(ICON)
Prudential
Multi-Sector
Fund, Inc.
ANNUAL
REPORT
April 30, 1998
(LOGO)
<PAGE>
Prudential Multi-Sector Fund, Inc.
Performance At A Glance.
In another year of exceptional stock market
performance, the
Prudential Multi-Sector Fund produced double-digit
returns but still trailed the average capital
appreciation
fund, as tracked by Lipper Analytical Services, by
a substantial
margin. Our move into smaller S&P 500 and mid-cap
companies hurt
our return, as did our limited exposure to better-
performing
industries such as telecommunications, drugs and
medical supplies.
<TABLE>
Cumulative Total Returns1
As of 4/30/98
<CAPTION>
One Five
Since
Year Years
Inception2
<S> <C> <C> <C>
Class A 29.86% 111.18%
181.12%
Class B 28.98 103.42
164.80
Class C 28.98 N/A
72.09
Class Z 30.03 N/A
42.09
Lipper Capital
Appreciation Fund Avg3 38.16 126.89
***
</TABLE>
<TABLE>
Average Annual Total Returns1
As of 3/31/98
<CAPTION>
One Five
Since
Year Years
Inception2
<S> <C> <C> <C>
Class A 23.32% 14.23%
13.07%
Class B 23.86 14.43
12.95
Class C 27.86 N/A
15.04
Class Z 29.99 N/A
16.71
</TABLE>
Past performance is not indicative of future
results. Principal
and investment return will fluctuate so that an
investor's shares,
when redeemed, may be worth more or less than
their
original cost.
1Source: Prudential 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.
2Inception dates: Class A and B, 6/29/90; Class C,
8/1/94; and Class Z,
3/1/96.
3Lipper average returns are for all funds in each
share class
for the one- and five-year periods.
***Lipper Since Inception returns are: Class A and
B, 210.01%;
Class C, 110.76% ; and Class Z, 47.92% for all
funds in each share
class.
How Investments Compared.
(As of 4/30/98)
(GRAPH)
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.
U.S. Taxable Money 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>
David Poiesz, Fund Manager
(PICTURE)
Portfolio
Manager's Report
The Fund seeks long-term capital growth by
investing primarily
in stocks of domestic and foreign companies. We
select stocks
following a growth investment style, looking for
stocks with
above-average revenue and earnings growth forecast
and
price/earnings ratios below growth rates. The Fund
may be
affected to a greater extent by any single
economic, political
or regulatory development than a mutual fund that
does not
focus its investments on specific economic
sectors. There can be no
assurance the Fund will achieve its investment
objective.
Fund Merger.
On June 24, 1998, shareholders approved a proposal
to
exchange the assets and liabilities of the
Prudential
Multi-Sector Fund for shares of the Prudential
Jennison Growth
Fund, a series of The Prudential Investment
Portfolios, Inc.
Strategy Session.
Drugs. We believe drugs offer a cost-effective
form of treatment
compared with traditional hospital-based
therapies. We had owned
the Swiss pharmaceutical company Novartis, which
contributed
a 27% return during the reporting period. We added
Bristol
Myers Squibb, Merck, Monsanto (which owns Searle),
American
Home Products, and Eli Lilly. The drive to contain
health
care costs may very well boost the earnings
of drug companies. We believe that other companies
that
are focused on containing health costs will
benefit, such
as Columbia Healthcare and Healthsouth, among
others.
Financials. We still like financial stocks. Stable
interest
rates and inflation have fostered solid business
performance.
We believe stock prices have room for further
gains as the
sector faces consolidation and productivity
improvements.
We added Chase Manhattan Bank and Citicorp during
the
reporting period. We also increased holdings in
Washington
Mutual and the Federal National Mortgage
Association.
Technology. Technology stocks remain volatile.
Some have
done very well, while others have been hurt by
transitions
to new products, inventory problems, and the
economic
slowdown in Asia. In well-run companies, temporary
problems
can present opportunities to buy at attractive
prices. We
have restructured our technology portfolio, adding
some
blue-chips, such as Texas Instruments, and some
lesser-known
companies that we believe have excellent growth
prospects,
such as Parametric Technologies.
Portfolio Composition.
Sectors expressed as a percentage of
net assets as of 4/30/98.
(PIE CHART)
<PAGE>
What Went Well.
About 13% of net assets were held in oil service
stocks, such as
McDermott International, during the reporting
period. Collectively,
these stocks contributed an 83% return and we took
our profits,
primarily in the early part of the period.
Our technology stocks also fared well. We took
profits on Uniphase, a
photonics company, after it gained nearly 120%. It
was one of our
larger holdings. Cisco Systems dominates the
market for computer
networking equipment and its return more than
doubled over the
past year. We also did well with Rational
Software. It
makes tools that software designers use. We bought
the stock
at a good price and already it has gained 67%
during our
reporting period.
Five Largest Holdings.
5.4% Cisco Systems, Inc.
Computer Networking
4.1% Limited, Inc.
Retailing
3.6% Nordstrom, Inc.
Retailing
3.3% Schlumberger Ltd.
Oil Services
3.2% Rational Software Corp.
Computer Software
Expressed as a percentage of net assetsas of
4/30/98.
And Not So Well.
A supply glut hurt our energy companies,
particularly stocks of
exploration and production companies. A warm
winter in the United
States, falling consumption in Asia, and increased
supplies have
combined to depress the price of oil and energy-
related stocks.
Pioneer Natural Resources, whose production was
below
estimates, suffered a price decline. We sold our
exploration
and production stocks.
We also owned Ucar International, which makes
graphite electrodes.
Allegations of price fixing pulled its stock price
down and we
sold it. The stock of 3Com, a major manufacturer
of networking
equipment, declined after the acquisition of U.S.
Robotics, a
leader in computer modems. 3Com earnings suffered
because the
industry was slow to agree on a way to handle the
higher-speed
modems, so we reduced our holdings here.
Jennison Welcomes You.
Upon completion of the reorganization,
shareholders of this
Fund will become shareholders of the Prudential
Jennison Growth
Fund. The Prudential Jennison Growth Fund seeks
long-term growth
of capital through investment primarily in stocks
of established
companies with above-average growth prospects. The
Fund is
managed by David Poiesz and Peter Reinemann who
share more
than 31 years of investment experience between
them. The
Jennison team tries to identify stocks with
attractive
potential for earnings growth appreciation in the
coming
12 to 18 months. They have room to grow and thus
focus
upon companies in the medium- to large-
capitalization range.
1
<PAGE>
President's Letter
June 24, 1998
See You On the Net!
Dear Shareholder:
We are proud to be part of the worldwide web and
we invite you
to visit our two web sites, if you have not
already done so. Yes,
we currently offer two sites -- each with its own
distinctive
identity.
http://www.prudential.com
The Prudential web site features information on
personal investing,
retirement planning, commercial and residential
real estate
opportunities, as well as insurance products for
life, health, home and
property.
You can look up performance data on your
Prudential mutual
funds, learn about proven investment strategies,
or take one
of our many interactive quizzes that will help
guide you in
determining long-term goals -- like how much to
save for
your child's college education or for your
retirement.
http://www.prusec.com
The Prudential Securities Virtual Branch Office is
a
full-service brokerage web site specifically
designed
to provide investors with the information they
need to make
informed financial decisions. It was rated the No.
1
full-service brokerage web site of its type by
Financial
Net News (February 1998), a subsidiary of
Institutional
Investor magazine, and was also rated among the
top corporate
web sites by Fortune magazine (Winter 1998).
What investors can find here are -- daily market
commentaries,
stock quotes, economic forecasts, product news,
and current
market research, in addition to interactive
investing programs.
Investors, through their Prudential Securities
Financial Advisors,
may also enroll in Prudential Online(R) and have
access to their
personal account information which includes
balances, security
values, transactions and account activities. They
can also
easily E-mail their Financial Advisor.
Both sites also contain professional opportunities
for people
who are searching for employment or considering a
change of
career paths.
We plan to make further enhancements to our web
pages as the
year progresses. So please, the next time you are
"web
browsing" or "surfing the net," pay us a visit.
Let us
know what you think and what you'd like to see
added in
the future.
Sincerely,
Brian M. Storms
President, Prudential Mutual Funds & Annuities
2
<PAGE>
Portfolio of Investments as
of April 30, 1998 PRUDENTIAL MULTI-
SECTOR FUND, INC.
- - --------------------------------------------------
- - ----------
<TABLE>
<CAPTION>
Shares Description Value
(Note 1)
<C> <S>
<C>
----------------------------------------------
- - -------------
LONG-TERM INVESTMENTS--97.4%
COMMON STOCKS--97.4%
----------------------------------------------
- - -------------
Consumer Goods & Services Sector--6.1%
83,000 Bestfoods
$ 4,554,625
100,000 Colgate-Palmolive Co.
8,968,750
132,000 General Electric Co.
11,236,500
- - ------------
24,759,875
- - --------------------------------------------------
- - ----------
Energy Sector--3.3%
158,900 Schlumberger Ltd.
13,168,838
- - --------------------------------------------------
- - ----------
Financial Services Sector--13.5%
240,000 Ace, Ltd.
9,090,000
70,000 American International Group, Inc.
9,209,375
110,000 Associates First Capital Corp.
8,222,500
31,000 Chase Manhattan Corp.
4,295,438
27,000 Citicorp
4,063,500
77,000 Federal National Mortgage
Association
4,610,375
120,000 Provident Cos. Inc.
4,687,500
149,400 Washington Mutual, Inc.
10,467,337
- - ------------
54,646,025
- - --------------------------------------------------
- - ----------
Health Care Sector--15.6%
90,000 American Home Products Corp.(a)
8,381,250
63,000 Bristol-Myers Squibb Co.
6,670,125
250,450 Columbia/HCA Healthcare Corp.
8,249,197
310,000 HEALTHSOUTH Corp.(a)
9,358,125
130,000 Lilly, (Eli) & Co.
9,043,125
121,000 Manor Care, Inc.
4,242,563
85,000 Merck & Co., Inc.
10,242,500
78,350 Novartis AG (ADR) (Switzerland)
6,365,937
81,500 Premier Research Worldwide,
LTD.(a)
509,375
- - ------------
63,062,197
Leisure Sector--6.6%
250,000 CBS Corp.(a)
$ 8,906,250
200,100 Hilton Hotels Corp.
6,390,694
90,000 Walt Disney Co.
11,188,125
- - ------------
26,485,069
- - --------------------------------------------------
- - ----------
Natural Resources Sector--2.1%
160,000 Monsanto Co.
8,460,000
- - --------------------------------------------------
- - ----------
Retailing Sector--11.7%
494,200 Limited, Inc. (The)
16,586,587
222,700 Nordstrom, Inc.
14,572,931
212,700 Proffitt's, Inc.(a)
8,454,825
127,500 Sears Roebuck & Co.
7,562,344
- - ------------
47,176,687
- - --------------------------------------------------
- - ----------
Technology Sector--34.7%
90,000 3Com Corp.(a)
3,082,500
440,000 Bay Networks, Inc.(a)
10,312,500
150,000 CIENA Corp.(a)
8,362,500
295,400 Cisco Systems, Inc.(a)
21,638,050
92,000 CNET, Inc.(a)
3,059,000
220,000 Compaq Computer Corp.
6,173,750
131,800 Computer Associates International,
Inc.
7,718,537
117,000 Hewlett-Packard Co.
8,811,562
100,000 Intel Corp.
8,081,250
110,000 KLA-Tencor Corp.(a)
4,434,375
113,000 Microsoft Corp.(a)
10,184,125
60,000 Network Associates, Inc.(a)
4,110,000
190,000 Parametric Technology Corp.(a)
6,074,063
405,000 Platinum Technology, Inc.(a)
10,327,500
780,000 Rational Software Corp.(a)
13,113,750
61,200 Tellabs, Inc.(a)
4,337,550
80,000 Texas Instruments, Inc.
5,125,000
130,000 WorldCom, Inc.(a)
5,561,563
- - ------------
140,507,575
</TABLE>
- - --------------------------------------------------
- - ------------------------------
See Notes to Financial Statements. 3
<PAGE>
PRUDENTIAL MULTI-SECTOR FUND, INC.
Portfolio of Investments as of April 30, 1998
- - --------------------------------------------------
- - ----------
<TABLE>
<CAPTION>
Shares Description Value
(Note 1)
<C> <S>
<C>
----------------------------------------------
- - -------------
Transportation Sector--3.8%
145,000 Boeing Co. (The)
$ 7,259,062
120,000 FDX Corp.(a)
8,160,000
- - ------------
15,419,062
- - ------------
Total long-term investments
(cost $344,962,444)
393,685,328
- - ------------
Principal
Amount
(000)
SHORT-TERM INVESTMENT--1.4%
REPURCHASE AGREEMENT--1.4%
- - ---------------
(a) Calculated based upon 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.
- - --------------------------------------------------
- - ------------------------------
See Notes to Financial Statements. 14
<PAGE>
Report of Independent Accountants
PRUDENTIAL MULTI-SECTOR FUND, INC.
- - --------------------------------------------------
- - ------------------------------
The Shareholders and Board of Directors of
Prudential Multi-Sector Fund, Inc.
In our opinion, the accompanying statement of
assets and liabilities, including
the portfolio of investments, and the related
statements of operations and of
changes in net assets and the financial highlights
present fairly, in all
material respects, the financial position of
Prudential Multi-Sector Fund, Inc.
(the 'Fund') at April 30, 1998, the results of its
operations for the year then
ended, and the changes in its net assets and the
financial highlights for each
of the two years in the period then ended, in
conformity with generally accepted
accounting principles. These financial statements
and financial highlights
(hereafter referred to as 'financial statements')
are the responsibility of the
Fund's management; our responsibility is to
express an opinion on these
financial statements based on our audits. We
conducted our audits of these
financial statements in accordance with generally
accepted auditing standards
which require that we plan and perform the audit
to obtain reasonable assurance
about whether the financial statements are free of
material misstatement. An
audit includes examining, on a test basis,
evidence supporting the amounts and
disclosures in the financial statements, assessing
the accounting principles
used and significant estimates made by management,
and evaluating the overall
financial statement presentation. We believe that
our audits, which included
confirmation of securities at April 30, 1998 by
correspondence with the
custodian and brokers and the application of
alternative auditing procedures
where confirmations from brokers were not
received, provide a reasonable basis
for the opinion expressed above. The accompanying
financial highlights for each
of the three years in the period ended April 30,
1996 were audited by other
independent accountants, whose opinion dated June
13, 1996 was unqualified.
As described in Note 7 to the financial
statements, the Fund's Board of
Directors and shareholders have approved a
reorganization plan whereby the Fund
will be merged into Prudential Jennison Growth
Fund, a series of The Prudential
Investment Portfolios, Inc. (formerly Prudential
Jennison Series Fund, Inc.)
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
June 25, 1998
- - --------------------------------------------------
- - ------------------------------
15
<PAGE>
Federal Income Tax Information (Unaudited)
PRUDENTIAL MULTI-SECTOR FUND, INC.
- - --------------------------------------------------
- - ------------------------------
We are required by the Internal Revenue Code to
advise you within 60 days of the
Fund's fiscal year end (April 30, 1998) 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,
1998, the Fund paid a currency
gain and short-term capital gain distribution for
Class A, Class B, Class C and
Class Z shares totaling $1.37 per share, which is
taxable as ordinary income.
The Fund also paid long-term capital gain
distributions for Class A, Class B,
Class C and Class Z shares totaling $2.15 per
share, of which $0.84 was taxable
at the 28% rate gain and $1.31 was taxable at the
20% rate gain.
We wish to advise you that the corporate dividends
received deduction for the
Fund is zero. In January 1999, 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 1998.
- - --------------------------------------------------
- - ------------------------------
16
<PAGE>
Comparing A $10,000 Investment.
- - --------------------------------------------
Prudential Multi-Sector Fund, Inc.
vs. the S&P 500 Index.
- - -- Prudential Multi-Sector Fund, Inc.
// S&P 500 Index.
Class A
(GRAPH)
Average Annual Total
Returns - Class A
- - -------------------------
With Sales Load
13.36% Since Inception
14.94% for 5 Years
23.37% for 1 Year
Without Sales Load
14.10% Since Inception
16.13% for 5 Years
29.86% for 1 Year
Class B
(GRAPH)
Average Annual Total
Returns - Class B
- - ----------------------
With Sales Load
13.23% Since Inception
15.15% for 5 Years
23.98% for 1 Year
Without Sales Load
13.23% Since Inception
15.26% for 5 Years
28.98% for 1 Year
Class C
(GRAPH)
Average Annual Total
- - -----------------------
Returns - Class C
With Sales Load
15.60% Since Inception
27.98% for 1 Year
Without Sales Load
15.60% Since Inception
28.98% for 1 Year
Class Z
(GRAPH)
Average Annual Total
Returns - Class Z
- - ---------------------------
17.63% Since Inception
30.03% for 1 Year
Past performance is not indicative of future
results. Investment
return and principal value will fluctuate so an
investor's shares,
when redeemed, may be worth more or less than
their original cost. The box on top of the graphs
(where
applicable) is designed to give you an idea of how
much
the Fund's returns can fluctuate from year to year
by
measuring the best and worst calendar years in
terms
of total annual return since inception of each
share class.
These graphs are furnished to you in accordance
with SEC
regulations. They compare a $10,000 investment in
the
Prudential Multi-Sector Fund (Class A, Class B,
Class
C and Class Z) with a similar investment in the
S&P
500 Index by portraying the initial account values
at
the commencement of operations of each class, and
subsequent
account values at the end of this reporting period
(April 30),
as measured on a quarterly basis, beginning in
1990 for Class
A and B shares, in 1994 for Class C shares, and in
1996 for
Class Z shares. For purposes of the graphs, and
unless
otherwise indicated, in the accompanying tables it
has
been assumed (a) that the maximum applicable front-
end
sales charge was deducted from the initial $10,000
investment
in Class A shares; (b) the maximum applicable
contingent
deferred sales charge was deducted from the value
of the
investment in Class B and Class C shares, assuming
full
redemption on April 30, 1998; (c) all recurring
fees (including management fees) were deducted;
and (d)
all dividends and distributions were reinvested.
Class Z
shares do not have a sales charge or a
distribution fee.
Class B shares will automatically convert to Class
A shares,
on a quarterly basis, beginning approximately
seven years
after purchase. This conversion feature 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 in
the S&P 500 may differ substantially from the
securities
in the Fund. The S&P 500 is not the only index
that may
be used to characterize performance of stock funds
and
other indexes may portray different comparative
performance.
Investors cannot directly invest in an index.
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
Douglas H. McCorkindale
Mendel A. Melzer, CFA
Thomas T. Mooney
Stephen P. Munn
Richard A. Redeker
Robin B. Smith
Louis A. Weil, III
Clay T. Whitehead
Officers
Richard A. Redeker, President
Robert F. Gunia, 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.
This report is not authorized for distribution to
prospective
investors unless preceded or accompanied by a
current prospectus.
74435J108 MF142E
74435J207 Cat. #444365Y
74435J306
74435J405
</TABLE>
