(ICON)
Prudential
Structured
Maturity
Fund, Inc.
- -------------------
Income Portfolio
SEMI
ANNUAL
REPORT
June 30, 1997
(LOGO)
<PAGE>
Prudential Structured Maturity Fund, Inc.
Income Portfolio
Performance At A Glance.
An expanding economy nudged interest rates higher
over the six months ended
June 30, making conditions less than ideal for
investing in bonds. But at the
same time, inflation remained subdued and
corporate profits climbed. So by
selling U.S. Treasuries and buying corporate bonds
that offered higher yields
and better price appreciation, your Prudential
Structured Maturity Fund
performed better than the competition.
Cumulative Total Returns1 As of
6/30/97
<TABLE>
<CAPTION>
Six
One Five Since
Months
Year Years Inception2
<S> <C> <C>
<C> <C>
Class A 3.3%
7.9% 33.9% 76.5%
Class B 3.0
7.2 N/A 25.8
Class C 3.0
7.2 N/A 19.2
Class Z 3.5
N/A N/A 18.7
Lipper S-T Inv. Grade
Debt Funds Avg3 2.6
6.6 31.6 ***
</TABLE>
Average Annual Total Returns1
As of 6/30/97
<TABLE>
<CAPTION>
One Five Since
Year Years Inception2
<S>
<C> <C> <C>
Class A
4.4% 5.3% 7.1%
Class B
4.2 N/A 5.2
Class C
6.2 N/A 6.2
</TABLE>
Dividends & Yields As of
6/30/97
<TABLE>
<CAPTION>
Total Dividends
30-Day
Paid for Six Mos.
SEC Yield
<C> <C>
<C>
Class A $0.35
5.89%
Class B $0.32
5.43
Class C $0.32
5.43
Class Z $0.36
6.19
</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 Investments 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% for
Class A shares and a
four-year, declining 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 automatically convert to Class A shares on
a quarterly basis, after
approximately seven years. Class Z shares do not
carry sales charges or
distribution fees. Since Class Z shares have been
in existence less than one
year, no average annual total returns are
presented.
2Inception dates: 9/1/89 Class A; 12/9/92 Class B;
8/1/94 Class C; 12/16/96
Class Z.
3The Lipper Short-Term Investment Grade Debt
average includes all funds in each
category for six months, one and five years since
inception of the Class A
shares on 9/1/89.
*** Lipper Since Inception returns are: Class A,
66.7%; Class B, 27.3%; Class
C, 18.7%; and Class Z, 2.7%.
How Investments Compared.
(As of 6/30/97)
(CHART)
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 returns for several Lipper mutual
fund categories to show you
that reaching for higher returns means tolerating
more risk. The greater the
risk, the larger the potential reward or loss. In
addition, we've included
historical 20-year average annual returns. These
returns assume the
reinvestment of dividends.
U.S. Growth Funds will fluctuate a great deal.
Investors have received higher
historical total returns from stocks than from
most other investments. Smaller
capitalization stocks offer greater potential for
long-term growth but may be
more volatile than larger capitalization stocks.
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.
General Municipal Debt Funds invest in bonds
issued by state governments, state
agencies and/or municipalities. This investment
provides income that is usually
exempt from federal and state income taxes.
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 (PHOTO)
Portfolio
Manager's Report
The Prudential Structured Maturity Fund -- Income
Portfolio features a fixed or
laddered maturity format where assets are
allocated evenly among six maturity
ranges or rungs of from one to six years. Within
this structure, your Fund
seeks high current income consistent with the
preservation of principal by
primarily investing in corporate bonds, government
bonds and U.S.
dollar-denominated "Yankee bonds" of foreign
corporations or governments.
There can be no assurance that the Fund will
achieve its investment objective.
What Are Yankee Bonds?
Yankee bonds are U.S. dollar denominated bonds
issued by foreign corporations
and governments. Because they are issued in U.S.
dollars, these securities
carry less currency risk for U.S. investors than
foreign bonds issued in
foreign currencies. They also represent one way
your Fund diversifies in the
U.S. bond market. On June 30, 1997, about 21% of
your Fund was invested in
these bonds.
Strategy Session.
- --------------------------------------------------
- -----------------------------
Corporates
Looked Good . . .
In early 1997, investors began to push bond yields
higher and prices lower.
They were concerned that the Federal Reserve might
increase the Federal Funds
rate (what banks charge each other to borrow money
overnight) to keep a robust
economy from reigniting inflation. The economy
expanded at a brisk 4.9%
annualized pace in the first quarter, powered
partly by a healthy job market
and solid retail sales. In March, the central bank
raised the Federal Funds
rate by a quarter percentage point to 5.5%, the
first increase in two years.
Portfolio Breakdown.
Expressed as a percentage of
total investments as of 6/30/97.
(CHART)
Initially, yields continued to climb as many
investors thought the first
Federal Reserve move would be followed by another.
But it was not to be.
Economic growth slowed in the second quarter,
inflation remained tame and as a
result, bond yields fell while prices rose.
. . . Very Good.
The combination of an expanding economy with
subdued inflation boosted
corporate earnings and profitability, making
corporate bonds more attractive.
Then too, with the yield on the average 30-year
Treasury bond hovering in a
somewhat narrow range of 6.50% to 7.15% over the
past six months, investors
sought corporate bonds because they offered higher
yields than Treasuries.
As a result, we sold Treasuries down to 2% of
total investments as of June 30,
1997 from 25% on December 31, 1996. We used the
proceeds to increase our
corporate bond holdings to 76% of total
investments as of June 30, 1997. This
was a wise choice as corporate bonds posted a 3.1%
total return over the past
six months compared with 2.6% on Treasuries,
according to Lehman Brothers.
<PAGE>
What Went Well.
- --------------------------------------------------
- ----
Our Stars.
Careful selection of bonds that offer competitive
yields along with potential
for improved credit quality and price appreciation
enhanced the performance of
your Fund. Among the luminaries in the portfolio
were U.S. corporate bonds and
bonds issued by South American governments.
- - Bonds of Tele-Communications Inc. (TCI)
appreciated in value more than
Treasuries as its financial position improved.
TCI has created partnerships
with other cable companies that enabled it to
reduce the amount of debt on
its balance sheet.
- - The past six months were a good time to own
bonds issued by Federated
Department Stores. Major credit rating agencies
upgraded the company's debt
ratings citing among other things its improving
financial position as well
as the successful integration of acquisitions
R.H. Macy & Co. and Broadway
Stores.
- - Recent positive developments helped bonds issued
by the Republic of
Argentina gain. After a recession in 1995,
continued strong economic growth
has boosted investor confidence in Argentina's
ability to pay interest and
principal to bondholders. In April, a major U.S.
credit rating agency
upgraded Argentina's sovereign debt risk rating.
- - Similarly, Venezuelan bonds fared well as the
government embarked upon a
program that included privatizing state-owned
enterprises and enacting labor
reforms. The government was enriched this year
by windfall gains from higher
oil prices in late 1996. In June, a major U.S.
credit rating agency also
upgraded Venezuela's sovereign debt risk rating.
And Not So Well.
- --------------------------------------------------
- ----
Viacom Bonds Fall.
Viacom's decision to sell its 10 radio stations to
Evergreen Media cheered
bondholders in February because Viacom planned to
use the more than $1 billion
in proceeds to reduce its debt. After the
announcement, the worldwide
entertainment and publishing conglomerate's bonds
gained. We took advantage of
the price gains by taking profits on some of our
Viacom holdings. In hindsight,
we wish we had sold all of them because the bonds
later declined in value amid
concern about plunging profits at Blockbuster
Entertainment Group, a Viacom
subsidiary.
Five Largest
Holdings.
5.6% First USA Bank
Banking
5.6% Salomon, Inc.
Financial Services
5.5% Republic of Venezuela
Foreign Government
5.5% Republic of Argentina
Foreign Government
5.4% Tele-Communications Inc.
Media
Expressed as a percentage of total investments as
of 6/30/97.
Looking Ahead.
- --------------------------------------------------
- ----
Although bonds issued by the governments of
Argentina and Venezuela have
chalked up impressive gains, we believe the
potential for further price
appreciation is limited. With this in mind, we
took profits on all of our
Argentinean and Venezuelan bonds after the
reporting period ended. We are
concerned about upcoming elections in both
countries. Argentinean congressional
elections this October could result in increased
government spending as the
incumbent party tries to hold on to power.
Similarly, the pace of reforms in
Venezuela may slow as politicians focus on winning
key elections scheduled for
1998.
1
<PAGE>
President's Letter
August 4, 1997
- --------------------------------------------------
- -----------------------------
(PHOTO)
Dear Shareholder:
With the midpoint of 1997 behind us, I'm pleased
to report that the recent news
from the financial markets has been decidedly
upbeat. The Dow Jones Industrial
Average has gained more than 20% through the end
of June, while lower long-term
interest rates have made bonds an attractive
investment.
This stands in contrast to April when the Dow fell
10% from a record high on
fears of higher interest rates and surging
inflation. Interest rates have since
fallen as the economy slowed and the Dow has
reached several new highs.
The market swings we've seen this year illustrate
the importance of "staying
the course" to your financial goal. We realize
that maintaining investment
discipline when faced with market uncertainty
isn't easy. Here are some
thoughts that may help:
- - Keep Your Expectations Realistic. The best
investors know that financial
markets rise and fall -- and so too, will the
value of their investments.
Over time, however, stocks have been shown to
produce very attractive returns
that were well ahead of inflation. And where
income is the primary goal,
bonds have also provided attractive returns.
- - Remember Your Time Horizon. If your investment
goals are long term (several
years or more), so should your time horizon.
During this period, it's not
unusual for stocks and bonds to experience
several periods of market
uncertainty.
- - We're On Your Side. Your Prudential Securities
Financial Advisor or Pruco
Securities Registered Representative can help
you understand what's happening
in the financial markets. They can assist you in
making informed decisions
based upon a thorough knowledge of your
financial needs and long-term goals.
Call him or her today.
Thank you for your continued confidence in
Prudential mutual funds. We'll do
everything we can to keep you informed and to earn
your trust.
Sincerely,
Brian M. Storms
President, Prudential Mutual Funds & Annuities
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.
(See D below.)
- --------------------------------------------------
- ------------------------------
Portfolio of Investments as of
PRUDENTIAL STRUCTURED MATURITY FUND
June 30, 1997 (Unaudited) INCOME
PORTFOLIO
- --------------------------------------------------
- ----------
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Moody's Principal
Rating Amount Description
Value (Note
(Unaudited) (000) 1)
- --------------------------------------------------
- ----------
<S> <C> <C>
<C>
5-6 YEARS--20.1%
B1 $ 8,827 Republic of Argentina,
FBR,
(Foreign Government)
(Average Life 5.16
years)D
6.75%, 3/31/05
$ 8,297,380
Ba2 9,000 Republic of Venezuela,
(Foreign Government)
(Average Life 5.71
years)D
6.75%, 12/18/07
8,347,500
Ba1 8,000 Tele-Communications,
Inc.,
(Media)
8.25%, 1/15/03
8,278,640
Ba2 6,000 Viacom Inc.,
(Media)
6.75%, 1/15/03
5,769,600
- -------------
30,693,120
- --------------------------------------------------
- ----------
4-5 YEARS--16.9%
Baa1 4,800 Comdisco Inc.,
(Leasing)
6.375%, 11/30/01
4,698,672
Baa2 6,100 Continental
Cablevision,
Inc.,
(Media)
8.50%, 9/15/01
6,442,942
Baa3 3,575 Fort Howard Corp.,
(Paper Mills)
8.25%, 2/1/02
3,735,875
Baa1 7,000 Norfolk Southern Corp.,
(Transportation)
6.95%, 5/1/02
7,051,100
A3 4,000 Rite Aid Corp.,
(Retail)
6.70%, 12/15/01
3,969,640
- -------------
25,898,229
3-4 YEARS--14.7%
Baa2 $ 7,000 Federated Department
Stores, Inc.,
(Retail)
10.00%, 2/15/01
$ 7,657,790
Baa3 3,700 Fort Howard Corp.,
(Paper Mills)
9.25%, 3/15/01
3,940,500
Baa1 8,500 Salomon, Inc.,
(Financial Services)
6.59%, 2/21/01
8,401,315
Aaa 2,500 United States Treasury
Note,
6.25%, 4/30/01
2,492,975
- -------------
22,492,580
- --------------------------------------------------
- ----------
2-3 YEARS--14.7%
Baa3 2,000 Banco de Comercio,
(Banking) (Colombia)
8.625%, 6/2/00
2,065,000
Baa3 8,000 News America Holdings,
Inc.,
(Media)
7.50%, 3/1/00
8,158,880
Baa3 3,000 Republic of Colombia,
(Foreign Government)
8.75%, 10/6/99
3,137,610
Ba1 8,000 Time Warner, Inc.,
(Media)
7.95%, 2/1/00
8,224,720
Aaa 1,000 United States Treasury
Note,
5.875%, 6/30/00
990,310
- -------------
22,576,520
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Moody's Principal
Rating Amount Description
Value (Note
(Unaudited) (000) 1)
- --------------------------------------------------
- ----------
1-2 YEARS--16.3%
Baa2 $ 3,000 Crane Co.,
(Industrial Services)
7.25%, 6/15/99
$ 3,044,340
Baa2 1,000 Federal Express Corp.,
(Consumer Services)
10.05%, 6/15/99
1,061,990
A3 6,000 Kansallis-Osake-Pankki
Bank,
(Banking) (Finland)
9.75%, 12/15/98
6,271,500
Baa1 7,000 Lehman Brothers
Holdings,
Inc.,
(Financial Services)
6.84%, 9/25/98
7,050,750
Aaa 7,500 Merck and Co.
(Pharmaceuticals)
5.76%, 5/3/99
7,499,475
- -------------
24,928,055
- --------------------------------------------------
- ----------
WITHIN 1 YEAR--16.1%
Baa3 3,000 Banco Ganadero S.A.,
(Banking) (Colombia)
9.75%, 8/26/99
3,142,500
A2 2,000 Bank One Credit Card
Trust,
(Asset Backed)
(Average Life .96
year)D
7.75%, 12/15/99
2,015,000
Baa2 6,500 Enterprise Rent-A-Car
Finance Co.,
(Financial Services)
7.875%, 3/15/98
6,573,385
Baa3 8,400 First USA Bank,
(Banking)
6.01641%, 1/13/98
8,403,864
Baa2 $ 4,200 Transco Energy Co.,
(Utilities)
9.125%, 5/1/98
$ 4,300,128
226 Joint Repurchase
Agreement
Account, (Note 5)
5.955%, 7/1/97
226,000
- -------------
24,660,877
- --------------------------------------------------
- ----------
Total Investments--98.8%
(cost $150,363,763;
Note
4)
151,249,381
Other assets in excess
of
liabilities--1.2%
1,853,314
- -------------
Net Assets--100%
$ 153,102,695
- -------------
- -------------
</TABLE>
- ---------------
D Asset-backed securities, mortgage-backed
securities, as well as certain other
securities are categorized based on such
securities' average life. Average
life represents the number of years required for
one half of a debt to be
retired through a sinking fund, serial maturity,
or amortizing payments.
The industry classification of portfolio holdings
and other net assets shown as
a percentage of net assets as of June 30, 1997
were as follows:
<TABLE>
<S>
<C>
Media.............................................
.... 24.1%
Financial
Services....................................
14.4
Banking...........................................
.... 13.0
Foreign
Government....................................
12.9
Retail............................................
.... 7.6
Industrial
Services................................... 7.0
Pharmaceuticals...................................
.... 4.9
Transportation....................................
.... 4.6
Leasing...........................................
.... 3.1
Utilities.........................................
.... 2.8
U.S. Treasury
Notes................................... 2.3
Asset
Backed..........................................
1.3
Consumer
Services.....................................
.7
Repurchase
Agreement.................................. .1
Other assets in excess of
liabilities................. 1.2
- -----
100.0%
- -----
- -----
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 4
<PAGE>
Statement of Assets and Liabilities
PRUDENTIAL STRUCTURED MATURITY FUND
(Unaudited) INCOME
PORTFOLIO
- --------------------------------------------------
- ------------------------------
<TABLE>
Assets
June 30, 1997
<S>
<C>
Investments, at value (cost
$150,363,763).....................................
.............................. $151,249,381
Interest
receivable........................................
.................................................
2,863,059
Receivable for Fund shares
sold..............................................
............................... 59,330
Deferred expenses and other
assets............................................
.............................. 5,366
- -------------
Total
assets............................................
.................................................
154,177,136
- -------------
Liabilities
Bank
overdraft.........................................
..................................................
... 27,212
Payable for Fund shares
reacquired........................................
..................................
546,588
Dividends
payable...........................................
................................................
215,248
Accrued
expenses..........................................
..................................................
176,557
Distribution fee
payable...........................................
.........................................
57,544
Management fee
payable...........................................
...........................................
51,292
- -------------
Total
liabilities.......................................
.................................................
1,074,441
- -------------
Net
Assets............................................
..................................................
.... $153,102,695
- -------------
- -------------
Net assets were comprised of:
Common stock, at
par...............................................
...................................... $
134,540
Paid-in capital in excess of
par...............................................
.......................... 162,010,618
- -------------
162,145,158
Accumulated net realized loss on
investments.......................................
...................... (9,928,081)
Net unrealized appreciation on
investments.......................................
........................ 885,618
- -------------
Net assets at June 30,
1997..............................................
...................................
$153,102,695
- -------------
- -------------
Class A:
Net asset value and redemption price per share
($71,092,474 / 6,245,882 shares of common
stock issued and
outstanding)...............................
$11.38
Maximum sales charge (3.25% of offering
price)............................................
............... .38
Maximum offering price to
public............................................
............................. $11.76
Class B:
Net asset value, offering price and redemption
price per share
($80,395,766 / 7,066,192 shares of common
stock issued and
outstanding)...............................
$11.38
Class C:
Net asset value, offering price and redemption
price per share
($1,264,232 / 111,117 shares of common stock
issued and
outstanding)..................................
$11.38
Class Z:
Net asset value, offering price and redemption
price per share
($350,223 / 30,775 shares of common stock
issued and
outstanding).....................................
$11.38
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 5
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
INCOME PORTFOLIO
Statement of Operations (Unaudited)
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Six Months
Ended
Net Investment Income
June 30, 1997
<S>
<C>
Income
Interest...................................
$ 6,028,087
-
- ------------
Expenses
Distribution fee--Class A..................
36,974
Distribution fee--Class B..................
325,250
Distribution fee--Class C..................
4,957
Management fee.............................
324,215
Transfer agent's fees and expenses.........
141,000
Reports to shareholders....................
64,500
Registration fees..........................
42,000
Custodian's fees and expenses..............
38,000
Audit fee..................................
19,000
Directors' fees............................
15,000
Legal fees.................................
7,500
Miscellaneous..............................
8,748
-
- ------------
Total expenses..........................
1,027,144
-
- ------------
Net investment income.........................
5,000,943
-
- ------------
Realized and Unrealized Gain (Loss)
on Investments
Net realized gain on investment
transactions...............................
417,333
Net change in unrealized depreciation of
investments................................
(218,375)
-
- ------------
Net gain on investments.......................
198,958
-
- ------------
Net Increase in Net Assets
Resulting from Operations.....................
$ 5,199,901
-
- ------------
-
- ------------
</TABLE>
PRUDENTIAL STRUCTURED MATURITY FUND
INCOME PORTFOLIO
Statement of Changes in Net Assets (Unaudited)
- --------------------------------------------------
- ----------
<TABLE>
<CAPTION>
Six Months
Ended
Year Ended
Increase (Decrease) June 30,
December 31,
in Net Assets 1997
1996
<S> <C>
<C>
Operations
Net investment income....... $ 5,000,943
$ 11,370,833
Net realized gain (loss) on
investment
transactions............. 417,333
(3,071,885)
Net change in unrealized
appreciation on
investments.............. (218,375)
(1,511,234)
-------------
- -----------------
Net increase in net assets
resulting from
operations............... 5,199,901
6,787,714
-------------
- -----------------
Dividends (Note 1)
Dividends from net
investment income
Class A.................. (2,412,693)
(5,213,753)
Class B.................. (2,545,780)
(6,084,170)
Class C.................. (38,831)
(72,909)
Class Z.................. (3,639)
(1)
-------------
- -----------------
(5,000,943)
(11,370,833)
-------------
- -----------------
Dividends in excess of net
investment income
Class A.................. --
(136,132)
Class B.................. --
(166,601)
Class C.................. --
(2,408)
Class Z.................. (297)
(1)
-------------
- -----------------
(297)
(305,142)
-------------
- -----------------
Fund share transactions
(Net of share conversions) (Note 6)
Net proceeds from shares
subscribed............... 10,165,397
25,615,019
Net asset value of shares
issued to shareholders in
reinvestment of dividends
and distributions ....... 3,233,439
7,793,568
Cost of shares reacquired... (33,413,145)
(65,822,535)
-------------
- -----------------
Net decrease in net assets
from Fund share
transactions............. (20,014,309)
(32,413,948)
-------------
- -----------------
Total decrease................. (19,815,648)
(37,302,209)
Net Assets
Beginning of period............ 172,918,343
210,220,552
-------------
- -----------------
End of period.................. $ 153,102,695
$ 172,918,343
-------------
- -----------------
-------------
- -----------------
</TABLE>
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 6
<PAGE>
Notes to Financial Statements PRUDENTIAL
STRUCTURED MATURITY FUND
(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. 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
Prudential Investments Fund Management
LLC ('PIFM'). Pursuant to this agreement, PIFM has
responsibility for all
investment advisory services and supervises the
subadviser's performance of such
services. PIFM 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. PIFM
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 PIFM 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 Securities Incorporated
('PSI'), which acts as the distributor of the
Class A, Class B, Class C and
Class Z shares of the Fund. The Fund compensates
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 for Class
- --------------------------------------------------
- ------------------------------
7
<PAGE>
Notes to Financial Statements PRUDENTIAL
STRUCTURED MATURITY FUND
(Unaudited) INCOME
PORTFOLIO
- --------------------------------------------------
- ------------------------------
A, B and C shares are accrued daily and payable
monthly. No distribution or
service fees are paid to PSI as distributor of the
Class Z shares of the Fund.'
Pursuant to the Class A, B and C Plans, the Fund
compensates PSI for the year
ended December 31, 1996 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, 1996.
PSI has advised the Portfolio that it has received
approximately $16,400 in
front-end sales charges resulting from sales of
Class A shares during the six
months ended June 30, 1997. From these fees, PSI
paid such sales charges to
Pruco Securities Corporation, an affiliated broker-
dealer, which in turn paid
commissions to salespersons and incurred other
distribution costs.
PSI advised the Portfolio that for the six months
ended June 30, 1997, it
received approximately $95,000 and $700 in
contingent deferred sales charges
imposed upon certain redemptions by Class B and
Class C shareholders,
respectively.
PSI, PIFM and PIC are indirect, wholly-owned
subsidiaries of The Prudential
Insurance Company of America.
The Fund, along with other affiliated registered
investment companies (the
'Funds'), entered into a credit agreement (the
'Agreement') on December 31, 1996
with an unaffiliated lender. The maximum
commitment under the Agreement is
$200,000,000. The Agreement expires on December
30, 1997. Interest on any such
borrowings outstanding will be at market rates.
The purpose of the Agreement is
to serve as an alternative source of funding for
capital share redemptions. The
Fund has not borrowed any amounts pursuant to the
Agreement as of December 31,
1996. The Funds pay a commitment fee at an annual
rate of .055 of 1% on the
unused portion of the credit facility. The
commitment fee is accrued and paid
quarterly on a pro-rata basis by the Funds.
- --------------------------------------------------
- ----------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a
wholly-owned subsidiary of PIFM,
serves as the Portfolio's transfer agent. During
the six months ended June 30,
1997, the Portfolio incurred fees of approximately
$90,600 for the services of
PMFS. As of June 30, 1997, approximately $17,700
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, 1997 were
$183,582,753 and $202,063,256,
respectively.
The federal income tax basis of the Portfolio's
investments at June 30, 1997 was
$150,363,763 and accordingly, net unrealized
appreciation for federal income tax
purposes was $885,618 (gross unrealized
appreciation--$1,466,684; gross
unrealized depreciation--$581,066).
For federal income tax purposes, the Portfolio had
a capital loss carryforward
as of December 31, 1996 of approximately
$10,329,900, of which $7,180,600
expires in 2002 and $3,149,300 expires in 2004.
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,
1997, the Portfolio had a .03% undivided interest
in the repurchase agreements
in the joint account. The undivided interest for
the Portfolio represented
$226,000 in principal amount. As of such date,
each repurchase agreement in the
joint account and the collateral therefor was as
follows:
Dean Witter Reynolds, Inc., 5.90%, in the
principal amount of $100,000,000,
repurchase price $100,016,389, due 7/1/97. The
value of the collateral including
accrued interest was $102,000,893.
Deutsche Bank Securities Corp., 5.95%, in the
principal amount of $184,000,000,
repurchase price $184,030,411, due 7/1/97. The
value of the collateral including
accrued interest was $187,680,112.
J.P. Morgan Securities, 6.00%, in the principal
amount of $170,000,000,
repurchase price $170,028,333, due 7/1/97. The
value of the collateral including
accrued interest was $173,400,988.
- --------------------------------------------------
- ------------------------------
8
<PAGE>
Notes to Financial Statements PRUDENTIAL
STRUCTURED MATURITY FUND
(Unaudited) INCOME
PORTFOLIO
- --------------------------------------------------
- ------------------------------
SBC Warburg, Ltd., 5.95%, in the principal amount
of $227,000,000, repurchase
price $227,037,518, due 7/1/97. The value of the
collateral including accrued
interest was $232,448,194.
- --------------------------------------------------
- ----------
Note 6. Capital
The Portfolio offers Class A, Class B, Class C and
Class Z 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. Effective December 16, 1996, the Fund
commenced offering Class Z shares.
Class Z shares are not subject to any sales or
redemption charge and are offered
exclusively for sale to a limited group of
investors.
There are 250 million authorized shares of $.01
par value common stock, divided
into four classes, designated Class A, Class B,
Class C and Class Z common
stock, each of which consists of 62,500,000
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, 1997:
Shares sold........................... 322,785
$ 3,657,553
Shares issued in reinvestment of
dividends........................... 139,167
1,578,297
Shares reacquired.....................
(1,205,620) (13,653,746)
----------
- ------------
Net decrease in shares outstanding
before conversion...................
(743,668) (8,417,896)
Shares issued upon conversion from
Class B............................. 210,311
2,388,434
----------
- ------------
Net decrease in shares outstanding....
(533,357) $ (6,029,462)
----------
- ------------
----------
- ------------
Year ended December 31, 1996:
Shares sold........................... 1,150,292
$ 13,199,197
Shares issued in reinvestment of
dividends........................... 311,003
3,533,398
Shares reacquired.....................
(2,636,204) (30,074,596)
----------
- ------------
Net decrease in shares outstanding
before conversion...................
(1,174,909) (13,342,001)
Shares issued upon conversion from
Class B............................. 305,819
3,462,886
----------
- ------------
Net decrease in shares outstanding....
(869,090) $ (9,879,115)
----------
- ------------
----------
- ------------
<CAPTION>
Class B Shares
Amount
- -------------------------------------- ----------
- ------------
<S> <C>
<C>
Six months ended June 30, 1997:
Shares sold........................... 494,387
$ 5,607,584
Shares issued in reinvestment of
dividends........................... 142,901
1,619,802
Shares reacquired.....................
(1,679,746) (19,038,926)
----------
- ------------
Net decrease in shares outstanding
before conversion...................
(1,042,458) (11,811,540)
Shares reacquired upon conversion into
Class A.............................
(210,311) (2,388,434)
----------
- ------------
Net decrease in shares outstanding....
(1,252,769) $(14,199,974)
----------
- ------------
----------
- ------------
Year ended December 31, 1996:
Shares sold........................... 1,010,371
$ 11,499,424
Shares issued in reinvestment of
dividends........................... 369,545
4,198,055
Shares reacquired.....................
(3,089,496) (35,143,225)
----------
- ------------
Net decrease in shares outstanding
before conversion...................
(1,709,580) (19,445,746)
Shares reacquired upon conversion into
Class A.............................
(305,885) (3,462,886)
----------
- ------------
Net decrease in shares outstanding....
(2,015,465) $(22,908,632)
----------
- ------------
----------
- ------------
Class C
- --------------------------------------
Six months ended June 30, 1997:
Shares sold........................... 15,210
$ 171,803
Shares issued in reinvestment of
dividends........................... 2,848
32,282
Shares reacquired.....................
(29,881) (338,453)
----------
- ------------
Net increase in shares outstanding....
(11,823) $ (134,368)
----------
- ------------
----------
- ------------
Year ended December 31, 1997:
Shares sold........................... 80,524
$ 916,198
Shares issued in reinvestment of
dividends........................... 5,471
62,115
Shares reacquired.....................
(53,376) (604,714)
----------
- ------------
Net increase in shares outstanding.... 32,619
$ 373,599
----------
- ------------
----------
- ------------
Class Z
- --------------------------------------
Six months ended June 30, 1997:
Shares sold........................... 64,170
$ 728,457
Shares issued in reinvestment of
dividends........................... 269
3,058
Shares reacquired.....................
(33,682) (382,020)
----------
- ------------
Net increase in shares outstanding.... 30,757
$ 349,495
----------
- ------------
----------
- ------------
Year ended December 31, 1996:
Shares sold........................... 18
$ 200
----------
- ------------
----------
- ------------
</TABLE>
- --------------------------------------------------
- ------------------------------
9
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
Financial Highlights (Unaudited) INCOME
PORTFOLIO
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class A
-----
- --------------------------------------------------
- -------------------
<S> <C>
<C> <C> <C> <C>
<C>
Six
Months
ended Year ended December
31,
June
30, ----------------------------------------
- ------------------
1997 1996 1995 1994
1993 1992
-----
- ------ ------- ------- -------- --
- ------ --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..... $
11.36 $ 11.63 $ 10.97 $ 11.78 $
11.79 $ 12.13
-----
- ------ ------- ------- -------- --
- ------ --------
Income from investment operations:
Net investment income....................
.35 .73 .73 .65
.71 .86(b)
Net realized and unrealized gain (loss)
on investment transactions............
.02 (.25) .66 (.80)
.12 (.08)
-----
- ------ ------- ------- -------- --
- ------ --------
Total from investment operations......
.37 .48 1.39 (.15)
.83 .78
-----
- ------ ------- ------- -------- --
- ------ --------
Less distributions:
Dividends from net investment income.....
(.35) (.73) (.73) (.65)
(.71) (.86)
Dividends in excess of net investment
income................................ --
(.02) -- (.01) --
- --
Distributions from net realized gains.... --
- -- -- -- (.13)
(.26)
-----
- ------ ------- ------- -------- --
- ------ --------
Total distributions...................
(.35) (.75) (.73) (.66)
(.84) (1.12)
-----
- ------ ------- ------- -------- --
- ------ --------
Net asset value, end of period........... $
11.38 $ 11.36 $ 11.63 $ 10.97 $
11.78 $ 11.79
-----
- ------ ------- ------- -------- --
- ------ --------
-----
- ------ ------- ------- -------- --
- ------ --------
TOTAL RETURN(a):.........................
3.33% 4.32% 13.12% (1.16)%
7.19% 6.67%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)..........
$71,092 $77,031 $88,982 $ 91,680
$119,449 $109,828
Average net assets (000).................
$74,560 $81,745 $89,500 $106,737
$114,728 $107,937
Ratios to average net assets:
Expenses, including distribution
fees...............................
.91%(c) .86% .82% .94%
.80% .70%(b)
Expenses, excluding distribution
fees...............................
.81%(c) .76% .72% .84%
.70% .60%(b)
Net investment income.................
6.53%(c) 6.38% 6.57% 5.88%
5.92% 7.15%(b)
For Class A, B, C and Z shares:
Portfolio turnover....................
116% 170% 160% 123%
137% 91%
</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.
(c) Annualized.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 10
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
Financial Highlights (Unaudited) INCOME
PORTFOLIO
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class B
- --------------------------------------------------
- ------------------------------
<S>
<C> <C> <C> <C>
<C> <C>
December 9,
Six Months
1992(c)
ended Year ended December 31,
Through
June 30, -----------------------------------
- ------------ December 31,
1997 1996 1995 1994
1993 1992
- ----------- -------- -------- --------
- -------- -------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..........
$ 11.36 $ 11.63 $ 10.97 $ 11.78
$ 11.79 $ 11.79
- ----------- -------- -------- --------
- -------- ------
Income from investment operations:
Net investment income.........................
.32 .65 .66 .58
.62 .04
Net realized and unrealized gain (loss) on
investment transactions....................
.02 (.25) .66 (.80)
.12 --
- ----------- -------- -------- --------
- -------- ------
Total from investment operations...........
.34 .40 1.32 (.22)
.74 .04
- ----------- -------- -------- --------
- -------- ------
Less distributions:
Dividends from net investment income..........
(.32) (.65) (.66) (.58)
(.62) (.04)
Dividends in excess of net investment
income.....................................
- -- (.02) -- (.01)
- -- --
Distributions from net realized gains.........
- -- -- -- --
(.13) --
- ----------- -------- -------- --------
- -------- ------
Total distributions........................
(.32) (.67) (.66) (.59)
(.75) (.04)
- ----------- -------- -------- --------
- -------- ------
Net asset value, end of period................
$ 11.38 $ 11.36 $ 11.63 $ 10.97
$ 11.78 $ 11.79
- ----------- -------- -------- --------
- -------- ------
- ----------- -------- -------- --------
- -------- ------
TOTAL RETURN(a):..............................
3.01% 3.64% 12.40% (1.83)%
6.38% .32%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...............
$80,396 $94,490 $120,188 $130,258
$123,306 $11,981
Average net assets (000)......................
$87,452 $106,224 $125,230 $134,985
$69,314 $5,474
Ratios to average net assets:
Expenses, including distribution fees......
1.56%(b) 1.51% 1.47% 1.66%
1.55% 1.67%(b)
Expenses, excluding distribution fees......
.81%(b) .76% .72% .84%
.70% .82%(b)
Net investment income......................
5.87%(b) 5.73% 5.92% 5.17%
5.08% 6.31%(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.
(f) Figures are actual and are not rounded to the
nearest thousand.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 11
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
Financial Highlights (Unaudited) INCOME
PORTFOLIO
- --------------------------------------------------
- ------------------------------
<TABLE>
<CAPTION>
Class C Class Z
- --------------------------------------------------
- -----------
August 1,
Six Months Year ended 1994(d)
Six Months
ended December 31, Through
ended
June 30, ----------------- December 31,
June 30,
1997 1996 1995 1994
1997
- ----------- ------ ------ ------------
- -----------
<S>
<C> <C> <C> <C>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..........
$ 11.36 $11.63 $10.97 $11.30
$ 11.37
- ----- ------ ------ -----
- -----
Income from investment operations:
Net investment income.........................
.32 .65 .66 .23
.34
Net realized and unrealized gain (loss) on
investment transactions....................
.02 (.25) .66 (.32)
.03
- ----- ------ ------ -----
- -----
Total from investment operations...........
.34 .40 1.32 (.09)
.37
- ----- ------ ------ -----
- -----
Less distributions:
Dividends from net investment income..........
(.32) (.65) (.66) (.23)
(.34)
Dividends in excess of net investment
income.....................................
- -- (.02) -- (.01)
(.02)
Distributions from net realized gains.........
- -- -- -- --
- --
- ----- ------ ------ -----
- -----
Total distributions........................
(.32) (.67) (.66) (.24)
(.36)
- ----- ------ ------ -----
- -----
Net asset value, end of period................
$ 11.38 $11.36 $11.63 $10.97
$ 11.38
- ----- ------ ------ -----
- -----
- ----- ------ ------ -----
- -----
TOTAL RETURN(a):..............................
3.01% 3.64% 12.40% (0.68)%
3.46%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...............
$1,264 $1,396 $1,050 $371
$350
Average net assets (000)......................
$1,333 $1,270 $667 $192
$39
Ratios to average net assets:
Expenses, including distribution fees......
1.56%(b) 1.51% 1.47% 1.90%(b)
.81%(b)
Expenses, excluding distribution fees......
.81%(b) 76% .72% 1.15%(b)
.81%(b)
Net investment income......................
5.88%(b) 5.73% 5.92% 5.30%(b)
6.63%(b)
<CAPTION>
December 16,
1996(e)
Through
December 31,
1996
--
- ----------
<S>
<C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..........
$11.41
- -----
Income from investment operations:
Net investment income.........................
.09
Net realized and unrealized gain (loss) on
investment transactions....................
(.02)
- -----
Total from investment operations...........
.07
- -----
Less distributions:
Dividends from net investment income..........
(.09)
Dividends in excess of net investment
income.....................................
(.02)
Distributions from net realized gains.........
- --
- -----
Total distributions........................
(.11)
- -----
Net asset value, end of period................
$11.37
- -----
- -----
TOTAL RETURN(a):..............................
.59%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)...............
$200(f)
Average net assets (000)......................
$200(f)
Ratios to average net assets:
Expenses, including distribution fees......
.76%(b)
Expenses, excluding distribution fees......
.76%(b)
Net investment income......................
6.48%(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.
(d) Commencement of offering of Class C shares.
(e) Commencement of offering of Class Z shares.
(f) Figures are actual and are not rounded to the
nearest thousand.
- --------------------------------------------------
- ------------------------------
See Notes to Financial Statements. 12
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
http://www.prudential.com
Directors
Edward D. Beach
Eugene C. Dorsey
Delayne Dedrick Gold
Robert F. Gunia
Harry A. Jacobs, Jr.
Donald D. Lennox
Mendel A. Melzer
Thomas T. Mooney
Thomas H. O'Brien
Richard A. Redeker
Nancy H. Teeters
Louis A. Weil, III
Officers
Richard A. Redeker, President
Thomas A. Early, Vice President
Grace C. Torres, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07102-3777
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 LLC
P.O. Box 15005
New Brunswick, NJ 08906
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Shereff, Friedman, Hoffman & Goodman LLP
919 Third Avenue
New York, NY 10022
The views expressed in this report and information
about the Fund's portfolio
holdings are for the period covered by this report
and are subject to change
thereafter.
The accompanying financial statements as of June
30, 1997 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>
(LOGO)
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
BULK RATE
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