<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
(CALIFORNIA SERIES)
(CLASS Z SHARES)
- --------------------------------------------------------------------------------
PROSPECTUS DATED SEPTEMBER 16, 1996
- --------------------------------------------------------------------------------
Prudential California Municipal Fund (the "Fund") (California Series) (the
"Series") is one of three series of an open-end, management investment company,
or mutual fund. This Series is diversified and seeks to provide the maximum
amount of income that is exempt from California State and federal income taxes
consistent with the preservation of capital and, in conjunction therewith, the
Series may invest in debt securities with the potential for capital gain. The
net assets of the Series are invested in obligations within the four highest
ratings of either Moody's Investors Service or Standard & Poor's Ratings Group
or in unrated obligations which, in the opinion of the Fund's investment
adviser, are of comparable quality. Subject to the limitations described herein,
the Series may utilize derivatives, including buying and selling futures
contracts and options thereon for the purpose of hedging its portfolio
securities. There can be no assurance that the Series' investment objective will
be achieved. See "How the Fund Invests--Investment Objective and Policies." The
Fund's address is One Seaport Plaza, New York, New York 10292, and its telephone
number is (800) 225-1852.
- --------------------------------------------------------------------------------
Class Z shares are offered exclusively for sale to a limited group of investors.
Only Class Z shares are offered through this Prospectus. The Series also offers
Class A, Class B and Class C shares through the attached Prospectus dated
November 1, 1995 (the Retail Class Prospectus), which is a part hereof.
- --------------------------------------------------------------------------------
This Prospectus sets forth concisely the information about the Fund and the
California Series that a prospective investor should know before investing.
Additional information about the Fund has been filed with the Securities and
Exchange Commission in a Statement of Additional Information dated November 1,
1995, 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.
- --------------------------------------------------------------------------------
INVESTORS ARE ADVISED TO READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE
REFERENCE.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
- --------------------------------------------------------------------------------
FUND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS Z SHARES
----------------
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)..................... None
Maximum Sales Load or Deferred Sales Load Imposed on Reinvested Dividends....................... None
Deferred Sales Load (as a percentage of original purchase price or redemption proceeds,
whichever is lower)............................................................................ None
Redemption Fees................................................................................. None
Exchange Fee.................................................................................... None
<CAPTION>
ANNUAL FUND OPERATING EXPENSES* CLASS Z SHARES
----------------
<S> <C>
(as a percentage of average net assets)
Management Fees (Before Waiver)................................................................. .50%
12b-1 Fees...................................................................................... None
Other Expenses.................................................................................. .17%
---
Total Fund Operating Expenses (Before Waiver)................................................... .67%
---
---
</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:....................................... $ 7 $ 21 $ 37 $ 83
The above example is based on expenses expected to have been incurred if Class Z shares had been in existence
throughout the fiscal year ended August 31, 1995. 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 Class Z shares of the California Series will bear, whether directly or indirectly. For more complete
descriptions of the various costs and expenses, see "How the Fund is Managed." "Other Expenses" includes operating
expenses of the Series, such as Trustees' and professional fees, registration fees, reports to shareholders and
transfer agency and custodian fees.
<FN>
--------------
*Estimated based on expenses expected to have been incurred if Class Z shares
had been in existence throughout the fiscal year ended August 31, 1995,
without taking into account the management fee waiver. At the current level of
management fee waiver (.05%), Management Fees would be .45% and Total Fund
Operating Expenses would be .62% of average net assets of the Series' Class Z
shares.
</TABLE>
2
<PAGE>
THE FOLLOWING INFORMATION SUPPLEMENTS "HOW THE FUND IS MANAGED--DISTRIBUTOR"
IN THE RETAIL CLASS PROSPECTUS:
Prudential Securities Incorporated (Prudential Securities) serves as the
Distributor of Class Z shares and incurs the expenses of distributing the
Series' Class Z shares under a Distribution Agreement with the Fund, none of
which is reimbursed by or paid for by the Series.
THE FOLLOWING INFORMATION SUPPLEMENTS "TAXES, DIVIDENDS AND
DISTRIBUTIONS--TAXATION OF SHAREHOLDERS" IN THE RETAIL CLASS PROSPECTUS:
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 Series' 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.
THE FOLLOWING INFORMATION SUPPLEMENTS THE INFORMATION UNDER "SHAREHOLDER
GUIDE--HOW TO BUY SHARES OF THE FUND" AND "SHAREHOLDER GUIDE--HOW TO SELL YOUR
SHARES" IN THE RETAIL CLASS PROSPECTUS:
Class Z shares of the Series are available for purchase by participants in any
fee-based program sponsored by Prudential Securities or its affiliates which
includes mutual funds as investment options and for which the Series is an
available option.
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 based on a percentage of the net asset
value of shares sold by such persons.
THE FOLLOWING INFORMATION SUPPLEMENTS "SHAREHOLDER GUIDE--HOW TO EXCHANGE YOUR
SHARES" IN THE RETAIL CLASS PROSPECTUS:
Class Z shareholders of the Series may exchange their Class Z shares for Class
Z shares of another Series or other Prudential Mutual Funds on the basis of
relative net asset value. Shareholders who qualify to purchase Class Z shares
(other than participants in any fee-based program) will have their Class B and
Class C shares which are not subject to contingent deferred sales charges and
their Class A shares exchanged for Class Z shares on a quarterly basis.
Participants in any fee-based program for which the Series is an available
option will have their Class A shares, if any, exchanged for 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 net asset
value. See "Shareholder Guide--How to Exchange Your Shares--Special Exchange
Privilege."
THE INFORMATION ABOVE ALSO SUPPLEMENTS THE INFORMATION UNDER "FUND HIGHLIGHTS"
IN THE RETAIL CLASS PROSPECTUS AS APPROPRIATE.
3
<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 any 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
<TABLE>
<S> <C>
PAGE
----
FUND HIGHLIGHTS...................................................... 2
Risk Factors and Special Characteristics........................... 2
FUND EXPENSES........................................................ 4
FINANCIAL HIGHLIGHTS................................................. 5
HOW THE FUND INVESTS................................................. 8
Investment Objective and Policies.................................. 8
Other Investments and Policies..................................... 12
Investment Restrictions............................................ 13
HOW THE FUND IS MANAGED.............................................. 13
Manager............................................................ 13
Distributor........................................................ 14
Portfolio Transactions............................................. 16
Custodian and Transfer and Dividend Disbursing Agent............... 16
HOW THE FUND VALUES ITS SHARES....................................... 16
HOW THE FUND CALCULATES PERFORMANCE.................................. 16
TAXES, DIVIDENDS AND DISTRIBUTIONS................................... 17
GENERAL INFORMATION.................................................. 19
Description of Shares.............................................. 19
Additional Information............................................. 20
SHAREHOLDER GUIDE.................................................... 20
How to Buy Shares of the Fund...................................... 20
Alternative Purchase Plan.......................................... 22
How to Sell Your Shares............................................ 24
Conversion Feature--Class B Shares................................. 26
How to Exchange Your Shares........................................ 27
Shareholder Services............................................... 28
THE PRUDENTIAL MUTUAL FUND FAMILY.................................... A-1
</TABLE>
-------------------------------------------
MF116Z 4440472
CUSIP No.: Class Z: 744313883
PROSPECTUS
SEPTEMBER 16,
1996
PRUDENTIAL
CALIFORNIA
MUNICIPAL FUND
(CALIFORNIA SERIES)
(CLASS Z SHARES)
- --------------------------------------
[LOGO]
<PAGE>
- --------------------------------------------------------------------------------
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
(CALIFORNIA SERIES)
Supplement dated September 16, 1996 to
Prospectus dated November 1, 1995
- --------------------------------------------------------------------------------
THE FOLLOWING INFORMATION SUPPLEMENTS "GENERAL INFORMATION--DESCRIPTION OF
SHARES" IN THE PROSPECTUS:
The Series is authorized to offer an unlimited number of shares of beneficial
interest, divided into four classes of shares, designated Class A, Class B,
Class C and Class Z shares. Each class represents an interest in the same assets
of the Series 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. For more information about
Class Z shares, contact your Prudential Securities financial adviser or Prusec
representative or telephone the Fund at (800) 225-1852. Participants in programs
sponsored by Prudential Retirement Services should contact their client
representative for more information about Class Z shares. 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 shares are not
subject to any distribution and/or service fee. In accordance with the Fund's
Declaration of Trust, the Board of Trustees may authorize the creation of
additional series and classes of shares within such series, with such
preferences, privileges, limitations and voting and dividend rights as the Board
of Trustees may determine. Currently, the Series is offering four classes
designated Class A, Class B, Class C and Class Z shares.
THE FOLLOWING INFORMATION SUPPLEMENTS "HOW THE FUND CALCULATES PERFORMANCE" IN
THE PROSPECTUS:
The Fund may include comparative performance information in advertising or
marketing the Series' shares. The Fund may include performance information about
each of the Series' classes and is no longer required to include performance
data for all classes of shares in any advertisement or other information
including performance data of the Series. See "How the Fund Calculates
Performance."
1
<PAGE>
THE FOLLOWING INFORMATION SUPPLEMENTS "FINANCIAL HIGHLIGHTS" IN THE
PROSPECTUS:
FINANCIAL HIGHLIGHTS
(for a share outstanding throughout the period indicated)
(Class A, Class B and Class C shares)
The following financial highlights for Class A, Class B and Class C shares
are unaudited. 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, Class
B and Class C share of beneficial interest, respectively, outstanding, total
return, ratios to average net assets and other supplemental data for the period
indicated. The information has been determined based on data contained in the
financial statements. No Class Z shares were outstanding during the indicated
period.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 29, 1996 (UNAUDITED)
---------------------------------------------
CLASS A CLASS B CLASS C
------- -------- -----------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............................. $ 11.49 $ 11.49 $11.49
------- -------- -----------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------
Net investment income............................................ .33(a) .31(a) .29(a)
Net realized and unrealized gain on investment transactions...... .30 .30 .30
------- -------- -----------
Total from investment operations............................. .63 .61 .59
------- -------- -----------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------
Dividends from net investment income............................. (.33) (.31) (.29)
Distributions from net realized gains............................ -- -- --
------- -------- -----------
Total distributions.......................................... (.33) (.31) (.29)
------- -------- -----------
Net asset value, end of period................................... $ 11.79 $ 11.79 $11.79
------- -------- -----------
------- -------- -----------
TOTAL RETURN (b):................................................ 5.52% 5.31% 5.18%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).................................. $70,154 $100,069 $ 243
Average net assets (000)......................................... $70,018 $103,217 $ 186
Ratios to average net assets
Expenses, including distribution fees.......................... .76%(a)/(c) 1.16%(a)/(c) 1.41%(a)/(c)
Expenses, excluding distribution fees.......................... .66%(a)/(c) .66%(a)/(c) .66%(a)/(c)
Net investment income.......................................... 5.63%(a)/(c) 5.23%(a)/(c) 4.98%(a)/(c)
Portfolio turnover rate.......................................... 18% 18% 18%
<FN>
- ---------------
(a) Net of fee waiver.
(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 the period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
(c) Annualized.
</TABLE>
MF116C-1 (9/12/96)
2
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
(CALIFORNIA SERIES)
Supplement dated September 16, 1996 to
Statement of Additional Information dated
November 1, 1995
THE FOLLOWING INFORMATION SUPPLEMENTS "TRUSTEES AND OFFICERS" IN THE STATEMENT
OF ADDITIONAL INFORMATION:
As of July 26, 1996, the Trustees and officers of the Fund, as a group,
owned beneficially less than 1% of the outstanding shares of beneficial interest
of the California Series of the Fund.
As of July 26, 1996, Prudential Securities Incorporated (Prudential
Securities) was record holder for other beneficial owners of 3,738,168 Class A
shares (or 57% of the outstanding Class A shares), 4,670,137 Class B shares (or
62% of the outstanding Class B shares) and 37,815 Class C shares (or 83% of the
outstanding Class C shares) of the Series. In the event of any meetings of
shareholders, Prudential Securities will forward, or cause the forwarding of,
proxy materials to the beneficial owners for which it is the record holder.
As of July 26, 1996, the beneficial owners, directly or indirectly, of more
than 5% of the outstanding shares of any class (except Class Z shares) of
beneficial interest of the California Series were: George T. Vangilder, 1864
Doris Drive, Menlo Park, CA 94025-6102 who held 13,318 Class C shares (29.2%);
Natanmuay Soparpun, 1266 Lisbon Ln., Pebble Beach, CA 93953-3204 who held 2,681
Class C shares (5.9%); Margaret R. Reddell TTEE, Successor Trust FBO Ferd D. &
Margaret Reddell Family Trust, 13 Fountain Grove Circle, Napa, CA 94558-2463 who
held 4,030 Class C shares (8.8%); Mrs. Rita C. Smith TTEE, Rita C. Smith
Survivors Trust, 2222 Francisco Dr. #510-180, El Dorado Hills, CA 95762-3762 who
held 8,999 Class C shares (19.7%); Anong Jackson Trust, Anong Jackson TTEE, PBO
Anong Jackson, 1266 Lisbon Ln., Pebble Beach, CA 93953-3204 who held 2,658 Class
C shares (5.8%); and James M. Stone, Pearl C. Stone, Co-Ttees, 20 W. Monterey
Ave., Stockton, CA 95204-3602 who held 4,624 Class C shares (10.1%).
As of September 16, 1996, Prudential Mutual Fund Management, Inc., located
at One Seaport Plaza, New York, NY 10292, owned all of the Series' outstanding
Class Z shares and therefore controlled Class Z of the Series.
THE FOLLOWING INFORMATION SUPPLEMENTS "DISTRIBUTOR" IN THE STATEMENT OF
ADDITIONAL INFORMATION:
Prudential Securities serves as the Distributor of Class Z shares and incurs
the expenses of distributing the Series' Class Z shares under a Distribution
Agreement with the Fund, none of which are reimbursed by or paid for by the
Fund.
THE FOLLOWING INFORMATION SUPPLEMENTS "PURCHASE AND REDEMPTION OF FUND SHARES"
IN THE STATEMENT OF ADDITIONAL INFORMATION:
Shares of the Series may be purchased at a price equal to the next
determined net asset value per share plus a sales charge which, at the election
of the investor, 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
of the Series are offered to a limited group of investors at net asset value
without any sales charges. See "Shareholder Guide--How to Buy Shares of the
Fund" in the Prospectus.
Each class of shares represents an interest in the same assets of the Series
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 for
sale to a limited group of investors. See "Distributor" and "Shareholder
Investment Account--Exchange Privilege."
<PAGE>
SPECIMEN PRICE MAKE-UP
Under the current distribution arrangements between the Fund and the
Distributor, Class A shares are sold with a maximum sales charge of 3% and Class
B*, Class C* and Class Z** shares are sold at net asset value. Using the Series'
net asset value at February 29, 1996, the maximum offering price of the Series'
shares is as follows:
<TABLE>
<S> <C>
CLASS A
Net asset value and redemption price per Class A share................................. $ 11.79
Maximum sales charge (3% of offering price)............................................ .36
-----------
Offering price to public............................................................... $ 12.15
-----------
-----------
CLASS B
Net asset value, offering price and redemption price per Class B share*................ $ 11.79
-----------
-----------
CLASS C
Net asset value, offering price and redemption price per Class C share*................ $ 11.79
-----------
-----------
CLASS Z
Net asset value, offering price and redemption price per Class Z share**............... $ 11.79
-----------
-----------
</TABLE>
- ------------------------
* Class B and Class C shares are subject to a contingent deferred sales charge
on certain redemptions. See "Shareholder Guide--How to Sell Your
Shares--Contingent Deferred Sales Charges" in the Prospectus.
**Class Z shares did not exist at February 29, 1996.
THE FOLLOWING INFORMATION SUPPLEMENTS "SHAREHOLDER INVESTMENT ACCOUNT--EXCHANGE
PRIVILEGE" IN THE STATEMENT OF ADDITIONAL INFORMATION:
CLASS Z. Class Z shares may be exchanged for Class Z shares of other
Prudential Mutual Funds.
2
MF116C-2 (9/16/96)
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
(CALIFORNIA INCOME SERIES)
(CLASS Z SHARES)
- --------------------------------------------------------------------------------
PROSPECTUS DATED SEPTEMBER 16, 1996
- --------------------------------------------------------------------------------
Prudential California Municipal Fund (the "Fund") (California Income Series)
(the "Series") is one of three series of an open-end, management investment
company, or mutual fund. This Series is diversified and seeks to provide the
maximum amount of income that is exempt from California State and federal income
taxes consistent with the preservation of capital. The Series will invest
primarily in investment grade municipal obligations but may also invest a
portion of its assets in lower-quality municipal obligations or in non-rated
securities which, in the opinion of the Fund's investment adviser, are of
comparable quality. Subject to limitations described herein, the Series may
utilize derivatives, including buying and selling futures contracts and options
thereon for the purpose of hedging its portfolio securities. There can be no
assurance that the Series' investment objective will be achieved. See "How the
Fund Invests--Investment Objective and Policies." The Fund's address is One
Seaport Plaza, New York, New York 10292, and its telephone number is (800)
225-1852.
- --------------------------------------------------------------------------------
Class Z shares are offered exclusively for sale to a limited group of investors.
Only Class Z shares are offered through this Prospectus. The Series also offers
Class A, Class B and Class C shares through the attached Prospectus dated
November 1, 1995 (the Retail Class Prospectus), which is a part hereof.
- --------------------------------------------------------------------------------
This Prospectus sets forth concisely the information about the Fund and the
California Income Series that a prospective investor should know before
investing. Additional information about the Fund has been filed with the
Securities and Exchange Commission in a Statement of Additional Information
dated November 1, 1995, 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.
- --------------------------------------------------------------------------------
INVESTORS ARE ADVISED TO READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE
REFERENCE.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
- --------------------------------------------------------------------------------
FUND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS Z SHARES
----------------
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)..................... None
Maximum Sales Load or Deferred Sales Load Imposed on Reinvested Dividends....................... None
Deferred Sales Load (as a percentage of original purchase price or redemption proceeds,
whichever is lower)........................................................................... None
Redemption Fees................................................................................. None
Exchange Fee.................................................................................... None
<CAPTION>
ANNUAL FUND OPERATING EXPENSES* CLASS Z SHARES
----------------
<S> <C>
(as a percentage of average net assets)
Management Fees (Before Waiver)................................................................. .50%
12b-1 Fees...................................................................................... None
Other Expenses.................................................................................. .21%
----------------
Total Fund Operating Expenses (Before Waiver)................................................... .71%
----------------
----------------
</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:....................................... $ 7 $ 23 $ 40 $ 88
The above example is based on expenses expected to have been incurred if Class Z shares had been in existence
throughout the fiscal year ended August 31, 1995. 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 Class Z shares of the California Income Series will bear, whether directly or indirectly. For more complete
descriptions of the various costs and expenses, see "How the Fund is Managed." "Other Expenses" includes
operating expenses of the Series, such as Trustees' and professional fees, registration fees, reports to
shareholders and transfer agency and custodian fees.
</TABLE>
- ------------
*Estimated based on expenses expected to have been incurred if Class Z shares
had been in existence throughout the fiscal year ended August 31, 1995,
without taking into account the management fee waiver. At the current level of
management fee waiver (.425%), Management Fees would be .075% and Total Fund
Operating Expenses would be .285% of average net assets of the Series' Class Z
shares.
2
<PAGE>
THE FOLLOWING INFORMATION SUPPLEMENTS "HOW THE FUND IS MANAGED--DISTRIBUTOR"
IN THE RETAIL CLASS PROSPECTUS:
Prudential Securities Incorporated (Prudential Securities) serves as the
Distributor of Class Z shares and incurs the expenses of distributing the
Series' Class Z shares under a Distribution Agreement with the Fund, none of
which is reimbursed by or paid for by the Series.
THE FOLLOWING INFORMATION SUPPLEMENTS "TAXES, DIVIDENDS AND
DISTRIBUTIONS--TAXATION OF SHAREHOLDERS" IN THE RETAIL CLASS PROSPECTUS:
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 Series' 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.
THE FOLLOWING INFORMATION SUPPLEMENTS THE INFORMATION UNDER "SHAREHOLDER
GUIDE--HOW TO BUY SHARES OF THE FUND" AND "SHAREHOLDER GUIDE--HOW TO SELL YOUR
SHARES" IN THE RETAIL CLASS PROSPECTUS:
Class Z shares of the Series are available for purchase by participants in
any fee-based program sponsored by Prudential Securities or its affiliates which
includes mutual funds as investment options and for which the Series is an
available option.
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 based on a percentage of the net asset
value of shares sold by such persons.
THE FOLLOWING INFORMATION SUPPLEMENTS "SHAREHOLDER GUIDE--HOW TO EXCHANGE
YOUR SHARES" IN THE RETAIL CLASS PROSPECTUS:
Class Z shareholders of the Series may exchange their Class Z shares for
Class Z shares of another Series or other Prudential Mutual Funds on the basis
of relative net asset value. Shareholders who qualify to purchase Class Z shares
(other than participants in any fee-based program) will have their Class B and
Class C shares which are not subject to contingent deferred sales charges and
their Class A shares exchanged for Class Z shares on a quarterly basis.
Participants in any fee-based program for which the Series is an available
option will have their Class A shares, if any, exchanged for 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 net asset
value. See "Shareholder Guide--How to Exchange Your Shares--Special Exchange
Privilege."
THE INFORMATION ABOVE ALSO SUPPLEMENTS THE INFORMATION UNDER "FUND
HIGHLIGHTS" IN THE RETAIL CLASS PROSPECTUS AS APPROPRIATE.
3
<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 any 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
<TABLE>
<S> <C>
PAGE
----
FUND HIGHLIGHTS...................................................... 2
Risk Factors and Special Characteristics........................... 2
FUND EXPENSES........................................................ 4
FINANCIAL HIGHLIGHTS................................................. 5
HOW THE FUND INVESTS................................................. 8
Investment Objective and Policies.................................. 8
Other Investments and Policies..................................... 13
Investment Restrictions............................................ 13
HOW THE FUND IS MANAGED.............................................. 14
Manager............................................................ 14
Distributor........................................................ 14
Portfolio Transactions............................................. 17
Custodian and Transfer and Dividend Disbursing Agent............... 17
HOW THE FUND VALUES ITS SHARES....................................... 17
HOW THE FUND CALCULATES PERFORMANCE.................................. 18
TAXES, DIVIDENDS AND DISTRIBUTIONS................................... 18
GENERAL INFORMATION.................................................. 21
Description of Shares.............................................. 21
Additional Information............................................. 22
SHAREHOLDER GUIDE.................................................... 22
How to Buy Shares of the Fund...................................... 22
Alternative Purchase Plan.......................................... 23
How to Sell Your Shares............................................ 25
Conversion Feature--Class B Shares................................. 28
How to Exchange Your Shares........................................ 28
Shareholder Services............................................... 29
DESCRIPTION OF SECURITY RATINGS...................................... A-1
THE PRUDENTIAL MUTUAL FUND FAMILY.................................... B-1
</TABLE>
-------------------------------------------
MF146Z 444-1272
CUSIP No.: Class Z: 744313875
PROSPECTUS
SEPTEMBER 16,
1996
PRUDENTIAL
CALIFORNIA
MUNICIPAL FUND
(CALIFORNIA INCOME SERIES)
(CLASS Z SHARES)
- --------------------------------------
[LOGO]
<PAGE>
- --------------------------------------------------------------------------------
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
(CALIFORNIA INCOME SERIES)
Supplement dated September 16, 1996 to
Prospectus dated November 1, 1995
- --------------------------------------------------------------------------------
THE FOLLOWING INFORMATION SUPPLEMENTS "GENERAL INFORMATION--DESCRIPTION OF
SHARES" IN THE PROSPECTUS:
The Series is authorized to offer an unlimited number of shares of beneficial
interest, divided into four classes of shares, designated Class A, Class B,
Class C and Class Z shares. Each class represents an interest in the same assets
of the Series 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. For more information about
Class Z shares, contact your Prudential Securities financial adviser or Prusec
representative or telephone the Fund at (800) 225-1852. Participants in programs
sponsored by Prudential Retirement Services should contact their client
representative for more information about Class Z shares. 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 shares are not
subject to any distribution and/or service fee. In accordance with the Fund's
Declaration of Trust, the Board of Trustees may authorize the creation of
additional series and classes of shares within such series, with such
preferences, privileges, limitations and voting and dividend rights as the Board
of Trustees may determine. Currently, the Series is offering four classes
designated Class A, Class B, Class C and Class Z shares.
THE FOLLOWING INFORMATION SUPPLEMENTS "HOW THE FUND CALCULATES PERFORMANCE" IN
THE PROSPECTUS:
The Fund may include comparative performance information in advertising or
marketing the Series' shares. The Fund may include performance information about
each of the Series' classes and is no longer required to include performance
data for all classes of shares in any advertisement or other information
including performance data of the Series. See "How the Fund Calculates
Performance."
1
<PAGE>
THE FOLLOWING INFORMATION SUPPLEMENTS "FINANCIAL HIGHLIGHTS" IN THE
PROSPECTUS:
FINANCIAL HIGHLIGHTS
(for a share outstanding throughout the period indicated)
(Class A, Class B and Class C shares)
The following financial highlights for Class A, Class B and Class C shares
are unaudited. 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, Class
B and Class C share of beneficial interest, respectively, outstanding, total
return, ratios to average net assets and other supplemental data for the period
indicated. The information has been determined based on data contained in the
financial statements. No Class Z shares were outstanding during the indicated
period.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 29, 1996 (UNAUDITED)
-------------------------------------
CLASS A CLASS B CLASS C
-------- ------- ----------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 10.28 $10.28 $10.28
-------- ------- ----------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income (b)............................................. .32 .30 .28
Net realized and unrealized gain on investment transactions........... .29 .29 .29
-------- ------- ----------
Total from investment operations.................................. .61 .59 .57
-------- ------- ----------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Dividends from net investment income.................................. (.32) (.30 ) (.28)
Distributions from net realized gains................................. -- -- --
-------- ------- ----------
Total distributions............................................... (.32) (.30 ) (.28)
-------- ------- ----------
Net asset value, end of period........................................ $ 10.57 $10.57 $10.57
-------- ------- ----------
-------- ------- ----------
TOTAL RETURN (c):..................................................... 5.97% 5.76 % 5.63%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)....................................... $164,052 $32,927 $3,673
Average net assets (000).............................................. $165,597 $30,911 $2,967
Ratios to average net assets (b):
Expenses, including distribution fees............................... .37%(a) .77 %(a) 1.02%(a)
Expenses, excluding distribution fees............................... .27%(a) .27 %(a) .27%(a)
Net investment income............................................... 6.08%(a) 5.68 %(a) 5.43%(a)
Portfolio turnover rate............................................... 16% 16 % 16%
<FN>
- ---------------
(a) Annualized.
(b) Net of expense subsidy and/or fee waiver.
(c) 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 the period reported and includes reinvestment of dividends and
distributions. Total returns for periods of less than a full year are not
annualized.
</TABLE>
2
MF146C-1 (9/16/96)
<PAGE>
PRUDENTIAL CALIFORNIA MUNICIPAL FUND
(CALIFORNIA INCOME SERIES)
Supplement dated September 16, 1996 to
Statement of Additional Information dated
November 1, 1995
THE FOLLOWING INFORMATION SUPPLEMENTS "TRUSTEES AND OFFICERS" IN THE STATEMENT
OF ADDITIONAL INFORMATION:
As of July 26, 1996, the Trustees and officers of the Fund, as a group,
owned beneficially less than 1% of the outstanding shares of beneficial interest
of the California Income Series of the Fund.
As of July 26, 1996, Prudential Securities Incorporated (Prudential
Securities) was record holder for other beneficial owners of 13,046,943 Class A
shares (or 84% of the outstanding Class A shares), 3,096,542 Class B shares (or
91% of the outstanding Class B shares) and 334,941 Class C shares (or 93% of the
outstanding Class C shares) of the Series. In the event of any meetings of
shareholders, Prudential Securities will forward, or cause the forwarding of,
proxy materials to the beneficial owners for which it is the record holder.
As of July 26, 1996, the beneficial owners, directly or indirectly, of more
than 5% of the outstanding shares of any class (except Class Z shares) of
beneficial interest of the California Income Series were: Donald Aluisi &
Dolores K. Aluisi JT TEN, 1269 E. Copper Ave., Fresno, CA 93720-3502 who held
77,290 Class C shares (21.4%); Zoe Ann On TTEE, 740 Brewington Ave.,
Watsonville, CA 95076-3260 who held 30,729 Class C shares (8.5%); and Markarian
Farms, 10278 South Elm Ave., Fresno, CA 93706-9221 who held 39,250 Class C
shares (10.9%).
As of September 16, 1996, Prudential Mutual Fund Management, Inc., located
at One Seaport Plaza, New York, NY 10292, owned all of the Series' outstanding
Class Z shares and therefore controlled Class Z of the Series.
THE FOLLOWING INFORMATION SUPPLEMENTS "DISTRIBUTOR" IN THE STATEMENT OF
ADDITIONAL INFORMATION:
Prudential Securities serves as the Distributor of Class Z shares and incurs
the expenses of distributing the Series' Class Z shares under a Distribution
Agreement with the Fund, none of which are reimbursed by or paid for by the
Fund.
THE FOLLOWING INFORMATION SUPPLEMENTS "PURCHASE AND REDEMPTION OF FUND SHARES"
IN THE STATEMENT OF ADDITIONAL INFORMATION:
Shares of the Series may be purchased at a price equal to the next
determined net asset value per share plus a sales charge which, at the election
of the investor, 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
of the Series are offered to a limited group of investors at net asset value
without any sales charges. See "Shareholder Guide--How to Buy Shares of the
Fund" in the Prospectus.
Each class of shares represents an interest in the same assets of the Series
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 for
sale to a limited group of investors. See "Distributor" and "Shareholder
Investment Account--Exchange Privilege."
1
<PAGE>
SPECIMEN PRICE MAKE-UP
Under the current distribution arrangements between the Fund and the
Distributor, Class A shares are sold with a maximum sales charge of 3% and Class
B*, Class C* and Class Z** shares are sold at net asset value. Using the Series'
net asset value at February 29, 1996, the maximum offering price of the Series'
shares is as follows:
<TABLE>
<CAPTION>
CLASS A
<S> <C>
Net asset value and redemption price per Class A share................................. $ 10.57
Maximum sales charge (3% of offering price)............................................ .33
-----------
Offering price to public............................................................... $ 10.90
-----------
-----------
CLASS B
Net asset value, offering price and redemption price per Class B share*................ $ 10.57
-----------
-----------
CLASS C
Net asset value, offering price and redemption price per Class C share*................ $ 10.57
-----------
-----------
CLASS Z
Net asset value, offering price and redemption price per Class Z share**............... $ 10.57
-----------
-----------
</TABLE>
- ------------------------
* Class B and Class C shares are subject to a contingent deferred sales charge
on certain redemptions. See "Shareholder Guide--How to Sell Your
Shares--Contingent Deferred Sales Charges" in the Prospectus.
**Class Z shares did not exist at February 29, 1996.
THE FOLLOWING INFORMATION SUPPLEMENTS "SHAREHOLDER INVESTMENT ACCOUNT--EXCHANGE
PRIVILEGE" IN THE STATEMENT OF ADDITIONAL INFORMATION:
CLASS Z. Class Z shares may be exchanged for Class Z shares of other
Prudential Mutual Funds.
2
MF146C-2 (9/16/96)
