(ICON)
Prudential
Multi-Sector
Fund, Inc.
SEMI
ANNUAL
REPORT
Oct. 31, 1997
(LOGO)
<PAGE>
Prudential Multi-Sector Fund, Inc.
Performance At A Glance.
The Prudential Multi-Sector Fund beat the
volatile overall market (as
represented by the Standard & Poor's 500
Index) by five percentage points
for the six months ending October 31. Our
energy holdings did particularly
well and low-performing industrial stocks
were a smaller part of our portfolio
than of the index. Nonetheless, we trailed
the average capital appreciation
fund, as measured by Lipper Analytical
Services, because our health care
stocks lost ground and we didn't participate
in the exceptionally high returns
of money center banks and stock brokerages.
Cumulative Total Returns1
As of 10/31/97
<TABLE>
<CAPTION>
Six One
Five Since
Months Year
Years Inception2
<S> <C> <C>
<C> <C>
Class A 20.28%
20.86% 122.34% 160.38%
Class B 19.83 19.97
114.04 146.02
Class C 19.83 19.97
N/A 59.88
Class Z 20.39 21.06
N/A 31.55
Lipper Capital
Appreciation Fund Avg3 22.30 22.74
119.38 ***
</TABLE>
Average Annual Total Returns1
As of 9/30/97
<TABLE>
<CAPTION>
One
Five Since
Year
Years Inception2
<S> <C>
<C> <C>
Class A
22.49% 17.44% 14.10%
Class B 22.98
17.64 14.02
Class C 26.98
N/A 17.89
Class Z 29.14
N/A 22.77
</TABLE>
Past performance is not indicative of future
results. Principal and investment
return will fluctuate so that an investor's
share, when redeemed, may be worth
more or less than their original cost.
1 Source: Prudential Investments Fund
Management and Lipper Analytical
Services. The cumulative total returns do not
take into account sales charges.
The average annual returns do take into
account applicable sales charges. The
Fund charges a maximum front-end sales load
of 5% for Class A shares and a
declining 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.
Class B shares will automatically convert to
Class A shares on a quarterly
basis, approximately seven years after
purchase. Class Z shares do not carry
a sales charge or a distribution fee.
2 Inception dates: Class A and Class B,
5/24/90; Class C, 8/1/94; Class Z,
3/1/96.
3 These are average returns for the 240 funds
in Lipper Analytical Services'
Capital Appreciation category for the past
six months, 203 for the past year,
and 77 for the past five years.
***Lipper Since Inception returns are: Class
A, and Class B, 172.81%; Class C,
83.83%; and Class Z, 30.78% for all funds in
each share class.
How Investments Compared.
(As of 10/31/97)
(GRAPH)
U.S. General General Money
Growth Bond Muni Debt Market
Funds Funds Funds Funds
Source: Lipper Analytical Services. Financial
markets change, so a mutual
fund's past performance should never be used
to predict future results. The
risks to each of the investments listed above
are different -- we provide 12-
month total returns for several Lipper mutual
fund categories to show you that
reaching for higher returns means tolerating
more risk. The greater the risk,
the larger the potential reward or loss. In
addition, we've included
historical 20-year average annual returns.
These returns assume the
reinvestment of dividends.
U.S. Growth Funds will fluctuate a great
deal. Investors have received higher
historical total returns from stocks than
from most other investments. Smaller
capitalization stocks offer greater potential
for long-term growth but may be
more volatile than larger capitalization
stocks.
General Bond Funds provide more income than
stock funds, which can help smooth
out their total returns year by year. But
their prices still fluctuate
(sometimes significantly) and their returns
have been historically lower
than those of stock funds.
General Municipal Debt Funds invest in bonds
issued by state governments,
state agencies and/or municipalities. This
investment provides income that
is usually exempt from federal and state
income taxes.
Money Market Funds attempt to preserve a
constant share value; they don't
fluctuate much in price but, historically,
their returns have been generally
among the lowest of the major investment
categories.
<PAGE>
Greg Goldberg, Fund Manager
Portfolio
Managers' Report
(PHOTO)
The Fund seeks long-term capital growth by
investing primarily in the stocks
of domestic and foreign companies in specific
economic sectors. We invest with
a growth style, looking for stocks with above-
average revenue and earnings
growth. We focus our stock selection on
certain themes -- established long-
term trends -- that may identify companies in
different global markets or of
any size. The Fund may be affected to a
greater extent by a single economic,
political, or regulatory development than a
mutual fund that is not as
concentrated. There can be no assurance that
the Fund will achieve its
investment objective.
Evolving Strategy
Our strategy has evolved. We are still
aggressively concentrated in the stocks
we think have the most growth potential. At
least a third of our assets will
be in our top 10 stocks. But now we focus on
long-term themes that guide our
selections. However, because they are not
cyclical, we can hold our strong
growth stocks longer.
Strategy Session.
We concentrate our portfolio in order to get
the full benefit of our best
stock selections. Our 10 best stocks
comprised 37% of the portfolio on October
31 and our top 20 normally will comprise
about two thirds. Our stock selection
is guided by themes -- trends that we believe
will particularly favor some
industries or companies. We are currently
following three investment themes:
The aging of America -- as the average age of
the population increases, we
expect certain industries and firms to
benefit, such as the health care and
leisure industries. Toys R Us is among our
top 20 holdings because
grandparents tend to spend heavily on
grandchildren.
Productivity means technology -- we increased
our technology holdings to 32%
of total net assets as of October 31. We are
avoiding companies focused on the
competitive home personal computer market,
favoring instead software and
networking companies. Cisco Systems and 3Com
are among our top five holdings.
Global economic expansion -- The global
economy is growing rapidly, creating a
strong and widely based demand for energy.
Recently we focused on oil service
companies, which are necessary to keep energy
flowing. Schlumberger -- a large
supplier of oil servicing -- is our fourth
largest holding.
Portfolio Composition.
Sectors expressed as a percentage
of net assets as of 10/31/97.
(PIE CHART)
<PAGE>
What Went Well.
Some Winners.
Some of our investments had exceptional six-
month returns in our reporting
period. For example, Crescent Real Estate and
Patriot American Hospitality --
two REITs (real estate investment trusts)
each gained more than 50%. The
former owns office buildings, the latter owns
hotels. We took profits,
reducing our positions substantially.
The U.S. economic expansion provided strong
returns for our investments in
financial services, particularly a pair of
consumer credit companies: Imperial
Credit and The Money Store. These companies
rose 53% and 32%, respectively.
Our technology holdings also had a good year.
We took some profits on
Uniphase, a photonics company, but it is
still among our 10 largest holdings.
Photonics is the technology for using light
waves instead of electricity to
carry data, as in fiber optic cable and
lasers. Uniphase rose 69%.
Our focus on oil service companies also
helped our return. Schlumberger and
Smith International each rose almost 60%. We
took some profits on Schlumberger,
but prices are volatile in this sector; we
may buy more if the price declines
again. J. Ray McDermott gained more than
140%, while McDermott International,
Input/Output and one of our foreign holdings,
Bouyges Offshore, almost doubled.
And Not So Well.
Some Rough Spots.
Two of our larger holdings, the hospital
management firms Aetna and Columbia
HCA, turned in negative returns for the
period. This industry is still young
and is struggling more than we anticipated to
bring large-scale financial
management to medical care. In medical
devices, we sold Boston Scientific at
a loss because the fall period for
introducing new products revealed
unforeseen problems.
Our purchase of 3Com is not going smoothly,
largely because of its acquisition
of U.S. Robotics. 3Com is a networking
company. This year it bought the premier
manufacturer of modem cards, which are the
predominant home connection to the
internet. 3Com found its distribution
channels, both domestically and overseas,
fully stocked. With high inven-tories, sales
and earnings dropped and the stock
price followed. However, we expect the
surplus inventory to be cleared out
soon and the company's basic strength to be
reflected in its stock price.
Five Largest Holdings.
5.6% Cisco Systems
Computer Networking
5.2% Novartis AG (ADR)
Pharmaceuticals
4.4% 3Com Corp.
Computer Networking
4.1% Schlumberger
Oil Services
3.2% Nordstrom
Retail
Expressed as a percentage of net assetsas of
10/31/97.
Looking Ahead.
Our investment themes are long range.
Productivity means technology leads us
to photonics, a technology still in its early
stages. We expect this
technology to grow.
The accelerating sales of personal computers
costing less than $1,000 will
expand the market, but will squeeze margins
for both computer and component
manufacturers. We are focusing on software
and networking companies, which we
think will be the long-term winners from
greater computer use.
- ---------------------------------------------
- ----------------------------------
1
<PAGE>
President's Letter
December 18, 1997
(PHOTO)
It Was Another Good
Year.
Dear Shareholder:
By many measures 1997 was another good year
for investors. The economy
continued its sixth straight year of moderate
growth. Inflation remained
subdued and unemployment fell to record lows.
Thanks to this favorable
environment, the stock market posted its
third year of double-digit returns
while bond values rose as yields declined to
five-year lows.
There were periods of uncertainty, of course.
The financial markets declined
significantly three times during the year.
Yet following each episode the
markets rebounded as investors took advantage
of buying opportunities. That
is very important because it shows that
investors today are not easily swayed
by temporary setbacks -- they choose to stay
the course and are investing for
the long term.
As we begin a new year, here are a few
thoughts to help guide your investment
decisions:
- - Keep your investment expectations
realistic. Seasoned investors know that
financial markets rise and fall -- as will
the value of their holdings. Over
time, however, stocks have been shown to
produce very attractive returns. In
fact, the S&P 500 rose more than 280% from
the time of the last major market
decline (October 31, 1987) through December
31, 1996, according to Lipper
Analytical Services.
- - Don't make rash decisions. If you have an
investment plan, stick to it.
(If you don't have one, see your Prudential
Financial Professional.) While
past performance is not indicative of future
results, many investors have
profited by the long-term growth prospects of
stocks and income producing
potential of bonds.
- - Review your portfolio. Sit down with your
Prudential Securities Financial
Advisor or Pruco Securities Registered
Representative today. Your Prudential
professional can advise you on financial
strategies and explain important new
developments, such as the federal Taxpayer
Relief Act of 1997, which may
change the way you save for college, a
retirement nest egg or other long-term
financial goal.
Thank you for your continued confidence in
Prudential Mutual Funds &
Annuities. In 1998, we'll do everything we
can to keep you informed and
earn your trust.
Sincerely,
Brian M. Storms
President, Prudential Mutual Funds &
Annuities
- ---------------------------------------------
- ----------------------------------
2
<PAGE>
Portfolio of Investments as of October 31,
1997
(Unaudited)
PRUDENTIAL MULTI-SECTOR FUND, INC.
- ---------------------------------------------
- ---------------
<TABLE>
<CAPTION>
Shares Description
Value (Note 1)
<C> <S>
<C>
- ---------------------------------------------
- ---------------
LONG-TERM INVESTMENTS--96.9%
COMMON STOCKS--96.9%
- ---------------------------------------------
- ---------------
Agriculture Sector--2.1%
214,200 Archer-Daniels Midland Co.
$ 4,765,950
55,400 Potash Corp. of Saskatchewan,
Inc. 4,539,337
- ------------
9,305,287
- ---------------------------------------------
- ---------------
Auto Sector--0.7%
44,900 General Motors Corp.
2,882,019
- ---------------------------------------------
- ---------------
Basic Industry Sector--3.6%
279,800 Agrium, Inc. (Canada)
3,132,201
200,000 Corrections Corporation of
America
(a)
6,100,000
175,000 USA Waste Services, Inc. (a)
6,475,000
- ------------
15,707,201
- ---------------------------------------------
- ---------------
Consumer Goods & Services Sector--1.4%
137,700 Corning, Inc.
6,213,713
- ---------------------------------------------
- ---------------
Energy Sector--14.9%
340,650 Bouygues Offshore S.A. (ADR)
8,260,762
36,100 Coflexip
1,985,500
136,600 Input/Output, Inc. (a)
3,662,588
176,450 J. Ray McDermott, S.A. (a)
7,300,619
303,550(b) McDermott International, Inc.
11,022,659
165,850 Pioneer Natural Resources Co.
6,644,366
203,900(b) Schlumberger Ltd.
17,841,250
117,450 Smith International, Inc. (a)
8,955,562
- ------------
65,673,306
- ---------------------------------------------
- ---------------
Financial Services Sector--8.2%
331,300 Banco Rio De La Plata SA (ADR)
(Argentina) (a)
3,478,650
197,000(b) Federal National Mortgage
Association
9,542,187
317,900(b) Imperial Credit Industries,
Inc.
(a)
7,987,238
1 Patriot American Hospitality
Inc. 22
163,400 ReliaStar Financial Corp.
6,107,075
309,200(b) The Money Store, Inc.
$ 8,773,550
1 Travelers Group, Inc.
70
- ------------
35,888,792
- ---------------------------------------------
- ---------------
Health Care Sector--14.1%
147,200(b) Aetna Inc.
10,460,400
337,450(b) Columbia/HCA Healthcare Corp.
9,532,962
37,200 Johnson & Johnson Co.
2,134,350
96,200(b) Manor Care, Inc.
3,300,863
290,700 Novartis AG (ADR) (Switzerland)
22,747,275
177,600 Premier Research Worldwide,
LTD.
(a)
1,998,000
132,600 Sierra Health Services, Inc.
(a) 4,897,912
285,600 Trigon Healthcare, Inc. (a)
6,979,350
- ------------
62,051,112
- ---------------------------------------------
- ---------------
Leisure Sector--4.9%
146,900 Carnival Corp.-Class A
7,124,650
138,600 Hilton Hotels Corp.
4,270,612
558,600(b) La Quinta Inns, Inc.
9,984,975
- ------------
21,380,237
- ---------------------------------------------
- ---------------
Medical Technology--0.5%
75,200 Spine-Tech Inc (a)
2,340,600
- ---------------------------------------------
- ---------------
Precious Metals Sector--2.9%
338,700 UCAR International, Inc. (a)
12,701,250
- ---------------------------------------------
- ---------------
Retailing Sector--9.5%
228,000(b) Nordstrom, Inc.
13,965,000
35,000 Proffitt's, Inc. (a)
1,004,063
155,000 Sears Roebuck & Co.
6,490,625
494,200(b) The Limited, Inc.
11,644,587
255,500 Toys 'R' Us, Inc. (a)
8,702,969
- ------------
41,807,244
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 3
<PAGE>
Portfolio of Investments as of October 31,
1997
(Unaudited)
PRUDENTIAL MULTI-SECTOR FUND, INC.
- ---------------------------------------------
- ---------------
<TABLE>
<CAPTION>
Shares Description
Value (Note 1)
<C> <S>
<C>
- ---------------------------------------------
- ---------------
Technology Sector--32.9%
464,100 3Com Corp. (a)
$ 19,231,144
317,275(b) ADC Telecommunications, Inc.
(a) 10,509,734
440,000(b) Bay Networks, Inc. (a)
13,915,000
352,600(b) BDM International, Inc. (a)
7,801,275
76,950 Boston Scientific Corp. (a)
3,501,225
298,700 Cisco Systems, Inc. (a)
24,502,734
204,000 Cognizant Corp.
7,994,250
159,000 Comverse Technology, Inc. (a)
6,558,750
117,500 Documentum Inc. (a)
3,510,313
498,000 Glenayre Technologies, Inc. (a)
6,474,000
70,000 Harmonic Lightwaves Inc.
875,000
319,600 Larscom, Inc. (a)
3,196,000
65,000 Network Associates, Inc. (a)
3,233,750
306,000 Premisys Communications Inc.
(a) 8,338,500
350,000 Rational Software Corp. (a)
3,193,750
61,200 Tellabs, Inc. (a)
3,304,800
191,600 Uniphase Corp. (a)
12,861,150
322,350 Westell Technologies, Inc. (a)
5,681,419
- ------------
144,682,794
- ---------------------------------------------
- ---------------
Transportation Sector--1.2%
425,000 OMI Corp. (a)
5,073,438
Total long-term investments
(cost $379,384,090)
425,706,993
- ------------
Principal
Amount
(000)
- --------
SHORT-TERM INVESTMENTS--5.2%
REPURCHASE AGREEMENT
- ---------------------------------------------
- ---------------
$23,027 Joint Repurchase Agreement
Account
5.70%, 11/3/97, (Note 5)
(cost $23,027,000)
23,027,000
- ------------
Total investments before
short sales--102.1%
(cost $402,411,090; Note 4)
448,733,993
- ------------
COMMON STOCK SOLD SHORT(a)--(1.3%)
- ---------------------------------------------
- ---------------
Retailing Sector--(0.4%)
50,000 General Nutrition Co.
$ (1,575,000)
- ---------------------------------------------
- ---------------
Technology Sector--(0.5%)
20,500 Aware, Inc.
(248,562)
58,400 Hutchinson Technology, Inc.
(1,540,300)
14,000 Innovex, Inc.
(361,375)
- ------------
(2,150,237)
- ---------------------------------------------
- ---------------
Restaurants Sector--(0.4%)
68,000 Cracker Barrel Old Country
Store,
Inc.
(2,006,000)
- ------------
Total common stocks sold short
(proceeds $5,277,681)
(5,731,237)
- ------------
Total investments, net of short sales--100.8%
443,002,756
Other liabilities in excess of
other assets--(0.8%)
(3,628,761)
- ------------
Net Assets--100%
$439,373,995
- ------------
- ------------
</TABLE>
- ---------------
(a) Non-income producing security.
(b) Pledged as collateral on short sale.
ADR--American Depository Receipt.
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 4
<PAGE>
Statement of Assets and Liabilities
(Unaudited)
PRUDENTIAL MULTI-SECTOR FUND, INC.
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Assets
October 31, 1997
<S>
<C>
Investments, at value (cost
$402,411,090)................................
.................................
$448,733,993
Cash.........................................
.............................................
................ 8,631
Receivable for investments
sold.........................................
..................................
4,059,822
Deposits with broker for securities sold
short........................................
.................... 1,638,816
Dividends and interest
receivable...................................
......................................
483,270
Receivable for Fund shares
sold.........................................
..................................
145,158
Other
assets.......................................
.............................................
.......... 10,494
- ----------------
Total
assets.......................................
.............................................
....... 455,080,184
- ----------------
Liabilities
Payable for investments
purchased....................................
.....................................
8,322,159
Investments sold short, at value (proceeds
$5,277,681)..................................
.................. 5,731,238
Payable for Fund shares
reacquired...................................
.....................................
769,104
Accrued
expenses.....................................
.............................................
........ 431,866
Management fee
payable......................................
.............................................
. 248,078
Distribution fee
payable......................................
............................................
203,744
- ----------------
Total
liabilities..................................
.............................................
....... 15,706,189
- ----------------
Net
Assets.......................................
.............................................
............ $439,373,995
- ----------------
- ----------------
Net assets were comprised of:
Common stock, at
par..........................................
.........................................
$ 28,485
Paid-in capital in excess of
par..........................................
.............................
310,076,775
- ----------------
310,105,260
Distributions in excess of net investment
income.......................................
................ (1,011,047)
Accumulated net realized capital and
currency
gains........................................
............ 84,410,496
Net unrealized appreciation on investments
and foreign
currencies...................................
... 45,869,286
- ----------------
Net assets, October 31,
1997.........................................
.....................................
$439,373,995
- ----------------
- ----------------
Class A:
Net asset value and redemption price per
share
($263,609,121 / 16,892,734 shares of
common stock issued and
outstanding)...........................
$15.60
Maximum sales charge (5% of offering
price).......................................
..................... .82
- ----------------
Maximum offering price to
public.......................................
................................
$16.42
- ----------------
- ----------------
Class B:
Net asset value, offering price and
redemption price per share
($155,290,744 / 10,275,867 shares of
common stock issued and
outstanding)...........................
$15.11
- ----------------
- ----------------
Class C:
Net asset value, offering price and
redemption price per share
($4,403,207 / 291,417 shares of common
stock issued and
outstanding)................................
$15.11
- ----------------
- ----------------
Class Z:
Net asset value, offering price and
redemption price per share
($16,070,923 / 1,026,801 shares of
common stock issued and
outstanding).............................
$15.65
- ----------------
- ----------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 5
<PAGE>
PRUDENTIAL MULTI-SECTOR FUND, INC.
Statement of Operations (Unaudited)
- ---------------------------------------------
- ---------------
<TABLE>
<CAPTION>
Six Months
Ended
October 31,
Net Investment Loss
1997
<S>
<C>
Income
Dividends...................................
$ 1,773,089
Interest....................................
634,142
- -----------
Total
income.............................
2,407,231
- -----------
Expenses
Management
fee..............................
1,437,364
Distribution fee--Class
A................... 302,578
Distribution fee--Class
B................... 976,250
Distribution fee--Class
C................... 23,456
Transfer agent's fees and
expenses.......... 383,000
Custodian's fees and
expenses............... 138,000
Reports to
shareholders.....................
93,000
Registration
fees........................... 55,000
Legal fees and
expenses..................... 19,000
Audit fee and
expenses...................... 13,000
Directors' fees and
expenses................ 11,250
Miscellaneous...............................
7,092
- -----------
Total
expenses...........................
3,458,990
- -----------
Net investment
loss............................
(1,051,759)
- -----------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions
Net realized gain on:
Investment
transactions.....................
82,948,944
Foreign currency
transactions............... 99,912
Short sale
transactions.....................
1,407,487
- -----------
84,456,343
- -----------
Net change in unrealized appreciation
(depreciation) on:
Investments.................................
(1,069,947)
Foreign currency
transactions............... (80,575)
Short
sales.................................
(291,734)
- -----------
(1,442,256)
- -----------
Net gain on investments and foreign currency
transactions................................
83,014,087
- -----------
Net Increase in Net Assets
Resulting from
Operations......................
$81,962,328
- -----------
- -----------
</TABLE>
PRUDENTIAL MULTI-SECTOR FUND, INC.
Statement of Changes in Net Assets
(Unaudited)
- ---------------------------------------------
- ---------------
<TABLE>
<CAPTION>
Six
Months
Ended
Year Ended
Increase October
31, April 30,
in Net Assets 1997
1996
<S> <C>
<C>
Operations
Net investment income
(loss)..................... $
(1,051,759) $ 455,351
Net realized gain on
investments and foreign
currencies.................
84,456,343 42,517,921
Net change in unrealized
appreciation (depreciation)
of investments.............
(1,442,256) (20,779,387)
----------
- ------ ------------
Net increase in net assets
resulting from
operations.................
81,962,328 22,193,885
----------
- ------ ------------
Dividends and distributions (Note
1)
Dividends from net investment
income
Class A....................
- -- (400,225)
Class B....................
- -- --
Class C....................
- -- --
Class Z....................
- -- (55,126)
----------
- ------ ------------
- -- (455,351)
----------
- ------ ------------
Distributions in excess of net
investment income
Class A....................
(373,455) (566,340)
Class B....................
(339,853) (620,254)
Class C....................
(7,855) (12,405)
Class Z....................
(30,482) (50,726)
----------
- ------ ------------
(751,645) (1,249,725)
----------
- ------ ------------
Distributions from net capital
gains
Class A....................
(8,064,541) (23,717,108)
Class B....................
(7,344,836) (25,810,921)
Class C....................
(169,575) (537,914)
Class Z....................
(658,409) (2,170,377)
----------
- ------ ------------
(16,237,361) (52,236,320)
----------
- ------ ------------
Fund share transactions (net of
share conversion) (Note 6)
Net proceeds from Fund shares
subscribed.................
51,492,073 116,532,381
Net asset value of Fund shares
issued in reinvestment of
dividends and
distributions..............
15,959,019 50,651,007
Cost of shares reacquired.....
(109,542,140) (196,343,364)
----------
- ------ ------------
Net decrease in net assets
from Fund share
transactions...............
(42,091,048) (29,159,976)
----------
- ------ ------------
Total increase (decrease)........
22,882,274 (60,907,487)
Net Assets
Beginning of period..............
416,491,721 477,399,208
----------
- ------ ------------
End of period.................... $
439,373,995 $416,491,721
----------
- ------ ------------
----------
- ------ ------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
See Notes to Financial Statements. 6
<PAGE>
Notes to Financial Statements (Unaudited)
PRUDENTIAL MULTI-SECTOR FUND, INC.
- ---------------------------------------------
- -----------------------------------
Prudential Multi-Sector Fund, Inc. (the
'Fund'), is registered under the
Investment Company Act of 1940 as a
diversified, open-end management investment
company. The Fund was incorporated in
Maryland on February 21, 1990 and had no
operations until May 11, 1990 when 4,398
shares each of Class A and Class B
common stock were sold for $100,000 to
Prudential Investments Fund Management
LLC ('PIFM'). Investment operations commenced
June 29, 1990. The Fund's
investment objective is long-term growth of
capital by primarily investing in
equity securities of companies in various
economic sectors.
- ---------------------------------------------
- ---------------
Note 1. Accounting Policies
The following is a summary of significant
accounting policies followed by the
Fund in the preparation of its financial
statements.
Securities Valuation: Investments, including
options and securities sold short,
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 under triparty repurchase
agreements, as the case may be, take
possession of the underlying collateral
securities, the value of which exceeds the
principal amount of the repurchase
transaction, including accrued interest. If
the seller defaults, and the value
of the collateral declines or if bankruptcy
proceedings are commenced with
respect to the seller of the security,
realization of the collateral by the Fund
may be delayed or limited.
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 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 year end.
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, such realized
foreign currency gains (losses) are
included in the reported net realized gains
(losses) on investment transactions.
Net realized gain on foreign currency
transactions of $99,912 represents net
foreign exchange gains from sales and
maturities of short-term securities,
holding of foreign currencies, currency gains
or losses realized between the
trade and settlement dates of security
transactions, and the difference between
the amounts of dividends, interest and
foreign taxes recorded on the Fund's
books and the U.S. dollar equivalent amounts
actually received or paid. Net
currency gains and losses from valuing
foreign currency denominated assets and
liabilities at year end exchange rates are
reflected as a component of net
unrealized appreciation on investments and
foreign currencies.
Foreign security and currency transactions
may involve certain considerations
and risks not typically associated with those
of domestic origin as a result of,
among other factors, the level of
governmental supervision and regulation of
foreign securities markets and the
possibility of political or economic
instability.
Forward Currency Contracts: A forward
currency contract is a commitment to
purchase or sell a foreign currency at a
future date at a negotiated forward
rate. The Fund enters into forward currency
contracts in order to hedge its
exposure to changes in foreign currency
exchange rates on its foreign portfolio
holdings or on specific receivables and
payables denominated in a foreign
currency. The contracts are valued daily at
current 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
- ---------------------------------------------
- -----------------------------------
7
<PAGE>
Notes to Financial Statements (Unaudited)
PRUDENTIAL MULTI-SECTOR FUND, INC.
- ---------------------------------------------
- -----------------------------------
their contracts. There were no open foreign
currency contracts at October 31,
1997.
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. The proceeds received from
the short sale are maintained as collateral
for its obligation to deliver the
security upon conclusion of the sale. The
Fund may have to pay a fee to borrow
the particular security and may be obligated
to pay over any payments received
on such borrowed securities. A gain, limited
to the price at which the Fund sold
the security short, or a loss, unlimited in
magnitude, will be recognized upon
the termination of a short sale if the market
price at termination is less than
or greater than, respectively, the proceeds
originally received.
Securities Transactions and Net 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.
Expenses are recorded on the accrual basis
which may require the use of certain
estimates by management.
Option Writing: When the Fund writes an
option, an amount equal to the premium
received by the Fund is recorded as a
liability and is subsequently adjusted to
the current market value of the option
written. Premiums received from writing
options which expire unexercised are treated
by the Fund on the expiration date
as realized gains from options. The
difference between the premium and the
amount paid on effecting a closing purchase
transaction, including brokerage
commissions, is also treated as a realized
gain, or if the premium received is
less than the amount paid for the closing
purchase transaction, as a realized
loss. If a call option is exercised, the
premium is added to the proceeds from
the sale of the underlying security or
currency in determining whether the Fund
has realized a gain or loss. If a put option
is exercised, the premium reduces
the cost basis of the securities or
currencies purchased by the Fund. The Fund,
as writer of an option may have no control
over whether the underlying
securities may be sold (call) or purchased
(put) and, as a result, bears the
market risk of an unfavorable change in the
price of the security or currency
underlying the written option.
Dividends and Distributions: Dividends from
net investment income are declared
and paid semi-annually. The Fund will
distribute net capital gains, if any, at
least annually. Dividends and distributions
are recorded on the ex-dividend
date.
Income distributions and capital gains
distributions are determined in
accordance with income tax regulations which
may differ from generally accepted
accounting principles.
Reclassification of Capital Accounts: The
Fund accounts for and reports
distributions to shareholders in accordance
with the A.I.C.P.A.'s Statement of
Position 93-2: Determination, Disclosure, and
Financial Statement Presentation
of Income, Capital Gain, and Return of
Capital Distributions by Investment
Companies. During the six months ended
October 31, 1997, the Fund reclassified
$19,338 of foreign currency gains 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.
- ---------------------------------------------
- ---------------
Note 2. Agreements
The Fund has a management agreement with
PIFM. Pursuant to this agreement, PIFM
has responsibility for all investment
advisory services and supervises the
subadviser's performance of such services.
PIFM 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. PIFM
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 PIFM is computed
daily and payable monthly, at an annual
rate of .65 of 1% of the Fund's average daily
net assets. For the fiscal year
ended April 30, 1998, the manager has agreed
to limit its management fee to no
more than .625 of 1% of the first $500
million of the average daily net assets
of the Fund, .55 of 1% of the next $500
million of average daily net assets and
.50 of 1% of the Fund's average daily net
assets in excess of $1 billion.
- ---------------------------------------------
- -----------------------------------
8
<PAGE>
Notes to Financial Statements (Unaudited)
PRUDENTIAL MULTI-SECTOR FUND, INC.
- ---------------------------------------------
- -----------------------------------
The Fund has a distribution agreement with
Prudential Securities Incorporated
('PSI'), which acts as the distributor of the
Class A, Class B, Class C and
Class Z shares of the Fund. The Fund
compensates PSI 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.
No distribution or service fees are paid to
PSI as distributor of the Class Z
shares of the Fund.
Pursuant to the Class A, B and C Plans, the
Fund compensates PSI for
distribution-related activities at an annual
rate of up to .30 of 1%, 1% and 1%
of the average daily net assets of the Class
A, B and C shares, respectively.
Such expenses under the Plans were .25 of 1%
of the average daily net assets of
Class A shares and 1% of the average daily
net assets of both the Class B and C
shares for the six months ended October 31,
1997.
PSI has advised the Fund that they have
received approximately $26,700 in
front-end sales charges resulting from sales
of Class A shares during the six
months ended October 31, 1997. From these
fees, PSI paid such sales charges to
affiliated broker-dealers, which in turn paid
commissions to salespersons and
incurred other distribution costs.
PSI has advised the Fund that for the six
months ended October 31, 1997, it
received approximately $198,000 and $300 in
contingent deferred sales charges
imposed upon redemptions by certain Class B
and Class C shareholders,
respectively.
PSI, PIFM and PIC are indirect, wholly-owned
subsidiaries of The Prudential
Insurance Company of America.
The Fund, along with other affiliated
registered investment companies (the
'Funds'), entered into a credit agreement
(the 'Agreement') on December 31, 1996
with an unaffiliated lender. The maximum
commitment under the Agreement is
$200,000,000. The Agreement expires on
December 30, 1997. Interest on any such
borrowings outstanding will be at market
rates. The purpose of the Agreement is
to serve an an alternative source of funding
for capital share redemptions. The
Fund has not borrowed any amounts pursuant to
the Agreement as of October 31,
1997. The Funds pay a commitment fee at an
annual rate of .055 of 1% on the
unused portion of the credit facility. The
commitment fee is accrued and paid
quarterly on a pro-rata basis by the Funds.
- ---------------------------------------------
- ---------------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'),
a wholly-owned subsidiary of PIFM,
serves as the Fund's transfer agent. During
the six months ended October 31,
1997, the Fund incurred fees of approximately
$324,000 for the services of PMFS.
As of October 31, 1997, approximately $52,700
of such fees were due to PMFS.
Transfer agent fees and expenses in the
Statement of Operations include certain
out-of-pocket expenses paid to non-
affiliates.
For the six months ended October 31, 1997,
PSI earned approximately $37,500 in
brokerage commissions from portfolio
transactions executed on behalf of the
Fund.
- ---------------------------------------------
- ---------------
Note 4. Portfolio Securities
Purchases and sales of investment securities,
other than short-term investments,
for the six months ended October 31, 1997
were $304,988,179 and $365,480,883,
respectively.
The cost basis of investments for federal
income tax purposes at October 31,
1997 was $403,182,342 and, accordingly, net
unrealized appreciation of
investments for federal income tax purposes
was $45,551,651 (gross unrealized
appreciation--$69,788,803, gross unrealized
depreciation--$24,237,152).
- ---------------------------------------------
- ---------------
Note 5. Joint Repurchase Agreement Account
The Fund, along with other affiliated
registered investment companies, transfers
uninvested cash balances into a single joint
account, the daily aggregate
balance of which is invested in one or more
repurchase agreements collateralized
by U.S. Treasury or Federal agency
obligations. As of October 31, 1997, the Fund
had a 2.9% undivided interest in the
repurchase agreements in the joint account.
The undivided interest for the Fund
represents $23,027,000 in principal amount.
As of such date, each repurchase agreement in
the joint account and the value of
the collateral therefore were as follows:
Bear Stearns, 5.70%, in the principal amount
of $236,000,000, repurchase price
$236,112,100, due 11/3/97. The value of the
collateral including accrued
interest is $241,912,917.
Credit Suisse First Boston Corp., 5.72%, in
the principal amount of
$237,440,000, repurchase price $237,553,180,
due 11/3/97. The value of the
collateral including accrued interest is
$246,134,363.
Deutsche Morgan Grenfell, 5.70%, in the
principal amount of $236,000,000,
repurchase price $236,112,100, due 11/3/97.
The value of the collateral
including accrued interest is $240,720,618.
SBC Warburg, 5.66%, in the principal amount
of $92,714,000, repurchase price
$92,757,730, due 11/3/97. The value of the
collateral including accrued interest
is $94,588,984.
- ---------------------------------------------
- -----------------------------------
9
<PAGE>
Notes to Financial Statements (Unaudited)
PRUDENTIAL MULTI-SECTOR FUND, INC.
- ---------------------------------------------
- -----------------------------------
Note 6. Capital
The Fund offers Class A, Class B, Class C and
Class Z shares. Class A shares are
sold with a front-end sales charge of up to
5%. Class B shares are sold with a
contingent deferred sales charge which
declines from 5% to zero depending on the
period of time the shares are held. Class C
shares are sold with a 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 qualify to purchase Class A
shares at net asset value. Class Z
shares are not subject to any sales or
redemption charge and are offered
exclusively for sale to a limited group of
investors.
The Fund has authorized 2 billion shares of
common stock, $.001 par value per
share, equally divided into four classes,
designated Class A, B, C and Class Z
common stock.
Transactions in shares of common stock were
as follows:
<TABLE>
<CAPTION>
Class A Shares
Amount
- ------------------------------ -------------
- --- -------------
<S> <C>
<C>
Six months ended October 31,
1997:
Shares sold................... 2,753,244
$ 41,930,887
Shares issued in reinvestment
of
distributions............... 541,817
7,932,202
Shares reacquired.............
(4,348,356) (66,649,480)
-------------
- --- -------------
Net decrease in shares
outstanding before
conversion..................
(1,053,295) (16,786,391)
Shares issued upon conversion
from Class B................ 2,886,761
45,712,544
-------------
- --- -------------
Net increase in shares
outstanding................. 1,813,466
$ 28,926,153
-------------
- --- -------------
-------------
- --- -------------
Year ended April 30, 1997:
Shares sold................... 6,197,250
$ 86,386,710
Shares issued in reinvestment
ofdividends and
distributions............... 1,685,407
23,239,649
Shares reacquired.............
(8,634,608) (120,199,576)
-------------
- --- -------------
Net decrease in shares
outstanding before
conversion..................
(751,951) (10,573,217)
Shares issued upon conversion
from Class B................ 1,116,749
15,549,557
-------------
- --- -------------
Net increase in shares
outstanding................. 364,798
$ 4,976,340
-------------
- --- -------------
-------------
- --- -------------
<CAPTION>
Class B Shares
Amount
- ------------------------------ -------------
- --- -------------
<S> <C>
<C>
Six months ended October 31,
1997:
Shares sold................... 314,859
$ 4,687,076
Shares issued in reinvestment
of distributions............ 504,116
7,168,527
Shares reacquired.............
(2,196,309) (32,592,345)
-------------
- --- -------------
Net decrease in shares
outstanding before
conversion..................
(1,377,334) (20,736,742)
Shares reacquired upon
conversion
from Class A................
(2,956,049) (45,712,544)
-------------
- --- -------------
Net decrease in shares
outstanding.................
(4,333,383) $ (66,449,286)
-------------
- --- -------------
-------------
- --- -------------
Year ended April 30, 1997:
Shares sold................... 1,236,387
$ 16,762,196
Shares issued in reinvestment
of distributions............ 1,823,196
24,608,185
Shares reacquired.............
(4,273,687) (57,627,667)
-------------
- --- -------------
Net decrease in shares
outstanding before
conversion..................
(1,214,104) (16,257,286)
Shares reacquired upon
conversion
from Class A................
(1,142,516) (15,549,557)
-------------
- --- -------------
Net decrease in shares
outstanding.................
(2,356,620) $ (31,806,843)
-------------
- --- -------------
-------------
- --- -------------
<CAPTION>
Class C
- ------------------------------
Six months ended October 31,
1997:
Shares sold................... 16,563
$ 244,621
Shares issued in reinvestment
of distributions............ 11,913
169,403
Shares reacquired.............
(64,819) (963,459)
-------------
- --- -------------
Net decrease in shares
outstanding.................
(36,343) $ (549,435)
-------------
- --- -------------
-------------
- --- -------------
Year ended April 30, 1997:
Shares sold................... 63,373
$ 852,741
Shares issued in reinvestment
of distributions............ 39,044
526,955
Shares reacquired.............
(137,317) (1,878,420)
-------------
- --- -------------
Net decrease in shares
outstanding.................
(34,900) $ (498,724)
-------------
- --- -------------
-------------
- --- -------------
<CAPTION>
Class Z
- ------------------------------
Six months ended October 31,
1997:
Shares sold................... 303,219
$ 4,629,489
Shares issued in reinvestment
of distributions............ 46,959
688,887
Shares reacquired.............
(612,191) (9,336,856)
-------------
- --- -------------
Net decrease in shares
outstanding.................
(262,013) $ (4,018,480)
-------------
- --- -------------
-------------
- --- -------------
</TABLE>
- ---------------------------------------------
- -----------------------------------
10
<PAGE>
Notes to Financial Statements (Unaudited)
PRUDENTIAL MULTI-SECTOR FUND, INC.
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class Z Shares
Amount
- ------------------------------ -------------
- --- -------------
<S> <C>
<C>
Year ended April 30, 1997:
Shares sold................... 897,823
$ 12,530,734
Shares issued in reinvestment
of dividends and
distributions............... 165,237
2,276,218
Shares reacquired.............
(1,204,635) (16,637,701)
-------------
- --- -------------
Net decrease in shares
outstanding.................
(141,575) $ (1,830,749)
-------------
- --- -------------
-------------
- --- -------------
</TABLE>
- ---------------------------------------------
- ---------------
Note 7. Distributions
On November 20, 1997 the Board of Directors
of the Fund declared a distribution
from net short-term capital gains of $1.34
per share and from net long-term
caital gains of $1.615 per share for Class A,
B, C and Z shares, respectively,
payable on November 28, 1997 to shareholders
of record on November 25, 1997.
- ---------------------------------------------
- -----------------------------------
11
<PAGE>
Financial Highlights (Unaudited)
PRUDENTIAL MULTI-SECTOR FUND, INC.
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class A
- ---------------------------------------------
- ----------------------------
Six Months
Ended Years Ended
April 30,
October 31, -----------------------------
- ----------------------------
1997 >1997 1996
1995(a) 1994 1993
- ----------- -------- -------- ---
- ---- ------- -------
<S>
<C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......
$ 13.48 $ 14.40 $ 13.45 $
13.21 $ 13.19 $ 12.51
- ----------- -------- -------- ---
- ---- ------- -------
Income from investment operations:
Net investment income......................
(.03) .06 .09 .09
.18 .30
Net realized and unrealized gain on
investments and foreign currency
transactions............................
2.72 .70 2.52 1.44
1.64 1.47
- ----------- -------- -------- ---
- ---- ------- -------
Total from investment operations........
2.69 .76 2.61 1.53
1.82 1.77
- ----------- -------- -------- ---
- ---- ------- -------
Less distributions:
Dividends from net investment income.......
- -- (.03) (.04) --
(.21) (.30)
Distributions in excess of net investment
income..................................
(.03) (.04) -- --
- -- --
Distributions from net capital and currency
gains...................................
(.54) (1.61) (1.62) (1.29)
(1.59) (.79)
- ----------- -------- -------- ---
- ---- ------- -------
Total distributions.....................
(.57) (1.68) (1.66) (1.29)
(1.80) (1.09)
- ----------- -------- -------- ---
- ---- ------- -------
Net asset value, end of period.............
$ 15.60 $ 13.48 $ 14.40 $
13.45 $ 13.21 $ 13.19
- ----------- -------- -------- ---
- ---- ------- -------
- ----------- -------- -------- ---
- ---- ------- -------
TOTAL RETURN(b):...........................
20.28% 5.24% 20.69% 12.15%
14.16% 15.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............
$ 263,609 $203,197 $211,920
$76,035 $53,237 $43,390
Average net assets (000)...................
$ 240,089 $211,504 $201,315
$59,316 $49,840 $46,890
Ratios to average net assets:
Expenses, including distribution fees...
1.19%(c) 1.23% 1.23% 1.44%
1.30% 1.28%
Expenses, excluding distribution fees...
.94%(c) .98% .98% 1.19%
1.08% 1.08%
Net investment income...................
(.18)%(c) .48% .47% .68%
1.15% 2.44%
For Class A, B, C and Z shares:
Portfolio turnover rate....................
70% 99% 136% 122%
110% 209%
Average commission rate paid per share.....
$ .0553 $ .0572 $ .0537
N/A N/A N/A
</TABLE>
- ---------------
(a) Calculated based upon weighted average
shares outstanding during the year.
(b) 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. Total return for periods
of less than a full year are not
annualized.
(c) Annualized.
- ---------------------------------------------
- -----------------------------------
12
<PAGE>
Financial Highlights (Unaudited)
PRUDENTIAL MULTI-SECTOR FUND, INC.
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class B
- ---------------------------------------------
- ------------------------------
Six Months
Ended Years Ended
April 30,
October 31, -----------------------------
- ------------------------------
1997 1997 1996
1995(a) 1994 1993
- ----------- -------- -------- ---
- ----- -------- -------
<S>
<C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......
$ 13.11 $ 14.13 $ 13.29 $
13.16 $ 13.15 $ 12.47
- ----------- -------- -------- ---
- ----- -------- -------
Income from investment operations:
Net investment income (loss)...............
(.13) (.05) .02 (.01)
.07 .19
Net realized and unrealized gain on
investments and foreign currency
transactions............................
2.70 .68 2.45 1.43
1.63 1.47
- ----------- -------- -------- ---
- ----- -------- -------
Total from investment operations........
2.57 .63 2.47 1.42
1.70 1.66
- ----------- -------- -------- ---
- ----- -------- -------
Less distributions:
Dividends from net investment income.......
- -- -- (.01) --
(.10) (.19)
Distributions in excess of net investment
income..................................
(.03) (.04) -- --
- -- --
Distributions from net capital and currency
gains...................................
(.54) (1.61) (1.62) (1.29)
(1.59) (.79)
- ----------- -------- -------- ---
- ----- -------- -------
Total distributions.....................
(.57) (1.65) (1.63) (1.29)
(1.69) (.98)
- ----------- -------- -------- ---
- ----- -------- -------
Net asset value, end of period.............
$ 15.11 $ 13.11 $ 14.13 $
13.29 $ 13.16 $ 13.15
- ----------- -------- -------- ---
- ----- -------- -------
- ----------- -------- -------- ---
- ----- -------- -------
TOTAL RETURN(b):...........................
19.83% 4.43% 19.84%
11.31% 13.22% 14.13%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............
$ 155,291 $191,599 $239,739
$185,474 $128,098 $92,921
Average net assets (000)...................
$ 193,658 $219,249 $236,580
$153,209 $108,981 $99,072
Ratios to average net assets:
Expenses, including distribution fees...
1.94%(c) 1.98% 1.98% 2.19%
2.08% 2.08%
Expenses, excluding distribution fees...
.94%(c) .98% .98% 1.19%
1.08% 1.08%
Net investment income (loss)............
(.85)%(c) (.28)% (.22)% (.07)%
.35% 1.64%
</TABLE>
- ---------------
(a) Calculated based upon weighted average
shares outstanding during the period.
(b) 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.
(c) Annualized.
- ---------------------------------------------
- -----------------------------------
13
<PAGE>
Financial Highlights (Unaudited)
PRUDENTIAL MULTI-SECTOR FUND, INC.
- ---------------------------------------------
- -----------------------------------
<TABLE>
<CAPTION>
Class C
Class Z
- ---------------------------------------------
- ------ ---------------------------
August 1,
Six Months
1994(d) Six Months
Ended Years Ended April 30,
Through Ended Year Ended
October 31, ---------------------
April 30, October 31, April 30,
1997 1997 1996
1995(a) 1997 1997
- ----- ----- ------ -------
- -- ----------- -----------
<S>
<C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......
$ 13.11 $14.13 $13.29 $
13.74 $ 13.50 $ 14.41
- ----- ----- ------ -------
- -- ----------- -----------
Income from investment operations:
Net investment income (loss)...............
(.08) (.04) .03 --
.03 .11
Net realized and unrealized gain on
investments and foreign currency
transactions............................
2.65 .67 2.44 .84
2.69 .67
- ----- ----- ------ -------
- -- ----------- -----------
Total from investment operations........
2.57 .63 2.47 .84
2.72 .78
- ----- ----- ------ -------
- -- ----------- -----------
Less distributions:
Dividends from net investment income.......
- -- -- (.01) --
- -- (.04)
Distributions in excess of net investment
income..................................
(.03) (.04) -- --
(.03) (.04)
Distributions from net capital and currency
gains...................................
(.54) (1.61) (1.62)
(1.29) (.54) (1.61)
- ----- ----- ------ -------
- -- ----------- -----------
Total distributions.....................
(.57) (1.65) (1.63)
(1.29) (.57) (1.69)
- ----- ----- ------ -------
- -- ----------- -----------
Net asset value, end of period.............
$ 15.11 $13.11 $14.13 $
13.29 $ 15.65 $ 13.50
- ----- ----- ------ -------
- -- ----------- -----------
- ----- ----- ------ -------
- -- ----------- -----------
TOTAL RETURN(b):...........................
19.83% 4.43% 19.84%
6.62% 20.39% 5.48%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............
$ 4,403 $4,298 $5,125 $
3,587 $16,071 $17,398
Average net assets (000)...................
$ 4,653 $4,708 $5,056 $
1,653 $17,806 $19,206
Ratios to average net assets:
Expenses, including distribution fees...
1.94%(c) 1.98% 1.98%
2.37%(c) .94%(c) .98%
Expenses, excluding distribution fees...
.94%(c) .98% .98%
1.37%(c) .94%(c) .98%
Net investment income (loss)............
(.89)%(c) (.27)% (.21)%
.03%(c) .13%(c) .74%
<CAPTION>
March 1,
1996(e)
Through
April 30,
1996
- ----------
<S>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......
$ 13.91
- ----------
Income from investment operations:
Net investment income (loss)...............
.01
Net realized and unrealized gain on
investments and foreign currency
transactions............................
.49
- ----------
Total from investment operations........
.50
- ----------
Less distributions:
Dividends from net investment income.......
- --
Distributions in excess of net investment
income..................................
- --
Distributions from net capital and currency
gains...................................
- --
- ----------
Total distributions.....................
- --
- ----------
Net asset value, end of period.............
$ 14.41
- ----------
- ----------
TOTAL RETURN(b):...........................
3.59%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............
$ 20,616
Average net assets (000)...................
$ 20,298
Ratios to average net assets:
Expenses, including distribution fees...
.98%(c)
Expenses, excluding distribution fees...
.98%(c)
Net investment income (loss)............
.54%(c)
</TABLE>
- ---------------
(a) Calculated based upon weighted average
shares outstanding during the period.
(b) 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.
(c) Annualized.
(d) Commencement of offering of Class C
shares.
(e) Commencement of offering of Class Z
shares.
- ---------------------------------------------
- -----------------------------------
14
<PAGE>
Getting The Most From Your Prudential Mutual
Fund.
Change Your Mind.
You can exchange your shares in most
Prudential Mutual Funds for shares in
most other Prudential Mutual Funds, without
charges. This may be most helpful
if your investment needs change.
Reinvest Dividends Free Of Charge.
Reinvest your dividends and/or capital gains
distributions automatically --
without charge.
Invest For Retirement.
There is no minimum investment for an IRA.
Plus, you defer taxes on your
investment earnings by investing in an IRA.
If you'd like, you can contribute up to
$2,000 a year in an IRA. And if you
are married and not covered by a retirement
plan at work, you and your spouse
may each contribute $2,000 a year to an IRA
for a total of $4,000.
Change Your Job.
You can take your pension with you. Use a
rollover IRA to manage your company-
sponsored retirement plan while retaining the
special tax-deferred advantages.
Invest In Your Children.
There's no fee to open a custodial account
for a child's education or other
needs.
Take Income.
Would you like to receive monthly or
quarterly checks in any amount from your
fund account? Just let us know. We'll take
care of it. Of course, there are
minimum amounts. And shares redeemed may be
subject to tax, and Class B and C
shares may be subject to contingent deferred
sales charges. We'll gladly
answer your questions.
Keep Informed.
We want to keep you up-to-date. Of course,
you receive account activity
statements every quarter. But you also
receive annual and semi-annual fund
reports, as well as other important updates
on events that affect your
investments, including tax information.
This material is only authorized for
distribution when preceded or accompanied
by a current prospectus. Read the prospectus
carefully before you invest or
send money.
<PAGE>
Getting The Most From Your Prudential Mutual
Fund.
When you invest through Prudential Mutual
Funds, you receive financial advice
through a Prudential Securities financial
advisor or Prudential/Pruco
Securities registered representative. Your
advisor or representative can
provide you with the following services:
There's No Reward Without Risk; But Is This
Risk Worth It?
Your financial advisor or registered
representative can help you match the
reward you seek with the risk you can
tolerate. And risk can be difficult to
gauge -- sometimes even the simplest
investments bear surprising risks. The
educated investor knows that markets seldom
move in just one direction --
there are times when a market sector or asset
class will lose value or provide
little in the way of total return. Managing
your own expectations is easier
with help from someone who understands the
markets and who knows you!
Keeping Up With The Joneses.
A financial advisor or registered
representative can help you wade through the
numerous mutual funds available to find the
ones that fit your own individual
investment profile and risk tolerance. While
the newspapers and popular
magazines are full of advice about investing,
they are aimed at generic groups
of people or representative individuals, not
at you personally. Your financial
advisor or registered representative will
review your investment objectives
with you. This means you can make financial
decisions based on the assets and
liabilities in your current portfolio and
your risk tolerance -- not just
based on the current investment fad.
Buy Low, Sell High.
Buying at the top of a market cycle and
selling at the bottom are among the
most common investor mistakes. But sometimes
it's difficult to hold on to an
investment when it's losing value every
month. Your financial advisor or
registered representative can answer
questions when you're confused or worried
about your investment, and remind you that
you're investing for the long haul.
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Directors
Edward D. Beach
Delayne Dedrick Gold
Robert F. Gunia
Donald D. Lennox
Douglas H. McCorkindale
Mendel A. Melzer
Thomas T. Mooney
Stephen P. Munn
Richard A. Redeker
Robin B. Smith
Louis A. Weil, III
Clay T. Whitehead
Officers
Richard A. Redeker, President
Thomas A. Early, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Marguerite E. H. Morrison, Assistant
Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
Distributor
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 LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
The views expressed in this report and
information about the Fund's portfolio
holdings are for the period covered by this
report and are subject to change
thereafter.
The accompanying financial statements as of
October 31, 1997 were not audited
and, accordingly, no opinion is expressed on
them.
This report is not authorized for
distribution to prospective investors unless
preceded or accompanied by a current
prospectus.
<PAGE>
(LOGO)
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
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