ANNUAL REPORT April 30, 1995
Prudential
Multi-Sector
Fund, Inc.
- ------------------------
(ICON)
<PAGE>
Letter to Shareholders
June 20, 1995
Dear Shareholder:
The U.S. stock market has rallied in 1995, bouncing back from a lackluster
1994. As a result, it has been a very good year for investors in the
Prudential Multi-Sector Fund, Inc. which substantially performed better
than the average Lipper capital appreciation fund for the year ended
April 30. Your Fund's superior performance is a result of its sector
allocation and stock selection, particularly its concentration in technology
stocks, which were the top performers in the past year.
(CHART)
Source: Prudential Mutual Fund Management,
Inc. U.S. Stocks: S&P 500; Global Stocks:
Morgan Stanley World Index; U.S. Bonds: Lehman
Brothers government/corporate aggregate; and
Money Markets: IBC/Donoghue taxable funds
average. Note: Total return figures are for
the 12-month period ended 4/30/95 and assumes
reinvestment of dividends and distributions.
All bond returns are market value weighted
inclusive of accrued interest. This chart is
for comparison purposes only. There are different
risks associated with each investment sector
which should be considered carefully before
investing. Past performance is not indicative
of future results.
<TABLE>
CUMULATIVE TOTAL RETURNS1
As of 4/30/95
<CAPTION>
One Year Since Inception2
<S> <C> <C>
Class A 12.2% 70.4%
Class B 11.3% 64.1%
Class C N/A 6.6%
Lipper Capital 8.7% 64.2%
Appreciation Fund Avg.3
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
As of 3/31/95
One Year Since Inception2
<S> <C> <C>
Class A 4.9% 10.0%
Class B 4.6% 10.2%
Class C N/A 2.9%
</TABLE>
Past performance is not a guarantee of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
1. Source: 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. Class B shares are subject to a declining contingent deferred sales
charge (CDSC) of 5%, 4%, 3%, 2%, 1% and 1% for six years. Class 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.
2. Inception dates: 6/29/90 Class A and B; 8/1/94 Class C.
3. Lipper average returns are for 141 funds for one year and 84 funds since
inception of the Class A and B shares on 6/29/90.
-1-
<PAGE>
Our Objective.
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.
Greg Smith, chief investment strategist for Prudential Securities
Incorporated, and a consultant to the Fund's subadviser, recommends
stock market sector allocations. Portfolio Manager Greg Goldberg
selects the individual securities for the Fund.
Senate Considers "Dream Account"
The U.S. Senate will soon be considering a
tax-deferred savings vehicle called the
"American Dream Savings Account," which
was approved by the House of Representatives
earlier in the year as part of the "Contract
with America" legislative agenda.
While similar to a traditional individual
retirement account or IRA, the American Dream
Savings Account goes further by raising the
contribution ceiling for non-working spouses
and permitting tax-free and penalty-free
withdrawals prior to age 59 1/2 for certain
major expenses. Prudential Mutual Funds
supports the American Dream Savings Account
and we urge you to share your opinion with
your legislators.
Emphasis on Technology Powered Fund.
Although the Fund has historically had very little exposure to technology
stocks, their prices became so attractive last spring that the Fund
aggressively started purchasing them. Global demand for electronics
increased dramatically in 1994 as more and more U.S. consumers purchased
computers and other electronic devices. Additionally, as the rest of
the world sought to remain competitive with the U.S.'s preeminence in
the use of technology, the increased demand for products raised technology
stock prices further. Technology stocks performed better than any other
sector in the last 12 months, as measured by Standard & Poor's. During
the reporting period, the Fund held as much as 22% of its assets in
technology issues -- nearly twice the concentration than the market as
a whole -- allowing the Fund to perform better than the competition.
Over the last six months, our holdings have included Seagate Technology
Inc., which rose 26% during the period; Adaptec, a computer hardware
company, which rose 27% while we owned it; and Computer Associates, which
rose 42% during the period we owned it.
We have sold off a portion of our technology holdings to take advantage
of rising prices. On April 30, 1995, 20.1% of net assets remained in
this sector because we believe technology remains fundamentally sound
and that there will be opportunities to explore in coming months.
A Shift in Strategy.
In addition to our heavy emphasis on technology, we also made another
significant portfolio move by reducing our holdings in foreign stocks
by half. We are reinvesting some of the proceeds in multi-national
companies that conduct at least 40% of their business overseas. This
enables us to benefit from those U.S.-based companies whose overseas
business has profited along with the strong Japanese yen and German
mark. While we have held as much as 30% in foreign stocks over the
last year, we now hold about 15%. We reduced our positions in European
industrial firms -- particularly cyclical firms that suffered during
the first quarter because investors feared the weak U.S. dollar could
threaten the European economic recovery.
-2-
<PAGE>
We have also invested more in the U.S. market, particularly in the financial
services and health care sectors, where we see greater opportunity. Financial
services now represents about 18% of the Fund, while earlier it was as small
as 5%. Health care represents about 11% of the Fund's net assets, up from
as little as 1%. Energy has remained relatively constant at approximately 11%.
Fund Update
Starting in February 1995, Class B
shareholders may have begun to notice
a change in their Fund holdings. That's
when Class B shares began to automatically
convert to Class A shares, on a quarterly
basis, approximately seven years after
purchase. As you may know, Class A shares
generally carry lower annual distribution
expenses than Class B shares. Accordingly,
after conversion as a Class A shareholder,
you will earn higher total returns on your
investment than you would have as a Class B
shareholder.
Conversions of eligible Class B shares and
special exchanges of Class B and C shares
will take place each calendar quarter (March,
June, September and December) starting in
September 1995.
Believing Boomers Will Become Savers.
We are optimistic about the financial services sector because we believe that
baby boomers will realize the necessity of saving for retirement. Although
the U.S. savings rate is low compared to that of other countries, we expect
it will increase as baby boomers begin to prepare for retirement. Possible
beneficiaries include insurance companies, whose annuity sales will continue
to grow. Our financial services holdings include SunAmerica, an insurance
and financial services company, and Dean Witter, Discover, the financial
services company.
Becoming A Healthier Nation.
Health care has been an attractive industry for us. In the first quarter,
hospital management stocks rose 19%, and drugs and medical stocks were up
16%. These stocks have benefited in the last year as national health care
legislation stalled in Congress, and investors became more confident that
the industry could have the freedom to reform itself. Among our holdings
are Roche Holdings and U.S. HealthCare. Although U.S. HealthCare's share
price has dropped significantly recently, we believe its long-term
fundamentals are good. The stock price dropped on a corporate announcement
that earnings growth will slacken due to increasing competition for market
share. But clearly, the trend in health care is toward HMOs, not only in
corporate employee benefits, but in government benefits as well -- such as
Medicare and Medicaid.
We Held Cash, But Stocks Did Better.
A factor that hindered performance was holding about 30% of assets in cash
and U.S. Treasury bills during the first quarter of 1995. We have since
reduced that position.
The Outlook.
We expect continued moderate growth from the economy throughout the year.
Stocks have advanced quite smartly in 1995, the Dow Jones Industrial Average
has broken not only the 4000 mark, but 4500 as well. Despite this rally,
falling interest rates have taken pressure off stocks and created room for
further stock gains this year.
-3-
<PAGE>
Longer term, we continue to favor financial stocks. We are also positive
on industrial stocks, as well as selected consumer growth stocks,
pharmaceutical and medical companies. In the short run, technology remains
the group with the most visible momentum.
As always, we are pleased you have selected the Prudential Multi-Sector Fund,
Inc. for the portion of your portfolio devoted to long-term growth.
Sincerely,
Gregory Goldberg
Portfolio Manager
Richard A. Redeker
President
-4-
<PAGE>
PRUDENTIAL MULTI-SECTOR FUND, INC. Portfolio of Investments
April 30, 1995
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--87.6%
COMMON STOCKS--86.9%
Auto Sector--2.1%
451,000 Fiat SpA* (ADR) (Italy)...... $ 1,835,614
135,000 Ford Motor Co................ 3,645,000
------------
5,480,614
------------
Basic Industry Sector--9.0%
140,000 Cominco, Ltd.* (Canada)...... 4,283,667
41,800 European Vinyls Corp.,
Int'l.* (Netherlands)...... 1,843,362
37,200 General Electric Co.......... 2,083,200
75,000 Hylsamex* S.A. (ADR)
(Mexico)................... 1,059,375
75,000 National Steel Corp.*........ 956,250
70,000 Owens-Corning Fiberglass
Corp.*..................... 2,563,750
35,000 Philips Electronics N.V...... 1,347,500
50,000 Ply Gem Industries, Inc...... 831,250
107,800 Quad Systems Corp.*.......... 862,400
74,400 TJ International, Inc........ 1,264,800
70,000 Trinity Industries, Inc...... 2,703,750
75,000 Uniphase Corp.*.............. 1,481,250
175,000 Ventritex, Inc.*............. 2,625,000
------------
23,905,554
------------
Consumer Goods & Services Sector--6.1%
60,800 Federal Express Corp.*....... 4,134,400
190,000 Fruit of the Loom, Inc.*..... 4,940,000
52,400 Nissen Co., Ltd. (Japan)..... 1,662,104
100,000 RJR Nabisco Holdings Corp.... 2,737,500
135,000 Stone Container Corp.*....... 2,683,125
------------
16,157,129
------------
Energy Sector--10.8%
130,000 Baker Hughes, Inc............ 2,925,000
Enterprise Oil PLC., (ADR)
54,100 (United Kingdom)........... 1,068,475
73,500 Exxon Corp................... 5,117,437
465,000 Mesa, Inc.*.................. 2,673,750
128,500 Noble Drilling Corp.*........ 851,313
139,500 Oryx Energy Co............... 1,918,125
118,900 Repsol S.A. (ADR) (Spain).... 3,804,800
72,200 Rigel Energy Corp.*.......... 731,025
200,000 Rowan Cos., Inc.*............ $ 1,375,000
70,000 Sonat Offshore Drilling,
Inc........................ 1,890,000
112,800 Talisman Energy, Inc.*
(Canada)................... 2,166,201
21,300 Weatherford International,
Inc........................ 234,300
190,000 YPF Sociedad Anonima (ADR)
(Argentina)................ 3,847,500
------------
28,602,926
------------
Financial Services Sector--17.9%
121,400 Ahmanson (H.F.) & Co......... 2,549,400
319,597 Banco Wiese (ADR) (Peru)..... 2,876,373
10,700 Berkley (W.R.) Corp.......... 401,250
80,500 Citicorp..................... 3,733,187
129,000 Dean Witter, Discover &
Co......................... 5,466,375
67,500 Federal National Mortgage
Assoc...................... 5,956,875
82,000 Manufactured Home
Communities, Inc........... 1,291,500
75,000 NationsBank Corp............. 3,750,000
65,500 PMI Group, Inc.*............. 2,439,875
50,200 Republic New York Corp....... 2,403,325
105,000 Salomon, Inc................. 3,793,125
171,500 SunAmerica, Inc.............. 8,403,500
107,000 Travelers Inc................ 4,427,125
------------
47,491,910
------------
Health Care Sector--11.1%
25,900 Akzo N.V. (ADR)
(Netherlands).............. 1,502,200
75,000 Columbia Healthcare Corp..... 3,150,000
100,000 Forest Laboratories, Inc.*... 4,500,000
151,500 Glaxo Holdings PLC (ADR)
(United Kingdom)........... 3,579,188
60,000 Merck & Co., Inc............. 2,572,500
165,000 National Medical Enterprises,
Inc.*...................... 2,805,000
75,000 Ostex International, Inc.*... 665,625
63,300 Physician Corp. of America,
Inc.*...................... 1,131,488
660 Roche Holdings, Ltd.
(Switzerland).............. 3,981,931
64,700 St. Jude Medical, Inc.*...... 2,782,100
99,500 U.S. HealthCare, Inc......... 2,661,625
------------
29,331,657
------------
</TABLE>
-5- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MULTI-SECTOR FUND, INC.
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
Leisure Sector--1.1%
117,300 Carnival Cruise Lines,
Inc........................ $ 2,917,837
------------
Precious Metals Sector--1.3%
280,000 Santa Fe Pacific Gold
Corp....................... 3,535,000
------------
Public Utilities Sector--0.9%
80,000 Telefonos de Mexico S.A.
(ADR) (Mexico)............. 2,420,000
------------
Retailing Sector--3.2%
93,000 Au Bon Pain Co., Inc.*....... 1,255,500
37,200 Burlington Northern, Inc..... 2,213,400
135,900 Caldor Corp.*................ 2,633,062
91,000 Dillard Department Stores,
Inc........................ 2,354,625
------------
8,456,587
------------
Technology Sector--20.1%
50,000 Applied Materials, Inc.*..... 3,081,250
65,000 Aspen Technology, Inc.*...... 1,348,750
75,000 Bay Networks*................ 2,728,125
100,000 Chipcom Corp.*............... 3,275,000
90,000 Cisco Systems, Inc.*......... 3,588,750
79,000 Compaq Computer Corp.*....... 3,002,000
65,000 Computer Associates Int'l.,
Inc........................ 4,184,375
31,500 Diamond Multimedia Systems,
Inc.*...................... 630,000
112,900 EMC Corp.*................... 2,229,775
30,500 Intel Corp................... 3,122,437
50,000 Motorola, Inc................ 2,843,750
230,000 NEXTEL Communications,
Inc.*...................... 3,708,750
70,000 Seagate Technology, Inc.*.... 2,231,250
70,000 Silicon Graphics, Inc.*...... 2,625,000
130,000 Sun Microsystems, Inc.*...... 5,183,750
58,000 Sybase, Inc.*................ 1,406,500
175,000 Tandem Computers, Inc.*...... 2,231,250
21,500 Veeco Instruments, Inc.*..... 309,063
102,300 VeriFone, Inc.*.............. 2,416,838
145,000 VLSI Technology, Inc.*....... 3,090,312
------------
53,236,925
------------
Transportation Sector--3.3%
213,900 Canadian Pacific, Ltd.
(Canada)................... $ 3,261,975
108,100 Carolina Freight Corp........ 986,413
70,000 Illinois Central Corp........ 2,458,750
21,700 Kansas City Southern
Industries, Inc............ 813,750
110,300 Methanex Corp.* (Canada)..... 1,155,377
------------
8,676,265
------------
Total common stocks
(cost $217,070,288).......... 230,212,404
------------
CONVERTIBLE PREFERRED STOCK--0.7%
Basic Industry Sector
16,000 Alumax, Inc.
(cost $1,351,972).......... 1,932,000
------------
Total long-term investments
(cost $218,422,260).......... 232,144,404
------------
<CAPTION>
Principal
Amount SHORT-TERM INVESTMENTS--13.8%
(000) U.S. Government Securities--9.5%
- ---------
<C> <S> <C>
U.S. Treasury Bills,
$ 500 # 5.76%, 5/11/95............... 499,200
1,000 # 5.72%, 5/18/95............... 997,334
1,700 # 5.685%, 6/1/95............... 1,691,678
1,000 5.855%, 6/8/95............... 993,910
825 # 5.685%, 6/15/95.............. 819,137
1,000 5.73%, 6/15/95............... 992,838
20,000 5.69%, 11/16/95.............. 19,269,642
------------
Total U.S. Government
Securities
(cost $25,263,739)........... 25,263,739
------------
Repurchase Agreement--4.3%
11,447 Joint Repurchase Agreement
Account,
5.93%, 5/1/95, (Note 5)
(cost $11,447,000)......... 11,447,000
------------
Total short-term investments
(cost $36,710,739)........... 36,710,739
------------
</TABLE>
-6- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MULTI-SECTOR FUND, INC.
<TABLE>
<CAPTION>
Value
Shares Description (Note 1)
<C> <S> <C>
Total investments before
short sales--101.4%
(cost $255,132,999; Note
4)......................... $268,855,143
------------
COMMON STOCKS SOLD SHORT*--(2.6%)
Basic Industry Sector--(0.5%)
100,000 Centocor, Inc................ (1,412,500)
------------
Consumer Goods & Services Sector--(0.8%)
15,000 NIKE, Inc.................... (1,149,375)
30,000 Reebok International......... (937,500)
------------
(2,086,875)
------------
Retailing Sector--(1.3%)
30,000 AutoZone, Inc................ (693,750)
50,000 Cracker Barrel Old Country,
Inc........................ (1,062,500)
20,000 PETsMART, Inc................ (667,500)
38,000 Starbucks Corp............... (893,000)
------------
(3,316,750)
------------
Total common stocks sold
short
(proceeds $7,577,839)...... (6,816,125)
------------
Total investments, net of
short sales--98.8%......... 262,039,018
Other assets in excess of
other
liabilities--1.2%.......... 3,057,107
------------
Net Assets--100%............. $265,096,125
------------
------------
</TABLE>
- ---------------
* Non-income producing security.
# Pledged as collateral on short sales.
ADR--American Depository Receipt.
-7- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL MULTI-SECTOR FUND, INC.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Assets
April 30, 1995
----------------
<S>
<C>
Investments, at value (cost
$255,132,999)............................................... $268,855,143
Foreign currency, at value (cost
$1,068)................................................ 1,121
Deposits with broker for securities sold
short.......................................... 7,577,839
Receivable for investments
sold......................................................... 3,232,149
Receivable for Fund shares
sold......................................................... 871,730
Forward currency contracts-amount receivable from
counterparties........................ 332,945
Interest and dividends
receivable.......................................................
231,498
Deferred expenses and other
assets...................................................... 13,569
----------------
Total
assets..........................................................................
281,115,994
----------------
Liabilities
Investments sold short, at value (proceeds
$7,577,839).................................. 6,816,125
Payable for investments
purchased.......................................................
5,610,445
Payable for Fund shares
reacquired......................................................
2,139,927
Forward currency contracts - amount payable to
counterparties........................... 838,084
Accrued expenses and other
liabilities.................................................. 310,174
Distribution fee
payable................................................................
167,074
Management fee
payable..................................................................
138,040
----------------
Total
liabilities.....................................................................
16,019,869
----------------
Net
Assets.......................................................................
....... $265,096,125
----------------
----------------
Net assets were comprised of:
Common stock, at
par.................................................................. $
19,875
Paid-in capital in excess of
par...................................................... 239,687,667
----------------
239,707,542
Undistributed net investment
income................................................... 22,179
Accumulated net realized capital and currency
gains................................... 11,387,268
Net unrealized appreciation on investments and foreign
currencies..................... 13,979,136
----------------
Net assets, April 30,
1995..............................................................
$265,096,125
----------------
----------------
Class A:
Net asset value and redemption price per share
($76,034,667 / 5,653,135 shares of common stock issued and
outstanding)............. $13.45
Maximum sales charge (5.00% of offering
price)........................................ .71
----------------
Maximum offering price to
public...................................................... $14.16
----------------
----------------
Class B:
Net asset value, offering price and redemption price per share
($185,474,014 / 13,951,887 shares of common stock issued and
outstanding)........... $13.29
----------------
----------------
Class C:
Net asset value, offering price and redemption price per share
($3,587,444 / 269,856 shares of common stock issued and
outstanding)................ $13.29
----------------
----------------
</TABLE>
See Notes to Financial Statements.
-8-
<PAGE>
PRUDENTIAL MULTI-SECTOR FUND, INC.
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
April 30,
Net Investment Income 1995
-----------
<S> <C>
Income
Dividends (net of foreign withholding
taxes of
$100,984).......................... $ 2,295,606
Interest and discount earned......... 2,226,288
-----------
Total income....................... 4,521,894
-----------
Expenses
Management fee....................... 1,389,386
Distribution fee--Class A............ 148,289
Distribution fee--Class B............ 1,532,086
Distribution fee--Class C............ 12,272
Transfer agent's fees and expenses... 317,000
Reports to shareholders.............. 277,000
Custodian's fees and expenses........ 265,000
Registration fees.................... 124,000
Legal fees and expenses.............. 52,500
Amortization of organization
expense.............................. 45,000
Directors' fees...................... 37,500
Audit fee............................ 30,000
Miscellaneous........................ 9,066
-----------
Total expenses..................... 4,239,099
-----------
Net investment income.................. 282,795
-----------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions
Net realized gain (loss) on:
Security transactions................ 20,552,418
Short sale transactions.............. 1,251,132
Foreign currency transactions........ (128,118)
Financial futures contracts.......... (1,523,750)
-----------
20,151,682
-----------
Net change in unrealized appreciation
on:
Securities........................... 3,098,459
Short sales.......................... 557,238
Foreign currencies................... (285,206)
-----------
3,370,491
-----------
Net gain on investments and foreign
currency
transactions......................... 23,522,173
-----------
Net Increase in Net Assets Resulting
from Operations........................ $23,804,968
-----------
-----------
</TABLE>
PRUDENTIAL MULTI-SECTOR FUND, INC.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended April 30,
----------------------------
Increase in Net Assets 1995 1994
------------ ------------
<S> <C> <C>
Operations
Net investment
income................. $ 282,795 $ 956,693
Net realized gain on
investments and
foreign currency
transactions......... 20,151,682 22,140,711
Net change in
unrealized
appreciation of
investments.......... 3,370,491 (5,325,410)
------------ ------------
Net increase in net
assets resulting from
operations........... 23,804,968 17,771,994
------------ ------------
Net equalization
credits................ 72,776 152,418
------------ ------------
Dividends and
distributions (Note 1)
Dividends from net
investment income
Class A.............. -- (724,102)
Class B.............. -- (736,046)
Class C.............. -- --
------------ ------------
-- (1,460,148)
------------ ------------
Distributions from net
capital and currency
gains
Class A.............. (5,260,734) (5,543,404)
Class B.............. (13,945,867) (12,086,917)
Class C.............. (48,280) --
------------ ------------
(19,254,881) (17,630,321)
------------ ------------
Fund share transactions
(net of conversion)
(Note 6)
Net proceeds from Fund
shares subscribed.... 131,985,932 81,243,634
Net asset value of Fund
shares issued in
reinvestment of
dividends and
distributions........ 17,954,751 17,794,396
Cost of shares
reacquired............. (70,803,068) (52,846,996)
------------ ------------
Net increase in net
assets from Fund
share transactions... 79,137,615 46,191,034
------------ ------------
Total increase........... 83,760,478 45,024,977
Net Assets
Beginning of year........ 181,335,647 136,310,670
------------ ------------
End of year.............. $265,096,125 $181,335,647
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
-9-
<PAGE>
<PAGE>
PRUDENTIAL MULTI-SECTOR FUND, INC.
Notes to Financial Statements
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 The following is a summary
Policies of significant accounting poli-
cies followed by the Fund in the preparation of
its financial statements.
Securities Valuation: Investments, including options, 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. Stock options traded on national
securities exchanges are valued at the closing prices on such exchanges.
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 $128,118 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
-10-
<PAGE>
<PAGE>
valued daily at current 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.
Financial Futures Contracts: A financial futures contract is an agreement to
purchase (long) or sell (short) an agreed amount of securities at a set price
for delivery on a future date. Upon entering into a financial futures contract,
the Fund is required to pledge to the broker an amount of cash and/or other
assets equal to a certain percentage of the contract amount. This amount is
known as the ``initial margin.'' Subsequent payments, known as ``variation
margin,'' are made or received by the Fund each day, depending on the daily
fluctuations in the value of the underlying security. Such variation margin is
recorded for financial statement purposes on a daily basis as unrealized gain
or
loss. When the contract expires or is closed, the gain or loss is realized and
is presented in the statement of operations as net realized gain (loss) on
financial futures contracts.
The Fund invests in financial futures contracts in order to hedge its existing
portfolio securities, or securities the Fund intends to purchase, against
fluctuations in value caused by changes in prevailing interest rates. Should
interest rates move unexpectedly, the Fund may not achieve the anticipated
benefits of the financial futures contracts and may realized a loss. The use of
futures transactions involves the risk of imperfect correlation in movements in
the price of futures contracts, interest rates and the underlying hedged assets.
There were no financial futures contracts outstanding at April 30, 1995.
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 fiscal year ended April 30 1995, the Fund reclassified
$177,685 of foreign currency losses which were recognized for tax purposes in
the current fiscal year by increasing undistributed net investment income and
decreasing 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
-11-
<PAGE>
<PAGE>
is being 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 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 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 and 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 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 year ended April 30, 1995.
PMFD has advised the Fund that it has received approximately $238,700 in
front-end sales charges resulting from sales of Class A shares during the year
ended April 30 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 year ended April 30, 1995, it received
approximately $351,300 in contingent deferred sales charges imposed upon
redemptions by certain Class B and Class C shareholders.
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 Prudential Mutual Fund Ser-
Transactions vices, Inc. (``PMFS''), a
with Affiliates wholly-owned subsidiary of
PMF, serves as the Fund's transfer agent. During
the year ended April 30, 1995, the Fund incurred fees of approximately $277,000
for the services of PMFS. As of April 30, 1995, approximately $29,000 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 year ended April 30, 1995, PSI earned approximately $28,000 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 April
30, 1995 aggregated $275,090,519 and $229,098,513, respectively.
The federal income tax basis of the Fund's investments at April 30, 1995 was
$255,829,870 and, accordingly, net unrealized appreciation for federal income
tax purposes was $13,025,273 (gross unrealized appreciation--$25,069,291, gross
unrealized depreciation--$12,044,018).
-12-
<PAGE>
<PAGE>
At April 30, 1995, the Fund had outstanding forward currency contracts to
purchase and sell foreign currency as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation/
Purchase Contract Payable Value (Depreciation)
<S> <C> <C> <C>
- -------------------------- ---------------- ---------- ---------------
Finnish Markka,
expiring 6/01/95 $ 3,379,481 $3,409,222 $ 29,741
Japanese Yen,
expiring 5/02/95 3,577,700 3,875,507 297,807
---------------- ---------- ---------------
$ 6,957,181 $7,284,729 $ 327,548
---------------- ---------- ---------------
---------------- ---------- ---------------
</TABLE>
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation/
Sale Contracts Receivable Value (Depreciation)
<S> <C> <C> <C>
- ----------------------- ---------------- ----------- ---------------
Finnish Markka,
expiring 6/01/95 $ 3,140,567 $ 3,409,222 $ (268,655)
Japanese Yen,
expiring
5/02/95-8/02/95 4,825,109 5,384,624 (559,515)
Swiss Francs,
expiring 6/30/95 3,300,000 3,304,517 (4,517)
---------------- ----------- ---------------
$ 11,265,676 $12,098,363 $ (832,687)
---------------- ----------- ---------------
---------------- ----------- ---------------
</TABLE>
Note 5. Joint The Fund, along with other
Repurchase affiliated registered invest-
Agreement Account ment 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 April 30, 1995, the Fund had a 1.7% undivided interest in the
repurchase agreements in the joint account. The undivided interest for the Fund
represents $11,447,000 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., Inc., 5.92%, in the principal amount of $125,000,000,
repurchase price $125,061,666, due 5/1/95. The value of the collateral including
accrued interest is $127,647,875.
UBS Securities Inc., 5.93%, in the principal amount of $100,000,000,
repurchase price $100,049,416, due 5/1/95. The value of the collateral including
accrued interest is $102,001,215.
Morgan Stanley and Co., Inc., 5.93%, in the principal amount of $225,000,000,
repurchase price $225,111,187, due 5/1/95. The value of the collateral including
accrued interest is $229,982,534.
CS First Boston Corp., 5.93%, in the principal amount of $225,000,000,
repurchase price $225,111,187, due 5/1/95. The value of the collateral including
accrued interest is $229,725,279.
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. A special exchange privilege is also available for
shareholders who qualified to purchase Class A shares at net asset value.
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>
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
---------------- ------------
---------------- ------------
Year ended April 30, 1994:
Shares sold...................... 2,294,758 $ 31,099,578
Shares issued in reinvestment of
dividends and distributions.... 451,690 5,953,064
Shares reacquired................ (2,004,567) (26,983,820)
---------------- ------------
Net increase in shares
outstanding.................... 741,881 $ 10,068,822
---------------- ------------
---------------- ------------
<CAPTION>
Class B
<S> <C> <C>
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
---------------- ------------
---------------- ------------
</TABLE>
-13-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Class B Shares Amount
- --------------------------------- ---------------- ------------
<S> <C> <C>
Year ended April 30, 1994:
Shares sold...................... 3,671,115 $ 50,144,056
Shares issued in reinvestment of
dividends and distributions.... 900,324 11,841,332
Shares reacquired................ (1,905,508) (25,863,176)
---------------- ------------
Net increase in shares
outstanding.................... 2,665,931 $ 36,122,212
---------------- ------------
---------------- ------------
<CAPTION>
Class C
- ---------------------------------
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.
Note 7. Distributions On June 15, 1995 the Board
of Directors of the Fund announced a dividend from
net investment income of $.040, $.015 and $.015 per Class A, B and C shares,
respectively and a distribution from net capital and currency gains to Class A,
B and C shareholders of $.69 per share, payable on June 22, 1995 to shareholders
of record on June 19, 1995.
Note 8. Proposed On March 16, 1995, the
Reorganization Board of Directors of the
Fund approved an Agreement and Plan of
Reorganization (the ``Plan'') which provides for the transfer of substantially
all of the assets and liabilities of the Prudential Strategist Fund, Inc.
(``Strategist'') to the Fund. Class A, Class B and Class C shares of Strategist
would be exchanged at net asset value for Class A, Class B and Class C shares,
respectively, of equivalent value of the Fund.
The Plan was approved by Strategist shareholders on June 9, 1995. It is
expected that the reorganization will take place in late June 1995. The Fund and
Strategist will each bear their pro-rata share of the costs of the
reoganization, including costs of proxy solicitation.
-14-
<PAGE>
<PAGE>
PRUDENTIAL MULTI-SECTOR FUND, INC.
Financial Highlights
<TABLE>
<CAPTION>
Class C
Class A
Class B --------
------------------------------------------------
- ---------------------------------------------------- August
June 29,
June 29, 1,
1990D
1990D 1994@
Through
Through Through
PER SHARE Years Ended April 30, April
Years Ended April 30, April April
OPERATING ------------------------------------- 30,
- ----------------------------------------- 30, 30,
PERFORMANCE: 1995** 1994 1993 1992 1991 1995**
1994 1993 1992 1991 1995**
------- ------- ------- ------- -------- --------
- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
<C> <C> <C> <C>
Net asset
value,
beginning
of
period..... $ 13.21 $ 13.19 $ 12.51 $ 12.10 $ 11.37 $ 13.16 $
13.15 $ 12.47 $ 12.06 $ 11.37 $ 13.74
------- ------- ------- ------- -------- --------
- -------- -------- -------- -------- --------
Income from
investment
operations:
Net
investment
income
(loss)..... .09 .18 .30 .23 .40 (.01)
.07 .19 .13 .32 --
Net realized
and
unrealized
gain on
investments
and
foreign
currency
transactions... 1.44 1.64 1.47 .50 .59 1.43
1.63 1.47 .51 .59 .84
------- ------- ------- ------- -------- --------
- -------- -------- -------- -------- --------
Total from
investment
operations... 1.53 1.82 1.77 .73 .99 1.42
1.70 1.66 .64 .91 .84
------- ------- ------- ------- -------- --------
- -------- -------- -------- -------- --------
Less
distributions:
Dividends
from net
investment
income..... -- (.21) (.30) (.30) (.26) --
(.10) (.19) (.21) (.22) --
Distributions
from net
capital and
currency
gains...... (1.29) (1.59) (.79) (.02) -- (1.29)
(1.59) (.79) (.02) -- (1.29)
------- ------- ------- ------- -------- --------
- -------- -------- -------- -------- --------
Total
distri-
butions... (1.29) (1.80) (1.09) (.32) (.26) (1.29)
(1.69) (.98) (.23) (.22) (1.29)
------- ------- ------- ------- -------- --------
- -------- -------- -------- -------- --------
Net asset
value, end
of
period..... $ 13.45 $ 13.21 $ 13.19 $ 12.51 $ 12.10 $ 13.29 $
13.16 $ 13.15 $ 12.47 $ 12.06 $ 13.29
------- ------- ------- ------- -------- --------
- -------- -------- -------- -------- --------
------- ------- ------- ------- -------- --------
- -------- -------- -------- -------- --------
TOTAL
RETURN#.... 12.15% 14.16% 15.14% 6.16% 17.64% 11.31%
13.22% 14.13% 5.39% 16.14% 6.62%
RATIOS/SUPPLEMENTAL
DATA:
Net assets,
end of
period
(000)...... $76,035 $53,237 $43,390 $52,625 $ 59,085 $185,474
$128,098 $ 92,921 $108,276 $ 99,537 $ 3,587
Average net
assets
(000)...... $59,316 $49,840 $46,890 $57,403 $ 55,545 $153,209
$108,981 $ 99,072 $108,510 $ 82,890 $ 1,653
Ratios to average net
assets:##
Expenses,
including
distribution
fees..... 1.44% 1.30% 1.28% 1.29% 1.35%* 2.19%
2.08% 2.08% 2.09% 2.15%* 2.37%*
Expenses,
excluding
distribution
fees..... 1.19% 1.08% 1.08% 1.09% 1.15%* 1.19%
1.08% 1.08% 1.09% 1.15%* 1.37%*
Net
investment
income
(loss)... .68% 1.15% 2.44% 1.83% 4.28%* (.07)%
.35% 1.64% 1.03% 3.39%* .03%*
Portfolio
turnover... 122% 110% 209% 147% 253% 122%
110% 209% 147% 253% 122%
</TABLE>
- ---------------
* Annualized.
** Calculated based upon weighted average shares outstanding during the year.
D Commencement of investment operations.
@ 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 return for periods of less than a
full year are not annualized.
## Because of the event referred to in @ and the timing of such, the ratios
for Class C shares are not necessarily comparable to that of Class A or
B shares and are not necessarily indicative of future ratios.
See Notes to Financial Statements.
-15-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors of
Prudential Multi-Sector Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
Prudential Multi-Sector Fund, Inc., including the portfolio of investments, as
of April 30, 1995, the related statements of operations for the year then ended
and of changes in net assets for each of the two years in the period then ended
and the financial highlights for each of the four years in the period then ended
and the period June 29, 1990 (commencement of investment operations) to April
30, 1991. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on
a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
April 30, 1995, by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Prudential
Multi-Sector Fund, Inc. at April 30, 1995, the results of its operations, the
changes in its net assets and the financial highlights for the respective stated
periods, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
New York, New York
June 15, 1995
FEDERAL INCOME TAX INFORMATION
We are required by the Internal Revenue Code to advise you within 60 days of
the Fund's fiscal year end (April 30, 1995) as to the federal income tax status
of dividends paid by the Fund during such fiscal year. Accordingly, we are
advising you that during its fiscal year ended April 30, 1995, the Fund paid
distributions for Class A, B and C shares totaling $1.29 per share, comprised
of
$0.52 per share short-term capital gains which are taxable as ordinary income
and $0.77 per share long-term capital gains which is taxable as such. Further,
we wish to advise you that 17.67% of the ordinary income dividends paid in the
fiscal year ended April 30, 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 will be
the amounts to use on your 1995 federal income tax return and will differ from
the amounts which we must report for the Fund's fiscal year ended April 30,
1995.
We are required by Massachusetts and Oregon to inform you that dividends
which have been derived from interest on federal obligations are not taxable to
shareholders. Please be advised that 7.95% of the dividends paid by the Fund
qualify for each of these states' tax exclusion.
-16-
<PAGE>
<PAGE>
(CHART)
Past performance is no guarantee of future performance and an investor's
shares when redeemed may be worth more or less than their original value.
These graphs are furnished in accordance with SEC regulations. They compare
a
$10,000 in the Prudential Multi-Sector Fund, Class A, B & C shares, with a
similar investment in the Standard and Poor's 500 Index (S&P 500 Index) by
portraying the initial account values on June 29, 1990 for Class A and B shares
and August 1, 1994 for Class C shares and subsequent account values at the end
of each fiscal year (April 30) as measured on a quarterly basis, beginning in
1990 for Class A and B shares and 1994 for Class C shares. For purposes of the
graphs, and unless otherwise indicated, the accompanying tables, it has been
assumed that the maximum sales charge was deducted from the initial $10,000
investment in Class A shares; the maximum applicable contingent deferred sales
charges were deducted from the value of the investment in Class B and Class C
shares assuming full redemption on April 30, 1995; all recurring fees--including
management fees--were deducted; and all dividends and distributions were
reinvested. Class B shares will automatically convert to Class A shares on a
quarterly basis, approximately seven years after purchase. This conversion
feature was implemented in February 1995 and is not reflected in the graph.
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 held in the Fund's
portfolio. The S&P 500 is not the only benchmark which may be used to
characterize performance of multiple sector equity funds and other indexes may
portray different comparative performance.
<PAGE>
<PAGE>
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
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852, Collect (908) 417-7555
This report is not authorized for distribution to prospective investors
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74436H101
74436H200 MF144E2
74436H507 (LOGO) Cat. #4443640
