<PAGE>
(LOGO)
ANNUAL REPORT
DECEMBER 31, 1999
Prudential
Structured Maturity Fund, Inc.--
Income Portfolio
(GRAPHIC)
<PAGE>
A Message from the Fund's President February 3, 2000
(PHOTO)
Dear Shareholder,
Despite the challenging conditions in many major fixed-income
markets during 1999, Prudential Structured Maturity Fund
provided modest, positive returns for the year that beat
the return of its benchmark, the Lipper Short/Intermediate
Grade Bond Fund Average. The Fund's performance can largely
be attributed to its considerable exposure to U.S. corporate
bonds rated BBB, which performed better, on a relative basis,
than more highly rated corporate debt securities.
The low returns of both the Fund and its Lipper Average
reflect the bearish trend that dominated many major bond
markets in 1999. For example, the U.S. economy continued
to expand at a rapid pace during the year, while the U.S.
stock market set successive records. Because brisk economic
growth can lead to higher inflation, the Federal Reserve
raised its key short-term interest rate three times to slow
the economic expansion. The repeated short-term rate increases
led investors to also demand higher yields on U.S. bonds, which
caused bond prices to decline.
A discussion of developments in the bond markets and a fuller
explanation of the Fund's performance follow.
New Portfolio Management
As a result of the restructuring of our Fixed Income Group
that was discussed in my last report to shareholders, Steven
Kellner was named head of the Corporate Sector team, one of
several formed by the reorganization. Along with Malcolm
Dalrymple (team member not pictured on the following
page), Steve is responsible for the day-to-day management
of the Fund. They work to identify trends in the relative
value of different bond markets, credit quality, and liquidity
in order to capitalize on changing opportunities in the debt
securities markets. Before joining the Corporate Sector team,
Steve and Malcolm managed investment-grade corporate bonds
for the Prudential Insurance General Account.
Thank you for your continued confidence in Prudential mutual
funds.
Sincerely,
John R. Strangfeld
President
Prudential Structured Maturity Fund, Inc.
<PAGE>
Performance Review
Portfolio manager Steven Kellner (Corporate [Sector] Team Leader)
Investment Goals and Style
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 primarily by
investing in investment-grade corporate and government bonds.
There can be no assurance that the Fund will achieve its
investment objective.
1999 was a tough year for many bond markets
Negative sentiment clouded many fixed-income markets
throughout most of 1999. Although some signs of slower
U.S. economic growth emerged in the second half of the
year, the economy remained strong overall, spurring fears of rising
inflation. But other than soaring oil prices, there were few
solid indications that inflationary pressures were building.
Investors remained concerned, however, because the tight
job market and robust consumer demand for goods and services have
historically been factors that can drive inflation higher.
Furthermore, U.S. stock prices continued their dramatic
rally, and the U.S. dollar had weakened against some
currencies so it no longer provided as much protection
against higher import prices or checked demand for U.S. exports.
To keep the economy from overheating and igniting higher
inflation, the Federal Reserve raised the federal funds
rate (what U.S. banks charge each other for overnight
loans) by a quarter of a percentage point in June,
August, and November. These moves pushed the key rate
from 4.75% to 5.50%. The repeated short-term rate hikes
led investors to require higher yields on bonds, which
caused bond prices to fall. When fixed-income markets sell
off, prices of short- and intermediate-term bonds (such
as those held by the Fund) tend to decline less than
prices of longer-term debt securities. Thus, the
intermediate-term component of the Lehman Brothers
Government/ Corporate Bond Index posted
a marginally positive return of 0.39% for the year,
but overall, the Index returned a negative 2.15%.
BBB-rated U.S. corporate bonds benefited the Fund
The Fund provided annual returns that beat its benchmark
Lipper Average and the Index partly because of its large
exposure to corporate bonds rated BBB, which accounted
for nearly 40% of its total investments as of December
31, 1999. These lower-investment-grade corporate bonds
had sold off in 1998, when a global financial crisis led
many investors to sell riskier assets and buy the safest
government securities, such as U.S. Treasuries.
But this "flight to quality" trend reversed as a resurgence
in the global economy boosted investor confidence in riskier
assets. Prices of U.S. corporate bonds also began to rebound,
but they eventually turned lower in 1999 as it became clear
the Fed would repeatedly tighten monetary policy to slow
U.S. economic growth. Because BBB-rated U.S. corporate
bonds had sold off more
<PAGE>
sharply in 1998 than higher-rated
corporate bonds, their prices declined less in 1999.
Therefore, having a considerable exposure to the
BBB-rated credit sector benefited the Fund.
Selling Treasuries and buying corporate bonds also helped
The Fund's overall exposure to U.S. corporate bonds stood at 79%
of its total investments at the end of 1999, up from 71% 12 months
earlier. Meanwhile, Treasuries declined to 17% from 23%. Our shift
in asset allocation enhanced the Fund's returns because U.S.
corporate bonds sold off less than Treasuries in 1999. As noted
earlier, prices of corporate bonds had declined in 1998, which
caused the spreads or differences between the yields of U.S.
corporate bonds and comparable Treasuries to increase that
year. However, these spreads shrank back closer to their
historical norms by the close of 1999, helping U.S.
corporate bonds to perform better than Treasuries,
on a relative basis.
<TABLE>
Performance at a Glance
<CAPTION>
Cumulative Total Returns1 As of 12/31/99
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A 1.72% 36.96% 91.85% (88.01) 98.26% (93.57)
Class B 1.21 32.67 N/A 39.04
Class C 1.21 32.67 N/A 31.77
Class Z 2.07 N/A N/A 17.47
Lipper Short/Int. Inv. Grade Debt Fd. Avg.3 0.89 35.30 88.60 ***
</TABLE>
<TABLE>
Average Annual Total Returns1 As of 12/31/99
<CAPTION>
One Five Ten Since
Year Years Years Inception2
<S> <C> <C> <C> <C>
Class A -1.58% 5.79% 6.38% (6.17) 6.51% (6.26)
Class B -1.79 5.82 N/A 4.78
Class C -0.80 5.60 N/A 5.03
Class Z 2.07 N/A N/A 5.44
</TABLE>
<TABLE>
Distributions and Yields As of 12/31/99
<CAPTION>
Total Distributions 30-Day
Paid for 12 Mos. SEC Yield
<S> <C> <C>
Class A $0.62 5.86%
Class B $0.56 5.55
Class C $0.57 5.50
Class Z $0.65 6.31
</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.
1 Source: Prudential Investments Fund Management LLC and Lipper Inc.
The cumulative total returns do not take into account sales charges.
The average annual total returns do take into account applicable
sales charges. The Fund charges a maximum front-end sales charge
of 3.25% for Class A shares. Class B shares are subject to a
declining contingent deferred sales charge (CDSC) of 3%, 2%,
1%, and 1% for four years. Class B shares will automatically
convert to Class A shares, on a quarterly basis, approximately
five years after purchase. Class C shares are subject to a
front-end sales charge of 1% and a CDSC of 1% for 18 months.
Class Z shares are not subject to a sales charge or distribution
and service (12b-1) fees. Without waiver of management fees
and/or expense subsidization, the Fund's cumulative and
average annual total returns and yields would
have been lower, as indicated in parentheses ( ).
2 Inception dates: Class A, 9/1/89; Class B, 12/9/92;
Class C, 8/1/94; and Class Z, 12/16/96.
3 Lipper average returns are for all funds in each share
class for the one- , five- , and ten-year
periods in the Short/Intermediate Investment Grade Debt
Fund category. The Lipper average is unmanaged.
Short/Intermediate Investment Grade Debt funds
invest at least 65% of their assets in investment-grade
debt issues (rated in top four grades)
with dollar-weighted average maturities of one to five years.
***Lipper Since Inception returns are 94.93% for Class A,
43.58% for Class B, 34.63% for Class C, and 14.95% for
Class Z, based on all funds in each share class.
1
<PAGE>
Review Cont'd.
Y2K anxieties created buying opportunities
A flood of newly issued corporate bonds came to market in
1999. Some companies had rushed to issue fixed-income
securities before the end of the year to avoid any
complications that might arise if computers misread
the year 2000 as 1900 and malfunctioned or shut down.
For a while, the supply of new corporate bonds was so
large that it caused spreads between U.S. corporate
bonds and Treasuries to increase. We took advantage
of this buying opportunity, correctly expecting
spreads to shrink by the end of 1999.
We emphasized higher-yielding debt securities, particularly
in the shorter maturities. These were primarily in REITs
(Real Estate Investment Trusts) such as ERP Operating L.P.;
brokerages such as Lehman Brothers Holdings, Inc.; and
financial services firms such as Finova Capital Corp.
Among our other purchases were bonds of Boise Cascade
Corp., Lear Corp., and CMS Energy Corp.
Looking Ahead
Slower U.S. economic growth
We believe the U.S. economic expansion could lose steam during the
year as the Fed's short-term rate hikes work their way through
the economy. Moderating economic growth might benefit bonds in
two ways--by stabilizing market interest rates and causing the
U.S. stock market rally to falter, which could prompt some
equity investors to turn to fixed-income securities.
Five Largest Issuers
Expressed as a percentage of net assets as of 12/31/99
U.S. Treasury Obligations 16.8%
Boise Cascade Corp. 4.4
Camden Property Trust 4.4
First Industrial L.P. 4.3
ERP Operating L.P. 3.9
Portfolio Composition
Expressed as a percentage of total investments as of 12/31/99
U.S. Corporate Bonds 78.6%
U.S. Treasuries 16.9
Asset Backed 4.2
Cash & Equivalents 0.3
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 maturityD categories.
- --------------------------------------------------------------------------------
PRUDENTIAL STRUCTURED MATURITY FUND, INC.
Portfolio of Investments as
of December 31, 1999 INCOME PORTFOLIO
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating* Amount
(Unaudited) (000) Description Value (Note 1)
<S> <C> <C> <C>
- ------------------------------------------------------------
5-6 YEARS--15.7%
Ba1 $ 1,225 Lear Corp.,
7.96%, 5/15/05 $ 1,188,250
United States Treasury
Notes,
Aaa 12,800 7.50%, 2/15/05 13,350,016
Aaa 3,275 6.50%, 5/15/05 3,276,015
-------------
17,814,281
- ------------------------------------------------------------
4-5 YEARS--15.1%
A2 1,200 Coca-Cola Enterprises,
Inc.,
6.625%, 8/1/04 1,174,932
Aaa 2,500 Comed Transitional Funding
Trust,
(Average life 4.43 years)D
5.44%, 3/25/07 2,340,625
Baa3 1,000 Delta Air Lines, Inc.,
6.65%, 3/15/04 954,010
Baa1 2,000 Finova Capital Corp.,
6.125%, 3/15/04 1,897,000
A2 1,000 Fortune Brands, Inc.,
7.125%, 11/1/04 986,090
A3 2,500 Heller Financial, Inc.,
6.00%, 3/19/04 2,373,825
A3 1,500 Lehman Brothers Holdings,
Inc.,
6.625%, 4/1/04 1,452,060
Baa1 2,500 PaineWebber Group, Inc.,
Medium Term Note,
7.015%, 2/10/04 2,445,375
Aaa 2,500 PECO Energy Transiton
Trust,
(Average life 4.55 years)D
5.80%, 3/1/07 2,362,750
Aa2 950 Procter & Gamble Co.,
6.60%, 12/15/04 937,365
Baa3 300 Utilicorp United, Inc.,
7.00%, 7/15/04 289,722
-------------
17,213,754
3-4 YEARS--18.6%
Baa1 $ 2,000 Cendant Corp.,
7.75%, 12/1/03 $ 1,995,200
Baa1 270 Duke Realty L.P.,
7.30%, 6/30/03 267,003
A1 2,000 Ford Motor Credit Co.,
6.625%, 6/30/03 1,967,300
A2 2,500 General Motors Acceptance
Corp.,
5.95%, 3/14/03 2,407,250
A1 1,000 Goldman, Sachs Group L.
P.,
6.25%, 2/1/03 970,690
A1 2,500 IBM Corp.,
5.37%, 9/22/03 2,373,625
A1 2,000 International Lease
Finance Corp., Medium Term
Note,
5.90%, 3/12/03 1,924,200
Ba1 1,000 ITT Corp.,
6.75%, 11/15/03 930,230
Baa2 2,000 Litton Industries, Inc.,
6.05%, 4/15/03 1,910,080
Aa3 3,000 Morgan Stanley Dean
Witter,
6.875%, 3/1/03 2,969,940
Baa2 2,000 Niagara Mohawk Power
Corp.,
7.375%, 8/1/03 2,000,200
Baa3 1,500 Osprey Trust,
8.31%, 1/15/03 1,492,125
-------------
21,207,843
- ------------------------------------------------------------
2-3 YEARS--15.3%
A2 500 BankBoston Corp.,
Medium Term Note,
6.125%, 3/15/02 490,750
A3 1,000 Bombardier Capital, Inc.,
Medium Term Note,
7.30%, 12/15/02 996,000
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 3
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND, INC.
Portfolio of Investments as
of December 31, 1999 INCOME PORTFOLIO
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Moody's Principal
Rating* Amount
(Unaudited) (000) Description Value (Note 1)
- ------------------------------------------------------------
<S> <C> <C> <C>
2-3 YEARS--(cont'd.)
Baa1 $ 300 Cox Enterprises, Inc.,
6.625%, 6/14/02 $ 295,659
A1 2,500 Goldman, Sachs Group L.P.,
7.80%, 7/15/02 2,528,275
A2 3,000 Household Finance Corp.,
Medium Term Note,
6.125%, 7/15/02 2,919,840
A3 2,500 MCI Communications Corp.,
6.125%, 4/15/02 2,459,450
A3 3,000 Sears Roebuck Acceptance
Corp., Medium Term Note,
6.38%, 10/7/02 2,903,610
Baa2 1,500 Telecomunicaiones De
Puerto Rico,
6.15%, 5/15/02 1,454,475
Aaa 800 United States Treasury
Notes,
6.625%, 4/30/02 806,128
Baa3 2,500 Viacom, Inc.,
7.50%, 1/15/02 2,505,425
-------------
17,359,612
- ------------------------------------------------------------
1-2 YEARS--15.8%
Baa2 2,500 Capital One Bank,
7.08%, 10/30/01 2,475,575
A1 2,500 Chrysler Financial Corp.,
Medium Term Note,
5.25%, 10/22/01 2,431,325
Ba3 500 CMS Energy Corp.,
8.00%, 7/1/01 495,300
Baa2 2,000 CSX Corp.,
Medium Term Note,
5.85%, 9/17/01 1,959,720
Baa2 5,000 First Industrial L.P.,
6.50%, 4/5/01 4,891,300
Baa3 600 Kroger Co.,
6.34%, 6/1/01 593,250
Baa2 1,000 Mallinckrodt, Inc.,
6.30%, 3/15/01DD 977,500
Baa2 $ 1,500 Raytheon Co.,
5.95%, 3/15/01 $ 1,475,595
Aaa 1,700 United States Treasury
Notes,
5.625%, 9/30/01 1,683,000
Baa1 1,060 US West Capital Funding,
Inc.,
6.875%, 8/15/01 1,055,548
-------------
18,038,113
- ------------------------------------------------------------
WITHIN 1 YEAR--18.7%
Baa3 5,000 Boise Cascade Corp.,
9.90%, 3/15/00 5,023,300
Baa2 5,000 Camden Property Trust,
7.23%, 10/30/00 4,981,500
A3 4,500 ERP Operating L.P.,
6.15%, 9/15/00 4,463,100
Baa2 4,000 Gables Realty L.P.,
6.55%, 10/1/00 3,972,640
Baa1 2,500 Ryder System, Inc.,
Medium Term Note,
7.51%, 3/24/00 2,505,425
311 Joint Repurchase Agreement
Account (Note 5)
2.83%, 1/3/00 311,000
-------------
21,256,965
- ------------------------------------------------------------
Total Investments--99.2%
(cost $115,971,976; Note
4) 112,890,568
Other assets in excess of
liabilities--0.8% 964,880
-------------
Net Assets--100% $ 113,855,448
-------------
-------------
</TABLE>
- ---------------
* The Fund's current Prospectus contains a description of Moody's rating.
D Average life is defined as the weighted average time to the return of a
dollar of principal and is commonly used as the measure of investment life
for pass-through securities such as asset-backed and mortgage-backed
securities.
DD Mandatory put/call in March 2001.
L.P. Limited Partnership.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 4
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND, INC.
Portfolio of Investments as
of December 31, 1999 INCOME PORTFOLIO
- ------------------------------------------------------------
The industry classification of portfolio holdings and other
net assets shown as a percentage of net assets as of December
31, 1999 were as follows:
U.S. Government Securities............................ 16.8%
REIT.................................................. 16.3
Consumer Finance...................................... 11.1
Investment Banking.................................... 9.1
Financial Services.................................... 6.4
Paper & Related Products.............................. 4.4
Asset Backed.......................................... 4.1
Telecommunications.................................... 3.4
Aerospace/Defense..................................... 3.0
Banking............................................... 2.6
Media................................................. 2.5
Utilities............................................. 2.5
Trucking.............................................. 2.2
Technology............................................ 2.1
Commercial Services................................... 1.8
Consumer Products..................................... 1.7
Transportation/Rail................................... 1.7
Oil & Gas Exploration/Production...................... 1.3
Auto/Truck Parts...................................... 1.0
Beverages............................................. 1.0
Finance/Leasing....................................... 0.9
Medical Products...................................... 0.9
Airlines.............................................. 0.8
Lodging............................................... 0.8
Retail................................................ 0.5
Repurchase Agreement.................................. 0.3
Other assets in excess of liabilities................. 0.8
-----
100.0%
-----
-----
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 5
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND, INC.
Statement of Assets and Liabilities INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets December 31, 1999
Investments, at value (cost $115,971,976)............................................................... $ 112,890,568
Cash.................................................................................................... 13,967
Interest receivable..................................................................................... 2,181,414
Receivable for investments sold......................................................................... 107,139
Receivable for Fund shares sold......................................................................... 37,016
Other assets............................................................................................ 3,701
-----------------
Total assets......................................................................................... 115,233,805
-----------------
Liabilities
Payable for Fund shares reacquired...................................................................... 1,092,413
Accrued expenses........................................................................................ 184,385
Management fee payable.................................................................................. 39,769
Distribution fee payable................................................................................ 34,960
Dividends payable....................................................................................... 26,830
-----------------
Total liabilities.................................................................................... 1,378,357
-----------------
Net Assets.............................................................................................. $ 113,855,448
-----------------
-----------------
Net assets were comprised of:
Common stock, at par................................................................................. $ 103,618
Paid-in capital in excess of par..................................................................... 126,916,608
-----------------
127,020,226
Accumulated net realized loss on investments......................................................... (10,083,370)
Net unrealized depreciation on investments........................................................... (3,081,408)
-----------------
Net assets at December 31, 1999......................................................................... $ 113,855,448
-----------------
-----------------
Class A:
Net asset value and redemption price per share
($85,359,902 / 7,768,167 shares of common stock issued and outstanding)........................... $10.99
Maximum sales charge (3.25% of offering price)....................................................... .37
Maximum offering price to public..................................................................... $11.36
Class B:
Net asset value, offering price and redemption price per share
($22,281,263 / 2,028,502 shares of common stock issued and outstanding)........................... $10.98
Class C:
Net asset value and redemption price per share
($2,184,765 / 198,895 shares of common stock issued and outstanding).............................. $10.98
Sales charge (1% of offering price).................................................................. .11
Offering price to public............................................................................. $11.09
Class Z:
Net asset value, offering price and redemption price per share
($4,029,518 / 366,248 shares of common stock issued and outstanding).............................. $11.00
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 6
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND, INC.
INCOME PORTFOLIO
Statement of Operations
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
Net Investment Income December 31, 1999
<S> <C>
Income
Interest.............................. $ 7,916,575
-----------------
Expenses
Management fee........................ 481,976
Distribution fee--Class A............. 215,061
Distribution fee--Class B............. 224,026
Distribution fee--Class C............. 13,251
Transfer agent's fees and expenses.... 183,000
Custodian's fees and expenses......... 86,000
Reports to shareholders............... 50,000
Registration fees..................... 48,000
Legal fees and expenses............... 26,000
Audit fee and expenses................ 25,000
Directors' fees and expenses.......... 24,000
Miscellaneous......................... 3,179
-----------------
Total expenses..................... 1,379,493
-----------------
Net investment income.................... 6,537,082
-----------------
Realized and Unrealized Loss
on Investments
Net realized loss on investment
transactions.......................... (1,871,916)
Net change in unrealized depreciation of
investments........................... (2,704,900)
-----------------
Net loss on investments.................. (4,576,816)
-----------------
Net Increase in Net Assets
Resulting from Operations................ $ 1,960,266
-----------------
-----------------
</TABLE>
PRUDENTIAL STRUCTURED MATURITY FUND, INC.
INCOME PORTFOLIO
Statement of Changes in Net Assets
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended December 31,
in Net Assets 1999 1998
<S> <C> <C>
Operations
Net investment income........ $ 6,537,082 $ 7,618,062
Net realized gain (loss) on
investment transactions... (1,871,916) 353,315
Net change in unrealized
appreciation
(depreciation) on
investments............... (2,704,900) 411,669
---------------- ----------------
Net increase in net assets
resulting from
operations................ 1,960,266 8,383,046
---------------- ----------------
Dividends from net investment
income
(Note 1)
Class A................... (4,779,259) (4,389,692)
Class B................... (1,502,384) (3,050,724)
Class C................... (90,019) (72,180)
Class Z................... (165,420) (105,466)
---------------- ----------------
(6,537,082) (7,618,062)
---------------- ----------------
Fund share transactions
(Net of share conversions) (Note 6)
Net proceeds from shares
subscribed................ 63,059,266 39,833,378
Net asset value of shares
issued to shareholders in
reinvestment of
dividends................. 4,539,763 5,214,748
Cost of shares reacquired.... (80,194,949) (53,344,205)
---------------- ----------------
Net decrease in net assets
from
Fund share transactions... (12,595,920) (8,296,079)
---------------- ----------------
Total decrease.................. (17,172,736) (7,531,095)
Net Assets
Beginning of year............... 131,028,184 138,559,279
---------------- ----------------
End of year..................... $113,855,448 $131,028,184
---------------- ----------------
---------------- ----------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 7
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND, INC.
Notes to Financial Statements INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Prudential Structured Maturity Fund, Inc. (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 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.
Repurchase Agreements: 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 has a distribution agreement with Prudential Investment Management
Services LLC ('PIMS'), which acts as the distributor of the Fund. The Fund
compensates PIMS 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 it. The distribution fees
are accrued daily and payable monthly. No distribution or service fees are paid
to PIMS as distributor of the Class Z shares of the Fund.
- --------------------------------------------------------------------------------
8
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND, INC.
Notes to Financial Statements INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Pursuant to the Class A, B and C Plans, the Fund compensates PIMS 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 .25 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, 1999.
PIMS has advised the Portfolio that it received approximately $44,400 and $7,900
in front-end sales charges resulting from sales of Class A and Class C shares,
respectively, for the year ended December 31, 1999. From these fees, PIMS paid
such sales charges to affiliated broker-dealers, which in turn paid commissions
to salespersons and incurred other distribution costs.
PIMS has advised the Portfolio that for the year ended December 31, 1999, it
received approximately $50,000 and $200 in contingent deferred sales charges
imposed upon certain redemptions by Class B and Class C shareholders,
respectively.
PIFM, PIMS and PIC are wholly owned subsidiaries of The Prudential Insurance
Company of America.
As of March 11, 1999, the Portfolio, along with other affiliated registered
investment companies (the 'Funds'), entered into a syndicated credit agreement
('SCA') with an unaffiliated lender. The maximum commitment under the SCA is $1
billion. Interest on any borrowings will be at market rates. The Funds pay a
commitment fee at an annual rate of .065 of 1% on the unused portion of the
credit facility, which is accrued and paid quarterly on a pro rata basis by the
Funds. The SCA expires on March 9, 2000. Prior to March 11, 1999, the Funds had
a credit agreement with a maximum commitment of $200,000,000. The commitment fee
was .055 of 1% on the unused portion of the credit facility. The Portfolio did
not borrow any amounts pursuant to either agreement during the year ended
December 31, 1999. The purpose of the agreements is to serve as an alternative
source of funding for capital share redemptions.
- ------------------------------------------------------------
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 year ended December 31,
1999, the Portfolio incurred fees of approximately $171,000 for the services of
PMFS. As of December 31, 1999, approximately $14,700 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 nonaffiliates.
Note 4. Portfolio Securities
Purchases and sales of portfolio securities, excluding short-term investments,
for the year ended December 31, 1999 were $195,399,799 and $200,001,162,
respectively.
The cost of investments for federal income tax purposes at December 31, 1999 was
$115,993,679 and accordingly, net unrealized depreciation for federal income tax
purposes was $3,103,111 (gross unrealized appreciation--$520; gross unrealized
depreciation--$3,103,631).
For federal income tax purposes, the Portfolio had a capital loss carryforward
as of December 31, 1999 of approximately $9,768,000, of which $5,082,000 expires
in 2002, $3,149,000 expires in 2004 and $1,537,000 expires in 2007. In addition,
the Fund will elect to treat net capital losses of approximately $329,000
incurred in the two month period ended December 31, 1999 as having been incurred
in the following fiscal year. 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, 1999, the Portfolio has a .044% undivided interest in the joint account. The
undivided interest for the Portfolio represents $311,000 in the principal
amount. As of such date, each repurchase agreement in the joint account and the
collateral therefor were as follows:
ABN AMRO, Inc., 2.75%, in the principal amount of $90,000,000, repurchase price
$90,020,625, due 1/3/2000. The value of the collateral including accrued
interest was $91,800,968.
Bear, Stearns & Co. Inc., 2.75%, in the principal amount of $210,000,000,
repurchase price $210,048,125, due 1/3/2000. The value of the collateral
including accrued interest was $221,923,528.
Lehman Brothers, Inc., 2.50%, in the principal amount of $100,000,000,
repurchase price $100,020,833, due 1/3/2000. The value of the collateral
including accrued interest was $101,979,049.
Morgan (J.P.) Securities, Inc., 3.00%, in the principal amount of $120,000,000,
repurchase price $120,030,000, due 1/3/2000. The value of the collateral
including accrued interest was $122,400,783.
- --------------------------------------------------------------------------------
9
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND, INC.
Notes to Financial Statements INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Morgan (J.P.) Securities, Inc., 4.50%, in the principal amount of $78,685,000,
repurchase price $78,714,506, due 1/3/2000. The value of the collateral
including accrued interest was $80,259,686.
Salomon Smith Barney, Inc., 2.00%, in the principal amount of $110,000,000,
repurchase price $110,018,333, due 1/3/2000. The value of the collateral
including accrued interest was $112,231,078.
- ------------------------------------------------------------
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 front-end sales charge of 1% and a contingent deferred sales charge of 1%
during the first 18 months. 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. 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. Of the shares
outstanding at December 31, 1999, Prudential owned 202,051.
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Class A Shares Amount
- -------------------------------------- ---------- ------------
<S> <C> <C>
Year ended December 31, 1999:
Shares sold........................... 1,885,912 $ 21,004,322
Shares issued in reinvestment of
dividends........................... 299,319 3,345,005
Shares reacquired..................... (2,532,550) (28,250,642)
---------- ------------
Net decrease in shares outstanding
before conversion................... (347,319) (3,901,315)
Shares issued upon conversion from
Class B............................. 651,983 7,293,535
---------- ------------
Net increase in shares outstanding.... 304,664 $ 3,392,220
---------- ------------
---------- ------------
Year ended December 31, 1998:
Shares sold........................... 1,187,754 $ 13,587,731
Shares issued in reinvestment of
dividends........................... 268,042 3,061,266
Shares reacquired..................... (1,573,390) (17,967,851)
---------- ------------
Net decrease in shares outstanding
before conversion................... (117,594) (1,318,854)
Shares issued upon conversion from
Class B............................. 1,817,276 20,807,459
---------- ------------
Net increase in shares outstanding.... 1,699,682 $ 19,488,605
---------- ------------
---------- ------------
<CAPTION>
Class B Shares Amount
- -------------------------------------- ---------- ------------
<S> <C> <C>
Year ended December 31, 1999:
Shares sold........................... 650,438 $ 7,273,867
Shares issued in reinvestment of
dividends........................... 87,478 979,270
Shares reacquired..................... (1,535,229) (17,199,140)
---------- ------------
Net decrease in shares outstanding
before conversion................... (797,313) (8,946,003)
Shares reacquired upon conversion into
Class A............................. (651,983) (7,293,535)
---------- ------------
Net decrease in shares outstanding.... (1,449,296) $(16,239,538)
---------- ------------
---------- ------------
Year ended December 31, 1998:
Shares sold........................... 866,989 $ 9,909,284
Shares issued in reinvestment of
dividends........................... 174,565 1,992,901
Shares reacquired..................... (2,005,389) (22,904,458)
---------- ------------
Net decrease in shares outstanding
before conversion................... (963,835) (11,002,273)
Shares reacquired upon conversion into
Class A............................. (1,818,128) (20,807,459)
---------- ------------
Net decrease in shares outstanding.... (2,781,963) $(31,809,732)
---------- ------------
---------- ------------
Class C
- --------------------------------------
Year ended December 31, 1999:
Shares sold........................... 187,639 $ 2,081,082
Shares issued in reinvestment of
dividends........................... 7,007 78,120
Shares reacquired..................... (127,779) (1,422,858)
---------- ------------
Net increase in shares outstanding.... 66,867 $ 736,344
---------- ------------
---------- ------------
Year ended December 31, 1998:
Shares sold........................... 55,465 $ 633,410
Shares issued in reinvestment of
dividends........................... 5,916 67,555
Shares reacquired..................... (45,186) (515,505)
---------- ------------
Net increase in shares outstanding.... 16,195 $ 185,460
---------- ------------
---------- ------------
Class Z
- --------------------------------------
Year ended December 31, 1999:
Shares sold........................... 2,889,588 $ 32,699,995
Shares issued in reinvestment of
dividends........................... 12,290 137,368
Shares reacquired..................... (2,939,772) (33,322,309)
---------- ------------
Net decrease in shares outstanding.... (37,894) $ (484,946)
---------- ------------
---------- ------------
Year ended December 31, 1998:
Shares sold........................... 1,369,668 $ 15,702,953
Shares issued in reinvestment of
dividends........................... 8,140 93,026
Shares reacquired..................... (1,042,730) (11,956,391)
---------- ------------
Net increase in shares outstanding.... 335,078 $ 3,839,588
---------- ------------
---------- ------------
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND, INC.
Financial Highlights INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year........................... $ 11.42 $ 11.35 $ 11.36 $ 11.63 $ 10.97
------- ------- ------- ------- -------
Income from investment operations:
Net investment income........................................ .62 .68 .74 .73 .73
Net realized and unrealized gain (loss) on investment
transactions.............................................. (.43) .07 .01 (.25) .66
------- ------- ------- ------- -------
Total from investment operations.......................... .19 .75 .75 .48 1.39
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income......................... (.62) (.68) (.74) (.73) (.73)
Dividends in excess of net investment income................. -- -- (.02) (.02) --
------- ------- ------- ------- -------
Total distributions....................................... (.62) (.68) (.76) (.75) (.73)
------- ------- ------- ------- -------
Net asset value, end of year................................. $ 10.99 $ 11.42 $ 11.35 $ 11.36 $ 11.63
------- ------- ------- ------- -------
------- ------- ------- ------- -------
TOTAL RETURN(a):............................................. 1.72% 6.81% 6.81% 4.32% 13.12%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)................................ $85,360 $85,213 $65,431 $77,031 $88,982
Average net assets (000)..................................... $86,025 $73,382 $70,899 $81,745 $89,500
Ratios to average net assets:
Expenses, including distribution fees..................... 1.02% .81% .94% .86% .82%
Expenses, excluding distribution fees..................... .77% .71% .84% .76% .72%
Net investment income..................................... 5.56% 5.98% 6.51% 6.38% 6.57%
For Class A, B, C and Z shares:
Portfolio turnover........................................ 168% 301% 180% 170% 160%
</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.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 11
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND, INC.
Financial Highlights INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------
Year Ended December 31,
---------------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year........................... $ 11.41 $ 11.35 $ 11.36 $ 11.63 $ 10.97
------- ------- ------- -------- --------
Income from investment operations:
Net investment income........................................ .56 .61 .67 .65 .66
Net realized and unrealized gain (loss) on investment
transactions.............................................. (.43) .06 .01 (.25) .66
------- ------- ------- -------- --------
Total from investment operations.......................... .13 .67 .68 .40 1.32
------- ------- ------- -------- --------
Less distributions:
Dividends from net investment income......................... (.56) (.61) (.67) (.65) (.66)
Dividends in excess of net investment income................. -- -- (.02) (.02) --
------- ------- ------- -------- --------
Total distributions....................................... (.56) (.61) (.69) (.67) (.66)
------- ------- ------- -------- --------
Net asset value, end of year................................. $ 10.98 $ 11.41 $ 11.35 $ 11.36 $ 11.63
------- ------- ------- -------- --------
------- ------- ------- -------- --------
TOTAL RETURN(a):............................................. 1.21% 6.03% 6.13% 3.64% 12.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)................................ $22,281 $39,694 $71,030 $ 94,490 $120,188
Average net assets (000)..................................... $29,870 $56,913 $81,673 $106,224 $125,230
Ratios to average net assets:
Expenses, including distribution fees..................... 1.52% 1.46% 1.59% 1.51% 1.47%
Expenses, excluding distribution fees..................... .77% .71% .84% .76% .72%
Net investment income..................................... 5.03% 5.36% 5.87% 5.73% 5.92%
</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.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 12
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND, INC.
Financial Highlights INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
--------------------------------------------------
Year Ended December 31,
--------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year........................... $11.41 $11.35 $11.36 $11.63 $10.97
------ ------ ------ ------ ------
Income from investment operations:
Net investment income........................................ .57 .61 .67 .65 .66
Net realized and unrealized gain (loss) on investment
transactions.............................................. (.43) .06 .01 (.25) .66
------ ------ ------ ------ ------
Total from investment operations.......................... .14 .67 .68 .40 1.32
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income......................... (.57) (.61) (.67) (.65) (.66)
Dividends in excess of net investment income................. -- -- (.02) (.02) --
------ ------ ------ ------ ------
Total distributions....................................... (.57) (.61) (.69) (.67) (.66)
------ ------ ------ ------ ------
Net asset value, end of year................................. $10.98 $11.41 $11.35 $11.36 $11.63
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN(a):............................................. 1.21% 6.03% 6.13% 3.64% 12.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000)................................ $2,185 $1,507 $1,314 $1,396 $1,050
Average net assets (000)..................................... $1,767 $1,351 $1,329 $1,270 $ 667
Ratios to average net assets:
Expenses, including distribution fees..................... 1.52% 1.46% 1.59% 1.51% 1.47%
Expenses, excluding distribution fees..................... .77% .71% .84% .76% .72%
Net investment income..................................... 5.10% 5.36% 5.87% 5.73% 5.92%
</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.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 13
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND, INC.
Financial Highlights INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class Z
---------------------------------------------
December 16,
1996(c)
Year Ended December 31, Through
---------------------------- December 31,
1999 1998 1997 1996
------ ------ ------ ------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period......................... $11.42 $11.35 $11.37 $11.41
------ ------ ------ -----
Income from investment operations:
Net investment income........................................ .65 .69 .77 .09
Net realized and unrealized gain (loss) on investment
transactions.............................................. (.42) .07 .02 (.02)
------ ------ ------ -----
Total from investment operations.......................... .23 .76 .79 .07
------ ------ ------ -----
Less distributions:
Dividends from net investment income......................... (.65) (.69) (.77) (.09)
Dividends in excess of net investment income................. -- -- (.04) (.02)
------ ------ ------ -----
Total distributions....................................... (.65) (.69) (.81) (.11)
------ ------ ------ -----
Net asset value, end of period............................... $11.00 $11.42 $11.35 $11.37
------ ------ ------ -----
------ ------ ------ -----
TOTAL RETURN(a):............................................. 2.07% 6.92% 7.01% .59%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000).............................. $4,029 $4,614 $ 784 $ 200(d)
Average net assets (000)..................................... $2,833 $1,748 $ 313 $ 200(d)
Ratios to average net assets:
Expenses, including distribution fees..................... .77% .71% .84% .76%(b)
Expenses, excluding distribution fees..................... .77% .71% .84% .76%(b)
Net investment income..................................... 5.84% 6.03% 6.71% 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.
(c) Commencement of offering of Class Z shares.
(d) Figures are actual and are not rounded to the nearest thousand.
- --------------------------------------------------------------------------------
See Notes to Financial Statements. 14
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND, INC.
Report of Independent Accountants INCOME PORTFOLIO
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
Prudential Structured Maturity Fund, Inc., Income Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Prudential Structured Maturity
Fund, Inc., Income Portfolio (the 'Fund') at December 31, 1999, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended and the financial highlights for each
of the three years in the period then ended, in conformity with accounting
principles generally accepted in the United States. These financial statements
and financial highlights (hereafter referred to as 'financial statements') are
the responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 1999 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above. The accompanying financial highlights for each of
the two periods in the period ended December 31, 1996 were audited by other
independent accountants, whose opinion dated February 14, 1997 was unqualified.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
February 18, 2000
- --------------------------------------------------------------------------------
15
<PAGE>
Federal Income Tax Information (Unaudited)
- --------------------------------------------------------------------------------
We are required by the Internal Revenue Code to advise you within 60 days of the
Portfolio's fiscal year end (December 31, 1999) as to the federal tax status of
dividends paid by the Portfolio during such fiscal year.
During 1999, dividends were paid from net investment income of $.62 per share
for Class A shares, $.56 per share for Class B shares, $.57 per share for Class
C shares and $.65 per share for Class Z shares and are taxable as ordinary
income. We are required by Massachusetts, Missouri and Oregon to inform you that
dividends which have been derived from interest on federal obligations are not
taxable to shareholders providing the Mutual Fund meets certain requirements
mandated by the respective state's taxing authorities. We are pleased to report
that 18.12% of the dividends paid by the Portfolio qualifies for such deduction.
We wish to advise you that the corporate dividends received deduction for the
Portfolio 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.
- --------------------------------------------------------------------------------
16
<PAGE>
Getting the Most from Your Prudential Mutual Fund
How many times have you read these reports--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: 1/100th of 1%. For example, one-half of one
percent is 50 basis points.
Collateralized Mortgage Obligations (CMOs): Mortgage-backed
bonds that separate mortgage pools into different maturity
classes, called tranches. 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 other
securities. The rate of return of these financial instruments
rises and falls--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 member banks.
Federal Funds Rate: The interest rate charged by one
bank to another on overnight loans.
Futures Contract: An agreement to purchase or sell a
specific amount of a commodity or financial instrument at a
set price at a specified date in the future.
Leverage: The use of borrowed assets to enhance return.
The expectation is that the interest rate charged on
borrowed funds 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 product) can be bought or sold (converted into cash)
in the financial markets.
Price/Earnings Ratio: The price of a share of stock divided by the
earnings per share for a 12-month period.
Option: An agreement to purchase or sell something, such
as shares of stock, by a certain time for a specified price.
An option need not be exercised.
Spread: The difference between two values; often
used to describe the difference between "bid" and "asked"
prices of a security, or between the yields of two similar
maturity bonds.
Yankee Bond: A bond sold by a foreign company or government
in the U.S. market and denominated in U.S. dollars.
<PAGE>
Comparing a $10,000 Investment
- --------------------------------------------------------------------
Prudential Structured Maturity Fund, Inc.--Income Portfolio vs. the
Lehman Brothers Intermediate Government/Corporate Bond Index
Class A
(GRAPH)
Average Annual Total Returns
With Sales Charge As of 12/31/99
Since Inception 6.51% (6.26)
Ten Years 6.38 (6.17)
Five Years 5.79
One Year -1.58
Without Sales Charge As of 12/31/99
Since Inception 6.85% (6.60)
Ten Years 6.73 (6.52)
Five Years 6.49
One Year 1.72
Class B
Average Annual Total Returns
With Sales Charge As of 12/31/99
Since Inception 4.78%
Five Years 5.82
One Year -1.79
Without Sales Charge As of 12/31/99
Since Inception 4.78%
Five Years 5.82
One Year 1.21
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.
The information beneath the graphs is designed to give you an idea
of 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 (or for the past ten
years for Class A shares).
These graphs compare a $10,000 investment in Prudential Structured
Maturity Fund, Inc.--Income Portfolio (Class A, B, C, and Z shares)
with a similar investment in the Lehman Brothers Intermediate
Government/Corporate Bond Index (the Index) by portraying the
initial account values of Class B, C, and Z shares at the
commencement of operations, at the beginning of the ten-year
period for Class A shares, and at the end of the fiscal year
(December 31), as measured on a quarterly basis, beginning
in 1989 for Class A, 1992 for Class B, 1994 for Class C, and
1996 for Class Z shares. For purposes of the graphs, and
unless otherwise indicated, it has been assumed that (a)
the maximum applicable front-end sales charge was deducted
from the initial $10,000 investment in Class A and Class C shares;
(b) the maximum applicable contingent deferred sales charges
were deducted from the value of the investment in Class B and
<PAGE>
Class C
(GRAPH)
Average Annual Total Returns
With Sales Charge As of 12/31/99
Since Inception 5.03%
Five Years 5.60
One Year -0.80
Without Sales Charge As of 12/31/99
Since Inception 5.23%
Five Years 5.82
One Year 1.21
Class Z
Average Annual Total Returns As of 12/31/99
Since Inception 5.44%
One Year 2.07
Class C shares, assuming full redemption on December 31, 1999;
(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, approximately seven years after purchase.
This conversion feature is not reflected in the graphs. Class
Z shares are not subject to a sales charge or distribution and
service (12b-1) fees. Without waiver of management fees and/or
expense subsidization, the Fund's average annual total returns
would have been lower, as indicated in parentheses ( ).
The Index is an unmanaged index of investment-grade securities
issued by the U.S. government and its agencies, and by
corporations with between one and ten years remaining to
maturity. The Index gives a broad look at how short- and
intermediate-term bonds have performed. The Index returns
include the reinvestment of all dividends, but do
not include the effect of any sales charges or operating
expenses of a mutual fund. The securities in the Index may
differ substantially from the securities in the Fund. The
Index is not the only one that may be used to characterize
performance of bond funds, and other indexes may portray
different comparative performance. Investors cannot invest
directly in an index.
These graphs are furnished to you in accordance with SEC regulations.
<PAGE>
The Prudential Mutual Fund Family
Prudential offers a broad range of mutual funds designed
to meet your individual needs. For information about these
funds, contact your financial adviser or call us at (800)
225-1852. Read the prospectus carefully before you invest or
send money.
STOCK FUNDS
Prudential Emerging Growth Fund, Inc.
Prudential Equity Fund, Inc.
Prudential Equity Income Fund
Prudential Index Series Fund
Prudential Small-Cap Index Fund
Prudential Stock Index Fund
The Prudential Investment Portfolios, Inc.
Prudential Jennison Growth Fund
Prudential Jennison Growth & Income Fund
Prudential Mid-Cap Value Fund
Prudential Real Estate Securities Fund
Prudential Sector Funds, Inc.
Prudential Financial Services Fund
Prudential Health Sciences Fund
Prudential Technology Fund
Prudential Utility Fund
Prudential Small-Cap Quantum Fund, Inc.
Prudential Small Company Value Fund, Inc.
Prudential Tax-Managed Funds
Prudential Tax-Managed Equity Fund
Prudential 20/20 Focus Fund
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Target Funds
Large Capitalization Growth Fund
Large Capitalization Value Fund
Small Capitalization Growth Fund
Small Capitalization Value Fund
Asset Allocation/Balanced Funds
Prudential Balanced Fund
Prudential Diversified Funds
Conservative Growth Fund
Moderate Growth Fund
High Growth Fund
The Prudential Investment Portfolios, Inc.
Prudential Active Balanced Fund
GLOBAL FUNDS
Global Stock Funds
Prudential Developing Markets Fund
Prudential Developing Markets Equity Fund
Prudential Latin America Equity Fund
Prudential Europe Growth Fund, Inc.
Prudential Global Genesis Fund, Inc.
Prudential Index Series Fund
Prudential Europe Index Fund
Prudential Pacific Index Fund
Prudential Natural Resources Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Prudential Global Growth Fund
Prudential International Value Fund
Prudential Jennison International Growth Fund
Global Utility Fund, Inc.
Target Funds
International Equity Fund
Global Bond Funds
Prudential Global Total Return Fund, Inc.
Prudential International Bond Fund, Inc.
BOND FUNDS
Taxable Bond Funds
Prudential Diversified Bond Fund, Inc.
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Short-Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential High Yield Total Return Fund, Inc.
Prudential Index Series Fund
Prudential Bond Market Index Fund
Prudential Structured Maturity Fund, Inc.
Income Portfolio
Target Funds
Total Return Bond Fund
Tax-Exempt Bond Funds
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Income Series
Insured Series
Prudential Municipal Series Fund
Florida Series
Massachusetts Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
MONEY MARKET FUNDS
Taxable Money Market Funds
Cash Accumulation Trust
Liquid Assets Fund
National Money Market Fund
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Special Money Market Fund, Inc.
Money Market Series
Prudential MoneyMart Assets, Inc.
Tax-Free Money Market Funds
Prudential Tax-Free Money Fund, Inc.
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
Command Funds
Command Money Fund
Command Government Fund
Command Tax-Free Fund
Institutional Money Market Funds
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
<PAGE>
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Fund Symbols
NASDAQ CUSIP
Class A PBSMX 743924102
Class B PSMBX 743924201
Class C -- 743924300
Class Z -- 743924706
visit our website at www.prudential.com
Directors
Eugene C. Dorsey
Delayne Dedrick Gold
Robert F. Gunia
Thomas T. Mooney
Stephen P. Munn
David R. Odenath, Jr.
Richard A. Redeker
John R. Strangfeld
Nancy H. Teeters
Louis A. Weil, III
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
Grace C. Torres, Treasurer
Deborah A. Docs, Secretary
Stephen M. Ungerman, Assistant Treasurer
David F. Connor, Assistant 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 Investment Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
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
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Swidler Berlin Shereff Friedman, LLP
405 Lexington Avenue
New York, NY 10174
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.
This report is not authorized for distribution to prospective
investors unless preceded or accompanied by a current prospectus.
(ICON) Printed on Recycled Paper
<PAGE>
<PAGE>
Fund Symbols
NASDAQ CUSIP
Class A PBSMX 743924102
Class B PSMBX 743924201
Class C -- 743924300
Class Z -- 743924706
visit our website at www.prudential.com
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.
This report is not authorized for distribution to prospective
investors unless preceded or accompanied by a current
prospectus.
MF140E
(ICON) Printed on Recycled Paper
