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Prudential Mutual Funds
Supplement dated August 1, 1995
The following information supplements the Statement of Additional
Information of each of the Funds listed below.
MANAGER
Prudential Mutual Fund Management, Inc. (PMF or the Manager), the Manager of
the Fund, is a subsidiary of Prudential Securities Incorporated and The
Prudential Insurance Company of America (Prudential). PMF has three wholly-owned
subsidiaries: Prudential Mutual Fund Distributors, Inc., Prudential Mutual Fund
Services, Inc. (PMFS or the Transfer Agent) and Prudential Mutual Fund
Investment Management, Inc. PMFS serves as the transfer agent for the Prudential
Mutual Funds and, in addition, provides customer service, record keeping and
management and administration services to qualified plans.
Prudential is one of the largest diversified financial services institutions
in the world and, based on total assets, the largest insurance company in North
America as of December 31, 1994. Its primary business is to offer a full range
of products and services in three areas: insurance, investments and home
ownership for individuals and families; health-care management and other benefit
programs for employees of companies and members of groups; and asset management
for institutional clients and their associates. Prudential (together with its
subsidiaries) employs nearly 100,000 persons worldwide, and maintains a sales
force of approximately 19,000 agents, 3,400 insurance brokers and 6,000
financial advisors. It insures or provides other financial services to more than
50 million people worldwide. Prudential is a major issuer of annuities,
including variable annuities. Prudential seeks to develop innovative products
and services to meet consumer needs in each of its business areas.
Investment advisory services are provided to the Fund by a unit of The
Prudential Investment Corporation (PIC or the Subadviser), a subsidiary of
Prudential.
The Subadviser maintains a credit unit which provides credit analysis and
research on both tax-exempt and taxable fixed-income securities. The portfolio
manager routinely consults with the credit unit in managing the Fund's
portfolio. The credit unit reviews on an ongoing basis issuers of tax-exempt and
taxable fixed-income obligations, including prospective purchases and portfolio
holdings of the Fund. Credit analysts have broad access to research and
financial reports, data retrieval services and industry analysts.
With respect to taxable fixed-income obligations, credit analysts review
financial statements published by corporate (and governmental) issuers to
examine income statements, balance sheets and cash flow numbers. They evaluate
this data against their expectations of sales, earnings growth and trends in
credit ratios. They study the impact of economic, regulatory and political
developments on companies and industries and look at the relative value of
companies. They are in regular communication both in person and by telephone
with company management, Wall Street analysts and rating agencies.
With respect to tax-exempt issuers, credit analysts review financial and
operating statements supplied by state and local governments and other issuers
of municipal securities to evaluate revenue projections and the financial
soundness of municipal issuers. They study the impact of economic and political
developments on state and local governments, evaluate industry sectors and meet
periodically with public officials and other representatives of state and local
governments and other tax-exempt issuers to discuss such matters as budget
projections, debt policy, the strength of the regional economy and, in the case
of revenue bonds, the demand for facilities. They also make site inspections to
review specific projects and to evaluate the progress of construction or the
operation of a facility.
Peter Allegrini oversees the municipal bond team at the Subadviser. He also
serves as the portfolio manager of the High Yield Series of Prudential Municipal
Bond Fund and the Pennsylvania Series of Prudential Municipal Series Fund. He
has been in the investment business since 1978.
From time to time, there may be media coverage of portfolio managers and
other investment professionals associated with the Manager and the Subadviser in
national and regional publications, or television and in other media.
Additionally, individual mutual fund portfolios are frequently cited in surveys
conducted by national and regional publications and media organizations such as
The Wall Street Journal, The New York Times, Barron's and USA Today.
SHAREHOLDER INVESTMENT ACCOUNT
Mutual Fund Programs
From time to time, the Fund (or a portfolio of the Fund, if applicable) may
be included in a mutual fund program with other Prudential Mutual Funds. Under
such a program, a group of portfolios will be selected and thereafter promoted
collectively. Typically, these programs are created with an investment theme,
e.g., to seek greater diversification, protection
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from interest rate movements or access to different management styles. In the
event such a program is instituted, there may be a minimum investment
requirement for the program as a whole. The Fund may waive or reduce the minimum
initial investment requirements in connection with such a program.
The mutual funds in the program may be purchased individually or as a part
of the program. Since the allocation of portfolios included in the program may
not be appropriate for all investors, investors should consult their Prudential
Securities Financial Advisor or Prudential/Pruco Securities Representative
concerning the appropriate blend of portfolios for them. If investors elect to
purchase the individual mutual funds that constitute the program in an
investment ratio different from that offered by the program, the standard
minimum investment requirements for the individual mutual funds will apply.
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APPENDIX--GENERAL INVESTMENT INFORMATION
The following terms are used in mutual fund investing.
Asset Allocation
Asset allocation is a technique for reducing risk, providing balance. Asset
allocation among different types of securities within an overall investment
portfolio helps to reduce risk and to potentially provide stable returns, while
enabling investors to work toward their financial goal(s). Asset allocation is
also a strategy to gain exposure to better performing asset classes while
maintaining investment in other asset classes.
Diversification
Diversification is a time-honored technique for reducing risk, providing
``balance'' to an overall portfolio and potentially achieving more stable
returns. Owning a portfolio of securities mitigates the individual risks (and
returns) of any one security. Additionally, diversification among types of
securities reduces the risks and (general returns) of any one type of security.
Duration
Debt securities have varying levels of sensitivity to interest rates. As
interest rates fluctuate, the value of a bond (or a bond portfolio) will
increase or decrease. Longer term bonds are generally more sensitive to changes
in interest rates. When interest rates fall, bond prices generally rise.
Conversely, when interest rates rise, bond prices generally fall.
Duration is an approximation of the price sensitivity of a bond (or a bond
portfolio) to interest rate changes. It measures the weighted average maturity
of a bond's (or a bond portfolio's) cash flows, i.e., principal and interest
rate payments. Duration is expressed as a measure of time in years--the longer
the duration of a bond (or a bond portfolio), the greater the impact of interest
rate changes on the bond's (or the bond portfolio's) price. Duration differs
from effective maturity in that duration takes into account call provisions,
coupon rates and other factors. Duration measures interest rate risk only and
not other risks, such as credit risk and, in the case of non-U.S. dollar
denominated securities, currency risk. Effective maturity measures the final
maturity dates of a bond (or a bond portfolio).
Market Timing
Market timing--buying securities when prices are low and selling them when
prices are relatively higher--may not work for many investors because it is
impossible to predict with certainty how the price of a security will fluctuate.
However, owning a security for a long period of time may help investors offset
short-term price volatility and realize positive returns.
Power of Compounding
Over time, the compounding of returns can significantly impact investment
returns. Compounding is the effect of continuous investment on long-term
investment results, by which the proceeds of capital appreciation (and income
distributions, if elected) are reinvested to contribute to the overall growth of
assets. The long-term investment results of compounding may be greater than that
of an equivalent initial investment in which the proceeds of capital
appreciation and income distributions are taken in cash.
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APPENDIX--PORTFOLIO MANAGERS
The following information supplements only the Statement of Additional
Information of the captioned Fund.
Prudential High Yield Fund, Inc.
According to data provided by Lipper Analytical Services, Inc., Prudential
High Yield Fund, Inc. is among the oldest and largest U.S. mutual funds in the
high current yield category of taxable fixed-income funds. Lars Berkman has
served as the Fund's portfolio manager since 1991. In managing the Fund, he
seeks to identify well priced, high yield securities consistent with the Fund's
investment objective. Mr. Berkman is assisted by a team of credit analysts who
analyze corporate cash flows, sales, earnings and management trends.
Prudential Diversified Bond Fund, Inc.
Prudential Government Income Fund, Inc.
Barbara Kenworthy serves as the portfolio manager of Prudential Diversified
Bond Fund, Inc. and Prudential Government Income Fund, Inc. and has 20 years of
investment management experience in both U.S. and foreign securities and
investment grade and high yield quality bonds. Ms. Kenworthy actively manages
each Fund's portfolio according to the investment adviser's interest rate
outlook. Consistent with each Fund's investment objective and policies, she
will, at times, invest in different sectors of the fixed-income markets seeking
price discrepancies and more favorable interest rates. The investment adviser
conducts extensive analysis of U.S. and overseas markets in an attempt to
identify trends in interest rates, supply and demand and economic growth. The
portfolio manager then selects the sectors, maturities and individual bonds she
believes provide the best value under those conditions. The portfolio manager is
assisted by two credit analysis teams, one that specializes in investment grade
bonds and one that specializes in high yield bonds.
Prudential Municipal Series Fund
(Arizona Series) (Ohio Series) and (Hawaii Income Series)
Prudential California Municipal Fund
(California Series) and (California Income Series)
Christian Smith serves as the portfolio manager of the Arizona Series, Ohio
Series and Hawaii Income Series of Prudential Municipal Series Fund and the
California Series and California Income Series of Prudential California
Municipal Fund. Consistent with each Series' investment objective and policies,
Mr. Smith seeks to invest in bonds with attractive yields and good relative
value in the municipal market. He makes use of Prudential's quantitative and
market analysis tools to structure the portfolios and seeks to achieve an
allocation among different sectors, coupons and maturities to achieve each
Series' investment goals. The portfolio manager also seeks bonds with a high
level of call protection.
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APPENDIX--HISTORICAL PERFORMANCE DATA
The historical performance data contained in this Appendix relies on data
obtained from statistical services, reports and other services believed by the
Manager to be reliable. The information has not been independently verified by
the Manager.
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Listed below are the names of the Prudential Mutual Funds and the dates of
the Statements of Additional Information to which this supplement relates.
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Name of Fund Statement Date
Prudential California Municipal Fund
California Income Series December 30, 1994
California Series December 30, 1994
Prudential Diversified Bond Fund, Inc. January 3, 1995
(as supplemented on June 20, 1995)
Prudential GNMA Fund, Inc. March 2, 1995
Prudential Government Income Fund, Inc. May 1, 1995
Prudential High Yield Fund, Inc. February 28, 1995
Prudential Intermediate Global Income Fund, Inc. March 2, 1995
Prudential Municipal Bond Fund June 30, 1995
Insured Series
High Yield Series
Intermediate Series
Prudential Municipal Series Fund
Arizona Series December 30, 1994
Florida Series December 30, 1994
Georgia Series December 30, 1994
Hawaii Income Series December 30, 1994
Maryland Series December 30, 1994
Massachusetts Series December 30, 1994
Michigan Series December 30, 1994
Minnesota Series December 30, 1994
New Jersey Series December 30, 1994
New York Series December 30, 1994
North Carolina Series December 30, 1994
Ohio Series December 30, 1994
Pennsylvania Series December 30, 1994
Prudential National Municipals Fund, Inc. February 28, 1995
Prudential Short Term Global Income Fund, Inc.
Global Assets Portfolio January 3, 1995
Short-Term Global Income Portfolio January 3, 1995
Prudential Structured Maturity Fund, Inc. March 1, 1995
Income Portfolio
Prudential U. S. Government Fund January 3, 1995
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MF 950C-10
