Folder Sync question

Hi there, I'm probably missing something silly here - but when monitoring a folder, and trying to copy new items, I'm getting a bit mixed up.
When the folder I'm monitoring has both nested folders, and individual files...anytime a new individual file is added to the master folder - a new folder is created in the destination folder, when it doesn't need one.
Here's a picture of the rule:

When the folder I'm monitoring has both nested folders, and individual files...anytime a new individual file is added to the master folder - a new folder is created in the destination folder, when it doesn't need one.
Here's a picture of the rule:
