(ICON)
Prudential
Structured
Maturity
Fund, Inc.
- ------------------
Income Portfolio
ANNUAL
REPORT
Dec. 31, 1995
(LOGO)
<PAGE>
Prudential Structured Maturity Fund, Inc.
Income Portfolio
Performance At A Glance.
Bond investors had a lot to cheer about in 1995. Slower economic growth
prompted interest rates to fall and bond prices to rise. We're pleased
to report that the Prudential Structured Maturity Fund -- Income Portfolio
finished 1995 solidly ahead of other short-term investment grade debt
funds, according to Lipper Analytical Services.
<TABLE>
Cumulative Total Returns1 As of 12/31/95
<CAPTION>
One Five Since
Year Years Inception2
<S> <C> <C> <C>
Class A 13.1% 44.8% 63.8%
Class B 12.4 N/A 17.8
Class C 12.4 N/A 11.6
Lipper S-T Inv. Grade Debt Fds Avg3 10.8 41.3 56.3
<CAPTION>
Average Annual Total Returns1 As of 12/31/95
One Five Since
Year Years Inception2
<S> <C> <C> <C>
Class A 9.5% 7.0% 7.6%
Class B 9.4 N/A 5.2
Class C 11.4 N/A 8.1
</TABLE>
<TABLE>
<CAPTION>
Total Dividends 30-Day
Paid for 12 Mos. SEC Yield
<C> <S> <C> <C>
Dividends
& Yields Class A $0.73 5.41%
As of Class B $0.66 4.94
12/31/95 Class C $0.66 4.94
</TABLE>
Past performance is not indicative of future results. Principal and
investment return 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 and Lipper Analytical
Services. The cumulative total returns do not take into account sales
charges. The average annual returns do take into account applicable
sales charges. The Fund charges a maximum front-end sales load of 3.25%
for Class A shares and a four-year contingent deferred sales charge
(CDSC) of 3%, 2% 1% and 1% for Class B shares. Class C shares have a
1% CDSC for one year. Class B shares will automatically convert to
Class A shares on a quarterly basis approximately five years after
purchase.
2Inception dates: 9/1/89 Class A shares; 12/9/92 Class B shares; 8/1/94
Class C shares.
3Lipper average returns are for the 147 funds in the Short-Term Investment
Grade Debt category for one year, 34 for five years and 27 since inception
of Class A shares on 9/1/89, according to Lipper Analytical Services.
How Investments Compared.
(As of 12/31/95)
(GRAPH)
Source: Lipper Analytical Services. 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 return averages 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. 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 have received higher
historical total returns from stocks than from most other investments.
General 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 significantly) and their returns have been
historically lower than those of stock funds. Unlike bond funds,
bonds, if held to maturity, generally offer a fixed rate of return
and a fixed principal value.
High Yield Bond Funds generally have provided more income than general
bond funds, but have also been subject to greater credit risk.
Money Market Funds attempt to preserve a constant share value; they
don't fluctuate much in price but, historically their returns have
been 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 approximately evenly
among six "rungs," or maturities, running from one to six years. Within
this structure, we buy mostly corporate bonds, but also government bonds
and U.S. dollar-denominated bonds of foreign corporations and governments.
When new money comes into the portfolio or as securities mature, we
purchase enough new bonds to keep the six weightings roughly in balance.
Strategy Session.
In 1995 interest rates fell steadily causing bond prices to rise and
the value of most bond funds to climb. Because the Portfolio's laddered
maturity format keeps its effective maturity longer than that of most
other short-term corporate bond funds (ours was approximately 3.0 years
during the year) we produced greater price gains -- and greater total
return -- than similar short-term investment grade debt funds.
Generally, funds with longer maturities perform better than those
with shorter maturities when interest rates fall. Of course, our
longer maturity means that we also tend to suffer bigger price
decreases when rates rise. Our strategy changed little in 1995:
In the shorter "rungs" of our ladder (zero- to four-year maturities),
we bought short-term, investment grade corporate bonds. These provided
competitive yield and were good values in a moderate growth and low
inflation economy. Corporate bonds, including U.S. dollar-denominated
foreign bonds, were a majority (76%) of the Portfolio's total net
assets on December 31, 1995, up from 63% on June 30, 1995 and 54%
a year ago. Treasury securities represented only 17% of assets on
December 31, 1995, down from 29% on June 30, 1995 and 25% on December
31, 1994.
In the intermediate-term "rungs" (five- to six-year maturities) we
split investments roughly equally between corporate bonds and U.S.
government bonds. Government bonds in this maturity range tend to
respond quickly to falling interest rates, helping the Portfolio's
total return. Our higher-yielding intermediate-term corporate bonds,
chiefly bonds of cable television and media companies, helped improve
the Portfolio's income.
Sector Breakdown.
Prudential Structured Maturity Fund, Inc.
as of 12/31/95.
(PIE CHART)
Putting 1995
In Perspective.
The financial markets posted extraordinary returns in 1995. While investors
celebrated this performance, few expect last year's returns to repeat in
1996.
It is important to maintain realistic expectations about the future --
differences in yearly returns highlight the importance of diversification
and professional management. Please see page 2 for more information.
<PAGE>
What Went Well.
Media Holdings
Were Winners.
Our media bonds (17% of assets on 12/31/95) helped performance all year
long. We bought them at low prices near the beginning of the year after
the market shunned them along with other consumer companies. Our largest
media holdings at year end were Paramount Communications and Time
Warner. Once relatively weak across the board, many media companies
have restructured and strengthened their balance sheets. Additionally,
business opportunities for media and cable companies may continue to
improve in the wake of expected telephone industry deregulation.
Emphasis On Short-Term
Corporate Bonds.
Our strategy to focus on corporate bonds in the shorter term portion of
the Portfolio paid off. Corporate bonds were the best performing bond
market sector this year, benefitting from economic growth and low
inflation, as well as positive corporate earnings. Not only did
corporate bonds generally yield more than Treasurys of comparable
maturity, they also performed better.
And Not So Well.
Although our strategy worked well this year, we weren't perfect.
Fleming Bonds
Were Stale.
We were disappointed by Fleming Companies, the nation's largest
wholesale grocery distributor that serves small chains and independent
stores and also operates its own grocery stores. We bought Fleming
bonds a year ago because we thought they were cheap considering the
company's potential strength. Instead of strong performance, however,
Fleming bonds faltered as smaller retail grocery stores suffered
from supercenter and other grocery store competition. Fleming is
now consolidating its operations to maximize productivity and
potentially improve earnings. We are watching Fleming's performance
closely. At year end, our total holdings of Fleming bonds was 5% of
total net assets.
Looking Ahead.
Our outlook for bonds is positive. In the new year, we think interest
rates will continue to fall, inflation will stay at low levels and
economic growth, while slow, will remain positive. Interest rates
could drop a little further and long-term bond yields may hover
around 5.5% to 5.8% (plus or minus 0.25%). We expect investment
grade corporate bonds and U.S. Treasury securities to perform well
again next year.
Then what? Our strategy seems to be working, and we do not anticipate
a major change. Probably the greatest risk to corporate bonds, our
primary holdings, is recession -- something that we think is unlikely
in the near future. However, if economic growth is slower than we
expect, we may respond by raising the Portfolio's credit quality or
reducing our exposure to corporate bonds.
Five Largest Holdings.
9.5% 5 Year U.S. Treasury Note
5.3% Kansallis-Osake-Pankki Bk
Banking
5.0% Time Warner, Inc.
Media
4.8% Advanta Corp.
Consumer Finance
4.7% Paramount Comm. Inc.
Media
Expressed as a percentage of total net assets as of 12/31/95.
1
<PAGE>
President's Letter February 5, 1996
(PICTURE)
Dear Shareholder:
For many investors, 1995 was a profitable year -- most stock and bond
funds enjoyed healthy returns from the U.S. markets. While climbing
returns can tempt even the most skittish investors to start buying
again, it is important to remember that the stock and bond markets go
down just as they go up. At times like these, remember the importance
of working with your Financial Advisor or Registered Representative to
help you find investments that are consistent with your risk tolerance
and time horizon. Your Financial Advisor or Registered Representative
can help you maintain realistic expectations about both the potential
performance and risks associated with your investments.
Shareholder Legislative Action Program.
From time to time we've been informing you about significant legislation
before Congress, such as the American Dream Savings Account, that may
potentially impact mutual fund investors. We want to make it easier
for you to share your views with your Congressional member. So,
beginning in 1996, whenever Congress is considering legislation
that would affect you, we'll send you postage-paid message cards
that you simply drop in the mail if you want to let your senator
or representative know how you want him or her to vote.
Fund Profiles.
Over the past year, we've worked to make your shareholder reports more
interesting, informative and easy to read. This year, we'll be
considering "fund profiles." Some mutual fund companies now offer
one to shareholders along with a full prospectus. The purpose of a
fund profile is to provide a very brief, reader-friendly summary of
a fund's objective, investments, risks and expenses. Would you like
to see fund profiles from us? Please call your Financial Advisor or
Registered Representative to share your views.
As always, thank you for your confidence in Prudential Mutual Funds.
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 of PRUDENTIAL STRUCTURED MATURITY FUND
December 31, 1995 INCOME PORTFOLIO
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) Description Value (Note 1)
- ------------------------------------------------------------
<C> <C> <S> <C>
5-6 YEARS--16.2%
Baa3 $ 7,250 Tele Communications, Inc.,
(Media)
7.35%, 8/27/01 $ 7,492,005
United States Treasury
Notes,
18,000 7.75%, 2/15/01 19,875,960
6,000 7.875%, 8/15/01 6,701,220
-------------
34,069,185
- ------------------------------------------------------------
4-5 YEARS--17.3%
Ba1 2,000 Banco de Commercio,
(Banking)
8.625%, 6/2/00 2,056,000
A1 2,000 Ford Motor Credit Co.,
(Financial Services)
6.85%, 8/15/00 2,076,060
Baa3 7,500 News America Holdings,
Inc.,
(Media)
7.45%, 6/1/00 7,814,850
Ba2 10,000 Paramount Communications,
Inc.,
(Media)
5.875%, 7/15/00 9,866,800
Ba1 10,000 Time Warner, Inc.,
(Media)
7.95%, 2/1/00 10,541,800
2,500 United States Treasury
Note,
5.75%, 10/31/00 2,535,925
Baa2 1,500 Woolworth Corp.,
(Retail)
7.00%, 6/1/00 1,526,370
-------------
36,417,805
3-4 YEARS--15.1%
Baa3 $ 5,500 Capital One Bank,
(Banking)
6.74%, 5/31/99 $ 5,625,180
Baa2 3,000 Crane Co.,
(Industrial Services)
7.25%, 6/15/99 3,100,680
Baa3 1,000 Federal Express Corp.,
(Consumer Services)
10.05%, 6/15/99 1,115,300
Ba1 6,000 Fleming Companies, Inc.,
(Food & Beverage)
9.17%, 3/1/99 6,356,940
Baa3 3,000 Republic of Columbia,
(Foreign Government)
8.75%, 10/6/99 3,171,360
Baa3 5,000 Republic of South Africa,
(Foreign Government)
9.625%, 12/15/99 5,392,850
6,300 United States Treasury
Note,
7.75%, 12/31/99 6,836,508
-------------
31,598,818
- ------------------------------------------------------------
2-3 YEARS--16.3%
Baa2 5,000 Comdisco, Inc.,
(Leasing)
7.25%, 4/15/98 5,148,400
Baa3 9,000 Enterprise Rent A Car
Finance Co.,
(Financial Services)
7.875%, 3/15/98 9,411,030
Ba1 4,000 Fleming Companies, Inc.,
(Food & Beverage)
9.125%, 2/27/98 4,173,200
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3 -----
<PAGE>
<PAGE>
Portfolio of Investments as of PRUDENTIAL STRUCTURED MATURITY FUND
December 31, 1995 INCOME PORTFOLIO
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) Description Value (Note 1)
- ------------------------------------------------------------
<C> <C> <S> <C>
2-3 YEARS (cont'd)
A3 $ 10,000 Kansallis-Osake-Pankki
Bank,
(Banking)
9.75%, 12/15/98 $ 11,053,700
Baa2 4,200 Transco Energy Co.,
(Utilities)
9.125%, 5/1/98 4,487,532
-------------
34,273,862
- ------------------------------------------------------------
1-2 YEARS--16.9%
Baa2 10,000 Advanta Corp.,
(Consumer Finance)
6.24%, 2/7/97 10,067,600
NR 3,000 Banco Ganadero S.A.,
(Banking)
9.75%, 8/26/97 3,075,000
A2 2,000 Bank One Credit Card
Trust,
(Asset Backed)
(Average Life 1.9 Years)
7.75%, 12/15/99 2,075,620
Baa3 2,500 Capital One Bank,
(Banking)
8.625%, 1/15/97 2,569,750
Baa2 1,500 Comdisco, Inc.,
(Leasing)
9.75%, 1/15/97 1,559,175
Baa2 2,100 Finova Financial Corp.,
(Industrial Finance)
9.67%, 7/1/97 2,214,555
General Motors Acceptance
Corp.,
(Financial Services)
A3 7,000 6.70%, 4/30/97 7,101,080
A3 2,000 7.50%, 11/4/97 2,066,320
Baa3 1,300 Mitchell Energy &
Development Corp.,
(Industrial Services)
5.10%, 2/15/97 1,288,053
A3 $ 3,500 Potomac Capital Investment
Corp.,
(Financial Services)
6.19%, 4/28/97 $ 3,509,100
-------------
35,526,253
- ------------------------------------------------------------
WITHIN 1 YEAR--16.4%
Baa1 1,000 Ashland Oil, Inc.,
(Oil)
8.95%, 1/17/96 1,001,900
Baa2 4,000 Centex Corp.,
(Industrial Finance)
9.05%, 5/1/96 4,034,440
A3 1,600 Chrysler Financial Corp.,
(Financial Services)
5.39%, 8/27/96 1,597,168
Aa3 1,000 CIT Group Holdings, Inc.,
(Financial Services)
8.75%, 2/15/96 1,003,270
A2 2,195 Grand Metropolitan
Investment Corp.,
(Industrial Finance)
8.125%, 8/15/96 2,226,081
Ba3 2,500 Oryx Energy Co.,
(Oil)
6.05%, 2/1/96 2,499,850
NR 2,500 Petroleos Mexicanos,
(Oil)
(Average Life 0.3 years)
6.8125%, 3/8/99, F.R.N. 2,225,000
Baa1 8,500 Salomon, Inc.,
(Financial Services)
6.6172%, 2/28/96 8,504,250
A2 2,000 TransAmerica Finance
Corp.,
(Financial Services)
5.85%, 7/15/96 2,001,240
A2 1,500 Union Bank Finland, Ltd.,
(Banking)
5.25%, 6/15/96 1,493,670
</TABLE>
- --------------------------------------------------------------------------------
- ----- 4 See Notes to Financial Statements.
<PAGE>
<PAGE>
Portfolio of Investments as of PRUDENTIAL STRUCTURED MATURITY FUND
December 31, 1995 INCOME PORTFOLIO
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount
(Unaudited) (000) Description Value (Note 1)
- ------------------------------------------------------------
<C> <C> <S> <C>
WITHIN 1 YEAR (cont'd)
A2 $ 1,350 Virginia Electric &
Power Co.,
(Utilities)
9.70%, 5/6/96 $ 1,367,037
Ba1 4,000 Westinghouse Credit
Corp.,
(Financial Services)
8.75%, 6/3/96 4,025,040
Westinghouse Electric
Corp.,
(Consumer Finance)
Ba1 1,530 7.75%, 4/15/96 1,536,442
Ba1 600 8.70%, 6/20/96 604,206
394 Joint Repurchase
Agreement Account,
5.85%, 1/02/96, (Note
5) 394,000
---------------
34,513,594
- ------------------------------------------------------------
Total Investments--98.2%
(cost $203,784,290; Note
4) 206,399,517
Other assets in excess
of liabilities--1.8% 3,821,035
---------------
Net Assets--100% $ 210,220,552
---------------
</TABLE> ---------------
- ------------------
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 December 31, 1995
were as follows:
<TABLE>
<S> <C>
Financial Services.................................... 19.6%
U.S. Treasury Notes................................... 17.1
Media................................................. 17.0
Banking............................................... 12.3
Consumer Finance...................................... 5.8
Food & Beverage....................................... 5.0
Foreign Government.................................... 4.1
Industrial Finance.................................... 4.1
Leasing............................................... 3.2
Utilities............................................. 2.8
Oil................................................... 2.7
Industrial Services................................... 2.1
Asset Backed.......................................... 1.0
Retail................................................ .7
Consumer Services..................................... .5
Repurchase Agreement.................................. .2
Other assets in excess of liabilities................. 1.8
-----
100.0%
-----
-----
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5 -----
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
Statement of Assets and Liabilities INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S>
<C>
Assets
December 31, 1995
Investments, at value (cost
$203,784,290)...............................................................
$ 206,399,517
Interest
receivable...................................................................
.................. 4,010,185
Receivable for Fund shares
sold.........................................................................
675,792
Deferred expenses and other
assets......................................................................
2,949
-----------------
Total
assets.......................................................................
.................. 211,088,443
-----------------
Liabilities
Payable for Fund shares
reacquired......................................................................
492,436
Accrued
expenses.....................................................................
................... 114,927
Dividends
payable......................................................................
................. 104,106
Distribution fee
payable......................................................................
.......... 85,015
Management fee
payable......................................................................
............ 71,407
-----------------
Total
liabilities..................................................................
.................. 867,891
-----------------
Net
Assets.......................................................................
....................... $ 210,220,552
-----------------
-----------------
Net assets were comprised of:
Common stock, at
par..........................................................................
....... $ 180,731
Paid-in capital in excess of
par.....................................................................
214,392,685
-----------------
214,573,416
Accumulated net realized loss on
investments.........................................................
(6,968,091)
Net unrealized appreciation on
investments...........................................................
2,615,227
-----------------
Net assets at December 31,
1995.........................................................................
$ 210,220,552
-----------------
-----------------
Class A:
Net asset value and redemption price per share
($88,981,974 / 7,648,329 shares of common stock issued and
outstanding)........................... $11.63
Maximum sales charge (3.25% of offering
price).......................................................
.39
Maximum offering price to
public.....................................................................
$12.02
Class B:
Net asset value, offering price and redemption price per share
($120,188,170 / 10,334,426 shares of common stock issued and
outstanding)......................... $11.63
Class C:
Net asset value, offering price and redemption price per share
($1,050,408 / 90,321 shares of common stock issued and
outstanding)............................... $11.63
</TABLE>
- --------------------------------------------------------------------------------
- ----- 6 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
INCOME PORTFOLIO
Statement of Operations
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income December 31, 1995
------------------
<S> <C>
Income
Interest................................ $ 15,919,734
------------------
Expenses
Distribution fee--Class A............... 89,500
Distribution fee--Class B............... 939,223
Distribution fee--Class C............... 5,006
Management fee.......................... 861,589
Transfer agent's fees and expenses...... 295,000
Reports to shareholders................. 115,000
Custodian's fees and expenses........... 95,000
Registration fees....................... 85,000
Audit fee............................... 37,000
Legal fees.............................. 30,000
Directors' fees......................... 30,000
Miscellaneous........................... 12,766
------------------
Total expenses....................... 2,595,084
------------------
Net investment income...................... 13,324,650
------------------
Realized and Unrealized Gain
on Investments
Net realized gain on investment
transactions............................ 1,914,240
Net change in unrealized appreciation of
investments............................. 10,735,269
------------------
Net gain on investments.................... 12,649,509
------------------
Net Increase in Net Assets
Resulting from Operations.................. $ 25,974,159
------------------
------------------
</TABLE>
PRUDENTIAL STRUCTURED MATURITY FUND
INCOME PORTFOLIO
Statement of Changes in Net Assets
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended December 31,
in Net Assets 1995 1994
<S> <C> <C>
Operations
Net investment income..... $ 13,324,650 $ 13,261,561
Net realized gain (loss)
on investment
transactions........... 1,914,240 (8,461,299)
Net change in unrealized
appreciation
(depreciation) on
investments............ 10,735,269 (8,556,463)
----------------- -----------------
Net increase (decrease) in
net assets resulting
from operations........ 25,974,159 (3,756,201)
----------------- -----------------
Dividends and distributions (Note 1)
Dividends to shareholders
from net investment
income
Class A................ (5,877,430) (6,272,073)
Class B................ (7,407,642) (6,985,271)
Class C................ (39,578) (4,217)
----------------- -----------------
(13,324,650) (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............. 30,676,035 71,130,664
Net asset value of shares
issued to shareholders
in reinvestment of
dividends and
distributions ......... 8,591,299 8,878,646
Cost of shares
reacquired............. (64,005,192) (83,235,470)
----------------- -----------------
Net decrease in net assets
from
Fund share
transactions........... (24,737,858) (3,226,160)
----------------- -----------------
Total decrease............... (12,088,349) (20,446,679)
Net Assets
Beginning of year............ 222,308,901 242,755,580
----------------- -----------------
End of year.................. $ 210,220,552 $ 222,308,901
----------------- -----------------
----------------- -----------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7 -----
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
Notes to Financial Statements 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 Net 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. Expenses are recorded on the accrual basis which may require the
use of certain estimates by management.
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 had a distribution agreement with Prudential Mutual Fund Distributors,
Inc. (``PMFD''), which acted as the distributor of the Class A shares of the
Fund through January 1, 1996. Prudential Securities Incorporated (``PSI'') is
the distributor of the Class B and Class C shares of the
- --------------------------------------------------------------------------------
- ----- 8
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
Notes to Financial Statements INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Fund (collectively the ``Distributors''). The Fund compensates PMFD and PSI 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. Effective January 2, 1996, PSI became the distributor of
the Class A shares of the Fund and is serving the Fund under the same terms and
conditions as under the arrangement with PMFD.
Pursuant to the Class A, B and C Plans, the Fund compensates PSI and PMFD for
the year ended December 31, 1995 with respect to Class A shares, 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
year ended December 31, 1995.
PMFD has advised the Portfolio that it has received approximately $71,100 in
front-end sales charges resulting from sales of Class A shares during the year
ended December 31, 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 year ended December 31, 1995, it received
approximately $335,200 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 year ended December
31, 1995, the Portfolio incurred fees of approximately $251,000 for the services
of PMFS. As of December 31, 1995, 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 Securities
Purchases and sales of portfolio securities, excluding short-term investments,
for the year ended December 31, 1995 were $341,030,755 and $364,720,336,
respectively.
The federal income tax basis of the Portfolio's investments at December 31, 1995
was substantially the same as for financial reporting purposes, and accordingly,
net unrealized appreciation for federal income tax purposes was $2,615,227
(gross unrealized appreciation--$4,122,203; gross unrealized
depreciation--$1,506,976).
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 fiscal year.
For federal income tax purposes, the Portfolio had a capital loss carryforward
as of December 31, 1995 of approximately $7,180,600 which expires in 2002. Such
carryforward is after utilization of approximately $968,300 to offset the
Portfolio's net taxable gains recognized in the year ended December 31, 1995.
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 December
31, 1995, the Portfolio had a 0.03% undivided interest in the repurchase
agreements in the joint account. The undivided interest for the Portfolio
represented $394,000 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., 5.80%, in the principal amount of $262,000,000,
repurchase price $262,168,844, due 1/2/96. The value of the collateral including
accrued interest was $267,947,172.
- --------------------------------------------------------------------------------
9 -----
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
Notes to Financial Statements INCOME PORTFOLIO
- --------------------------------------------------------------------------------
BT Securities Corp., 5.75%, in the principal amount of $61,765,000, repurchase
price $61,804,461, due 1/2/96. The value of the collateral including accrued
interest was $63,059,883.
Goldman, Sachs & Co., 5.90%, in the principal amount of $365,000,000, repurchase
price $365,239,278, due 1/2/96. The value of the collateral including accrued
interest was $372,300,053.
Morgan Stanley & Co., Inc., 5.89%, in the principal amount of $103,000,000,
repurchase price $103,067,408, due 1/2/96. The value of the collateral including
accrued interest was $105,192,608.
Smith Barney, Inc., 5.83%, in the principal amount of $365,000,000, repurchase
price $365,236,439, due 1/2/96. The value of the collateral including accrued
interest was $372,300,416.
- ------------------------------------------------------------
Note 6. Capital
The Portfolio 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% during the first year. Class B shares
automatically convert to Class A shares on a quarterly basis approximately five
years after purchase. A special exchange privilege is also available for
shareholders who qualified to purchase Class A shares at net asset value.
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 for the years ended December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- -------------------------------------- ---------- ------------
<S> <C> <C>
Year ended December 31, 1995:
Shares sold........................... 812,745 $ 9,281,283
Shares issued in reinvestment of
dividends........................... 325,730 3,698,766
Shares reacquired..................... (2,387,143) (26,982,383)
---------- ------------
Net decrease in shares outstanding
before conversion................... (1,248,668) (14,002,334)
Shares issued upon conversion from
Class B............................. 540,088 6,039,105
---------- ------------
Net decrease in shares outstanding.... (708,580) $ (7,963,229)
---------- ------------
---------- ------------
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 Shares Amount
- -------------------------------------- ---------- ------------
<S> <C> <C>
Year ended December 31, 1995:
Shares sold........................... 1,817,442 $ 20,499,580
Shares issued in reinvestment of
dividends........................... 428,576 4,863,912
Shares reacquired..................... (3,249,167) (36,739,116)
---------- ------------
Net decrease in shares outstanding
before conversion................... (1,003,149) (11,375,624)
Shares reacquired upon conversion into
Class A............................. (540,088) (6,039,105)
---------- ------------
Net decrease in shares outstanding.... (1,543,237) $(17,414,729)
---------- ------------
---------- ------------
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
- --------------------------------------
Year ended December 31, 1995:
Shares sold........................... 78,793 $ 895,172
Shares issued in reinvestment of
dividends........................... 2,515 28,621
Shares reacquired..................... (24,796) (283,693)
---------- ------------
Net increase in shares outstanding.... 56,512 $ 640,100
---------- ------------
---------- ------------
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 INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
- -----------------------------------------------------------
Year ended
December 31,
- -----------------------------------------------------------
1995 1994 1993
1992 1991
------- -------- --------
-------- --------
<S> <C> <C> <C>
<C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year....... $ 10.97 $ 11.78 $ 11.79
$ 12.13 $ 11.67
------- -------- --------
-------- --------
Income from investment operations:
Net investment income.................... .73 .65 .71
.86(b) .93(b)
Net realized and unrealized gain (loss)
on investment transactions............ .66 (.80) .12
(.08) .56
------- -------- --------
-------- --------
Total from investment operations...... 1.39 (.15) .83
.78 1.49
------- -------- --------
-------- --------
Less distributions:
Dividends from net investment income..... (.73) (.65) (.71)
(.86) (.93)
Distributions in excess of net investment
income................................ -- (.01) --
-- --
Distributions from net realized gains.... -- -- (.13)
(.26) (.10)
------- -------- --------
-------- --------
Total distributions................... (.73) (.66) (.84)
(1.12) (1.03)
------- -------- --------
-------- --------
Net asset value, end of year............. $ 11.63 $ 10.97 $ 11.78
$ 11.79 $ 12.13
------- -------- --------
-------- --------
------- -------- --------
-------- --------
TOTAL RETURN(a):......................... 13.12% (1.16)% 7.19%
6.67% 13.35%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)............ $88,982 $ 91,680 $119,449
$109,828 $109,997
Average net assets (000)................. $89,500 $106,737 $114,728
$107,937 $113,010
Ratios to average net assets:
Expenses, including distribution
fees............................... .82% .94% .80%
.70%(b) .37%(b)
Expenses, excluding distribution
fees............................... .72% .84% .70%
.60%(b) .27%(b)
Net investment income................. 6.57% 5.88% 5.92%
7.15%(b) 7.89%(b)
For Class A, B and C shares:
Portfolio turnover.................... 160% 123% 137%
91% 117%
</TABLE>
- ---------------
(a) 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 year reported and includes reinvestment of dividends and
distributions.
(b) Net of expense subsidy and/or fee waiver.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 11 -----
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
Financial Highlights INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class
B Class C
- --------------------------------------------------- ------------
December 9,
1992(c) Year
Year ended December 31,
through Ended
- ---------------------------------- December 31, December 31,
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......................... .66 .58
.62 .04 .66
Net realized and unrealized gain (loss) on
investment transactions.................... .66 (.80)
.12 -- .66
-------- --------
- -------- -------- ------------
Total from investment operations........... 1.32 (.22)
.74 .04 1.32
-------- --------
- -------- -------- ------------
Less distributions:
Dividends from net investment income.......... (.66) (.58)
(.62) (.04) (.66)
Distributions in excess of net investment
income..................................... -- (.01)
- -- -- --
Distributions from net realized gains......... -- --
(.13) -- --
-------- --------
- -------- -------- ------------
Total distributions........................ (.66) (.59)
(.75) (.04) (.66)
-------- --------
- -------- -------- ------------
Net asset value, end of period................ $ 11.63 $ 10.97 $
11.78 $ 11.79 $ 11.63
-------- --------
- -------- -------- ------------
-------- --------
- -------- -------- ------------
TOTAL RETURN(a):.............................. 12.40% (1.83)%
6.38% .32% 12.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............... $120,188 $130,258
$123,306 $11,981 $1,050
Average net assets (000)...................... $125,230 $134,985
$69,314 $5,474 $667
Ratios to average net assets:
Expenses, including distribution fees...... 1.47% 1.66%
1.55% 1.67%(b) 1.47%
Expenses, excluding distribution fees...... .72% .84%
.70% .82%(b) .72%
Net investment income...................... 5.92% 5.17%
5.08% 6.31%(b) 5.92%
<CAPTION>
Class C
----------
August 1,
1994(d)
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(a):.............................. (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%(b)
Expenses, excluding distribution fees...... 1.15%(b)
Net investment income...................... 5.30%(b)
</TABLE>
- ---------------
(a) 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.
(b) Annualized.
(c) Commencement of offering of Class B shares.
(d) Commencement of offering of Class C shares.
- --------------------------------------------------------------------------------
- ----- 12 See Notes to Financial Statements.
<PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
Independent Auditors' Report INCOME PORTFOLIO
- --------------------------------------------------------------------------------
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, 1995, the related statements of operations for the
year then ended and of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an
opinion on these financial statements and 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 securities owned as of
December 31, 1995 by correspondence with the custodian. 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, 1995, the results
of its operations, the changes in its net assets and its financial highlights
for the respective stated periods in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
February 9, 1996
PRUDENTIAL STRUCTURED MATURITY FUND
Tax Information INCOME PORTFOLIO
- --------------------------------------------------------------------------------
We are required by the Internal Revenue Code to advise you within 60 days of the
Portfolio's fiscal year end (December 31, 1995) as to the federal tax status of
dividends paid by the Portfolio during such fiscal year.
During 1995, dividends paid from net investment income of $.73 per share for
Class A shares, $.66 per share for Class B and C shares are taxable as ordinary
income. 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.
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.
- --------------------------------------------------------------------------------
13 -----
<PAGE>
Getting
The Most
From Your
Prudential
Mutual
Fund
Some mutual fund shareholders won't ever read this -- they don't read
annual and semi-annual reports. It's quite understandable. These annual
and semi-annual reports are prepared to comply with Federal regulations.
They are often written in language that is difficult to understand. So
when most people run into those particularly daunting sections of these
reports, they don't read them.
We think that's a mistake.
At Prudential Mutual Funds, we've made some changes to our report to make
it easier to understand and more pleasant to read, in hopes you'll find
it profitable to spend a few minutes familiarizing yourself with your
investment. Here's what you'll find in the report:
At A Glance
Since an investment's performance is often a shareholder's primary concern,
we present performance information in two different formats. You'll find
it first on the "At A Glance" page where we compare the Fund and the
comparable average calculated by Lipper Analytical Services, Inc., a
nationally recognized mutual fund rating agency. We report both the
cumulative total returns and the average annual total returns. The
cumulative total return is the total amount of income and appreciation the
Fund has achieved in various time periods. The average annual total return
is an annualized representation of the Fund's performance -- it generally
smoothes out returns and gives you an idea how much the Fund has earned
in an average year, for a given time period. Under the performance box,
you'll see legends that explain the performance information, whether
fees and sales charges have been included in returns, and the inception
dates for the Fund's share classes.
See the performance comparison charts at the back of the report for
more performance information. And keep in mind that past performance
is not indicative of future results.
Portfolio
Manager's Report
The portfolio manager who invests your money for you reports on
successful -- and not-so-successful -- strategies in this section
of your report. Look for recent purchases and sales here, as well
as information about the sectors the portfolio manager favors and
any changes that are on the drawing board.
Portfolio Of
Investments
This is where the report begins to look technical, but it's really just
a listing of each security held at the end of the reporting period,
along with valuations and other information. Please note that sometimes
we discuss a security in the Portfolio Manager's Report that doesn't
appear in this listing because it was sold before the close of the
reporting period.
<PAGE>
Statement Of Assets
And Liabilities
The balance sheet shows the assets (the value of the Fund's holdings),
liabilities (how much the Fund owes) and net assets (the Fund's equity,
or holdings after the Fund pays its debts) as of the end of the
reporting period. It also shows how we calculate the net asset value
per share for each class of shares. The net asset value is reduced by
payment of your dividend, capital gain, or other distribution, but
remember that the money or new shares are being paid or issued to
you and thus is not a realized loss. The net asset value fluctuates
daily along with the value of every security in the portfolio.
Statement Of
Operations
This is the income statement, which details income (mostly interest
and dividends earned) and expenses (including what you pay us to manage
your money). You'll also see capital gains here -- both realized and
unrealized.
Statement Of Changes
In Net Assets
This schedule shows how income and expenses translate into changes in
net assets, compared to last year's performance. The Fund is required
to pay out the bulk of its income to shareholders every year, and this
statement shows you how we do it -- through dividends and
distributions -- and how that affects the net assets. This
statement also shows how money from investors flowed into and
out of the Fund.
Notes To Financial
Statements
This is the kind of technical material that can intimidate readers,
but it does contain useful information. The Notes provide a brief
history and explanation of your Fund's objectives. In addition, they
also outline how Prudential Mutual Funds prices securities. The Notes
also explain who manages and distributes the Fund's shares, and more
importantly, how much they are paid for doing so. Finally, the Notes
explain how many shares are outstanding and the number issued and
redeemed over the period.
Financial Highlights
This information contains many elements from prior pages, but on a per
share basis. It is designed to help you understand how the Fund performed
and to compare this year's performance and expenses to those of prior years.
Independent
Auditor's Report
Once a year, an outside auditor looks over our books and certifies that
the information we've presented is fair and complies with generally
accepted accounting principles.
Tax Information
This is information which we report annually about how much of your
total return is taxable. Should you have any questions, you may want
to consult a tax advisor.
Performance
Comparison
These charts are included in the annual report and are required by
the Securities Exchange Commission. Performance is presented here as
a hypothetical $10,000 investment in the Fund since its inception or
for 10 years (whichever is shorter). To help you put that return in
context, we are required to include the performance of an unmanaged,
broad based securities index, as well. The index does not reflect the
cost of buying the securities it contains or the cost of managing a
mutual fund. Of course, the index holdings do not mirror those of
the fund -- the index is a broadly based reference point commonly
used by investors to measure how well they are doing. A definition
of the selected index is also provided. Investors generally cannot
invest directly in an index.
<PAGE>
Getting
The Most
From Your
Prudential
Mutual
Fund
How many times have you read these letters -- or other financial
materials -- and stumbled across a word that you don't understand?
Many shareholders have run into the same problem. We'd like to help.
So we'll use this space from time to time to explain some of the words
you might have read, but not understood. And if you have a favorite
word that no one can explain to your satisfaction, please write to us.
Basis Point: One 1/100th of 1%. For example, one half of one percentage
point is 50 basis points.
Call Option: A contract giving the holder a right to buy stocks or bonds
at a predetermined price (called the strike price) before a predetermined
expiration date. A buyer of a call option generally expects to benefit
from a rise in the price of the stock or bond.
Capital Gain/Capital Loss: The difference between the cost of a capital
asset (for example, a stock, bond or mutual fund share) and its selling
price. Under current law the federal income tax rate for individuals on
a long-term gain is 28%.
Collateralized Mortgage Obligations (CMOs): Pools of mortgage-backed
securities sliced in maturity ranges that bear differing interest
rates. These instruments are sensitive to changes in interest rates
and homeowner refinancing activity. They are subject to prepayment
and maturity extension risk.
Derivatives: Securities that derive their value from another security.
The rate of return of these financial products rise and fall -- sometimes
very suddenly -- in response to changes in some specific interest rate,
currency, stock or other variable.
Discount Rate: The interest rate charged by the Federal Reserve on loans
to banks and other depository institutions.
Federal Funds Rate: The interest rate charged by one bank to another
on overnight loans.
Futures Contract: An agreement to deliver a specific amount of a
commodity or financial instruments at a set price at a stipulated
time in the future.
Leverage: The use of borrowed assets to enhance return on equity.
The expectation is that the interest rate charged will be lower than
the return on the investment. While leverage can increase profits, it
can also magnify losses.
Liquidity: The ease with which a financial instrument (or mutual fund)
can be bought or sold (converted into cash) in the financial markets.
Option: An agreement to buy something, such as shares of stock, by a
certain time for a specified price. An option need not be exercised.
In fact, most expire unexercised.
Price/Earnings Ratio: The price of a share of stock divided by the
earnings per share for a 12-month period.
Spread: The difference between two values; most often used to describe
the difference between prices bid and asked for a security.
Yankee Bond: A bond denominated in U.S. dollars but sold by a foreign
company or government in the U.S. market.
<PAGE>
- -- Prudential Structured Maturity Fund, Inc. - Income Port.
== Lehman Bros. Inter. Gov't/Corp. Bond Index
The Prudential Structured Maturity Fund and the Lehman
Bros. Intermediate Government/Corporate Bond Index:
Comparing a $10,000 Investment.
Average Annual
Total Returns
- ---------------
With Sales Load
7.6% Since Inception
7.0% for 5 Years
9.5% for 1 Year
Class A
(GRAPH)
Without Sales Load
8.1% Since Inception
7.7% for 5 Years
13.1% for 1 Year
Average Annual
Total Returns
- ---------------
With Sales Load
5.2% Since Inception
9.4% for 1 Year
Class B
(GRAPH)
Without Sales Load
5.5% Since Inception
12.4% for 1 Year
Average Annual
Total Returns
- ---------------
With Sales Load
8.1% Since Inception
11.4% for 1 Year
Class C
(GRAPH)
Without Sales Load
8.1% Since Inception
12.4% for 1 Year
Past performance is no guarantee of future results. Investment return
and principal value will fluctuate so an investor's shares, when
redeemed, will be worth more or less than their original cost. The
charts on the right are designed to give you an idea how much the
Fund's returns can fluctuate from year to year by measuring the best
and worst calendar years in terms of total annual return since inception
of each share class.
These graphs are furnished to you in accordance with SEC regulations.
They compare a $10,000 investment in the Prudential Structured Maturity
Fund (Class A, Class B and Class C) with a similar investment in the
Lehman Brothers Intermediate Government/Corporate Bond Index by portraying
the initial account values at the commencement of operations of each
class, 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, in 1992 for Class B shares and in 1994 for Class
C shares. For purposes of the graphs, and unless otherwise indicated,
in the accompanying tables it has been assumed (a) that the maximum
applicable front-end 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 and Class C shares, assuming full redemption on December
31, 1995; (c) all recurring fees (including management fees) were
deducted; and (d) all dividends and distributions were reinvested.
Class B shares will automatically convert to Class A shares, on a
quarterly basis, beginning approximately five years after
purchase. This conversion feature is not reflected in the graph.
The Intermediate Government/Corporate Index is a weighted index comprised
of securities issued 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 in publicly
issued debt outstanding. The Index 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 Index may differ substantially
from the securities in the Fund's portfolio. The Intermediate
Government/Corporate Index is not the only index that may be used
to characterize performance of bond funds and other indexes may
portray different comparative performance.
<PAGE>
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852
Internet Address:
http:\\www.prudential.com
(LOGO)
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
Distributor
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 Auditors
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
This report is not authorized for distribution to prospective
investors unless preceded or accompanied by a current prospectus.
743924102 MF140E
743924201 Cat. #444113B
743924300
