PRUDENTIAL HIGH YIELD FUND INC, 497, 1998-06-01

PRUDENTIAL HIGH YIELD FUND INC
497, 1998-06-01

Previous: FIDELITY PHILLIPS STREET TRUST, 497, 1998-06-01

Next: MICROSEMI CORP, 8-K, 1998-06-01

Prudential High Yield Fund, Inc.

- --------------------------------------------------------------------------------

PROSPECTUS DATED MARCH 3, 1998
(REVISED AS OF JUNE 1, 1998)

- --------------------------------------------------------------------------------

Prudential High Yield Fund, Inc. (the Fund) is an open-end, diversified
management investment company whose primary investment objective is to maximize
current income through investment in a diversified portfolio of high yield fixed
income securities. Capital appreciation is a secondary investment objective
which will only be sought when consistent with the primary objective. The high
yield securities sought by the Fund will generally be securities rated in the
medium to lower categories by recognized rating services (Baa or lower by
Moody's Investors Service, or BBB or lower by Standard & Poor's Ratings Group or
comparably rated by any other Nationally Recognized Statistical Rating
Organization) or non-rated securities which are, in the opinion of the Fund's
investment adviser, of comparable quality. There can be no assurance that the
Fund's investment objectives will be achieved. See "How the Fund
Invests--Investment Objectives and Policies."

THE FUND MAY INVEST UP TO 100% OF ITS ASSETS IN LOWER RATED BONDS, COMMONLY
KNOWN AS JUNK BONDS. INVESTMENTS OF THIS TYPE ARE SUBJECT TO GREATER RISK OF
LOSS OF PRINCIPAL AND INTEREST, INCLUDING DEFAULT RISK, THAN HIGHER RATED BONDS.
THE FUND MAY ALSO INVEST IN DISTRESSED SECURITIES. PURCHASERS SHOULD CAREFULLY
ASSESS THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND. SEE "HOW THE FUND
INVESTS--INVESTMENT OBJECTIVES AND POLICIES" AT PAGE 9. SEE ALSO "HOW THE FUND
INVESTS--RISK FACTORS--RISKS RELATING TO INVESTING IN HIGH YIELD SECURITIES" AT
PAGE 14, "--RISKS RELATING TO INVESTING IN DISTRESSED SECURITIES" AT PAGE 15 AND
"DESCRIPTION OF CORPORATE BOND RATINGS" AT PAGE A-1.

The Fund's address is Gateway Center Three, 100 Mulberry Street, Newark, New
Jersey 07102-4077, and its telephone number is (800) 225-1852.

- --------------------------------------------------------------------------------

This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. Additional information about
the Fund has been filed with the Securities and Exchange Commission (the
Commission) in a Statement of Additional Information, dated March 3, 1998, which
information is incorporated herein by reference (is legally considered a part of
this Prospectus) and is available without charge upon request to the Fund at the
address or telephone number noted above. The Commission maintains a Web site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference, and other information regarding the Fund.

- --------------------------------------------------------------------------------

INVESTORS ARE ADVISED TO READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE
REFERENCE.

- --------------------------------------------------------------------------------

AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF ANY BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

<PAGE>

- --------------------------------------------------------------------------------

FUND HIGHLIGHTS

- --------------------------------------------------------------------------------

The following summary is intended to highlight certain information
contained in this Prospectus and is qualified in its entirety by the more
detailed information appearing elsewhere herein.

WHAT IS PRUDENTIAL HIGH YIELD FUND, INC.?

Prudential High Yield Fund, Inc. is a mutual fund. A mutual fund pools the
resources of investors by selling its shares to the public and investing the
proceeds of such sale in a portfolio of securities designed to achieve its
investment objective. Technically, the Fund is an open-end, diversified
management investment company.

WHAT ARE THE FUND'S INVESTMENT OBJECTIVES?

The primary investment objective of the Fund is to maximize current income
through investment in a diversified portfolio of high yield fixed income
securities rated Baa or lower by Moody's Investors Service (Moody's), or BBB or
lower by Standard & Poor's Ratings Group (Standard & Poor's) or comparably rated
by any other Nationally Recognized Statistical Rating Organization (NRSRO), and
which, in the opinion of the Fund's investment adviser, do not subject a fund
investing in such securities to unreasonable risks. As a secondary investment
objective, the Fund will seek capital appreciation but only when consistent with
its primary objective. Capital appreciation may result, for example, from an
improvement in the credit standing of an issuer whose securities are held in the
Fund's portfolio or from a general lowering of interest rates, or a combination
of both. There can be no assurance that the Fund's objectives will be achieved.
See "How the Fund Invests--Investment Objectives and Policies" at page 9.

WHAT ARE THE FUND'S RISK FACTORS AND SPECIAL CHARACTERISTICS?

The Fund invests primarily in lower rated bonds, commonly known as junk
bonds. Investments of this type are subject to greater risk of loss of principal
and interest. The Fund may also invest in distressed securities. Purchasers
should carefully assess the risks associated with an investment in the Fund. See
"How the Fund Invests--Investment Objectives and Policies" at page 9. See also
"How the Fund Invests--Risk Factors-Risks Relating to Investing in High Yield
Securities" at page 14, "--Risks Relating to Investing in Distressed Securities"
at page 15 and "Description of Corporate Bond Ratings" at page A-1. As with an
investment in any mutual fund, an investment in this Fund can decrease in value
and you can lose money.

The Fund may also engage in various hedging and return enhancement
strategies, including using derivatives, which may be considered speculative and
may result in higher risks and costs to the Fund. See "How the Fund Invests -
Hedging and Return Enhancement Strategies" at page 10.

WHO MANAGES THE FUND?

Prudential Investments Fund Management LLC (PIFM or the Manager) is the
Manager of the Fund and is compensated for its services at an annual rate of .50
of 1% of the Fund's average daily net assets up to and including $250 million,
.475 of 1% of the next $500 million, .45 of 1% of the next $750 million, .425 of
1% of the next $500 million, .40 of 1% of the next $500 million, .375 of 1% of
the next $500 million and .35 of 1% of the Fund's average daily net assets in
excess of $3 billion. As of January 31, 1998, PIFM served as manager or
administrator to 64 investment companies, including 42 mutual funds, with
aggregate assets of approximately $63 billion. The Prudential Investment
Corporation, which does business under the name of Prudential Investments (PI,
the Subadviser or the investment adviser) furnishes investment advisory services
in connection with the management of the Fund under a Subadvisory Agreement with
PIFM. See "How the Fund is Managed--Manager" at page 18.

WHO DISTRIBUTES THE FUND'S SHARES?

Prudential Investment Management Services LLC (the Distributor) acts as the
Distributor of the Fund's Class A, Class B, Class C and Class Z shares. The
Distributor is paid an annual distribution and service fee which is currently
being charged at the rate of .15 of 1% of the average daily net assets of the
Class A shares, at the rate of up to .75 of 1% of the average daily net assets
of the Class B shares and which is currently being charged at the rate of .75 of
1% of the average daily net assets of the Class C shares. The Distributor incurs
the expense of distributing the Fund's Class Z shares under a Distribution
Agreement with the Fund, none of which is reimbursed by the Fund. See "How the
Fund is Managed -- Distributor" at page 18.

<PAGE>

WHAT IS THE MINIMUM INVESTMENT?

The minimum initial investment is $1,000 for Class A and Class B shares and
$5,000 for Class C shares. The minimum subsequent investment is $100 for Class
A, Class B and Class C shares. Class Z shares are not subject to any minimum
investment requirement. There is no minimum investment requirement for certain
retirement and employee savings plans or custodial accounts for the benefit of
minors. For purchases made through the Automatic Savings Accumulation Plan, the
minimum initial and subsequent investment is $50. See "Shareholder Guide--How to
Buy Shares of the Fund" at page 24 and "Shareholder Guide--Shareholder Services"
at page 34.

HOW DO I PURCHASE SHARES?

You may purchase shares of the Fund through the Distributor or brokers or
dealers that have entered into agreements to act as participating or introducing
brokers for the Distributor (Dealers) or directly from the Fund through its
transfer agent, Prudential Mutual Fund Services LLC (PMFS or the Transfer
Agent). In each case, sales are made at the net asset value per share (NAV) next
determined after receipt of your purchase order by the Transfer Agent, a Dealer
or the Distributor, plus a sales charge which may be imposed either (i) at the
time of purchase (Class A shares) or (ii) on a deferred basis (Class B or Class
C shares). Class Z shares are offered to a limited group of investors at NAV
without any sales charge. Dealers may charge their customers a separate fee for
handling purchase transactions. See "How the Fund Values its Shares" at page 21
and "Shareholder Guide--How to Buy Shares of the Fund" at page 24.

WHAT ARE MY PURCHASE ALTERNATIVES?

The Fund offers four classes of shares through this Prospectus:

<TABLE>
<S> <C>
o Class A Shares: Sold with an initial sales charge of up to 4% of the
offering price.
o Class B Shares: Sold without an initial sales charge but are subject to a
contingent deferred sales charge or CDSC (declining from
5% to zero of the lower of the amount invested or the
redemption proceeds) which will be imposed on certain
redemptions made within six years of purchase. Although
Class B shares are subject to higher ongoing
distribution- related expenses than Class A shares, Class
B shares will automatically convert to Class A shares
(which are subject to lower ongoing distribution-related
expenses) approximately seven years after purchase.
o Class C Shares: Sold without an initial sales charge and, for one year
after purchase, are subject to a 1% CDSC on redemptions.
Like Class B shares, Class C shares are subject to higher
ongoing distribution-related expenses than Class A shares
but do not convert to another class.
o Class Z Shares: Sold without either an initial sales charge or CDSC to a
limited group of investors. Class Z shares are not
subject to any ongoing service or distribution expenses.
</TABLE>

See "Shareholder Guide--Alternative Purchase Plan" at page 25.

HOW DO I SELL MY SHARES?

You may redeem shares of the Fund at any time at the NAV next determined
after your Dealer, the Distributor or the Transfer Agent receives your sell
order. The proceeds of redemptions of Class B and Class C shares may be subject
to a CDSC. Dealers may charge their customers a separate fee for handling sale
transactions. See "Shareholder Guide--How to Sell Your Shares" at page 29.

HOW ARE DIVIDENDS AND DISTRIBUTIONS PAID?

The Fund expects to declare daily and pay monthly dividends of net
investment income and make distributions of any net capital gains, if any, at
least annually. Dividends and distributions will be automatically reinvested in
additional shares of the Fund at NAV without a sales charge unless you request
that they be paid to you in cash. See "Taxes, Dividends and Distributions" at
page 22.

<PAGE>

- --------------------------------------------------------------------------------

FUND EXPENSES

- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS Z SHARES
SHAREHOLDER TRANSACTION EXPENSES+ ============== ============== ============== ==============
<S> <C> <C> <C> <C>

Maximum Sales Load Imposed
on Purchases (as a percentage of
offering price) ................... 4% None None None
Maximum Sales Load on
Reinvested Dividends .............. None None None None
Maximum Deferred Sales Load (as a
percentage of original purchase
price or redemption proceeds,
whichever is lower) ............... None 5% during the first year, 1% on redemptions None
decreasing by 1% made within one
annually to 1% in the year of purchase
fifth and sixth years and
0% the seventh year*
Redemption Fees .................... None None None None
Exchange Fees ...................... None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)

CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS Z SHARES
============== ============== ============== ==============
<C> <C> <C> <C>
Management Fees ................ .41% .41% .41% .41%
12b-1 Fees (After Reduction) ... .15%++ .75% .75%++ None
Other Expenses .. .13% .13% .13% .13%
--- --- --- ---
Total Fund Operating Expenses (After
Reduction) .................... .69% 1.29% 1.29% .54%
=== ==== ==== ===
</TABLE>

<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
======= ======= ======= ======= ========
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time
period: ..............................................................
Class A ............................................................ $47 $61 $77 $122
Class B ............................................................ $63 $71 $81 $131
Class C ............................................................ $23 $41 $71 $156
Class Z ............................................................ $ 6 $17 $30 $ 68
You would pay the following expenses on the same investment, assuming
no redemption: .......................................................
Class A ............................................................ $47 $61 $77 $122
Class B ............................................................ $13 $41 $71 $131
Class C ............................................................ $13 $41 $71 $156
Class Z ............................................................ $ 6 $17 $30 $ 68
</TABLE>

The above example is based on data for the Fund's fiscal year ended
December 31, 1997. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

The purpose of this table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear, whether
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "How the Fund is Managed." "Other Expenses" include operating
expenses of the Fund, such as Directors' and professional fees, registration
fees, reports to shareholders, transfer agency and custodian fees.

- ------------
* Class B shares will automatically convert to Class A shares approximately
seven years after purchase. See "Shareholder Guide--Conversion Feature--Class
B Shares."
+ Dealers may independently charge additional fees for shareholder transactions
or advisory services. Pursuant to rules of the National Association of
Securities Dealers, Inc., the aggregate initial sales charges, deferred sales
charges and asset-based sales charges on shares of the Fund may not exceed
6.25% of total gross sales, subject to certain exclusions. This 6.25%
limitation is imposed on each class of the Fund rather than on a per
shareholder basis. Therefore, long-term shareholders of the Fund may pay more
in total sales charges than the economic equivalent of 6.25% of such
shareholders' investment in such shares. See "How the Fund is
Managed--Distributor."
++ Although the Class A and Class C Distribution and Service Plans provide that
the Fund may pay a distribution fee of up to .30 of 1% per annum and 1% per
annum of the average daily net assets of the Class A and Class C shares,
respectively, the Distributor has agreed to limit its distribution fees with
respect to Class A and Class C shares of the Fund to no more than .15 of 1%
and .75 of 1% of the average daily net asset value of the Class A and Class C
shares, respectively, for the year ending December 31, 1998. Total operating
expenses without such limitations would be .84% and 1.54% for Class A and
Class C shares, respectively. See "How the Fund is Managed--Distributor."

<PAGE>
- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS
(for a share outstanding throughout each of the periods indicated)
(Class A Shares)

- --------------------------------------------------------------------------------

The following financial highlights with respect to each of the five years
in the period ended December 31, 1997 have been audited by Price Waterhouse LLP,
independent accountants, whose report thereon was unqualified. This information
should be read in conjunction with the financial statements and the notes
thereto, which appear in the Statement of Additional Information. The financial
highlights contain selected data for a Class A share of common stock
outstanding, total return, ratios to average net assets and other supplemental
data for each of the periods indicated. The information is based on data
contained in the financial statements. Further performance information is
contained in the annual report which may be obtained without charge. See
"Shareholder Guide--Shareholder Services--Reports to Shareholders."

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
=========================================
1997 1996 1995
=========== ========== ==========
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period ............................................. $8.39 $8.19 $7.68
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................ .73 .75 .81
Net realized and unrealized gain (loss) on
investments ..................................... .30 .22 .53
---------- ---------- ----------
Total from investment operations ................ 1.03 .97 1.34
---------- ---------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment income ............. (.73) (.75) (.81)
Distributions in excess of net investment income (.04) (.02) (.02)
Distributions from paid-in capital in excess of par -- -- --
---------- ---------- ----------
Total distributions ............................ (.77) (.77) (.83)
---------- ---------- ----------
Net asset value, end of period ................... 8.65 $ 8.39 $ 8.19
========== ========== ==========
TOTAL RETURN:(B) .................................. 12.81% 12.60% 18.17%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ................... $1,730,473 $1,564,429 $1,336,354
Average net assets (000) ......................... $1,635,480 $1,385,143 $1,056,555
Ratios to average net assets:
Expenses, including distribution fees .......... .69% .72% .75%
Expenses, excluding distribution fees .......... .54% .57% .60%
Net investment income ............................ 8.59% 9.20% 10.13%
Portfolio turnover rate ......................... 113% 89% 78%

JANUARY 22,

1990(A)

THROUGH
DECEMBER 31,
1994 1993 1992 1991 1990
========= ========== ========= ========== =============
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period ............................................. $8.70 $8.19 $7.88 $6.72 $ 8.45
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................. .80 .84 .90 .93 1.01
Net realized and unrealized gain (loss) on
investments ...................................... (1.00) .52 .32 1.26 (1.70)
-------- -------- -------- ------- ---------
Total from investment operations ................. (.20) 1.36 1.22 2.19 (.69)
-------- -------- -------- ------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income .............. (.80) (.84) (.90) (.93) (1.01)
Distributions in excess of net investment income (.02) (.01) -- -- --
Distributions from paid-in capital in excess of par -- -- (.01) (.10) (.03)
-------- -------- -------- ------- ---------
Total distributions ............................. (.82) (.85) (.91) (1.03) (1.04)
-------- -------- -------- ------- ---------
Net asset value, end of period .................... $7.68 $8.70 $8.19 $7.88 $ 6.72
======== ======== ======== ======= =========
TOTAL RETURN:(B) ................................... (2.35)% 17.32% 15.97% 34.29% (9.15)%

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) .................... $161,435 $171,364 $106,188 $54,025 $ 21,448
Average net assets (000) .......................... $165,517 $149,190 $ 81,129 $37,194 $ 15,594
Ratios to average net assets:
Expenses, including distribution fees ........... .78% .76% .85% .88% .93%(c)
Expenses, excluding distribution fees ........... .63% .61% .70% .73% .78%(c)
Net investment income ............................. 9.86% 9.93% 10.96% 12.73% 13.58%(c)
Portfolio turnover rate .......................... 74% 85% 68% 51% 40%
</TABLE>

- ------------
(a) Commencement of offering of Class A shares.

(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 returns for periods of less than a full year are not
annualized.

<PAGE>
- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS
(for a share outstanding throughout each of the years indicated)
(Class B Shares)

- --------------------------------------------------------------------------------

The following financial highlights with respect to each of the five years
in the period ended December 31, 1997, have been audited by Price Waterhouse
LLP, independent accountants, whose report thereon was unqualified. This
information should be read in conjunction with the financial statements and the
notes thereto, which appear in the Statement of Additional Information. The
financial highlights contain selected data for a Class B share of common stock
outstanding, total return, ratios to average net assets and other supplemental
data for each of the periods indicated. The information is based on data
contained in the financial statements. Further performance information is
contained in the annual report which may be obtained without charge. See
"Shareholder Guide--Shareholder Services--Reports to Shareholders."

YEAR ENDED DECEMBER 31,

---------------------------------------------------------
1997 1996 1995 1994
==== ==== ==== =====
<S> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of year ..... $8.38 $8.18 $7.67 $8.69
---------- ---------- ---------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .................. .68 .71 .76 .76
Net realized and unrealized gain
(loss) on investments ............... .29 .22 .53 (1.00)
---------- ---------- ---------- ---------
Total from investment operations ...... .97 .93 1.29 (.24)
---------- ---------- ---------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment
income .............................. (.68) (.71) (.76) (.76)
Distributions in excess of net
investment income ..................... (.04) (.02) (.02) (.02)
Distributions from paid-in capital
in excess of par ..................... -- -- -- --
Distributions from net realized
gains ................................. -- -- -- --
---------- ---------- ---------- ---------
Total distributions .................. (.72) (.73) (.78) (.78)
---------- ---------- ---------- ---------
Net asset value, end of year ......... $8.63 $8.38 $8.18 $7.67
========== ========== ========== =========
TOTAL RETURN:(A) ..................... 12.07% 11.97% 17.49% (2.92)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) ......... $2,640,491 $2,596,207 $2,730,903 $3,311,323
Average net assets (000) ............... $2,589,122 $2,652,883 $2,725,385 $3,566,709
Ratio to average net assets:
Expenses, including distribution
fees ................................. 1.29% 1.32% 1.35% 1.38%
Expenses, excluding distribution
fees ................................. .54% .57% .60% .63%
Net investment income ............... 7.99% 8.62% 9.56% 9.28%
Portfolio turnover rate ............... 113% 89% 78% 74%

-----------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988(B)
==== ==== ==== ==== ===== =======
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:

Net asset value, beginning of year ..... $8.19 $7.88 $6.71 $8.52 $9.71 $9.69
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:

Net investment income .................. .79 .85 .88 1.00 1.10 1.10
Net realized and unrealized gain
(loss) on investments ............... .51 .32 1.26 (1.76) (1.19) -
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations ...... 1.30 1.17 2.14 (.76) (.09) 1.10
---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment
income .............................. (.79) (.85) (.88) (1.02) (1.10) (1.08)
Distributions in excess of net
investment income ..................... (.01) -- -- -- -- --
Distributions from paid-in capital
in excess of par ..................... -- (.01) (.09) ( .03) -- --
Distributions from net realized
gains ................................. -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions .................. (.80) (.86) (.97) (1.05) (1.10) (1.08)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of year ......... $8.69 $8.19 $ 7.88 $6.71 $8.52 $9.71
========== ========== ========== ========== ========== ==========
TOTAL RETURN:(A) ..................... 16.54% 15.30% 33.62% (9.52)% (1.38)% 11.87%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000) ......... $3,745,985 $2,887,698 $2,199,127 $1,626,067 $2,405,670 $2,561,016
Average net assets (000) ............... $3,389,439 $2,582,922 $1,970,257 $1,994,229 $2,689,992 $2,427,581
Ratio to average net assets:
Expenses, including distribution

fees ................................. 1.36% 1.45% 1.48% 1.55% 1.36% 1.30%
Expenses, excluding distribution
fees ................................. .61% .70% .73% .80% .71% .67%
Net investment income ............... 9.35% 10.29% 11.65% 13.34% 11.70% 10.93%
Portfolio turnover rate ............... 85% 68% 51% 40% 59% 57%
</TABLE>

- ------------
(a) 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.

(b) On May 2, 1988, Prudential Mutual Fund Management, Inc. succeeded The
Prudential Insurance Company of America as investment adviser and since then
has acted as manager of the Fund.

<PAGE>

- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS
(for a share outstanding throughout the periods indicated)
(Class C Shares)

- --------------------------------------------------------------------------------

The following financial highlights have been audited by Price Waterhouse
LLP, independent accountants, whose report thereon was unqualified. This
information should be read in conjunction with the financial statements and the
notes thereto, which appear in the Statement of Additional Information. The
financial highlights contain selected data for a Class C share of common stock
outstanding, total return, ratios to average net assets and other supplemental
data for the period indicated. The information is based on data contained in the
financial statements. Further performance information is contained in the annual
report which may be obtained without charge. See "Shareholder Guide--Shareholder
Services--Reports to Shareholders."

YEAR ENDED DECEMBER 31,
--------------------------------------- AUGUST 1, 1994(A)
THROUGH
1997 1996 1995 DECEMBER 31, 1994
------- ------- ------- -----------------
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................... $8.38 $8.18 $7.67 $8.05
------- ------- ------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................. .68 .71 .76 .32
Net realized and unrealized gain (loss) on investments . .29 .22 .53 (.37)
------- ------- ------- --------
Total from investment operations .97 .93 1.29 (.05)
------- ------- ------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ................... (.68) (.71) (.76) (.32)
Distributions in excess of net investment income ....... (.04) (.02) (.02) (.01)
------- --------
Total distributions .. ................................ (.72) (.73) (.78) (.33)
------- ------- ------- --------
Net asset value, end of period .. ...................... $8.63 $ 8.38 $8.18 $7.67
======= ======= ======= ========
TOTAL RETURN:(B) ... ................................... 12.07% 11.97% 17.49% (0.79)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ... .................... $55,879 $43,374 $24,021 $ 4,860
Average net assets (000) .. ............................ $45,032 $28,647 $12,063 $ 2,840
Ratios to average net assets:
Expenses, including distribution fees ... ............. 1.29% 1.32% 1.35% 1.48%(c)
Expenses, excluding distribution fees ... ............. .54% .57% .60% .73%(c)
Net investment income ... ............................. 7.99% 8.60% 9.49% 9.80%(c)
Portfolio turnover rate .. ............................. 113% 89% 78% 74%
</TABLE>

- ------------
(a) Commencement of offering of Class C shares.

<PAGE>

- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS
(for a share outstanding throughout the periods indicated)
(Class Z Shares)

- --------------------------------------------------------------------------------

The following financial highlights have been audited by Price Waterhouse
LLP, independent accountants, whose report thereon was unqualified. This
information should be read in conjunction with the financial statements and the
notes thereto, which appear in the Statement of Additional Information. The
financial highlights contain selected data for a share of Class Z common stock
outstanding, total return, ratios to average net assets and other supplemental
data for the period indicated. The information is based on data contained in the
financial statements. Further performance information is contained in the annual
report which may be obtained without charge. See "Shareholder Guide--Shareholder
Services--Reports to Shareholders."

MARCH 1,
YEAR 1996(A)
ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1997 1996
------------- -------------
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C>
Net asset value, beginning of period ............... $ 8.39 $ 8.34
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .............................. .74 .63
Net realized and unrealized gains on investments ... .30 .07
------- --------
Total from investment operations .................. 1.04 .70
------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ............... (.74) (.63)
Distributions in excess of net investment income ... (.04) (.02)
------- --------
Total distributions ............................... (.78) (.65)
------- --------
Net asset value, end of period ..................... $ 8.65 $ 8.39
======= ========
TOTAL RETURN:(B) ................................... 12.96% 8.77%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) .................... $41,625 $ 31,748
Average net assets (000) ........................... $35,808 $ 28,978
Ratios to average net assets: ......................
Expenses .......................................... .54% .57%(c)
Net investment income ............................. 8.74% 9.31%(c)
Portfolio turnover rate .. ......................... 113% 89%
</TABLE>

- ------------
(a) Commencement of offering of Class Z shares.

<PAGE>

- --------------------------------------------------------------------------------
HOW THE FUND INVESTS
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVES AND POLICIES

THE PRIMARY INVESTMENT OBJECTIVE OF THE FUND IS TO MAXIMIZE CURRENT INCOME
THROUGH INVESTMENT IN A DIVERSIFIED PORTFOLIO OF HIGH YIELD FIXED INCOME
SECURITIES WHICH, IN THE OPINION OF THE FUND'S INVESTMENT ADVISER, DO NOT
SUBJECT A FUND INVESTING IN SUCH SECURITIES TO UNREASONABLE RISKS. AS A
SECONDARY INVESTMENT OBJECTIVE, THE FUND WILL SEEK CAPITAL APPRECIATION BUT ONLY
WHEN CONSISTENT WITH ITS PRIMARY OBJECTIVE. CAPITAL APPRECIATION MAY RESULT, FOR
EXAMPLE, FROM AN IMPROVEMENT IN THE CREDIT STANDING OF AN ISSUER WHOSE
SECURITIES ARE HELD IN THE FUND'S PORTFOLIO OR FROM A GENERAL LOWERING OF
INTEREST RATES, OR A COMBINATION OF BOTH. CONVERSELY, CAPITAL DEPRECIATION MAY
RESULT, FOR EXAMPLE, FROM A LOWERED CREDIT STANDING OR A GENERAL RISE IN
INTEREST RATES, OR A COMBINATION OF BOTH. THE ACHIEVEMENT OF THE FUND'S
OBJECTIVES WILL DEPEND UPON THE INVESTMENT ADVISER'S ANALYTICAL AND PORTFOLIO
MANAGEMENT SKILLS. THERE CAN BE NO ASSURANCE THAT THESE OBJECTIVES WILL BE
ACHIEVED.

AS WITH AN INVESTMENT IN ANY MUTUAL FUND, AN INVESTMENT IN THIS FUND CAN
DECREASE IN VALUE AND YOU CAN LOSE MONEY.

THE FUND'S INVESTMENT OBJECTIVES ARE FUNDAMENTAL POLICIES AND, THEREFORE,
MAY NOT BE CHANGED WITHOUT THE APPROVAL OF THE HOLDERS OF A MAJORITY OF THE
FUND'S OUTSTANDING VOTING SECURITIES AS DEFINED IN THE INVESTMENT COMPANY ACT OF
1940, AS AMENDED (THE INVESTMENT COMPANY ACT). FUND POLICIES THAT ARE NOT
FUNDAMENTAL MAY BE MODIFIED BY THE BOARD OF DIRECTORS.

THE HIGHER YIELDS SOUGHT BY THE FUND ARE GENERALLY OBTAINABLE FROM
SECURITIES RATED IN THE LOWER CATEGORIES BY RECOGNIZED RATING SERVICES. THE FUND
EXPECTS TO SEEK HIGH CURRENT INCOME BY INVESTING PRINCIPALLY IN FIXED INCOME
SECURITIES RATED BAA OR LOWER BY MOODY'S INVESTORS SERVICE (MOODY'S), OR BBB OR
LOWER BY STANDARD & POOR'S RATINGS GROUP (STANDARD & POOR'S) OR COMPARABLY RATED
BY ANY OTHER NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION (NRSRO).
Changes in economic or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments in bonds rated Baa or lower or
BBB or lower than is the case with higher grade bonds. Corporate bonds which are
rated Baa by Moody's are described by Moody's as being investment grade, but are
also characterized as having speculative characteristics. Corporate bonds rated
below Baa by Moody's and BBB by Standard & Poor's are considered speculative.
Such high yield securities are commonly known as junk bonds. It is the present
policy of the Fund not to invest in securities rated below B by both Moody's and
Standard & Poor's unless, in the opinion of the investment adviser, the
financial condition of the issuer or the protection afforded to the particular
securities is stronger than would otherwise be indicated by such lower ratings
(except with respect to distressed securities), however, this policy is
evaluated from time to time and is subject to change. A description of corporate
bond ratings is contained in Appendix A to this Prospectus. Since some issuers
do not seek ratings for their securities, non-rated securities will also be
considered for investment by the Fund but only when the investment adviser
believes that the financial condition of the issuers of such securities and/or
the protection afforded by the terms of the securities themselves limit the risk
to the Fund to a degree comparable to that of rated securities which are
consistent with the Fund's objectives and policies.

Medium to lower rated and comparable non-rated securities tend to offer
higher yields than higher rated securities with the same maturities because the
historical financial condition of the issuers of such securities may not have
been as strong as that of other issuers. Since medium to lower rated securities
generally involve greater risk of loss of income and principal than higher rated
securities, investors should consider carefully the relative risks associated
with investments in securities which carry medium to lower ratings and in
comparable non-rated securities.

The investment adviser will perform its own investment analysis and will
not rely principally on the ratings assigned by the rating services, although
such ratings will be considered by the investment adviser. The investment
adviser will consider, among other things, the financial history and condition,
the prospects and the management of an issuer in selecting securities for the
Fund's portfolio.

<PAGE>

CONSISTENT WITH ITS PRIMARY INVESTMENT OBJECTIVE, UNDER NORMAL CONDITIONS
AT LEAST 80% OF THE VALUE OF THE FUND'S TOTAL ASSETS WILL BE INVESTED IN THE
HIGH YIELD, MEDIUM TO LOWER RATED FIXED INCOME SECURITIES PREVIOUSLY DESCRIBED.
However, when prevailing economic conditions cause a narrowing of the spreads
between the yields derived from medium to lower rated or comparable non-rated
securities and those derived from higher rated issues, the Fund may invest in
higher rated fixed income securities which provide similar yields but have less
risk. Fixed income securities appropriate for the Fund may include both
convertible and nonconvertible debt securities and preferred stock. Generally,
the Fund's average weighted maturity will range from 7 to 12 years. As of
December 31, 1997, the Fund's average weighted maturity was 8.4 years.

THE FUND MAY ALSO INVEST IN ZERO COUPON, PAY-IN-KIND OR DEFERRED PAYMENT
SECURITIES. Zero coupon securities are securities that are sold at a discount to
par value and on which interest payments are not made during the life of the
security. Upon maturity, the holder is entitled to receive the par value of the
security. While interest payments are not made on such securities, holders of
such securities are deemed to have received annually phantom income. The Fund
accrues income with respect to these securities for federal income tax and
accounting purposes prior to the receipt of cash payments. Pay-in-kind
securities are securities that have interest payable by delivery of additional
securities. Upon maturity, the holder is entitled to receive the aggregate par
value of the securities. Deferred payment securities are securities that remain
a zero coupon security until a predetermined date, at which time the stated
coupon rate becomes effective and interest becomes payable at regular intervals.
Zero coupon, pay-in-kind and deferred payment securities may be subject to
greater fluctuation in value and lesser liquidity in the event of adverse market
conditions than comparably rated securities paying cash interest at regular
interest payment periods. See "Portfolio Characteristics-Zero Coupon,
Pay-in-Kind and Deferred Payment Securities" in the Statement of Additional
Information.

The Fund may invest in non-fixed income equity securities, such as
securities of financially troubled or bankrupt companies (financially troubled
issuers) and in equity securities of companies, that in the view of the
Subadviser are currently undervalued, out-of-favor or price depressed relative
to their long-term potential for growth and income (operationally troubled
issuers) (collectively referred to with financially troubled issuers as
distressed securities). Equity securities include common stocks, preferred
stocks and warrants. The Board has adopted a non-fundamental policy that the
Fund initially will limit its investments in such securities to no more than 10%
of its total assets. To the extent the Fund invests in equity securities, there
will be a diminution in the Fund's overall yield. See "Risk Factors-Risks
Relating to Investing in Distressed Securities."

The Fund may on occasion invest up to 20% of its assets in United States
currency denominated fixed income issues of foreign governments and other
foreign issuers and up to 10% of its total assets in foreign currency
denominated debt issues of foreign or domestic issuers. Such investment
strategies involve certain risks. See "Portfolio Characteristics" in the
Statement of Additional Information.

WHEN MARKET CONDITIONS DICTATE A MORE DEFENSIVE INVESTMENT STRATEGY, THE
FUND MAY INVEST TEMPORARILY IN SHORT-TERM OBLIGATIONS OF, OR SECURITIES
GUARANTEED BY, THE UNITED STATES GOVERNMENT, ITS AGENCIES OR INSTRUMENTALITIES
OR IN HIGH QUALITY OBLIGATIONS OF BANKS AND CORPORATIONS. THE YIELD ON THESE
SECURITIES WILL TEND TO BE LOWER THAN THE YIELD ON OTHER SECURITIES TO BE
PURCHASED BY THE FUND.

HEDGING AND RETURN ENHANCEMENT STRATEGIES

THE FUND MAY ENGAGE IN VARIOUS PORTFOLIO STRATEGIES, INCLUDING USING
DERIVATIVES, TO REDUCE CERTAIN RISKS OF ITS INVESTMENTS AND TO ATTEMPT TO
ENHANCE RETURN, BUT NOT FOR SPECULATION. The Fund, and thus the investor, may
lose money through any unsuccessful use of these strategies. These strategies
currently include the use of futures contracts and options thereon (including
interest rate futures contracts and options thereon). The Fund's ability to use
these strategies may be limited by market conditions, regulatory limits and
there can be no assurance that any of these

<PAGE>

strategies will succeed. New financial products and risk management techniques
continue to be developed and the Fund may use these new investments and
techniques to the extent consistent with its investment objectives and policies.

FUTURES CONTRACTS

The Fund may enter into futures contracts for the purchase or sale of debt
securities and financial indices (collectively, interest rate futures contracts)
in accordance with the Fund's investment objectives. A purchase of a futures
contract (or a long futures position) means the assumption of a contractual
obligation to acquire a specified quantity of the securities underlying the
contract at a specified price at a specified future date. A sale of a futures
contract (or a short futures position) means the assumption of a contractual
obligation to deliver a specified quantity of the securities underlying the
contract at a specified price at a specified future date. At the time a futures
contract is purchased or sold, the Fund is required to deposit cash or other
liquid assets with a futures commission merchant or in a segregated account
representing between approximately 11 1/2% to 5% of the contract amount, called
initial margin. Thereafter, the futures contract will be valued daily and the
payment in cash of maintenance or variation margin may be required, resulting in
the Fund paying or receiving cash that reflects any decline or increase in the
contract's value, a process known as marking-to-market.

Some futures contracts by their terms may call for the actual delivery or
acquisition of the underlying assets and other futures contracts must be cash
settled. In most cases the contractual obligation is extinguished before the
expiration of the contract by buying (to offset an earlier sale) or selling (to
offset an earlier purchase) an identical futures contract calling for delivery
or acquisition in the same month. The purchase (or sale) of an offsetting
futures contract is referred to as a closing transaction.

LIMITATIONS ON THE PURCHASE AND SALE OF FUTURES CONTRACTS AND RELATED OPTIONS

CFTC LIMITS. In accordance with Commodity Futures Trading Commission (CFTC)
regulations, the Fund is not permitted to purchase or sell interest rate futures
contracts or options thereon for return enhancement or risk management purposes
if immediately thereafter the sum of the amounts of initial margin deposits on a
Fund's existing futures and premiums paid for options on futures exceed 5% of
the liquidation value of such Fund's total assets (the 5% CFTC limit). This
restriction does not apply to the purchase and sale of interest rate futures
contracts and options thereon for bona fide hedging purposes.

SEGREGATION REQUIREMENTS. To the extent the Fund enters into futures
contracts, it is required by the Commission to maintain a segregated asset
account sufficient to cover the Fund's obligations with respect to such futures
contracts, which will consist of cash or other liquid assets in an amount equal
to the difference between the fluctuating market value of such futures contracts
and the aggregate value of the initial margin deposited by the Fund with respect
to such futures contracts. Offsetting the contract by another identical contract
eliminates the segregation requirement.

With respect to options on futures, there are no segregation requirements
for options that are purchased and owned by the Fund. However, written options,
since they involve potential obligations of the Fund, may require segregation of
Fund assets if the options are not covered as described below under "Options on
Futures Contracts." If the Fund writes a call option that is not covered, it
must segregate for the term of the options cash or other liquid assets equal to
the fluctuating value of the optioned futures. If the Fund writes a put option
that is not covered, the segregated amount would have to be at all times equal
in value to the exercise price of the put (less any initial margin segregated by
the Fund with respect to such option).

USES OF INTEREST RATE FUTURES CONTRACTS

Interest rate futures contracts will be used for bona fide hedging, risk
management and return enhancement purposes.

POSITION HEDGING. The Fund might sell interest rate futures contracts to
protect the Fund against a rise in interest rates which would be expected to
decrease the value of debt securities which the Fund holds. This would be
considered a bona fide hedge and, therefore, is not subject to the 5% CFTC
limit. For example, if interest rates are expected to

<PAGE>

increase, the Fund might sell futures contracts on debt securities, the values
of which historically have closely correlated or are expected to closely
correlate to the values of the Fund's portfolio securities. Such a sale would
have an effect similar to selling an equivalent value of the Fund's portfolio
securities. If interest rates increase, the value of the Fund's portfolio
securities will decline, but the value of the futures contracts to the Fund will
increase at approximately an equivalent rate thereby keeping the NAV of the Fund
from declining as much as it otherwise would have. The Fund could accomplish
similar results by selling debt securities with longer maturities and investing
in debt securities with shorter maturities when interest rates are expected to
increase. However, since the futures market may be more liquid than the cash
market, the use of futures contracts as a hedging technique would allow the Fund
to maintain a defensive position without having to sell portfolio securities. If
in fact interest rates decline rather than rise, the value of the futures
contract will fall but the value of the bonds should rise and should offset all
or part of the loss. If futures contracts are used to hedge 100% of the bond
position and correlate precisely with the bond positions, there should be no
loss or gain with a rise (or fall) in interest rates. However, if only 50% of
the bond position is hedged with futures, then the value of the remaining 50% of
the bond position would be subject to change because of interest rate
fluctuations. Whether the bond positions and futures contracts correlate
precisely is a significant risk factor.

ANTICIPATORY POSITION HEDGING. Similarly, when it is expected that interest
rates may decline and the Fund intends to acquire debt securities, the Fund
might purchase interest rate futures contracts. The purchase of futures
contracts for this purpose would constitute an anticipatory hedge against
increases in the price of debt securities (caused by declining interest rates)
which the Fund subsequently acquires and would normally qualify as a bona fide
hedge not subject to the 5% CFTC limit. Since fluctuations in the value of
appropriately selected futures contracts should approximate that of the debt
securities that would be purchased, the Fund could take advantage of the
anticipated rise in the cost of the debt securities without actually buying
them. Subsequently, the Fund could make the intended purchases of the debt
securities in the cash market and concurrently liquidate the futures positions.

RISK MANAGEMENT AND RETURN ENHANCEMENT. The Fund might sell interest rate
futures contracts covering bonds. This has the same effect as selling bonds in
the portfolio and holding cash and reduces the duration of the portfolio.
(Duration measures the price sensitivity of the portfolio to interest rates. The
longer the duration, the greater the impact of interest rate changes on the
portfolio's price.) This should lessen the risks associated with a rise in
interest rates. In some circumstances, this may serve as a hedge against a loss
of principal, but is usually referred to as an aspect of risk management.

The Fund might buy interest rate futures contracts covering bonds with a
longer maturity than its portfolio average. This would tend to increase the
duration and should increase the gain in the overall portfolio if interest rates
fall. This is often referred to as risk management rather than hedging but, if
it works as intended, has the effect of increasing principal value. If it does
not work as intended because interest rates rise instead of fall, the loss will
be greater than would otherwise have been the case. Futures contracts used for
these purposes are not considered bona fide hedges and, therefore, are subject
to the 5% CFTC limit.

OPTIONS ON FUTURES CONTRACTS

The Fund may enter into options on futures contracts for certain bona fide
hedging, risk management and return enhancement purposes. This includes the
ability to purchase put and call options and write (I.E., sell) covered put and
call options on futures contracts that are traded on commodity and futures
exchanges.

If the Fund purchased an option on a futures contract, it has the right but
not the obligation, in return for the premium paid, to assume a position in a
futures contract (a long position if the option is a call or a short position if
the option is a put) at a specified exercise price at any time during the option
exercise period.

Unlike purchasing an option, which is similar to purchasing insurance to
protect against a possible rise or fall of security prices or currency values,
the writer or seller of an option undertakes an obligation upon exercise of the
option to either buy or sell the underlying futures contract at the exercise
price. A writer of a call option has the obligation upon exercise to assume a
short futures position and a writer of a put option has the obligation to assume
a long futures

<PAGE>

position. Upon exercise of the option, the assumption of offsetting futures
positions by the writer and holder of the option will be accompanied by delivery
of the accumulated cash balance in the writer's futures margin account which
represents the amount by which the market price of the futures contract at
exercise exceeds (in the case of a call) or is less than (in the case of a put)
the exercise price of the option on the futures contract. If there is no balance
in the writer's margin account, the option is out of the money and will not be
exercised. The Fund, as the writer, has income in the amount it was paid for the
option. If there is a margin balance, the Fund will have a loss in the amount of
the balance less the premium it was paid for writing the option.

When the Fund writes a put or call option on a futures contracts, the option
must either be covered or, to the extent not covered, will be subject to
segregation requirements. The Fund will be considered covered with respect to a
call option it writes on a futures contract if the Fund owns the securities or
currency which is deliverable under the futures contract or an option to
purchase that futures contract having a strike price equal to or less than the
strike price of the covered option. A Fund will be considered covered with
respect to a put option it writes on a futures contract if it owns an option to
sell that futures contract having a strike price equal to or greater than the
strike price of the covered option.

To the extent the Fund is not covered as described above with respect to
written options, it will segregate for the term of the option, cash or other
liquid assets as described above under "Limitations on the Purchase and Sale of
Futures Contracts and Related Options--Segregation Requirements."

USES OF OPTIONS ON FUTURES CONTRACTS

Options on interest rate futures contracts would be used for bona fide
hedging, risk management and return enhancement purposes.

POSITION HEDGING. The Fund may purchase put options on interest rate or
currency futures contracts to hedge its portfolio against the risk of a decline
in the value of the debt securities it owns as a result of rising interest
rates.

ANTICIPATORY HEDGING. The Fund may also purchase call options on futures
contracts as a hedge against an increase in the value of securities the Fund
might intend to acquire as a result of declining interest rates.

Writing a put option on a futures contract may serve as a partial
anticipatory hedge against an increase in the value of debt securities the Fund
might intend to acquire. If the futures price at expiration of the option is
above the exercise price, the Fund retains the full amount of the option premium
which provides a partial hedge against any increase that may have occurred in
the price of the debt securities the Fund intended to acquire. If the market
price of the underlying futures contract is below the exercise price when the
option is exercised, the Fund would incur a loss, which may be wholly or
partially offset by the decrease in the value of the securities the Fund might
intend to acquire.

Whether options on interest rate futures contracts are subject to or exempt
from the 5% CFTC limit depends on whether the purposes of the options
constitutes a bona fide hedge.

RISK MANAGEMENT AND RETURN ENHANCEMENT. Writing a put option that does not
relate to securities the Fund intends to acquire would be a return enhancement
strategy which would result in a loss if interest rates rise.

Similarly, writing a covered call option on a futures contract is also a
return enhancement strategy. If the market price of the underlying futures
contract at expiration of a written call option is below the exercise price, the
Fund would retain the full amount of the option premium increasing the income of
the Fund. If the futures price when the option is exercised is above the
exercise price, however, the Fund would sell the underlying securities which
were the cover for the contract and incur a gain or loss depending on the cost
basis for the underlying asset.

Writing a covered call option as in any return enhancement strategy can also
be considered a partial hedge against a decrease in the value of a Fund's
portfolio securities. The amount of the premium received acts as a partial hedge
against any decline that may have occurred in the Fund's debt securities. See
"Portfolio Characteristics-Futures Contracts" in the Statement of Additional
Information.

<PAGE>

RISK FACTORS

RISKS RELATING TO INVESTING IN HIGH YIELD SECURITIES

Fixed income securities are subject to the risk of an issuer's inability to
meet principal and interest payments on the obligations (credit risk) and may
also be subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer and general
market liquidity (market risk). Lower rated or unrated (I.E., high yield)
securities are more likely to react to developments affecting market and credit
risk than are more highly rated securities, which react primarily to movements
in the general level of interest rates. The investment adviser considers both
credit risk and market risk in making investment decisions for the Fund. The
achievement of its investment objective may be more dependent on the investment
adviser's own credit analysis than is the case for higher quality bonds.
Investors should carefully consider the relative risks of investing in high
yield securities and understand that such securities are not generally meant for
short-term investing.

Under adverse economic conditions, there is a risk that highly leveraged
issuers may be unable to service their debt obligations or to repay their
obligations upon maturity. During an economic downturn or recession, securities
of highly leveraged issuers are more likely to default than securities of higher
rated issuers. In addition, the secondary market for high yield securities,
which is concentrated in relatively few market makers, may not be as liquid as
the secondary market for more highly rated securities. Under adverse market or
economic conditions, the secondary market for high yield securities could
contract further, independent of any specific adverse changes in the condition
of a particular issuer. As a result, the investment adviser could find it more
difficult to sell these securities or may be able to sell the securities only at
prices lower than if such securities were widely traded. Prices realized upon
the sale of such lower rated or unrated securities, under these circumstances,
may be less than the prices used in calculating the Fund's NAV. Under
circumstances where the Fund owns the majority of an issue, market and credit
risks may be greater.

Lower rated or unrated debt obligations also present risks based on payment
expectations. If an issuer calls the obligation for redemption, the Fund may
have to replace the security with a lower yielding security, resulting in a
decreased return for investors. If the Fund experiences unexpected net
redemptions, it may be forced to sell its higher rated securities, resulting in
a decline in the overall credit quality of the Fund's portfolio and increasing
the exposure of the Fund to the risks of high yield securities.

Ratings of fixed income securities represent the rating agencies' opinions
regarding their credit quality and are not a guarantee of quality. Rating
agencies attempt to evaluate the safety of principal and interest payments and
do not evaluate the risks of fluctuations in market value. Also, rating agencies
may fail to make timely changes in credit ratings in response to subsequent
events, so that an issuer's current financial condition may be better or worse
than a rating indicates.

During the fiscal year ended December 31, 1997, the monthly dollar weighted
average ratings of the debt obligations held by the Fund, expressed as a
percentage of the Fund's total investments, were as follows:

PERCENTAGE OF TOTAL
RATINGS INVESTMENTS
------- -------------------
AAA/Aaa --
AA/Aa --
A/A --
BBB/Baa 0.68%
BB/Ba 30.19%
B/B 53.63%
CCC/Caa 4.29%
Unrated 11.21%

See "Investment Objectives and Policies" in the Statement of Additional
Information.

<PAGE>

RISKS OF HEDGING AND RETURN ENHANCEMENT STRATEGIES

PARTICIPATION IN THE OPTIONS OR FUTURES MARKETS INVOLVES INVESTMENT RISKS
AND TRANSACTION COSTS TO WHICH THE FUND WOULD NOT BE SUBJECT ABSENT THE USE OF
THESE STRATEGIES. THE FUND, AND THUS THE INVESTOR, MAY LOSE MONEY THROUGH ANY
UNSUCCESSFUL USE OF THESE STRATEGIES. If the investment adviser's prediction of
movements in the direction of the securities and interest rate markets are
inaccurate, the adverse consequences to the Fund may leave the Fund in a worse
position than if such strategies were not used. Risks inherent in the use of
futures contracts and options on futures contracts include (1) dependence on the
investment adviser's ability to predict correctly movements in the direction of
interest rates and securities prices and markets; (2) imperfect correlation
between the price of options and futures contracts and options thereon and
movements in the prices of the securities being hedged; (3) the fact that skills
needed to use these strategies are different from those needed to select
portfolio securities; (4) the possible absence of a liquid secondary market for
any particular instrument at any time; and (5) the possible inability of the
Fund to purchase or sell a portfolio security at a time that otherwise would be
favorable for it to do so, or the possible need for the Fund to sell a security
at a disadvantageous time, due to the need for the Fund to maintain cover or to
segregate securities in connection with hedging techniques.

RISKS RELATING TO INVESTING IN DISTRESSED SECURITIES

DISTRESSED SECURITIES INVOLVE A HIGH DEGREE OF CREDIT AND MARKET RISK AND
ARE SUBJECT TO GREATER CREDIT AND MARKET RISK AND PRICE VOLATILITY THAN THE
SECURITIES IN WHICH THE FUND GENERALLY INVESTS. ALTHOUGH THE FUND WOULD INVEST
IN SELECT COMPANIES WHICH IN THE VIEW OF ITS INVESTMENT ADVISER HAVE THE
POTENTIAL OVER THE LONG TERM FOR CAPITAL GROWTH, THERE CAN BE NO ASSURANCE THAT
SUCH FINANCIALLY OR OPERATIONALLY TROUBLED COMPANIES CAN BE SUCCESSFULLY
TRANSFORMED INTO PROFITABLE OPERATING COMPANIES. THERE IS A POSSIBILITY THAT THE
FUND MAY INCUR SUBSTANTIAL OR TOTAL LOSSES ON ITS INVESTMENTS. DURING ECONOMIC
DOWNTURN OR RECESSION, SECURITIES OF FINANCIALLY TROUBLED ISSUERS ARE MORE
LIKELY TO GO INTO DEFAULT THAN SECURITIES OF OTHER ISSUERS. IN ADDITION, IT MAY
BE DIFFICULT TO OBTAIN INFORMATION ABOUT FINANCIALLY AND OPERATIONALLY TROUBLED
ISSUERS.

SECURITIES OF FINANCIALLY TROUBLED ISSUERS ARE LESS LIQUID AND MORE
VOLATILE THAN SECURITIES OF COMPANIES NOT EXPERIENCING FINANCIAL DIFFICULTIES.
THE MARKET PRICES OF SUCH SECURITIES ARE SUBJECT TO ERRATIC AND ABRUPT MARKET
MOVEMENTS AND THE SPREAD BETWEEN BID AND ASKED PRICES MAY BE GREATER THAN
NORMALLY EXPECTED. IN ADDITION, IT IS ANTICIPATED THAT MANY OF THE FUND'S
PORTFOLIO INVESTMENTS MAY NOT BE WIDELY TRADED AND THAT THE FUND'S POSITION IN
SUCH SECURITIES MAY BE SUBSTANTIAL RELATIVE TO THE MARKET FOR SUCH SECURITIES.
AS A RESULT, THE FUND MAY EXPERIENCE DELAYS AND INCUR LOSSES AND OTHER COSTS IN
CONNECTION WITH THE SALE OF ITS PORTFOLIO SECURITIES.

DISTRESSED SECURITIES WHICH THE FUND MAY PURCHASE MAY ALSO INCLUDE
SECURITIES OF COMPANIES INVOLVED IN BANKRUPTCY PROCEEDINGS, REORGANIZATIONS AND
FINANCIAL RESTRUCTURINGS. TO THE EXTENT THE FUND INVESTS IN SUCH SECURITIES, IT
MAY HAVE A MORE ACTIVE PARTICIPATION IN THE AFFAIRS OF ISSUERS THAN IS GENERALLY
ASSUMED BY AN INVESTOR. THIS MAY SUBJECT THE FUND TO LITIGATION RISKS OR PREVENT
THE FUND FROM DISPOSING OF SECURITIES.

OTHER INVESTMENTS AND POLICIES

REPURCHASE AGREEMENTS

The Fund may on occasion enter into repurchase agreements whereby the
seller of a security agrees to repurchase a security from the Fund at a mutually
agreed upon time and price. The period of maturity is usually quite short,
possibly overnight or a few days, although it may extend over a number of
months. The resale price is in excess of the purchase price, reflecting an
agreed upon rate of return effective for the period of time the Fund's money is
invested in the security. The Fund's repurchase agreements will at all times be
fully collateralized in an amount at least equal to the resale price. The
instruments held as collateral are valued daily, and if the value of instruments
declines, the Fund will require additional collateral. If the seller defaults
and the value of the collateral securing the repurchase agreement declines, the

<PAGE>

Fund may incur a loss. The Fund participates in a joint repurchase account with
other investment companies managed by PIFM pursuant to an order of the
Commission. See "Portfolio Characteristics-Repurchase Agreements" in the
Statement of Additional Information.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

The Fund may purchase securities on a when-issued or delayed basis.
When-issued or delayed delivery transactions arise when securities are purchased
by the Fund with payment and delivery taking place a month or more in the future
in order to secure what is considered to be an advantageous price and yield to
the Fund at the time of entering into the transaction. While the Fund will only
purchase securities on a when-issued or delayed delivery basis with the
intention of acquiring the securities, the Fund may sell the securities before
the settlement date, if it is deemed advisable. At the time the Fund makes the
commitment to purchase securities on a when-issued or delayed delivery basis,
the Fund will record the transaction and thereafter reflect the value, each day,
of such security in determining the net asset value of the Fund. At the time of
delivery of the securities, the value may be more or less than the purchase
price. The Fund will segregate cash or other liquid assets having a value equal
to or greater than the Fund's purchase commitments. Subject to this requirement,
the Fund may purchase securities on such basis without limit.

BORROWING

The Fund may borrow an amount equal to no more than 20% of the value of its
total assets (calculated when the loan is made) from banks for temporary,
extraordinary or emergency purposes or for the clearance of transactions. The
Fund may pledge up to 20% of its total assets to secure these borrowings.
However, the Fund will not purchase securities when borrowings exceed 5% of the
value of the Fund's total assets.

SECURITIES LENDING

The Fund may lend its portfolio securities to brokers or dealers in
corporate or governmental securities, banks or other recognized institutional
borrowers of securities, provided that the borrower at all times maintains cash
or other liquid assets or secures an irrevocable letter of credit in favor of
the Fund in an amount equal to at least 100%, determined daily, of the market
value of the securities loaned which are maintained in a segregated account
pursuant to applicable regulations. During the time portfolio securities are on
loan, the borrower will pay the Fund an amount equivalent to any dividend or
interest paid on such securities and the Fund may invest the cash collateral and
earn additional income, or it may receive an agreed-upon amount of interest
income from the borrower. As with any extensions of credit, there are risks of
delay in recovery and in some cases loss of rights in the collateral should the
borrower of the securities fail financially. The Fund may pay reasonable
administration and custodial fees in connection with a loan.

LOAN PARTICIPATIONS AND ASSIGNMENTS

The Fund may invest in bank debt which includes interests in loans to
companies or their affiliates undertaken to finance a capital restructuring or
in connection with recapitalizations, acquisitions, leveraged buyouts,
refinancings or other financially leveraged transactions and may include loans
which are designed to provide temporary or bridge financing to a borrower
pending the sale of identified assets, the arrangement of longer-term loans or
the issuance and sale of debt obligations. These loans, which may bear fixed or
floating rates, have generally been arranged through private negotiations
between a corporate borrower and one or more financial institutions (Lenders),
including banks. The Fund's investment may be in the form of participations in
loans (Participations) or of assignments of all or a portion of loans from third
parties (Assignments).

<PAGE>

Participations differ both from the public and private debt securities
typically held by the Fund and from Assignments. In Participations, the Fund has
a contractual relationship only with the Lender, not with the borrower. As a
result, the Fund has the right to receive payments of principal, interest and
any fees to which it is entitled only from the Lender selling the Participation
and only upon receipt by the Lender of the payments from the borrower. In
connection with purchasing Participations, the Fund generally will have no right
to enforce compliance by the borrower with the terms of the loan agreement
relating to the loan, nor any rights of set-off against the borrower, and the
Fund may not benefit directly from any collateral supporting the loan in which
it has purchased the Participation. Thus, the Fund assumes the credit risk of
both the borrower and the Lender that is selling the Participation. In the event
of the insolvency of the Lender, the Fund may be treated as a general creditor
of the Lender and may not benefit from any set-off between the Lender and the
borrower. In Assignments, by contrast, the Fund acquires direct rights against
the borrower, except that under certain circumstances such rights may be more
limited than those held by the assigning Lender. See "Portfolio
Characteristics--Bank Debt" in the Statement of Additional Information.

ILLIQUID SECURITIES

The Fund may hold up to 15% of its net assets in illiquid securities,
including repurchase agreements which have a maturity of longer than seven days,
securities with legal or contractual restrictions on resale (restricted
securities) and securities that are not readily marketable. Restricted
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933, as amended (Securities Act), that have a readily available market would
not be considered illiquid for purposes of this limitation. The Fund's
investment in Rule 144A securities could have the effect of increasing
illiquidity to the extent that qualified institutional buyers become, for a
time, uninterested in purchasing Rule 144A securities. The investment adviser
will monitor the liquidity of such restricted securities under the supervision
of the Board of Directors. Repurchase agreements subject to demand are deemed to
have a maturity equal to the applicable notice period.

Restricted securities are sometimes referred to as private placement
securities. Such securities may be purchased directly from the issuer or in the
secondary market (Direct Placement Securities). The Fund will purchase Direct
Placement Securities when, in the opinion of the investment adviser, such
securities provide greater value due either to higher yields, attractive
technical features (such as call or refunding protection) or both.

Direct Placement Securities are subject to statutory or contractual
restrictions and delays on resale. Limitations on the resale of such securities
may have an adverse effect on their marketability, which may prevent the Fund
from disposing of them promptly at reasonable prices. The Fund may have to bear
the expense of registering such securities for resale and the risk of
substantial delays in effecting such registration. At certain times, adverse
conditions in the public securities markets may preclude a public offering of an
issuer's securities.

INVESTMENTS IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may invest up to 10% of its total assets in shares of other
investment companies. To the extent that the Fund does invest in securities of
other investment companies, shareholders of the Fund may be subject to duplicate
management and advisory fees.

INVESTMENT RESTRICTIONS

The Fund is subject to certain investment restrictions which, like its
investment objectives, constitute fundamental policies. Fundamental policies
cannot be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities, as defined in the Investment Company Act.
See "Investment Restrictions" in the Statement of Additional Information.

<PAGE>

- --------------------------------------------------------------------------------
HOW THE FUND IS MANAGED
- --------------------------------------------------------------------------------

THE FUND HAS A BOARD OF DIRECTORS WHICH, IN ADDITION TO OVERSEEING THE
ACTIONS OF THE FUND'S MANAGER, SUBADVISER AND DISTRIBUTOR, AS SET FORTH BELOW,
DECIDES UPON MATTERS OF GENERAL POLICY. THE FUND'S MANAGER CONDUCTS AND
SUPERVISES THE DAILY BUSINESS OPERATIONS OF THE FUND. THE FUND'S SUBADVISER
FURNISHES DAILY INVESTMENT ADVISORY SERVICES.

For the year ended December 31, 1997, the Fund's total expenses as a
percentage of average net assets for the Fund's Class A, Class B, Class C and
Class Z shares were .69%, 1.29%, 1.29% and .54%, respectively. See "Financial
Highlights."

MANAGER

PRUDENTIAL INVESTMENTS FUND MANAGEMENT LLC (PIFM OR THE MANAGER), GATEWAY
CENTER THREE, 100 MULBERRY STREET, NEWARK, NEW JERSEY 07102-4077, IS THE MANAGER
OF THE FUND AND IS COMPENSATED FOR ITS SERVICES AT AN ANNUAL RATE OF .50 OF 1%
OF THE FUND'S AVERAGE DAILY NET ASSETS UP TO AND INCLUDING $250 MILLION, .475 OF
1% OF THE NEXT $500 MILLION, .45 OF 1% OF THE NEXT $750 MILLION, .425 OF 1% OF
THE NEXT $500 MILLION, .40 OF 1% OF THE NEXT $500 MILLION, .375 OF 1% OF THE
NEXT $500 MILLION AND .35 OF 1% OF THE FUND'S AVERAGE DAILY NET ASSETS IN EXCESS
OF $3 BILLION. PIFM is organized in New York as a limited liability company. It
is the successor to Prudential Mutual Fund Management, Inc., which transferred
its assets to PIFM in September 1996. For the fiscal year ended December 31,
1997, the Fund paid management fees to PIFM of .41% of the Fund's average net
assets. See "Manager" in the Statement of Additional Information.

As of January 31, 1998, PIFM served as the manager to 42 open-end
investment companies, constituting all of the Prudential Mutual Funds, and as
manager or administrator to 22 closed-end investment companies with aggregate
assets of approximately $63 billion.

UNDER THE MANAGEMENT AGREEMENT WITH THE FUND, PIFM MANAGES THE INVESTMENT
OPERATIONS OF THE FUND AND ALSO ADMINISTERS THE FUND'S CORPORATE AFFAIRS. See
"Manager" in the Statement of Additional Information.

UNDER A SUBADVISORY AGREEMENT BETWEEN PIFM AND THE PRUDENTIAL INVESTMENT
CORPORATION (PIC), DOING BUSINESS AS PRUDENTIAL INVESTMENTS (PI, THE SUBADVISER
OR THE INVESTMENT ADVISER), PI FURNISHES INVESTMENT ADVISORY SERVICES IN
CONNECTION WITH THE MANAGEMENT OF THE FUND AND IS REIMBURSED BY PIFM FOR ITS
REASONABLE COSTS AND EXPENSES INCURRED IN PROVIDING SUCH SERVICES. PIFM
continues to have responsibility pursuant to the Management Agreement for all
investment advisory services and supervises PI's performance of such services.

The co-portfolio managers of the Fund are George Edwards, Managing Director,
and Ken Peterson, Vice President of Prudential Investments. Mr. Edwards and Mr.
Peterson share responsibility for the day-to-day management of the Fund. Mr.
Edwards has been employed by Prudential as a portfolio manager since 1985, has
been a co-portfolio manager of the Fund since March, 1998 and, in addition,
served as co-portfolio manager of the Fund in 1994. Mr. Edwards also serves as
co-portfolio manager of Prudential Distressed Securities Fund, Inc. and
Prudential High Yield Total Return Fund, Inc. Mr. Peterson joined Prudential in
1985 and has been employed as a portfolio manager since 1995 and has been a
co-portfolio manager of the Fund since March, 1998. Prior to 1995, he was
employed as a credit analyst. Mr. Peterson also serves as portfolio manager of
The High Yield Income Fund, Inc. and several offshore funds.

PIFM and PIC are wholly-owned subsidiaries of Prudential, a major
diversified insurance and financial services company.

DISTRIBUTOR

PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC (THE DISTRIBUTOR), GATEWAY
CENTER THREE, 100 MULBERRY STREET, NEWARK, NEW JERSEY 07102-4077, IS A LIMITED
LIABILITY COMPANY ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE AND SERVES
AS THE DISTRIBUTOR OF THE SHARES OF THE FUND. IT IS A WHOLLY-OWNED SUBSIDIARY OF
PRUDENTIAL. Prudential Securities Incorporated, One Seaport Plaza, New York, New
York 10292, previously served as the exclusive distributor of Fund shares and
will serve as a co-distributor of the Fund for shares sold through its financial
advisors until approximately July 1, 1998. Thereafter, Prudential Investment
Management Services LLC

<PAGE>

will serve as the exclusive distributor of Fund shares. Prudential Securities
Incorporatd is an indirect, wholly-owned subsidiary of Prudential.

UNDER SEPARATE DISTRIBUTION AND SERVICE PLANS (THE CLASS A PLAN, THE CLASS
B PLAN AND THE CLASS C PLAN, COLLECTIVELY, THE PLANS) ADOPTED BY THE FUND UNDER
RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT AND A DISTRIBUTION AGREEMENT (THE
DISTRIBUTION AGREEMENT), THE DISTRIBUTOR INCURS THE EXPENSES OF DISTRIBUTING THE
FUND'S CLASS A, CLASS B AND CLASS C SHARES. The Distributor also incurs the
expenses of distributing the Fund's Class Z shares under the Distribution
Agreement, none of which is reimbursed by or paid for by the Fund. These
expenses include commissions and account servicing fees paid to, or on account
of, Dealers or financial institutions which have entered into agreements with
the Distributor, advertising expenses, the cost of printing and mailing
prospectuses to potential investors and indirect and overhead costs of the
Distributor associated with the sale of the Fund's shares, including lease,
utility, communications and sales promotion expenses.

Under the Plans, the Fund is obligated to pay distribution and/or service
fees to the Distributor as compensation for its distribution and service
activities, not as reimbursement for specific expenses incurred. If the
Distributor's expenses exceed its distribution and service fees, the Fund will
not be obligated to pay any additional expenses. If the Distributor's expenses
are less than such distribution and service fees, it will retain its full fees
and realize a profit.

The distribution and/or service fees may also be used by the Distributor to
compensate on a continuing basis Dealers in consideration for the distribution,
marketing, administrative and other services and activities provided by Dealers
with respect to the promotion of the sale of the Fund's shares and the
maintenance of related shareholder accounts.

UNDER THE CLASS A PLAN, THE FUND MAY PAY THE DISTRIBUTOR FOR ITS
DISTRIBUTION-RELATED ACTIVITIES WITH RESPECT TO CLASS A SHARES AT AN ANNUAL RATE
OF UP TO .30 OF 1% OF THE AVERAGE DAILY NET ASSETS OF THE CLASS A SHARES. The
Class A Plan provides that (i) up to .25 of 1% of the average daily net assets
of the Class A shares may be used to pay for personal service and/or the
maintenance of shareholder accounts (service fee) and (ii) total distribution
fees (including the service fee of .25 of 1%) may not exceed .30 of 1% of the
average daily net assets of the Class A shares. It is expected that in the case
of Class A Shares, proceeds from the distribution fee will be used primarily to
pay account servicing fees to financial advisers. The Distributor has agreed to
limit its distribution-related fees payable under the Class A Plan to .15 of 1%
of the average daily net assets of the Class A shares for the current fiscal
year ending December 31, 1998.

UNDER THE CLASS B AND CLASS C PLANS, THE FUND MAY PAY PRUDENTIAL SECURITIES
FOR ITS DISTRIBUTION-RELATED ACTIVITIES WITH RESPECT TO CLASS B AND CLASS C
SHARES AT AN ANNUAL RATE OF UP TO .75 OF 1% AND 1% OF THE AVERAGE DAILY NET
ASSETS OF THE CLASS B AND CLASS C SHARES, RESPECTIVELY. The Class B Plan
provides for the payment to the Distributor of (i) an asset-based sales charge
of up to .75 of 1% of the average daily net assets of the Class B shares and
(ii) a service fee of up to .25 of 1% of the average daily net assets of the
Class B shares; provided that the total distribution-related fee does not exceed
.75 of 1%. The Class C Plan provides for the payment to the Distributor of (i)
an asset-based sales charge of up to .75 of 1% of the average daily net assets
of the Class C shares, and (ii) a service fee of up to .25 of 1% of the average
daily net assets of the Class C shares. The service fee is used to pay for
personal service and/or the maintenance of shareholder accounts. The Distributor
has agreed to limit its distribution-related fees payable under the Class C Plan
to .75 of 1% of the average daily net assets of the Class C shares for the
fiscal year ending December 31, 1998. The Distributor also receives contingent
deferred sales charges from certain redeeming shareholders. See "Shareholder
Guide--How to Sell Your Shares--Contingent Deferred Sales Charge."

For the fiscal year ended December 31, 1997, the Fund paid distribution
expenses of .15%, .75% and .75% of the average net assets of the Class A, Class
B and Class C shares, respectively. The Fund records all payments made under the
Plans as expenses in the calculation of net investment income. See "Distributor"
in the Statement of Additional Information.

Distribution expenses attributable to the sale of Class A, Class B and
Class C shares of the Fund will be allocated to each such class based upon the
ratio of sales of each such class to the sales of Class A, Class B and Class C
shares of the Fund other than expenses allocable to a particular class. The
distribution fee and sales charge of one class will not be used to subsidize the
sale of another class.

<PAGE>

Each Plan provides that it shall continue in effect from year to year
provided that a majority of the Board of Directors of the Fund, including a
majority of the Directors who are not interested persons of the Fund (as defined
in the Investment Company Act) and who have no direct or indirect financial
interest in the operation of the Plan or any agreement related to the Plan (the
Rule 12b-1 Directors), vote annually to continue the Plan. Each Plan may be
terminated at any time by vote of a majority of the Rule 12b-1 Directors or of a
majority of the outstanding shares of the applicable class of the Fund. The Fund
will not be obligated to pay expenses incurred under any Plan if it is
terminated or not continued.

In addition to distribution and service fees paid by the Fund under the
Class A, Class B and Class C Plans, the Manager (or one of its affiliates) may
make payments out of its own resources to Dealers (including Prudential
Securities) and other persons which distribute shares of the Fund (including
Class Z shares). Such payments may be calculated by reference to the net asset
value of shares sold by such persons or otherwise.

The Distributor is subject to the rules of the National Association of
Securities Dealers, Inc. governing maximum sales charges. See "Distributor" in
the Statement of Additional Information.

FEE WAIVERS

The Distributor has agreed to limit its distribution fee for the Class A
and Class C shares as described above under "Distributor." Fee waivers will
increase the Fund's total return. See "Performance Information" in the Statement
of Additional Information and "Fund Expenses" above.

PORTFOLIO TRANSACTIONS

Affiliates of the Distributor may act as brokers for the Fund, provided that
the commissions, fees or other remuneration they receive are fair and
reasonable. See "Portfolio Transactions and Brokerage" in the Statement of
Additional Information.

From time to time Prudential Securities (and other affiliates of
Prudential) render investment banking services which may relate to or involve
issuers of securities held by the Fund or sought to be purchased or sold by the
Fund. Accordingly, Prudential Securities and its clients may have interests in
actual or potential conflict with the interests of the Fund. Under such
circumstances, the Manager will act in the best interests of the Fund without
regard to the interests of Prudential Securities or its clients.

CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT

State Street Bank and Trust Company (State Street or the Custodian), One
Heritage Drive, North Quincy, Massachusetts 02171, serves as Custodian for the
Fund's portfolio securities and cash and, in that capacity, maintains certain
financial and accounting books and records pursuant to an agreement with the
Fund. Its mailing address is P.O. Box 1713, Boston, Massachusetts 02105.

Prudential Mutual Fund Services LLC (PMFS or the Transfer Agent), Raritan
Plaza One, Edison, New Jersey 08837, serves as Transfer Agent and Dividend
Disbursing Agent and, in those capacities, maintains certain books and records
for the Fund. PMFS is a wholly-owned subsidiary of PIFM. Its mailing address is
P.O. Box 15035, New Brunswick, New Jersey 08906-5005.

YEAR 2000

The services provided to the Fund and the shareholders by the Manager, the
Distributor, the Transfer Agent and the Custodian depend on the smooth
functioning of their computer systems and those of their outside service
providers. Many computer software systems in use today cannot distinguish the
year 2000 from the year 1900 because of the way dates are encoded and
calculated. Such event could have a negative impact on handling securities
trades, payments of interest and dividends, pricing and account services.
Although, at this time, there can be no assurance that there will be no adverse
impact on the Fund, the Manager, the Distributor, the Transfer Agent and the
Custodian have advised the Fund that they have been actively working on
necessary changes to their computer systems to prepare for the year 2000 and
expect that their systems, and those of their outside service providers, will be
adapted in time for that event.

<PAGE>

- --------------------------------------------------------------------------------
HOW THE FUND VALUES ITS SHARES
- --------------------------------------------------------------------------------

THE FUND'S NAV IS DETERMINED BY SUBTRACTING ITS LIABILITIES FROM THE VALUE
OF ITS ASSETS AND DIVIDING THE REMAINDER BY THE NUMBER OF OUTSTANDING SHARES.
NAV IS CALCULATED SEPARATELY FOR EACH CLASS. THE BOARD OF DIRECTORS HAS FIXED
THE SPECIFIC TIME OF DAY FOR THE COMPUTATION OF THE FUND'S NAV TO BE AS OF 4:15
P.M., NEW YORK TIME.

Portfolio securities are valued based on market quotations or, if not
readily available, at fair value as determined in good faith under procedures
established by the Fund's Board of Directors. For valuation purposes, quotations
of foreign securities in a foreign currency are converted to U.S. dollar
equivalents. See "Net Asset Value" in the Statement of Additional Information.

The Fund will compute its NAV once daily on days that the New York Stock
Exchange is open for trading except on days on which no orders to purchase, sell
or redeem shares have been received by the Fund or days on which changes in the
value of the Fund's portfolio securities do not materially affect the NAV.

Although the legal rights of each class of shares are substantially
identical, the different expenses borne by each class will result in different
NAVs and dividends. The NAV of Class B and Class C shares will generally be
lower than the NAV of Class A shares as a result of the larger
distribution-related fee to which Class B and Class C shares are subject. The
NAV of Class Z shares will generally be higher than the NAV of the other three
classes because Class Z shares are not subject to any distribution and/or
service fees. It is expected, however, that the NAV of the four classes will
tend to converge immediately after the recording of dividends, which will differ
by approximately the amount of the distribution and/or service fee expense
accrual differential among the classes.

- --------------------------------------------------------------------------------
HOW THE FUND CALCULATES PERFORMANCE
- --------------------------------------------------------------------------------

FROM TIME TO TIME THE FUND MAY ADVERTISE ITS YIELD AND TOTAL RETURN
(INCLUDING AVERAGE ANNUAL TOTAL RETURN AND AGGREGATE TOTAL RETURN) IN
ADVERTISEMENTS AND SALES LITERATURE. YIELD AND TOTAL RETURN ARE CALCULATED
SEPARATELY FOR CLASS A, CLASS B, CLASS C AND CLASS Z SHARES. THESE FIGURES ARE
BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE
PERFORMANCE. The yield refers to the income generated by an investment in the
Fund over a one-month or 30-day period. This income is then annualized; that is,
the amount of income generated by the investment during that 30-day period is
assumed to be generated each 30-day period for twelve periods and is shown as a
percentage of the investment. The income earned on the investment is also
assumed to be reinvested at the end of the sixth 30-day period. The total return
shows how much an investment in the Fund would have increased (decreased) over a
specified period of time (I.E., one, five or ten years or since inception of the
Fund) assuming that all distributions and dividends by the Fund were reinvested
on the reinvestment dates during the period and less all recurring fees. The
aggregate total return reflects actual performance over a stated period of time.
Average annual total return is a hypothetical rate of return that, if achieved
annually, would have produced the same aggregate total return if performance had
been constant over the entire period. Average annual total return smooths out
variations in performance and takes into account any applicable initial or
contingent deferred sales charges. Neither average annual total return nor
aggregate total return takes into account any federal or state income taxes
which may be payable upon redemption. The Fund also may include comparative
performance information in advertising or marketing the Fund's shares. Such
performance information may include data from Lipper Analytical Services, Inc.,
Morningstar Publications, Inc., other industry publications, business
periodicals and market indices. See "Performance Information" in the Statement
of Additional Information. Further performance information is contained in the
Fund's annual and semi-annual reports to shareholders, which may be obtained
without charge. See "Shareholder Guide--Shareholder Services--Reports to
Shareholders."

<PAGE>

- --------------------------------------------------------------------------------
TAXES, DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------

TAXATION OF THE FUND

THE FUND HAS QUALIFIED AND INTENDS TO REMAIN QUALIFIED AS A REGULATED
INVESTMENT COMPANY UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
INTERNAL REVENUE CODE). ACCORDINGLY, THE FUND WILL NOT BE SUBJECT TO FEDERAL
INCOME TAXES ON ITS NET INVESTMENT INCOME AND NET CAPITAL AND CURRENCY GAINS, IF
ANY, THAT IT DISTRIBUTES TO ITS SHAREHOLDERS. See "Taxes, Dividends and
Distributions" in the Statement of Additional Information.

TAXATION OF SHAREHOLDERS

All dividends out of net investment income, together with distributions of
net short-term capital gains in excess of net long-term capital losses, will be
taxable as ordinary income to the shareholder whether or not reinvested. Any net
long-term capital gains (I.E., the excess of capital gains from the sale of
assets held for more than 12 months over net short-term capital losses)
distributed to shareholders will be taxable as such to the shareholders, whether
or not reinvested and regardless of the length of time a shareholder has owned
his or her shares. The maximum capital gains rate for individual shareholders is
28% with respect to securities held by the Fund for more than 12 months, but not
more than 18 months, and 20% with respect to securities held by the Fund for
more than 18 months. The maximum tax for ordinary income is 39.6%. The maximum
long-term capital gains rate for corporate shareholders is currently 35%.

Any gain or loss realized upon a sale or redemption of Fund shares by a
shareholder who is not a dealer in securities will be treated as a capital gain.
Any such capital gain derived by an individual will be subject to tax at the
reduced rates described above depending upon the shareholder's holding period of
the shares sold. Any such loss will be long-term capital loss if the shares have
been held for more than one year and otherwise as a short-term capital loss. Any
such loss, with respect to shares that are held for six months or less, however,
will be treated as a long-term capital loss to the extent of any capital gains
distributions received by the shareholder.

A shareholder who acquires shares of the Fund and sells or otherwise
disposes of such shares within 90 days of acquisition may not be allowed to
include certain sales charges incurred in acquiring such shares for purposes of
calculating gain or loss realized upon a sale or exchange of shares of the Fund.

The Fund has obtained opinions of counsel to the effect that neither (i)
the conversion of Class B shares into Class A shares nor (ii) the exchange of
any class of the Fund's shares for any other class of its shares constitutes a
taxable event for federal income tax purposes. However, such opinions are not
binding on the Internal Revenue Service.

Shareholders not subject to tax on their income will generally not be
required to pay tax on amounts distributed to them.

WITHHOLDING TAXES

Under the Internal Revenue Code, the Fund is generally required to withhold
and remit to the U.S. Treasury 31% of dividends, capital gain distributions and
redemption proceeds payable to individuals and certain noncorporate shareholders
who fail to furnish correct tax identification numbers on IRS Form W-9 (or IRS
Form W-8 in the case of certain foreign shareholders) or generally who are
otherwise subject to backup withholding. Dividends of net investment income and
net short-term capital gains payable to a foreign shareholder will generally be
subject to U.S. withholding tax at the rate of 30% (or lower treaty rate).

Shareholders are advised to consult their own tax advisers regarding
specific questions as to federal, state or local taxes. See "Taxes, Dividends
and Distributions" in the Statement of Additional Information.

DIVIDENDS AND DISTRIBUTIONS

THE FUND EXPECTS TO DECLARE DAILY AND PAY MONTHLY DIVIDENDS BASED ON ACTUAL NET
INVESTMENT INCOME DETERMINED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES; HOWEVER, A PORTION OF SUCH DIVIDEND MAY ALSO INCLUDE

<PAGE>

PROJECTED NET INVESTMENT INCOME. THE FUND EXPECTS TO MAKE DISTRIBUTIONS AT LEAST
ANNUALLY OF ANY NET CAPITAL GAINS, IF ANY. Dividends paid by the Fund with
respect to each class of shares, to the extent any dividends are paid, will be
calculated in the same manner, at the same time, on the same day and will be in
the same amount except that each class will bear its own distribution expenses,
generally resulting in lower dividends for Class B and Class C shares in
relation to Class A and Class Z shares and lower dividends for Class A shares in
relation to Class Z shares. Distributions of net capital gains, if any, will be
paid in the same amount for each class of shares. See "How the Fund Values its
Shares."

Dividends and distributions will be paid in additional Fund shares based on
the NAV of each class of Fund shares on the payment date and record date,
respectively, or such other date as the Board of Directors may determine, unless
the shareholder elects in writing not less than five business days prior to the
record date to receive such dividends and distributions in cash. Such election
should be submitted to Prudential Mutual Fund Services LLC, Attention: Account
Maintenance, P.O. Box 15035, New Brunswick, New Jersey 08906-5015. The Fund will
notify each shareholder after the close of the Fund's taxable year both of the
dollar amount and the taxable status of that year's dividends and distributions
on a per share basis.

As of December 31, 1997 the Fund had a capital loss carryforward for
federal income tax purposes of $553,025,700. Accordingly, no capital gains
distribution is expected to be paid to shareholders until net gains have been
realized in excess of such carryforward amount.

To the extent that, in a given year, distributions to shareholders exceed
the Fund's current and accumulated earnings and profits, shareholders will
receive a return of capital in respect of such year and, in an annual statement,
will be notified of the amount of any return of capital for such year.

Any distributions of net capital gains paid shortly after a purchase by an
investor will have the effect of reducing the NAV of the investor's shares by
the per share amount of the distributions. Such distributions, although in
effect a return of invested principal, are subject to federal income taxes.
Accordingly, prior to purchasing shares of the Fund, an investor should
carefully consider the impact of capital gains distributions which are expected
to be or have been announced.

IF YOU BUY SHARES ON OR IMMEDIATELY BEFORE THE RECORD DATE (THE DATE THAT
DETERMINED WHO RECEIVES THE DIVIDEND), YOU WILL RECEIVE A PORTION OF THE MONEY
YOU INVESTED AS A TAXABLE DIVIDEND. THEREFORE, YOU SHOULD CONSIDER THE TIMING OF
DIVIDENDS WHEN BUYING SHARES OF THE FUND.

- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------

DESCRIPTION OF COMMON STOCK

THE FUND WAS INCORPORATED IN MARYLAND ON JANUARY 5, 1979. THE FUND IS
AUTHORIZED TO ISSUE 3 BILLION SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE,
DIVIDED INTO FOUR CLASSES, DESIGNATED CLASS A, CLASS B, CLASS C AND CLASS Z
COMMON STOCK, WHICH CONSISTS OF 750 MILLION AUTHORIZED CLASS A SHARES, 750
MILLION AUTHORIZED CLASS B SHARES, 750 MILLION AUTHORIZED CLASS C SHARES AND 750
MILLION AUTHORIZED CLASS Z SHARES. Each class of common stock represents an
interest in the same assets of the Fund and is identical in all respects except
that (i) each class is subject to different sales charges and distribution
and/or service fees (except for Class Z shares, which are not subject to any
sales charges and distribution and/or service fees), which may affect
performance, (ii) each class has exclusive voting rights on any matter submitted
to shareholders that relates solely to its arrangement and has separate voting
rights on any matter submitted to shareholders in which the interests of one
class differ from the interests of any other class, (iii) each class has a
different exchange privilege, (iv) only Class B shares have a conversion feature
and (v) Class Z shares are offered exclusively for sale to a limited group of
investors. See "How the Fund is Managed-Distributor." In accordance with the
Fund's Articles of Incorporation, the Board of Directors may authorize the
creation of additional series of common stock and classes within such series,
with such preferences, privileges, limitations and voting and dividend rights as
the Board may determine. Currently, the Fund is offering only four classes,
designated Class A, Class B, Class C and Class Z shares.

<PAGE>

The Board of Directors may increase or decrease the number of authorized
shares without approval by the shareholders. Shares of the Fund, when issued,
are fully paid, nonassessable, fully transferable and redeemable at the option
of the holder. Shares are also redeemable at the option of the Fund under
certain circumstances as described under "Shareholder Guide-How to Sell Your
Shares." Each share of each class of common stock is equal as to earnings,
assets and voting privileges, except that, as noted above, each class of shares
(with the exception of Class Z shares, which are not subject to any distribution
and/or service fees) bears the expenses related to the distribution of its
shares. Except for the conversion feature applicable to Class B shares, there
are no conversion, preemptive or other subscription rights. In the event of
liquidation, each share of common stock of the Fund is entitled to its portion
of all of the Fund's assets after all debt and expenses of the Fund have been
paid. Since Class B and Class C shares generally bear higher distribution
expenses than Class A shares, the liquidation proceeds to shareholders of those
classes are likely to be lower than to Class A shareholders and to Class Z
shareholders, whose Class Z shares are not subject to any distribution and/or
service fee. The Fund's shares do not have cumulative voting rights for the
election of Directors.

THE FUND DOES NOT INTEND TO HOLD ANNUAL MEETINGS OF SHAREHOLDERS UNLESS
OTHERWISE REQUIRED BY LAW. THE FUND WILL NOT BE REQUIRED TO HOLD MEETINGS OF
SHAREHOLDERS UNLESS, FOR EXAMPLE, THE ELECTION OF DIRECTORS IS REQUIRED TO BE
ACTED ON BY SHAREHOLDERS UNDER THE INVESTMENT COMPANY ACT. SHAREHOLDERS HAVE
CERTAIN RIGHTS, INCLUDING THE RIGHT TO CALL A MEETING UPON A VOTE OF 10% OF THE
FUND'S OUTSTANDING SHARES FOR THE PURPOSE OF VOTING ON THE REMOVAL OF ONE OR
MORE DIRECTORS OR TO TRANSACT ANY OTHER BUSINESS.

ADDITIONAL INFORMATION

This Prospectus, including the Statement of Additional Information which
has been incorporated by reference herein, does not contain all the information
set forth in the Registration Statement filed by the Fund with the Commission
under the Securities Act. Copies of the Registration Statement may be obtained
at a reasonable charge from the Commission or may be examined, without charge,
at the office of the Commission in Washington, D.C.

- --------------------------------------------------------------------------------
SHAREHOLDER GUIDE
- --------------------------------------------------------------------------------

HOW TO BUY SHARES OF THE FUND

YOU MAY PURCHASE SHARES OF THE FUND THROUGH THE DISTRIBUTOR, THROUGH
DEALERS, OR DIRECTLY FROM THE FUND THROUGH ITS TRANSFER AGENT, PRUDENTIAL MUTUAL
FUND SERVICES LLC (PMFS OR TRANSFER AGENT), ATTENTION: INVESTMENT SERVICES, P.O.
BOX 15035, NEW BRUNSWICK, NEW JERSEY 08906-5020. The purchase price is the NAV
next determined following receipt of an order in proper form by the Distributor,
your Dealer or the Transfer Agent, plus a sales charge which, at your option,
may be imposed either (i) at the time of purchase (Class A shares) or (ii) on a
deferred basis (Class B or Class C shares). Class Z shares are offered to a
limited group of investors at NAV without any sales charge. Dealers may charge
their customers a separate fee for handling purchase transactions. Payments may
be made by cash, wire, check or through your brokerage account. See "Alternative
Purchase Plan" and "How the Fund Values its Shares."

In order to receive that day's NAV, your order must be received before the
Fund's NAV is computed (currently 4:15 P.M., New York time). If you purchase
shares through your Dealer, the Dealer must receive your order before the Fund's
NAV is computed that day and must transmit the order to the Distributor that
same day for you to receive that day's NAV.

The minimum initial investment for Class A and Class B shares is $1,000 and
$5,000 for Class C shares, except that the minimum initial investment for Class
C shares may be waived from time to time. There is no minimum initial investment
for Class Z shares. The minimum subsequent investment is $100 for all classes,
except for Class Z shares for which there is no such minimum. All minimum
investment requirements are waived for certain retirement and employee savings
plans or custodial accounts for the benefit of minors. For purchases through the
Automatic Savings Accumulation Plan, the minimum initial and subsequent
investment is $50. See "Shareholder Services" below.

<PAGE>

The Fund reserves the right to reject any purchase order (including an
exchange into the Fund) or to suspend or modify the continuous offering of its
shares. See "How to Sell Your Shares" below.

If a stock certificate is desired, it must be requested in writing for each
transaction. Certificates are issued only for full shares. Shareholders who hold
their shares in street name with their Dealer will not receive stock
certificates.

Your Dealer is responsible for forwarding payment promptly to the Fund. The
Distributor reserves the right to cancel any purchase order for which payment
has not been received by the third business day following the placement of the
order.

Transactions in Fund shares may be subject to postage and handling charges
imposed by your Dealer. Any such charge is retained by the Dealer and is not
remitted to the Fund.

PURCHASE BY WIRE. For an initial purchase of shares of the Fund by wire,
you must first telephone PMFS to receive an account number at (800) 225-1852
(toll-free). The following information will be requested: your name, address,
tax identification number, class election, dividend distribution election,
amount being wired and wiring bank. Instructions should then be given by you to
your bank to transfer funds by wire to State Street Bank and Trust Company,
Boston, Massachusetts, Custody and Shareholder Services Division, Attention:
Prudential High Yield Fund, Inc., specifying on the wire the account number
assigned by PMFS and your name and identifying the class in which you are
eligible to invest (Class A, Class B, Class C or Class Z shares).

If you arrange for receipt by State Street of Federal Funds prior to 4:15
P.M., New York time, on a business day, you may purchase shares of the Fund as
of that day.

In making a subsequent purchase order by wire, you should wire State Street
directly and should be sure that the wire specifies Prudential High Yield Fund,
Inc., Class A, Class B, Class C or Class Z shares and your name and individual
account number. It is not necessary to call PMFS to make subsequent purchase
orders utilizing Federal Funds. The minimum amount which may be invested by wire
is $1,000.

ALTERNATIVE PURCHASE PLAN

THE FUND OFFERS FOUR CLASSES OF SHARES THROUGH THIS PROSPECTUS (CLASS A,
CLASS B, CLASS C AND CLASS Z SHARES) WHICH ALLOWS YOU TO CHOOSE THE MOST
BENEFICIAL SALES CHARGE STRUCTURE FOR YOUR INDIVIDUAL CIRCUMSTANCES GIVEN THE
AMOUNT OF THE PURCHASE, THE LENGTH OF TIME YOU EXPECT TO HOLD THE SHARES AND
OTHER RELEVANT CIRCUMSTANCES (ALTERNATIVE PURCHASE PLAN).

ANNUAL 12B-1 FEES
(AS A % OF AVERAGE DAILY
SALES CHARGE NET ASSETS) OTHER INFORMATION
----------------------------------- -------------------------- ---------------------------------
<S> <C> <C> <C>
CLASS A Maximum initial sales charge of .30 of 1% (Currently Initial sales charge waived or
4% of the public offering price being charged at a reduced for certain purchases
rate of .15 of 1%)

CLASS B Maximum CDSC of 5% of .75 of 1% Shares convert to Class A shares
the lesser of the amount invested approximately seven years after
or the redemption proceeds; purchase
declines to zero after six years

CLASS C Maximum CDSC of 1% of the 1% (Currently being Shares do not convert to another
lesser of the amount invested or charged at a rate of .75 class
the redemption proceeds on of 1%)
redemptions made within one year
of purchase

CLASS Z None None Sold to a limited group of
investors.

</TABLE>

<PAGE>

The four classes of shares represent an interest in the same portfolio of
investments of the Fund and have the same rights, except that (i) each class
(with the exception of Class Z shares which are not subject to any distribution
or service fees) bears the separate expenses of its Rule 12b-1 distributor and
service plan. (ii) each class has exclusive voting rights on any matter
submitted to shareholders that relates solely to its arrangement and has
separate voting rights on any matter submitted to shareholders in which the
interests of one class differ from the interests of any other class, (iii) only
Class B shares have a conversion feature, and (iv) Class Z shares are
exclusively offered for sale to a limited group of investors. The four classes
also have separate exchange privileges. See "How to Exchange Your Shares" below.
The income attributable to each class and the dividends payable on the shares of
each class will be reduced by the amount of the distribution fee (if any) of
each class. Class B and Class C shares bear the expenses of a higher
distribution fee which will generally cause them to have higher expense ratios
and to pay lower dividends than the Class A and Class Z shares.

Financial advisers and other sales agents who sell shares of the Fund will
receive different compensation for selling Class A, Class B, Class C and Class Z
shares and will generally receive more compensation initially for selling Class
A and Class B shares than for selling Class C or Class Z shares.

IN SELECTING A PURCHASE ALTERNATIVE, YOU SHOULD CONSIDER, AMONG OTHER
THINGS, (1) the length of time you expect to hold your investment, (2) the
amount of any applicable sales charge (whether imposed at the time of purchase
or redemption) and distribution-related fees, as noted above, (3) whether you
qualify for any reduction or waiver of any applicable sales charge, (4) the
various exchange privileges among the different classes of shares (see "How to
Exchange Your Shares" below) and (5) the fact that Class B shares automatically
convert to Class A shares approximately seven years after purchase (see
"Conversion Feature-Class B Shares" below).

The following is provided to assist you in determining which method of
purchase best suits your individual circumstances and is based on current fees
and expenses being charged to the Fund:

If you intend to hold your investment in the Fund for less than 7 years and
do not qualify for a reduced sales charge on Class A shares, since Class A
shares are subject to a maximum initial sales charge of 4% and Class B shares
are subject to a CDSC of 5% which declines to zero over a 6 year period, you
should consider purchasing Class C shares over either Class A or Class B shares.

If you intend to hold your investment for more than 6 years, you should
consider purchasing Class A shares over either Class B or Class C shares
regardless of whether or not you qualify for a reduced sales charge on Class A
shares.

If you qualify for a reduced sales charge on Class A shares, it may be more
advantageous for you to purchase Class A shares over either Class B or Class C
shares regardless of how long you intend to hold your investment. However,
unlike Class B and Class C shares, you would not have all of your money invested
initially because the sales charge on Class A shares is deducted at the time of
purchase.

If you do not qualify for a reduced sales charge on Class A shares and you
purchase Class B or Class C shares, you would have to hold your investment for
more than 6 years in the case of Class B shares and Class C shares for the
higher cumulative annual distribution-related fee on those shares to exceed the
initial sales charge plus cumulative annual distribution-related fees on Class A
shares. This does not take into account the time value of money, which further
reduces the impact of the higher Class B or Class C distribution-related fee on
the investment, fluctuations in NAV, the effect of the return on the investment
over this period of time or redemptions during which the CDSC is applicable.

<PAGE>

ALL PURCHASES OF $1 MILLION OR MORE, EITHER AS PART OF A SINGLE INVESTMENT
OR UNDER RIGHTS OF ACCUMULATION OR LETTERS OF INTENT, MUST BE FOR CLASS A SHARES
UNLESS THE PURCHASER IS ELIGIBLE TO PURCHASE CLASS Z SHARES. SEE "REDUCTION AND
WAIVER OF INITIAL SALES CHARGES" AND "CLASS Z SHARES" BELOW.

CLASS A SHARES

The offering price of Class A shares for investors choosing the initial
sales charge alternative is the next determined NAV plus a sales charge
(expressed as a percentage of the offering price and of the amount invested) as
shown in the following table:

SALES CHARGE AS SALES CHARGE AS DEALER CONCESSION
PERCENTAGE OF PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
------------------ ----------------- ----------------- -----------------
<S> <C> <C> <C>
Less than $50,000 ....... 4.00% 4.17% 3.75%
$50,000 to $99,999 ...... 3.50% 3.63% 3.25%
$100,000 to $249,999 .... 2.75% 2.83% 2.50%
$250,000 to $499,999 .... 2.00% 2.04% 1.90%
$500,000 to $999,999 .... 1.50% 1.52% 1.40%
$1,000,000 and above .... None None None
</TABLE>

The Distributor may reallow the entire sales charge to Dealers. Dealers may
be deemed to be underwriters, as that term is defined in the Securities Act. The
Distributor reserves the right, without prior notice to any Dealer, to suspend
or eliminate Dealer concessions or commissions.

In connection with the sale of Class A shares at NAV (without payment of an
initial sales charge), the Manager, the Distributor or one of their affiliates
will pay Dealers, financial advisors and other persons which distribute shares
of the Fund finders' fees from its own resources based on a percentage of the
NAV of shares sold by such persons.

REDUCTION AND WAIVER OF INITIAL SALES CHARGES. Reduced sales charges are
available through Rights of Accumulation and Letters of Intent. Shares of the
Fund and shares of other Prudential Mutual Funds (excluding money market funds
other than those acquired pursuant to the exchange privilege) may be aggregated
to determine the applicable reduction. See "Purchase and Redemption of Fund
Shares-Reduction and Waiver of Initial Sales Charges-Class A Shares" in the
Statement of Additional Information.

BENEFIT PLANS. Class A shares may be purchased at NAV, without payment of
an initial sales charge, by pension, profit-sharing or other employee benefit
plans qualified under Section 401 of the Internal Revenue Code and deferred
compensation and annuity plans under Sections 457 and 403(b)(7) of the Internal
Revenue Code (collectively, Benefit Plans), provided that the Benefit Plan has
existing assets of at least $1 million invested in shares of Prudential Mutual
Funds (excluding money market funds other than those acquired pursuant to the
exchange privilege) or 250 eligible employees or participants. In the case of
Benefit Plans whose accounts are held directly with the Transfer Agent and for
which the Transfer Agent does individual account recordkeeping (Direct Account
Benefit Plans), Class A shares may be purchased at NAV by participants who are
repaying loans made from such plans to the participant.

SPECIAL RULES APPLICABLE TO RETIREMENT PLANS. After a Benefit Plan
qualifies to purchase Class A shares at NAV, all subsequent purchases will be
made at NAV.

OTHER WAIVERS. In addition, Class A shares may be purchased at NAV, through
the Transfer Agent, by the following persons: (a) officers of the Prudential
Mutual Funds (including the Fund), (b) employees of the Distributor and PIFM and
their subsidiaries and members of the families of such persons who maintain an
employee related account at the Transfer Agent, (c) employees of subadvisers of
the Prudential Mutual Funds, provided that purchases at NAV are permitted by
such person's employer, (d) Prudential employees and special agents of
Prudential and its subsidiaries and all persons who have retired directly from
active service with Prudential or one of its subsidiaries, (e) registered

<PAGE>

representatives and employees of Dealers provided that purchases at NAV are
permitted by such person's employer, (f) investors in Individual Retirement
Accounts, provided the purchase is made with the proceeds of a tax-free rollover
of assets from a Benefit Plan for which Prudential Investments serves as the
record keeper or administrator, (g) investors previously eligible to purchase
Class A shares at NAV because of their participation in programs sponsored by an
affiliate of the Distributor for certain retirement plan or deferred
compensation plan participants, (h) orders placed by broker-dealers, investment
advisers or financial planners who have entered into an agreement with the
Distributor, who place trades for their own accounts or the accounts of their
clients and who charge a management, consulting or other fee for their services,
(e.g., mutual fund "wrap" or asset allocation programs), and (i) orders placed
by clients of broker-dealers, investment advisers or financial planners who
place trades for their own accounts if the accounts are linked to the master
account of such broker-dealer, investment adviser or financial planner on the
books and records of the broker-dealer, investment adviser or financial planner
(e.g., mutual fund "supermarket" programs).

For an investor to obtain any reduction or waiver of the initial charges,
at the time of the sale, either the Transfer Agent must be notified directly by
the investor or the Distributor must be notified by the Dealer facilitating the
transaction that the sale qualifies for the reduced or waived sales charge. The
reduction or waiver will be granted subject to confirmation of your entitlement.
No initial sales charges are imposed upon Class A shares purchased upon the
reinvestment of dividends and distributions. See "Purchase and Redemption of
Fund Shares--Reduction and Waiver of Initial Sales Charges--Class A Shares" in
the Statement of Additional Information.

CLASS B AND CLASS C SHARES

The offering price of Class B and Class C shares for investors choosing one
of the deferred sales charge alternatives is the NAV next determined following
receipt of an order by the Transfer Agent, a Dealer, or the Distributor.
Although there is no sales charge imposed at the time of purchase, redemptions
of Class B and Class C shares may be subject to a CDSC. See "How to Sell Your
Shares--Contingent Deferred Sales Charges." The Distributor will pay, from its
own resources, sales commissions of up to 4% of the purchase price of Class B
shares to Dealers, financial advisers and other persons who sell the Class B
shares at the time of sale. This facilitates the ability of the Fund to sell the
Class B shares without an initial sales charge being deducted at the time of
purchase. The Distributor anticipates that it will recoup its advancement of
sales commissions from the combination of the CDSC and the distribution fee. See
"How the Fund is Managed--Distributor." In connection with the sale of Class C
shares, the Distributor will pay, from its own resources, Dealers, financial
advisers and other persons which distribute Class C shares a sales commission of
up to 1% of the purchase price at the time of the sale.

CLASS Z SHARES

Class Z shares of the Fund currently are available for purchase by:

(i) pension, profit-sharing or other employee benefit plans qualified under
Section 401 of the Internal Revenue Code, deferred compensation and annuity
plans under Sections 457 and 403(b)(7) of the Internal Revenue Code and
non-qualified plans for which the Fund is an available option (collectively,
Benefit Plans), provided such Benefit Plans (in combination with other plans
sponsored by the same employer or group of related employers) have at least $50
million in defined contribution assets; (ii) participants in any fee-based
program or trust program sponsored by any affiliate of the Distributor which
includes mutual funds as investment options and for which the Fund is an
available option; (iii) certain participants in the MEDLEY Program (group
variable annuity contracts) sponsored by an affiliate of the Distributor for
whom Class Z shares of the Prudential Mutual Funds are an available option; (iv)
Benefit Plans for which an affiliate of the Distributor serves as recordkeeper
and as of September 20, 1996, (a) were Class Z shareholders of the Prudential
Mutual Funds or (b) executed a letter of intent to purchase Class Z shares of
the Prudential Mutual Funds; (v) current and former Directors/Trustees of the
Prudential Mutual Funds (including the Fund); and (vi) employees of an affiliate
of the Distributor who participate in an employer-sponsored employee savings
plan. After a Benefit Plan qualifies to purchase Class Z shares, all subsequent
purchases will be for Class Z shares.

<PAGE>

In connection with the sale of Class Z shares, the Manager, the Distributor
or one of their affiliates may pay Dealers, financial advisers and other persons
which distribute shares a finders' fee from its own resources based on a
percentage of the NAV of shares sold by such persons.

HOW TO SELL YOUR SHARES

YOU CAN REDEEM YOUR SHARES AT ANY TIME FOR CASH AT THE NAV PER SHARE NEXT
DETERMINED AFTER THE REDEMPTION REQUEST IS RECEIVED IN PROPER FORM BY THE
TRANSFER AGENT, THE DISTRIBUTOR OR YOUR DEALER. See "How the Fund Values its
Shares." In certain cases, however, redemption proceeds will be reduced by the
amount of any applicable CDSC, as described below. See "Contingent Deferred
Sales Charges" below.

If you are redeeming your shares through a Dealer, your Dealer must receive
your sell order before the Fund computes its NAV for that day (I.E., 4:15 P.M.,
New York time) in order to receive that day's NAV. Your Dealer will be
responsible for furnishing all necessary documentation to the Distributor and
may charge you for its services in connection with redeeming shares of the Fund.

IF YOU HOLD SHARES IN NON-CERTIFICATE FORM, A WRITTEN REQUEST FOR
REDEMPTION SIGNED BY YOU EXACTLY AS THE ACCOUNT IS REGISTERED IS REQUIRED. IF
YOU HOLD CERTIFICATES, THE CERTIFICATES, SIGNED IN THE NAME(S) SHOWN ON THE FACE
OF THE CERTIFICATES, MUST BE RECEIVED BY THE TRANSFER AGENT, THE DISTRIBUTOR OR
YOUR DEALER IN ORDER TO BE REDEEMED, WHICH MAY DELAY RECEIPT OF THE PROCEEDS FOR
THE REDEMPTION REQUEST TO BE PROCESSED. IF REDEMPTION IS REQUESTED BY A
CORPORATION, PARTNERSHIP, TRUST OR FIDUCIARY, WRITTEN EVIDENCE OF AUTHORITY
ACCEPTABLE TO THE TRANSFER AGENT MUST BE SUBMITTED BEFORE SUCH REQUEST WILL BE
ACCEPTED. All correspondence and documents concerning redemptions should be sent
to the Fund in care of its Transfer Agent, Prudential Mutual Fund Services LLC,
Attention: Redemption Services, P.O. Box 15035, New Brunswick, New Jersey
08906-5010, the Distributor or to your Dealer.

If the proceeds of the redemption (a) exceed $50,000, (b) are to be paid to
a person other than the record owner, (c) are to be sent to an address other
than the address on the Transfer Agent's records, or (d) are to be paid to a
corporation, partnership, trust or fiduciary, the signature(s) on the redemption
request and on the certificates, if any, or stock power, must be guaranteed by
an eligible guarantor institution. An eligible guarantor institution includes
any bank, broker, dealer or credit union. The Transfer Agent reserves the right
to request additional information from, and make reasonable inquiries of, any
eligible guarantor institution.

PAYMENT FOR SHARES PRESENTED FOR REDEMPTION WILL BE MADE BY CHECK WITHIN
SEVEN DAYS AFTER RECEIPT BY THE TRANSFER AGENT, THE DISTRIBUTOR OR YOUR DEALER
OF THE CERTIFICATE AND/OR WRITTEN REQUEST EXCEPT AS INDICATED BELOW. Such
payment may be postponed or the right of redemption suspended at times (a) when
the New York Stock Exchange is closed for other than customary weekends and
holidays, (b) when trading on such Exchange is restricted, (c) when an emergency
exists as a result of which disposal by the Fund of securities owned by it is
not reasonably practicable or it is not reasonably practicable for the Fund
fairly to determine the value of its net assets, or (d) during any other period
when the Commission, by order, so permits; provided that applicable rules and
regulations of the Commission shall govern as to whether the conditions
prescribed in (b), (c) or (d) exist.

PAYMENT FOR REDEMPTION OF RECENTLY PURCHASED SHARES WILL BE DELAYED UNTIL
THE FUND OR THE TRANSFER AGENT HAS BEEN ADVISED THAT THE PURCHASE CHECK HAS BEEN
HONORED, WHICH MAY TAKE UP TO 10 CALENDAR DAYS FROM THE TIME OF RECEIPT OF THE
PURCHASE CHECK BY THE FUND OR THE TRANSFER AGENT. SUCH DELAY MAY BE AVOIDED BY
PURCHASING SHARES BY WIRE OR BY CERTIFIED OR CASHIER'S CHECK.

REDEMPTION IN KIND. If the Board of Directors determines that it would be
detrimental to the best interests of the remaining shareholders of the Fund to
make payment wholly or partly in cash, the Fund may pay the redemption price in
whole or in part by a distribution in kind of securities from the investment
portfolio of the Fund, in lieu of cash, in conformity with applicable rules of
the Commission. Securities will be readily marketable and will be valued in the
same manner as in a regular redemption. See "How the Fund Values its Shares." If
your shares are redeemed in kind, you would incur transaction costs in
converting the assets into cash. The Fund, however, has elected to be governed
by Rule 18f-1 under the Investment Company Act, under which the Fund is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of
the NAV of the Fund during any 90-day period for any one shareholder.

<PAGE>

INVOLUNTARY REDEMPTION. In order to reduce expenses of the Fund, the Board
of Directors may redeem all of the shares of any shareholder, other than a
shareholder which is an IRA or other tax deferred retirement plan, whose account
has a NAV of less than $500 due to a redemption. The Fund will give such
shareholders 60 days' prior written notice in which to purchase sufficient
additional shares to avoid such redemption. No CDSC will be imposed on any
involuntary redemption.

90-DAY REPURCHASE PRIVILEGE. If you redeem your shares and have not
previously exercised the repurchase privilege, you may reinvest any portion or
all of the proceeds of such redemption in shares of the Fund at the NAV next
determined after the order is received, which must be within 90 days after the
date of the redemption. Any CDSC paid in connection with such redemption will be
credited (in shares) to your account. If less than a full repurchase is made,
the credit will be on a PRO RATA basis. You must notify the Fund's Transfer
Agent, either directly or through your Dealer or the Distributor, at the time
the repurchase privilege is exercised to adjust your account for the CDSC you
previously paid. Thereafter, any redemptions will be subject to the CDSC
applicable at the time of the redemption. See "Contingent Deferred Sales
Charges" below. Exercise of the repurchase privilege may affect federal tax
treatment of any gain realized upon redemption.

CONTINGENT DEFERRED SALES CHARGES

Redemptions of Class B shares will be subject to a contingent deferred
sales charge or CDSC declining from 5% to zero over a six-year period. Class C
shares redeemed within one year of purchase will be subject to a 1% CDSC. The
CDSC will be deducted from the redemption proceeds and reduce the amount paid to
you. The CDSC will be imposed on any redemption by you which reduces the current
value of your Class B or Class C shares to an amount which is lower than the
amount of all payments by you for shares during the preceding six years, in the
case of Class B shares, and one year, in the case of Class C shares. A CDSC will
be applied on the lesser of the original purchase price or the current value of
the shares being redeemed. Increases in the value of your shares or shares
acquired through reinvestment of dividends or distributions are not subject to a
CDSC. The amount of any CDSC will be paid to and retained by the Distributor.
See "How the Fund is Managed-Distributor" and "Waiver of the Contingent Deferred
Sales Charges-Class B Shares" below.

The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of shares until the time of redemption
of such shares. Solely for purposes of determining the number of years from the
time of any payment for the purchase of shares, all payments during a month will
be aggregated and deemed to have been made on the last day of the month. The
CDSC will be calculated from the first day of the month after the initial
purchase, excluding the time shares were held in a money market fund. See "How
to Exchange Your Shares" below.

The following table sets forth the rates of the CDSC applicable to
redemptions of Class B shares:

CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE
YEAR SINCE PURCHASE OF DOLLARS INVESTED OR
PAYMENT MADE REDEMPTION PROCEEDS
------------------- -------------------------
First ....................... 5.0%
Second ...................... 4.0%
Third ....................... 3.0%
Fourth ...................... 2.0%
Fifth ....................... 1.0%
Sixth ....................... 1.0%
Seventh ..................... None

In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible rate.
It will be assumed that the redemption is made first of amounts representing
shares acquired

<PAGE>

pursuant to the reinvestment of dividends and distributions; then of amounts
representing the increase in net asset value above the total amount of payments
for the purchase of Fund shares made during the preceding six years (five years
for Class B shares purchased prior to January 22, 1990); then of amounts
representing the cost of shares held beyond the applicable CDSC period; then of
amounts representing the cost of shares acquired prior to July 1, 1985; and
finally, of amounts representing the cost of shares held for the longest period
of time within the applicable CDSC period.

For example, assume you purchased 100 Class B shares at $10 per share for a
cost of $1,000. Subsequently, you acquired 5 additional Class B shares through
dividend reinvestment. During the second year after the purchase you decided to
redeem $500 of your investment. Assuming at the time of the redemption the NAV
had appreciated to $12 per share, the value of your Class B shares would be
$1,260 (105 shares at $12 per share). The CDSC would not be applied to the value
of the reinvested dividend shares and the amount which represents appreciation
($260). Therefore, $240 of the $500 redemption proceeds ($500 minus $260) would
be charged at a rate of 4% (the applicable rate in the second year after
purchase) for a total CDSC of $9.60.

For federal income tax purposes, the amount of the CDSC will reduce the
gain or increase the loss, as the case may be, on the amount recognized on the
redemption of shares.

WAIVER OF CONTINGENT DEFERRED SALES CHARGES--CLASS B SHARES. The CDSC will
be waived in the case of a redemption following the death or disability of a
shareholder or, in the case of a trust, following the death or disability of the
grantor. The waiver is available for total or partial redemptions of shares
owned by a person, either individually or in joint tenancy (with rights of
survivorship), at the time of death or initial determination of disability,
provided the shares were purchased prior to death or disability.

The CDSC will also be waived in the case of a total or partial redemption
in connection with certain distributions made without penalty under the Internal
Revenue Code from a tax-deferred retirement plan, an IRA or Section 403(b)
custodial account. These distributions include: (i) in the case of a
tax-deferred retirement plan, a lump-sum or other distribution after retirement;
(ii) in the case of an IRA or Section 403(b) custodial account, a lump-sum or
other distribution after attaining age 591|M/2; and (iii) a tax-free return of
an excess contribution or plan distributions following the death or disability
of the shareholder, provided that the shares were purchased prior to death or
disability. The waiver does not apply in the case of a tax-free rollover or
transfer of assets, other than one following a separation from service (I.E.,
following voluntary or involuntary termination of employment or following
retirement). Under no circumstances will the CDSC be waived on redemptions
resulting from the termination of a tax-deferred retirement plan, unless such
redemptions otherwise qualify for a waiver as described above. Shares purchased
with amounts used to repay a loan from such plans on which a CDSC was not
previously deducted will thereafter be subject to a CDSC without regard to the
time such amounts were previously invested. In the case of a 401(k) plan, the
CDSC will also be waived upon the redemption of shares purchased with amounts
used to repay loans made from the account to the participant and from which a
CDSC was previously deducted.

SYSTEMATIC WITHDRAWAL PLAN. The CDSC will be waived (or reduced) on certain
redemptions from a Systematic Withdrawal Plan. On an annual basis, up to 12% of
the total dollar amount subject to the CDSC may be redeemed without charge. The
Transfer Agent will calculate the total amount available for this waiver
annually on the anniversary date of your purchase or, for shares purchased prior
to March 1, 1997, on March 1 of the current year. The CDSC will be waived (or
reduced) on redemptions until this threshold 12% amount is reached.

In addition, the CDSC will be waived on redemptions of shares held by a
Director of the Fund.

You must notify the Fund's Transfer Agent either directly or through your
Dealer, at the time of redemption, that you are entitled to waiver of the CDSC
and provide the Transfer Agent with such supporting documentation as it may

<PAGE>

deem appropriate. The waiver will be granted subject to confirmation of your
entitlement. See "Purchase and Redemption of Fund Shares--Waiver of the
Contingent Deferred Sales Charge--Class B Shares" in the Statement of Additional
Information.

A quantity discount may apply to redemptions of Class B shares purchased
prior to August 1, 1994. See "Purchase and Redemption of Fund Shares-Quantity
Discount-Class B Shares Purchased Prior to August 1, 1994" in the Statement of
Additional Information.

WAIVER OF CONTINGENT DEFERRED SALES CHARGES--CLASS C SHARES

CERTAIN OTHER EMPLOYEE BENEFIT AND RETIREMENT PLANS. The CDSC will be
waived on redemptions from certain employee benefit plans and retirement plans
that invest in the Fund through third party recordkeeping and administrative
service providers that have entered into a services agreement with the
Distributor and that invest in the Fund through the use of an omnibus investment
account. Such third party recordkeeping and administrative service providers may
be compensated by the Distributor from its own resources.

CONVERSION FEATURE--CLASS B SHARES

Class B shares will automatically convert to Class A shares on a quarterly
basis approximately seven years after purchase. Conversions will be effected at
relative net asset value without the imposition of any additional sales charge.

Since the Fund tracks amounts paid rather than the number of shares bought
on each purchase of Class B shares, the number of Class B shares eligible to
convert to Class A shares (excluding shares acquired through the automatic
reinvestment of dividends and other distributions) (the Eligible Shares) will be
determined on each conversion date in accordance with the following formula: (i)
the ratio of (a) the amounts paid for Class B shares purchased at least seven
years prior to the conversion date to (b) the total amount paid for all Class B
shares purchased and then held in your account (ii) multiplied by the total
number of Class B shares purchased and then held in your account. Each time any
Eligible Shares in your account convert to Class A shares, all shares or amounts
representing Class B shares then in your account that were acquired through the
automatic reinvestment of dividends and other distributions will convert to
Class A shares.

For purposes of determining the number of Eligible Shares, if the Class B
shares in your account on any conversion date are the result of multiple
purchases at different NAVs per share, the number of Eligible Shares calculated
as described above will generally be either more or less than the number of
shares actually purchased approximately seven years before such conversion date.
For example, if 100 shares were initially purchased at $10 per share (for a
total of $1,000) and a second purchase of 100 shares was subsequently made at
$11 per share (for a total of $1,100), 95.24 shares would convert approximately
seven years from the initial purchase (I.E., $1,000 divided by $2,100 (47.62%)
multiplied by 200 shares equals 95.24 shares). The Manager reserves the right to
modify the formula for determining the number of Eligible Shares in the future
as it deems appropriate on notice to shareholders.

Since annual distribution-related fees are lower for Class A shares than
Class B shares, the per share NAV of the Class A shares may be higher than that
of the Class B shares at the time of conversion. Thus, although the aggregate
dollar value will be the same, you may receive fewer Class A shares than Class B
shares converted. See "How the Fund Values its Shares."

For purposes of calculating the applicable holding period for conversions,
all payments for Class B shares during a month will be deemed to have been made
on the last day of the month, or for Class B shares acquired through exchange,
or a series of exchanges, on the last day of the month in which the original
payment for purchases of such Class B shares was made. For Class B shares
previously exchanged for shares of a money market fund, the time period during
which such shares were held in the money market fund will be excluded. For
example, Class B shares held in a money market

<PAGE>

fund for one year will not convert to Class A shares until approximately eight
years from purchase. For purposes of measuring the time period during which
shares are held in a money market fund, exchanges will be deemed to have been
made on the last day of the month. Class B shares acquired through exchange will
convert to Class A shares after expiration of the conversion period applicable
to the original purchase of such shares.

The conversion feature may be subject to the continuing availability of
opinions of counsel or rulings of the Internal Revenue Service (i) that the
dividends and other distributions paid on Class A, Class B, Class C and Class Z
shares will not constitute preferential dividends under the Internal Revenue
Code and (ii) that the conversion of shares does not constitute a taxable event.
The conversion of Class B shares into Class A shares may be suspended if such
opinions or rulings are no longer available. If conversions are suspended, Class
B shares of the Fund will continue to be subject, possibly indefinitely, to
their higher annual distribution and service fee.

HOW TO EXCHANGE YOUR SHARES

AS A SHAREHOLDER OF THE FUND, YOU HAVE AN EXCHANGE PRIVILEGE WITH CERTAIN
OTHER PRUDENTIAL MUTUAL FUNDS, INCLUDING ONE OR MORE SPECIFIED MONEY MARKET
FUNDS, SUBJECT TO THE MINIMUM INVESTMENT REQUIREMENT OF SUCH FUNDS. CLASS A,
CLASS B, CLASS C AND CLASS Z SHARES MAY BE EXCHANGED FOR CLASS A, CLASS B, CLASS
C AND CLASS Z SHARES, RESPECTIVELY, OF ANOTHER FUND ON THE BASIS OF THE RELATIVE
NAV. No sales charge will be imposed at the time of the exchange. Any applicable
CDSC payable upon the redemption of shares exchanged will be calculated from the
first day of the month after the initial purchase, excluding the time shares
were held in a money market fund. Class B and Class C shares may not be
exchanged into money market funds other than the Prudential Special Money Market
Fund, Inc. For purposes of calculating the holding period applicable to the
Class B conversion feature, the time period during which Class B shares were
held in a money market fund will be excluded. See "Conversion Feature-Class B
Shares" above. An exchange will be treated as a redemption and purchase for tax
purposes. See "Shareholder Investment Account-Exchange Privilege" in the
Statement of Additional Information.

IN ORDER TO EXCHANGE SHARES BY TELEPHONE, YOU MUST AUTHORIZE TELEPHONE
EXCHANGES ON YOUR INITIAL APPLICATION FORM OR BY WRITTEN NOTICE TO THE TRANSFER
AGENT AND HOLD SHARES IN NON-CERTIFICATE FORM. Thereafter, you may call the Fund
at (800) 225-1852 to execute a telephone exchange of shares, on weekdays, except
holidays, between the hours of 8:00 A.M. and 6:00 P.M., New York time. For your
protection and to prevent fraudulent exchanges, your telephone call will be
recorded and you will be asked to provide your personal identification number. A
written confirmation of the exchange transaction will be sent to you. NEITHER
THE FUND NOR ITS AGENTS WILL BE LIABLE FOR ANY LOSS, LIABILITY OR COST WHICH
RESULTS FROM ACTING UPON INSTRUCTIONS REASONABLY BELIEVED TO BE GENUINE UNDER
THE FOREGOING PROCEDURES. (THE FUND OR ITS AGENTS COULD BE SUBJECT TO LIABILITY
IF THEY FAIL TO EMPLOY REASONABLE PROCEDURES.) All exchanges will be made on the
basis of the relative NAV of the two funds next determined after the request is
received in good order.

IF YOU HOLD CERTIFICATES, THE CERTIFICATES, SIGNED IN THE NAME(S) SHOWN ON
THE FACE OF THE CERTIFICATES, MUST BE RETURNED IN ORDER FOR THE SHARES TO BE
EXCHANGED. SEE "HOW TO SELL YOUR SHARES" ABOVE.

You may also exchange shares by mail by writing to Prudential Mutual Fund
Services LLC, Attention: Exchange Processing, P.O. Box 15035, New Brunswick, New
Jersey 08906-5010.

IN PERIODS OF SEVERE MARKET OR ECONOMIC CONDITIONS THE TELEPHONE EXCHANGE
OF SHARES MAY BE DIFFICULT TO IMPLEMENT AND YOU SHOULD MAKE EXCHANGES BY MAIL BY
WRITING TO PRUDENTIAL MUTUAL FUND SERVICES LLC AT THE ADDRESS NOTED ABOVE.

SPECIAL EXCHANGE PRIVILEGES. A special exchange privilege is available for
shareholders who qualify to purchase Class A shares at NAV (see "Alternative
Purchase Plan--Class A Shares--Reduction and Waiver of Initial Sales Charges"
above) and for shareholders who qualify to purchase Class Z shares (see
"Alternative Purchase Plan--Class Z Shares" above). Under this exchange
privilege, amounts representing any Class B and Class C shares (which are not
subject to a CDSC) held in such a shareholder's account will be automatically
exchanged for Class A shares for shareholders who qualify to purchase Class A
shares at NAV on a quarterly basis, unless the shareholder elects otherwise.
Similarly, shareholders who qualify to purchase Class Z shares will have their
Class B and Class C shares, which are not subject

33
<PAGE>

to a CDSC, and their Class A shares exchanged for Class Z shares on a quarterly
basis. Eligibility for this exchange privilege will be calculated on the
business day prior to the date of the exchange. Amounts representing Class B or
Class C shares which are not subject to a CDSC include the following: (1)
amounts representing Class B or Class C shares acquired pursuant to the
automatic reinvestment of dividends and distributions, (2) amounts representing
the increase in the NAV above the total amount of payments for the purchase of
Class B or Class C shares and (3) amounts representing Class B or Class C shares
held beyond the applicable CDSC period. Class B and Class C shareholders must
notify the Transfer Agent either directly or through their Dealer that they are
eligible for this special exchange privilege.

Participants in any fee-based program for which the Fund is an available
option will have their Class A shares, if any, exchanged to Class Z shares when
they elect to have those assets become a part of the fee-based program. Upon
leaving the program (whether voluntarily or not), such Class Z shares (and, to
the extent provided for in the program, Class Z shares acquired through
participation in the program) will be exchanged for Class A shares at NAV.

The exchange privilege is not a right and may be suspended, modified or
terminated on 60 days' notice to shareholders.

FREQUENT TRADING. The Fund and the other Prudential Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market timing
investment strategies and excessive trading can have on efficient portfolio
management, each Prudential Mutual Fund and the Fund reserves the right to
refuse purchase orders and exchanges by any person, group or commonly controlled
accounts, if, in the Manager's sole judgment, such person, group or accounts
were following a market timing strategy or were otherwise engaging in excessive
trading (Market Timers).

To implement this authority to protect the Fund and its shareholders from
excessive trading, the Fund will reject all exchanges and purchases from a
Market Timer unless the Market Timer has entered into a written agreement with
the Fund or its affiliates pursuant to which the Market Timer has agreed to
abide by certain procedures, which include a daily dollar limit on trading. The
Fund may notify the Market Timer of rejection of an exchange or purchase order
subsequent to the day on which the order was placed.

SHAREHOLDER SERVICES

In addition to the exchange privilege, as a shareholder in the Fund, you
can take advantage of the following additional services and privileges:

o AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR DISTRIBUTIONS WITHOUT A SALES
CHARGE. For your convenience, all dividends and distributions are automatically
reinvested in full and fractional shares of the Fund at NAV without a sales
charge. You may direct the Transfer Agent in writing not less than 5 full
business days prior to the record date to have subsequent dividends and/or
distributions sent in cash rather than reinvested.

o AUTOMATIC SAVINGS ACCUMULATION PLAN (ASAP). Under ASAP you may make
regular purchases of the Fund's shares in amounts as little as $50 via an
automatic debit to a bank account or Prudential Securities account. For
additional information about this service, you may contact the Transfer Agent
directly.

o TAX-DEFERRED RETIREMENT PLANS. Various tax-deferred retirement plans,
including a 401(k) plan, self-directed individual retirement accounts and
tax-sheltered accounts under Section 403(b)(7) of the Internal Revenue Code are
available through the Distributor. These plans are for use by both self-employed
individuals and corporate employers. These plans permit either self-direction of
accounts by participants, or a pooled account arrangement. Information regarding
the establishment of these plans, the administration, custodial fees and other
details is available from the Transfer Agent. If you are considering adopting
such a plan, you should consult with your own legal or tax adviser with respect
to the establishment and maintenance of such a plan.

o SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan is available to
shareholders which provides for monthly or quarterly checks. Withdrawals of
Class B and Class C shares may be subject to a CDSC. See "How to Sell Your
Shares--Contingent Deferred Sales Charges."

<PAGE>

o REPORTS TO SHAREHOLDERS. The Fund will send you annual and semi-annual
reports. The financial statements appearing in annual reports are audited by
independent accountants. In order to reduce duplicate mailing and printing
expenses the Fund will provide one annual report and semi-annual shareholder
report and annual prospectus per household. You may request additional copies of
such reports by calling (800) 225-1852 or by writing to the Fund at Gateway
Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077. In addition,
monthly unaudited financial data are available upon request from the Fund.

o SHAREHOLDER INQUIRIES. Inquiries should be addressed to the Fund at
Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077, or by
telephone at (800) 225-1852 (toll free) or, from outside the U.S.A., at (732)
417-7555 (collect).

For additional information regarding the services and privileges described
above, see "Shareholder Investment Account" in the Statement of Additional
Information.

<PAGE>

- --------------------------------------------------------------------------------

APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS

- --------------------------------------------------------------------------------

MOODY'S INVESTORS SERVICE CORPORATE BOND RATINGS:

AAA-Bonds which are rated Aaa are judged to be the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

AA-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than the Aaa securities.

Moody's applies numerical modifiers 1, 2 and 3 in the Aa and A rating
categories. The modifier 1 indicates that the security ranks at a higher end of
the rating category, the modifier 2 indicates a mid-range rating and the
modifier 3 indicates that the issue ranks at the lower end of the rating
category.

A-Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.

BAA-Bonds which are rated Baa are considered as medium grade obligations,
I.E., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

BA-Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B-Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

CAA-Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

CA-Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.

C-Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

A-1

<PAGE>

STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS:

AAA-Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation and indicate an extremely strong capacity to pay principal
and interest.

AA-Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only to a small degree.

A-Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.

BBB-Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.

BB, B, CCC, CC, C-Debt rated BB, B, CCC, CC and C is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.

BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB-rating.

B: Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.

CCC: Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.

CC: The rating CC typically is applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.

C: The rating C typically is applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
debt service payments are continued.

C1: The rating C1 is reserved for income bonds on which no interest is
being paid.

D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

A-2

<PAGE>

No dealer, sales representative or any other person has been authorized to give
any information or to make any representations, other than those contained in
this Prospectus, in connection with the offer contained herein, and, if given or
made, such other information or representations must not be relied upon as
having been authorized by the Fund or the Distributor. This Prospectus does not
constitute an offer by the Fund or by the Distributor to sell or a solicitation
of an offer to buy any of the securities offered hereby in any jurisdiction to
any person to whom it is unlawful to make such offer in such jurisdiction.

================================================================================
TABLE OF CONTENTS

PAGE
-----
FUND HIGHLIGHTS .................................... 2
What are the Fund's Risk Factors and
Special Characteristics? ..................... 2
FUND EXPENSES .................................... 4
FINANCIAL HIGHLIGHTS .............................. 5
HOW THE FUND INVESTS .............................. 9
Investment Objectives and Policies ............ 9
Hedging and Return Enhancement Strategies ...... 10
Risk Factors .................................... 14
Other Investments and Policies .................. 15
Investment Restrictions ........................ 17
HOW THE FUND IS MANAGED ........................... 18
Manager ....................................... 18
Distributor .................................... 18
Fee Waivers .................................... 20
Portfolio Transactions ........................ 20
Custodian and Transfer and Dividend
Disbursing Agent .............................. 20
Year 2000 ....................................... 20
HOW THE FUND VALUES ITS SHARES ..................... 21
HOW THE FUND CALCULATES PERFORMANCE .............. 21
TAXES, DIVIDENDS AND DISTRIBUTIONS ............... 22
GENERAL INFORMATION .............................. 23
Description of Common Stock ..................... 23
Additional Information ........................ 24
SHAREHOLDER GUIDE ................................. 24
How to Buy Shares of the Fund .................. 24
Alternative Purchase Plan ..................... 25
How to Sell Your Shares ........................ 29
Conversion Feature-Class B Shares ............. 32
How to Exchange Your Shares ..................... 33
Shareholder Services ........................... 34
DESCRIPTION OF CORPORATE BOND RATINGS .............. A-1
================================================================================
MF110P
- --------------------------------------------------------------------------------
Class A: 74435F-10-6
CUSIP Nos.: Class B: 74435F-20-5
Class C: 74435F-30-4
Class Z: 74435F-40-3
- --------------------------------------------------------------------------------

PRUDENTIAL
HIGH YIELD FUND, INC.
PROSPECTUS

[Picture]

MARCH 3, 1998
[REVISED JUNE 1, 1998]

[LOGO] PRUDENTIAL
INVESTMENTS