PRUDENTIAL SECTOR FUNDS INC, N-30D, 1999-08-09

PRUDENTIAL SECTOR FUNDS INC
N-30D, 1999-08-09

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<PAGE>

(ICON)

Prudential
Utility
Fund

SEMI
ANNUAL
REPORT
May 31, 1999

(LOGO)

<PAGE>

Prudential Utility Fund
A Series of Prudential Sector Funds, Inc.

Performance at a Glance
Utility stocks lagged early in 1999, then surged toward
the end of our five-month reporting period when investors
shifted their interests to underpriced stocks. Except for
a poor January when our focus on gas and electric companies
made us particularly vulnerable to the warm winter weather,
the Prudential Utility Fund outperformed the Lipper Utility
Fund Average. We finished slightly ahead over the full period,
accelerating significantly when value stocks pulled ahead in
April and May. The strong performance of our gas utilities,
together with our small holdings in energy exploration companies,
more than offset the poor January return on our electric utilities.

<TABLE>
Cumulative Total Returns1 As of 5/31/99
<CAPTION>
Five One Five Ten Since
Months Year Years Years Inception2
<S> <C> <C> <C> <C> <C>
Class A 5.93% 6.92% 118.19% N/A 216.37%
Class B 5.62 6.17 110.37 228.41% 1,392.60
Class C 5.62 6.17 N/A N/A 103.44
Class Z 6.08 7.28 N/A N/A 76.74
Lipper Utility
Fund Avg.3 5.63 17.28 114.91 265.20 ***
</TABLE>

<TABLE>
Average Annual Total Returns1 As of 6/30/99
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 0.41% 16.32% N/A 12.39%
Class B -0.13 16.55 12.32% 16.32
Class C 2.82 N/A N/A 15.33
Class Z 5.96 N/A N/A 18.71
</TABLE>

Past performance is not indicative of future results. Principal
and investment return will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.

1 Source: Prudential Investments Fund Management LLC and Lipper,
Inc. The cumulative total returns do not take into account sales
charges. The average annual total returns do take into account
applicable sales charges. The Fund charges a maximum front-end
sales charge of 5% for Class A shares. Class B shares are subject
to a declining contingent deferred sales charge (CDSC) of 5%, 4%,
3%, 2%, 1%, and 1% for six years. Class B shares will
automatically convert to Class A shares, on a quarterly
basis, approximately seven years after purchase. Class C
shares are subject to a front-end sales charge of 1% and
a CDSC of 1% for 18 months. Class C shares bought before
November 2, 1998, have a 1% CDSC if sold within one year.
Class Z shares are not subject to a sales charge or distribution
and service (12b-1) fee.

2 Inception dates: Class A, 1/22/90; Class B, 8/10/81; Class C,
8/1/94; and Class Z, 3/1/96.

3 Lipper average returns are for all funds in each share class
for the five-month, one-, five-, and ten-year periods in the
Utility Fund category.

*** Lipper Since Inception returns are 230.96% for Class A,
829.49% for Class B, 112.34% for Class C, and 68.71% for Class
Z, based on all funds in each share class.

How Investments Compared
(As of 5/31/99)
(GRAPH)

Source: Lipper, Inc. Financial markets change, so a mutual fund's
past performance should never be used to predict future
results. The risks to each of the investments listed
above are different--we provide 12-month total returns
for several Lipper mutual fund categories to show you
that reaching for higher returns means tolerating more
risk. The greater the risk, the larger the potential reward or loss.
In addition, we've included historical 20-year average annual returns.
These returns assume the reinvestment of dividends.

U.S. Growth Funds will fluctuate a great deal. Investors have
received higher historical total returns from stocks than from
most other investments. Smaller capitalization stocks offer
greater potential for long-term growth, but may be more volatile
than larger capitalization stocks.

General Bond Funds provide more income than stock funds, which
can help smooth out their total returns year by year. But their
prices still fluctuate (sometimes significantly), and their
returns have been historically lower than those of stock funds.

General Municipal Debt Funds invest in bonds issued by state
governments, state agencies and/or municipalities. This
investment provides income that is usually exempt from
federal and state income taxes.

U.S. Taxable Money Funds attempt to preserve a constant
share value; they don't fluctuate much in price but,
historically, their returns have been generally among
the lowest of the major investment categories.

<PAGE>

Portfolio Manager's Report

(PHOTO)
David A. Kiefer
Fund Manager

Investment Goals and Style
The Prudential Utility Fund invests in stocks of utility
companies--primarily electric, natural gas, gas pipeline,
telephone and telecommunications, water, and cable--both in
the United States and abroad. Utility investments can be
affected by government regulations, the price of fuel,
environmental factors, and interest rates. Foreign investments
are subject to additional risks, including currency, political
and social risks, and illiquidity. There can be no assurance
that the Fund's investment objective of total return will be
achieved.

After the end of its last reporting period, the Prudential
Utility Fund, Inc. became a portfolio of the Prudential
Sector Funds, Inc. It is now known as the Prudential
Utility Fund and its fiscal year end is now November 30.
Consequently, the current report covers the five month period
between its last report to shareholders and its new fiscal
semiannual period end.

Performance Review
A new strategic focus for the electric utility industry
With the passage of restructuring legislation in Ohio, the rules
concerning competition are clarified in enough states that investors
and managements in the electric utility industry can move beyond a
focus on the risks from deregulation. Investors can focus more on
opportunities. Consolidations and alliances among companies are
creating large combatants who are planning to compete with packages
of services that will look quite different from what has been
available in the past. We have tried to focus our portfolio on
companies with strong management and on undervalued firms with
assets that will be attractive acquisitions to others. Some
companies will focus on a "wires" strategy (operating networks
of transmission and distribution wires to deliver electricity
to customers), some on generation, and some on energy marketing.
We don't believe any one of these strategies is superior to the
others. Rather, the skill of a management team in using its
assets will determine a utility's success.

The substantial amount of recent merger and acquisition
activity affecting companies we own appears to endorse our
judgment. Several of our holdings--including two of our largest,
Columbia Energy and Sonat--are targets of merger or acquisition
activity at substantial premiums to the prior stock prices. For
a long time, we have believed that the gas and electric industries
need to consolidate. Investors seem to support the smart
consolidation deals that have affected our portfolio: after
several of the announcements, the stocks of both the acquirer
and the target have performed well. This is a positive sign
because, in agreements viewed as bad, the acquirer's stock
typically sinks.

Another of our top five holdings--Williams Companies--had a 67%
return over our reporting period, making a very substantial
contribution to our performance. Williams owns the largest
U.S. gas pipeline system (by volume) and has usedits rights
of way to build a modern fiberoptic telecommunications network.
Investors have rewarded Williams' decision to highlight the
value of this network by selling pieces to the public and to
SBC Communications, a local telephone powerhouse, by pushing
up its stock.

We have mentioned only companies among our top five that have
been affected by the rapid restructuring of the utilities
sector. There were many others, notably Frontier,

<PAGE>

which gained 56% in our reporting period. As we write
this report in July, KN Energy shares are rising sharply
on announcement of an acquisition agreement that would
join its assets with a very strong management team. We
believe our focus on the best managers and on undervalued
assets positions us well to benefit from the jockeying for
strategic advantage that will dominate the sector for a while.

The markets begin to recognize the value of natural gas
March 23 seems to have marked a major turning point for our natural
gas utilities because on that day, OPEC announced oil production
cuts. Before then, consecutive warm winters, high inventories, and
low oil prices (natural gas competes with oil as a fuel) conspired
to weaken demand and pricing for natural gas. Now, OPEC's cuts have
led to a dramatic rise in oil prices, allowing the market to once
again focus on the environmental and cost advantages of natural gas
over oil. Our gas utilities rallied strongly toward the end of this
period as prices for both natural gas and pipeline capacity rose.
We think this is only the beginning, as investors will now focus
on the rising long-term trend in natural gas demand.

Portfolio Composition
Expressed as a percentage of net assets
as of 5/31/99

U.S. Electric Utilities 44%
U.S. Natural Gas 29
Foreign Utilities 13
U.S. Telecommunications 10
Miscellaneous 4

Electric utilities: adding spice to the porridge
Our largest sector focus is U.S. electric companies--44% of net
assets on May 31. On average, these held steady over our reporting
period. They are very attractively priced compared to the S&P 500
stocks. Their defensive characteristics--above-market dividend
yield and stable earnings--are nutritious, but perhaps bland,
ingredients. Add the spice of their potential for appreciation
from industry consolidation and they are more appetizing.

In telecommunications we are contrarian
Our return suffered because we continue to resist the general
enthusiasm for telecommunications stocks, believing many to be
overpriced. As with Internet stocks in the broader market,
investors see a rapidly developing industry, and many have
been willing to pay high prices to get in on the ground floor.
Consumer demand doesn't necessarily mean profits. We believe
the industry will be bitterly competitive; there will be
prominent losers as well as winners. We are being conservative
in our purchases in this sector.

Looking Ahead
Converting value to total return
We think this is an exciting time to be investing in utility
companies. With the energy-related industries selling at
still-depressed prices, and astute managers looking to buy
bargain-priced assets, we can expect widescale restructuring. The
competitive landscape in the telecommunications industry
changes rapidly as major powers form new alliances. The
utility sector used to be an investing backwater, when
regulated industries offered no pay-off to entrepreneurial
managers. Not any more.

Five Largest Holdings
Expressed as a percentage of net assets
as of 5/31/99

Coastal Corp. 4.3%
Gas Pipelines

Williams Companies, Inc. 3.8
Gas Pipelines

Columbia Energy Group 3.5
Gas Pipelines

Northeast Utilities Co. 3.1
Electrical Power

Sonat, Inc. 2.8
Gas Pipelines

1
<PAGE>

A Message to Our Shareholders July 16, 1999
(PHOTO)

Dear Shareholder:

In the last couple of years, the recurring possibility of a
global economic crisis caused investors to focus on securities
they perceived to be safe. In the equity market, they focused
on the stocks of a handful of very large companies that were
perceived to be well-buffeted from an economic slowdown. These
stocks became very expensive--out of proportion to their earnings
expectations. As a result, there was a substantial disparity in
value between large and small companies and between
growth and value stocks.

Since earlier this year, however, that gap has narrowed
significantly amid news of strong U.S. economic growth
and faster-than-expected global stability. While the
long-term prospects of U.S. growth stocks are still
very good, many of the smaller and economically sensitive
companies favored by our value managers now are posting
very attractive returns.

In the bond market, U.S. Treasuries and select European
government bonds were the major beneficiaries of the flight
to quality that occurred in recent years. When this trend
reversed itself toward the end of 1998, other sectors of
the bond market rebounded. However, with a strong U.S.
economy comes the threat of higher inflation, which erodes
the value of bonds' fixed interest payments. The recent
inflation concerns jolted the bond market and helped send
long-term interest rates to a 19-month high.

The winds of change in the equity market and the recent
turbulence in the bond market not only highlight the value
of professional portfolio management, but they illustrate
why investors should have a well-diversified asset allocation
strategy. It is also a good practice to rebalance your holdings,
when necessary, to keep your asset allocation consistent with
your long-term objectives and risk tolerance. A properly
diversified portfolio of value- and growth-oriented equity
funds, domestic and international bond funds, and money
market funds could help you weather inevitable market
turbulence and achieve more consistent returns over time.
Prudential offers a wide range of mutual funds to help our
shareholders diversify, as well as several
balanced and diversified funds to allow one-decision
diversification.

Thank you for your continued confidence in Prudential mutual funds.

Sincerely,

John R. Strangfeld
President
Prudential Sector Funds, Inc.--Prudential Utility Fund

2
<PAGE>
PRUDENTIAL SECTOR FUNDS, INC.
Portfolio of Investments as of
May 31, 1999 (Unaudited) PRUDENTIAL UTILITY FUND
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--99.6%
COMMON STOCKS--98.0%
- ------------------------------------------------------------
Chemical-Specialty--0.4%
894,600 Nova Chemicals Corp. (Canada) $ 19,117,978
- ------------------------------------------------------------
Diversified Manufacturing--0.6%
61,950 Viag AG (Germany)(b) 28,211,882
- ------------------------------------------------------------
Electrical Power--48.7%
542,700 AES Corp.(a) 26,999,325
1,391,600 Allegheny Energy Inc. 48,532,050
994,000 American Electric Power
Company, Inc.(b) 43,114,750
1,039,100 BCE Energy(b) 45,720,400
1,100,000 BNDES Participacoes SA BNDESP 22,550,000
2,616,885 CINergy Corp. 89,301,201
975,400 Cleco Corp. 32,249,162
1,172,400 CMP Group Inc. 23,741,100
2,485,000 CMS Energy Corp. 115,552,500
484,100 Commonwealth Energy System 20,513,737
1,153,381 Companhia Energetica de Minas
Gerais-Cemig (ADR) (Brazil) 24,373,183
2,000,000 Constellation Energy Group Inc. 62,375,000
2,982,000 DPL, Inc. 53,862,375
1,477,411 Duke Energy Co. 89,106,351
3,114,400 Edison International 85,646,000
4,565,400 Energy East Corp. 126,689,850
3,205,100 FirstEnergy Corp. 101,962,244
2,982,000 Iberdrola (Spain)(b) 42,697,621
3,476,900 Illinova Corp. 94,528,219
2,000,000 Korea Electric Power Corp.
(ADR) (Korea)(b) 34,125,000
7,523,805 National Power PLC (United
Kingdom) 58,733,323
800,000 Nevada Power Co. 20,100,000
706,800 New Century Energies, Inc. 28,581,225
6,436,800 Niagara Mohawk 95,747,400
2,328,853 NiSource Inc. 65,062,331
8,112,500 Northeast Utilities Co. 142,982,812
4,378,400 PacifiCorp 79,632,150
1,266,700 PECO Energy Co.(b) $ 61,989,131
1,991,400 Pinnacle West Capital Corp. 83,389,875
2,541,700 Public Service Company of New
Mexico 52,740,275
1,362,000 Rochester Gas & Electric Corp. 38,050,875
999,400 RWE AG (Germany) 44,627,184
3,327,066 Sempra Energy 71,531,919
600,000 Sierra Pacific Resources 21,825,000
1,568,267 Texas Utilities Electric Co. 70,572,015
2,496,800 Unicom Corp. 105,645,850
1,760,140 Unisource Energy Corp. 22,001,750
---------------
2,246,853,183
- ------------------------------------------------------------
Gas Distribution--6.0%
3,197,404 British Gas PLC (ADR) (United
Kingdom) 88,128,448
437,700 Eastern Enterprises, Inc. 15,182,719
696,400 Energen Corp. 13,318,650
1,999,992 Keyspan Energy(b) 53,999,784
2,369,300 MCN Corp.(b) 47,386,000
805,700 NICOR, Inc. 30,314,462
116,900 Providence Energy Corp. 2,520,656
619,600 Washington Gas Light Co. 15,141,475
303,450 Yankee Energy System, Inc. 9,577,641
---------------
275,569,835
- ------------------------------------------------------------
Gas Pipelines--23.8%
5,158,350 Coastal Corp. 198,918,872
3,006,900 Columbia Energy Group 160,869,150
802,400 Consolidated Natural Gas Co. 47,692,650
2,582,600 El Paso Energy Corp. 93,135,012
2,049,400 Equitable Resources, Inc. 64,684,187
2,992,450 KN Energy, Inc. 64,150,647
4,347,500 Questar Corp. 82,874,219
3,614,500 Sonat, Inc. 128,088,844
4,473,000 TransCanada Pipelines, Ltd.
(Canada) 60,843,725
1,467,100 Western Gas Resources, Inc. 19,072,300
3,421,022 Williams Companies, Inc. 177,251,702
---------------
1,097,581,308
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3

<PAGE>
PRUDENTIAL SECTOR FUNDS, INC.
Portfolio of Investments as of
May 31, 1999 (Unaudited) PRUDENTIAL UTILITY FUND
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Media--0.3%
1,129,171 Ascent Entertainment Group,
Inc.(a) $ 12,844,320
- ------------------------------------------------------------
Oil & Gas Exploration/Production--3.0%
1,000,000 Alberta Energy Co., Ltd.
(Canada)(b) 28,750,000
1,161,600 Devon Energy Corp. 40,365,600
1,630,410 EEX Corp. 11,107,168
356,900 Enron Oil & Gas Co. 6,803,406
372,800 RAO Gazprom (ADR) (Russia) 3,867,800
1,505,700 Pioneer Natural Resources Co. 16,374,488
2,200,000 Union Pacific Resources Group,
Inc. 30,662,500
---------------
137,930,962
- ------------------------------------------------------------
Real Estate Investment Trust--1.4%
890,400 Crescent Real Estate Equities,
Co. 20,534,850
964,100 Equity Residential Property
Trust 46,216,544
---------------
66,751,394
- ------------------------------------------------------------
Telecommunications--13.8%
500,000 Ameritech Corp. 32,906,250
2,103,300 AT&T Corp. 116,733,150
1,255,400 BCE, Inc. (Canada) 57,826,863
1,000,000 Bell Atlantic Corp. 54,750,000
1,911,500 Comsat Corp. 62,362,687
1,714,000 Frontier Corp. 90,199,250
300,000 GTE Corp. 18,918,750
1,451,300 Millicom International Cellular
S.A. (Luxembourg)(a)/(b) 52,246,800
710,000 Philippine Long Distance
Telephone Co. (ADR)(b) 20,501,250
1,554,050 SBC Communications, Inc.(b) 79,450,806
369,200 Telecomunicacoes Brasileiras
S.A. (ADR) (Brazil)(b) 23,075
607,800 Telefonos de Mexico, S.A. (ADR)
(Mexico)(b) 48,586,013
---------------
634,504,894
---------------
Total common stocks
(cost $2,961,715,263) 4,519,365,756
---------------
PREFERRED STOCKS--1.2%
- ------------------------------------------------------------
Gas Pipelines--0.5%
705,700 KN Energy, Inc. $ 25,228,775
- ------------------------------------------------------------
Telecommunications--0.7%
369,200 Telecomunicacoes Brasileiras
S.A. (ADR) (Brazil)(a)/(b) 30,828,200
---------------
Total preferred stocks
(cost $71,004,889) 56,056,975
---------------
Principal Amount
(000)
- ------------------------------------------------------------
BONDS--0.4%
- ------------------------------------------------------------
Electrical Power
$ 10,000 Niagara Mohawk Power Co.
9.50%, 3/1/21 10,609,800
5,000 Texas Utilities Electric Co.
9.75%, 5/1/21 5,487,000
---------------
Total bonds
(cost $15,077,600) 16,096,800
---------------
Total long-term investments
(cost $3,047,797,752) 4,591,519,531
---------------
SHORT-TERM INVESTMENTS--5.6%
- ------------------------------------------------------------
Bank Notes--0.1%
5,000 Heller Financial Inc.(c)
5.05%, 7/6/1999
(cost $5,000,180) 5,000,180
- ------------------------------------------------------------
Commercial Paper--5.0%
20,138 Asset Securitization Corp.(c)
4.925%, 6/4/1999 20,121,470
30,000 Centric Capital Corp.(c)
4.88%, 6/30/1999 29,882,067
16,181 Clipper Receivables Corp.(c)
4.82%, 6/1/1999 16,181,000
30,000 Delaware Funding Corp.(c)
4.85%, 6/15/1999 29,931,292
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 4

<PAGE>
PRUDENTIAL SECTOR FUNDS, INC.
Statement of Assets and Liabilities
(Unaudited) PRUDENTIAL UTILITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets May 31, 1999
<S> <C>
Investments, at value (cost $3,307,372,823)................................................................. $4,851,094,602
Cash........................................................................................................ 875,441
Dividends and interest receivable........................................................................... 13,022,216
Receivable for investments sold............................................................................. 5,201,829
Receivable for Fund shares sold............................................................................. 1,939,412
Receivable for securities lending........................................................................... 171,952
Prepaid expenses and other assets........................................................................... 51,143
--------------
Total assets............................................................................................. 4,872,356,595
--------------
Liabilities
Payable to broker for collateral for securities on loan..................................................... 249,109,071
Payable for Fund shares reacquired.......................................................................... 7,580,578
Distribution fee payable.................................................................................... 2,138,481
Management fee payable...................................................................................... 1,556,585
Accrued expenses............................................................................................ 962,434
Foreign withholding taxes payable........................................................................... 205,970
Securities lending rebate payable........................................................................... 12,834
--------------
Total liabilities........................................................................................ 261,565,953
--------------
Net Assets.................................................................................................. $4,610,790,642
--------------
--------------
Net assets were comprised of:
Common stock, at par..................................................................................... $ 3,705,561
Paid-in capital in excess of par......................................................................... 2,828,127,725
--------------
2,831,833,286
Undistributed net investment income...................................................................... 18,848,214
Accumulated net realized gain on investments............................................................. 216,405,934
Net unrealized appreciation on investments and foreign currencies........................................ 1,543,703,208
--------------
Net assets, May 31, 1999.................................................................................... $4,610,790,642
--------------
--------------
Class A:
Net asset value and redemption price per share
($2,717,630,619 / 218,256,211 shares of common stock issued and outstanding).......................... $12.45
Maximum sales charge (5% of offering price).............................................................. .66
--------------
Maximum offering price to public......................................................................... $13.11
--------------
--------------
Class B:
Net asset value, offering price and redemption price per share
($1,823,979,427 / 146,744,743 shares of common stock issued and outstanding).......................... $12.43
--------------
--------------
Class C:
Net asset value and redemption price per share
($25,173,930 / 2,025,382 shares of common stock issued and outstanding)............................... $12.43
Sales charge (1% of offering price)...................................................................... .13
--------------
Offering price to public................................................................................. $12.56
--------------
--------------
Class Z:
Net asset value, offering price and redemption price per share
($44,006,666 / 3,529,805 shares of common stock issued and outstanding)............................... $12.47
--------------
--------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 6

<PAGE>
PRUDENTIAL SECTOR FUNDS, INC.
PRUDENTIAL UTILITY FUND
Statement of Operations (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Five Months
Ended
Net Investment Income May 31, 1999
<S> <C>
Income
Dividends (net of foreign withholding taxes
of $820,422)............................ $60,045,896
Interest................................... 2,237,365
Interest from securities loaned, net....... 387,230
------------
Total income............................ 62,670,491
------------
Expenses
Management fee............................. 7,417,657
Distribution fee--Class A.................. 2,696,012
Distribution fee--Class B.................. 7,469,194
Distribution fee--Class C.................. 98,466
Transfer agent's fees and expenses......... 1,949,000
Custodian's fees and expenses.............. 193,000
Reports to shareholders.................... 159,000
Insurance.................................. 51,000
Registration fees.......................... 21,000
Legal fees................................. 19,000
Directors' fees............................ 18,000
Audit fees................................. 13,000
Miscellaneous.............................. 15,817
------------
Total expenses.......................... 20,120,146
------------
Net investment income......................... 42,550,345
------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions
Net realized gain (loss) on:
Investment transactions.................... 221,157,041
Foreign currency transactions.............. (3,988 )
------------
221,153,053
------------
Net change in unrealized appreciation (depreciation) on:
Investments................................ (24,927,977 )
Foreign currencies......................... (43,704 )
------------
(24,971,681 )
------------
Net gain on investments and foreign
currencies................................. 196,181,372
------------
Net Increase in Net Assets
Resulting from Operations..................... $238,731,717
------------
------------
</TABLE>

PRUDENTIAL SECTOR FUNDS, INC.
PRUDENTIAL UTILITY FUND
Statement of Changes in Net Assets (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Five Months
Ended Year Ended
Increase (Decrease) May 31, December 31,
in Net Assets 1999 1998
<S> <C> <C>
Operations
Net investment income....... $ 42,550,345 $ 101,425,211
Net realized gain on
investments.............. 221,153,053 392,411,532
Net change in unrealized
appreciation
(depreciation) of
investments.............. (24,971,681) (137,310,063)
-------------- --------------
Net increase in net assets
resulting from
operations............... 238,731,717 356,526,680
-------------- --------------
Dividends and distributions
(Note 1)
Dividends from net
investment income
Class A.................. (18,110,188) (68,056,406)
Class B.................. (8,568,735) (37,778,258)
Class C.................. (118,282) (384,643)
Class Z.................. (318,637) (1,307,870)
-------------- --------------
(27,115,842) (107,527,177)
-------------- --------------
Distributions from net
realized capital gains
Class A.................. (44,492,930) (197,560,744)
Class B.................. (29,915,410) (153,950,412)
Class C.................. (412,950) (1,758,047)
Class Z.................. (712,458) (3,456,422)
-------------- --------------
(75,533,748) (356,725,625)
-------------- --------------
Fund share transactions (net of
share conversions) (Note 5)
Proceeds from shares sold... 184,180,489 598,995,199
Net asset value of shares
issued in reinvestment of
dividends and
distributions............ 94,129,823 426,138,453
Cost of shares reacquired... (607,886,426) (883,989,695)
-------------- --------------
Net increase (decrease) in
net assets from Fund
share transactions....... (329,576,114) 141,143,957
-------------- --------------
Total increase (decrease)...... (193,493,987) 33,417,835
Net Assets
Beginning of year.............. 4,804,284,629 4,770,866,794
-------------- --------------
End of year(a)................. $4,610,790,642 $4,804,284,629
-------------- --------------
-------------- --------------
(a) Includes undistributed net
investment income of:...... $ 18,668,080 $ 3,417,699
-------------- --------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7

<PAGE>
PRUDENTIAL SECTOR FUNDS, INC.
Notes to Financial Statements
(Unaudited) PRUDENTIAL UTILITY FUND
- --------------------------------------------------------------------------------
Prudential Sector Funds, Inc. (the 'Company') formerly known as Prudential
Utility Fund, Inc. is registered under the Investment Company Act of 1940 as an
open-end, diversified management investment company. The Company presently
consists of four Portfolios: Prudential Financial Services Fund, Prudential
Health Sciences Fund, Prudential Technology Fund, and Prudential Utility Fund
(the 'Fund'). Subsequent to December 31, 1998 (the Company's prior fiscal
year-end), the Company changed its fiscal year-end to November 30. The Fund's
investment objective is to seek total return through a combination of income and
capital appreciation. The Fund seeks to achieve this objective by investing
primarily in equity and debt securities of utility companies. Utility companies
include electric, gas, gas pipeline, telephone, telecommunications, water,
cable, airport, seaport and toll road companies. The ability of issuers of
certain debt securities held by the Fund to meet their obligations may be
affected by economic developments in a specific industry or region.

- ------------------------------------------------------------
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the
Company and the Fund in the preparation of its financial statements.

Securities Valuation: Securities traded on an exchange and NASDAQ National
Market Securities are valued at the last reported sales price on the exchange or
system on which they are traded or, if no sale was reported on that date, at the
mean between the last reported bid and asked prices or at the bid price on such
day in the absence of an asked price. Securities traded in the over-the-counter
market (including securities listed on exchanges whose primary market is
believed to be over-the-counter) are valued by an independent pricing agent or
principal market maker. Short-term securities which mature in more than 60 days
are valued based on current market quotations. Short-term securities which
mature in 60 days or less are valued at amortized cost. Securities for which
reliable market quotations are not readily available are valued by the Valuation
Committee or Board of Directors in consultation with the manager or subadviser.

In connection with transactions in repurchase agreements with U.S. financial
institutions, it is the Company's policy that its custodian or designated
subcustodians, as the case may be under triparty repurchase agreements, takes
possession of the underlying collateral securities, the value of which exceeds
the principal amount of the repurchase transaction, including accrued interest.
If the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.

All securities are valued as of 4:15 P.M., New York time.

Foreign Currency Translation: The books and records of the Company are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis:

(i) market value of investment securities, other assets and liabilities--at the
closing daily rate of exchange;

(ii) purchases and sales of investment securities, income and expenses--at the
rate of exchange prevailing on the respective dates of such transactions.

Although the net assets of the Fund are presented at the foreign exchange rates
and market values at the close of the period, the Fund does not isolate that
portion of the results of operations arising as a result of changes in the
foreign exchange rates from the fluctuations arising from changes in the market
prices of securities held at the end of the period. Similarly, the Fund does not
isolate the effect of changes in foreign exchange rates from the fluctuations
arising from changes in the market prices of portfolio securities sold during
the period.

Net realized gains or losses on foreign currency transactions represent net
foreign exchange gains or losses from sales and maturities of short-term
securities, disposition of foreign currency, gains or losses realized between
the trade and settlement dates of security transactions, and the difference
between amounts of dividends, interest and foreign withholding taxes recorded on
the Fund's books and the U.S. dollar equivalent amounts actually received or
paid. Net currency gains and losses from valuing foreign currency denominated
assets, except portfolio securities, and liabilities (other than investments) at
period end exchange rates are reflected as a component of unrealized
appreciation or depreciation on investments and foreign currencies.

Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of domestic origin as a result of,
among other factors, the possibility of political and economic instability and
the level of governmental supervision and regulation of foreign securities
markets.

Securities Transactions and Net Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of investments
and foreign currencies are calculated on the identified cost basis. Dividend
income is recorded on the ex-dividend date and interest
- --------------------------------------------------------------------------------
8

<PAGE>
PRUDENTIAL SECTOR FUNDS, INC.
Notes to Financial Statements
(Unaudited) PRUDENTIAL UTILITY FUND
- --------------------------------------------------------------------------------
income is recorded on the accrual basis. The Fund amortizes discounts on
purchases of debt securities as adjustments to interest income. Expenses are
recorded on the accrual basis which may require the use of certain estimates by
management.

Net investment income (other than distribution fees) and unrealized and realized
gains or losses are allocated daily to each class of shares based upon the
relative proportion of net assets of each class at the beginning of the day.
Dividends and Distributions: Dividends from net investment income are declared
and paid quarterly. The Fund will distribute at least annually any net capital
gains in excess of capital loss carryforwards. Dividends and distributions are
recorded on the ex-dividend date.

Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles.

Securities Lending: The Fund may lend securities to broker-dealers. The loans
are secured by collateral at least equal at all times to the market value of the
securities loaned. Loans are subject to termination at the option of the
borrower or the Fund. Upon termination of the loan, the borrower will return to
the lender securities identical to the loaned securities. The Fund may bear the
risk of delay in recovery of, or even loss of rights in, the securities loaned
should the borrower of the securities fail financially. The Fund receives
compensation, net of any rebate, for lending its securities in the form of fees
or it retains a portion of interest on the investment of any cash received as
collateral. The Fund also continues to receive interest, on the securities
loaned and any gain or loss in the market price of the securities loaned that
may occur during the term of the loan will be for the account of the Fund.
Prudential Securities Incorporated ('PSI') is the securities lending agent for
the Fund. For the five months ended May 31, 1999, PSI has been compensated
approximately $30,400.

Taxes: It is the Fund's policy to continue to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable net income to its shareholders. Therefore, no
federal income tax provision is required.

Withholding taxes on foreign dividends have been provided for in accordance with
the Fund's understanding of the applicable country's tax rules and rates.

Reclassification of Capital Accounts: The Fund accounts for and reports
distributions to shareholders in accordance with the American Institute of
Certified Public Accountants' Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. The effect of applying
this statement was to decrease undistributed net investment income and increase
accumulated net realized gain on investments by $3,988 for realized foreign
currency losses during the five months ended May 31, 1999. Net investment
income, net realized gains and net assets were not affected by this change.

- ------------------------------------------------------------
Note 2. Agreements
The Company has a management agreement with Prudential Investments Fund
Management LLC ('PIFM'). Pursuant to this agreement, PIFM has responsibility for
all investment advisory services and supervises the subadviser's performance of
such services. Pursuant to a subadvisory agreement between PIFM and The
Prudential Investment Corporation ('PIC'), PIC furnishes investment advisory
services in connection with the management of the Fund. PIFM pays for the cost
of the subadviser's services, the cost of compensation of officers of the Fund,
occupancy and certain clerical and bookkeeping costs of the Fund. The Fund bears
all other costs and expenses.

The management fee paid PIFM is computed daily and payable monthly at an annual
rate of .60% of the Fund's average daily net assets up to $250 million, .50% of
the next $500 million, .45% of the next $750 million, .40% of the next $500
million, .35% of the next $2 billion, .325% of the next $2 billion and .30% of
the average daily net assets of the Fund in excess of $6 billion.

The Company has a distribution agreement with Prudential Investment Management
Services LLC ('PIMS'), which acts as the distributor of the Class A, B, C and Z
shares of the Company. The Company compensates PIMS for distributing and
servicing the Fund's Class A, Class B and Class C shares, pursuant to plans of
distribution (the 'Class A, B and C Plans'), regardless of expenses actually
incurred by PIMS. The distribution fees are accrued daily and payable monthly.
No distribution or service fees are paid to PIMS as distributor of the Class Z
shares of the Company.

Pursuant to the Class A, B and C Plans, the Fund compensates PIMS for
distribution-related activities at an annual rate of up to .30 of 1%, 1% and 1%
of the average daily net assets of the Class A, B and C shares, respectively.
Such expenses under the Plans were .25 of 1%, 1% and 1% of the average daily net
assets of the Class A, B and C shares, respectively, for the five months ended
May 31, 1999.
- --------------------------------------------------------------------------------
9
<PAGE>
PRUDENTIAL SECTOR FUNDS, INC.
Notes to Financial Statements
(Unaudited) PRUDENTIAL UTILITY FUND
- --------------------------------------------------------------------------------
PIMS has advised the Fund that it received approximately $243,734 and $29,927 in
front-end sales charges resulting from sales of Class A and Class C shares,
respectively, during the five months ended May 31, 1999. From these fees, PIMS
paid such sales charges to dealers, which in turn paid commissions to
salespersons and incurred other distribution costs.

PIMS has advised the Fund that for the five months ended May 31, 1999, it
received approximately $1,066,106 and $9,556 in contingent deferred sales
charges imposed upon redemptions by certain Class B and Class C shareholders,
respectively.

PIFM, PIMS and PIC are indirect, wholly owned subsidiaries of The Prudential
Insurance Company of America.

As of March 11, 1999, the Company, along with other affiliated registered
investment companies (the 'Funds'), entered into a syndicated credit agreement
('SCA') with an unaffiliated lender. The maximum commitment under the SCA is $1
billion. The Funds pay a commitment fee at an annual rate of .065 of 1% on the
unused portion of the credit facility, which is accrued and paid quarterly on a
pro rata basis by the Funds. The SCA expires on March 9, 2000. Prior to March
11, 1999, the Funds had a credit agreement with a maximum commitment of
$200,000,000. The commitment fee was .055 of 1% on the unused portion of the
credit facility. The Fund did not borrow any amounts pursuant to either
agreement during the five months ended May 31, 1999. The purpose of the
agreements is to serve as an alternative source of funding for capital share
redemptions.

- ------------------------------------------------------------
Note 3. Other Transactions With Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM,
serves as the Company's transfer agent. During the five months ended May 31,
1999, the Fund incurred fees of approximately $1,773,000 for the services of
PMFS. As of May 31, 1999, approximately $349,000 of such fees were due to PMFS.
Transfer agent fees and expenses in the Statement of Operations also include
certain out-of-pocket expenses paid to nonaffiliates.

For the five months ended May 31, 1999, PSI earned approximately $49,000 in
brokerage commissions from portfolio transactions executed on behalf of the
Fund.

Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments,
for the five months ended May 31, 1999, were $380,452,179 and $692,291,229,
respectively.

The federal income tax basis of the Fund's investments at May 31, 1999 was
$3,062,069,725 and, accordingly, net unrealized appreciation for federal income
tax purposes was $1,539,115,846 (gross unrealized appreciation--$1,672,043,973;
gross unrealized depreciation--$132,198,127).

As of May 31, 1999, the Fund has securities on loan with an aggregate market
value of $236,863,628. The Fund received $249,109,071 in cash, as collateral for
securities on loan with which it purchased highly liquid short-term investments
in accordance with the Fund's securities lending procedures.

- ------------------------------------------------------------
Note 5. Joint Repurchase Agreement Account
The Fund, along with other affiliated registered investment companies, transfers
uninvested cash balances into a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements collateralized
by U.S. Treasury or federal agency obligations. As of May 31, 1999, the Fund had
a 1.5% undivided interest in the joint account. The undivided interest for the
Fund represents $10,466,000 in principal amount. As of such date, each
repurchase agreement in the joint account and the collateral therefor were as
follows:

Bear Stearns & Co., Inc., 4.82%, in the principal amount of $200,000,000,
repurchase price $200,107,111, due 6/1/99. The value of the collateral including
accrued interest was $204,177,828.

Credit Suisse First Boston Corp., 4.60%, in the principal amount of $85,711,000,
repurchase price $85,754,808, due 6/1/99. The value of the collateral including
accrued interest was $88,385,257.

Deutsche Bank Securities Inc., 4.83%, in the principal amount of $200,000,000,
repurchase price $200,107,333, due 6/1/99. The value of the collateral including
accrued interest was $204,000,179.

Morgan (J.P.) Securities, Inc., 4.82%, in the principal amount of $200,000,000,
repurchase price $200,107,111, due 6/1/99. The value of the collateral including
accrued interest was $204,000,892.
- --------------------------------------------------------------------------------
10
<PAGE>
PRUDENTIAL SECTOR FUNDS, INC.
Notes to Financial Statements
(Unaudited) PRUDENTIAL UTILITY FUND
- --------------------------------------------------------------------------------
Note 6. Capital
The Fund offers Class A, Class B, Class C and Class Z shares. Class A shares are
sold with a front-end sales charge of up to 5%. Class B shares are sold with a
contingent deferred sales charge which declines from 5% to zero depending on the
period of time the shares are held. Class C shares are sold with a front-end
sales charge of 1% and a contingent deferred sales charge of 1% during the first
18 months. Prior to November 2, 1998, Class C shares were sold with a contingent
deferred sales charge of 1% during the first year. Class B shares automatically
convert to Class A shares on a quarterly basis approximately seven years after
purchase. A special exchange privilege is also available for shareholders who
qualified to purchase Class A shares at net asset value. Class Z shares are not
subject to any sales or redemption charge and are offered exclusively for sale

to a limited group of investors.
There are 800 million shares of $.01 par value per share common stock authorized
which consists of 400 million shares of Class A common stock, 300 million shares
of Class B common stock, 50 million shares of Class C common stock and 50
million shares of Class Z common stock.

Transactions in shares of common stock were as follows:

<TABLE>
<CAPTION>
Class A Shares Amount
- -------------------------------- ------------ ---------------
<S> <C> <C>
Five months ended May 31, 1999:
Shares sold..................... 6,495,550 $ 75,390,786
Shares issued in reinvestment of
dividends and distributions... 5,140,932 57,012,947
Shares reacquired............... (24,068,004) (280,864,009)
------------ ---------------
Net decrease in shares
outstanding before
conversion.................... (12,431,522) (148,460,276)
Shares issued upon conversion
from Class B.................. 3,371,252 39,106,525
------------ ---------------
Net decrease in shares
outstanding................... (9,060,270) $ (109,353,751)
------------ ---------------
------------ ---------------
Year ended December 31, 1998:
Shares sold..................... 19,037,525 $ 237,779,818
Shares issued in reinvestment of
dividends and distributions... 19,621,888 242,393,959
Shares reacquired............... (29,837,592) (374,504,596)
------------ ---------------
Net increase in shares
outstanding before
conversion.................... 8,821,821 105,669,181
Shares issued upon conversion
from Class B.................. 9,025,214 109,890,889
------------ ---------------
Net increase in shares
outstanding................... 17,847,035 $ 215,560,070
------------ ---------------
------------ ---------------
<CAPTION>
Class B Shares Amount
- -------------------------------- ------------ ---------------
<S> <C> <C>
Five months ended May 31, 1999:
Shares sold..................... 7,536,803 $ 86,969,041
Shares issued in reinvestment of
dividends and distributions... 3,209,733 35,595,937
Shares reacquired............... (25,801,788) (297,357,966)
------------ ---------------
Net decrease in shares
outstanding before
conversion.................... (15,055,252) (174,792,988)
Shares reacquired upon
conversion into Class A....... (3,379,994) (39,106,525)
------------ ---------------
Net decrease in shares
outstanding................... (18,435,246) $ (213,899,513)
------------ ---------------
------------ ---------------
Year ended December 31, 1998:
Shares sold..................... 24,489,734 $ 307,013,338
Shares issued in reinvestment of
dividends and distributions... 14,344,999 177,016,698
Shares reacquired............... (37,529,567) (468,939,125)
------------ ---------------
Net increase in shares
outstanding before
conversion.................... 1,305,166 15,090,911
Shares reacquired upon
conversion into Class A....... (9,136,008) (109,890,889)
------------ ---------------
Net decrease in shares
outstanding................... (7,830,842) $ (94,799,978)
------------ ---------------
------------ ---------------
<CAPTION>
Class C
- --------------------------------
<S> <C> <C>
Five months ended May 31, 1999:
Shares sold..................... 780,373 $ 9,002,263
Shares issued in reinvestment of
dividends and distributions... 44,845 497,327
Shares reacquired............... (1,047,062) (11,910,723)
------------ ---------------
Net decrease in shares
outstanding................... (221,844) $ (2,411,133)
------------ ---------------
------------ ---------------
Year ended December 31, 1998:
Shares sold..................... 1,692,797 $ 21,154,562
Shares issued in reinvestment of
dividends and distributions... 161,515 1,983,980
Shares reacquired............... (701,686) (8,661,428)
------------ ---------------
Net increase in shares
outstanding................... 1,152,626 $ 14,477,114
------------ ---------------
------------ ---------------
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
PRUDENTIAL SECTOR FUNDS, INC.
Notes to Financial Statements
(Unaudited) PRUDENTIAL UTILITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class Z Shares Amount
- -------------------------------- ------------ ---------------
<S> <C> <C>
Five months ended May 31, 1999:
Shares sold..................... 1,098,516 $ 12,818,399
Shares issued in reinvestment of
dividends and distributions... 92,217 1,023,612
Shares reacquired............... (1,525,880) (17,753,728)
------------ ---------------
Net decrease in shares
outstanding................... (335,147) $ (3,911,717)
------------ ---------------
------------ ---------------
Year ended December 31, 1998:
Shares sold..................... 2,632,084 $ 33,047,481
Shares issued in reinvestment of
dividends and distributions... 383,622 4,743,816
Shares reacquired............... (2,547,360) (31,884,546)
------------ ---------------
Net increase in shares
outstanding................... 468,346 $ 5,906,751
------------ ---------------
------------ ---------------
</TABLE>

- ------------------------------------------------------------
Note 7. Dividends
On June 28, 1999 the Board of Directors of the Fund declared the following
dividends per share, payable on June 30, 1999 to shareholders of record on June
29, 1999.

<TABLE>
<CAPTION>
Class Class B Class
A and C Z
--------- --------- ---------
<S> <C> <C> <C>
Ordinary Income................. $.081 $.057 $.089
</TABLE>
- --------------------------------------------------------------------------------
12

<PAGE>
PRUDENTIAL SECTOR FUNDS, INC.
Financial Highlights (Unaudited) PRUDENTIAL UTILITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------
Five
Months
Ended Year Ended December 31,
May 31, -----------------------------------------------------
1999(b) 1998(b) 1997(b) 1996(b) 1995 1994
------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....... $12.06 $12.33 $10.88 $ 9.87 $ 8.27 $ 9.72
------- ------- ------- ------- ------ ------
Income from investment operations
Net investment income...................... .13 .30 .34 .32 .30 .31
Net realized and unrealized gains (losses)
on investment and foreign currency
transactions............................ .54 .69 2.53 1.80 1.79 (1.06)
------- ------- ------- ------- ------ ------
Total from investment operations........ .67 .99 2.87 2.12 2.09 (.75)
------- ------- ------- ------- ------ ------
Less distributions
Dividends from net investment income....... (.08 ) (.32 ) (.32 ) (.32) (.30) (.32)
Distributions from net realized gains...... (.20 ) (.94 ) (1.10 ) (.79) (.19) (.36)
Distributions in excess of net realized
gains................................... -- -- -- -- -- (.02)
------- ------- ------- ------- ------ ------
Total distributions..................... (.28 ) (1.26 ) (1.42 ) (1.11) (.49) (.70)
------- ------- ------- ------- ------ ------
Net asset value, end of period............. $12.45 $12.06 $12.33 $ 10.88 $ 9.87 $ 8.27
------- ------- ------- ------- ------ ------
------- ------- ------- ------- ------ ------
TOTAL RETURN(a)............................ 5.93 % 7.98 % 27.77 % 22.09% 25.74% (7.89)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000,000)........ $2,718 $2,741 $2,583 $2,023 $1,709 $254
Average net assets (000,000)............... $2,607 $2,652 $2,201 $1,786 $1,440 $294
Ratios to average net assets:
Expenses, including distribution fees... .78%(c) .78% .82% .86% .88% .88%
Expenses, excluding distribution fees... .53%(c) .53% .57% .61% .63% .63%
Net investment income................... 2.60%(c) 2.43% 2.95% 3.10% 3.12% 3.37%
For Class A, B, C and Z shares:
Portfolio turnover rate................. 9% 17% 15% 17% 14% 15%
</TABLE>
- ---------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than one full year are not
annualized.
(b) Calculated based upon weighted average shares outstanding during the period.
(c) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 13

<PAGE>
PRUDENTIAL SECTOR FUNDS, INC.
Financial Highlights (Unaudited) PRUDENTIAL UTILITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
-----------------------------------------------------------------
Five
Months
Ended Year Ended December 31,
May 31, -----------------------------------------------------
1999(b) 1998(b) 1997(b) 1996(b) 1995 1994
------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....... $12.05 $12.32 $10.88 $ 9.87 $ 8.26 $ 9.69
------- ------- ------- ------- ------ ------
Income from investment operations
Net investment income...................... .09 .21 .25 .24 .22 .24
Net realized and unrealized gains (losses)
on investment and foreign currency
transactions............................ .55 .69 2.53 1.80 1.80 (1.05)
------- ------- ------- ------- ------ ------
Total from investment operations........ .64 .90 2.78 2.04 2.02 (.81)
------- ------- ------- ------- ------ ------
Less distributions
Dividends from net investment income....... (.06 ) (.23 ) (.24 ) (.24) (.22) (.24)
Distributions from net realized gains...... (.20 ) (.94 ) (1.10 ) (.79) (.19) (.36)
Distributions in excess of net realized
gains................................... -- -- -- -- -- (.02)
------- ------- ------- ------- ------ ------
Total distributions..................... (.26 ) (1.17 ) (1.34 ) (1.03) (.41) (.62)
------- ------- ------- ------- ------ ------
Net asset value, end of period............. $12.43 $12.05 $12.32 $ 10.88 $ 9.87 $ 8.26
------- ------- ------- ------- ------ ------
------- ------- ------- ------- ------ ------
TOTAL RETURN(a)............................ 5.62% 7.18% 26.80% 21.16% 24.80% (8.51)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000,000)........ $1,824 $1,990 $2,132 $2,137 $2,355 $3,526
Average net assets (000,000)............... $1,805 $2,120 $2,059 $2,184 $2,450 $4,152
Ratios to average net assets:
Expenses, including distribution fees... 1.53%(c) 1.53% 1.57% 1.61% 1.63% 1.63%
Expenses, excluding distribution fees... .53%(c) .53% .57% .61% .63% .63%
Net investment income................... 1.85%(c) 1.67% 2.20% 2.35% 2.37% 2.62%
</TABLE>
- ---------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than one full year are not
annualized.
(b) Calculated based upon weighted average shares outstanding during the period.
(c) Annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 14

<PAGE>
PRUDENTIAL SECTOR FUNDS, INC.
Financial Highlights (Unaudited) PRUDENTIAL UTILITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
-----------------------------------------------------------------------
Five August 1,
Months 1994(d)
Ended Year Ended December 31, Through
May 31, ------------------------------------------ December 31,
1999(b) 1998(b) 1997(b) 1996(b) 1995 1994
------- ------- ------- ------- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....... $12.05 $ 12.32 $ 10.88 $ 9.87 $ 8.26 $ 9.30
------- ------- ------- ------- ------ -----
Income from investment operations
Net investment income...................... .09 .21 .25 .24 .22 .11
Net realized and unrealized gains (losses)
on investment and foreign currency
transactions............................ .55 .69 2.53 1.80 1.80 (.69)
------- ------- ------- ------- ------ -----
Total from investment operations........ .64 .90 2.78 2.04 2.02 (.58)
------- ------- ------- ------- ------ -----
Less distributions
Dividends from net investment income....... (.06) (.23) (.24) (.24 ) (.22) (.13)
Distributions from net realized gains...... (.20) (.94) (1.10) (.79 ) (.19) (.31)
Distributions in excess of net realized
gains................................... -- -- -- -- -- (.02)
------- ------- ------- ------- ------ -----
Total distributions..................... (.26) (1.17) (1.34) (1.03 ) (.41) (.46)
------- ------- ------- ------- ------ -----
Net asset value, end of period............. $12.43 $ 12.05 $ 12.32 $10.88 $ 9.87 $ 8.26
------- ------- ------- ------- ------ -----
TOTAL RETURN(a)............................ 5.62% 7.18% 26.80% 21.16 % 24.80% (6.27)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............ $25,174 $27,072 $13,490 $6,001 $3,455 $ 787
Average net assets (000)................... $23,801 $20,309 $ 9,424 $4,517 $2,181 $ 433
Ratios to average net assets:
Expenses, including distribution fees... 1.53%(c) 1.53% 1.57% 1.61 % 1.63% 1.70%(c)
Expenses, excluding distribution fees... .53%(c) .53% .57% .61 % .63% .70%(c)
Net investment income................... 1.85%(c) 1.71% 2.20% 2.35 % 2.37% 2.65%(c)
</TABLE>
- ---------------
(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than one full year are not
annualized.
(b) Calculated based upon weighted average shares outstanding during the period.
(c) Annualized.
(d) Commencement of offering of Class C shares.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 15

<PAGE>
PRUDENTIAL SECTOR FUNDS, INC.
Financial Highlights (Unaudited) PRUDENTIAL UTILITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class Z
------------------------------------------------
Five March 1,
Months Year Ended December 1996(d)
Ended 31, Through
May 31, ------------------- December 31,
1999(b) 1998(b) 1997(b) 1996(b)
------- ------- ------- ------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....... $12.07 $ 12.34 $ 10.88 $ 10.05
------- ------- ------- ------
Income from investment operations
Net investment income...................... .14 .34 .36 .29
Net realized and unrealized gains on
investment and foreign currency
transactions............................ .55 .69 2.54 1.67
------- ------- ------- ------
Total from investment operations........ .69 1.03 2.90 1.96
------- ------- ------- ------
Less distributions
Dividends from net investment income....... (.09) (.36) (.34) (.34)
Distributions from net realized gains...... (.20) (.94) (1.10) (.79)
Distributions in excess of net realized
gains................................... -- -- -- --
------- ------- ------- ------
Total distributions..................... (.29) (1.30) (1.44) (1.13)
------- ------- ------- ------
Net asset value, end of period............. $12.47 $ 12.07 $ 12.34 $ 10.88
------- ------- ------- ------
TOTAL RETURN(a)............................ 6.08% 8.24% 28.15% 20.11%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............ $44,007 $46,642 $41,904 $ 34,446
Average net assets (000)................... $42,483 $46,093 $35,994 $ 34,291
Ratios to average net assets:
Expenses, including distribution fees... .53%(c) .53% .57% .61%(c)
Expenses, excluding distribution fees... .53%(c) .53% .57% .61%(c)
Net investment income................... 2.85%(c) 2.68% 3.20% 3.35%(c)
</TABLE>
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(a) Total return does not consider the effects of sales loads. Total return is
calculated assuming a purchase of shares on the first day and a sale on the
last day of each period reported and includes reinvestment of dividends and
distributions. Total return for periods of less than one full year are not
annualized.
(b) Calculated based upon weighted average shares outstanding during the period.
(c) Annualized.
(d) Commencement of offering of Class Z shares.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 16

<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077

(800) 225-1852
http://www.prudential.com

Directors
Edward D. Beach
Delayne Dedrick Gold
Robert F. Gunia
Douglas H. McCorkindale
Thomas T. Mooney
Stephen P. Munn
Richard A. Redeker
Robin B. Smith
John R. Strangfeld
Louis A. Weil, III
Clay T. Whitehead

Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
Marguerite E.H. Morrison, Secretary

Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077

Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
751 Broad Street
Newark, NJ 07102-3777

Distributor
Prudential Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077

Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171

Transfer Agent
Prudential Mutual Fund Services LLC
P.O. Box 15005
New Brunswick, NJ 08906

Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036

Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795

The views expressed in this report and information about the
Fund's portfolio holdings are for the period covered by this
report, and are subject to change thereafter.

The accompanying financial statements as of May 31, 1999,
were not audited and, accordingly, no opinion is expressed
on them.

This report is not authorized for distribution to prospective
investors unless preceded or accompanied by a current prospectus.

<PAGE>

(LOGO)

Prudential Mutual Funds BULK RATE
Gateway Center Three U.S. POSTAGE
100 Mulberry Street PAID
Newark, NJ 07102-4077 Permit 6807
(800) 225-1852 New York, NY

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