<PAGE>
Prudential Structured
Maturity Fund
- ------------------------------------------------
Prudential Mutual Funds
BUILDING YOUR FUTURE
(LOGO)
ON OUR STRENGTH(sm)
ANNUAL REPORT
DECEMBER 31, 1993
<PAGE>
LETTER TO
SHAREHOLDERS
FEBRUARY 10, 1994
DEAR SHAREHOLDER:
In the last year, short-term government and corporate bonds provided
attractive total returns, as interest rates shifted lower and then
retraced their steps late in the year. We are pleased to report
the Prudential Structured Maturity Fund: Income
Portfolio provided competitive returns in this environment.
Laddering for Discipline
The Income Portfolio seeks high current income, consistent with
preservation of principal, from a portfolio of short- to intermediate-term
investment grade corporate bonds and U.S. government obligations.
The Portfolio has a unique "laddered"
maturity format: assets are allocated equally between
six "rungs," or maturities, running from approximately one to six
years. When new money comes into the Portfolio or as securities
mature, we purchase new bonds to keep the six equal weightings
in relative balance. With a 3.0 year average effective maturity,
this Portfolio will not rise as much as a long-term fund when rates
are falling; but it should not fall as much if rates rise.
<TABLE>
<CAPTION>
Total Returns
As of December 31, 1993
Historical1 Average Annual2
-------------------- --------------------
One-Yr. Since Incep. One-Yr. Since Incep.
<S> <C> <C> <C> <C>
Class A (incep. 9/1/89) 7.2% 46.5% 3.7% 8.4%
Class B (incep. 12/9/92) 6.4% 6.7% 3.4% 4.5%
Lipper Short Investment
Grade Debt Average* 6.4% 41.1%** NA NA
<FN>
Past performance is no guarantee of future results and an investors
shares, when redeemed, may be worth more or less than their original
value.
1Source: Lipper Analytical Services, Inc. These figures do not take
into account sales charges. The Fund charges a maximum front-end sales
load of 3.25% (Class A). Class B shares are subject to a declining
contingent deferred sales charge of 3%, 2%, 1% and 1% for the first 4 years.
2Source: Prudential Mutual Fund Management, Inc. These averages take
into account applicable sales charges.
*This is the average of 92 funds in the short investment grade debt
category, according to Lipper Analytical Services, Inc.
**Return from 9/30/89 to 12/31/93.
</TABLE>
Understanding Performance
Historical Investment Results represent the cumulative total returns
for a specified period. These returns assume the reinvestment of
dividends and distributions but do not take into account applicable
sales charges.
Average Annual Total Returns are not actual yearly results but
even out performance so that investors can compare different funds
on an equal basis. These returns take into account sales charges
and would produce the same results as the historic
total returns if performance had been constant over the entire period.
-1-
<PAGE>
In 1993, the Portfolio paid dividends and distributions totaling
$0.84 and $0.75 for Class A and Class B shares, respectively.
The Fund also had a 30-day SEC yield of 3.98% per Class A and 3.36%
per Class B share as of December 31, 1993. Of
course, past performance can be no guarantee of future results.
The Economy and Bond Prices
The economy's strength, the demand for credit and the inflation
rate are several of the factors that determine interest rate levels.
Overall, interest rates fell throughout most of 1993 until September,
when the long-term U.S. Treasury bond
began to rise. The decline in rates was not as pronounced for shorter
maturities although the five-year U.S. Treasury note's yield fell to
5.2% from 6.2% over the year. Low inflation, modest growth and the
Administration's budget deficit program
have been the primary forces behind this shift in rates.
Good Times for Governments and Corporates Alike
Low interest rates, moderate growth and low inflation were
beneficial for most types of bonds in 1993. In this environment,
our short-term portfolio provided higher yields and total returns
than money market securities without all the price
sensitivity of longer term bonds.
--Government bonds reaped the benefits of falling interest
rates as their prices increased steadily. The effects of the bond
rally were captured by our Treasury securities, which comprised about
30% of the portfolio at year end. Although
Treasury securities are considered to entail minimal credit risk,
their prices are very sensitive to interest rate movements.
--Corporate bonds paid higher coupons, on average, than
comparable maturity government issues in 1993. This means that
by investing in corporate bonds, the Portfolio may pick up additional
yield in return for higher credit risk. In addition,
we selected bonds we believe have the potential for price appreciation
as issuers pare employment roles and streamline operations through
restructuring. Corporates, which were 68% of the portfolio on December
31, 1993, also helped the Portfolio
withstand price pressure when rates began to rise at the end of the year.
--By purchasing bonds across the quality spectrum, we have been
able to pick up additional yield and appreciation potential by shifting
some assets from credits rated Aaa, Aa and A into Baa credits. Bonds
rated Baa by Moody's made up 24% of
assets in December, up from 18% at the beginning of the year. We look
for undervalued credits, like Federal Express for example, that may be
out of favor with investors but have the potential for gains.
-2-
<PAGE>
A Word Or Two About Mortgages
In the past few years, the mortgage market has been dominated by
high prepayment rates and falling mortgage prices. Since interest
rates appear to be stabilizing, we have begun shifting a small amount
of assets to mortgage-backed securities
(1.8% of net assets at year end). When rates are stable or rising,
prepayments should fall, and these securities should become more
valuable to investors.
Our Outlook
Looking to 1994, we anticipate the pace of interest rate rises will
depend on several factors, including the impact of higher taxes and
lower government spending on growth, how much the global recession
limits exports, the depth of corporate
layoffs in 1994 and the pattern of Treasury issuance.
--The recently completed North American Free Trade Agreement and
the latest successful round of General Agreement on Tariffs and Trade
talks should lead to increased economic activity worldwide.
--Health care reform, budget battles and higher income taxes
could have a dampening effect on the U.S. economy in 1994 without
undermining the trend toward recovery.
--The Federal Reserve raised its short-term rate benchmark
from 3.0% to 3.25% in early February. If growth continues at present
levels, we expect the Fed may raise interest rates again by mid-year.
We will monitor the markets closely to see how these developments
affect bond prices and will shift assets between sectors to take
advantage of any opportunities to increase yield and total return.
Once again, we appreciate having you as a shareholder and remain
committed to managing the Prudential Structured Maturity Fund:
Income Portfolio for your gain.
Sincerely,
Lawrence C. McQuade
President
Annamarie Carlucci
Portfolio Manager
-3-
<PAGE>
<PAGE>
Commentary on Presentation of Portfolio of Investments:
The Portfolio of Investments, following hereto, is presented in a ``laddered''
maturity structure. The Income Portfolio invests in investment grade corporate
debt securities and in obligations of the U.S. Government, its agencies and
instrumentalities with maturities of six years or less. These securities are
categorized within six annual maturity categories.
- --------------------------------------------------------------------------------
PRUDENTIAL STRUCTURED MATURITY FUND Portfolio of Investments
INCOME PORTFOLIO December 31, 1993
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (Note 1)
<S> <C> <C> <C>
5-6 Years--16.2%
Federal Express Corp.
(Consumer Services)
Baa3 $ 1,000 10.05%, 6/15/99......... $ 1,173,330
United States Treasury
Note
36,300 6.375%, 7/15/99......... 38,109,192
------------
39,282,522
------------
4-5 Years--16.2%
Aristar, Inc.
(Financial Services)
Baa1 2,000 5.75%, 7/15/98.......... 1,999,560
Associates Corp. of
North America
(Consumer Finance)
A1 200 8.375%, 1/15/98......... 220,538
Carnival Cruise Lines,
Inc.
(Leisure)
Baa1 2,500 5.75%, 3/15/98.......... 2,491,875
Countrywide Funding
Corp.
(Financial Services)
Baa1 3,000 6.88%, 8/3/98........... 3,141,060
First Union Corp.
(Banking)
Baa1 2,000 6.75%, 1/15/98.......... 2,077,360
Ford Motor Credit Co.
(Consumer Finance)
A2 2,000 6.25%, 2/26/98.......... 2,048,640
Goldman Sachs Group,
L.P.
(Financial Services)
A1 1,500 6.10%, 4/15/98.......... 1,513,605
Hospitality Franchise
Systems, Inc.
(Industrial Services)
Baa3 $ 2,000 5.875%, 12/15/98........ $ 1,993,560
Korea Development Bank
(Banking)
A1 1,200 5.875%, 12/1/98......... 1,198,188
NationsBank Corp.
(Financial Services)
A3 1,500 6.625%, 1/15/98......... 1,560,450
Southern California
Edison Co.
(Utilities)
A1 2,000 5.875%, 2/1/98.......... 2,027,340
Texas Utilities Electric
Co.
(Utilities)
Baa2 3,000 5.875%, 4/1/98.......... 3,037,800
United States Treasury
Note
14,300 8.25%, 7/15/98.......... 16,096,366
------------
39,406,342
------------
3-4 Years--16.2%
Coca-Cola Enterprises,
Inc.
(Beverages)
A3 1,000 6.50%, 11/15/97......... 1,037,860
Comdisco, Inc.
(Leasing)
Baa2 1,500 9.75%, 1/15/97.......... 1,669,800
General Motors
Acceptance Corp.
(Financial Services)
Baa1 2,000 7.50%, 11/4/97.......... 2,117,940
Greyhound Financial
Corp.
(Industrial Finance)
Baa2 2,100 9.67%, 7/1/97........... 2,381,253
</TABLE>
-4- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
INCOME PORTFOLIO
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (Note 1)
<S> <C> <C> <C>
3-4 Years (cont'd.)
International Bank for
Reconstruction &
Development
(Financial Services)
Aaa $ 1,000 9.61%, 12/3/97.......... $ 1,158,110
International Lease
Finance Corp.
(Equipment Leasing)
A2 2,000 5.54%, 5/27/97.......... 2,013,560
Korea Development Bank
(Banking)
A1 1,200 7.71%, 5/5/97........... 1,278,132
MBNA Master Card Trust
(Asset Backed)
(Average Life 3.4
Years)
Aaa 4,000 7.25%, 6/15/99.......... 4,263,720
Mellon Financial Co.
(Financial Services)
Baa1 1,000 6.50%, 12/1/97.......... 1,040,050
Potomac Capital
Investment Corp.
(Financial Services)
A3 3,500 6.19%, 4/28/97.......... 3,536,540
Sears Roebuck & Co.
(Retail Services)
Baa1 2,000 9.25%, 8/1/97........... 2,241,100
Tenneco Credit Corp.
(Financial Services)
Baa2 1,850 10.125%, 12/1/97........ 2,122,283
United States Treasury
Note
12,990 8.50%, 7/15/97.......... 14,534,640
------------
39,394,988
------------
2-3 Years--16.1%
Ashland Oil, Inc.
(Oil)
Baa1 1,000 8.95%, 1/17/96.......... 1,072,490
Associates Corp. of
North America
(Consumer Finance)
A1 3,500 4.56%, 10/29/96......... 3,466,645
Bausch & Lomb, Inc.
(Consumer Products)
A2 $ 3,500 6.80%, 12/12/96......... $ 3,673,355
Centex Corp.
(Industrial Finance)
Baa2 4,000 9.05%, 5/1/96........... 4,316,040
CIT Group Holdings, Inc.
(Financial Services)
A1 1,000 8.75%, 2/15/96.......... 1,069,240
Federal Farm Credit Bank
1,000 7.90%, 3/1/96........... 1,069,190
Georgia Power Co.
(Utility)
A3 2,000 4.75%, 3/1/96........... 1,980,600
Grand Metropolitan
Investment Corp.
(Industrial Finance)
A2 2,195 8.125%, 8/15/96......... 2,361,052
Hanson Overseas
(Diversified
Industrial)
A1 2,000 5.50%, 1/15/96.......... 2,008,320
Mobil Corp.
(Oil)
Aa2 2,000 6.50%, 12/17/96......... 2,090,680
New Zealand Government
(Foreign Government)
Aa3 4,300 8.25%, 9/25/96.......... 4,640,259
Norwest Financial, Inc.
(Consumer Finance)
A1 2,000 4.85%, 11/15/96......... 1,998,580
TransAmerica Finance
Corp.
(Financial Services)
A2 2,000 5.85%, 7/15/96.......... 2,043,080
Union Bank Finland, Ltd.
(Banking)
A3 1,500 5.25%, 6/15/96.......... 1,498,875
Virginia Electric &
Power Co.
(Utility)
A2 1,350 9.70%, 5/6/96........... 1,487,471
</TABLE>
-5- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
INCOME PORTFOLIO
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (Note 1)
<S> <C> <C> <C>
2-3 Years (cont'd.)
Westinghouse Credit
Corp.
(Financial Services)
Baa3 $ 4,000 8.75%, 6/3/96........... $ 4,286,090
------------
39,061,967
------------
1-2 Years--17.9%
Alcan Aluminum Ltd.
(Aluminum)
A2 1,000 9.40%, 6/1/95........... 1,066,100
Cemex S.A.
(Industrial Services)
NR 1,000 6.25%, 10/25/95......... 1,028,750
Central Fidelity Bank
(Financial Services)
A2 1,000 4.70%, 2/15/95.......... 1,005,530
Chrysler Financial Corp.
(Financial Services)
Baa3 1,300 5.26%, 7/6/95........... 1,314,768
Citicorp
(Financial Services)
Baa1 1,000 7.80%, 3/24/95.......... 1,041,130
Comdisco, Inc.
(Leasing)
Baa2 1,000 8.95%, 5/15/95.......... 1,050,770
Commonwealth Edison Co.
(Utility)
A3 2,500 6.125%, 5/15/95......... 2,543,750
Federal National
Mortgage
Association
(Average Life 1.9
Years)
4,000 11.00%, 11/1/00......... 4,490,000
General Motors
Acceptance Corp.
(Financial Services)
A1 2,000 7.05%, 4/13/95.......... 2,062,660
Greyhound Financial
Corp.
(Industrial Finance)
Baa2 2,000 4.625%, 4/19/95......... 2,006,080
International Lease
Finance Corp.
(Equipment Leasing)
A2 $ 1,000 9.80%, 7/31/95.......... $ 1,081,100
Mellon Financial Co.
(Financial Services)
Baa1 1,500 6.125%, 11/15/95........ 1,542,135
Merrill Lynch & Co.,
Inc.
(Financial Services)
A1 1,500 5.50%, 7/28/95.......... 1,524,150
Morgan Stanley Group,
Inc.
(Financial Services)
A1 1,000 9.875%, 5/1/95.......... 1,068,900
Norwest Financial, Inc.
(Consumer Finance)
Aa3 2,500 7.25%, 11/1/95.......... 2,618,600
Occidental Petroleum
Corp.
(Oil)
Baa2 3,750 5.37%, 9/11/95.......... 3,784,612
Pacific-Tel Capital
Resources Group
(Utility)
A1 2,000 8.95%, 6/20/95.......... 2,129,860
PaineWebber Group, Inc.
(Financial Services)
A3 3,000 9.625%, 5/1/95.......... 3,183,360
Philip Morris Cos., Inc.
(Tobacco)
A2 1,000 9.20%, 11/2/95.......... 1,078,670
Sears Roebuck & Co.
(Retail Services)
Baa1 1,000 5.60%, 7/17/95.......... 1,016,140
Standard Credit Card
Trust
(Asset Backed)
(Average Life 1.2
Years)
A2 2,000 9.375%, 3/10/96......... 2,118,125
Union Pacific Corp.
(Oil)
A2 1,750 9.33%, 10/12/95......... 1,891,015
Waste Management, Inc.
(Chemicals)
A1 2,700 4.875%, 7/1/95.......... 2,717,523
------------
43,363,728
------------
</TABLE>
-6- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
INCOME PORTFOLIO
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Value
(Unaudited) (000) Description (Note 1)
<S> <C> <C> <C>
Within 1 Year--16.3%
American Express Credit
Corp.
(Financial Services)
A1 $ 1,000 8.625%, 7/15/94......... $ 1,024,730
Bancomer S.A.
(Banking)
NR 4,000 Zero Coupon, 4/5/94..... 3,948,140
Bank of Delaware
(Banking)
Aa3 3,000 3.30%, 6/10/94.......... 2,975,812
Bank of New York, Master
Credit Card Trust
(Asset Backed)
(Average Life 0.4
Years)
Aaa 3,833 7.95%, 4/15/96.......... 3,895,625
Beneficial Corp.
(Financial Services)
A2 1,650 9.85%, 2/1/94........... 1,656,881
Eastman Kodak Co.
(Chemicals)
A3 1,000 10.05%, 3/15/94......... 1,011,210
Federal Express Corp.
(Consumer Services)
Baa3 1,000 9.75%, 10/3/94.......... 1,039,200
Baa3 1,475 9.20%, 11/15/94......... 1,534,723
First Chicago Corp.
(Banking)
Baa1 1,750 9.20%, 2/18/94.......... 1,761,165
General Electric Capital
Corp.
(Industrial Finance)
Aaa 2,000 5.64%, 3/4/94........... 2,007,520
Aaa 1,000 8.60%, 11/15/94......... 1,039,380
Hydro Quebec
(Utility)
A1 2,000 3.44%, 3/15/94, F.R.N... 1,740,000
Nordstrom Credit, Inc.
(Consumer Finance)
A2 2,000 8.60%, 7/15/94.......... 2,051,480
Philip Morris Cos., Inc.
(Tobacco)
A2 $ 2,000 8.70%, 8/1/94........... $ 2,053,340
Salomon, Inc.
(Financial Services)
A3 2,500 4.22%, 6/6/94........... 2,504,625
Society National Bank of
Cleveland
(Banking)
A1 2,500 3.25%, 4/21/94.......... 2,495,475
Texas Utilities Electric
Co.
(Utility)
Baa2 1,500 9.625%, 9/30/94......... 1,558,125
Union Oil of California
(Oil)
Baa2 1,000 9.75%, 3/1/94........... 1,007,900
Westinghouse Credit
Corp.
(Financial Services)
Baa3 1,000 8.73%, 8/8/94........... 1,023,780
Joint Repurchase
Agreement Account
3.15%, 1/3/94 (Note
3,362 5).................... 3,362,000
------------
39,691,111
------------
Total Investments--98.9%
(cost $239,764,237; Note
4).................... 240,200,658
Other assets in excess
of
liabilities--1.1%..... 2,554,922
------------
Net Assets--100%........ $242,755,580
------------
------------
<FN>
- ------------------
F.R.N.-Floating Rate Note.
N.R.-Not Rated.
</TABLE>
-7- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
INCOME PORTFOLIO
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
December 31,
Assets 1993
------------
<S> <C>
Investments, at value (cost $239,764,237)...................................................... $240,200,658
Cash........................................................................................... 1,221,715
Interest receivable............................................................................ 5,022,040
Receivable for Fund shares sold................................................................ 1,634,502
Deferred organization expenses and other assets................................................ 57,816
------------
Total assets............................................................................... 248,136,731
------------
Liabilities
Payable for investments purchased.............................................................. 4,527,500
Payable for Fund shares reacquired............................................................. 634,967
Due to Distributors............................................................................ 95,474
Due to Manager................................................................................. 79,564
Dividends payable.............................................................................. 43,646
------------
Total liabilities.......................................................................... 5,381,151
------------
Net Assets..................................................................................... $242,755,580
------------
------------
Net assets were comprised of:
Common stock, at par......................................................................... $ 206,037
Paid-in capital in excess of par............................................................. 242,331,397
------------
242,537,434
Accumulated net realized losses.............................................................. (218,275)
Net unrealized appreciation on investments................................................... 436,421
------------
Net assets at December 31, 1993.............................................................. $242,755,580
------------
------------
Class A:
Net asset value and redemption price per share
($119,449,469 (div) 10,138,402 shares of common stock issued and outstanding).............. $11.78
Maximum sales charge (3.25% of offering price)............................................... 0.40
------------
Maximum offering price to public............................................................. $12.18
------------
------------
Class B:
Net asset value, offering price and redemption price per share
($123,306,111 (div) 10,465,300 shares of common stock issued and outstanding).............. $11.78
------------
------------
</TABLE>
See Notes to Financial Statements.
-8-
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
INCOME PORTFOLIO
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
December
31,
Net Investment Income 1993
-----------
<S> <C>
Income
Interest................................ $12,297,193
-----------
Expenses
Management fee.......................... 736,171
Distribution fee--Class A............... 114,728
Distribution fee--Class B............... 589,173
Transfer agent's fees and expenses...... 212,000
Custodian's fees and expenses........... 80,000
Registration fees....................... 53,000
Legal fees and expenses................. 50,000
Reports to shareholders................. 49,000
Directors' fees......................... 36,000
Audit fees.............................. 34,000
Amortization of deferred organization
expenses................................ 32,000
Miscellaneous........................... 5,456
-----------
Total expenses........................ 1,991,528
-----------
Net investment income..................... 10,305,665
-----------
Realized and Unrealized Gain (Loss) on
Investments
Net realized gain on investments.......... 1,676,837
Net change in unrealized appreciation of
investments............................. (1,001,998)
-----------
Net gain on investments................... 674,839
-----------
Net Increase in Net Assets
Resulting from Operations................. $10,980,504
-----------
-----------
</TABLE>
PRUDENTIAL STRUCTURED MATURITY FUND
INCOME PORTFOLIO
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended December 31,
Increase (Decrease) ------------------------------
in Net Assets 1993 1992
------------- -------------
<S> <C> <C>
Operations
Net investment income..... $ 10,305,665 $ 7,736,396
Net realized gain on
investments............. 1,676,837 2,200,151
Net change in unrealized
appreciation of
investments............. (1,001,998) (2,953,610)
------------- -------------
Net increase in net assets
resulting from
operations.............. 10,980,504 6,982,937
------------- -------------
Dividends and distributions (Note 1)
Dividends to shareholders
from net investment
income
Class A................. (6,786,531) (7,715,627)
Class B................. (3,519,134) (20,769)
------------- -------------
(10,305,665) (7,736,396)
------------- -------------
Distributions to
shareholders from net
realized gains
Class A................. (1,295,162) (2,339,842)
Class B................. (1,027,120) --
------------- -------------
(2,322,282) (2,339,842)
------------- -------------
Fund share transactions
(Note 6)
Net proceeds from shares
subscribed.............. 155,140,884 36,953,072
Net asset value of shares
issued
to shareholders in
reinvestment
of dividends and
distributions........... 8,391,229 6,394,139
Cost of shares
reacquired................ (40,937,219) (28,443,145)
------------- -------------
Net increase in net assets
from Fund share
transactions............ 122,594,894 14,904,066
------------- -------------
Total increase.............. 120,947,451 11,810,765
Net Assets
Beginning of year........... 121,808,129 109,997,364
------------- -------------
End of year................. $ 242,755,580 $ 121,808,129
------------- -------------
------------- -------------
</TABLE>
See Notes to Financial Statements. See Notes to Financial Statements.
-9-
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
INCOME PORTFOLIO
Notes to Financial Statements
Prudential Structured Maturity Fund (the ``Fund''), is registered under the
Investment Company Act of 1940, as a diversified, open-end management investment
company. The Fund consists of two portfolios--the Income Portfolio (the
``Portfolio'') and the Municipal Income Portfolio. The Municipal Income
Portfolio has not yet begun operations. The Fund was incorporated in Maryland on
June 8, 1988 and had no operations until July 1989 when 8,613 shares of the
Portfolio's common stock was sold for $100,000 to Prudential Mutual Fund
Management, Inc. (``PMF''). Investment operations commenced on September 1,
1989. The Portfolio's investment objective is high current income consistent
with the preservation of principal. The ability of issuers of debt securities
held by the Portfolio to meet their obligations may be affected by economic
developments in a specific industry or region.
Note 1. Accounting The following is a summary
Policies of significant accounting poli
cies followed by the Portfolio in the preparation
of its financial statements.
Securities Valuation: The Board of Directors has authorized the use of an
independent pricing service to determine valuations of U.S. Government and
corporate obligations. The pricing service considers such factors as security
prices, yields, maturities, call features, ratings and developments relating to
specific securities in arriving at securities valuations. When market quotations
are not readily available, a security is valued by appraisal at its fair value
as determined in good faith under procedures established under the general
supervision and responsibility of the Board of Directors.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost.
In connection with transactions in repurchase agreements, the Portfolio's
custodian takes possession of the underlying collateral securities, the value of
which at least equals the principal amount of the repurchase transaction,
including accrued interest. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is marked-to-market on a
daily basis to ensure the adequacy of the collateral. If the seller defaults and
the value of the collateral declines or if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of the collateral by the
Fund may be delayed or limited.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of securities are
calculated on the identified cost basis. Interest income is recorded on the
accrual basis.
Net investment income (other than distribution fees) and unrealized and
realized gains or losses are allocated daily to each class of shares based upon
the relative proportion of net assets of each class at the beginning of the day.
Federal Income Taxes: It is the Portfolio's policy to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable net income and capital gains, if
any, to its shareholders. Therefore, no federal income tax provision is
required.
Dividends and Distributions: The Portfolio declares daily and pays monthly
dividends of net investment income. Distributions of net capital gains, if any,
are made at least annually. Dividends and distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles.
Deferred Organization Expenses: Approximately $160,000 of expenses were incurred
in connection with the organization and initial registration of the Portfolio.
These expenses have been deferred and are being amortized over the period of
benefit not to exceed 60 months from the date of commencement of investment
operations.
Note 2. Agreements The Fund has a management
agreement with PMF. Pursuant to this agreement,
PMF has responsibility for all investment advisory services and supervises the
subadviser's performance of such services. PMF has entered into a subadvisory
agreement with The Prudential Investment Corporation (``PIC''); PIC furnishes
investment advisory services in connection with the management of the Fund. PMF
pays for the cost of the subadviser's services, the compensation of officers and
employees of the Fund, occupancy and certain clerical and bookkeeping costs of
the Fund. The Fund bears all other costs and expenses.
The management fee paid PMF is computed daily and payable monthly, at an
annual rate of .40 of 1% of the average daily net assets of the Portfolio.
-10-
<PAGE>
<PAGE>
The Fund has distribution agreements with Prudential Mutual Fund
Distributors, Inc. (``PMFD''), which acts as distributor of the Class A shares
of the Fund, and with Prudential Securities Incorporated (``PSI''), which acts
as distributor of the Class B shares of the Fund (collectively the
``Distributors''). To reimburse the Distributors for their expenses incurred in
distributing and servicing the Fund's Class A and B shares, the Fund, pursuant
to plans of distribution, pays the Distributors a reimbursement, accrued daily
and payable monthly.
Pursuant to the Class A Plan, the Portfolio reimburses PMFD for its
distribution-related expenses with respect to Class A shares at an annual rate
of .10 of 1% of the average daily net assets of the Class A shares. PMFD pays
various broker-dealers, including PSI and Pruco Securities Corporation
(``Prusec''), affiliated broker-dealers, for account servicing fees and other
expenses incurred by such broker-dealers.
Pursuant to the Class B Plan, the Portfolio reimburses PSI for its
distribution-related expenses with respect to Class B shares at an annual rate
of up to 1% of the average daily net assets of the Class B shares. Such expenses
under the Class B Plan were .85 of 1% of the average daily net assets of the
Class B shares for the year ended December 31, 1993.
The Class B distribution expenses include commission credits for payment of
commissions and account servicing fees to financial advisers and an allocation
for overhead and other distribution-related expenses, interest and/or carrying
charges, the cost of printing and mailing prospectuses to potential investors
and of advertising incurred in connection with the distribution of shares.
The Distributors recover the distribution expenses and service fees incurred
through the receipt of reimbursement payments from the Portfolio under the plans
and the receipt of initial sales charges (Class A only) and contingent deferred
sales charges (Class B only) from shareholders.
PMFD has advised the Portfolio that it has received approximately $669,100 in
front-end sales charges resulting from sales of Class A shares during the year
ended December 31, 1993. From these fees, PMFD paid such sales charges to
dealers (PSI and Prusec) which in turn paid commissions to salespersons.
With respect to the Class B Plan, at any given time, the amount of expenses
incurred by PSI in distributing the Portfolio's shares and not recovered through
the imposition of contingent deferred sales charges in connection with certain
redemptions of shares may exceed the total reimbursement made by the Portfolio
pursuant to the Class B Plan. PSI advised the Portfolio that for the year ended
December 31, 1993, it received approximately $86,000 in contingent deferred
sales charges imposed upon certain redemptions by investors. PSI, as
distributor, has also advised the Portfolio that at December 31, 1993, the
amount of distribution expenses incurred by PSI and not yet reimbursed by the
Fund or recovered through contingent deferred sales charges approximated
$2,318,100. This amount may be recovered through future payments under the Class
B Plan or contingent deferred sales charges.
In the event of termination or noncontinuation of the Class B Plan, the
Portfolio would not be contractually obligated to pay PSI, as distributor, for
any expenses not previously reimbursed under the Class B Plan or recovered
through contingent deferred sales charges.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are indirect,
wholly-owned subsidiaries of The Prudential Insurance Company of America.
Note 3. Other Prudential Mutual Fund Ser-
Transactions vices, Inc. (``PMFS''), a
with Affiliates wholly-owned subsidiary of
PMF, serves as the Portfolio's transfer agent.
During the year ended December 31, 1993, the Portfolio incurred fees of
approximately $169,000 for the services of PMFS. As of December 31, 1993,
approximately $20,000 of such fees were due to PMFS. Transfer agent fees and
expenses in the Statement of Operations also include certain out-of-pocket
expenses paid to non-affiliates.
Note 4. Portfolio Purchases and sales of port
Securities folio securities, excluding
short-term investments, for the year ended
December 31, 1993 were $361,710,920 and $245,081,744, respectively.
The federal income tax basis of the Portfolio's investments at December 31,
1993 was $239,784,112 and accordingly, net unrealized appreciation for federal
income tax purposes was $416,546 (gross unrealized appreciation--$2,259,467;
gross unrealized depreciation-- $1,842,921).
The Portfolio elected to treat approximately $249,000 of net capital losses
incurred in the two month period ended December 31, 1993 as having occurred in
the following year.
Note 5. Joint The Portfolio, along with
Repurchase other affiliated registered
Agreement investment companies, trans
Account fers uninvested cash balances
into a single joint account, the daily aggregate
balance of which is invested in one or more repurchase agreements collateralized
by U.S. Treasury
-11-
<PAGE>
<PAGE>
or federal agency obligations. As of December 31, 1993, the Portfolio had a 0.3%
undivided interest in the repurchase agreements in the joint account. The
undivided interest for the Portfolio represented $3,362,000 in principal amount.
As of such date, each repurchase agreement in the joint account and the
collateral therefor was as follows:
Barclays de Zoete Wedd Securities, Inc., 3.10%, dated 12/31/93, in the
principal amount of $100,000,000, repurchase price $100,025,833, due 1/3/94;
collateralized by $49,000,000 U.S. Treasury Notes, 8.875%, due 11/15/98;
$32,000,000 U.S. Treasury Notes, 7.50%, due 11/15/01 and $7,305,000 U.S.
Treasury Notes, 8.50%, due 2/15/00; approximate aggregate value including
accrued interest--$102,043,014.
Bear Stearns & Co., Inc., 3.18%, dated 12/31/93, in the principal amount of
$323,000,000, repurchase price $323,085,595, due 1/3/94; collateralized by
$200,000,000 U.S. Treasury Notes, 3.875%, due 3/31/95; $80,030,000 U.S. Treasury
Notes, 7.50%, due 11/15/01; $30,000,000 U.S. Treasury Notes, 5.625%, due
1/31/98; $5,745,000 U.S. Treasury Notes, 4.25%, due 7/31/95 and $85,000 U.S.
Treasury Notes, 7.375%, due 5/15/96; approximate aggregate value including
accrued interest--$329,753,949.
Goldman, Sachs & Co., 3.10%, dated 12/31/93, in the principal amount of
$399,000,000, repurchase price $399,103,075, due 1/3/94; collateralized by
$363,720,000 U.S. Treasury Bonds, 7.50%, due 11/15/16; approximate value
including accrued interest-- $408,104,889.
Kidder, Peabody & Co., Inc., 3.20%, dated 12/31/93, in the principal amount
of $375,000,000, repurchase price $375,100,000, due 1/3/94; collateralized by
$200,000,000 U.S. Treasury Bonds, 11.625%, due 11/15/04; $38,000,000 U.S.
Treasury Bonds, 12.75%, due 11/15/10; $90,000 U.S. Treasury Bonds, 9.00%, due
2/15/93; $15,000,000 U.S. Treasury Notes, 7.375%, due 5/15/96 and $11,730,000
U.S. Treasury Notes, 7.25%, due 11/15/96; approximate aggregate value including
accrued interest--$383,014,020.
Note 6. Capital The Portfolio offers both
Class A and Class B shares. Class A shares are
sold with a front-end sales charge of up to 3.25%. Class B shares are sold with
a contingent deferred sales charge which declines from 3% to zero depending on
the period of time the shares are held. Both classes of shares have equal rights
as to earnings, assets and voting privileges except that each class bears
different distribution expenses and has exclusive voting rights with respect to
its distribution plan. Class B shares commenced operations on December 9, 1992.
There are 500 million shares of $.01 par value common stock, divided into two
classes, designated Class A and Class B common stock, each of which consists of
250 million authorized shares. Of the 20,603,702 shares issued and outstanding
at December 31, 1993, PMF owned 8,613 Class A shares. Transactions in shares of
common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- -------------------------------- ---------- ------------
<S> <C> <C>
Year ended December 31, 1993:
Shares sold..................... 2,594,107 $ 31,677,141
Shares issued in reinvestment of
dividends and distributions... 434,693 5,183,611
Shares reacquired............... (2,208,544) (26,405,354)
---------- ------------
Increase in shares
outstanding................... 820,256 $ 10,455,398
---------- ------------
---------- ------------
Year ended December 31, 1992:
Shares sold..................... 2,074,317 $ 24,857,002
Shares issued in reinvestment of
dividends and distributions... 535,228 6,380,724
Shares reacquired............... (2,360,989) (28,308,480)
---------- ------------
Increase in shares
outstanding................... 248,556 $ 2,929,246
---------- ------------
---------- ------------
Class B
- --------------------------------
Year ended December 31, 1993:
Shares sold..................... 10,395,504 $123,463,743
Shares issued in reinvestment of
dividends and distributions... 269,387 3,207,618
Shares reacquired............... (1,216,010) (14,531,865)
---------- ------------
Increase in shares
outstanding................... 9,448,881 $112,139,496
---------- ------------
---------- ------------
December 9, 1992* through
December 31, 1992:
Shares sold..................... 1,026,709 $ 12,096,070
Shares issued in reinvestment of
dividends..................... 1,137 13,415
Shares reacquired............... (11,427) (134,665)
---------- ------------
Increase in shares
outstanding................... 1,016,419 $ 11,974,820
---------- ------------
---------- ------------
<FN>
- ---------------
*Commencement of Class B operations.
</TABLE>
-12-
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
INCOME PORTFOLIO
Financial Highlights
<TABLE>
<CAPTION>
Class A Class B
------------------------------------------------------------ ----------------------------
September 1, December 9,
1989* 1992(dag)(dag)
Years ended December 31, through Year ended through
-------------------------------------------- December 31, December 31, December 31,
PER SHARE OPERATING PERFORMANCE: 1993 1992 1991 1990 1989 1993 1992
-------- -------- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.......................... $ 11.79 $ 12.13 $ 11.67 $ 11.63 $ 11.61 $ 11.79 $ 11.79
-------- -------- -------- -------- ------------ ------------ ------------
Income from investment operations:
Net investment income............. .71 .86) .93) 1.00) .35(d) .62 .04
Net realized and unrealized gain
(loss) on
investment transactions......... .12 (.08) .56 .04 .03 .12 --
-------- -------- -------- -------- ------------ ------------ ------------
Total from investment
operations.................... .83 .78 1.49 1.04 .38 .74 .04
-------- -------- -------- -------- ------------ ------------ ------------
Less distributions:
Dividends from net investment
income.......................... (.71) (.86) (.93) (1.00) (.35) (.62) (.04)
Distributions from net realized
gains........................... (.13) (.26) (.10) -- (.01) (.13) --
-------- -------- -------- -------- ------------ ------------ ------------
Total distributions............. (.84) (1.12) (1.03) (1.00) (.36) (.75) (.04)
-------- -------- -------- -------- ------------ ------------ ------------
Net asset value, end of period.... $ 11.78 $ 11.79 $ 12.13 $ 11.67 $ 11.63 $ 11.78 $ 11.79
-------- -------- -------- -------- ------------ ------------ ------------
-------- -------- -------- -------- ------------ ------------ ------------
TOTAL RETURN#:.................... 7.19% 6.67% 13.35% 9.40% 3.30% 6.38% .32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)... $119,449 $109,828 $109,997 $113,125 $ 98,414 $ 123,306 $ 11,981
Average net assets (000).......... $114,728 $107,937 $113,010 $107,276 $ 89,176 $ 69,314 $ 5,474
Ratios to average net assets:
Expenses, including distribution
fees.......................... .80% .70%(dag) .37%(dag) .13%(dag) 0%**(dag) 1.55% 1.67%**
Expenses, excluding distribution
fees.......................... .70% .60%(dag) .27%(dag) .10%(dag) 0%**(dag) .70% .82%**
Net investment income........... 5.92% 7.15%(dag 7.89%(dag) 8.67%(dag) 8.41%**(dag) 5.08% 6.31%**
Portfolio turnover................ 137% 91% 117% 46% 69% 137% 91%
<FN>
- ---------------
* Commencement of investment operations.
** Annualized.
(dag) Net of expense subsidy and/or fee waiver.
(dag)(dag) Commencement of Class B operations.
# 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 one
year are not annualized.
</TABLE>
See Notes to Financial Statements.
-13-
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors of
Prudential Structured Maturity Fund, Income Portfolio
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Prudential Structured Maturity Fund,
Income Portfolio, as of December 31, 1993, the related statements of operations
for the year then ended and of changes in net assets for each of the years in
the two year period then ended, and the financial highlights for each of the
periods in the four year period then ended and for the period September 1, 1989
(commencement of investment operations) to December 31, 1989. These financial
statements and the financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
December 31, 1993 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Prudential
Structured Maturity Fund, Income Portfolio, as of December 31, 1993, the results
of its operations, the changes in its net assets and the financial highlights
for the respective stated periods in conformity with generally accepted
accounting principles.
Deloitte & Touche
New York, New York
February 3, 1994
TAX INFORMATION
We are required by the Internal Revenue Code to advise you within 60 days of
the Portfolio's fiscal year end (December 31, 1993) as to the federal tax status
of dividends paid by the Portfolio during such fiscal year.
During 1993, dividends paid from net investment income of $.71 per share for
Class A shares and $.62 per share for Class B shares are taxable as ordinary
income. In addition, the Fund paid short-term capital gain distributions of $.08
per share (Class A and Class B shares), which are taxable as ordinary income,
and long-term capital gain distributions of $.055 per share (Class A and Class B
shares), which are taxable as such.
For the purpose of preparing your annual federal income tax return, however,
you should report the amounts as reflected on the appropriate Form 1099-DIV or
substitute Form 1099-DIV.
We are required by Massachusetts and Oregon to inform you that dividends
which have been derived from interest on federal obligations are not taxable to
shareholders. Please be advised that 27.35% of the dividends paid by the Fund
qualify for each of these states' tax exclusion.
We wish to advise you that the corporate dividends received deduction for the
Fund is zero. Only funds that invest in U.S. equity securities are entitled to
pass-through a corporate dividends received deduction.
-14-
<PAGE>
<PAGE>
The following two charts compare a $10,000 investment in
Class A shares and Class B shares, with a similar investment in
the Lehamn Brothers Intermediate Government/Corporation Index.
Included in the charts are the average annual total returns for
each Class for the one-year, five-year and since inception
periods with and without sales charges.
Past performance is no guarantee of future performance, and an investor's
shares when redeemed, may be worth more or less than their original value.
These graphs are furnished to you in accordance with SEC regulations. They
compare a $10,000 investment in Prudential Structured Maturity Fund (Class A and
Class B) with a similar investment in the Lehman Brothers Intermediate
Government/Corporate Bond Index (LIGC) by portraying the initial account values
on September 1, 1989 for Class A shares and December 9, 1992 for Class B shares
and subsequent account values at the end of each fiscal year (December 31), as
measured on a quarterly basis, beginning in 1989 for Class A shares and in 1992
for Class B shares. For purposes of the graphs and, unless otherwise indicated,
the accompanying tables, it has been assumed that (a) the maximum sales charge
was deducted from the initial $10,000 investment in Class A shares; (b) the
maximum applicable contingent deferred sales charge was deducted from the value
of the investment in Class B shares assuming full redemption on December 31,
1993; (c) all recurring fees (including management fees) were deducted; and (d)
all dividends and distributions were reinvested.
The LIGC is a weighted index comprised of securities issued or backed by the
U.S. government and its agencies and securities publicly issued by corporations
with one to 9.99 years remaining to maturity, rated investment grade and have
$50 million or more outstanding. The LIGC is an unmanaged index and includes the
reinvestment of all dividends, but does not reflect the payment of transaction
costs and advisory fees associated with an investment in the Fund. The
securities that comprise the LIGC may differ substantially from the securities
in the Fund's portfolio. The LIGC is not the only index that be used to
characterize performance of bond funds and other indexes may portray different
comparative performance.
-15-
<PAGE>
<PAGE>
Directors
Robert R. Fortune
Delayne D. Gold
Harry A. Jacobs, Jr.
Lawrence C. McQuade
William C. Norby
Thomas A. Owens, Jr.
Robert J. Schultz
Merle T. Welshans
Officers
Lawrence C. McQuade, President
Robert F. Gunia, Vice President
Susan C. Cote, Treasurer
S. Jane Rose, Secretary
Marguerite E.H. Morrison, Assistant Secretary
Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101
Distributors
Prudential Mutual Fund Distributors, Inc.
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Deloitte & Touche
1633 Broadway
New York, NY 10019
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
One Seaport Plaza
New York, NY 10292
Toll free (800) 225-1852
Collect (908) 417-7555
This report is not authorized for distribution to prospective investors
unless preceded or accompanied by a current prospectus.
743924102 MF140E
743924201 Cat.#4443335
