<PAGE>
Prudential Mutual Funds
- ------------------------------------------------------------------------------
PROSPECTUS SUPPLEMENT DATED SEPTEMBER 20, 1999
Shareholder Guide
The following information supplements the Section entitled 'How the Fund is
Managed--Portfolio Manager' in the Prospectus:
Prudential Investments' Fixed Income Group manages more than $135 billion for
Prudential's retail investors, institutional investors, and policyholders.
Senior Managing Directors James J. Sullivan and Jack W. Gaston head the Group,
which is organized into teams specializing in different market sectors.
Top-down, broad investment decisions are made by the Fixed Income Policy
Committee, whereas bottom-up security selection is made by the sector teams.
Mr. Sullivan has overall responsibility for overseeing portfolio management
and credit research. Prior to joining Prudential Investments in 1998, he was a
managing director in Prudential's Capital Management Group, where he oversaw
portfolio management and credit research for Prudential's General Account and
subsidiary fixed-income portfolios. He has more than 16 years of experience in
risk management, arbitrage trading, and corporate bond investing.
Mr. Gaston has overall responsibility for overseeing quantitative research
and risk management. Prior to this appointment in 1999, he was senior managing
director of the Capital Management Group where he was responsible for the
investment performance and risk management for Prudential's General Account and
subsidiary fixed-income portfolios. He has more than 20 years of experience in
investment management, including extensive experience applying quantitative
techniques to portfolio management.
The Fixed Income Investment Policy Committee is comprised of key senior
investment managers. Members include seven sector team leaders, the chief
investment strategist, and the head of risk management. The Committee uses a
top-down approach to investment strategy, asset allocation, and general risk
management, identifying sectors in which to invest.
MF990C11
<PAGE>
The High Yield Team, headed by Casey Walsh, is primarily responsible for
overseeing the day-to-day management of the Fund. This Team uses a bottom-up
approach, which focuses on individual securities, while staying within the
guidelines of the Investment Policy Committee and the Fund's investment
restrictions and policies. In addition, the Credit Research team of analysts
supports the sector teams using bottom-up fundamentals, as well as economic and
industry trends. Other sector teams may contribute to securities selection when
appropriate.
The following are the fixed income sector teams and the corresponding team
leaders: (Assets under management are as of June 30, 1999.)
High Yield
Assets Under Management: $9.9 billion.
Team Leader: Casey Walsh. General Investment Experience: 17 years.
Portfolio Managers: 7. Average General Investment Experience: 19 years, which
includes team members with significant mutual fund experience.
Sector: Below-investment-grade corporate securities.
Investment Strategy: Focus is generally on bonds with high total return
potential, given existing risk parameters. They also seek securities with high
current income, as appropriate. The Team uses a relative value approach.
U.S. Liquidity
Assets Under Management: $27.9 billion.
Team Leader: Michael Lillard. General Investment Experience: 12 years.
Portfolio Managers: 10. Average General Investment Experience: 13 years, which
includes team members with significant mutual fund experience.
Sector: U.S. Treasuries, agencies and mortgages.
Investment Strategy: Focus is on high quality, liquidity and controlled risk.
<PAGE>
Corporate
Assets Under Management: $48.6 billion.
Team Leader: Steven Kellner. General Investment Experience: 13 years.
Portfolio Managers: 8. Average General Investment Experience: 13 years, which
includes team members with mutual fund experience.
Sector: U.S. investment-grade corporate securities.
Investment Strategy: Focus is on identifying spread, credit quality and
liquidity trends to capitalize on changing opportunities in the market.
Ultimately, they seek the highest expected return with the least risk.
Global Bond
Assets Under Management: $1.9 billion.
Team Leader: Gabriel Irwin. General Investment Experience: 18 years.
Portfolio Managers: 5. Average General Investment Experience: 14 years, which
includes team members with significant mutual fund experience.
Sector: Corporate and government securities of foreign issuers.
Investment Strategy: Focus is on a top-down, geographic-allocation process. They
seek to add value by exploiting yield variances between different countries and
credit qualities.
Emerging Markets
Assets Under Management: $1.6 billion.
Team Leader: David Bessey. General Investment Experience: 10 years.
Portfolio Managers: 3. Average General Investment Experience: 12 years, which
includes team members with mutual fund experience.
Sector: Government and corporate securities issued by developing markets and
countries.
Investment Strategy: Focus is on a fundamental investment approach that uses a
strong technical and value overlay to make country selections.
<PAGE>
Money Markets
Assets Under Management: $41.8 billion.
Team Leader: Joseph Tully. General Investment Experience: 16 years.
Portfolio Managers: 8. Average General Investment Experience: 12 years, which
includes team members with significant mutual fund experience.
Sector: High-quality short-term securities, including both taxable and
tax-exempt instruments.
Investment Strategy: Focus is on safety of principal, liquidity and controlled
risk.
Listed below are the names of the Prudential mutual funds and the dates of
the prospectuses to which this supplement relates.
Name of Fund Prospectus Date
- ------------------------------------------ -----------------
Prudential High Yield Fund, Inc. March 3, 1999
Prudential High Yield Total Return Fund,
Inc. June 1, 1999
Prudential Diversified Funds October 5, 1998
Conservative Growth Fund
Moderate Growth Fund
