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<SEC-DOCUMENT>0000834126-96-000005.txt : 19960910
<SEC-HEADER>0000834126-96-000005.hdr.sgml : 19960910
ACCESSION NUMBER:		0000834126-96-000005
CONFORMED SUBMISSION TYPE:	N-30D
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	19960430
FILED AS OF DATE:		19960906
SROS:			NONE

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			DUFF & PHELPS UTILITIES TAX FREE INCOME INC
		CENTRAL INDEX KEY:			0000879535
		STANDARD INDUSTRIAL CLASSIFICATION:	UNKNOWN SIC - 0000 [0000]
		STATE OF INCORPORATION:			MD
		FISCAL YEAR END:			1031

	FILING VALUES:
		FORM TYPE:		N-30D
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-06416
		FILM NUMBER:		96626542

	BUSINESS ADDRESS:	
		STREET 1:		55 EAST MONROE ST
		CITY:			CHICAGO
		STATE:			IL
		ZIP:			60603
		BUSINESS PHONE:		3122141250
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-30D
<SEQUENCE>1
<DESCRIPTION>PRUDENTIAL STRUCTURED MATURITY FUND N30D
<TEXT>

(ICON)

Prudential
Structured
Maturity
Fund, Inc.

Income Portfolio

SEMI
ANNUAL
REPORT
June 30, 1996

(LOGO)

<PAGE>

Prudential Structured Maturity Fund, Inc.
Income Portfolio

Performance At A Glance.
Indications of a stronger than expected U.S. economy caused
interest rates to rise in the first half of 1996. This climb began slowly in the
first quarter but the upturn became sharper in the second quarter. Since bond
prices generally fall when interest rates rise, bond funds struggled. But,
because your Fund owns shorter term bonds, it weathered the bond market downturn
better than longer term funds. The fund finished the past six months with nearly
flat returns, just below the average short-intermediate term investment grade
bond fund.

<TABLE>
<CAPTION>

Cumulative Total Returns1                                         As of 6/30/96
                                       Six        One       Five       Since
                                      Months      Year      Years     Inception2
                     <S>                <C>       <C>        <C>         <C>
                   Class A            -0.1%       5.0%       38.8%       63.6%
                   Class B            -0.4        4.3         N/A        17.4
                   Class C            -0.4        4.3         N/A        11.2
Lipper Short-Intermed. Inv.
       Grade Debt Fund Avg3            0.3        4.9        94.8        59.8
</TABLE>

<TABLE>
<CAPTION>

Average Annual Total Returns1                                      As of 6/30/96
                                                   One       Five       Since
                                                   Year      Years    Inception2
                     <S>                          <C>        <C>         <C>
                  Class A                          1.6%       6.1%    7.0%
(6.8)4
                  Class B                          1.3        N/A     4.4
                  Class C                          3.3        N/A     5.7
</TABLE>

<TABLE>
<CAPTION>
                              Total Dividends                 30-Day
                              Paid for Six Mos.              SEC Yield
<S>                 <C>             <C>                         <C>
Dividends          Class A         $0.36                        6.02%
& Yields           Class B         $0.33                        5.57
As of              Class C         $0.33                        5.57
6/30/96
</TABLE>

Past performance is not indicative of future results. Principal and investment
return will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost.

1Source: Prudential Mutual Fund Management and Lipper Analytical Services. The
cumulative total returns do not take into account sales charges. The average
annual returns do take into account applicable sales charges. The Fund charges
a maximum front-end sales load of 3.25% for Class A shares and a four-year,
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 five years.
2Inception dates: 9/1/89 Class A; 12/9/92 Class B; 8/1/94 Class C.
3The Lipper Short-Intermediate-term Investment Grade Debt average includes 69
funds for six months, 65 funds for one year, 19 funds for five years and 11
funds since inception of the Class A shares on 9/1/89. 
4Without waivers and/or expense subsidiaries, the Fund's average annual total
return would have been lower, as indicated in parentheses( ).

How Investments Compared.
(As of 6/30/96)

  (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 return averages for several Lipper mutual fund categories to
show you that reaching for higher yields means tolerating more risk. The greater
the risk, the larger the potential reward or loss. In addition, we've 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. Unlike bond funds, bonds, if held to maturity, generally
offer a fixed rate of return and fixed principal value.

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 A. Rodriguez, Fund Manager

Portfolio                                                   (PHOTO)
Manager's Report

The Prudential Structured Maturity Fund -- Income Portfolio has a fixed
"laddered" maturity format where assets are allocated approximately evenly
among six "rungs," or maturities, running from one to six years. Within this
structure, we buy mostly corporate bonds, but also government bonds and U.S.
dollar-denominated bonds of foreign corporations and governments. When new
money comes into the portfolio or as bonds mature, we purchase enough new bonds
to keep the six weightings in balance.

Yankee Bonds.
Your Fund has the capability to invest in U.S. dollar-denominated bonds issued
by foreign corporations and governments. On June 30, 1996, these bonds were
10.1% of total net assets. Sometimes called "Yankee" bonds, these securities
generally carry less risk than foreign securities denominated in foreign
currencies. That's because they are issued in U.S. dollars, reducing currency
risk for U.S. investors. This diversification helps to reduce the overall risk
in a portfolio, potentially counterbalancing negative returns in the U.S. bond
market.

Strategy Session.
The first half of 1996 offered your Fund a chance to show how shorter maturity
bonds can perform better than longer term bonds when interest rates rise and
bond prices fall. However, it is important to remember that during times when
"short" is better, "shortest" is best. So the shorter term "rungs" of the
maturity "ladder" in your Fund performed better than the longer maturity
portion. Even though the longer term portion of the Fund lost more value as
interest rates rose, the higher yields of those somewhat longer maturity bonds
helped contribute to the Fund's overall performance.

Several things worked in our favor this year besides our standard shorter
duration (a measure of the portfolio's sensitivity to interest rate changes).
First, we maintained our significant commitment to corporate bonds. Corporate
bonds benefited from the stock market's strength. The factors that propelled
stocks -- solid economic growth and strong corporate earnings -- also helped
the short-term bonds issued by those same companies. In addition, corporate
bond prices were buoyed by rising demand in the face of modest supply.

We keep the proportion of certain types of bonds in the "rungs" of our ladder
fairly similar, using predominantly investment grade corporate bonds for the
shorter maturities (zero to four years) and adding U.S. government bonds to the
mix for the intermediate-term (five- to six-year maturities). With few changes
in the composition of the "ladder" and a strict maturity structure, we focus on
adding value through good bond selection.

   Corporate Bonds Dominate.
 Expressed as a percentage of
total net assets as of 6/30/96.

           (CHART)

<PAGE>
What Went Well.
Financial Companies
Did Especially Well.
Overall, corporate bonds performed better than other types of bonds. In the
first half of 1996 their prices didn't fall as much. Some corporate bonds even
rose in price. We benefited particularly from bonds issued by credit card
companies, banks, securities broker-dealers and other financial companies. The
prices of these bonds fell when the economy was considered weak, but when
economic data releases showed a stronger economy, they rose in price.
Specifically, we benefited from increases in value of the securities of
Salomon, Inc., Ford Motor Credit and Advanta. 

How 'Bout Them
Yankees?
Our small position in the U.S. dollar-denominated bonds of governments and
corporations in the world's small, emerging markets was the best-performing
sector in your Fund. "Yankee" bonds were 10.1% of the Fund's total net assets
on June 30, 1996 -- half of them were carefully selected securities of the
Argentine, Mexican and Colombian governments and corporations. Because these
bonds were U.S. dollar-denominated, they were not as risky as the Latin
American bonds that suffered so terribly when the Mexican peso stumbled in
1994. Our modest investment in the dramatic economic turnaround in Latin
America contributed more than proportionately to the Fund's positive returns.

And Not So Well.
Fleming Never
Rebounded.
In 1995, the Fund lost some ground as a result of its investment in the bonds
of Fleming Companies, the nation's largest wholesale grocery distributor.
Fleming's securities first began to falter when the smaller retail grocery
stores it serviced began to suffer from competition with larger chains. We
retained our position, however, while Fleming consolidated operations to
maximize productivity and potentially improve earnings.
This year Fleming lost a Texas lawsuit in which the company was accused of
violating a contract's provisions. Although the company has appealed and the
decision is expected to be reversed, the litigation problems continued to
erode the value of its bonds. Ultimately, we decided to sell our position in
May, which amounted to 1% of total net assets at the time of the sale.

Five Largest Issuers.
13.6%  U.S. Treasury Note
       7.875% Coupon
5.5%   Time Warner Inc.
5.4%   Advanta National Bank
5.2%   Salomon, Inc.
5.1%   Paramount Communications
Expressed as a percentage of total net assets as of 6/30/96.

Looking Ahead.
Today's higher interest rates should eventually act as a brake on economic
growth. This, in turn, should reverse the downward direction of the bond market.
We believe that bond yields will continue to rise until inflation fears recede.
Once this happens, interest rates could begin to fall by year-end. In the more
immediate future, we expect corporate bonds to continue to provide good value
and offer a positive contribution to your Fund's income.
                                                                          1


<PAGE>
President's Letter                                               August 1, 1996

Dear Shareholder:
Last year, U.S. stocks and bonds generally posted extraordinary returns.
Investors celebrated this performance by putting record amounts of new money
into mutual funds in the first few months of 1996. According to figures released
by the Investment Company Institute, a mutual fund industry trade group, new
investments in mutual funds reached an all-time monthly high of $33 billion in
January of 1996. An additional $66 billion was invested in the following three
months, although this rapid inflow subsided somewhat in late spring.

While we are pleased that mutual funds are attracting new investors, we're
concerned that some of them may be "buying last year's returns." Few expect
1995's virtual non-stop returns from the stock and bond markets. In fact, 1996's
markets have been volatile so far (stock and bond prices go down just as they
go
up). There's no better time than now to be talking with your Financial Advisor
or Registered Representative. She or he can help you determine reasonable
expectations about both the potential performance and risks associated with
your investments.

Board of Directors Election.
In addition to this report, we are including a notice about a special
shareholder meeting to elect new Prudential mutual fund boards of directors.
Your Board of Directors has approved a proposal to place a common board of
experienced directors across many of Prudential's mutual funds to improve
business efficiency. The enclosed material contains more complete information
about this proposal.

Changes at Prudential.
Finally, there have been some important changes recently at Prudential that
were made with you in mind. Prudential Mutual Funds has moved under the umbrella
of Prudential's newly created "Money Management Group." This group manages and
administers nearly $190 billion in client assets and provides mutual funds,
annuities, defined benefit and defined contribution plans to our individual
and institutional investors. We plan to improve the range and quality of
investment products and services that we can provide you by better leveraging
Prudential's strengths. There will, however, be no change in the service you
receive from your Financial Advisor, Registered Representative or our Customer
Service unit. We're excited about our future and hope that you are, too. Thank
you for your continued support and confidence in Prudential Mutual Funds.

Sincerely,

Richard A. Redeker
President

2

<PAGE>
Commentary on Presentation of Portfolio of Investments:
The Portfolio of Investments, following hereto, is presented in a ``laddered''
maturity structure. The Income Portfolio invests in investment grade corporate
debt securities and in obligations of the U.S. Government, its agencies and
instrumentalities with maturities of six years or less. These securities are
categorized within six annual maturity categories.
- --------------------------------------------------------------------------------
Portfolio of Investments as of               PRUDENTIAL STRUCTURED MATURITY FUND
June 30, 1996 (Unaudited)                    INCOME PORTFOLIO
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
              Principal                                                       
          Principal
Moody's       Amount
Rating        (000)       Description                  Value (Note 1)
<C>           <C>          <S>                          <C>
- ------------------------------------------------------------
5-6 YEARS--17.5%
Ba1           $   7,250    Tele Communications, Inc.,
                           (Media)
                           7.35%, 8/27/01               $   7,233,470
                 23,800    United States Treasury
                           Note,
                           7.875%, 8/15/01                 25,213,006
                                                        -------------
                                                           32,446,476
- ------------------------------------------------------------
4-5 YEARS--15.2%
B1                  500    Republic of Argentina,
                           (Foreign Government)
                           9.25%, 2/23/01                     479,375
Aa3               5,000    Associates Corporation of
                           North America,
                           (Financial Services)
                           6.625%, 5/15/01                  4,942,000
Ba1               5,000    Federated Department
                           Stores,
                           Inc.,
                           (Retail)
                           10.00%, 2/15/01                  5,262,500
Ba2              10,000    Paramount Communications,
                           Inc.,
                           (Media)
                           5.875%, 7/15/00                  9,510,800
                           United States Treasury
                           Notes,
                  2,000    6.25%, 4/30/01                   1,980,940
                  6,000    6.50%, 5/31/01                   6,002,820
                                                        -------------
                                                           28,178,435
- ------------------------------------------------------------
3-4 YEARS--16.0%
NR                2,000    Banco de Comercio,
                           (Banking) (Colombia)
                           8.625%, 6/2/00                   2,035,000
Baa3              7,500    News America Holdings,
                           Inc.,
                           (Media)
                           7.45%, 6/1/00                    7,607,775
Baa3              3,000    Republic of Colombia,
                           (Foreign Government)
                           8.75%, 10/6/99                   3,063,750
Ba1           $  10,000    Time Warner, Inc.,
                           (Media)
                           7.95%, 2/1/00                $  10,215,000
                  6,500    United States Treasury
                           Note,
                           7.75%, 12/31/99                  6,772,155
                                                        -------------
                                                           29,693,680
- ------------------------------------------------------------
2-3 YEARS--17.9%
Baa3              5,500    Capital One Bank,
                           (Banking)
                           6.90%, 4/15/99                   5,500,000
Baa2              3,000    Crane Co.,
                           (Industrial Services)
                           7.25%, 6/15/99                   3,006,540
Baa2              1,000    Federal Express Corp.,
                           (Consumer Services)
                           10.05%, 6/15/99                  1,073,420
A3                6,500    Kansallis-Osake-Pankki
                           Bank,
                           (Banking) (Finland)
                           9.75%, 12/15/98                  6,939,920
NR                3,000    National Bank of Romania,
                           (Banking) (Romania)
                           9.75%, 6/25/99                   3,030,000
Baa1              9,600    Salomon, Inc.,
                           (Financial Services)
                           7.00%, 5/15/99                   9,604,896
A2                4,000    Sears Roebuck Acceptance
                           Corporation,
                           (Financial Services)
                           6.38%, 2/16/99                   3,982,200
                                                        -------------
                                                           33,136,976
- ------------------------------------------------------------
1-2 YEARS--16.9%
NR                3,000    Banco Ganadero S.A.,
                           (Banking) (Colombia)
                           9.75%, 8/26/97                   3,116,250
A2                2,000    Bank One Credit Card
                           Trust,
                           (Asset Backed)
                           (Average Life 1.3 years)
                           7.75%, 12/15/99                  2,036,240
</TABLE>
 
- --------------------------------------------------------------------------------
See Notes to Financial Statements.                                       3 -----
 <PAGE>
<PAGE>
Portfolio of Investments as of               PRUDENTIAL STRUCTURED MATURITY FUND
June 30, 1996 (Unaudited)                    INCOME PORTFOLIO
- ------------------------------------------------------------
- ------------------------------------------------------------
<TABLE>
<CAPTION>
              Principal                                                       
          Principal
Moody's       Amount
Rating        (000)       Description                  Value (Note 1)
<C>           <C>          <S>                          <C>
- ------------------------------------------------------------
1-2 YEARS (cont'd.)
Baa2          $   5,000    Comdisco, Inc.,
                           (Leasing)
                           7.25%, 4/15/98               $   5,060,250
Baa3              6,500    Enterprise Rent A Car
                           Finance Co.,
                           (Financial Services)
                           7.875%, 3/15/98                  6,660,290
Baa2              2,100    Finova Financial Corp.,
                           (Industrial Finance)
                           9.67%, 7/1/97                    2,162,181
A3                2,000    General Motors Acceptance
                           Corp.,
                           (Financial Services)
                           7.50%, 11/4/97                   2,034,480
Baa2              4,200    Transco Energy Co.,
                           (Utilities)
                           9.125%, 5/1/98                   4,364,598
                  6,000    United States Treasury
                           Note,
                           6.00%, 5/31/98                   5,986,860
                                                        -------------
                                                           31,421,149
- ------------------------------------------------------------
WITHIN 1 YEAR--15.0%
Baa2             10,000    Advanta Corp.,
                           (Consumer Finance)
                           6.24%, 2/7/97                   10,000,300
Baa3              2,500    Capital One Bank,
                           (Banking)
                           8.625%, 1/15/97                  2,531,825
A3                1,600    Chrysler Financial Corp.,
                           (Financial Services)
                           5.39%, 8/27/96                   1,599,040
Baa2              1,500    Comdisco, Inc.,
                           (Leasing)
                           9.75%, 1/15/97                   1,528,425
A2                2,195    Grand Metropolitan
                           Investment Corp.,
                           (Industrial Finance)
                           8.125%, 8/15/96                  2,199,939
A3                3,500    Potomac Capital Investment
                           Corp.,
                           (Financial Services)
                           6.19%, 4/28/97                   3,491,740
A2            $   2,000    TransAmerica Finance
                           Corp.,
                           (Financial Services)
                           5.85%, 7/15/96               $   1,999,960
                  4,576    Joint Repurchase Agreement
                           Account,
                           5.46%, 7/1/96                    4,576,000
                                                        -------------
                                                           27,927,229
- ------------------------------------------------------------
Total Investments--98.5%
                           (cost $184,358,138; Note
                           4)                             182,803,945
                           Other assets in excess of
                           liabilities--1.5%                2,731,464
                                                        -------------
                           Net Assets--100%             $ 185,535,409
                                                        -------------
                                                        -------------
- ------------------
NR-Not Rated.
The industry classification of portfolio holdings and other net
assets shown as a percentage of net assets as of June 30, 1996 were
as follows:
U.S. Treasury Notes...................................   24.7%
Financial Services....................................   18.5
Media.................................................   18.6
Banking...............................................   12.5
Consumer Finance......................................    5.4
Leasing...............................................    3.6
Retail................................................    2.8
Industrial Finance....................................    2.4
Utilities.............................................    2.4
Repurchase Agreement..................................    2.4
Foreign Government....................................    1.9
Industrial Services...................................    1.6
Asset Backed..........................................    1.1
Consumer Services.....................................     .6
Other assets in excess of liabilities.................    1.5
                                                        -----
                                                        100.0%
                                                        -----
                                                        -----
 
- --------------------------------------------------------------------------------
4                                             See Notes to Financial Statements.
 <PAGE>
<PAGE>
Statement of Assets and Liabilities          PRUDENTIAL STRUCTURED MATURITY FUND
(Unaudited)                                  INCOME PORTFOLIO
- --------------------------------------------------------------------------------

</TABLE>
<TABLE>
<S>                                                                           
                                   <C>
Assets                                                                        
                                  June 30, 1996
Investments, at value (cost
$184,358,138)................................................................... 
    $182,803,945
Cash.........................................................................
 ...............................             1,128
Interest
receivable...................................................................
 ......................         4,127,582
Receivable for Fund shares
sold.........................................................................
 ....            91,148
Deferred expenses and other
assets.......................................................................... 
           6,765
                                                                              
                                   -------------
   Total
assets.......................................................................
 ......................       187,030,568
                                                                              
                                   -------------
Liabilities
Payable for Fund shares
reacquired...................................................................
 .......           912,490
Dividends
payable......................................................................
 .....................           306,519
Accrued
expenses.....................................................................
 .......................           142,134
Distribution fee
payable......................................................................
 ..............            72,385
Management fee
payable......................................................................
 ................            61,631
                                                                              
                                   -------------
   Total
liabilities..................................................................
 ......................         1,495,159
                                                                              
                                   -------------
Net
Assets.......................................................................
 ...........................      $185,535,409
                                                                              
                                   -------------
                                                                              
                                   -------------
Net assets were comprised of:
   Common stock, at
par..........................................................................
 ...........      $    164,620
   Paid-in capital in excess of
par.........................................................................  
    196,052,013
                                                                              
                                   -------------
                                                                              
                                    196,216,633
   Accumulated net realized loss on
investments.............................................................      
 (9,127,031 )
   Net unrealized depreciation on
investments...............................................................    
   (1,554,193 )
                                                                              
                                   -------------
Net assets at June 30,
1996.........................................................................
 ........      $185,535,409
                                                                              
                                   -------------
                                                                              
                                   -------------
Class A:
   Net asset value and redemption price per share
      ($80,731,093 / 7,161,376 shares of common stock issued and
outstanding)...............................             $11.27
   Maximum sales charge (3.25% of offering
price)...........................................................             
 .38
   Maximum offering price to
public......................................................................... 
          $11.65
Class B:
   Net asset value, offering price and redemption price per share
      ($103,565,873 / 9,190,694 shares of common stock issued and
outstanding)..............................            $11.27
Class C:
   Net asset value, offering price and redemption price per share
      ($1,238,443 / 109,903 shares of common stock issued and
outstanding)..................................            $11.27
</TABLE>
 
- --------------------------------------------------------------------------------
See Notes to Financial Statements.                                       5 -----
 <PAGE>
<PAGE>
PRUDENTIAL STRUCTURED MATURITY FUND
INCOME PORTFOLIO
Statement of Operations (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
                                                   Six Months
                                                      Ended
Net Investment Income                             June 30, 1996
<S>                                               <C>
Income
   Interest....................................    $  7,189,906
                                                  -------------
Expenses
   Distribution fee--Class A...................          42,217
   Distribution fee--Class B...................         419,036
   Distribution fee--Class C...................           4,399
   Management fee..............................         394,699
   Transfer agent's fees and expenses..........         142,000
   Reports to shareholders.....................          82,000
   Registration fees...........................          42,000
   Custodian's fees and expenses...............          38,000
   Audit fee...................................          19,000
   Legal fees..................................          15,000
   Directors' fees.............................          15,000
   Miscellaneous...............................           4,991
                                                  -------------
      Total expenses...........................       1,218,342
                                                  -------------
Net investment income..........................       5,971,564
                                                  -------------
Realized and Unrealized Loss
on Investments
Net realized loss on investment transactions...      (2,158,940)
Net change in unrealized appreciation of
   investments.................................      (4,169,420)
                                                  -------------
Net loss on investments........................      (6,328,360)
                                                  -------------
Net Decrease in Net Assets
Resulting from Operations......................    $   (356,796)
                                                  -------------
                                                  -------------
</TABLE>


PRUDENTIAL STRUCTURED MATURITY FUND
INCOME PORTFOLIO
Statement of Changes in Net Assets (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
                                     Six Months       Year Ended
Increase (Decrease)                     Ended        December 31,
in Net Assets                       June 30, 1996        1995
<S>                                 <C>              <C>
Operations
   Net investment income..........  $   5,971,564    $ 13,324,650
   Net realized gain (loss) on
      investment transactions.....     (2,158,940)      1,914,240
   Net change in unrealized
      appreciation on
      investments.................     (4,169,420)     10,735,269
                                    -------------    ------------
   Net increase (decrease) in net
      assets resulting from
      operations..................       (356,796)     25,974,159
                                    -------------    ------------
Dividends (Note 1)
   Dividends to shareholders from
      net investment income
      Class A.....................     (2,712,382)     (5,877,430)
      Class B.....................     (3,225,156)     (7,407,642)
      Class C.....................        (34,026)        (39,578)
                                    -------------    ------------
                                       (5,971,564)    (13,324,650)
                                    -------------    ------------
Fund share transactions
   (Net of share conversions) (Note 6)
   Net proceeds from shares
      subscribed..................     17,011,601      30,676,035
   Net asset value of shares
      issued to shareholders in
      reinvestment of dividends
      and distributions ..........      3,789,229       8,591,299
   Cost of shares reacquired......    (39,157,613)    (64,005,192)
                                    -------------    ------------
   Net decrease in net assets from
      Fund share transactions.....    (18,356,783)    (24,737,858)
                                    -------------    ------------
Total decrease....................    (24,685,143)    (12,088,349)
Net Assets
Beginning of period...............    210,220,552     222,308,901
                                    -------------    ------------
End of period.....................  $ 185,535,409    $210,220,552
                                    -------------    ------------
                                    -------------    ------------
</TABLE>
 
- --------------------------------------------------------------------------------
6                                             See Notes to Financial Statements.
 <PAGE>
<PAGE>
                                             PRUDENTIAL STRUCTURED MATURITY FUND
Notes to Financial Statements (Unaudited)    INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Prudential Structured Maturity Fund (the ``Fund''), is registered under the
Investment Company Act of 1940, as a diversified, open-end management investment
company. The Fund consists of two portfolios--the Income Portfolio (the
``Portfolio'') and the Municipal Income Portfolio. The Municipal Income
Portfolio has not yet begun operations. The Fund was incorporated in Maryland
on
June 8, 1988 and had no operations until July 1989 when 8,613 shares of the
Portfolio's common stock were sold for $100,000 to Prudential Mutual Fund
Management, Inc. (``PMF''). Investment operations commenced on September 1,
1989. The Portfolio's investment objective is high current income consistent
with the preservation of principal. The ability of issuers of debt securities
held by the Portfolio to meet their obligations may be affected by economic
developments in a specific industry or region.
- ------------------------------------------------------------
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the
Portfolio in the preparation of its financial statements.
Securities Valuation: The Board of Directors has authorized the use of an
independent pricing service to determine valuations of U.S. Government and
corporate obligations. The pricing service considers such factors as security
prices, yields, maturities, call features, ratings and developments relating to
specific securities in arriving at securities valuations. When market quotations
are not readily available, a security is valued by appraisal at its fair value
as determined in good faith under procedures established under the general
supervision and responsibility of the Board of Directors.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost.
In connection with transactions in repurchase agreements, the Portfolio's
custodian or designated subcustodians, as the case may be under triparty
repurchase agreements, takes possession of the underlying collateral securities,
the value of which at least equals the principal amount of the repurchase
transaction, including accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. If
the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Portfolio may be delayed or limited.
Securities Transactions and Net Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of securities are
calculated on the identified cost basis. Interest income is recorded on the
accrual basis. Expenses are recorded on the accrual basis which may require the
use of certain estimates by management.
Net investment income (other than distribution fees) and unrealized and realized
gains or losses are allocated daily to each class of shares based upon the
relative proportion of net assets of each class at the beginning of the day.
Federal Income Taxes: It is the Portfolio's policy to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable net income and capital gains, if
any, to its shareholders. Therefore, no federal income tax provision is
required.
Dividends and Distributions: The Portfolio declares daily and pays monthly
dividends from net investment income. Distributions from net capital gains, if
any, are made at least annually. Dividends and distributions are recorded on the
ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
- ------------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement with PMF. Pursuant to this agreement, PMF
has responsibility for all investment advisory services and supervises the
subadviser's performance of such services. PMF has entered into a subadvisory
agreement with The Prudential Investment Corporation (``PIC''); PIC furnishes
investment advisory services in connection with the management of the Fund. PMF
pays for the cost of the subadviser's services, the compensation of officers and
employees of the Fund, occupancy and certain clerical and bookkeeping costs of
the Fund. The Fund bears all other costs and expenses.
The management fee paid PMF is computed daily and payable monthly, at an annual
rate of .40 of 1% of the average daily net assets of the Portfolio.
The Fund had a distribution agreement with Prudential Mutual Fund Distributors,
Inc. (``PMFD''), which acted as the distributor of the Class A shares of the
Fund through January 1, 1996. Effective January 2, 1996, Prudential Securities
Incorporated (PSI) became the distributor of the
- --------------------------------------------------------------------------------
                                                                         7 -----
 <PAGE>
<PAGE>
                                             PRUDENTIAL STRUCTURED MATURITY FUND
Notes to Financial Statements (Unaudited)    INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Class A shares of the Fund and is serving the Fund under the same terms and
conditions as under the arrangement with PMFD. PSI is also distributor of the
Class B and Class C 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 are accrued daily
and payable monthly.
Pursuant to the Class A, B and C Plans, the Fund compensates PSI for the six
months ended June 30, 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 six months ended June 30, 1996.
PSI has advised the Portfolio that it has received approximately $49,000 in
front-end sales charges resulting from sales of Class A shares during the six
months ended June 30, 1996. From these fees, PSI paid such sales charges to
Pruco Securities Corporation, an affiliated broker-dealer, which in turn paid
commissions to salespersons.
PSI advised the Portfolio that for the six months ended June 30, 1996, it
received approximately $106,000 in contingent deferred sales charges imposed
upon certain redemptions by Class B and Class C shareholders.
PMFD is a wholly-owned subsidiary of PMF; PSI, PMF and PIC are indirect,
wholly-owned subsidiaries of The Prudential Insurance Company of America.
- ------------------------------------------------------------
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services, Inc. (``PMFS''), a wholly-owned subsidiary of
PMF, serves as the Portfolio's transfer agent. During the six months ended June
30, 1996, the Portfolio incurred fees of approximately $125,000 for the services
of PMFS. As of June 30, 1996, approximately $21,000 of such fees were due to
PMFS. Transfer agent fees and expenses in the Statement of Operations also
include certain out-of-pocket expenses paid to non-affiliates.
- ------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of portfolio securities, excluding short-term investments,
for the six months ended June 30, 1996 were $148,973,997 and $170,423,210,
respectively.
The federal income tax basis of the Portfolio's investments at June 30, 1996 was
$184,362,357 and accordingly, net unrealized depreciation for federal income tax
purposes was $1,558,412 (gross unrealized appreciation--$780,898; gross
unrealized depreciation--$2,339,310).
For federal income tax purposes, the Portfolio had a capital loss carryforward
as of December 31, 1995 of approximately $7,180,600 which expires in 2002.
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,
1996, the Portfolio had a 0.41% undivided interest in the repurchase agreements
in the joint account. The undivided interest for the Portfolio represented
$4,576,000 in principal amount. As of such date, each repurchase agreement in
the joint account and the collateral therefor was as follows:
Bear, Stearns & Co., 5.40%, in the principal amount of $369,000,000, repurchase
price $369,055,350, due 7/1/96. The value of the collateral including accrued
interest was $377,194,429.
Goldman, Sachs & Co. Inc., 5.47%, in the principal amount of $369,000,000,
repurchase price $369,056,068, due 7/1/96. The value of the collateral including
accrued interest was $376,380,556.
Smith Barney, Inc., 5.50%, in the principal amount of $369,000,000, repurchase
price $369,056,375, due 7/1/96. The value of the collateral including accrued
interest was $376,380,118.
- ------------------------------------------------------------
Note 6. Capital
The Portfolio offers Class A, Class B and Class C shares. Class A shares are
sold with a front-end sales charge of up to 3.25%. Class B shares are sold with
a contingent deferred sales charge which declines from 3% to zero depending on
the period of time the shares are held. Class C shares are sold with a
contingent deferred sale charge of 1% during the first year. Class B shares
automatically convert to Class A shares on a quarterly basis approximately five
years after purchase. A special exchange privilege is
- --------------------------------------------------------------------------------
8
 <PAGE>
<PAGE>
                                             PRUDENTIAL STRUCTURED MATURITY FUND
Notes to Financial Statements (Unaudited)    INCOME PORTFOLIO
- --------------------------------------------------------------------------------
also available for shareholders who qualified to purchase Class A shares at net
asset value.
There are 250 million authorized shares of $.01 par value common stock, divided
into three classes, designated Class A, Class B and Class C common stock, each
of which consists of 83,333,333 1/3 authorized shares. Transactions in shares
of
common stock were as follows:
<TABLE>
<CAPTION>
Class A                                   Shares        Amount
- --------------------------------------  ----------   ------------
<S>                                     <C>          <C>
Six months ended June 30, 1996:
Shares sold...........................     808,744   $  9,315,552
Shares issued in reinvestment of
  dividends...........................     148,440      1,689,579
Shares reacquired.....................  (1,582,835)   (18,131,687)
                                        ----------   ------------
Net decrease in shares outstanding
  before conversion...................    (625,651)    (7,126,556)
Shares issued upon conversion from
  Class B.............................     138,698      1,564,028
                                        ----------   ------------
Net decrease in shares outstanding....    (486,953)  $ (5,562,528)
                                        ----------   ------------
                                        ----------   ------------
Year ended December 31, 1995:
Shares sold...........................     812,745   $  9,281,283
Shares issued in reinvestment of
  dividends...........................     325,730      3,698,766
Shares reacquired.....................  (2,387,143)   (26,982,383)
                                        ----------   ------------
Net decrease in shares outstanding
  before conversion...................  (1,248,668)   (14,002,334)
Shares issued upon conversion from
  Class B.............................     540,088      6,039,105
                                        ----------   ------------
Net decrease in shares outstanding....    (708,580)  $ (7,963,229)
                                        ----------   ------------
                                        ----------   ------------
<CAPTION>
Class B                                   Shares        Amount
- --------------------------------------  ----------   ------------
<S>                                     <C>          <C>
Six months ended June 30, 1996:
Shares sold...........................     630,177   $  7,198,442
Shares issued in reinvestment of
  dividends...........................     182,085      2,072,963
Shares reacquired.....................  (1,817,296)   (20,728,989)
                                        ----------   ------------
Net decrease in shares outstanding
  before conversion...................  (1,005,034)   (11,457,584)
Shares reacquired upon conversion into
  Class A.............................    (138,698)    (1,564,028)
                                        ----------   ------------
Net decrease in shares outstanding....  (1,143,732)  $(13,021,612)
                                        ----------   ------------
                                        ----------   ------------
Year ended December 31, 1995:
Shares sold...........................   1,817,442   $ 20,499,580
Shares issued in reinvestment of
  dividends...........................     428,576      4,863,912
Shares reacquired.....................  (3,249,167)   (36,739,116)
                                        ----------   ------------
Net decrease in shares outstanding
  before conversion...................  (1,003,149)   (11,375,624)
Shares reacquired upon conversion into
  Class A.............................    (540,088)    (6,039,105)
                                        ----------   ------------
Net decrease in shares outstanding....  (1,543,237)  $(17,414,729)
                                        ----------   ------------
                                        ----------   ------------
Class C
- --------------------------------------
Six months ended June 30, 1996:
Shares sold...........................      43,496   $    497,607
Shares issued in reinvestment of
  dividends...........................       2,347         26,687
Shares reacquired.....................     (26,261)      (296,937)
                                        ----------   ------------
Net increase in shares outstanding....      19,582   $    227,357
                                        ----------   ------------
                                        ----------   ------------
Year ended December 31, 1995:
Shares sold...........................      78,793   $    895,172
Shares issued in reinvestment of
  dividends...........................       2,515         28,621
Shares reacquired.....................     (24,796)      (283,693)
                                        ----------   ------------
Net increase in shares outstanding....      56,512   $    640,100
                                        ----------   ------------
                                        ----------   ------------
</TABLE>
 
- --------------------------------------------------------------------------------
                                                                         9 -----
 <PAGE>
<PAGE>
                                             PRUDENTIAL STRUCTURED MATURITY FUND
Financial Highlights (Unaudited)             INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                      Class A
                                    
- --------------------------------------------------------------------------
                                     Six Months
                                       Ended                          Year ended
December 31,
                                      June 30,     
- -----------------------------------------------------------
                                        1996         1995         1994        
1993         1992         1991
                                     ----------     -------     --------    
- --------     --------     --------
<S>                                  <C>            <C>         <C>          <C> 
        <C>          <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
   period........................     $  11.63      $ 10.97     $  11.78     $ 
11.79     $  12.13     $  11.67
                                     ----------     -------     --------    
- --------     --------     --------
Income from investment
operations:
Net investment income............          .36          .73          .65      
   .71          .86(c)       .93 c)
Net realized and unrealized gain
   (loss) on investment
   transactions..................         (.36)         .66         (.80)     
   .12         (.08)         .56
                                     ----------     -------     --------    
- --------     --------     --------
   Total from investment
      operations.................       --             1.39         (.15)     
   .83          .78         1.49
                                     ----------     -------     --------    
- --------     --------     --------
Less distributions:
Dividends from net investment
   income........................         (.36)        (.73)        (.65)     
  (.71)        (.86)        (.93)
Distributions in excess of net
   investment income.............       --            --            (.01)     
 --           --           --
Distributions from net realized
   gains.........................       --            --           --         
  (.13)        (.26)        (.10)
                                     ----------     -------     --------    
- --------     --------     --------
   Total distributions...........         (.36)        (.73)        (.66)     
  (.84)       (1.12)       (1.03)
                                     ----------     -------     --------    
- --------     --------     --------
Net asset value, end of period...     $  11.27      $ 11.63     $  10.97     $ 
11.78     $  11.79     $  12.13
                                     ----------     -------     --------    
- --------     --------     --------
                                     ----------     -------     --------    
- --------     --------     --------
TOTAL RETURN(a):.................        (0.07)%      13.12%       (1.16)%    
  7.19%        6.67%       13.35%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
   (000).........................     $ 80,731      $88,982     $ 91,680    
$119,449     $109,828     $109,997
Average net assets (000).........     $ 84,898      $89,500     $106,737    
$114,728     $107,937     $113,010
Ratios to average net assets:
   Expenses, including
      distribution fees..........          .86%(b)      .82%         .94%     
   .80%         .70%(c)      .37  c)
   Expenses, excluding
      distribution fees..........          .76%(b)      .72%         .84%     
   .70%         .60%(c)      .27  c)
   Net investment income.........         6.42%(b)     6.57%        5.88%     
  5.92%        7.15%(c)     7.89  c)
For Class A, B and C shares:
   Portfolio turnover............           77%         160%         123%     
   137%          91%         117%
</TABLE>
 
- ---------------
(a) Total return does not consider the effects of sales loads. Total return is
    calculated assuming a purchase of shares on the first day and a sale on the
    last day of each year reported and includes reinvestment of dividends and
    distributions. Total returns for periods of less than one full year are not
    annualized.
(b) Annualized.
(c) Net of expense subsidy and/or fee waiver.
- --------------------------------------------------------------------------------
10                                            See Notes to Financial Statements.
 <PAGE>
<PAGE>
                                             PRUDENTIAL STRUCTURED MATURITY FUND
Financial Highlights (Unaudited)             INCOME PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                      Class B 
                                 Class C
                                        
- ------------------------------------------------------------------     --------
                                                                              
                December 9,        Six
                                         Six Months                           
                  1992(c)         Months
                                           Ended             Year ended December
31,             Through         Ended
                                          June 30,     
- ----------------------------------     December 31,     June 30,
                                            1996          1995         1994   
     1993           1992           1996
                                         ----------     --------     -------- 
   --------     ------------     --------
<S>                                      <C>            <C>          <C>      
   <C>          <C>              <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
   period............................     $  11.63      $  10.97     $  11.78 
   $  11.79       $  11.79       $ 11.63
                                         ----------     --------     -------- 
   --------        -------       --------
Income from investment operations:
Net investment income................          .33           .66          .58 
        .62            .04           .33
Net realized and unrealized gain
   (loss) on investment
   transactions......................         (.36)          .66         (.80) 
       .12         --              (.36)
                                         ----------     --------     -------- 
   --------        -------       --------
   Total from investment
      operations.....................         (.03)         1.32         (.22) 
       .74            .04          (.03)
                                         ----------     --------     -------- 
   --------        -------       --------
Less distributions:
Dividends from net investment
   income............................         (.33)         (.66)        (.58) 
      (.62)          (.04)         (.33)
Distributions in excess of net
   investment income.................       --             --            (.01) 
     --            --             --
Distributions from net realized
   gains.............................       --             --           --    
       (.13)        --             --
                                         ----------     --------     -------- 
   --------        -------       --------
   Total distributions...............         (.33)         (.66)        (.59) 
      (.75)          (.04)         (.33)
                                         ----------     --------     -------- 
   --------        -------       --------
Net asset value, end of period.......     $  11.27      $  11.63     $  10.97 
   $  11.78       $  11.79       $ 11.27
                                         ----------     --------     -------- 
   --------        -------       --------
                                         ----------     --------     -------- 
   --------        -------       --------
TOTAL RETURN(a):.....................        (0.38)%       12.40%       (1.83)% 
     6.38%           .32%        (0.38)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)......     $103,566      $120,188     $130,258 
   $123,306        $11,981        $1,238
Average net assets (000).............     $112,357      $125,230     $134,985 
    $69,314         $5,474        $1,180
Ratios to average net assets:
   Expenses, including distribution
      fees...........................         1.51%(b)      1.47%        1.66% 
      1.55%          1.67%(b)      1.51%(b)
   Expenses, excluding distribution
      fees...........................          .76%(b)       .72%         .84% 
       .70%           .82%(b)       .76%(b)
   Net investment income.............         5.77%(b)      5.92%        5.17% 
      5.08%          6.31%(b)      5.77%(b)
<CAPTION>
 
                                                         August 1,
                                           Year           1994(d)
                                          Ended           Through
                                       December 31,     December 31,
                                           1995             1994
                                       ------------     ------------
<S>                                      <C>            <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
   period............................    $  10.97         $  11.30
                                        ------------         ------
Income from investment operations:
Net investment income................         .66              .23
Net realized and unrealized gain
   (loss) on investment
   transactions......................         .66             (.32)
                                        ------------         ------
   Total from investment
      operations.....................        1.32             (.09)
                                        ------------         ------
Less distributions:
Dividends from net investment
   income............................        (.66)            (.23)
Distributions in excess of net
   investment income.................      --                 (.01)
Distributions from net realized
   gains.............................      --               --
                                        ------------         ------
   Total distributions...............        (.66)            (.24)
                                        ------------         ------
Net asset value, end of period.......    $  11.63         $  10.97
                                        ------------         ------
                                        ------------         ------
TOTAL RETURN(a):.....................       12.40%           (0.68)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)......      $1,050             $371
Average net assets (000).............        $667             $192
Ratios to average net assets:
   Expenses, including distribution
      fees...........................        1.47%            1.90%(b)
   Expenses, excluding distribution
      fees...........................         .72%            1.15%(b)
   Net investment income.............        5.92%            5.30%(b)
</TABLE>
 
- ---------------
(a) Total return does not consider the effects of sales loads. Total return is
    calculated assuming a purchase of shares on the first day and a sale on the
    last day of each period reported and includes reinvestment of dividends and
    distributions. Total returns for periods of less than one full year are not
    annualized.
(b) Annualized.
(c) Commencement of offering of Class B shares.
(d) Commencement of offering of Class C shares.
- --------------------------------------------------------------------------------
See Notes to Financial Statements.                                      11 -----
 <PAGE>
<PAGE>
Getting The Most
From Your Prudential
Mutual Fund.
When you invest through Prudential Mutual Funds, you receive financial
advice through a Prudential Securities financial advisor or Prudential/Pruco
Securities registered representative. Your advisor or representative can provide
you with the following services:

There's No Reward Without Risk; But Is This Risk Worth It?
Your financial advisor or registered representative can help you match the
reward you seek with the risk you can tolerate. And risk can be difficult to
gauge -- sometimes even the simplest investments bear surprising risks. The
educated investor knows that markets seldom move in just one direction -- there
are times when a market sector or asset class will lose value or provide little
in the way of total return. Managing your own expectations is easier with help
from someone who understands the markets and who knows you!

Keeping Up With The Joneses.
A financial advisor or registered representative can help you wade through the
numerous mutual funds available to find the ones that fit your own individual
investment profile and risk tolerance. While the newspapers and popular
magazines are full of advice about investing, they are aimed at generic groups
of people or representative individuals, not at you personally. Your financial
advisor or registered representative will review your investment objectives with
you. This means you can make financial decisions based on the assets and
liabilities in your current portfolio and your risk tolerance -- not just based
on the current investment fad.

Buy Low, Sell High.
Buying at the top of a market cycle and selling at the bottom are among the most
common investor mistakes. But sometimes it's difficult to hold on to an
investment when it's losing value every month. Your financial advisor or
registered representative can answer questions when you're confused or worried
about your investment, and remind you that you're investing for the long haul.

<PAGE>
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
(800) 225-1852
http:\\www.prudential.com

Directors
Robert R. Fortune
Delayne Dedrick Gold
Harry A. Jacobs, Jr.
Thomas A. Owens, Jr.
Richard A. Redeker
Merle T. Welshans

Officers
Richard A. Redeker, President
Robert F. Gunia, Vice President
Eugene S. Stark, Treasurer
Stephen M. Ungerman, Assistant Treasurer
S. Jane Rose, Secretary
Marguerite E.H. Morrison, Assistant Secretary

Manager
Prudential Mutual Fund Management, Inc.
One Seaport Plaza
New York, NY 10292

Investment Adviser
The Prudential Investment Corporation
Prudential Plaza
Newark, NJ 07101

Distributor
Prudential Securities Incorporated
One Seaport Plaza
New York, NY 10292

Custodian
State Street Bank and Trust Company
One Heritage Drive
North Quincy, MA 02171

Transfer Agent
Prudential Mutual Fund Services, Inc.
P.O. Box 15005
New Brunswick, NJ 08906

Independent Accountants
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281

Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
The 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, 1996 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)
                                                           BULK RATE
Prudential Mutual Funds                                  U.S. POSTAGE
One Seaport Plaza                                            PAID
New York, NY 10292                                        Permit 6807
(800) 225-1852                                            New York, NY


743924102
743924201    MF140E2
743924300    Cat# 444111F


</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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