The Prudential
Strategist
Fund, Inc.
- ---------------------------------
Annual Report
February 28, 1995
<PAGE>
Letter to Shareholders
April 10, 1995
Dear Shareholder:
The past 12 months have been difficult for most financial markets and for
the Prudential Strategist Fund, Inc. The 1994 calendar year proved to be
a challenging year to pick stocks. For the New York Stock Exchange, there
were 2,000 stocks down and only 800 up. The bond market spent most of 1994
going straight down, although in the last few months there has been a
fairly strong rally. Your Fund was directly hurt by the bond market due
to company sensitivity to rising interest rates, as well as indirectly
because of the impact on corporate earnings.
<TABLE>
<CAPTION>
Five Largest Equity Holdings*
As of February 28, 1995
<S> <C>
1. First Financial 6.1%
Management Corp.
Financial data processing
2. Computer Associates Int.'l, Inc 4.9%
Systems software packages
3. Autodesk, Inc. 4.5%
Computer-aided design &
drafting
4. Federal National Mortgage Corp. 3.7%
Residential mortgage provider
5. CSX Corp. 3.0%
Railroad holding company
* Percent of net assets
</TABLE>
A Tough Year
The Federal Reserve was extremely tough last year on U.S. financial markets
by virtually doubling interest rates. In February 1995, Federal Reserve
Chairman Alan Greenspan made some encouraging remarks, as he effectively
declared that inflation will be contained in this particular business cycle.
However, just as we were starting to believe we could have clear sailing with
low inflation, stable interest rates and improving profits, the dollar took
a major nosedive. Currently, the dollar situation is unsettling the
credit market with some spillover into the equity market.
Portfolio Summary And Activity
Out of all the market volatility, the Fund is positioning itself to take
advantage of several long-term trends. We are focusing on U.S. companies
that are doing business around the world, as opposed to simply in the United
States or any other single market. They appear to be gaining greater
credibility among investors about their ability to grow future profits
even in uncertain financial markets and political and economic times.
The Fund demonstrated its commitment to global companies by maintaining
and/or increasing positions in high quality consumer companies like Gillette
(2.9% of net assets), Coca-Cola (1.3%) and Philip Morris (1.5%). In the
banking and financial services sectors, the Fund has exposure to firms
that should maintain good growth from foreign expansion like First Financial
Management (6.1% of net assets) and Citicorp (2.7%). Also, the Fund will
continue to focus on globally competitive technology companies with relatively
unique products and services.
-1-
<PAGE>
<TABLE>
HISTORICAL TOTAL RETURNS1
As of February 28, 1995
<CAPTION>
One Year Five Years Ten Years Since Inception2
<S> <C> <C> <C> <C>
Class A -5.0% 30.3% N/A 30.5%
Class B -5.7% 25.4% 146.7% 137.2%
Class C N/A N/A N/A 1.6%
Lipper
Growth Average3 0.9% 68.1% 221.6% 232.0%
</TABLE>
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS1
As of March 31, 1995
<CAPTION>
One Year Five Years Ten Years Since Inception2
<S> <C> <C> <C> <C>
Class A 1.2% 5.0% N/A 5.1%
Class B 0.7% 5.1% 10.2% 8.0%
Class C N/A N/A N/A 5.2%
</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, Inc. and Lipper Analytical
Services, Inc. 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 (CDSC) 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. Beginning in February 1995, Class B shares automatically
convert to Class A shares on a quarterly basis, after shareholders hold
their shares approximately seven years.
2Inception dates: 1/22/90 Class A; 6/13/83 Class B; 8/1/94 Class C.
3Lipper growth fund averages include 489 funds for one year, 231 funds for
five years, 134 funds for 10 years and 112 funds since inception of the
Class B shares on 6/13/83.
N/A -- Performance data with respect to Class A and Class C is not available
as operations commenced 1/22/90 and 8/1/94, respectively.
With a weaker currency, increased exports and stronger U.S. industry, we
expect transportation sectors to show attractive growth and profit
potential. This belief is represented by Fund positions in CSX (3.0%
of net assets), XTRA (1.4%) and OMI (0.8%).
Investment Outlook
It looks as though 1995 is going to have its fair share of volatility.
Hopefully it will be an environment which creates more opportunity to make
money, whereas last year created more opportunity to lose money. Equities,
especially your Fund's positions, should benefit from a period of low
inflation and growth for the U.S., as well as global business expansion.
While slower than the strong pace of 1994, corporate profits should continue
to improve.
-2-
<PAGE>
Important Proxy On Proposed Fund Merger
The Board of Directors of your Fund has recommended a merger with the
Prudential Multi-Sector Fund, Inc. Proxy materials describing the proposed
merger of your Fund into the Prudential Multi-Sector Fund, Inc. are included
with your Annual Report mailing. Please read the proxy carefully for full
details.
As always, it has been a pleasure having you as a shareholder in the
Prudential Strategist Fund. We look forward to being able to serve your
investment needs in the future.
Sincerely,
Lawrence C. McQuade
President
Greg A. Smith
Portfolio Manager
-3-
<PAGE>
PRUDENTIAL STRATEGIST FUND, INC. Portfolio of Investments
February 28, 1995
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--80.7%
Common Stock--79.6%
Automotive--2.5%
60,000 Ford Motor Co................ $ 1,567,500
60,000 General Motors Corp.......... 2,557,500
------------
4,125,000
------------
Automotive Parts--0.4%
43,200 Hayes Wheels International,
Inc........................ 734,400
------------
Banking--2.7%
100,000 Citicorp..................... 4,500,000
------------
Chemicals--0.1%
15,000 Methanex Corp.*.............. 157,500
------------
Computer & Related Equipment--6.2%
20,000 Applied Materials, Inc.*..... 922,500
10,000 International Business
Machines Corp.............. 750,600
10,000 Micron Technology, Inc....... 613,720
55,000 Motorola, Inc................ 3,162,500
30,000 Novell, Inc.*................ 609,844
45,000 Silicon Graphics, Inc.*...... 1,558,125
100,000 Stratus Computer, Inc.*...... 2,637,500
------------
10,254,789
------------
Computer Software & Services--12.1%
190,000 Autodesk, Inc................ 7,457,500
140,000 Computer Associates
International, Inc......... 7,980,000
95,000 Informix Corp.*.............. 3,586,250
20,000 Lotus Development Corp.*..... 835,000
------------
19,858,750
------------
Conglomerates--0.6%
70,000 Canadian Pacific, Ltd........ 980,000
------------
Consumer Products--2.9%
60,000 Gillette Co.................. 4,747,500
------------
Electronics--1.9%
75,000 Loral Corp................... 3,065,625
------------
Exploration & Production--1.1%
50,000 Potash Corp. of Saskatchewan,
Inc. (Canada).............. $ 1,787,500
------------
Financial Services--12.5%
75,000 Federal Home Loan Mortgage
Corp....................... 4,350,000
80,000 Federal National Mortgage
Association................ 6,170,000
145,000 First Financial Management
Corp....................... 10,023,125
------------
20,543,125
------------
Food & Beverage--4.2%
70,000 McDonald's Corp.............. 2,327,500
40,000 Philip Morris Cos., Inc...... 2,430,000
40,000 The Coca-Cola Co............. 2,200,000
------------
6,957,500
------------
Health Care Services--0.6%
22,500 U.S. HealthCare, Inc......... 967,500
------------
Hotel/Motel--2.5%
130,000 La Quinta Inns, Inc.......... 3,233,750
25,000 Promuse Companies, Inc. *.... 893,750
------------
4,127,500
------------
Machinery & Equipment--9.1%
85,000 Caterpillar, Inc............. 4,388,125
70,000 Clark Equipment Co.*......... 3,745,000
45,000 Stewart & Stevenson Services,
Inc........................ 1,485,000
94,000 Varity Corp.*................ 3,431,000
50,000 York International Corp...... 1,925,000
------------
14,974,125
------------
Oil & Gas - International--5.9%
30,000 British Petroleum PLC (ADR)
(United Kingdom)........... 2,295,000
25,000 Chevron Corp................. 1,187,500
44,100 Societe Nationale Elf
Aquitaine (ADR) (France)... 1,582,087
35,000 Texaco, Inc.................. 2,231,250
15,000 YPF Sociedad Anonima (ADR)
(Argentina)................ 285,000
75,000 Total SA (ADR) (France)...... 2,081,250
------------
9,662,087
------------
</TABLE>
-4- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL STRATEGIST FUND, INC.
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
Paper & Forest Products--5.9%
5,000 Boise Cascade Corp........... $ 160,625
75,000 Bowater, Inc................. 2,493,750
40,000 International Paper Co....... 3,055,000
50,000 Scott Paper Co............... 3,962,500
------------
9,671,875
------------
Pharmaceuticals--1.1%
10,000 Bristol Myers Squibb Co...... 620,000
20,000 Johnson & Johnson Co......... 1,135,000
------------
1,755,000
------------
Railroads--2.9%
62,500 CSX Corp..................... 4,859,375
------------
Telecommunications--0.5%
70,000 Nextel Communications,
Inc.*...................... 848,750
------------
Transportation--2.0%
60,000 Harper Group, Inc............ 1,005,000
45,000 XTRA Corp.................... 2,261,250
------------
3,266,250
------------
Trucking & Shipping--1.9%
40,000 Anangel - American
Shipholdings, Ltd. (ADR)
(Cayman Islands)........... 590,000
255,000 OMI Corp.*................... 1,338,750
48,400 Overseas Shipholding Group,
Inc........................ 1,119,250
------------
3,048,000
------------
Total common stock
(cost $118,495,645)........ 130,892,151
------------
Convertible Bond--1.1%
<CAPTION>
Principal
Amount
(000) Chemicals
- -------
<C> <S> <C>
IMC Fertilizer Group, Inc.
Conv. Sub. Deb.,
$ 2,000 6.25%, 12/1/01 (cost
$1,786,849)................ 1,880,000
------------
Total long-term investments
(cost $120,282,494)........ 132,772,151
------------
SHORT-TERM INVESTMENTS--19.8%
Commercial Paper
Atlantic Asset Securitization
Corp.,
$ 7,000 5.85%, 3/3/95................ $ 6,997,725
Bridgestone/Firestone, Inc.,
9,000 5.95%, 3/1/95................ 9,000,000
Ciesco, L.P.,
7,000 5.80%, 3/1/95................ 7,000,000
Koch Industries, Inc.,
9,600 5.95%, 3/1/95................ 9,600,000
------------
Total short-term investments
(cost $32,597,725)......... 32,597,725
------------
Total investments before
short sales and outstanding
call options
written--100.5%
(cost $152,880,219; Note
4)......................... 165,369,876
------------
<CAPTION>
Shares COMMON STOCK SOLD SHORT*--(2.9%)
- -------
<C> <S> <C>
10,000 Cummins Engine Co., Inc...... (455,000)
10,000 Inco Ltd. (Canada)........... (268,750)
20,000 LSI Logic Corp............... (1,090,000)
27,500 Oxford Health Plans, Inc..... (2,502,500)
15,000 Starbucks Corp............... (358,125)
------------
Total common stock sold short
(proceeds $4,123,792)...... (4,674,375)
------------
<CAPTION>
ContractsD OUTSTANDING CALL OPTION WRITTEN*
- -------
<C> <S> <C>
Motorola, Inc.
135 Expiring April '95 @ $55
(premium received
$44,319)................... (55,688)
------------
Total investments net of
short sales and call
options
written--97.6%............. 160,639,813
Other assets in excess of
liabilities--2.4%.......... 3,894,208
------------
Net Assets--100%............. $164,534,021
------------
------------
</TABLE>
- ------------------
* Non-income producing security.
D One contract relates to 100 shares.
ADR--American Depository Receipt.
-5- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL STRATEGIST FUND, INC.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Assets
February 28, 1995
-----------------
<S>
<C>
Investments, at value (cost
$152,880,219).............................................. $ 165,369,876
Cash.........................................................................
.......... 99,681
Deposits with brokers for securities sold
short........................................ 6,290,108
Receivable for investments
sold........................................................ 5,794,705
Dividends and interest
receivable......................................................
410,264
Receivable for Fund shares
sold........................................................ 100,268
Other
assets.......................................................................
.... 1,778
-----------------
Total
assets.......................................................................
178,066,680
-----------------
Liabilities
Payable for investments
purchased......................................................
5,646,670
Investments sold short, at value (proceeds
$4,123,792)................................. 4,674,375
Due to
broker..........................................................................
2,077,956
Payable for Fund shares
reacquired.....................................................
642,164
Accrued
expenses.......................................................................
288,259
Management fee
payable.................................................................
78,755
Distribution fee
payable...............................................................
68,792
Outstanding option written, at value (premium received
$44,319)........................ 55,688
-----------------
Total
liabilities..................................................................
13,532,659
-----------------
Net
Assets.......................................................................
...... $ 164,534,021
-----------------
-----------------
Net assets were comprised of:
Common stock, at
par................................................................. $
121,017
Paid-in capital in excess of
par..................................................... 152,479,393
-----------------
152,600,410
Undistributed net investment
income.................................................. 235,878
Accumulated net realized loss on
investments......................................... (229,972)
Net unrealized appreciation on
investments........................................... 11,927,705
-----------------
Net assets, February 28,
1995.......................................................... $ 164,534,021
-----------------
-----------------
Class A:
Net asset value and redemption price per share
($124,873,417 / 9,148,848 shares of common stock issued and
outstanding)........... $13.65
Maximum sales charge (5% of offering
price).......................................... .72
-----------------
Maximum offering price to
public..................................................... $14.37
-----------------
-----------------
Class B:
Net asset value, offering price and redemption price per share
($39,597,330 / 2,948,183 shares of common stock issued and
outstanding)............ $13.43
-----------------
-----------------
Class C:
Net asset value, offering price and redemption price per share
($63,274 / 4,713 shares of common stock issued and
outstanding).................... $13.43
-----------------
-----------------
</TABLE>
See Notes to Financial Statements.
-6-
<PAGE>
PRUDENTIAL STRATEGIST FUND, INC.
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
February 28,
Net Investment Income 1995
------------
<S> <C>
Income
Dividends (net of foreign
withholding taxes of $71,427).... $ 2,388,993
Interest........................... 1,638,316
------------
Total income..................... 4,027,309
------------
Expenses
Distribution fee--Class A.......... 29,580
Distribution fee--Class B.......... 1,669,441
Distribution fee--Class C.......... 247
Management fee..................... 1,117,504
Transfer agent's fees and
expenses........................... 461,000
Reports to shareholders............ 215,000
Custodian's fees and expenses...... 184,000
Audit fee.......................... 55,000
Legal fees......................... 50,000
Registration fees.................. 45,000
Directors' fees.................... 39,375
Franchise taxes.................... 22,500
Miscellaneous...................... 34,583
------------
Total expenses................... 3,923,230
------------
Net investment income................ 104,079
------------
Realized and Unrealized Gain (Loss)
on Investments
Net realized gain (loss) on:
Investment transactions............ 1,858,769
Investments sold short............. (1,175,167)
Written options.................... (789,092)
------------
(105,490)
------------
Net change in unrealized appreciation
on:
Investments........................ (11,378,290)
Investments sold short............. (549,886)
Written options.................... (11,369)
------------
(11,939,545)
------------
Net loss on investments.............. (12,045,035)
------------
Net Decrease in Net Assets Resulting
from Operations...................... $(11,940,956)
------------
------------
</TABLE>
PRUDENTIAL STRATEGIST FUND, INC.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended February 28,
Increase (Decrease) in ----------------------------
Net Assets 1995 1994
------------ ------------
<S> <C> <C>
Operations
Net investment income
(loss)................. $ 104,079 $ (1,273,013)
Net realized gain
(loss) on
investments.......... (105,490) 30,887,914
Net change in
unrealized
appreciation of
investments.......... (11,939,545) (12,404,253)
------------ ------------
Net increase (decrease)
in net assets
resulting from
operations........... (11,940,956) 17,210,648
------------ ------------
Net equalization debits
(credits).............. 877,014 (76,178)
------------ ------------
Distributions to
shareholders from net
realized capital gains
(Note 1)
Class A................ (195,077) (488,857)
Class B................ (8,877,022) (25,505,673)
Class C................ (43) --
------------ ------------
(9,072,142) (25,994,530)
------------ ------------
Distributions to
shareholders in excess
of net realized capital
gains
Class A................ (2,677) --
Class B................ (121,804) --
Class C................ (1) --
------------ ------------
(124,482) --
------------ ------------
Fund share transactions
(net of share
conversions) (Note 5)
Proceeds from shares
sold................. 20,987,711 33,043,389
Net asset value of
shares issued in
reinvestment of
distributions........ 8,672,176 24,494,400
Cost of shares
reacquired........... (53,449,860) (80,947,271)
------------ ------------
Net decrease in net
assets
from Fund share
transactions......... (23,789,973) (23,409,482)
------------ ------------
Total decrease........... (44,050,539) (32,269,542)
Net Assets
Beginning of year........ 208,584,560 240,854,102
------------ ------------
End of year.............. $164,534,021 $208,584,560
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
-7-
<PAGE>
PRUDENTIAL STRATEGIST FUND, INC.
Notes to Financial Statements
Prudential Strategist Fund, Inc., formerly known as Prudential Growth Fund,
Inc. (the ``Fund''), is registered under the Investment Company Act of 1940 as
a
diversified, open-end management investment company. The Fund's investment
objective is to seek a high total return consistent with reasonable risk through
allocating assets among equity securities, fixed-income securities and cash
based on an evaluation of current market and economic conditions.
Note 1. Accounting The following is a summary of
Policies significant accounting policies
followed by the Fund in the preparation of its
financial statements.
Security Valuation: Investments, including options, traded on an 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. 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.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains or losses on sales of securities are
calculated on the identified cost basis. Dividend income is recorded on the
ex-dividend date; interest income is recorded on the accrual basis. Net
investment income/loss (other than distribution fees) and unrealized and
realized gains or losses are allocated daily to each class of shares of the Fund
based upon the relative proportion of net assets of each class at the beginning
of the day.
Options: The Fund may either purchase or write options in order to hedge against
adverse market movements or fluctuations in value caused by changes in
prevailing interest rates or foreign currency exchange rates with respect to
securities or currencies which the Fund currently owns or intends to purchase.
When the Fund purchases an option, it pays a premium and an amount equal to that
premium is recorded as an investment. When the Fund writes an option, it
receives a premium and an amount equal to that premium is recorded as a
liability. The investment or liability is adjusted daily to reflect the current
market value of the option. If an option expires unexercised, the Fund realizes
a gain or loss to the extent of the premium received or paid. If an option is
exercised, the premium received or paid is an adjustment to the proceeds from
the sale or the cost basis of the purchase in determining whether the Fund has
realized a gain or loss. The difference between the premium and the amount
received or paid on effecting a closing purchase or sale transaction is also
treated as a realized gain or loss. Gain or loss on purchased options is
included in net realized gain (loss) on investment transactions. Gain or loss
on
written options is presented separately as net realized gain (loss) on written
option transactions.
The Fund, as writer of an option, has no control over whether the underlying
securities or currencies may be sold (called) or purchased (put). As a result,
the Fund bears the market risk of an unfavorable change in the price of the
security or currency underlying the written option. The Fund, as purchaser of
an
option, bears the risk of 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.
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.
-8-
<PAGE>
Dividends and Distributions: The Fund expects to pay dividends of net investment
income, if any, semi-annually and make distributions at least annually of any
net capital gains. Dividends and distributions are recorded on the ex-dividend
date.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.
Federal Income 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 rates.
Note 2. Agreements The Fund has a management
agreement with Prudential Mutual Fund Management,
Inc. (``PMF''). Pursuant to this agreement, PMF has responsibility for all
investment advisory services and supervises the subadviser's performance of such
services. PMF has entered into a subadvisory agreement with Greg A. Smith Asset
Management Corporation (``GSAM''); GSAM furnishes investment advisory services
in connection with the management of the Fund. PMF pays for the cost of the
subadviser's services, the compensation of officers of the Fund, occupancy and
certain clerical and bookkeeping costs of the Fund. The Fund bears all other
costs and expenses.
The management fee paid to PMF is computed daily and payable monthly, at an
annual rate of .625 of 1% of the average daily net assets up to $500 million,
.55 of 1% of the next $500 million of average daily net assets and .50 of 1% of
such assets in excess of $1 billion. Pursuant to the subadvisory agreement, PMF
compensates the subadviser for its services in connection with the management
of
the Fund at an annual rate of .375 of 1% of the Fund's average daily net assets
up to $500 million, .35 of 1% of the next $500 million of average daily net
assets and .30 of 1% of such average daily net assets in excess of $1 billion.
During the year ended February 28, 1995, PMF earned $1,117,504 in management
fees of which it paid $670,503 to GSAM under the foregoing agreements.
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 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.
On July 19, 1994, shareholders of the Fund approved amendments to the Class
A
and Class B distribution plans under which the distribution plans became
compensation plans, effective August 1, 1994. Prior thereto, the distribution
plans were reimbursement plans, under which PMFD and PSI were reimbursed for
expenses actually incurred by them up to the amount permitted under the Class
A
and Class B Plans, respectively. The Fund is not obligated to pay any prior or
future excess distribution costs (costs incurred by the Distributors in excess
of distribution fees paid by the Fund or contingent deferred sales charges
received by the Distributors). The rate of the distribution fees charged to
Class A and Class B shares of the Fund did not change under the amended plans
of
distribution. The Fund began offering Class C shares on August 1, 1994.
Pursuant to the Class A, B and C Plans, the Fund contractually 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. However, actual 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 year ended February 28, 1995.
PMFD has advised the Fund that it has received approximately $24,800 in
front-end sales charges resulting from sales of Class A shares during the year
ended February 28, 1995. From these fees, PMFD paid such sales charges to PSI
and Pruco Securities Corporation, affiliated broker-dealers, which in turn paid
commissions to salespersons and incurred other distribution costs.
PSI has advised the Fund that for the year ended February 28, 1995, it
received approximately $190,300 in contingent deferred sales charges imposed
upon certain redemptions by Class B shareholders.
PMFD is a wholly-owned subsidiary of PMF; PSI and PMF are indirect,
wholly-owned subsidiaries of The Prudential Insurance Company of America.
Note 3. Other Prudential Mutual Fund Ser-
Transactions vices, Inc. (``PMFS''), a
with Affiliates wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent. For the
year ended February 28, 1995, the Fund incurred fees of approximately $364,000
for the services of PMFS. As of February 28, 1995, approximately
-9-
<PAGE>
<PAGE>
$30,000 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
non-affiliates.
For the year ended February 28, 1995, PSI earned approximately $34,000 in
brokerage commissions from portfolio transactions executed on behalf of the
Fund.
Note 4. Portfolio Purchases and sales of invest-
Securities ment securities, other than
short-term investments, for the year ended
February 28, 1995 were $277,741,586 and $314,388,059, respectively.
The federal income tax basis of the Fund's investments at February 28, 1995
was $153,346,726, and accordingly, net unrealized appreciation for federal
income tax purposes was $12,023,150 (gross unrealized appreciation--$16,677,465;
gross unrealized depreciation--$4,654,315).
Transactions in options written during the year ended February 28, 1995, were
as follows:
<TABLE>
<CAPTION>
Number of Premiums
Contracts Received
--------- -----------
<S> <C> <C>
Options written.................... 1,290 $ 1,993,802
Options terminated in closing
purchase transactions............ (1,135) (1,937,543)
Options expired.................... (20) (11,940)
--------- -----------
Options outstanding at February 28,
1995............................. 135 $ 44,319
--------- -----------
--------- -----------
</TABLE>
Note 5. Capital The Fund currently 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. Commencing
in February 1995, Class B shares automatically convert to Class A shares on a
quarterly basis approximately seven years after purchase. Classes of shares have
equal rights as to earnings, assets and voting privileges except that each class
bears different distribution expenses and has exclusive voting rights with
respect to its distribution plan.
There are 500 million shares of common stock, $.01 par value per share,
divided into three classes, designated Class A, Class B and Class C common
stock, which consists of 166,666,666 authorized Class A shares, 166,666,666
authorized Class B shares and 166,666,668 authorized Class C shares.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
<S> <C> <C>
--------- ------------
Year ended February 28, 1995:
Shares sold................... 824,869 $ 10,274,989
Shares issued in reinvestment
of distributions............ 14,401 190,908
Shares reacquired............. (971,898) (13,275,664)
--------- ------------
Net decrease in shares
outstanding before
conversion.................. (132,628) (2,809,767)
Shares issued upon conversion
from Class B................ 8,919,597 119,076,584
--------- ------------
Net increase in shares
outstanding................. 8,786,969 $116,266,817
--------- ------------
--------- ------------
Year ended February 28, 1994:
Shares sold................... 574,337 $ 9,064,280
Shares issued in reinvestment
of distributions............ 31,195 464,547
Shares reacquired............. (514,635) (8,182,012)
--------- ------------
Net increase in shares
outstanding................. 90,897 $ 1,346,815
--------- ------------
--------- ------------
<CAPTION>
Class B
<S> <C> <C>
Year ended February 28,
1995:
Shares sold................. 780,941 $ 10,649,527
Shares issued in
reinvestment of
distributions............. 645,569 8,481,224
Shares reacquired........... (2,971,667) (40,174,196)
----------- -------------
Net decrease in shares out-
standing before
conversion................ (1,545,157) (21,043,445)
Shares reacquired upon
conversion into Class A... (9,055,248) (119,076,584)
----------- -------------
Net decrease in shares
outstanding............... (10,600,405) $(140,120,029)
----------- -------------
----------- -------------
Year ended February 28,
1994:
Shares sold................. 1,528,319 $ 23,979,109
Shares issued in
reinvestment of
distributions............. 1,620,447 24,029,853
Shares reacquired........... (4,630,005) (72,765,259)
----------- -------------
Net decrease in shares
outstanding............... (1,481,239) $ (24,756,297)
----------- -------------
----------- -------------
<CAPTION>
Class C
<S> <C> <C>
August 1, 1994* through
February 28, 1995
Shares sold................... 4,710 $ 63,195
Shares issued in reinvestment
of distributions............ 3 44
--------- ------------
Net increase in shares
outstanding................. 4,713 $ 63,239
--------- ------------
--------- ------------
</TABLE>
- ---------------
* Commencement of offering of Class C Shares.
-10-
<PAGE>
Note 6. Proposed On March 16, 1995, the
Reorganization Board of Directors of the
Fund approved an Agreement and Plan of
Reorganization and Liquidation (the ``Plan'') which provides for the transfer
of
substantially all of the assets and liabilities of the Fund to Prudential
Multi-Sector Fund, Inc. (``Multi-Sector''). Class A, Class B and Class C shares
of the Fund would be exchanged at net asset value for Class A, Class B and Class
C shares, respectively, of equivalent value of Multi-Sector. The Fund would then
cease operations.
The Plan requires the approval of shareholders of the Fund to become
effective and a proxy/prospectus will be mailed to shareholders in late April
1995. If the Plan is approved, it is expected that the reorganization will take
place in or about June 1995. The Fund and Multi-Sector will each bear their
pro-rata share of the costs of the reorganization, including costs of proxy
solicitation.
-11-
<PAGE>
<PAGE>
PRUDENTIAL STRATEGIST FUND, INC.
Financial Highlights
<TABLE>
<CAPTION>
Class
A
- ------------------------------------------------------
Year Ended
February 28/29,
- ------------------------------------------------------
PER SHARE OPERATING PERFORMANCE: 1995** 1994
1993 1992** 1991
---------- ------
- ------ ------ ------
<S> <C> <C> <C>
<C> <C>
Net asset value, beginning of year............. $ 15.11 $15.74
$15.84 $14.91 $14.47
---------- ------
- ------ ------ ------
Income from investment operations
Net investment income.......................... .11 .03
.19 .21 .27
Net realized and unrealized gain (loss) on
investment transactions...................... (.88) 1.29
.37 1.75 .64
---------- ------
- ------ ------ ------
Total from investment operations............. (.77) 1.32
.56 1.96 .91
---------- ------
- ------ ------ ------
Less distributions
- -----------------------------------------------
Dividends from net investment income........... -- --
(.18) (.29) (.26)
Distributions from net realized gains.......... (.68) (1.95)
(.48) (.74) (.21)
Distributions in excess of net realized
gains........................................ (.01) --
-- -- --
---------- ------
- ------ ------ ------
Total distributions.......................... (.69) (1.95)
(.66) (1.03) (.47)
---------- ------
- ------ ------ ------
Net asset value, end of year................... $ 13.65 $15.11
$15.74 $15.84 $14.91
---------- ------
- ------ ------ ------
---------- ------
- ------ ------ ------
TOTAL RETURN#.................................. (4.96)% 8.81%
3.74% 13.76% 6.74%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000).................. $ 124,873 $5,469
$4,264 $5,202 $1,105
Average net assets (000)....................... $ 11,832 $4,172
$4,177 $2,126 $ 705
Ratios to average net assets:
Expenses, including distribution fees........ 1.49% 1.34%
1.29% 1.35% 1.46%
Expenses, excluding distribution fees........ 1.24% 1.13%
1.09% 1.15% 1.26%
Net investment income........................ .76% .20%
1.13% 1.37% 1.94%
Portfolio turnover............................. 188% 178%
99% 146% 77%
</TABLE>
- ---------------
** Calculated based upon weighted average shares outstanding during the year.
# Total return does not consider the effects of sales loads. Total return
is calculated assuming a purchase of shares on the first day and a sale
on the last day of each year reported and includes reinvestment of
dividends and distributions.
See Notes to Financial Statements.
-12-
<PAGE>
PRUDENTIAL STRATEGIST FUND, INC.
Financial Highlights
<TABLE>
<CAPTION>
Class C
Class B ------------
- -------------------------------------------------------------- August 1,
1994@
Year Ended
February 28/29, Through
- -------------------------------------------------------------- February 28,
PER SHARE OPERATING PERFORMANCE: 1995** 1994
1993 1992** 1991 1995**
<S> <C> <C>
<C> <C> <C> <C>
---------- --------
- -------- -------- -------- ------------
Net asset value, beginning of period........... $ 14.99 $ 15.74
$ 15.86 $ 14.92 $ 14.46 $13.23
---------- --------
- -------- -------- -------- ------
Income from investment operations
Net investment income (loss)................... -- (.09)
.06 .11 .17 .04
Net realized and unrealized gain (loss) on
investment transactions...................... (.87) 1.29
.37 1.73 .65 .17
---------- --------
- -------- -------- -------- ------
Total from investment operations............. (.87) 1.20
.43 1.84 .82 .21
---------- --------
- -------- -------- -------- ------
Less distributions
- -----------------------------------------------
Dividends from net investment income........... -- --
(.07) (.16) (.16) --
Distributions from net realized gains.......... (.68) (1.95)
(.48) (.74) (.20) (.01)
Distributions in excess of net realized
gains........................................ (.01) --
-- -- -- --
---------- --------
- -------- -------- -------- ------
Total distributions.......................... (.69) (1.95)
(.55) (.90) (.36) (.01)
---------- --------
- -------- -------- -------- ------
Net asset value, end of period................. $ 13.43 $ 14.99
$ 15.74 $ 15.86 $ 14.92 $13.43
---------- --------
- -------- -------- -------- ------
---------- --------
- -------- -------- -------- ------
TOTAL RETURN#.................................. (5.70)% 8.02%
2.91% 12.80% 6.03% 1.59%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)................ $ 39,597 $203,115
$236,590 $275,826 $277,282 $ 63
Average net assets (000)....................... $ 166,944 $218,040
$246,195 $270,211 $291,028 $ 43
Ratios to average net assets:
Expenses, including distribution fees........ 2.24% 2.13%
2.09% 2.15% 2.26% 2.24%*
Expenses, excluding distribution fees........ 1.24% 1.13%
1.09% 1.15% 1.26% 1.24%*
Net investment income (loss)................. .01% (.59)%
0.37% 0.74% 1.14% .01%*
Portfolio turnover............................. 188% 178%
99% 146% 77% 188%
</TABLE>
- ---------------
* Annualized.
** Calculated based upon weighted average shares outstanding during the
period.
@ Commencement of offering of Class C shares.
# 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.
See Notes to Financial Statements.
-13-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Prudential Strategist Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Prudential Strategist Fund, Inc.
(the ``Fund'') at February 28, 1995, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
``financial statements'') are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
February 28, 1995 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
April 21, 1995
TAX INFORMATION
We are required by the Internal Revenue Code to advise you within 60 days of
the Fund's fiscal year end (February 28, 1995) as to certain tax benefits
inherent in the Fund's distributions. Accordingly, we wish to advise you that
during its fiscal year ended February 28, 1995, the Fund paid distributions to
both Class A and B shareholders from net realized short-term capital gains of
$.155 per share, which are fully taxable as ordinary income, and $.535 per Class
A and B share and $.01 per Class C share from net realized long-term capital
gains, which are taxable as such. Further, we wish to advise you that 100% of
the ordinary dividends paid in the fiscal year ended February 28, 1995 qualified
for the corporate dividends received deduction available to corporate taxpayers.
In January 1996, you will be advised on IRS Form 1099 DIV or substitute Form
1099 as to the federal tax status of the distributions received by you in
calendar 1995. The amounts that will be reported on such Form 1099 DIV or
substitute Form 1099 will be the amounts to use on your 1995 federal income tax
return and probably will differ from the amounts which we must report for the
Fund's fiscal year ended February 28, 1995.
-14-
<PAGE>
<PAGE>
Past performance is not predictive of future performance and an investor's
shares, when redeemed, may be worth more or less than their original cost.
These graphs are furnished to you in accordance with SEC regulations. They
compare a $10,000 investment in the Prudential Strategist Fund (Class A, Class
B, and Class C) with a similar investment in the Standard & Poor's 500 Index (S
& P 500) portraying the initial account values on January 22, 1990 for Class A
shares, March 1, 1985 for Class B shares and August 1, 1994 for Class C shares
and subsequent account values at the end of each fiscal year (February 28), as
measured on a quarterly basis, beginning in 1990 for Class A, in 1985 for Class
B shares and in 1994 for Class C shares. For purposes of the graphs and, unless
otherwise indicated in the accompanying tables, it has been assumed that (a) the
maximum sales charge was deducted from the initial $10,000 investment in Class
A
shares; (b) The maximum applicable contingent deferred sales charge was deducted
from the value of the investment in Class B and Class C shares assuming full
redemption on February 28, 1995; (c) all recurring fees (including management
fees) were deducted; and (d) all dividends and distributions were reinvested.
Class B shares automatically convert to Class A shares on a quarterly basis
approximately seven years after purchase. This conversion feature was
implemented in February 1995.
The S & P 500 is a capital-weighted index, representing the aggregate market
value of the common equity of 500 stocks primarily traded on the New York Stock
Exchange. The S & P 500 is an unmanaged index and includes the reinvestment of
all dividends, but does not reflect the payment of transaction costs and
advisory fees associated with an investment in the Fund. The securities which
comprise the S & P 500 may differ substantially from the securities in the
Fund's portfolio. The S & P 500 is not the only index which may be used to
characterize performance of growth funds and other indexes may portray different
comparative performance.
-15-
<PAGE>
