<PAGE>
SEMI ANNUAL REPORT
June 30, 1994
Prudential Structured
Maturity Fund
Income Portfolio
Prudential Mutual Funds
Building Your Future (LOGO)
On Our Strength
<PAGE>
LETTER TO
SHAREHOLDERS
------------------------------------------------
August 12, 1994
Dear Shareholder:
In the past six months, short-term U.S. government and corporate bond
yields have risen steadily in a bond market distressed by fears of growing
inflation. While bond prices have suffered generally, short-term bonds
are not as sensitive to interest rate changes as long-term bonds.
The Prudential Structured Maturity Fund--Income Portfolio produced
average total returns.
Portfolio Update
The Prudential Structured Maturity Fund-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.
HISTORICAL PERFORMANCE1
As of June 30, 1994
<TABLE>
<CAPTION>
Since
6-Month 12-Month Inception** 30-Day
Total Return Total Return Total Return SEC Yield NAV
<S> <C> <C> <C> <C> <C>
Class A -1.7% +0.4% +43.4% 5.19% $11.25
Class B -2.1% -0.5% +4.7% 4.61% $11.24
Lipper Short
Inv. Grade Avg.*: -1.2% +1.1% +38.9% N/A N/A
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS2
As of June 30, 1994
<TABLE>
<CAPTION>
One-Year Since Inception**
<S> <C> <C>
Class A -2.9% +7.0%
Class B -3.5% +1.7%
</TABLE>
Past performance is no guarantee of future results and the Fund's
investment return and principal value will fluctuate so that an investor's
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% for Class A shares. 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 109 funds in the short investment grade
debt category on 6/30/94 according to Lipper Analytical Services, Inc.
**Inception date: Class A 9/1/89, Class B 12/9/92.
-1-
<PAGE>
The Portfolio has a "laddered' maturity format: assets are allocated
between six "rungs,' or maturities, running from one year or less to
between five and six years. When new money comes into the Portfolio or
as securities mature, we purchase new bonds to keep the six annual
maturity categories in balance. With a steady average effective
maturity between 2.5 and 3.5 years, this Portfolio should not fall
as much in net asset value as a long-term bond portfolio when interest
rates rise. Of course, there can be no assurance that the Fund will
achieve its objective.
The Fund also paid dividends during the period totalling $0.34 and
$0.30 per share for Class A and Class B shares, respectively.
The Market
Since the Federal Reserve began raising short-term interest rates in
early February, bond investors have had a rough ride. The central bank
raised the federal funds rate (the interbank overnight loan rate) 125
basis points, in a move designed to quell inflation fears. Long-term
rates spiked slightly more--roughly 130 basis points so far this year.
Bond prices have generally fallen to compensate for higher yields
available now in the market,as well as for the risk. Yields will
move even higher if the Fed acts again this summer.
(CHART) Treasury Yield Curve 6/30/93 v. 6/30/94
While not exempt from this correction, short-term bonds have been less
affected than long-term bonds. Short-term corporate bonds were not as
resilient as governments because they entail greater credit risk.
Mortgages were another strong asset class (they have naturally
shorter average lives than government securities and higher coupons
that reflect greater prepayment risk). While U.S. government mortgage-backed
security prices have fallen this year, their high coupons help cushion price
losses and they have not dropped as much as other government bonds. In
addition, the prepayment fears that racked this market last year,
when rates were tumbling, have abated. Actual prepayments are down
about 70% this year.
The Strategy
In this environment, the Portfolio's 30-day Class A SEC yield
increased by about 134 basis points, to 5.19% in June from 3.85%
in January (At June 30, 1994, Class B SEC yield was 58 basis points
lower than Class A). That's a function of our laddered maturity format;
the Fund's current yield drifts upwards in tandem with rising interest
rates. Our total returns have been lower than those of the Lipper Short
Investment Grade Bond Average, however, because we maintain a 3.0 year
effective maturity range. Many short-intermediate term funds have
reduced their maturities much lower than that to ride out this
volatile market, so we pick up a little more in yield and lose a
little in total return.
-2-
<PAGE>
To take advantage of more resilient sectors, we looked for securities
to cushion performance from the adverse effects of higher interest rates.
In the government sector, for instance, we bought a limited number of
premium coupon mortgages, which benefitted from the slowdown in prepayments.
On the corporate side, we retained a high (63%) position in corporate
bonds, especially those in the finance and industrial sectors. These
sectors have been among the better performers in this turbulent
market and they should benefit from the moderately expanding economy.
We bought several new issues this year, including: Oryx Energy, Penske
Truck Leasing and Westinghouse Electric.
The Outlook
Economic growth in the U.S. remains moderate and inflation is still
under control, but nagging signs of strength in the leading economic
indicators are making the financial markets nervous about inflation.
In this environment, bonds may continue to suffer from rising interest
rates, especially if the Fed hikes rates again. The good news: bond fund
yields should be rising for several months, as higher rate levels are
ultimately incorporated into portfolios. But investors should expect
continued price losses until interest rates stabilize. Mortgages and
corporates can be a good defensive holding in this type of bond market
because the benefits of higher coupons may help offset price losses.
As always, we appreciate having you as a shareholder of the Prudential
Structured Maturity Fund--Income Portfolio, and remain committed to
managing it for your long-term benefit.
Sincerely,
Lawrence C. McQuade
President
Annamarie Carlucci
Portfolio Manager
-3-
<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 June 30, 1994 (Unaudited)
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description (Note 1)
<C> <C> <S> <C>
5-6 YEARS--16.4%
General Motors
Acceptance Corp.
(Financial Services)
Baa1 $ 1,700 8.40%, 10/15/99......... $ 1,741,786
United States Treasury
Note
40,300 6.00%, 10/15/99......... 38,568,309
------------
40,310,095
------------
4-5 YEARS--16.5%
Aristar, Inc.
(Financial Services)
Baa1 2,000 5.75%, 7/15/98.......... 1,897,580
Countrywide Funding
Corp.
(Financial Services)
A3 3,000 6.88%, 8/3/98........... 2,947,530
Crane Co.
(Industrial Services)
Baa3 3,000 7.25%, 6/15/99.......... 2,931,690
Federal Express Corp.
(Consumer Services)
Baa3 1,000 10.05%, 6/15/99......... 1,083,030
Green Tree Financial
Corp.
(Asset Backed)
(Average Life 5.0
Years)
Aa2 4,000 7.35%, 5/15/19.......... 3,953,750
Hospitality Franchise
Systems, Inc.
(Industrial Services)
Baa3 2,000 5.875%, 12/15/98........ 1,854,600
Korea Development Bank
(Banking)
A1 1,200 5.875%, 12/1/98......... 1,122,000
Penske Truck Leasing Co.
(Industrial Services)
Baa3 2,000 7.75%, 5/15/99.......... 1,986,180
United States Treasury
Note
$24,500 5.125%, 11/30/98........ $ 22,876,875
------------
40,653,235
------------
3-4 YEARS--16.4%
Associates Corp. of
North America
(Consumer Finance)
A1 200 8.375%, 1/15/98......... 206,574
Carnival Cruise Lines,
Inc.
(Leisure)
A3 2,500 5.75%, 3/15/98.......... 2,379,250
Coca-Cola Enterprises,
Inc.
(Beverages)
A3 1,000 6.50%, 11/15/97......... 981,750
Federal Home Loan
Mortgage Corp.
(Average Life 3.1 Years)
4,900 7.50%, 6/1/01........... 4,916,807
First Union Corp.
(Banking)
A2 2,000 6.75%, 1/15/98.......... 1,962,740
Ford Motor Credit Co.
(Consumer Finance)
A2 2,000 6.25%, 2/26/98.......... 1,932,400
General Motors
Acceptance Corp.
(Financial Services)
Baa1 2,000 7.50%, 11/4/97.......... 2,006,960
Goldman Sachs Group,
L.P.
(Financial Services)
A1 1,500 6.10%, 4/15/98.......... 1,428,120
Greyhound Financial
Corp.
(Industrial Finance)
Baa2 2,100 9.67%, 7/1/97........... 2,233,203
International Bank for
Reconstruction &
Development
(Financial Services)
Aaa 1,000 9.61%, 12/3/97.......... 1,081,120
</TABLE>
-4- See Notes to Financial Statements.
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND<PAGE>
INCOME PORTFOLIO
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description (Note 1)
<S> <C> <C> <C>
3-4 YEARS (cont'd.)
ITT Financial Corp.
(Financial Services)
Baa1 $ 4,225 8.85%, 7/10/97.......... $ 4,450,784
MBNA Master Card Trust
(Asset Backed)
(Average Life 3.0
Years)
Aaa 4,000 7.25%, 6/15/99.......... 4,032,480
Mellon Financial Co.
(Financial Services)
A3 1,000 6.50%, 12/1/97.......... 978,630
NationsBank Corp.
(Financial Services)
A2 1,500 6.625%, 1/15/98......... 1,471,380
Sears Roebuck & Co.
(Retail)
Baa1 2,000 9.25%, 8/1/97........... 2,107,920
Southern California
Edison Co.
(Utilities)
A1 2,000 5.875%, 2/1/98.......... 1,908,960
Tenneco Credit Corp.
(Financial Services)
Baa2 1,850 10.125%, 12/1/97........ 1,994,873
Texas Utilities Electric
Co.
(Utilities)
Baa2 3,000 5.875%, 4/1/98.......... 2,857,860
United States Treasury
Note
1,500 5.375%, 5/31/98......... 1,428,285
------------
40,360,096
------------
2-3 YEARS--16.4%
Associates Corp. of North America
(Consumer Finance)
A1 3,500 4.56%, 10/29/96......... 3,336,480
Bausch & Lomb, Inc.
(Consumer Products)
A2 3,500 6.80%, 12/12/96......... 3,505,355
Chrysler Financial Corp.
(Financial Services)
Baa2 1,600 5.39%, 8/27/96.......... 1,555,248
Comdisco, Inc.
(Leasing)
Baa2 $ 1,500 9.75%, 1/15/97.......... $ 1,587,135
Federal National
Mortgage Association
(Average Life 2.7 Years)
3,211 11.00%, 11/1/00......... 3,575,155
Grand Metropolitan
Investment Corp.
(Industrial Finance)
A2 2,195 8.125%, 8/15/96......... 2,252,970
International Lease
Finance Corp.
(Equipment Leasing)
A2 2,000 5.54%, 5/27/97.......... 1,921,200
Korea Development Bank
(Banking)
A1 1,200 7.71%, 5/5/97........... 1,199,256
Mitchell Energy &
Development Corp.
(Industrial Services)
Baa3 1,300 5.10%, 2/15/97.......... 1,231,789
Mobil Corp.
(Oil)
Aa2 2,000 6.50%, 12/17/96......... 1,989,200
New Zealand Government
(Foreign Government)
Aa2 4,300 8.25%, 9/25/96.......... 4,419,669
Norwest Financial, Inc.
(Consumer Finance)
A1 2,000 4.85%, 11/15/96......... 1,927,500
Potomac Capital
Investment Corp.
(Financial Services)
A3 3,500 6.19%, 4/28/97.......... 3,395,595
TransAmerica Finance
Corp.
(Financial Services)
A2 2,000 5.85%, 7/15/96.......... 1,967,920
</TABLE>
-5- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND INCOME PORTFOLIO
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description (Note 1)
<S> <C> <C> <C>
2-3 YEARS (cont'd.)
United States Treasury
Note
$ 6,000 8.50%, 5/15/97.......... $ 6,310,320
------------
40,174,792
------------
1-2 YEARS--16.6%
Ashland Oil, Inc.
(Oil)
Baa1 1,000 8.95%, 1/17/96.......... 1,034,700
Cemex S.A.
(Industrial Services)
NR 1,000 6.25%, 10/25/95......... 990,000
Centex Corp.
(Industrial Finance)
Baa2 4,000 9.05%, 5/1/96........... 4,128,840
Chrysler Financial Corp.
(Financial Services)
Baa3 1,300 5.26%, 7/6/95........... 1,287,234
CIT Group Holdings, Inc.
(Financial Services)
A1 1,000 8.75%, 2/15/96.......... 1,035,260
Georgia Power Co.
(Utilities)
A2 2,000 4.75%, 3/1/96........... 1,947,720
Hanson Overseas
(Diversified Industrial)
A1 2,000 5.50%, 1/15/96.......... 1,971,380
International Lease Finance Corp.
(Equipment Leasing)
A2 1,000 9.80%, 7/31/95.......... 1,038,530
Mellon Financial Co.
(Financial Services)
A3 1,500 6.125%, 11/15/95........ 1,498,725
Merrill Lynch & Co.,
Inc.
(Financial Services)
A1 1,500 5.50%, 7/28/95.......... 1,492,260
Norwest Financial, Inc.
(Consumer Finance)
Aa3 2,500 7.25%, 11/1/95.......... 2,533,750
Occidental Petroleum
Corp.
(Oil)
Baa3 3,750 5.37%, 9/11/95.......... 3,704,475
Oryx Energy Co.
(Oil)
Ba2 $ 2,500 6.05%, 2/1/96........... $ 2,417,500
Philip Morris Cos., Inc.
(Tobacco)
A2 1,000 9.20%, 11/2/95.......... 1,037,260
Sears Roebuck & Co.
(Retail)
Baa1 1,000 5.60%, 7/17/95.......... 994,670
Union Bank Finland, Ltd.
(Banking)
A3 1,500 5.25%, 6/15/96.......... 1,452,660
Union Pacific Corp.
(Oil)
A2 1,750 9.33%, 10/12/95......... 1,818,162
Virginia Electric &
Power Co.
(Utilities)
A2 1,350 9.70%, 5/6/96........... 1,422,725
Waste Management, Inc.
(Chemicals)
A1 2,700 4.875%, 7/1/95.......... 2,672,514
Westinghouse Credit
Corp.
(Financial Services)
Ba1 4,000 8.75%, 6/3/96........... 4,095,760
Westinghouse Electric
Corp.
(Consumer Finance)
Ba1 1,530 7.75%, 4/15/96.......... 1,540,083
Ba1 600 8.70%, 6/20/96.......... 613,638
------------
40,727,846
------------
WITHIN 1 YEAR--16.5%
Alcan Aluminum Ltd.
(Aluminum)
A2 1,000 9.40%, 6/1/95........... 1,029,380
American Express Credit
Corp.
(Financial Services)
A1 1,000 8.625%, 7/15/94......... 1,000,760
Bank of New York Master
Credit Card Trust
(Asset Backed)
(Average Life 0.2
Years)
Aaa 1,533 7.95%, 4/15/96.......... 1,538,117
</TABLE>
-6- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND INCOME PORTFOLIO
<TABLE>
<CAPTION>
Principal
Moody's Amount Value
Rating (000) Description (Note 1)
<S> <C> <C> <C>
WITHIN 1 YEAR (cont'd.)
Central Fidelity Bank
(Financial Services)
A2 $ 1,000 4.70%, 2/15/95.......... $ 995,440
Citicorp
(Financial Services)
A2 1,000 7.80%, 3/24/95.......... 1,014,120
Comdisco, Inc.
(Leasing)
Baa2 1,000 8.95%, 5/15/95.......... 1,022,150
Commonwealth Edison Co.
(Utilities)
Baa2 2,500 6.125%, 5/15/95......... 2,491,575
Federal Express Corp.
(Consumer Services)
Baa3 1,000 9.75%, 10/3/94.......... 1,009,320
Baa3 1,475 9.20%, 11/15/94......... 1,494,308
General Electric Capital
Corp.
(Industrial Finance)
Aaa 1,000 8.60%, 11/15/94......... 1,011,730
General Motors
Acceptance Corp.
(Financial Services)
Baa1 2,000 7.05%, 4/13/95.......... 2,015,780
Greyhound Financial
Corp.
(Industrial Finance)
Baa2 2,000 4.625%, 4/19/95......... 1,979,080
Hydro Quebec
(Utilities)
A1 2,000 4.25%, 9/15/94,
F.R.N................. 1,655,000
Morgan Stanley Group,
Inc.
(Financial Services)
A1 1,000 9.875%, 5/1/95.......... 1,031,170
Nordstrom Credit, Inc.
(Consumer Finance)
A2 2,000 8.60%, 7/15/94.......... 2,001,500
Pacific-Tel Capital
Resources Group
(Utilities)
A1 $ 2,000 8.95%, 6/20/95.......... $ 2,056,960
PaineWebber Group, Inc.
(Financial Services)
A3 3,000 9.625%, 5/1/95.......... 3,079,200
Petroleos Mexicanos
(Foreign Government)
Ba2 2,500 4.828%, 9/8/94,
F.R.N................. 2,462,500
Philip Morris Cos., Inc.
(Tobacco)
A2 2,000 8.70%, 8/1/94........... 2,004,760
Standard Credit Card
Trust
(Asset Backed)
(Average Life 0.8
Years)
A2 2,000 9.375%, 3/10/96......... 2,049,062
Texas Utilities Electric
Co.
(Utilities)
Baa2 1,500 9.625%, 9/30/94......... 1,513,695
Westinghouse Credit
Corp.
(Financial Services)
Ba1 1,000 8.73%, 8/8/94........... 1,002,320
Joint Repurchase
Agreement Account
5,031 4.26%, 7/1/94 (Note
5).................... 5,031,000
------------
40,488,927
------------
Total Investments--98.8%
(cost $248,318,122; Note
4).................... 242,714,991
Other assets in excess
of
liabilities--1.2%..... 2,883,209
------------
Net Assets--100%........ $245,598,200
------------
------------
</TABLE>
- ------------------
F.R.N.-Floating Rate Note.
NR-Not Rated.
-7- See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
INCOME PORTFOLIO
Statement of Assets and Liabilities
(Unaudited)
<TABLE>
<CAPTION>
Assets June 30, 1994
-------------
<S> <C>
Investments, at value (cost $248,318,122)...................................................... $ 242,714,991
Interest receivable............................................................................ 3,771,721
Receivable for Fund shares sold................................................................ 572,214
Deferred organization expenses and other assets................................................ 62,151
-------------
Total assets............................................................................... 247,121,077
-------------
Liabilities
Payable for Fund shares reacquired............................................................. 966,325
Dividends payable.............................................................................. 369,465
Distribution fee payable....................................................................... 105,910
Management fee payable......................................................................... 81,177
-------------
Total liabilities.......................................................................... 1,522,877
-------------
Net Assets..................................................................................... $ 245,598,200
-------------
-------------
Net assets were comprised of:
Common stock, at par......................................................................... $ 218,386
Paid-in capital in excess of par............................................................. 256,498,809
-------------
256,717,195
Accumulated net realized loss on investments................................................. (5,515,864)
Net unrealized depreciation on investments................................................... (5,603,131)
-------------
Net assets at June 30, 1994.................................................................. $ 245,598,200
-------------
-------------
Class A:
Net asset value and redemption price per share
($106,472,402 / 9,464,946 shares of common stock issued and outstanding)................... $11.25
Maximum sales charge (3.25% of offering price)............................................... .38
-------------
Maximum offering price to public............................................................. $11.63
-------------
-------------
Class B:
Net asset value, offering price and redemption price per share
($139,125,798 / 12,373,647 shares of common stock issued and outstanding).................. $11.24
-------------
-------------
</TABLE>
See Notes to Financial Statements.
-8-
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
INCOME PORTFOLIO
Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
Net Investment Income 1994
-----------
<S> <C>
Income
Interest................................ $ 8,160,089
-----------
Expenses
Management fee.......................... 484,827
Distribution fee--Class A............... 55,871
Distribution fee--Class B............... 555,352
Transfer agent's fees and expenses...... 143,000
Custodian's fees and expenses........... 75,000
Registration fees....................... 47,000
Reports to shareholders................. 35,000
Legal fees and expenses................. 26,000
Audit fees.............................. 17,000
Amortization of deferred organization
expenses................................ 16,000
Directors' fees......................... 15,000
Miscellaneous........................... 4,181
-----------
Total expenses........................ 1,474,231
-----------
Net investment income................. 6,685,858
-----------
Realized and Unrealized Loss on
Investments
Net realized loss on investments.......... (5,297,589)
Net change in unrealized appreciation
(depreciation) of investments........... (6,039,552)
-----------
Net loss on investments................... (11,337,141)
-----------
Net Decrease in Net Assets
Resulting from Operations................. $(4,651,283)
-----------
-----------
</TABLE>
PRUDENTIAL STRUCTURED MATURITY FUND
INCOME PORTFOLIO
Statement of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Increase (Decrease) June 30, December 31,
in Net Assets 1994 1993
------------- -------------
<S> <C> <C>
Operations
Net investment income..... $ 6,685,858 $ 10,305,665
Net realized gain (loss)
on investments.......... (5,297,589) 1,676,837
Net change in unrealized
appreciation
(depreciation) of
investments............. (6,039,552) (1,001,998)
------------- -------------
Net increase (decrease) in
net assets resulting
from operations......... (4,651,283) 10,980,504
------------- -------------
Dividends and distributions
(Note 1)
Dividends to shareholders
from net investment
income
Class A................. (3,303,568) (6,786,531)
Class B................. (3,382,290) (3,519,134)
------------- -------------
(6,685,858) (10,305,665)
------------- -------------
Distributions to
shareholders from net
realized capital gains
Class A................. -- (1,295,162)
Class B................. -- (1,027,120)
------------- -------------
-- (2,322,282)
------------- -------------
Fund share transactions
(Note 5)
Net proceeds from shares
subscribed.............. 49,621,731 155,140,884
Net asset value of shares
issued to shareholders
in reinvestment of
dividends and
distributions........... 4,166,917 8,391,229
Cost of shares
reacquired.............. (39,608,887) (40,937,219)
------------- -------------
Net increase in net assets
from Fund share
transactions............ 14,179,761 122,594,894
------------- -------------
Total increase.............. 2,842,620 120,947,451
Net Assets
Beginning of period......... 242,755,580 121,808,129
------------- -------------
End of period............... $ 245,598,200 $ 242,755,580
------------- -------------
------------- -------------
</TABLE>
See Notes to Financial Statements.
-9-
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
INCOME PORTFOLIO
Notes to Financial Statements
(Unaudited)
Prudential-Bache Structured Maturity Fund, Inc., doing business as 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
were 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 or designated subcustodians, as the case may be under triparty
repurchase agreements, 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 Portfolio 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 from net investment income. Distributions from 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 ratably 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
-10-
<PAGE>
<PAGE>
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.
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 six months ended June 30, 1994.
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 $236,600 in
front-end sales charges resulting from sales of Class A shares during the six
months ended June 30, 1994. 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 six months
ended June 30, 1994, it received approximately $159,400 in contingent deferred
sales charges imposed upon certain redemptions by investors. PSI, as
distributor, has also advised the Portfolio that at June 30, 1994, the amount of
distribution expenses incurred by PSI and not yet reimbursed by the Fund or
recovered through contingent deferred sales charges approximated $2,140,100.
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 six months ended June 30, 1994, the Portfolio incurred fees of
approximately $126,000 for the services of PMFS. As of June 30, 1994,
approximately $22,000 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 six months ended
June 30, 1994 were $162,128,136 and $147,410,771, respectively.
The federal income tax basis of the Portfolio's investments at June 30, 1994
was substantially the same as for financial reporting purposes, and accordingly,
net unrealized depreciation for federal income tax purposes was $5,603,131
(gross unrealized appreciation--$240,799; gross unrealized
depreciation--$5,843,930).
The Portfolio elected to treat approximately $249,000 of net capital losses
incurred during the two month period ended December 31, 1993 as having occurred
in the current year.
-11-
<PAGE>
<PAGE>
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 or federal agency obligations. As of June 30, 1994, the
Portfolio had a 0.53% undivided interest in the repurchase agreements in the
joint account. The undivided interest for the Portfolio represented $5,031,000
in principal amount. As of such date, each repurchase agreement in the joint
account and the collateral therefor was as follows:
Goldman Sachs & Co., 4.30%, in the principal amount of $300,000,000,
repurchase price $300,035,833, due 7/1/94. The value of the collateral including
accrued interest is $306,000,136.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 4.15%, in the principal amount
of $232,000,000, repurchase price $232,026,744, due 7/1/94. The value of the
collateral including accrued interest is $236,645,037.
Nomura Securities International, Inc., 4.25%, in the principal amount of
$275,000,000, repurchase price $275,032,465, due 7/1/94. The value of the
collateral including accrued interest is $280,500,174.
Smith Barney, Inc., 4.35%, in the principal amount of $150,000,000,
repurchase price $150,018,125, due 7/1/94. The value of the collateral including
accrued interest is $153,000,285.
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 21,838,593 shares issued and outstanding
at June 30, 1994, 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>
Six months ended June 30, 1994:
Shares sold..................... 942,235 $ 10,877,624
Shares issued in reinvestment of
dividends..................... 170,914 1,965,067
Shares reacquired............... (1,786,605) (20,646,129)
---------- ------------
Decrease in shares
outstanding................... (673,456) $ (7,803,438)
---------- ------------
---------- ------------
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
---------- ------------
---------- ------------
Class B
- --------------------------------
Six months ended June 30, 1994:
Shares sold..................... 3,362,571 $ 38,744,107
Shares issued in reinvestment of
dividends..................... 191,769 2,201,850
Shares reacquired............... (1,645,993) (18,962,758)
---------- ------------
Increase in shares
outstanding................... 1,908,347 $ 21,983,199
---------- ------------
---------- ------------
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
---------- ------------
---------- ------------
</TABLE>
Note 7. Subsequent On July 19, 1994, a meeting
Event of the shareholders of the
Fund was held at which time the shareholders
approved among other things, a) amendments to the Fund's Articles of
Incorporation to permit a conversion feature for Class B shares to Class A
shares after seven years, b) amendments to the Class A and Class B Distribution
Plans, under which the Distribution Plans become compensation rather than
reimbursement plans, c) elimination or amendment of certain investment
restrictions and d) a change in the Fund's name from Prudential-Bache Structured
Maturity Fund, Inc. to Prudential Structured Maturity Fund, Inc. These
amendments were effective August 1, 1994.
-12-
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
INCOME PORTFOLIO
Financial Highlights
(Unaudited)
<TABLE>
<CAPTION>
Class A Class B
---------------------------------------------------------------------- ----------------------------------------
September 1, December 9,
Six Months 1989* Six Months 1992(D)(D)
PER SHARE Ended Years ended December 31, through Ended Year ended through
OPERATING June 30, ----------------------------------------- December 31, June 30, December 31, December 31,
PERFORMANCE: 1994 1993 1992 1991 1990 1989 1994 1993 1992
---------- -------- -------- -------- -------- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset
value,
beginning of
period...... $ 11.78 $ 11.79 $ 12.13 $ 11.67 $ 11.63 $ 11.61 $ 11.78 $ 11.79 $ 11.79
---------- -------- -------- -------- -------- ------------- ---------- ------------ ------------
Income from
investment
operations:
Net investment
income...... .34 .71 .86(D) .93(D) 1.00(D) .35(D) .30 .62 .04(D)
Net realized
and
unrealized
gain (loss)
on
investment
transactions... (.53) .12 (.08) .56 .04 .03 (.54) .12 --
---------- -------- -------- -------- -------- ------------- ---------- ------------ ------------
Total from
investment
operations... (.19) .83 .78 1.49 1.04 .38 (.24) .74 .04
---------- -------- -------- -------- -------- ------------- ---------- ------------ ------------
Less
distributions:
Dividends from
net
investment
income...... (.34) (.71) (.86) (.93) (1.00) (.35) (.30) (.62) (.04)
Distributions
from net
realized
gains....... -- (.13) (.26) (.10) -- (.01) -- (.13) --
---------- -------- -------- -------- -------- ------------- ---------- ------------ ------------
Total
distributions... (.34) (.84) (1.12) (1.03) (1.00) (.36) (.30) (.75) (.04)
---------- -------- -------- -------- -------- ------------- ---------- ------------ ------------
Net asset
value, end
of period... $ 11.25 $ 11.78 $ 11.79 $ 12.13 $ 11.67 $ 11.63 $ 11.24 $ 11.78 $ 11.79
---------- -------- -------- -------- -------- ------------- ---------- ------------ ------------
---------- -------- -------- -------- -------- ------------- ---------- ------------ ------------
TOTAL
RETURN#:.... (1.70)% 7.19% 6.67% 13.35% 9.40% 3.30% (2.13)% 6.38% .32%
RATIOS/SUPPLEMENTAL
DATA:
Net assets,
end of
period
(000)....... $ 106,472 $119,449 $109,828 $109,997 $113,125 $98,414 $ 139,126 $123,306 $ 11,981
Average net
assets
(000)....... $ 112,668 $114,728 $107,937 $113,010 $107,276 $89,176 $ 131,754 $ 69,314 $ 5,474
Ratios to
average net
assets:
Expenses,
including
distribution
fees...... .81%** .80% .70(D) .37(D) .13(D) 0%**(D) 1.56%** 1.55% 1.67%**(D)
Expenses,
excluding
distribution
fees...... .71%** .70% .60(D) .27(D) .10(D) 0%**(D) .71%** .70% .82%**(D)
Net
investment
income.... 5.92%** 5.92% 7.15(D) 7.89(D) 8.67(D) 8.41%**(D) 5.17%** 5.08% 6.31%**(D)
Portfolio
turnover.... 71% 137% 91% 117% 46% 69% 71% 137% 91%
</TABLE>
- ---------------
* Commencement of investment operations.
** Annualized.
(D) Net of expense subsidy and/or fee waiver.
(D)(D) 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 a full year are not annualized.
See Notes to Financial Statements.
-13-
<PAGE>
<PAGE>
Directors
Robert R. Fortune
Delayne Dedrick Gold
Harry A. Jacobs, Jr.
Lawrence C. McQuade
Thomas A. Owens, Jr.
Richard A. Redeker
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
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll free (800) 225-1852, Collect (908) 417-7555
The accompanying financial statements as of June 30, 1994 were not audited
and, accordingly, no opinion is expressed on them.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
743924102 MF140E2
743924201 Prudential Mutual Fund Management (LOGO) Cat.#444111F
