(ICON)
Prudential
Structured
Maturity Fund, Inc.
Income Portfolio
SEMI
ANNUAL
REPORT
June 30, 1995
Prudential Mutual Funds
Building Your Future
On Our StrengthSM (LOGO)
<PAGE>
Prudential Structured Maturity Fund, Inc.
Income Portfolio
Performance At A Glance.
Investors have enjoyed healthy gains from the short-term bond market this year.
Interest rates fell and bond prices rose as investors watched the economic
recovery lose steam following a year of rising interest rates. In the past six
months, we'er pleased to announce that the Prudential Structured Maturity
Fund--Income Portfolio provided higher total returns than the average
short-term (maturities of 5 years or less) investment grade debt fund, as
reported by Lipper Analytical Services Inc.
<TABLE>
<CAPTION>
Cumulative Total Returns1 As of 6/30/95
Six One Five Since
Months Year Years Inception2
<S> <C> <C> <C> <C>
Class A 7.7% 8.4% 45.9%# 55.9%#
Class B 7.3 7.8 N/A 12.5
Class C 7.3 N/A N/A 6.6
*Lipper S-T Inv. Grade
Debt Avg 6.4 7.2 41.4 49.9
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns1 As of 6/30/95
One Five Since
Year Years Inception2
<S> <C> <C> <C>
Class A 4.8% 7.1%# 7.3%#
Class B 4.8 N/A 4.4
Class C N/A N/A 5.6
</TABLE>
<TABLE>
<CAPTION>
Your Six-Month 30-Day
Dividend Dividend/Share SEC-Yield
As of 6/30/95
<S> <C> <C>
Class A $0.35 5.83%
Class B $0.32 5.37
Class C $0.32 5.37
</TABLE>
Past performance is not a guarantee of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
1Source: Prudential Mutual Fund Management, Inc. and Lipper Analytical
Services, Inc. The cumulative total returns do not take into account sales
charges. The average annual total returns do take into account applicable 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 (CDSC) of 3%, 2%, 1% and 1%, for four years. Class C shares have a 1%
CDSC for one year. Class B shares will automatically convert to Class A shares
on a quarterly basis, after approximately five years.
2Inception dates: 9/1/89 Class A; 12/9/92 Class B; 8/1/94 Class C.
*These are the average returns of 121 funds in the short-term investment grade
debt category for six months; 102 funds for one year; 11 funds for five years;
and 10 since inception of the Class A shares, as determined by Lipper
Analytical Services, Inc.
#Without management fee waiver and/or expense subsidization, the Fund's total
return would have been slightly lower.
GRAPH
Source: Lipper Analytical Services, Inc. Financial markets change, so a mutual
fund's past performance should never be used to predict future results. The
risks to each of the investments listed above are different -- we provide
12-month total returns for several Lipper mutual fund categories to show you
that reaching for higher yields means tolerating more risk. The greater the
risk, the larger the potential reward or loss. In addition, we've added
historical 20-year average annual returns to show that 1995's returns (so far)
are higher than normal. These returns assume the reinvestment of dividends.
Stock funds will fluctuate a great deal. Smaller capitalization stocks offer
greater potential for long term growth but may be more volatile than larger
capitalization stocks. Investors receive higher historical total returns from
stocks than from most other investments.
Bond funds provide more income than stock funds, which can help smooth out
their total returns year by year. But their prices still fluctuate (sometimes
a
good deal) and their returns are historically lower than those of stock funds.
Sector or specialty stock funds usually entail the greatest risks because they
are not widely diversified. They are designed for sophisticated investors who
can tolerate additional risk in exchange for higher potential rewards or
losses.
Money market funds attempt to preserve a constant share value; they don't
fluctuate much in price but their returns are generally among the lowest of the
major investment categories.
<PAGE>
Tony Rodriguez, Fund Manager
(PICTURE)
Portfolio
Manager's Report
The Prudential Structured Maturity Fund--Income Portfolio has a unique
"laddered" maturity format: assets are allocated equally among six "rungs,"
or maturities, running from one to six years.
Overview
We buy corporate bonds, government bonds and U.S.-denominated foreign bonds.
When new money comes into the Portfolio or as securities mature, we purchase
enough new bonds to keep the six weightings in balance.
1. Strategy Session.
What We See Now.
The Portfolio's laddered structure provides a disciplined framework for our
overall investment strategy -- to keep maturities in the short- to
intermediate-term range (currently about 3.0 years effective maturity for the
whole Portfolio) and to use corporate bonds to increase yield. In today's
economy, characterized by moderate growth and low inflation, we are especially
concentrating on two areas:
- In the short-term portion of the portfolio, we purchase mainly investment-
grade corporate bonds. This helps maximize income when interest rates are
falling (and bond prices are rising). Corporate bonds are also slightly more
insulated from price decreases when interest rates rise, compared to more-
sensitive Treasury notes. In addition, short-term paper is less vulnerable to
credit risk than longer-term securities.
- For our intermediate-term holdings, we purchase a mix of corporate and U.S.
government bonds. Government bonds, especially Treasury securities, help
improve total return when interest rates are falling because their prices rise
quickly, in response. But we selectively add corporate bonds in this maturity
range, to support the Portfolio's income stream.
GRAPH
<PAGE>
2. What Went Well.
Plugging Into Cable.
We purchased cable television and media companies, currently 4.8% of net
assets, which helped performance in the past six months. The reason? The market
was shunning consumer companies normally sensitive to the economic cycle,
permitting us to buy bonds from companies we felt had been unfairly valued. We
especially liked companies with positive restructuring trends -- Newscorp.
produced gains following the announcement of a cash infusion from MCI and Time
Warner's stock rose on news the company would reduce its debt load.
Autos Drive
Performance.
Automobile manufacturers (5.5% of net assets) have also issued bonds we found
attractive. Many of these companies are already reaping the benefits of
restructuring their operations to improve quality and efficiency. Two holdings
that helped performance included American giants GMAC and Chrysler.
Up the Ladder.
Our laddered maturity format forces us to maintain a longer effective maturity
than most other short-term corporate bond funds, which means our holdings were
more sensitive to interest rate changes. In a falling rate environment, that
helps us pick up bigger price gains; of course, our longer maturity compared to
our peers means we also tend to suffer bigger price decreases when rates rise.
3. And Not So Well.
Hurt by the Peso.About 1.4% of the Portfolio is invested in Mexican securities.
When the peso crashed six months ago, we suffered losses. These securities have
recovered dramatically since the International Monetary Fund agreed to bail out
some Mexican bond issuers, and we currently plan to retain both of our bonds
(oil producer Petroleos Mexicanos and cement producer Cemex).
4. Looking Ahead.
In 1995, bond market performance will be heavily impacted by economic reports--
but after weighing the risks in various markets, we believe bonds are the asset
class of choice for the rest of the year. Certainly, however, they won't match
the stellar returns of the first half any time soon. Investors will probably
"clip coupons," earning at least that--and possibly a bit more in price
appreciation. As investor sentiment wanes and the rally slows, prices will
probably become volatile. We will monitor the various market sectors carefully
and attempt to adjust the portfolio to maintain competitive returns.
Five Largest Holdings.*
15.9% 5-Year U.S. Treasury
5.0% Kansallis -Osake-Pankki Bank
4.9% Capital One Bank
4.8% New America Holdings
4.3% Enterprise Rent A Car
*Expressed as a percentage of total net assets.
1
<PAGE>
President's Letter
(PICTURE)
August 10, 1995
Dear Shareholder:
You've probably noticed your shareholder report looks different this month.
We've designed it to provide clear, concise and forthright information about
your investment, its performance, risks and potential rewards. And, from time
to time, I'll share some thoughts with you about the industry, mutual fund
trends and how we're responding to them at Prudential Mutual Funds.
On The Hill
One recent trend we like is part of the "Contract with America." It's called
the American Dream Savings Account and it was approved by the House of
Representatives earlier in the year. The Senate will now take up the proposal,
which would improve the traditional Individual Retirement Account program by
allowing higher non-working spouse contributions. The proposed law would also
allow tax-free and penalty-free withdrawals from the account before age 59 1/2,
for certain expenses. Prudential Mutual Funds supports the proposal and we urge
you to share your opinion about it with your Senator. You can reach your
Senator's office by calling 202-224-3121.
In Closing
One final note: if you're a Class B shareholder, you'll begin noticing a change
on your statements once you've held your shares for five years. At that time
they will automatically begin to convert to Class A shares on a quarterly
basis. Since Class A shares carry lower annual distribution charges than Class
B shares, your total returns will automatically rise after the conversion.
Conversions started earlier this year and will occur each calendar quarter --
beginning in December, 1995, they'll take place every March, June, September
and December. I hope you'll find this information useful as you work with your
financial advisor or registered representative to develop your personal
investment plan. Thank you for choosing Prudential Mutual Funds for your mutual
fund investment.
Sincerely,
Richard A. Redeker
President
2
<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.
--------------------------------------------------------------------------------
Portfolio of Investments as PRUDENTIAL STRUCTURED MATURITY FUND
of June 30, 1995 (Unaudited) INCOME PORTFOLIO
------------------------------------------------------------
------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
------------------------------------------------------------
<C> <C> <S> <C>
5-6 YEARS--15.9%
$ 31,000 United States Treasury
Note
8.75%, 8/15/00 $ 34,720,000
------------------------------------------------------------
4-5 YEARS--16.6%
Ba1 2,000 Banco de Comercio
(Banking)
8.625%, 6/2/00 2,017,500
Ba1 3,000 Columbia Republic
(Foreign Government)
8.75%, 10/6/99 3,105,000
General Motors Acceptance
Corp.
(Financial Services)
A3 1,700 8.40%, 10/15/99 1,806,131
NR 5,000 7.875%, 3/15/00 5,230,600
A1 1,200 Korea Development Bank
(Banking)
8.09%, 10/1/99 1,252,632
News America Holdings,
Inc.
(Media)
Ba1 2,000 9.125%, 10/15/99 2,169,300
Ba1 5,000 7.50%, 3/1/00 5,119,500
Ba1 3,000 7.45%, 6/1/00 3,058,470
United States Treasury
Notes
7,000 7.75%, 12/31/99 7,473,620
4,700 6.75%, 4/30/00 4,842,457
-------------
36,075,210
------------------------------------------------------------
3-4 YEARS--15.6%
A3 2,000 Aristar, Inc.
(Financial Services)
5.75%, 7/15/98 1,965,120
Baa3 8,000 Capital One Bank
(Banking)
6.74%, 5/31/99 8,004,880
Baa3 $ 3,000 Crane Co.
(Industrial Services)
7.25%, 6/15/99 $ 3,044,160
Baa3 1,000 Federal Express Corp.
(Consumer Services)
10.05%, 6/15/99 1,104,330
A3 10,000 Kansallis-Osake-Pankki
Bank (Banking)
9.75%, 12/15/98 10,910,800
9,250 United States Treasury
Note
5.00%, 1/31/99 8,969,632
-------------
33,998,922
------------------------------------------------------------
2-3 YEARS--17.6%
Aa3 200 Associates Corp. of North
America
(Consumer Finance)
8.375%, 1/15/98 209,034
NR 3,000 Banco Ganadero S.A.
(Banking)
9.75%, 8/26/97 3,003,750
A2 2,000 Bank One Credit Card Trust
(Asset Backed)
(Average Life 2.6 years)
7.75%, 12/15/99 2,066,875
Baa3 9,000 Enterprise Rent A Car
Finance Co.
(Financial Services)
7.875%, 3/15/98 9,292,500
Baa1 2,000 General Motors Acceptance
Corp.
(Financial Services)
7.50%, 11/4/97 2,046,260
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements. 3 -----
<PAGE>
Portfolio of Investments as PRUDENTIAL STRUCTURED MATURITY FUND
of June 30, 1995 (Unaudited) INCOME PORTFOLIO
------------------------------------------------------------
------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
<C> <C> <S> <C>
------------------------------------------------------------
2-3 YEARS (cont'd)
Baa2 $ 2,100 Greyhound Financial Corp.
(Industrial Finance)
9.67%, 7/1/97 $ 2,224,236
Baa1 4,225 ITT Financial Corp.
(Financial Services)
8.85%, 7/10/97 4,929,139
Aaa 4,000 MBNA Master Card Trust
(Asset Backed)
(Average Life 2.2 years)
7.25%, 6/15/99 4,058,720
A2 1,000 Mellon Financial Co.
(Financial Services)
6.50%, 12/1/97 1,004,350
A3 2,000 Southern California Edison
Co.
(Utilities)
5.875%, 2/1/98 1,973,160
Baa2 3,000 Texas Utilities Electric
Co.
(Utilities)
5.875%, 4/1/98 2,942,280
Baa2 4,200 Transco Energy Company
(Utilities)
9.125%, 5/1/98 4,468,716
-------------
38,219,020
------------------------------------------------------------
1-2 YEARS--15.3%
A1 3,500 Associates Corp. of North
America
(Consumer Finance)
4.56%, 10/29/96 3,436,090
Baa3 2,500 Capital One Bank
(Banking)
8.625%, 1/15/97 2,576,700
Baa2 1,600 Chrysler Financial Corp.
(Financial Services)
5.39%, 8/27/96 1,585,552
Baa2 1,500 Comdisco, Inc.
(Leasing)
9.75%, 1/15/97 1,573,050
A2 $ 2,195 Grand Metropolitan
Investment Corp.
(Industrial Finance)
8.125%, 8/15/96 $ 2,239,361
A1 1,200 Korea Development Bank
(Banking)
7.71%, 5/5/97 1,227,840
Baa3 1,300 Mitchell Energy &
Development Corp.
(Industrial Services)
5.10%, 2/15/97 1,270,763
Aa2 4,300 New Zealand Government
(Foreign Government)
8.25%, 9/25/96 4,391,246
A1 2,000 Norwest Financial, Inc.
(Consumer Finance)
4.85%, 11/15/96 1,963,760
A3 3,500 Potomac Capital Investment
Corp.
(Financial Services)
6.19%, 4/28/97 3,474,205
A2 2,000 TransAmerica Finance Corp.
(Financial Services)
5.85%, 7/15/96 1,991,780
7,500 United States Treasury
Note
6.25%, 8/31/96 7,535,156
-------------
33,265,503
------------------------------------------------------------
WITHIN 1 YEAR--17.8%
Baa1 1,000 Ashland Oil, Inc.
(Oil)
8.95%, 1/17/96 1,014,800
NR 1,000 Cemex S.A.
(Industrial Services)
6.25%, 10/25/95 1,000,000
Baa2 4,000 Centex Corp.
(Industrial Finance)
9.05%, 5/1/96 4,069,640
--------------------------------------------------------------------------------
----- 4 See Notes to Financial Statements.
<PAGE>
<PAGE>
Portfolio of Investments as PRUDENTIAL STRUCTURED MATURITY FUND
of June 30, 1995 (Unaudited) INCOME PORTFOLIO
------------------------------------------------------------
------------------------------------------------------------
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
------------------------------------------------------------
<C> <C> <S> <C>
WITHIN 1 YEAR (cont'd.)
Baa3 $ 4,000 Central Maine Power Co.
(Utilities)
6.98%, 8/3/95 $ 4,000,000
Baa3 1,300 Chrysler Financial Corp.
(Financial Services)
5.26%, 7/6/95 1,300,000
Aa3 1,000 CIT Group Holdings, Inc.
(Financial Services)
8.75%, 2/15/96 1,015,250
A2 1,000 International Lease
Finance Corp.
(Leasing)
9.80%, 7/31/95 1,002,400
Ba3 2,500 Oryx Energy Co.
(Oil)
6.05%, 2/1/96 2,484,250
Ba2 2,500 Petroleos Mexicanos
(Oil)
(Average Life 0.1 years)
6.9375%, 3/8/99, F.R.N. 2,050,000
A2 1,000 Philip Morris Cos., Inc.
(Tobacco)
9.20%, 11/2/95 1,009,130
Baa1 8,500 Salomon, Inc.
(Financial Services)
6.8125%, 2/28/96 8,492,520
A2 1,500 Union Bank of Finland,
Ltd. (Banking)
5.25%, 6/15/96 1,480,425
A2 1,350 Virginia Electric & Power
Co.
(Utilities)
9.70%, 5/6/96 1,389,447
Ba1 $ 4,000 Westinghouse Credit Corp.
(Financial Services)
8.75%, 6/3/96 $ 4,070,480
Westinghouse Electric
Corp. (Consumer Finance)
Ba1 1,530 7.75%, 4/15/96 1,539,379
Ba1 600 8.70%, 6/20/96 611,010
2,232 Joint Repurchase Agreement
Account,
6.12%, 7/3/95, (Note 5) 2,232,000
-------------
38,760,731
------------------------------------------------------------
Total Investments--98.8%
(cost $212,994,525; Note
4) 215,039,386
Other assets in excess of
liabilities--1.2% 2,677,425
-------------
Net Assets--100% $ 217,716,811
-------------
-------------
------------------
F.R.N.-Floating Rate Note. The maturity date of such securities is
considered to be the later of the next date on which the security can
be redeemed at par or the next date on which the rate of interest is
adjusted.
NR-Not Rated.
The industry classification of portfolio holdings and other net
assets shown as a percentage of net assets as of June 30, 1995 were
as follows:
U.S. Treasury Notes................................... 29.2%
Financial Services.................................... 22.1
Banking............................................... 14.0
Utilities............................................. 6.8
Media................................................. 4.8
Industrial Finance.................................... 3.9
Consumer Finance...................................... 3.6
Foreign Government.................................... 3.3
Asset Backed.......................................... 2.8
Oil................................................... 2.7
Industrial Services................................... 2.4
Leasing............................................... 1.2
Repurchase Agreement.................................. 1.0
Consumer Services..................................... 0.5
Tobacco............................................... 0.5
Other assets in excess of liabilities................. 1.2
-----
100.0%
-----
-----
--------------------------------------------------------------------------------
See Notes to Financial Statements. 5 -----
<PAGE>
<PAGE>
Statement of Assets and PRUDENTIAL STRUCTURED MATURITY FUND
Liabilities (Unaudited) INCOME PORTFOLIO
--------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Assets
June 30, 1995
-------------
<S>
<C>
Investments, at value (cost
$212,994,525)...................................................................
$ 215,039,386
Cash.........................................................................
............................... 55,900
Receivable for investments
sold.........................................................................
.... 7,630,489
Interest
receivable...................................................................
...................... 3,913,464
Receivable for Fund shares
sold.........................................................................
.... 184,905
Deferred expenses and other
assets..........................................................................
5,054
-------------
Total
assets.......................................................................
...................... 226,829,198
-------------
Liabilities
Payable for investments
purchased....................................................................
....... 7,698,200
Payable for Fund shares
reacquired...................................................................
....... 763,222
Dividends
payable......................................................................
..................... 380,644
Accrued
expenses.....................................................................
....................... 112,197
Distribution fee
payable......................................................................
.............. 86,341
Management fee
payable......................................................................
................ 71,783
-------------
Total
liabilities..................................................................
...................... 9,112,387
-------------
Net
Assets.......................................................................
........................... $ 217,716,811
-------------
-------------
Net assets were comprised of:
Common stock, at
par..........................................................................
........... $ 190,108
Paid-in capital in excess of
par.........................................................................
225,133,221
-------------
225,323,329
Accumulated net realized loss on
investments.............................................................
(9,651,379)
Net unrealized appreciation on
investments...............................................................
2,044,861
-------------
Net assets at June 30,
1995.........................................................................
........ $ 217,716,811
-------------
-------------
Class A:
Net asset value and redemption price per share
($89,979,323 / 7,855,236 shares of common stock issued and
outstanding)............................... $11.45
Maximum sales charge (3.25% of offering
price)...........................................................
.38
Maximum offering price to
public.........................................................................
$11.83
Class B:
Net asset value, offering price and redemption price per share
($126,936,113 / 11,085,593 shares of common stock issued and
outstanding)............................. $11.45
Class C:
Net asset value, offering price and redemption price per share
($801,375 / 69,986 shares of common stock issued and
outstanding)..................................... $11.45
</TABLE>
--------------------------------------------------------------------------------
----- 6 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
INCOME PORTFOLIO
Statement of Operations (Unaudited)
------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income June 30, 1995
-------------
<S> <C>
Income
Interest $ 8,151,358
-------------
Expenses
Distribution fee--Class A................... 45,311
Distribution fee--Class B................... 471,158
Distribution fee--Class C................... 2,223
Management fee.............................. 433,714
Transfer agent's fees and expenses.......... 142,000
Reports to shareholders..................... 77,000
Custodian's fees and expenses............... 53,000
Registration fees........................... 53,000
Legal fees.................................. 28,000
Audit fee................................... 17,000
Directors' fees............................. 15,000
Miscellaneous............................... 7,146
-------------
Total expenses........................... 1,344,552
-------------
Net investment income.......................... 6,806,806
-------------
Realized and Unrealized Gain (Loss)
on Investments
Net realized loss on investment transactions... (769,048)
Net change in unrealized appreciation of
investments................................. 10,164,903
-------------
Net gain on investments........................ 9,395,855
-------------
Net Increase in Net Assets
Resulting from Operations...................... $ 16,202,661
-------------
-------------
</TABLE>
PRUDENTIAL STRUCTURED MATURITY FUND
INCOME PORTFOLIO
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Six Months Year Ended
Ended December 31,
Increase (Decrease) June 30,
in Net Assets 1995 1994
------------ ------------
<S> <C> <C>
Operations
Net investment income.......... $ 6,806,806 $ 13,261,561
Net realized loss on investment
transactions................ (769,048) (8,461,299)
Net change in unrealized
appreciation (depreciation)
on investments.............. 10,164,903 (8,556,463)
------------ ------------
Net increase (decrease) in net
assets resulting from
operations.................. 16,202,661 (3,756,201)
------------ ------------
Dividends and distributions (Note
1)
Dividends to shareholders from
net investment income
Class A..................... (3,016,121) (6,272,073)
Class B..................... (3,772,745) (6,985,271)
Class C..................... (17,940) (4,217)
------------ ------------
(6,806,806) (13,261,561)
------------ ------------
Distributions to shareholders
in excess of net investment
income
Class A..................... -- (83,531)
Class B..................... -- (118,895)
Class C..................... -- (331)
------------ ------------
-- (202,757)
------------ ------------
Fund share transactions
(Net of share conversions)
(Note 6)
Net proceeds from shares
subscribed.................. 17,323,452 71,130,664
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions........... 4,198,990 8,878,646
Cost of shares reacquired...... (35,510,387) (83,235,470)
------------ ------------
Net decrease in net assets from
Fund share transactions..... (13,987,945) (3,226,160)
------------ ------------
Total decrease.................... (4,592,090) (20,446,679)
Net Assets
Beginning of period............... 222,308,901 242,755,580
------------ ------------
End of period..................... $217,716,811 $222,308,901
------------ ------------
------------ ------------
</TABLE>
--------------------------------------------------------------------------------
See Notes to Financial Statements. 7 -----
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
Notes to Financial Statements (Unaudited) INCOME PORTFOLIO
--------------------------------------------------------------------------------
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 Policies
The following is a summary of significant accounting policies 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.
------------------------------------------------------------
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.
The Fund has distribution agreements with Prudential Mutual Fund Distributors,
Inc. (``PMFD''), which acts as the distributor of the Class A shares of the
Fund, and with Prudential Securities Incorporated (``PSI''), which acts as
distributor of the Class B and Class C shares of the Fund (collectively the
``Distributors''). The Fund compensates the Distributors
--------------------------------------------------------------------------------
----- 8
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
Notes to Financial Statements (Unaudited) INCOME PORTFOLIO
--------------------------------------------------------------------------------
for distributing and servicing the Fund's Class A, Class B and Class C shares,
pursuant to plans of distribution (the ``Class A, B and C Plans''), regardless
of expenses actually incurred by them. The distribution fees are accrued daily
and payable monthly.
Pursuant to the Class A, B and C Plans, the Fund compensates the Distributors
for distribution-related activities at an annual rate of up to .30 of 1%, 1% and
1%, of the average daily net assets of the Class A, B and C shares,
respectively. Such expenses under the Plans were .10 of 1%, .75 of 1% and .75
of
1% of the average daily net assets of the Class A, B and C shares, respectively
for the six months ended June 30, 1995.
PMFD has advised the Portfolio that it has received approximately $40,500 in
front-end sales charges resulting from sales of Class A shares during the six
months ended June 30, 1995. From these fees, PMFD paid such sales charges to
dealers (PSI and Prusec) which in turn paid commissions to salespersons.
PSI advised the Portfolio that for the six months ended June 30, 1995, it
received approximately $183,800 in contingent deferred sales charges imposed
upon certain redemptions by Class B and Class C shareholders.
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 Transactions with Affiliates
Prudential Mutual Fund Services, Inc. (``PMFS''), a wholly-owned subsidiary of
PMF, serves as the Portfolio's transfer agent. During the six months ended June
30, 1995, the Portfolio incurred fees of approximately $128,000 for the services
of PMFS. As of June 30, 1995, approximately $21,000 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 Securities
Purchases and sales of portfolio securities, excluding short-term investments,
for the six months ended June 30, 1995 were $184,825,302 and $199,185,859,
respectively.
The federal income tax basis of the Portfolio's investments at June 30, 1995 was
$213,009,575, and accordingly, net unrealized appreciation for federal income
tax purposes was $2,029,811 (gross unrealized appreciation--$4,381,738; gross
unrealized depreciation--$2,351,927).
The Portfolio elected to treat approximately $758,200 of net capital losses
incurred during the two month period ended December 31, 1994 as having occurred
in the current year.
For federal income tax purposes, the Portfolio had a capital loss carryforward
as of December 31, 1994 of approximately $8,148,900 which expires in 2002.
Accordingly, no capital gain distributions are expected to be paid to
shareholders until net gains have been realized in excess of such carryforward.
------------------------------------------------------------
Note 5. Joint Repurchase Agreement Account
The Portfolio, along with other affiliated registered investment companies,
transfers 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,
1995, the Portfolio had a 0.3% undivided interest in the repurchase agreements
in the joint account. The undivided interest for the Portfolio represented
$2,232,000 in principal amount. As of such date, each repurchase agreement in
the joint account and the collateral therefor was as follows:
Bear, Stearns & Co. Inc., 6.125%, in the principal amount of $200,000,000,
repurchase price $200,102,083, due 7/3/95. The value of the collateral including
accrued interest was $204,321,562.
CS First Boston Corp., 6.13%, in the principal amount of $160,000,000,
repurchase price $160,081,733, due 7/3/95. The value of the collateral including
accrued interest was $163,246,196.
Goldman, Sachs & Co., 6.10%, in the principal amount of $116,557,000, repurchase
price $116,616,250, due 7/3/95. The value of the collateral including accrued
interest was $118,889,059.
Smith Barney, Inc., 6.13%, in the principal amount of $200,000,000, repurchase
price $200,102,167, due 7/3/95. The value of the collateral including accrued
interest was $204,000,775.
------------------------------------------------------------
Note 6. Capital
The Portfolio currently offers Class A, Class B and Class C 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. Class C shares are sold
with a contingent deferred sale charge of 1%
--------------------------------------------------------------------------------
9 -----
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
Notes to Financial Statements (Unaudited) INCOME PORTFOLIO
--------------------------------------------------------------------------------
during the first year. Class B shares automatically convert to Class A shares
on
a quarterly basis approximately five years after purchase.
There are 250 million authorized shares of $.01 par value common stock, divided
into three classes, designated Class A, Class B and Class C common stock, each
of which consists of 83,333,333 1/3 authorized shares. Transactions in shares
of
common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
------------------------------------- ---------- ------------
<S> <C> <C>
Six months ended June 30, 1995:
Shares sold.......................... 326,800 $ 3,683,645
Shares issued in reinvestment of
dividends.......................... 161,848 1,815,095
Shares reacquired.................... (1,400,675) (15,659,826)
---------- ------------
Net decrease in shares outstanding
before conversion.................. (912,027) (10,161,086)
Shares issued upon conversion from
Class B............................ 410,354 4,541,342
---------- ------------
Net decrease in shares outstanding... (501,673) $ (5,619,744)
---------- ------------
---------- ------------
<CAPTION>
Class A Shares Amount
------------------------------------- ---------- ------------
<S> <C> <C>
Year ended December 31, 1994:
Shares sold.......................... 1,327,030 $ 15,172,253
Shares issued in reinvestment of
dividends and distributions........ 352,857 3,992,113
Shares reacquired.................... (3,461,380) (39,309,298)
---------- ------------
Net decrease in shares outstanding... (1,781,493) $(20,144,932)
---------- ------------
---------- ------------
<CAPTION>
Class B
-------------------------------------
<S> <C> <C>
Six months ended June 30, 1995:
Shares sold.......................... 1,178,564 $ 13,156,094
Shares issued in reinvestment of
dividends.......................... 211,561 2,371,378
Shares reacquired.................... (1,771,841) (19,758,013)
---------- ------------
Net decrease in shares outstanding
before conversion.................. (381,716) (4,230,541)
Shares reacquired upon conversion
into Class A....................... (410,354) (4,541,342)
---------- ------------
Net decrease in shares outstanding... (792,070) $ (8,771,883)
---------- ------------
---------- ------------
Year ended December 31, 1994:
Shares sold.......................... 4,868,067 $ 55,579,090
Shares issued in reinvestment of
dividends and distributions........ 432,507 4,882,473
Shares reacquired.................... (3,888,211) (43,919,636)
---------- ------------
Net increase in shares outstanding... 1,412,363 $ 16,541,927
---------- ------------
---------- ------------
Class C
-------------------------------------
Six months ended June 30, 1995:
Shares sold.......................... 43,236 $ 483,713
Shares issued in reinvestment of
dividends.......................... 1,114 12,517
Shares reacquired.................... (8,173) (92,548)
---------- ------------
Net increase in shares outstanding... 36,177 $ 403,682
---------- ------------
---------- ------------
August 1, 1994* through
December 31, 1994:
Shares sold.......................... 34,035 $ 379,321
Shares issued in reinvestment of
dividends and distributions........ 368 4,060
Shares reacquired.................... (594) (6,536)
---------- ------------
Net increase in shares outstanding... 33,809 $ 376,845
---------- ------------
---------- ------------
---------------
* Commencement of offering of Class C shares.
</TABLE>
--------------------------------------------------------------------------------
----- 10
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
Financial Highlights (Unaudited) INCOME PORTFOLIO
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------------------
Six Months
Ended
Year ended December 31,
June 30,
------------------------------------------------------------
1995 1994 1993
1992 1991 1990
---------- --------
-------- -------- -------- --------
<S> <C> <C> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..... $ 10.97 $ 11.78 $
11.79 $ 12.13 $ 11.67 $ 11.63
---------- --------
-------- -------- -------- --------
Income from investment operations:
Net investment income.................... .35 .65
.71 .86(b) .93(b) 1.00(b)
Net realized and unrealized gain (loss)
on investment transactions............. .48 (.80)
.12 (.08) .56 .04
---------- --------
-------- -------- -------- --------
Total from investment operations....... .83 (.15)
.83 .78 1.49 1.04
---------- --------
-------- -------- -------- --------
Less distributions:
Dividends from net investment income..... (.35) (.65)
(.71) (.86) (.93) (1.00)
Distributions in excess of net investment
income................................. -- (.01)
-- -- -- --
Distributions from net realized gains.... -- --
(.13) (.26) (.10) --
---------- --------
-------- -------- -------- --------
Total distributions.................... (.35) (.66)
(.84) (1.12) (1.03) (1.00)
---------- --------
-------- -------- -------- --------
Net asset value, end of period........... $ 11.45 $ 10.97 $
11.78 $ 11.79 $ 12.13 $ 11.67
---------- --------
-------- -------- -------- --------
---------- --------
-------- -------- -------- --------
TOTAL RETURN(c):......................... 7.66% (1.16)%
7.19% 6.67% 13.35% 9.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).......... $ 89,979 $ 91,680
$119,449 $109,828 $109,997 $113,125
Average net assets (000)................. $ 91,373 $106,737
$114,728 $107,937 $113,010 $107,276
Ratios to average net assets:
Expenses, including distribution
fees................................. .86%(a) .94%
.80% .70%(b) .37%(b) .13%(b)
Expenses, excluding distribution
fees................................. .76%(a) .84%
.70% .60%(b) .27%(b) .10%(b)
Net investment income.................. 6.66%(a) 5.88%
5.92% 7.15%(b) 7.89%(b) 8.67%(b)
Portfolio turnover....................... 86% 123%
137% 91% 117% 46%
</TABLE>
---------------
(a) Annualized.
(b) Net of expense subsidy and/or fee waiver
(c) Total return does not consider the effects of sales loads. Total return
is calculated assuming a purchase of shares on the first day and a sale
on the last day of each period reported and includes reinvestment of
dividends and distributions. Total returns for periods of less than one
full year are not annualized.
--------------------------------------------------------------------------------
See Notes to Financial Statements. 11 -----
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
Financial Highlights (Unaudited) INCOME PORTFOLIO
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class
B Class C
----------------------------------------------------- ----------
December 9,
Six Months Year ended
1992(b) Six Months
Ended December
31, through Ended
June 30,
--------------------- December 31, June 30,
1995 1994
1993 1992 1995
---------- --------
-------- ------------ ----------
<S> <C> <C>
<C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 10.97 $ 11.78
$ 11.79 $ 11.79 $ 10.97
---------- --------
-------- -------- ----------
Income from investment operations:
Net investment income......................... .32 .58
.62 .04 .32
Net realized and unrealized gain (loss) on
investment transactions..................... .48 (.80)
.12 -- .48
---------- --------
-------- -------- ----------
Total from investment operations............ .80 (.22)
.74 .04 .80
---------- --------
-------- -------- ----------
Less distributions:
Dividends from net investment income.......... (.32) (.58)
(.62) (.04) (.32)
Distributions in excess of net investment
income...................................... -- (.01)
-- -- --
Distributions from net realized gains......... -- --
(.13) -- --
---------- --------
-------- -------- ----------
Total distributions......................... (.32) (.59)
(.75) (.04) (.32)
---------- --------
-------- -------- ----------
Net asset value, end of period................ $ 11.45 $ 10.97
$ 11.78 $ 11.79 $ 11.45
---------- --------
-------- -------- ----------
---------- --------
-------- -------- ----------
TOTAL RETURN(d):.............................. 7.33% (1.83)%
6.38% .32% 7.33%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $126,936 $130,258
$123,306 $11,981 $801
Average net assets (000)...................... $126,683 $134,985
$69,314 $5,474 $597
Ratios to average net assets:
Expenses, including distribution fees....... 1.51%(a) 1.66%
1.55% 1.67%(a) 1.51%(a)
Expenses, excluding distribution fees....... .76%(a) .84%
.70% .82%(a) .76%(a)
Net investment income....................... 6.01%(a) 5.17%
5.08% 6.31%(a) 6.01%(a)
Portfolio turnover............................ 86% 123%
137% 91% 86%
<CAPTION>
August 1,
1994(c)
through
December 31,
1994
------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 11.30
------
Income from investment operations:
Net investment income......................... .23
Net realized and unrealized gain (loss) on
investment transactions..................... (.32)
------
Total from investment operations............ (.09)
------
Less distributions:
Dividends from net investment income.......... (.23)
Distributions in excess of net investment
income...................................... (.01)
Distributions from net realized gains......... --
------
Total distributions......................... (.24)
------
Net asset value, end of period................ $ 10.97
------
------
TOTAL RETURN(d):.............................. (0.68)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $371
Average net assets (000)...................... $192
Ratios to average net assets:
Expenses, including distribution fees....... 1.90%(a)
Expenses, excluding distribution fees....... 1.15%(a)
Net investment income....................... 5.30%(a)
Portfolio turnover............................ 123%
</TABLE>
---------------
(a) Annualized.
(b) Commencement of offering of Class B shares.
(c) Commencement of offering of Class C shares.
(d) 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
full year are not annualized.
--------------------------------------------------------------------------------
----- 12 See Notes to Financial Statements.
<PAGE>
President Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852
Directors
Thomas R. Anderson
Robert R. Fortune
Delayne Dedrick Gold
Harry A. Jacobs, Jr.
Thomas A. Owens, Jr.
Richard A. Redeker
Merle T. Welshans
Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Eugene S. Stark, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Marguerite 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 LLP
Two World Financial Center
New York, NY 10281
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
The accompanying financial statements as of June 30, 1995 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.
<PAGE>
Prudential Mutual Funds
Building Your Future
On Our StrengthSM (LOGO)
BULK RATE
U.S. POSTAGE
PAID
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Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852
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