PRUDENTIAL MULTI-SECTOR FUND, INC.
(Class Z Shares)
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PROSPECTUS DATED JUNE 28, 1996
AS SUPPLEMENTED ON SEPTEMBER 12, 1996
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Prudential Multi-Sector Fund, Inc. (the Fund) is an open-end, diversified,
management investment company whose primary investment objective is long-term
growth of capital. The Fund seeks to achieve this objective by focusing its
investments in domestic and foreign securities, primarily equity securities, of
companies in the economic sectors described in the Appendix to the attached
Prospectus. The investment adviser expects to make significant shifts in the
Fund's investments among those sectors that the investment adviser believes may
benefit from economic, demographic or other changes in the 1990's and into the
21st century. Current income is a secondary objective. The Fund's portfolio is
aggressively managed and therefore an investment in the Fund should not be
considered to be a complete investment program. The Fund may engage in
short-selling and short-term trading and may utilize derivatives. These
techniques may be considered speculative and may result in higher risks and
costs to the Fund. There can be no assurance that the Fund's investment
objective will be achieved. See "How the Fund Invests--Investment Objective and
Policies." The Fund's address is One Seaport Plaza, New York, New York 10292,
and its telephone number is (800) 225-1852.
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Class Z shares are offered exclusively for sale to a limited group of investors.
Only Class Z shares are offered through this Prospectus. The Fund also offers
Class A, Class B and Class C shares through the attached Prospectus dated June
28, 1996 (the Retail Class Prospectus), which is a part hereof.
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This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. Additional information about
the Fund has been filed with the Securities and Exchange Commission in a
Statement of Additional Information, dated June 28, 1996, which information is
incorporated herein by reference (is legally considered a part of this
Prospectus) and is available without charge upon request to the Fund at the
address or telephone number noted above.
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Investors are advised to read this Prospectus and retain it
for future reference.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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FUND EXPENSES
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Class Z Shares
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SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) ........................ None
Maximum Sales Load or Deferred Sales Load
Imposed on Reinvested Dividends ............................ None
Deferred Sales Load (as a percentage of
original purchase price or redemption
proceeds, whichever is lower) .............................. None
Redemption Fees .............................................. None
Exchange Fee ................................................. None
Class Z Shares
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ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees .............................................. .63%
12b-1 Fees ................................................... None
Other Expenses ............................................... .35%
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Total Fund Operating Expenses ............................ .98%
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1 3 5 10
EXAMPLE year years years years
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You would pay the following expenses on
a $1,000 investment, assuming:
(1) 5% annual return and (2) redemption
at the end of each time period:
Class Z .............................. $10 $31 $54 $122
The above example is based on restated data for the fiscal year ended April 30,
1996. The example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
The purpose of this table is to assist investors in understanding the various
costs and expenses that an investor in Class Z shares of the Fund will bear,
whether directly or indirectly. For more complete descriptions of the various
costs and expenses, see "How the Fund is Managed." "Other Expenses" includes
operating expenses of the Fund, such as Directors' and professional fees,
registration fees, reports to shareholders, transfer agency and custodian fees
and franchise taxes.
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2
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FINANCIAL HIGHLIGHTS
(for a share outstanding throughout the indicated period)
(Class Z Shares)
The following financial highlights have been audited by Deloitte & Touche
LLP, independent accountants, whose report thereon was unqualified. This
information should be read in conjunction with the financial statements and the
notes thereto, which appear in the Statement of Additional Information. The
financial highlights contain selected data for a Class Z share of common stock
outstanding, total return, ratios to average net assets and other supplemental
data for the period indicated. The information is based on data contained in the
financial statements. Further performance information is contained in the annual
report, which may be obtained without charge. See "Shareholder Guide--
Shareholder Services--Reports to Shareholders" in the Retail Class Prospectus.
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Class Z
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March 1, 1996(a)
Through
April 30, 1996
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PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ...................... $13.91
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INCOME FROM INVESTMENT OPERATIONS
Net investment income ..................................... .01
Net realized and unrealized gain on investments
and foreign currency transactions ........................ .49
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Total from investment operations ....................... .50
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LESS DISTRIBUTIONS
Dividends from net investment income ...................... --
Distributions from net capital and currency gains ......... --
Total distributions .................................... --
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Net asset value, end of period ........................... $14.41
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TOTAL RETURN(C) ............................................. 3.59%
RATIOS/SUPPLEMENTAL DATA:(D)
Net assets, end of period (000) ........................... $20,616
Average net assets (000) .................................. $20,298
Ratios to average net assets:
Expenses ................................................ .98%(b)
Net investment income ................................... .54%(b)
Portfolio turnover rate ................................... 136%
Average commission rate paid per share .................... $.0537
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(a) Commencement of offering of Class Z shares.
(b) Annualized.
(c) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of the period reported and includes
reinvestment of dividends and distributions. Total returns are not
annualized.
(d) Because of the event referred to in (a) and the timing of such, the ratios
of Class Z shares are not necessarily comparable to those of Class A, B or
C shares and are not necessarily indicative of future ratios.
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3
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THE FOLLOWING INFORMATION SUPPLEMENTS "HOW THE FUND IS MANAGED-MANAGER" IN
THE RETAIL CLASS PROSPECTUS:
For the period from March 1, 1996 through April 30, 1996, the Fund's
expenses as a percentage of average net assets for Class Z shares were .98%
(annualized).
THE FOLLOWING INFORMATION SUPPLEMENTS "HOW THE FUND IS MANAGED--
DISTRIBUTOR" IN THE RETAIL CLASS PROSPECTUS:
Prudential Securities Incorporated (Prudential Securities) serves as
the Distributor of Class Z shares and incurs the expenses of distributing
the Fund's Class Z shares under a Distribution Agreement with the Fund,
none of which is reimbursed by or paid for by the Fund.
THE FOLLOWING INFORMATION SUPPLEMENTS "HOW THE FUND VALUES ITS SHARES" IN
THE RETAIL CLASS PROSPECTUS:
The NAV of Class Z shares will generally be higher than the NAV of
Class A, Class B or Class C shares as a result of the fact that the Class Z
shares are not subject to any distribution and/or service fee. It is
expected, however, that the NAV of the four classes will tend to converge
immediately after the recording of dividends, which will differ by
approximately the amount of the distribution-related expense accrual
differential among the classes.
THE FOLLOWING INFORMATION SUPPLEMENTS "TAXES, DIVIDENDS AND
DISTRIBUTIONS--TAXATION OF SHAREHOLDERS" IN THE RETAIL CLASS PROSPECTUS:
The Fund has obtained opinions of counsel to the effect that neither
(i) the conversion of Class B shares into Class A shares nor (ii) the
exchange of any class of the Fund's shares for any other class of its
shares constitutes a taxable event for federal income tax purposes.
However, such opinions are not binding on the Internal Revenue Service.
THE FOLLOWING INFORMATION SUPPLEMENTS "SHAREHOLDER GUIDE--HOW TO BUY SHARES
OF THE FUND" AND "SHAREHOLDER GUIDE--HOW TO SELL YOUR SHARES" IN THE RETAIL
CLASS PROSPECTUS:
Class Z shares of the Fund are available for purchase by the following
categories of investors:
(i) pension, profit-sharing or other employee benefit plans qualified
under Section 401 of the Internal Revenue Code, deferred compensation and
annuity plans under Sections 457 and 403(b)(7) of the Internal Revenue
Code, and non-qualified plans for which the Fund is an available option
(collectively, Benefit Plans), provided such Benefit Plans (in combination
with other plans sponsored by the same employer or group of related
employers) have at least $50 million in defined contribution assets; (ii)
participants in any fee-based program sponsored by Prudential Securities or
its affiliates which includes mutual funds as investment options and for
which the Fund is an available option; and (iii) investors who are, or have
executed a letter of intent to become, shareholders of any series of The
Prudential Institutional Fund (Institutional Fund) on or before one or more
series of Institutional Fund reorganize or who on that date have
investments in certain products for which Institutional Fund provides
exchangeability. After a Benefit Plan qualifies to purchase Class Z shares,
all subsequent purchases will be for Class Z shares.
In connection with the sale of Class Z shares, the Manager, the
Distributor or one of their affiliates may pay dealers, financial advisers
and other persons which distribute shares a finders' fee based on a
percentage of the net asset value of shares sold by such persons.
THE FOLLOWING INFORMATION SUPPLEMENTS "SHAREHOLDER GUIDE--HOW TO EXCHANGE
YOUR SHARES" IN THE RETAIL CLASS PROSPECTUS:
Class Z shareholders of the Fund may exchange their Class Z shares for
Class Z shares of other Prudential Mutual Funds on the basis of relative
net asset value. Shareholders who qualify to purchase Class Z shares (other
than participants in any fee-based program) will have their Class B and
Class C shares which are not subject to contingent deferred sales charges
and their Class A shares exchanged for Class Z shares on a quarterly basis.
Participants in any fee-based program for which the Fund is an available
option will have their Class A shares, if any, exchanged for Class Z shares
when they elect to have those assets become a part of the fee-based
program. Upon leaving the program (whether voluntarily or not), such Class
Z shares (and, to the extent provided for in the program, Class Z shares
acquired through participation in the program) will be exchanged for Class
A shares at net asset value. Similarly, participants in the PSI 401(k)
Plan, an employee benefit plan sponsored by Prudential Securities (the PSI
401(k) Plan) for which the Fund's Class Z shares are an available option
and who wish to transfer their Class Z shares out of the PSI 401(k) Plan
following separation from service (i.e., voluntary or involuntary
termination of employment or retirement) will have their Class Z shares
exchanged for Class A shares at net asset value. See "Shareholder
Guide--How to Exchange Your Shares--Special Exchange Privilege."
THE INFORMATION ABOVE ALSO SUPPLEMENTS THE INFORMATION UNDER "FUND
HIGHLIGHTS" IN THE RETAIL CLASS PROSPECTUS AS APPROPRIATE.
4
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No dealer, sales representative or any other person has been authorized to give
any information or to make any representations, other than those contained in
this Prospectus, in connection with the offer contained herein, and, if given or
made, such other information or representations must not be relied upon as
having been authorized by the Fund or the Distributor. This Prospectus does not
constitute an offer by the Fund or by the Distributor to sell or a solicitation
of any offer to buy any of the securities offered hereby in any jurisdiction to
any person to whom it is unlawful to make such offer in such jurisdiction.
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TABLE OF CONTENTS
Page
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FUND HIGHLIGHTS .......................................................... 2
Risk Factors and Special Characteristics ............................... 2
FUND EXPENSES ............................................................ 4
FINANCIAL HIGHLIGHTS ..................................................... 5
HOW THE FUND INVESTS ..................................................... 8
Investment Objective and Policies ...................................... 8
Hedging and Return Enhancement Strategies .............................. 11
Other Investments and Policies ......................................... 14
Investment Restrictions ................................................ 16
HOW THE FUND IS MANAGED .................................................. 16
Manager ................................................................ 16
Distributor ............................................................ 17
Portfolio Transactions ................................................. 19
Custodian and Transfer and Dividend Disbursing Agent ................... 19
HOW THE FUND VALUES ITS SHARES ........................................... 19
HOW THE FUND CALCULATES PERFORMANCE ...................................... 20
TAXES, DIVIDENDS AND DISTRIBUTIONS ....................................... 21
GENERAL INFORMATION ...................................................... 23
Description of Common Stock ............................................ 23
Additional Information ................................................. 23
SHAREHOLDER GUIDE ........................................................ 24
How to Buy Shares of the Fund .......................................... 24
Alternative Purchase Plan .............................................. 25
How to Sell Your Shares ................................................ 28
Conversion Feature--Class B Shares ..................................... 31
How to Exchange Your Shares ............................................ 32
Shareholder Services ................................................... 33
DESCRIPTION OF ECONOMIC SECTORS .......................................... A-1
DESCRIPTION OF SECURITY RATINGS .......................................... B-1
THE PRUDENTIAL MUTUAL FUND FAMILY ........................................ C-1
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MF142Z 444123A
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CUSIP No.: Class Z: 74435J405
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PRUDENTIAL
MULTI-SECTOR
FUND, INC.
(Class Z Shares)
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PROSPECTUS
June 28, 1996
as supplemented on
September 12, 1996
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PRUDENTIAL MUTUAL FUNDS
BUILDING YOUR FUTURE [logo]
ON OUR STRENGTH(sm)
<PAGE>
PRUDENTIAL MULTI-SECTOR FUND, INC.
Supplement dated September 12, 1966 to
Prospectus dated June 28, 1996
THE FOLLOWING INFORMATION SUPPLEMENTS "GENERAL INFORMATION--DESCRIPTION OF
COMMON STOCK" IN THE PROSPECTUS:
The Fund is authorized to issue two billion shares of common stock,
$.001 par value per share, divided into four classes of shares, designated
Class A, Class B, Class C and Class Z shares, each consisting of 500
million authorized shares. Each class represents an interest in the same
assets of the Fund and is identical in all respects except that (i) each
class is subject to different sales charges and distribution and/or service
fees (except for Class Z shares which are not subject to any sales charges
and distribution and/or service fees), which may affect performance, (ii)
each class has exclusive voting rights on any matter submitted to
shareholders that relates solely to its arrangement and has separate voting
rights on any matter submitted to shareholders in which the interests of
one class differ from the interests of any other class, (iii) each class
has a different exchange privilege, (iv) only Class B shares have a
conversion feature and (v) Class Z shares are offered exclusively for sale
to a limited group of investors. For more information about Class Z shares,
contact your Prudential Securities financial adviser or Prusec
representative or telephone the Fund at (800) 225-1852. Participants in
programs sponsored by Prudential Retirement Services should contact their
client representative for more information about Class Z shares. Since
Class B and Class C shares generally bear higher distribution expenses than
Class A shares, the liquidation proceeds to shareholders of those classes
are likely to be lower than to Class A shareholders and to Class Z
shareholders, whose shares are not subject to any distribution and/or
service fee. In accordance with the Fund's Articles of Incorporation, the
Board of Directors may authorize the creation of additional series and
classes within such series, with such preferences, privileges, limitations
and voting and dividend rights as the Board of Directors may determine.
MF 142C-1 (9/12/96)
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PRUDENTIAL MULTI-SECTOR FUND, INC.
Supplement dated September 12, 1966 to
Statement of Additional Information dated June 28, 1996
THE FOLLOWING INFORMATION SUPPLEMENTS "PURCHASE AND REDEMPTION OF FUND
SHARES" IN THE STATEMENT OF ADDITIONAL INFORMATION:
Shares of the Fund may be purchased at a price equal to the next
determined net asset value per share plus a sales charge which, at the
election of the investor, may be imposed either (i) at the time of purchase
(Class A shares) or (ii) on a deferred basis (Class B or Class C shares).
Class Z shares of the Fund are offered to a limited group of investors at
net asset value without any sales charges. See "Shareholder Guide--How to
Buy Shares of the Fund" in the Prospectus.
Each class represents an interest in the same assets of the Fund and
is identical in all respects except that (i) each class is subject to
different sales charges and distribution and/or service fees (except for
Class Z shares which are not subject to any sales charges and distribution
and/or service fees), which may affect performance, (ii) each class has
exclusive voting rights on any matter submitted to shareholders that
relates solely to its arrangement and has separate voting rights on any
matter submitted to shareholders in which the interests of one class differ
from the interests of any other class, (iii) each class has a different
exchange privilege, (iv) only Class B shares have a conversion feature and
(v) Class Z shares are offered exclusively for sale to a limited group of
investors. See "Distributor" and "Shareholder Investment Account--Exchange
Privilege."
THE FOLLOWING INFORMATION SUPPLEMENTS "SHAREHOLDER INVESTMENT ACCOUNT--
EXCHANGE PRIVILEGE" IN THE STATEMENT OF ADDITIONAL INFORMATION:
CLASS Z. Class Z shares may be exchanged for Class Z shares of other
Prudential Mutual Funds.
MF 142C-2 (9/12/96)
