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Prudential Diversified Bond Fund, Inc.
Supplement dated March 5, 1996 to
Statement of Additional Information dated January 3, 1995
(as supplemented June 20, 1995)
The following chart, although not relevant to share ownership in the Fund,
may provide useful information about the effects of a hypothetical investment
diversified over different asset portfolios. The chart shows the range of annual
total returns for major stock and bond indices for the period from December 31,
1975 through December 31, 1995. The horizontal ``Best Returns Zone'' band shows
that a hypothetical blended portfolio constructed of one-third U.S. stocks (S&P
500), one-third foreign stocks (EAFE Index), and one-third U.S. bonds (Lehman
Index) would have eliminated the ``highest highs'' and ``lowest lows'' of any
single asset class.
(HYPOTHETICAL INVESTMENT DIVERSIFIED OVER
DIFFERENT ASSET PORTFOLIOS CHART)
* Source: Prudential Investment Corporation based on data from Lipper Analytical
New Applications (LANA). Past performance is not indicative of future results.
The S&P 500 Index is a weighted, unmanaged index comprised of 500 stocks which
provides a broad indication of stock price movements. The Morgan Stanley EAFE
Index is an unmanaged index comprised of 20 overseas stock markets in Europe,
Australia, New Zealand and the Far East. The Lehman Aggregate Index includes
all publicly-issued investment grade debt with maturities over one year,
including U.S. government and agency issues, 15 and 30 year fixed-rate
government agency mortgage securities, dollar denominated SEC registered
corporate and government securities, as well as asset-backed securities.
Investors cannot invest directly in stock or bond market indices.
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The following chart shows where the Fund fits in the Prudential Fund Family
in terms of the maturity of its portfolio securities.
(PRUDENTIAL FUND FAMILY CHART)
The Fund may provide: (i) higher yield and total return than Prudential's
U.S. government funds, but with lower overall quality and (ii) higher
overall quality than the Prudential High Yield Fund, but with potentially
lower yield and total return.
Currently, the Fund is maintaining an intermediate-term duration of 5 to 6
years. This is subject to change.
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Set forth below is historical performance data relating to various sectors
of the fixed-income securities markets. The chart shows the historical total
returns of U.S. Treasury bonds, U.S. mortgage securities, U.S. corporate bonds,
U.S. high yield bonds and world government bonds on an annual basis from 1987
to 1995. The total returns of the indices include accrued interest, plus the
price changes (gains or losses) of the underlying securities during the period
mentioned. The data is provided to illustrate the varying historical total
returns and investors should not consider this performance data as an indication
of the future performance of the Fund or of any sector in which the Fund
invests.
All information relies on data obtained from statistical services, reports
and other services believed by the Manager to be reliable. Such information has
not been verified. The figures do not reflect the operating expenses and fees of
a mutual fund. See ``Fund Expenses'' in the prospectus. The net effect of the
deduction of the operating expenses of a mutual fund on these historical total
returns, including the compounded effect over time, could be substantial.
Historical Total Returns of Different Bond Market Sectors
(HISTORICAL TOTAL RETURNS CHART)
1 Lehman Brothers Treasury Bond Index is an unmanaged index made up of over 150
public issues of the U.S. Treasury having maturities of at least one year.
2 Lehman Brothers Mortgage-Backed Securities Index is an unmanaged index that
includes over 600 15-and 30-year fixed-rate mortgage-backed securities of the
Government National Mortgage Association (GNMA), Federal National Mortgage
Association (FNMA), and the Federal Home Loan Mortgage Corporation (FHLMC).
3 Lehman Brothers Corporate Bond Index includes over 3,000 public fixed-rate,
nonconvertible investment-grade bonds. All bonds are U.S. dollar-denominated
issues and include debt issued or guaranteed by foreign sovereign governments,
municipalities, governmental agencies or international agencies. All bonds in
the index have maturities of at least one year.
4 Lehman Brothers High Yield Bond Index is an unmanaged index comprising over
750 public, fixed-rate, nonconvertible bonds that are rated Ba1 or lower by
Moody's Investors Service (or rated BB+ or lower by Standard & Poor's or
Fitch Investors Service). All bonds in the index have maturities of at
least one year.
5 Salomon Brothers World Government Index (Non U.S.) includes over 800 bonds
issued by various foreign governments or agencies, excluding those in the
U.S., but including those in Japan, Germany, France, the U.K., Canada, Italy,
Australia, Belgium, Denmark, the Netherlands, Spain, Sweden and Austria. All
bonds in the index have maturities of at least one year.
MF166B-1
