(ICON)
Prudential
Multi-Sector
Fund, Inc.
SEMI
ANNUAL
REPORT
Oct. 31, 1995
(LOGO)
<PAGE>
Prudential Multi-Sector Fund, Inc.
Performance At A Glance.
The U.S. stock market rallied on to new highs over the last six months, as
corporate earnings rose and interest rates fell. Stocks rose 29% to date in
1995, as measured by the S&P 500, including 14% for the latest six months
ending October 31. The Prudential Multi-Sector Fund delivered a 20% total
return to date this year, and 11% during the six-month period. Fund performance
during the six months slightly trailed the average capital appreciation fund
measured by Lipper Analytical Services because the Fund held a larger
percentage of assets in energy stocks (particularly oil services stocks) than
its competition, and these stocks did not perform well.
<TABLE>
<CAPTION>
Cumulative Total Returns1 As of
10/31/95
Six One Five
Since
Months Year Years
Inception2
<S> <C> <C> <C>
<C>
Class A 11.4% 13.2% 112.1%
89.9%
Class B 11.1 12.4 104.1
82.2
Class C 11.1 12.4 N/A
18.4
Lipper Capital
Appreciation Avg3 15.6 21.1 136.0
87.9
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns1 As of
9/30/95
One Five Since
Year Years
Inception2
<S> <C> <C> <C>
Class A 12.2% 15.6% 12.5%
Class B 12.3 15.8 12.6
Class C 16.3 N/A 18.6
</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.
1Source: Prudential Mutual Fund Management and Lipper Analytical Services. The
cumulative total returns do not take into account sales charges. The average
annual returns do take into account applicable sales charges. The Fund charges
a maximum front-end sales load of 5% for Class A shares and a contingent
deferred sales charge of 5%, 4%, 3%, 2%, 1% and 1% for six years, for Class B
shares. Class C shares have a 1% CDSC for one year. Class B shares will
automatically convert to Class A shares on a quarterly basis, approximately
seven years after purchase.
2Inception dates: 6/29/90 Class A and B; 8/1/94 Class C.
3Lipper average returns are for 168 funds for six months, 150 funds for one
year, 86 funds for five years and 83 funds since inception of the Class A and
B shares on 6/29/90.
How Investments Compared.
(As of 10/31/95)
(CHART)
Source: Lipper Analytical Services. Financial markets change, so a mutual fund's
past performance should never be used to predict future results. The risks to
each of the investments listed above are different - we provide 12-month total
returns for several Lipper mutual fund categories to show you that reaching for
higher yields means tolerating more risk. The greater the risk, the larger the
potential reward or loss. In addition, we've added historical 20-year average
annual returns to show that 1995's returns (so far) are higher than normal.
These returns assume the reinvestment of dividends.
Growth Funds will fluctuate a great deal. Smaller capitalization stocks offer
greater potential for long-term growth but may be more volatile than larger
capitalization stocks. Investors receive higher historical total returns from
stocks than from most other investments.
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
substantially) and their returns are historically lower than those of stock
funds.
Global Stock Funds will fluctuate more than domestic stock funds, since they
invest at least 25% of their portfolios outside the United States. They are
subject to risks of currency fluctuation, and social, political and economic
change. They are designed for investors who can tolerate additional risks in
hopes of higher rewards.
Money Market Funds attempt to preserve a constant share value; they don't
fluctuate much in price but their returns are generally among the lowest of
the major investment categories.
<PAGE>
Greg Goldberg, Fund Manager
Portfolio
Manager's Report (PICTURE)
The Fund seeks long-term capital growth by investing primarily in domestic and
foreign stocks of companies in specific economic sectors, and makes significant
shifts among these sectors based on world economic changes and other investment
trends. The Fund may use derivatives like foreign currency futures, forward
contracts and stock options to hedge risk.
Overview.
Greg Smith, chief investment strategist for Prudential Securities, and a
consultant to the Fund's subadviser, recommends asset and stock market sector
allocations. Portfolio manager Greg Goldberg selects the stocks following a
growth investment style. He looks for stocks with above-average revenue and
earnings growth forecast for the next two to three years and price/earnings
ratios below growth rates.
Strategy Session.
Themes: The World,
Technology & Finance.
The Fund is positioned to benefit from increasing worldwide economic activity
by investing in both U.S.-based, multinational corporations and foreign stocks.
About 55% of assets are invested in multinationals (companies whose sales
overseas account for more than 40% of their total business) and 15% of assets
are in foreign stocks. Many of these companies are technology-related: selling
products worldwide to help companies catch up to the high level of information
technology available in the U.S. today. We prefer multinational corporations
to foreign stocks because they 1) are easier to buy and sell; 2) offer less
currency risk; 3) adhere to more familiar accounting standards and 4) are not
limited by their home country's economic growth.
Our worldwide geographic exposure tends to be clustered primarily in two sectors
of the economy - technology and financial services. In fact, we have
concentrated 63% of our assets here. Coincidentally, these are the two highest
performing sectors of the S&P 500 to date this year. In fact, this is the third
year in a row that technology has been the market's leading sector, as
lower-priced, higher-powered computer products help increase productivity and
control wages worldwide. We have significant holdings in the financial services
industry because falling interest rates have helped to enhance balance sheets
of banks, savings and loans, and insurance firms. In addition, baby boomers
are becoming more interested in saving for retirement than the latest fashions:
apparel sales are shrinking while annuity sales are growing.
Sector Breakdown.
Prudential Multi-Sector Fund
As of 10/31/95
(CHART)
<PAGE>
What Went Well.
Technology Rose.
We increased our holdings in technology to 37% from 20% over the past six
months, focusing on semiconductor equipment manufacturers and computer
networking companies. We're glad we did, because technology stocks led the
broader market higher this year - they are up 51% to date this year and 17% in
the last six months.
One of our favorites is Applied Materials, our fourth largest holding. It is a
semiconductor equipment manufacturer which is enjoying strong cyclical demand.
We also like Bay Networks, a computer networking company that has increasing
market penetration.
We also increased our holdings in financial services to 25% of assets from 18%
on April 30. We are glad we did so, because lower interest rates have helped
make this the second-best performing sector to date with a total return of 42%,
including 25% over the six month period.
Our two largest holdings here are Federal National Mortgage Association (FNMA),
better known as Fannie Mae, and Citicorp. FNMA is the largest force today in the
mortgage business, and has benefited from an upswing in housing this year.
Citicorp is attractively priced at less than nine times estimated 1996 earnings,
considering that we expect its Latin American and emerging markets holdings to
improve next year.
One of the best selling new financial products this year has been the variable
annuity, a growing choice for baby boomers who are just starting to think
seriously about planning for retirement.
And Not So Well.
We held a larger percentage of assets in energy stocks (9%) than our
competitors, and the performance of this sector lagged. Our exposure to oil
service stocks was a factor here, because this industry lost ground in recent
weeks, as worldwide economic growth slowed, diminishing the urgency for drilling
for more oil.
Our basic industry stocks (4% of assets) tend to improve with economic growth,
so they suffered a fate similar to our energy holdings. As the economy slows,
so does demand, crimping the value of the stocks as well.
Discount retailer Caldor did not perform up to expectations, and then filed
for reorganization under Chapter 11 of the federal bankruptcy laws in September.
We still hold the stock, believing it will rebound. It amounts to less than one
percent of assets.
Five Largest
Holdings.*
3.4% Fed. Nat. Mort. Assn.
Savings & Loans
2.6% Bay Networks
Technology
2.4% SunAmerica
Insurance
2.3% Applied Materials
Electronics
2.3% CitiCorp
Money Center Banks
*Expressed as a percentage of total net assets as of 10/31/95. Portfolio
holdings are subject to change.
Looking Ahead.
We believe that above average corporate earnings will be harder to attain
next year, because economic growth has downshifted to a slower, more steady
pace. Some companies will face difficulty increasing earnings next year because
1995 has been such an outstanding year.
That said, we believe that there will be opportunity in certain stocks in
select sectors, where earnings growth will be superior to the general market.
But these will become more difficult for many to find.
We expect volatility to continue in technology shares, but we believe it
represents opportunity. And we look for continued gains in financial stocks,
although not perhaps as dramatic as this year's.
1
<PAGE>
President's Letter
(PICTURE)
December 15, 1995
Dear Shareholder:
For many investors, 1995 was a profitable year - most stock and bond funds
enjoyed healthy returns from the U.S. markets. While climbing returns can
tempt even the most skittish investors to start buying again, it is important
to remember that the stock and bond markets go down just as they go up. At times
like these, remember the importance of working with your Financial Advisor or
Registered Representative to help you find investments that are consistent
with your risk tolerance and time horizon. Your Financial Advisor or Registered
Representative can help you maintain realistic expectations about both the
potential performance and risks associated with your investments.
American Dream Savings Account.
The U.S. Congress is now considering one of the most significant and positive
pieces of legislation to affect individual investors - the American Dream
Savings Account. This legislation may improve the traditional Individual
Retirement Account (IRA) by allowing higher non- working spouse contributions
as well as tax-free and penalty-free withdrawals from the account before age
59 1/2, for certain expenses. We will keep our Financial Advisors and Registered
Representatives updated on the progress of this legislation, so call him or her
to learn how you may benefit.
Shareholder Legislative Action Program.
From time to time we've be informing you about significant legislation before
Congress, such as the American Dream Savings Account, that may potentially
impact mutual fund investors. We want to make it easier for you to share your
views with your Congressional member. So, beginning in 1996, your shareholder
reports will contain postage-paid message cards that you simply drop in the
mail if you want to let your senator or representative know how you feel about
pending legislation.
Fund Profiles.
Over the past year, we've worked to make your shareholder reports more
interesting, informative and easy to read. This year, we'll be turning our
attention to fund profiles. Some mutual fund companies now offer one to
shareholders along with a full prospectus. The purpose of a fund profile is to
provide a very brief, reader-friendly summary of a fund's objective,
investments, risks and expenses. Would you like to see fund profiles from us?
Please call your Financial Advisor or Registered Representative to share your
views.
As always, thank you for your confidence in Prudential Mutual Funds.
Sincerely,
Richard A. Redeker
President
2
<PAGE>
Portfolio of Investments as of
October 31, 1995 (Unaudited) PRUDENTIAL MULTI-SECTOR FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
LONG-TERM INVESTMENTS--92.5%
COMMON STOCKS--91.4%
- ------------------------------------------------------------
Auto Sector--0.8%
135,000 Ford Motor Co. $ 3,881,250
- ------------------------------------------------------------
Basic Industry Sector--4.4%
96,600 Advanta Corp. 3,453,450
140,000 Agrium Inc. (Canada) 5,733,209
75,000 National Steel Corp.(a) 993,750
60,900 Quad Systems Corp.(a) 502,425
65,500 The PMI Group Inc. 3,144,000
74,400 TJ International, Inc. 1,288,050
70,000 Trinity Industries, Inc.(a) 2,073,750
126,400 Uniphase Corp. 3,697,200
------------
20,885,834
- ------------------------------------------------------------
Consumer Goods & Services Sector--5.1%
119,100 Fruit of the Loom, Inc. 2,069,363
66,900 La Quinta Inns, Inc. 1,722,675
52,400 Nissen Co., Ltd. (Japan) 1,509,570
100,000 Philip Morris Cos., Inc. 8,450,000
275,000 RJR Nabisco Holdings Corp. 8,456,250
135,000 Stone Container Corp.(a) 2,227,500
------------
24,435,358
- ------------------------------------------------------------
Energy Sector--8.8%
130,000 Baker Hughes Inc. 2,551,250
300,000 BJ Services Corp.(a) 7,050,000
125,000 Exxon Corp. 9,546,875
465,000(b) Mesa, Inc.(a) 1,976,250
308,300 Noble Drilling Corp.(a) 2,158,100
139,500 Oryx Energy Co. 1,604,250
118,900 Repsol S.A. (ADR) (Spain) 3,522,412
400,000 Rowan Cos., Inc.(a) 2,650,000
40,000 Royal Dutch Petroleum Co.(a) 4,915,000
131,100 Smith International, Inc.(a) 2,097,600
112,800 Talisman Energy, Inc.(a) (Canada) 2,041,343
120,000 YPF Sociedad Anonima (ADR)
(Argentina) 2,055,000
------------
42,168,080
Financial Services Sector--25.2%
121,400 Ahmanson (H.F.) & Co. $ 3,035,000
200,000 American General Corp. 6,575,000
68,800 Banc One Corp. 2,322,000
152,697 Banco Wiese (ADR) (Peru) 1,011,618
47,700 Chubb Corp. 4,287,038
170,500 Citicorp 11,061,187
170,000 Dean Witter Discover & Co. 8,457,500
43,900 Equitable of Iowa Cos. 1,536,500
130,000 Federal Home Loan Mortgage Corp. 9,002,500
152,500 Federal National Mortgage
Association 15,993,437
82,000 Manufactured Home Communities,
Inc. 1,353,000
125,000 NationsBank Corp. 8,218,750
115,000 Nichiei Co. (Japan) 7,131,348
123,800 Republic New York Corp. 7,257,775
230,000 Salomon, Inc. 8,308,750
184,000 SunAmerica, Inc. 11,454,000
200,000 The Equitable Companies, Inc. 4,250,000
180,000 Travelers Inc. 9,090,000
------------
120,345,403
- ------------------------------------------------------------
Health Care Sector--6.0%
150,000 Columbia Healthcare Corp. 7,368,750
107,000 Forest Laboratories, Inc.(a) 4,427,125
55,000 Johnson & Johnson Co. 4,482,500
101,300 Physician Corp. of America(a) 1,557,488
880 Roche Holdings Ltd. 6,368,253
80,000 St. Jude Medical, Inc. 4,260,000
------------
28,464,116
- ------------------------------------------------------------
Leisure--0.6%
117,300 Carnival Cruise Lines, Inc. 2,727,225
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
3
<PAGE>
<PAGE>
Portfolio of Investments as of
October 31, 1995 (Unaudited) PRUDENTIAL MULTI-SECTOR FUND, INC.
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
Precious Metals Sector--1.7%
280,000 Santa Fe Pacific Gold Corp. $ 2,765,000
189,900 UCAR International Inc.(a) 5,412,150
------------
8,177,150
- ------------------------------------------------------------
Retailing Sector--0.6%
135,900 Caldor Corp.(a) 662,512
91,000 Dillard Department Stores, Inc. 2,468,375
------------
3,130,887
- ------------------------------------------------------------
Technology Sector--37.4%
223,400 Applied Materials, Inc. 11,197,925
200,000 Autodesk, Inc. 6,800,000
89,600 Baan Company, N.V.(a) 3,808,000
190,000 Bay Networks, Inc. 12,587,500
120,000 Cisco Systems, Inc. 9,300,000
141,300 Compaq Computer Corp.(a) 7,877,475
39,100 Computer Associates International,
Inc. 2,150,500
43,500 Comverse Technology, Inc.(a) 989,625
228,000 EMC Corp.(a) 3,534,000
158,590 First Data Corp. 10,486,764
232,000 Integrated Device Technology,
Inc.(a) 4,408,000
150,000 Intel Corp. 10,481,250
157,000 KLA Instruments Corp.(a) 6,711,750
170,000 Loral Corp. 5,036,250
80,000 Micron Technology Inc. 5,650,000
90,000 Microsoft Corp.(a) 9,000,000
130,000 Motorola, Inc. 8,531,250
284,400 Network Express, Inc.(a) 2,595,150
230,000 NEXTEL Communications Inc.(a) 3,191,250
105,000 Nintendo Co., Ltd. (Japan) 7,710,937
145,000 Seagate Technology Inc.(a) 6,488,750
304,000 Silicon Graphics Inc. 10,108,000
49,200 Softkey International Inc.(a) 1,522,740
106,100 Tencor Instruments(a) 4,522,513
80,000 Texas Instruments Inc. 5,460,000
139,100 Ultratech Stepper Inc.(a) 5,564,000
73,700 Verifone, Inc. 1,989,900
278,000 VLSI Technology, Inc.(a) $ 6,533,000
273,000 Western Digital Corp. 4,231,500
------------
178,468,029
- ------------------------------------------------------------
Transportation Sector--0.8%
110,300 Methanex Corp.(a) (Canada) 740,821
85,000 Varity Corp.(a) 3,081,250
------------
3,822,071
------------
Total common stocks
(cost $377,731,850) 436,505,403
------------
CONVERTIBLE PREFERRED STOCKS--1.1%
- ------------------------------------------------------------
Financial Services Sector--1.1%
136,450 Advanta Corporation
(cost $3,875,750) 5,150,988
------------
Total long-term investments
(cost $381,607,600) 441,656,391
------------
Principal
Amount
(000)
- --------
SHORT-TERM INVESTMENTS--6.0%
- ------------------------------------------------------------
U.S. Government Securities--1.2%
U.S. Treasury Bills,
$1,200(b) 5.43%, 11/16/95 1,197,407
1,500(b) 5.435%, 11/16/95 1,496,759
500(b) 5.22%, 12/14/95 496,932
2,525(b) 5.30%, 12/14/95 2,509,504
------------
Total U. S. Government Securities
(cost $5,699,786) 5,700,602
------------
- ------------------------------------------------------------
Repurchase Agreement--4.8%
23,114 Joint Repurchase Agreement
Account,
5.89%, 11/1/95, (Note 5)
(cost $23,114,000) 23,114,000
------------
Total short-term investments
(cost $28,813,786) 28,814,602
------------
Total investments before short
sales - 98.5%
(cost $410,421,386; Note 4) 470,470,993
------------
- --------------------------------------------------------------------------------
4 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MULTI-SECTOR FUND, INC.
Portfolio of Investments as of October 31, 1995 (Unaudited)
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- ------------------------------------------------------------
COMMON STOCKS SOLD SHORT(a)--(2.4)%
- ------------------------------------------------------------
Basic Industry Sector--(0.2%)
100,000 Centocor Inc. $ (1,125,000)
- ------------------------------------------------------------
Consumer Goods & Service Sector--(0.8%)
30,000 NIKE, Inc. (1,702,500)
60,000 Reebok International, Ltd. (2,040,000)
------------
(3,742,500)
- ------------------------------------------------------------
Retailing Sector--(1.2)%
60,000 AutoZone, Inc.(a) (1,485,000)
50,000 Cracker Barrel Old Country Store,
Inc. (850,000)
45,000 Petsmart Inc. (1,507,500)
50,000 Starbucks Corp. (1,962,500)
------------
(5,805,000)
- ------------------------------------------------------------
Technology Sector--(0.2%)
30,000 Advanced Micro (716,250)
------------
Total common stocks sold short
(proceeds $10,953,800) (11,388,750)
------------
- ------------------------------------------------------------
Total Investments, net of short sales--96.1% 459,082,243
Other assets in excess of other
liabilities--3.9% 18,590,744
------------
Net Assets--100% $477,672,987
------------
------------
</TABLE>
- ---------------
(a) Non-income producing security.
(b) Pledged as collateral on short sales.
ADR--American Depository Receipt.
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
5
<PAGE>
<PAGE>
Statement of Assets and Liabilities PRUDENTIAL MULTI-SECTOR FUND, INC.
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S>
<C>
Assets
October 31, 1995
Investments, at value (cost
$410,421,386)...................................................................
$ 470,470,993
Cash.........................................................................
............................... 5,915
Deposits with broker for securities sold
short..............................................................
10,953,800
Receivable for investments
sold.........................................................................
.... 9,391,395
Interest and dividends
receivable...................................................................
........ 856,909
Forward currency contracts-amount receivable from
counterparties............................................ 721,480
Receivable for Fund shares
sold.........................................................................
.... 348,551
Deferred expenses and other
assets..........................................................................
40,651
--------------
Total
assets.......................................................................
...................... 492,789,694
--------------
Liabilities
Investments sold short, at value (proceeds
$10,953,800).....................................................
11,388,750
Payable for investments
purchased....................................................................
....... 2,461,847
Payable for Fund shares
reacquired...................................................................
....... 617,644
Distribution fee
payable......................................................................
.............. 265,359
Management fee
payable......................................................................
................ 255,887
Accrued
expenses.....................................................................
....................... 127,220
--------------
Total
liabilities..................................................................
...................... 15,116,707
--------------
Net
Assets.......................................................................
........................... $ 477,672,987
--------------
--------------
Net assets were comprised of:
Common stock, at
par..........................................................................
........... $ 33,834
Paid-in capital in excess of
par.........................................................................
386,275,854
--------------
386,309,688
Distributions in excess of net investment
income.........................................................
49,037
Accumulated net realized capital and currency
gains...................................................... 30,978,681
Net unrealized appreciation on investments and foreign
currencies........................................ 60,335,581
--------------
Net assets, October 31,
1995.........................................................................
....... $ 477,672,987
--------------
--------------
Class A:
Net asset value and redemption price per share
($223,527,415 / 15,712,251 shares of common stock issued and
outstanding)............................. $14.23
Maximum sales charge (5% of offering
price)..............................................................
.75
--------------
Maximum offering price to
public.........................................................................
$14.98
--------------
--------------
Class B:
Net asset value, offering price and redemption price per share
($248,646,121 / 17,729,210 shares of common stock issued and
outstanding)............................. $14.02
--------------
--------------
Class C:
Net asset value, offering price and redemption price per share
($5,499,451 / 392,137 shares of common stock issued and
outstanding).................................. $14.02
--------------
--------------
</TABLE>
- --------------------------------------------------------------------------------
6 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL MULTI-SECTOR FUND, INC.
Statement of Operations (Unaudited)
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income October 31, 1995
<S> <C>
Income
Dividends (net of foreign withholding taxes
of $63,410)............................. $ 2,286,656
Interest................................... 1,310,477
----------------
Total income............................ 3,597,133
----------------
Expenses
Distribution fee--Class A.................. 229,245
Distribution fee--Class B.................. 1,162,821
Distribution fee--Class C.................. 24,061
Management fee............................. 1,326,851
Transfer agent's fees and expenses......... 236,000
Reports to shareholders.................... 133,000
Custodian's fees and expenses.............. 129,000
Registration fees.......................... 21,500
Directors' fees and expenses............... 19,700
Legal fees and expenses.................... 18,000
Audit fee and expenses..................... 17,500
Amortization of organization expense....... 7,000
Miscellaneous.............................. 2,454
----------------
Total expenses.......................... 3,327,132
----------------
Net investment income......................... 270,001
----------------
Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions
Net realized gain (loss) on:
Security transactions...................... 33,458,401
Foreign currency transactions.............. (376,722)
Short sale transactions.................... (169,051)
----------------
32,912,628
----------------
Net change in unrealized
appreciation/depreciatiion on:
Securities................................. 46,326,648
Short sales................................ (1,196,664)
Foreign currencies......................... 1,226,461
----------------
46,356,445
----------------
Net gain on investments and foreign currency
transactions............................... 79,269,073
----------------
Net Increase in Net Assets Resulting
from Operations............................... $ 79,539,074
----------------
----------------
</TABLE>
PRUDENTIAL MULTI-SECTOR FUND, INC.
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months Year Ended
Increase Ended April 30,
in Net Assets October 31, 1995 1995
<S> <C> <C>
Operations
Net investment income......... $ 270,001 $ 282,795
Net realized gain on
investments
and foreign currency
transactions............... 32,912,628 20,151,682
Net change in unrealized
appreciation of
investments................ 46,356,445 3,370,491
---------------- ------------
Net increase in net assets
resulting from
operations................. 79,539,074 23,804,968
---------------- ------------
Net equalization credits......... 569,551 72,776
---------------- ------------
Dividends and distributions (Note 1)
Dividends from net investment
income
Class A.................... (136,933) --
Class B.................... (130,186) --
Class C.................... (2,882) --
---------------- ------------
(270,001) --
---------------- ------------
Distributions in excess of net
investment income
Class A.................... (84,173) --
Class B.................... (80,027) --
Class C.................... (1,771) --
---------------- ------------
(165,971) --
---------------- ------------
Distributions from net capital
and currency gains
Class A.................... (3,814,077) (5,260,734)
Class B.................... (9,669,790) (13,945,867)
Class C.................... (214,070) (48,280)
---------------- ------------
(13,697,937) (19,254,881)
---------------- ------------
Fund share transactions (net of
conversion) (Note 6)
Net proceeds from Fund shares
subscribed (Note 7)........ 211,272,030 131,985,932
Net asset value of Fund shares
issued in reinvestment of
dividends and
distributions.............. 13,255,569 17,954,751
Cost of shares reacquired..... (77,925,453) (70,803,068)
---------------- ------------
Net increase in net assets
from Fund share
transactions............... 146,602,146 79,137,615
---------------- ------------
Total increase................... 212,576,862 83,760,478
Net Assets
Beginning of period.............. 265,096,125 181,335,647
---------------- ------------
End of period.................... $477,672,987 $265,096,125
---------------- ------------
---------------- ------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
7
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL MULTI-SECTOR FUND, INC.
- --------------------------------------------------------------------------------
Prudential Multi-Sector Fund, Inc. (the ``Fund''), is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The Fund was incorporated in Maryland on February 21, 1990 and had no
operations until May 11, 1990 when 4,398 shares each of Class A and Class B
common stock were sold for $100,000 to Prudential Mutual Fund Management, Inc.
(``PMF''). Investment operations commenced June 29, 1990. The Fund's investment
objective is long-term growth of capital by primarily investing in equity
securities of companies in various economic sectors.
- ------------------------------------------------------------
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Securities Valuation: Investments, traded on a national securities exchange and
NASDAQ national market equity securities are valued at the last reported sales
price on the primary exchange on which they are traded. Securities traded in the
over-the-counter market (including securities listed on exchanges whose primary
market is believed to be over-the-counter) and listed securities for which no
sales were reported on that date are valued at the mean between the last
reported bid and asked prices. Options on stock and stock indices traded on an
exchange are valued at the mean between the most recently quoted bid and asked
prices on the respective exchange. Futures contracts and options thereon are
valued at their last sale prices as of the close of the commodities exchange or
board of trade. Securities for which market quotations are not readily available
are valued at fair value as determined in good faith by or under the direction
of the Fund's Board of Directors.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost.
In connection with transactions in repurchase agreements, it is the Fund's
policy that its custodian or designated subcustodians, as the case may be under
triparty repurchase agreements, take possession of the underlying collateral
securities, the value of which exceeds the principal amount of the repurchase
transaction, including accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. If
the seller defaults, and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
Foreign Currency Translation: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(i) market value of investment securities, other assets and liabilities--at the
closing rates of exchange.
(ii) purchases and sales of investment securities, income and expenses--at the
rate of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates
and market values at the close of the fiscal year, the Fund does not isolate
that portion of the results of operations arising as a result of changes in the
foreign exchange rates from the fluctuations arising from changes in the market
prices of securities held at the end of the fiscal year. Similarly, the Fund
does not isolate the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of long-term portfolio
securities sold during the fiscal year. Accordingly, these realized foreign
currency gains (losses) are included in the reported net realized gains on
security transactions.
Net realized loss on foreign currency transactions of $376,722 represents net
foreign exchange losses from sales and maturities of short-term securities,
holding of foreign currencies, currency gains or losses realized between the
trade and settlement dates of security transactions, and the difference between
the amounts of dividends, interest and foreign taxes recorded on the Fund's
books and the U.S. dollar equivalent amounts actually received or paid. Net
currency gains and losses from valuing foreign currency denominated assets and
liabilities at year end exchange rates are reflected as a component of net
unrealized appreciation 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 level of governmental supervision and regulation of
foreign securities markets and the possibility of political or economic
instability.
Forward Currency Contracts: A forward currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. The Fund enters into forward currency contracts in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign portfolio
holdings or on specific receivables and payables denominated in a foreign
currency. The contracts are valued daily at current
- --------------------------------------------------------------------------------
8
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL MULTI-SECTOR FUND, INC.
- --------------------------------------------------------------------------------
exchange rates and any unrealized gain or loss is included in net unrealized
appreciation or depreciation on investments. Gain or loss is realized on the
settlement date of the contract equal to the difference between the settlement
value of the original and renegotiated forward contracts. This gain or loss, if
any, is included in net realized gain (loss) on foreign currency transactions.
Risks may arise upon entering into these contracts from the potential inability
of the counterparties to meet the terms of their contracts.
Short Sales: The Fund may sell a security it does not own in anticipation of a
decline in the market value of that security (short sale). When the Fund makes
a
short sale, it must borrow the security sold short and deliver it to the
broker-dealer through which it made the short sale as collateral for its
obligation to deliver the security upon conclusion of the sale. The Fund may
have to pay a fee to borrow the particular security and may be obligated to pay
over any payments received on such borrowed securities. A gain, limited to the
price at which the Fund sold the security short, or a loss, unlimited in
magnitude, will be recognized upon the termination of a short sale if the market
price at termination is less than or greater than, respectively, the proceeds
originally received.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of securities are
calculated on the identified cost basis. Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis. Net
investment income, other than distribution fees, and unrealized and realized
gains or losses are allocated daily to each class of shares based upon the
relative proportion of net assets of each class at the beginning of the day.
Equalization: The Fund follows the accounting practice known as equalization by
which a portion of the proceeds from sales and costs of reacquisitions of Fund
shares, equivalent on a per share basis to the amount of distributable net
investment income on the date of the transaction, is credited or charged to
undistributed net investment income. As a result, undistributed net investment
income per share is unaffected by sales or reacquisitions of the Fund's shares.
Dividends and Distributions: Dividends from net investment income are declared
and paid semi-annually. The Fund will distribute net capital gains, if any, at
least annually. Dividends and distributions are recorded on the ex-dividend
date.
Income distributions and capital gains distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.
Reclassification of Capital Accounts: The Fund accounts for and reports
distributions to shareholders in accordance with the A.I.C.P.A.'s Statement of
Position 93-2: Determination, Disclosure, and Financial Statement Presentation
of Income, Capital Gain, and Return of Capital Distributions by Investment
Companies. During the six months ended October 31, 1995, the Fund reclassified
$376,722 of foreign currency losses which were recognized for tax purposes in
the current fiscal year by decreasing undistributed net investment income and
increasing accumulated net realized capital and currency gains. Net investment
income, net realized gains, and net assets were not affected by this change.
Taxes: It is the Fund's policy 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.
Deferred Organizational Expenses: Approximately $225,000 of expenses were
incurred in connection with the organization and initial registration of the
Fund. This amount has been amortized over a period of 60 months from the date
investment operations commenced.
- ------------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement with PMF. Pursuant to this agreement, PMF
has responsibility for all investment advisory services and supervises the
subadviser's performance of such services. PMF has entered into a subadvisory
agreement with The Prudential Investment Corporation (``PIC''). PIC furnishes
investment advisory services in connection with the management of the Fund. PMF
pays for the services of PIC, 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 PMF is computed daily and payable monthly, at an annual
rate of .65 of 1% of the Fund's average daily net assets.
The Fund has distribution agreements with Prudential Mutual Fund Distributors,
Inc. (``PMFD''), which acts as the distributor of the Class A shares of the
Fund, and with Prudential Securities Incorporated (``PSI''), which acts as
distributor of the Class B and Class C shares of the Fund (collectively the
``Distributors''). The Fund compensates the Distributors for distributing and
servicing the Fund's Class A, Class B and Class C
- --------------------------------------------------------------------------------
9
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL MULTI-SECTOR FUND, INC.
- --------------------------------------------------------------------------------
shares, pursuant to plans of distribution, (the ``Class A, B and C Plans'')
regardless of expenses actually incurred by them. The distribution fees are
accrued daily and payable monthly.
Pursuant to the Class A, B and C Plans, the Fund compensates the Distributors
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% of the average daily
net assets of Class A shares and 1% of the average daily net assets of both the
Class B and C shares for the six months ended October 31, 1995.
PMFD has advised the Fund that it has received approximately $97,500 in
front-end sales charges resulting from sales of Class A shares during the six
months ended October 31, 1995. From these fees, PMFD paid such sales charges to
dealers (PSI and Prusec) which in turn paid commissions to salespersons and
incurred other distribution costs.
PSI has advised the Fund that for the six months ended October 31, 1995, it
received approximately $284,000 and $1,000 in contingent deferred sales charges
imposed upon redemptions by certain Class B and Class C shareholders,
respectively.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are indirect,
wholly-owned subsidiaries of The Prudential Insurance Company of America.
- ------------------------------------------------------------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services, Inc. (``PMFS''), a wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent. During the six months ended October
31, 1995, the Fund incurred fees of approximately $330,000 for the services of
PMFS. As of October 31, 1995, approximately $27,000 of such fees were due to
PMFS. Transfer agent fees and expenses in the Statement of Operations include
certain out-of-pocket expenses paid to non-affiliates.
For the six months ended October 31, 1995, PSI earned approximately $35,000 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 six months ended October 31, 1995 aggregated $352,567,549 and
$221,604,195, respectively.
The federal income tax basis of the Fund's investments at October 31, 1995 was
$410,705,868 and, accordingly, net unrealized appreciation for federal income
tax purposes was $59,765,125 (gross unrealized appreciation--$79,042,157, gross
unrealized depreciation--$19,277,032).
At October 31, 1995, the Fund had outstanding forward currency contracts to sell
foreign currency as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation/
Sale Contracts Receivable Value (Depreciation)
<S> <C> <C> <C>
- ------------------- ---------------- ----------- ---------------
Japanese Yen,
expiring 2/02/96 $ 14,975,290 $14,862,775 $ 112,515
Swiss Francs,
expiring 12/29/95 6,129,597 6,179,739 (50,142)
---------------- ----------- ---------------
$ 21,104,887 $21,042,514 $ 62,373
---------------- ----------- ---------------
---------------- ----------- ---------------
</TABLE>
- ------------------------------------------------------------
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 October 31, 1995, the Fund
had a 2.48% undivided interest in the repurchase agreements in the joint
account. The undivided interest for the Fund represents $23,114,000 in principal
amount. As of such date, each repurchase agreement in the joint account and the
value of the collateral therefor were as follows:
Bear, Stearns & Co., 5.875%, in the principal amount of $273,000,000, repurchase
price $273,044,552, due 11/1/95. The value of the collateral including accrued
interest is $278,800,077.
CS First Boston Corp., 5.90%, in the principal amount of $273,000,000,
repurchase price $273,044,742, due 11/1/95. The value of the collateral
including accrued interest is $278,529,780.
Goldman, Sachs & Co., 5.88%, in the principal amount of $273,000,000, repurchase
price $273,044,590, due 11/1/95. The value of the collateral including accrued
interest is $278,460,050.
Smith Barney & Co., 5.93%, in the principal amount of $114,753,000, repurchase
price $114,771,902, due 11/1/95. The value of the collateral including accrued
interest is $117,048,982.
- --------------------------------------------------------------------------------
10
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL MULTI-SECTOR FUND, INC.
- --------------------------------------------------------------------------------
Note 6. Capital
The Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge of up to 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 contingent
deferred sales charge of 1% during the first year. Class B shares will
automatically convert to Class A shares on a quarterly basis approximately seven
years after purchase.
The Fund has authorized 2 billion shares of common stock, $.001 par value per
share, equally divided into three classes, designated Class A, B and Class C
common stock.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- ------------------------------- ---------------- ------------
<S> <C> <C>
Six months ended October 31,
1995:
Shares sold.................... 3,140,621 $130,755,173
Shares issued in connection
with acquisition of
Prudential Strategist Fund
(Note 7)..................... 10,275,056 26,467,368
Shares issued in reinvestment
of dividends and
distributions................ 286,100 3,850,915
Shares reacquired.............. (3,862,896) (54,285,539)
---------------- ------------
Net increase in shares
outstanding before
conversion................... 9,838,881 106,787,917
Shares issued upon conversion
from Class B and C........... 220,235 2,994,039
---------------- ------------
Net increase in shares
outstanding.................. 10,059,116 $109,781,956
---------------- ------------
---------------- ------------
Year ended April 30, 1995:
Shares sold.................... 3,485,186 $45,817,949
Shares issued in reinvestment
of distributions............. 389,581 5,024,771
Shares reacquired.............. (2,985,480) (39,186,110 )
---------------- ------------
Net increase in shares
outstanding before
conversion................... 889,287 11,656,610
Shares issued upon conversion
from Class B................. 733,225 9,121,406
---------------- ------------
Net increase in shares
outstanding.................. 1,622,512 $20,778,016
---------------- ------------
---------------- ------------
<CAPTION>
Class B Shares Amount
---------------- ------------
<S> <C> <C>
Six months ended October 31,
1995:
Shares sold.................... 1,974,235 $36,381,080
Shares issued in connection
with acquisition of
Prudential Strategist Fund
(Note 7)..................... 3,011,418 15,860,707
Shares issued in reinvestment
of dividends and
distributions................ 687,660 9,194,015
Shares reacquired.............. (1,685,140) (23,380,929)
---------------- ------------
Net increase in shares
outstanding before
conversion................... 3,988,173 38,054,873
Shares reacquired upon
conversion
from Class A................. (210,850) (2,901,259)
---------------- ------------
Net increase in shares
outstanding.................. 3,777,323 $35,153,614
---------------- ------------
---------------- ------------
Year ended April 30, 1995:
Shares sold.................... 6,351,539 $82,308,938
Shares issued in reinvestment
of distributions............. 1,004,374 12,882,502
Shares reacquired.............. (2,410,850) (31,149,102)
---------------- ------------
Net increase in shares
outstanding before
conversion................... 4,945,063 64,042,338
Shares reacquired upon
conversion from Class A...... (725,642) (9,121,406)
---------------- ------------
Net increase in shares
outstanding.................. 4,219,421 $54,920,932
---------------- ------------
---------------- ------------
<CAPTION>
Class C
- -------------------------------
<S> <C> <C>
Six months ended October 31,
1995:
Shares sold.................... 126,691 $ 1,795,364
Shares issued in connection
with acquisition of
Prudential Strategist Fund
(Note 7)..................... 5,166 12,338
Shares issued in reinvestment
of dividends and
distributions................ 15,766 210,639
Shares reacquired.............. (18,633) (258,985)
---------------- ------------
Net increase in shares
outstanding
before conversion............ 128,990 1,759,356
Shares reacquired upon
conversion from Class A...... (6,709) (92,780)
---------------- ------------
Net increase in shares
outstanding.................. 122,281 $ 1,666,576
---------------- ------------
---------------- ------------
<CAPTION>
August 1, 1994* through
April 30, 1995:
<S> <C> <C>
Shares sold.................... 303,058 $ 3,859,045
Shares issued in reinvestment
of distributions............. 3,797 47,478
Shares reacquired.............. (36,999) (467,856)
---------------- ------------
Net increase in shares
outstanding.................. 269,856 $ 3,438,667
---------------- ------------
---------------- ------------
</TABLE>
- ---------------
* Commencement of offering of Class C shares.
- --------------------------------------------------------------------------------
11
<PAGE>
<PAGE>
Notes to Financial Statements (Unaudited) PRUDENTIAL MULTI-SECTOR FUND, INC.
- --------------------------------------------------------------------------------
Note 7. Acquisition of Prudential Strategist Fund
On June 23, 1995, the Fund acquired all the net assets of Prudential Strategist
Fund, Inc. (``Strategist'') pursuant to a plan of reorganization approved by
Strategist shareholders on June 9, 1995. The acquisition was accomplished by a
tax-free exchange of 8,589,796 Class A shares, 2,528,242 Class B shares, and
4,337 Class C shares of the Fund (valued at $181,061,433 in the aggregate) for
the Class A, B and C shares of Strategist outstanding on June 23, 1995.
Strategist's net assets at that date ($181,061,433), including $42,340,413 of
unrealized depreciation, were combined with those of the Fund. The aggregate net
assets of the Fund and Strategist immediately before the acquisition were
$283,310,931 and $181,061,433, respectively.
- ------------------------------------------------------------
Note 8. Distributions
On November 20, 1995, the Board of Directors of the Fund announced distributions
from foreign currency gains of $.01 per share, from net short-term capital gains
of $.565 per share and from net long-term capital gains of $.352 per share for
Class A, B and C shares, respectively. These distributions are payable on
November 29, 1995 to shareholders of record on November 24, 1995.
- --------------------------------------------------------------------------------
12
<PAGE>
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL MULTI-SECTOR FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
- -------------------------------------------------------------------------
<S> <C> <C> <C>
<C> <C> <C>
June 29,
Six Months
1990(c)
Ended Years
Ended April 30, Through
October 31,
- ------------------------------------------- April 30,
1995 1995(b) 1994
1993 1992 1991
----------- -------
- ------- ------- ------- ---------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....... $ 13.45 $ 13.21 $
13.19 $ 12.51 $ 12.10 $ 11.37
----------- -------
- ------- ------- ------- ---------
Income from investment operations:
Net investment income...................... .04 .09
.18 .30 .23 .40
Net realized and unrealized gain on
investments and foreign currency
transactions............................ 1.47 1.44
1.64 1.47 .50 .59
----------- -------
- ------- ------- ------- ---------
Total from investment operations........ 1.51 1.53
1.82 1.77 .73 .99
----------- -------
- ------- ------- ------- ---------
Less distributions:
Dividends from net investment income....... (.02) --
(.21) (.30) (.30) (.26)
Distributions in excess of net investment
income.................................. (.02) --
-- -- -- --
Distributions from net capital and currency
gains................................... (.69) (1.29)
(1.59) (.79) (.02) --
----------- -------
- ------- ------- ------- ---------
Total distributions..................... (.73) (1.29)
(1.80) (1.09) (.32) (.26)
----------- -------
- ------- ------- ------- ---------
Net asset value, end of period............. $ 14.23 $ 13.45 $
13.21 $ 13.19 $ 12.51 $ 12.10
----------- -------
- ------- ------- ------- ---------
----------- -------
- ------- ------- ------- ---------
TOTAL RETURN(d)............................ 11.43% 12.15%
14.16% 15.14% 6.16% 17.64%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............ $ 223,528 $76,035
$53,237 $43,390 $52,625 $59,085
Average net assets (000)................... $ 182,399 $59,316
$49,840 $46,890 $57,403 $55,545
Ratios to average net assets:
Expenses, including distribution fees... 1.16%(a) 1.44%
1.30% 1.28% 1.29% 1.35%(a)
Expenses, excluding distribution fees... .91%(a) 1.19%
1.08% 1.08% 1.09% 1.15%(a)
Net investment income (loss)............ .47%(a) .68%
1.15% 2.44% 1.83% 4.28%(a)
Portfolio turnover......................... 57% 122%
110% 209% 147% 253%
</TABLE>
- ---------------
(a) Annualized.
(b) Calculated based upon weighted average shares outstanding during the year.
(c) Commencement of offering of Class A shares.
(d) 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 a full year are not
annualized.
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
13
<PAGE>
<PAGE>
Financial Highlights (Unaudited) PRUDENTIAL MULTI-SECTOR FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
<C> <C> <C>
June 29,
Six Months
1990(c)
Ended Years
Ended April 30, Through
October 31,
- ---------------------------------------------- April 30,
1995 1995(b)
1994 1993 1992 1991
----------- --------
- -------- ------- -------- ----------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....... $ 13.29 $ 13.16 $
13.15 $ 12.47 $ 12.06 $ 11.37
----------- --------
- -------- ------- -------- ----------
Income from investment operations:
Net investment income (loss)............... -- (.01)
.07 .19 .13 .32
Net realized and unrealized gain on
investments and foreign currency
transactions............................ 1.44 1.43
1.63 1.47 .51 .59
----------- --------
- -------- ------- -------- ----------
Total from investment operations........ 1.44 1.42
1.70 1.66 .64 .91
----------- --------
- -------- ------- -------- ----------
Less distributions:
Dividends from net investment income....... (.01) --
(.10) (.19) (.21) (.22)
Distributions in excess of net investment
income.................................. (.01) --
-- -- (.01) --
Distributions from net capital and currency
gains................................... (.69) (1.29)
(1.59) (.79) (.02) --
----------- --------
- -------- ------- -------- ----------
Total distributions..................... (.71) (1.29)
(1.69) (.98) (.23) (.22)
----------- --------
- -------- ------- -------- ----------
Net asset value, end of period............. $ 14.02 $ 13.29 $
13.16 $ 13.15 $ 12.47 $ 12.06
----------- --------
- -------- ------- -------- ----------
----------- --------
- -------- ------- -------- ----------
TOTAL RETURN(e)............................ 11.06% 11.31%
13.22% 14.13% 5.39% 16.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............ $ 248,646 $185,474
$128,098 $92,921 $108,276 $ 99,537
Average net assets (000)................... $ 231,301 $153,209
$108,981 $99,072 $108,510 $ 82,890
Ratios to average net assets:
Expenses, including distribution fees... 1.91%(a) 2.19%
2.08% 2.08% 2.09% 2.15%*
Expenses, excluding distribution fees... .91%(a) 1.19%
1.08% 1.08% 1.09% 1.15%*
Net investment income (loss)............ (.13)%(a) (.07)%
.35% 1.64% 1.03% 3.39%*
Portfolio turnover......................... 57% 122%
110% 209% 147% 253%
<CAPTION>
Class C
--------------------------
<S> <C> <C>
August 1,
Six Months 1994(d)
Ended Through
October 31, April 30,
1995 1995(b)
----- -----
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....... $ 13.29 $13.74
----- -----
Income from investment operations:
Net investment income (loss)............... -- --
Net realized and unrealized gain on
investments and foreign currency
transactions............................ 1.44 .84
----- -----
Total from investment operations........ 1.44 .84
----- -----
Less distributions:
Dividends from net investment income....... (.01) --
Distributions in excess of net investment
income.................................. (.01) --
Distributions from net capital and currency
gains................................... (.69) (1.29)
----- -----
Total distributions..................... (.71) (1.29)
----- -----
Net asset value, end of period............. $ 14.02 $13.29
----- -----
----- -----
TOTAL RETURN(e)............................ 11.06% 6.62%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............ $ 5,499 $3,587
Average net assets (000)................... $ 4,786 $1,653
Ratios to average net assets:
Expenses, including distribution fees... 1.91%(a) 2.37%(a)
Expenses, excluding distribution fees... .91%(a) 1.37%(a)
Net investment income (loss)............ (.13)%(a) .03%(a)
Portfolio turnover......................... 57% 122%
</TABLE>
- ---------------
(a) Annualized.
(b) Calculated based upon weighted average shares outstanding during the year.
(c) Commencement of investment operations.
(d) Commencement of offering of Class C shares.
(e) 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 a full year are not
annualized.
- --------------------------------------------------------------------------------
14 See Notes to Financial Statements.
<PAGE>
Getting The Most From Your Prudential Mutual Fund
Change Your Mind.
You can exchange your shares in most Prudential Mutual Funds for shares in most
other Prudential Mutual Funds, without charges. This may be most helpful if your
investment needs change.
Reinvest Dividends Free Of Charge.
Reinvest your dividends and/or capital gains distributions automatically -
without charge.
Invest For Retirement.
There is no minimum investment for an IRA. Plus, you defer taxes on your
investment earnings by investing in an IRA.
If you'd like, you can contribute up to $2,000 a year in an IRA. If you are
married, you and your spouse (if not working outside the home) can contribute
up to $2,250 a year. (Withdrawals are taxed as ordinary income and may be
subject to a 10% penalty prior to age 59 1/2.)
Change Your Job.
You can take your pension with you. Use a rollover IRA to manage your
company-sponsored retirement plan while retaining the special tax-deferred
advantages.
Invest In Your Children.
There's no fee to open a custodial account for a child's education or other
needs.
Take Income.
Would you like to receive monthly or quarterly checks in any amount from your
fund account? Just let us know. We'll take care of it. Of course, there are
minimum amounts. And shares redeemed may be subject to tax, and Class B and C
shares may be subject to contingent deferred sales charges. We'll gladly answer
your questions.
Keep Informed.
We want to keep you up-to-date. Of course, you receive account activity
statements every quarter. But you also receive annual and semi-annual fund
reports, as well as other important updates on events that affect your
investments, including tax information.
This material is only authorized for distribution when preceded or accompanied
by a current prospectus. Read the prospectus carefully before you invest or
send money.
<PAGE>
Getting The Most From Your
Prudential Mutual Fund
When you invest through Prudential Mutual Funds, you receive financial advice
through a Prudential Securities financial advisor or Prudential/Pruco Securities
registered representative. Your advisor or representative can provide you with
the following services:
There's No Reward Without Risk; But Is This Risk Worth It?
Your financial advisor or registered representative can help you match the
reward you seek with the risk you can tolerate. And risk can be difficult to
gauge -sometimes even the simplest investments bear surprising risks. The
educated investor knows that markets seldom move in just one direction -
there are times when a market sector or asset class will lose value or provide
little in the way of total return. Managing your own expectations is easier
with help from someone who understands the markets and who knows you!
Keeping Up With The Joneses.
A financial advisor or registered representative can help you wade through the
numerous mutual funds available to find the ones that fit your own individual
investment profile and risk tolerance. While the newspapers and popular
magazines are full of advice about investing, they are aimed at generic groups
of people or representative individuals, not at you personally. Your financial
advisor or registered representative will review your investment objectives with
you. This means you can make financial decisions based on the assets and
liabilities in your current portfolio and your risk tolerance - not just based
on the current investment fad.
Buy Low, Sell High.
Buying at the top of a market cycle and selling at the bottom are among the
most common investor mistakes. But sometimes it's difficult to hold on to an
investment when it's losing value every month. Your financial advisor or
registered representative can answer questions when you're confused or worried
about your investment, and remind you that you're investing for the long haul.
<PAGE>
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852
Internet Address:
http:\\www.prudential.com
Directors
Edward D. Beach
Donald D. Lennox
Douglas H. McCorkindale
Thomas T. Mooney
Richard A. Redeker
Louis A. Weil, III
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Susan C. Cote Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Marguerite E.H. Morrison, Assistant Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributors
Prudential Mutual Fund Distributors, Inc.
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
The accompanying financial statements as of October 31, 1995
were not audited and, accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective investors
unless preceded or accompanied by a current prospectus.
<PAGE>
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