service
Agreement, dated _______________________, between International Bond
Fund and Prudential Mutual Fund Services, Inc.; provided, however, that
such counsel may state that they express no opinion in their opinion
pursuant to this paragraph 7.5.3 with respect to federal or state
securities laws, other antifraud laws and fraudulent transfer laws;
provided further that insofar as performance by International Bond Fund
of its obligations under this Agreement is concerned, such counsel may
state that they express no opinion as to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to
general equity principles;
7.5.4 All regulatory consents, authorizations and approvals required to be
obtained by International Bond Fund under the federal laws of the United
States, and the laws of the State of Maryland for the consummation of the
transactions contemplated by this Agreement have been obtained (other than
such as may be required under Maryland securities laws or Blue Sky laws as
to which such counsel may state that they express no opinion);
7.5.5 Such counsel knows of no litigation or any governmental proceeding
instituted or threatened against International Bond Fund that would be
required to be disclosed in the Registration Statement and is not so
disclosed; and
7.5.6 International Bond Fund has been registered with the SEC as an
investment company, and, to the knowledge of such counsel, no order has
been issued or proceeding instituted to suspend such registration.
Such opinion may rely on an opinion of Maryland counsel to the extent it
addresses Maryland law. As to paragraph 7.5.2, such counsel may state that they
have assumed that the agreement is governed by the laws of the State of
Illinois.
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8. Further Conditions Precedent to Obligations of Global Total Return Fund and
International Bond Fund
The obligations of each Fund hereunder are subject to the further
conditions that on or before the Closing Date:
8.1 This Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of (a) the Board of Directors of International
Bond Fund and the Board of Directors of Global Total Return Fund, as to the
determinations set forth in Rule 17a-8(a) under the Investment Company Act, (b)
the Board of Directors of Global Total Return Fund as to the assumption by
Global Total Return Fund of the liabilities of International Bond Fund and (c)
the holders of the outstanding shares of International Bond Fund in accordance
with the provisions of International Bond Fund's Articles of Incorporation, and
certified copies of the resolutions evidencing such approvals shall have been
delivered to Global Total Return Fund and International Bond Fund, as
applicable.
8.2 Any proposed change to Global Total Return Fund's operations that may be
approved by the Board of Directors of Global Total Return Fund subsequent to the
date of this Agreement but in connection with and as a condition to implementing
the transactions contemplated by this Agreement, for which the approval of
Global Total Return Fund's shareholders is required pursuant to the Investment
Company Act or otherwise, shall have been approved by the requisite vote of the
holders of the outstanding shares of the Global Total Return Fund in accordance
with the Investment Company Act and Maryland law, and certified copies of the
resolutions evidencing such approval shall have been delivered to International
Bond Fund.
8.3 On the Closing Date, no action, suit or other proceeding shall be pending
before any court or governmental agency in which it is sought to restrain or
prohibit, or obtain damages or other relief in connection with, this Agreement
or the transactions contemplated herein.
8.4 All consents of other parties and all consents, orders and permits of
federal, state and local regulatory authorities (including those of the SEC and
of state Blue Sky or securities authorities, including "no-action" positions of
such authorities) deemed necessary by Global Total Return Fund or International
Bond Fund to permit consummation, in all material respects, of the transactions
contemplated hereby shall have been obtained, except where failure to obtain any
such consent, order or permit would not involve a risk of a material adverse
effect on the assets or properties of Global Total Return Fund or International
Bond Fund, provided that either party hereto may for itself waive any part of
this condition.
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8.5 The Registration Statement shall have become effective under the 1933 Act,
and no stop orders suspending the effectiveness thereof shall have been issued,
and to the best knowledge of the parties hereto, no investigation or proceeding
under the 1933 Act for that purpose shall have been instituted or be pending,
threatened or contemplated.
8.6 International Bond Fund and Global Total Return Fund shall have received on
or before the Closing Date an opinion of Gardner, Carton & Douglas satisfactory
to International Bond Fund and to Global Total Return Fund, substantially to the
effect that for federal income tax purposes:
8.6.1 The acquisition by Global Total Return Fund of the assets of
International Bond Fund in exchange solely for voting shares of Global
Total Return Fund and the assumption by Global Total Return Fund of
International Bond Fund's liabilities, if any, followed by the distribution
of Global Total Return Fund's voting shares by International Bond Fund PRO
RATA to its shareholders, as a liquidating distribution and the liquidation
of International Bond Fund pursuant to the reorganization and
constructively in exchange for their International Bond Fund shares, will
constitute a reorganization within the meaning of Section 368(a)(1)(C) of
the Internal Revenue Code, and International Bond Fund and Global Total
Return Fund each will be "a party to a reorganization" within the meaning
of Section 368(b) of the Internal Revenue Code;
8.6.2 International Bond Fund's shareholders will recognize no gain or loss
upon the receipt of Class A, Class B, Class C and Class Z shares of Global
Total Return Fund solely in exchange for and in cancellation of
International Bond Fund shares of common stock as described above and in
the Agreement;
8.6.3 No gain or loss will be recognized by International Bond Fund upon
the transfer of all of its assets to Global Total Return Fund in exchange
solely for Class A, Class B, Class C and Class Z shares of Global Total
Return Fund and the assumption by Global Total Return Fund of International
Bond Fund's liabilities, if any. In addition, no gain or loss will be
recognized by International Bond Fund on the distribution of such shares to
the International Bond Fund shareholders in liquidation of International
Bond Fund;
8.6.4 No gain or loss will be recognized by Global Total Return Fund upon
the acquisition of International Bond Fund's assets in exchange solely for
Class A, Class B, Class C and Class Z shares of Global Total Return Fund
and the assumption of International Bond Fund's liabilities, if any;
8.6.5 Global Total Return Fund's basis in the assets acquired from
International Bond Fund will be the same as the basis of such assets in the
hands of International Bond Fund immediately before the reorganization, and
the holding period of such assets acquired by Global Total Return Fund will
include the holding period thereof when held by International Bond Fund
immediately before the reorganization;
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8.6.6 International Bond Fund shareholders' basis in the Class A, Class B,
Class C and Class Z shares of Global Total Return Fund to be received by
them pursuant to the reorganization will be the same as their basis in the
Class A, Class B, Class C and Class Z shares of International Bond Fund to
be constructively surrendered in exchange therefor; and
8.6.7 The holding period of Global Total Return Fund shares to be received
by International Bond Fund shareholders will include the period during
which International Bond Fund shares to be constructively surrendered in
exchange therefor were held; provided such International Bond Fund shares
were held as capital assets by those shareholders on the date of the
reorganization.
In rendering this opinion, such counsel may rely as to factual matters,
exclusively and without independent verification, on the representations made in
this Agreement (or in separate letters addressed to such counsel) and the
certificates delivered pursuant to paragraph 3.4.
9. Finder's Fees and Expenses
9.1 Each Fund represents and warrants to the other that there are no finder's
fees payable in connection with the transactions provided for herein.
9.2 The expenses incurred in connection with the entering into and carrying out
of the provisions of this Agreement shall be allocated to International Bond
Fund and Global Total Return Fund PRO RATA in a fair and equitable manner in
proportion to their respective assets.
10. Entire Agreement; Survival of Warranties
10.1 This Agreement constitutes the entire agreement between the Funds.
10.2 The representations, warranties and covenants contained in this Agreement
or in any document delivered pursuant hereto or in connection herewith shall
survive the consummation of the transactions contemplated hereunder.
11. Termination
Either Fund may at its option terminate this Agreement at or prior to the
Closing Date because of:
11.1 A material breach by the other of any representation, warranty or covenant
contained herein to be performed at or prior to the Closing Date; or
11.2 A condition herein expressed to be precedent to the obligations of either
party not having been met and it reasonably appearing that it will not or cannot
be met; or
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11.3 A mutual written agreement of International Bond Fund and Global Total
Return Fund.
In the event of any such termination, there shall be no liability for
damages on the part of either Fund (other than the liability of the Funds to pay
their allocated expenses pursuant to paragraph 9.2) or any Director or officer
of Global Total Return Fund or International Bond Fund.
12. Amendment
This Agreement may be amended, modified or supplemented only in writing
by the parties; provided, however, that following the shareholders' meeting
called by International Bond Fund pursuant to paragraph 5.2, no such amendment
may have the effect of changing the provisions for determining the number of
shares of Global Total Return Fund to be distributed to International Bond Fund
shareholders under this Agreement to the detriment of such shareholders without
their further approval.
13. Notices
Any notice, report, demand or other communication required or permitted by
any provision of this Agreement shall be in writing and shall be given by hand
delivery, or prepaid certified mail or overnight service addressed to Prudential
Investments Fund Management LLC, Gateway Center Three, 100 Mulberry Street,
Newark, New Jersey 07102 Attention: Marguerite E. H. Morrison.
14. Headings; Counterparts; Governing Law; Assignment
14.1 The paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of which
will be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with the
laws of the State of New York; provided that, in the case of any conflict
between such laws and the federal securities laws, the latter shall govern.
14.4 This Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns, and no assignment or transfer hereof or of
any rights or obligations hereunder shall be made by either party without the
written consent of the other party. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give any person, firm or
corporation other than the parties and their respective successors and assigns
any rights or remedies under or by reason of this Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed by its President or Vice President.
Prudential International Bond Fund, Inc.
By: ______________________________
John R. Strangfeld
President
Prudential Global Total Return Fund, Inc.
By: ______________________________
Robert F. Gunia
Vice President
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TABLE OF CONTENTS
VOTING INFORMATION
SYNOPSIS
Investment Objectives and Policies
Principal Investment Strategies
Comparison of Other Policies of the Funds
Expense Structures
The Proposed Reorganization
Fund Operating Expenses
Comparative Fee Tables
Examples of the Effect of Fund Expenses
Pro Forma Capitalization and Ratios
Performance Comparisons of the Funds
COMPARISON OF PRINCIPAL RISK FACTORS
OPERATIONS OF TOTAL RETURN FUND FOLLOWING THE REORGANIZATION
PURCHASES, REDEMPTIONS AND EXCHANGES
Purchasing Shares
Redeeming Shares
Minimum Investment Requirements
Purchases and Redemptions of Balanced Fund
Exchanges of Fund Shares
Dividends and Other Distributions
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
THE PROPOSED TRANSACTION
Reorganization Plan
Reasons for the Reorganization
Description of the Securities to be Issued
Forms of Organization
Federal Income Tax Considerations
Conclusion
ADDITIONAL INFORMATION ABOUT TOTAL RETURN FUND
MISCELLANEOUS
Legal Matters
Independent Accountants
Available Information
Notice to Banks, Broker-Dealers and Voting Directors and Their Nominees
SHAREHOLDER PROPOSALS
OTHER BUSINESS
APPENDIX A: Agreement and Plan of Reorganization and Liquidation between
Prudential International Bond Fund, Inc. and Prudential Global Total Return
Fund, Inc.
ENCLOSURES: Annual Report of Total Return Fund for the fiscal year ended
December 31, 2000
Prospectus of Total Return Fund dated March 8, 2000, as
supplemented on March 27, 2000, and August 30, 2000
PRUDENTIAL GLOBAL TOTAL RETURN FUND, INC.
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
(800) 225-1852
STATEMENT OF ADDITIONAL INFORMATION
dated March __, 2001
PRUDENTIAL INTERNATIONAL BOND FUND, INC.
GATEWAY CENTER THREE
100 MULBERRY STREET
NEWARK, NEW JERSEY 07102-4077
(800) 225-1852
This Statement of Additional Information specifically relates to the
proposed transfer of all of the assets and the assumption of all of the
liabilities, if any, of Prudential International Bond Fund, Inc. (International
Bond Fund) by Prudential Global Total Return Fund, Inc. (Total Return Fund).
This Statement of Additional Information consists of this cover page and the
following described documents, each of which is attached hereto and incorporated
herein by reference:
1. Pro Forma Financial Statements as of December 31, 2000.
2. Statement of Additional Information of Total Return Fund dated March
8, 2000.
3. Annual Report of Total Return Fund for the fiscal year ended December
31, 2000.
4. Annual Report of International Bond Fund for the fiscal year ended
December 31, 2000.
This Statement of Additional Information is not a prospectus and should be
read only in conjunction with the Prospectus and Proxy Statement dated March __,
2001, relating to the above-referred matter. A copy of the Prospectus and Proxy
Statement may be obtained from Total Return Fund without charge by writing or
calling Total Return Fund at the address or phone number listed above.
B-1
FINANCIAL STATEMENTS
The following are pro forma financial statements which give effect to the
proposed transaction whereby all the assets of Prudential International Bond
Fund, Inc. will be exchanged for shares of Prudential Global Total Return Fund,
Inc. and Prudential Global Total Return Fund, Inc. will assume the liabilities,
if any, of Prudential International Bond Fund, Inc. Immediately thereafter, the
shares of Prudential Global Total Return Fund, Inc. will be distributed to the
shareholders of Prudential International Bond Fund, Inc. in a total liquidation
of Prudential International Bond Fund, Inc. The following pro forma financial
statements include a pro forma Portfolio of Investments at December 31, 2000, a
pro forma Statement of Assets and Liabilities at December 31, 2000 and a pro
forma Statement of Operations for the 12 months ended December 31, 2000.
B-2
PRO FORMA FINANCIAL STATEMENTS
PRO FORMA SCHEDULE OF INVESTMENTS
31-DEC-00
PRINCIPAL AMOUNT (000) VALUE ($)
- ----------------------------------------- ---------------------------------------
PRO FORMA:
PRUDENTIAL PRUDENTIAL
PRO FORMA: GLOBAL GLOBAL
PRUDENTIAL PRUDENTIAL PRUDENTIAL PRUDENTIAL TOTAL TOTAL
INTERNATIONAL GLOBAL TOTAL GLOBAL TOTAL INTERNATIONAL RETURN RETURN
BOND FUND, RETURN FUND, RETURN FUND, DESCRIPTION BOND FUND, FUND, FUND,
INC. INC. INC. INC. INC. INC.*
- ------------- ------------ ------------ -------------------------------------------------- ------------- ---------- ------------
LONG-TERM INVESTMENTS - 96.7%
C$ C$ C$ CANADA - 4.1%
Government of Canada
2,194 4,557 6,751 6.00%, 9/1/05 1,503,178 3,122,143 4,625,321
660 - 660 8.75%, 12/1/05 503,515 - 503,515
1,177 8,325 9,502 5.75%, 9/01/06 801,299 5,667,639 6,468,938
------------- ---------- ------------
2,807,992 8,789,782 11,597,774
------------- ---------- ------------
DKK DKK DKK DENMARK - 1.3%
6,040 24,180 30,220 Kingdom of Denmark, 5.00%, 8/15/05 753,899 3,018,090 3,771,989
------------- ---------- ------------
EURO EURO EURO EURO - 27.1%
370 1,490 1,860 Callahan Nordrhein Westfalen, 14.00%, 7/15/10 302,954 1,220,006 1,522,960
- 2,000 2,000 Cesp Cia Energetic, 9.25%, 5/10/01 - 957,647 957,647
760 2,889 3,649 Depfa Bank Ag, 5.50%, 2/12/08 718,456 2,731,079 3,449,535
- 480 480 East Telecom Group PLC (United Kingdom), 11.875%,
11/1/09 - 559,220 559,220
370 1,473 1,843 Flags Telecom Holdings Ltd., 11.625%, 3/30/10 313,799 1,249,259 1,563,058
700 2,540 3,240 French Government Bonds, 8.50%, 4/25/23 903,048 3,276,774 4,179,822
2,920 10,200 13,120 German Government Bonds, 6.25%, 1/04/24 3,013,057 10,525,062 13,538,119
1,440 5,410 6,850 Kingdom of Belgium, 5.50%, 03/28/2028 1,295,365 4,866,614
325 1,304 1,629 Kingdom of Spain, 5.40%, 7/30/11 298,314 1,196,927 1,495,241
- 500 500 Municipality of Sophia (France), 9.75%, 6/3/02 - 468,947 468,947
257 1,017 1,274 Neste Chemicals International Oy, 12.25%, 8/15/10 204,094 807,639 1,011,733
490 1,960 2,450 Netia Holdings BV, (Nederlands), 13.75%, 6/15/10 393,459 1,573,837 1,967,296
1,912 7,762 9,674 Osprey Trust, 6.375%, 1/15/03 1,801,525 7,313,512 9,115,037
Republic of Austria
3,630 15,350 18,980 3.40%, 10/20/04 3,229,935 13,658,263 16,888,198
690 3,830 4,520 4.00%, 07/15/09 591,869 3,285,304 3,877,173
Republic of Italy
800 3,400 4,200 4.50%, 7/1/01 743,169 3,158,468 3,901,637
605 2,425 3,030 6.75%, 7/1/07 616,062 2,469,339 3,085,401
812 1,761 2,573 6.00%, 5/01/31 781,969 1,695,870 2,477,839
---------------------------------------
15,207,075 61,013,767 76,220,842
---------------------------------------
GRD GRD GRD GREECE - 0.6%
131,000 425,000 556,000 Republic of Greece, 6.50%, 10/22/19 377,664 1,225,247 1,602,911
---------------------------------------
HUF HUF HUF HUNGARY - 0.7%
80,000 480,000 560,000 Hungarian Government Bonds, 15.00%, 7/24/01 286,836 1,721,013 2,007,849
---------------------------------------
JPY JPY JPY JAPAN - 16.0%
Japanese Government Bonds,
445,000 1,795,000 2,240,000 Zero Coupon, 11/20/02 3,883,354 15,664,317 19,547,671
133,000 541,500 674,500 1.20%, 12/20/05 1,171,304 4,768,880 5,940,184
246,000 1,252,000 1,498,000 1.80%, 6/20/08 2,213,046 11,263,146 13,476,192
133,000 541,500 674,500 1.80%, 6/21/10 1,174,120 4,780,344 5,954,464
---------------------------------------
8,441,824 36,476,687 44,918,511
---------------------------------------
NZ$ NZ$ NZ$ NEW ZEALAND - 5.1%
3,500 14,900 18,400 Federal National Mortgage Association, 7.25%,
6/20/02 1,561,696 6,648,363 8,210,059
2,500 10,000 12,500 New Zealand Government Bonds, 8.00%, 11/15/06 1,209,422 4,837,689 6,047,111
---------------------------------------
2,771,118 11,486,052 14,257,170
---------------------------------------
RUB RUB RUB RUSSIA - 0.2%
European Bank Reconstruction Development,
4,500 18,900 23,400 Zero Coupon, 5/28/02 119,660 502,572 622,232
------------- ----------- ------------
SEK SEK SEK SWEDEN - 6.5%
Swedish Government Bond
31,820 132,300 164,120 6.00%, 2/9/05 3,536,746 14,704,950 18,241,696
------------- ----------- ------------
GBP GBP GBP UNITED KINGDOM - 2.3%
500 2,000 2,500 Abbey National Treasury, 8.00%, 4/02/03 777,080 3,108,321 3,885,401
- 342 342 Banco Central del Uruguay, FRN, 7.25%, 2/19/07 - 474,994 474,994
- 1,300 1,300 Powergen PLC, 8.875%, 3/26/03 - 2,041,758 2,041,758
- 300 300 United Kingdom Treasury Bond, 5.00%, 6/7/04 - 445 445
------------- ----------- ------------
777,080 5,625,518 6,402,598
------------- ----------- ------------
US$ US$ US$ UNITED STATES - 32.8%
CORPORATE BONDS - 11.2%
- 750 750 Banco del Estado Chile, 8.39%, 8/1/01 - 755,198 755,198
- 1,000 1,000 Central Bank of Tunisia, 7.50%, 9/19/07 - 942,500 942,500
300 1,300 1,600 Chonhung Bank, 11.90375%, 1/7/05 289,500 1,254,500 1,544,000
945 3,807 4,752 Fideicomiso Petalco, 10.16%, 12/23/09 926,100 3,730,860 4,656,960
160 670 830 Hanvit Bank (Korea), 12.75%, 3/1/10 160,000 670,000 830,000
500 2,030 2,530 Industrial Bank of Korea, 8.375%, 9/30/02 511,000 2,074,660 2,585,660
980 3,930 4,910 Korea Development Bank, 6.625%, 11/21/03 963,830 3,865,155 4,828,985
Korea Electric Power Corp.
219 875 1,094 7.00%, 10/1/02 218,253 872,016 1,090,269
1,360 5,170 6,530 6.375%, 12/1/03 1,320,560 5,020,070 6,340,630
705 2,840 3,545 Level 3 Communications, Inc., 10.75%, 3/15/08 551,012 2,219,681 2,770,693
555 2,210 2,765 Partner Communicatoins Company Limited, 13.00%,
8/15/10 477,300 1,900,600 2,377,900
300 1,300 1,600 Phillipine Long Dist. Telephone Co. (Phillipines),
10.50%, 4/15/09 252,000 1,092,000 1,344,000
300 1,300 1,600 Sakura Capital Funding (Cayman Island), 7.4775%,
9/29/49 287,844 1,247,323 1,535,167
------------- ----------- ------------
5,957,399 25,644,563 31,601,962
------------- ----------- ------------
SOVEREIGN BONDS - 7.8%
70,000 300,000 370,000 Banque Central De Tunisie, 3.30%, 8/02/10 597,691 2,561,533 3,159,224
400 1,600 2,000 Embotelladura Andina SA, 7.875%, 10/1/97 302,538 1,210,152 1,512,690
- 500 500 Jamaican Government Bonds, 9.625%, 7/2/02 - 485,000 485,000
500 2,250 2,750 Oman Sultante, 7.125%, 3/20/02 498,750 2,244,375 2,743,125
92 338 430 Republic of Brazil, FRN, 7.875%, 1/1/01 92,250 338,250 430,500
750 2,750 3,500 Republic of Bulgaria, 3.00%, 7/28/12 555,000 2,035,000 2,590,000
500 3,300 3,800 Republic of Columbia, 7.25%, 2/23/04 431,000 2,844,600 3,275,600
787 4,028 4,815 Republic of Croatia, 7.75%, 3/31/06 749,393 3,836,891 4,586,284
- 1,000 1,000 Republic of Italy, 7.00%, 9/18/01 - 1,003,500 1,003,500
400 1,700 2,100 Republic of Lithuania, 7.125%, 7/22/02 397,000 1,687,250 2,084,250
------------- ----------- ------------
PRINCIPAL AMOUNT (000) VALUE ($)
- ----------------------------------------- ---------------------------------------
PRO FORMA:
PRUDENTIAL PRUDENTIAL
PRO FORMA: GLOBAL GLOBAL
PRUDENTIAL PRUDENTIAL PRUDENTIAL PRUDENTIAL TOTAL TOTAL
INTERNATIONAL GLOBAL TOTAL GLOBAL TOTAL INTERNATIONAL RETURN RETURN
BOND FUND, RETURN FUND, RETURN FUND, DESCRIPTION BOND FUND, FUND, FUND,
INC. INC. INC. INC. INC. INC.*
- ------------- ------------ ------------ -------------------------------------------------- ------------- ---------- -----------
------------ ----------- -----------
3,623,622 18,246,551 21,870,173
------------ ----------- -----------
SUPRANATIONAL BONDS - 0.2%
- 500 500 Corporacion Andina de Formento, 7.63%, 4/03/01 - 497,500 497,500
---------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 13.6%
570 - 570 United States Treasury Bonds, 6.625%, 2/15/27 651,048 - 651,048
United States Treasury Notes,
4,410 13,030 17,440 5.625%, 5/15/08 4,525,763 13,372,037 17,897,800
3,550 14,170 17,720 6.50%, 2/15/10 3,883,913 15,502,830 19,386,743
150 150 5.75%, 8/15/10 - 157,196 157,196
------------ ----------- -----------
9,060,724 29,032,063 38,092,787
------------ ----------- -----------
TOTAL LONG-TERM INVESTMENTS (COST $53,727,542
AND $219,368,631 RESPECTIVELY) 53,721,639 217,984,355 271,705,994
------------ ----------- -----------
SHORT-TERM INVESTMENTS - 0.8%
REPURCHASE AGREEMENT - 0.8%
Joint Repurchase Agreement Account,
- 301 301 4.78%, 1/02/01 - 301,000 301,000
1,827 - 1,827 Prudential Taxable Money Market, 6.6819%,
1/2/01 (a) 1,826,555 - 1,826,555
---------------------------------------
1,826,555 301,000 2,127,555
---------------------------------------
U.S. GOVERNMENT OBLIGATIONS
United States Treasury Bills,
65 80 145 6.60%(b), 4/12/01 63,897 77,592 141,489
---------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $1,890,452 AND
$379,681 RESPECTIVELY) 1,890,452 378,592 2,269,044
------------ ----------- -----------
TOTAL INVESTMENTS (COST $55,617,994 AND
$219,748,312 RESPECTIVELY) - 97.5% 55,612,091 218,362,947 273,975,038
OTHER ASSETS IN EXCESS OF LIABILITIES - 2.5% 266,824 6,857,329 7,124,153
------------ ----------- -----------
NET ASSETS-- 100% $ 55,878,915 $ 225,220,276 $ 281,099,191
============ ============= =============
* The Global Total Return Fund, Inc. does not anticipate
having to sell any securities as a result
of the Merger.
(a) An affiliate of the investment advisor.
(b) Rate quoted represents yield to maturity as of
purchase date.
FRN - Floating Rate Note.
See notes to proforma financial statements
[Statement of Additional Information for Total Return Fund
dated March 8, 2000 and filed previously with the
Securities and Exchange Commission via EDGAR on
March 7, 2000 to come.]
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
As permitted by Sections 17(h) and (i) of the Investment Company Act of
1940 (the 1940 Act) and pursuant to Article VI of the Registrant's Articles of
Incorporation (Exhibit 1(a) to the Registration Statement), Article VII of the
Registrant's By-Laws (Exhibit 2 to the Registration Statement), officers,
directors, employees and agents of the Registrant will not be liable to the
Registrant, any shareholder, officer, director, employee, agent or other person
for any action or failure to act, except for bad faith, willful misfeasance,
gross negligence or reckless disregard of duties, and those individuals may be
indemnified against liabilities in connection with the Registrant, subject to
the same exceptions. Section 2-418 of the Maryland General Corporation Law
permits indemnification of directors who acted in good faith and reasonably
believed that the conduct was in the best interests of the Registrant. As
permitted by Section 17(i) of the 1940 Act, pursuant to Section 10 of the
Distribution Agreement (Exhibit 7(a) to the Registration Statement), the
Distributor of the Registrant may be indemnified against liabilities which it
may incur, except liabilities arising from bad faith, gross negligence, willful
misfeasance or reckless disregard of duties.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (Securities Act) may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provision 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
1940 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of successful defense of any action, suit or proceeding) is asserted
against the Registrant by such director, officer or controlling person in
connection with the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1940 Act and
will be governed by the final adjudication of such issue.
The Registrant has purchased an insurance policy insuring its officers and
directors against 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 in the performance of their duties. The
insurance policy also insures the Registrant against the cost of indemnification
payments to officers and directors under certain circumstances.
Section 9 of the Management Agreement (Exhibit 6(a) to the Registration
Statement) and Section 4 of the Subadvisory Agreement (Exhibit 6(b) to the
Registration Statement) limit the liability of Prudential Investments Fund
Management LLC (PIFM) 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 Articles of Incorporation and By-Laws and the Distribution
Agreement in a manner consistent with Release No. 11330 of the Securities and
Exchange Commission under the 1940 Act so long as that interpretation of
Sections 17(h) and 17(i) of such Act remains in effect and is consistently
applied.
Under Section 17(h) of the 1940 Act, it is the position of the staff of the
Securities and Exchange Commission that if there is neither a court
determination on the merits that the defendant is not liable nor a court
determination that the defendant was not guilty of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of one's office, no indemnification will be permitted unless an
independent legal counsel (not including counsel who does work for either the
Registrant, its investment adviser, its principal underwriter or persons
affiliated with these persons) determines, based upon a review of the facts,
C-1
that the person in question was not guilty of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
Under its Articles of Incorporation, the Registrant may advance funds to
provide for indemnification. Pursuant to the Securities and Exchange Commission
staff's position on Section 17(h), advances will be limited in the following
respect:
(1) Any advances must be limited to amounts used, or to be used, for the
preparation and/or presentation of a defense to the action (including
cost connected with preparation of a settlement);
(2) Any advances must be accompanied by a written promise by, or on behalf
of, the recipient to repay that amount of the advance which exceeds
the amount to which it is ultimately determined that he is entitled to
receive from the Registrant by reason of indemnification;
(3) Such promise must be secured by a surety bond or other suitable
insurance; and
(4) Such surety bond or other insurance must be paid for by the recipient
or such advance.
ITEM 16. EXHIBITS
1. (a) Amended and Restated Articles of Incorporation.(1)
(b) Amendment to Articles of Incorporation.(1)
(c) Articles of Amendment.(5)
(d) Articles Supplementary.(2)
(e) Articles Supplementary.(3)
2. Amended and Restated By-Laws.(5)
4. Agreement and Plan of Reorganization and Liquidation filed herewith as
Appendix A to the Proxy Statement and Prospectus.
5. Instruments defining rights of shareholders.(1)
6. (a) Amended and Restated Management Agreement between the Registrant and
Prudential Investments Fund Management LLC.(5)
(b) Amended and Restated Subadvisory Agreement between Prudential Mutual
Fund Management, LLC and The Prudential Investment Corporation.(5)
7. (a) Distribution Agreement between the Registrant and Prudential Investment
Management Services LLC.(3)
(b) Form of Selected Dealer Agreement.(3)
9. (a) Custodian Contract between the Registrant and State Street Bank and
Trust Company.(1)
(b) Amendment to Custodian Contract.(5)
10. (a) Amended and Restated Distribution and Service Plan for Class A
Shares.(4)
(b) Amended and Restated Distribution and Service Plan for Class B
Shares.(4)
(c) Amended and Restated Distribution and Service Plan for Class C
Shares.(4)
(d) Amended Rule 18f-3 Plan.(3)
11. Opinion and Consent of Counsel.**
12. Form of Tax Opinion and Consent.**
13. (a) Transfer Agency and Service Agreement.(1)
(b) Amendment to Transfer Agency Agreement.(5)
14. Consent of Independent Accountants.**
17. (a) Proxy.*
(b) Prospectus of Prudential International Bond Fund, Inc. dated March 8,
2000.**
(c) Supplements dated March 27, 2000, August 28, 2000 and August 30, 2000,
respectively, to Prudential International Bond Fund, Inc. Prospectus.*
C-2
(d) Statement of Additional Information for Prudential International
Bond Fund, Inc. dated March 8, 2000.**
(e) Prospectus of Prudential Global Total Return Fund, Inc. dated March 8,
1999.**
(f) Supplements dated March 27, 2000 and August 30, 2000, respectively, to
Prudential Global Total Return Fund, Inc. Prospectus. Filed
herewith as part of Exhibit 17(c).
- -----------
(1) Incorporated by reference to Registration Statement on Form N-1A on or
about November 3, 1995 (File No. 33-63943).
(2) Incorporated by reference to Registrant's Post-Effective Amendment No. 2 to
its Registration Statement on Form N-1A filed on or about February 28, 1997
(File No. 33-63943).
(3) Incorporated by reference to Registrant's Post-Effective Amendment No. 4 to
its Registration Statement on Form N-1A filed on or about December 31, 1998
(File No. 33-63943).
(4) Incorporated by reference to Registrant's Post-Effective Amendment No. 5 to
its Registration Statement on Form N-1A filed on or about March 1, 1999
(File No. 33-63943).
(5) Incorporated by reference to Registrant's Post-Effective Amendment No. 6 to
its Registration Statement on Form N-1A filed on or about March 7, 2000
(File No. 33-63943).
* Filed herewith.
** To be filed by amendment.
ITEM 17. UNDERTAKINGS
(1) The undersigned registrant agrees that prior to any public reoffering of
the securities through the use of a prospectus which is a part of this
statement by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c) of the Securities Act, the reoffering prospectus
will contain the information called for by the applicable registration form
for reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form.
(2) The undersigned registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act, each
post-effective amendment shall be deemed to be a new registration statement
for the securities offered therein, and the offering of the securities at
that time shall be deemed to be the initial bona fide offering of them.
(3) The undersigned registrant undertakes to file, by post-effective amendment,
an opinion of counsel supporting the tax consequences of the proposed
reorganization within a reasonably time after receipt of such opinion.
C-3
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement has
been signed on behalf of the Registrant, in the City of Newark, and the State of
New Jersey, on the 2nd day of February, 2001.
PRUDENTIAL GLOBAL TOTAL RETURN FUND, INC.
/s/ David R. Odenath, Jr.
-------------------------
David R. Odenath, Jr., President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Saul K. Fenster
- ------------------------------------
Saul K. Fenster Director February 2, 2001
/s/ Delayne D. Gold
- ------------------------------------
Delayne D. Gold Director February 2, 2001
/s/ Robert F. Gunia
- ------------------------------------
Robert F. Gunia Director February 2, 2001
/s/ Douglas H. McCorkindale
- ------------------------------------
Douglas H. McCorkindale Director February 2, 2001
/s/ W. Scott McDonald, Jr.
- ------------------------------------
W. Scott McDonald, Jr. Director February 2, 2001
/s/ Thomas T. Mooney
- ------------------------------------
Thomas T. Mooney Director February 2, 2001
/s/ Stephen P. Munn
- ------------------------------------
Stephen P. Munn Director February 2, 2001
/s/ David R. Odenath, Jr.
- ------------------------------------
David R. Odenath, Jr. President and Director February 2, 2001
/s/ Richard A. Redeker
- ------------------------------------
Richard A. Redeker Director February 2, 2001
/s/ Judy A. Rice
- ------------------------------------
Judy A. Rice Director February 2, 2001
/s/ Robin B. Smith
- ------------------------------------
Robin B. Smith Director February 2, 2001
C-4
/s/ Louis A. Weil, III
- ------------------------------------
Louis A. Weil, III Director February 2, 2001
/s/ Clay T. Whitehead
- ------------------------------------
Clay T. Whitehead Director February 2, 2001
/s/ Grace C. Torres Treasurer and Principal Financial and Accounting
- ------------------------------------
Grace C. Torres Officer February 2, 2001
C-5
EXHIBIT INDEX
1. (a) Amended and Restated Articles of Incorporation.(1)
(b) Amendment to Articles of Incorporation.(1)
(c) Articles of Amendment.(5)
(d) Articles Supplementary.(2)
(e) Articles Supplementary.(3)
2. Amended and Restated By-Laws.(5)
4. Agreement and Plan of Reorganization and Liquidation filed herewith as
Appendix A to the Proxy Statement and Prospectus.
5. Instruments defining rights of shareholders.(1)
6. (a) Amended and Restated Management Agreement between the Registrant and
Prudential Investments Fund Management LLC.(5)
(b) Amended and Restated Subadvisory Agreement between Prudential Mutual
Fund Management, LLC and The Prudential Investment Corporation.(5)
7. (a) Distribution Agreement between the Registrant and Prudential
Investment Management Services LLC.(3)
(b) Form of Selected Dealer Agreement.(3)
9. (a) Custodian Contract between the Registrant and State Street Bank and
Trust Company.(1)
(b) Amendment to Custodian Contract.(5)
10. (a) Amended and Restated Distribution and Service Plan for Class A
Shares.(4)
(b) Amended and Restated Distribution and Service Plan for Class B
Shares.(4)
(c) Amended and Restated Distribution and Service Plan for Class C
Shares.(4)
(d) Amended Rule 18f-3 Plan.(3)
11. Opinion and Consent of Counsel.*
12. Draft of Tax Opinion and Consent.*
13. (a) Transfer Agency and Service Agreement.(1)
(b) Amendment to Transfer Agency Agreement.(5)
14. Consent of Independent Accountants.*
17. (a) Proxy*
(b) Prospectus of Prudential International Bond Fund, Inc. dated March 8,
2000.**
(c) Supplements dated March 27, 2000, August 28, 2000 and August 30, 2000,
respectively, to Prudential International Bond Fund, Inc. Prospectus.*
(d) Statement of Additional Information for Prudential International
Bond Fund, Inc. dated March 8, 2000.**
(e) Prospectus of Prudential Global Total Return Fund, Inc. dated March 8,
1999.**
(f) Supplements dated March 27, 2000 and August 30, 2000, respectively, to
Prudential Global Total Return Fund, Inc. Prospectus. Filed
herewith as part of Exhibit 17(c).
- -----------
(1) Incorporated by reference to Registration Statement on Form N-1A on or
about November 3, 1995 (File No. 33-63943).
(2) Incorporated by reference to Registrant's Post-Effective Amendment No.
2 to its Registration Statement on Form N-1A filed on or about
February 28, 1997 (File No. 33-63943).
(3) Incorporated by reference to Registrant's Post-Effective Amendment No.
4 to its Registration Statement on Form N-1A filed on or about
December 31, 1998 (File No. 33-63943).
(4) Incorporated by reference to Registrant's Post-Effective Amendment No.
5 to its Registration Statement on Form N-1A filed on or about March
1, 1999 (File No. 33-63943).
(5) Incorporated by reference to Registrant's Post-Effective Amendment No.
6 to its Registration Statement on Form N-1A filed on or about March
7, 2000 (File No. 33-63943).
* Filed herewith.
** To be filed by amendment.