<PAGE>
(ICON)
SEMIANNUAL REPORT JANUARY 31, 2000
Target Funds
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
(LOGO)
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Build on the Rock
THE TARGET FUNDS: RESEARCH DRIVEN--RESULTS ORIENTED
The Target Funds are managed by an elite group of independent money-management
firms, selected by Prudential through a rigorous selection process based on the
managers' long-term risk-adjusted performance, well-defined and disciplined
investment process, consistency of investment style, reputation, management
stability, and compliance procedures. Prudential continues to monitor the
performance, investment style consistency, and asset class purity of Target
Fund managers.
For each Target domestic equity fund, two leading investment firms share
responsibility. This dual-manager approach may enhance diversification.
Contents
1 Message From the Fund's President
Performance Review
2 Large Capitalization Growth Fund
5 Large Capitalization Value Fund
8 Small Capitalization Growth Fund
12 Small Capitalization Value Fund
16 International Equity Fund
19 Total Return Bond Fund
21 Combined Financial Statements
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www.prudential.com (800) 225-1852
Message From the Fund's President As of March 6, 2000
(PHOTO)
DEAR SHAREHOLDER,
The three months after the inception of the Target Funds were characterized by
a very unusual investment environment. The price gap between the most expensive
fifth of the S&P 500 and the other 80% was far greater than at any other time
in the past 30 years. Stock-price volatility was extraordinarily high. With
this heightened market uncertainty, it is particularly important to have
diversified investments.
The Target Funds are committed to style consistency so our shareholders can
maintain the diversification profile they have selected. In this unusual
market, some of our Target Funds were hurt by their consistent adherence to
their investment disciplines. After several years of superior growth-style
performance, many other value managers have chased the market, diluting their
style consistency. They benefited over our reporting period in comparison with
the strictly disciplined Target value managers. Historically, however, such
runs of style superiority have always come to an end. Since these ends often
come rapidly, we believe a diversified asset allocation is your best
protection. Our Small Capitalization Growth Fund also trailed its Lipper
Average. It was operating in a very speculative market: the five best
performers in the top-performing healthcare sector were biotech companies with
no reported earnings. Target Fund managers generally have a preference for
companies whose growth potential has been demonstrated.
Sincerely,
John R. Strangfeld
President
Target Funds
1
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Target Funds Large Capitalization Growth Fund
Performance Review
A GROWTH MARKET
In the three months between the inception of Large Capitalization Growth Fund
on November 3, 1999, and the end of the fiscal period on January 31, 2000,
there was a large market gain that was narrowly concentrated in technology
growth stocks, followed by a swift decline in January by many of the stocks
and sectors that had led the advances. Among S&P 500 companies, growth stocks
fell more than twice as far, on average, as value stocks. Technology stocks
still finished almost 18 percentage points ahead of the next highest-performing
sector over this period.
Large Capitalization Growth Fund returned a very strong 16.00% (Class A shares)
in this abbreviated reporting period--almost three percentage points above the
13.35% Lipper Average. Including sales charges, the Fund's Class A shares
returned 10.20%. Both of its managers had more invested in the technology
sector than technology's share of the S&P 500. However, Oak Associates had a
much less diversified portfolio and a correspondingly higher return in this
narrow market. About 30% of its holdings on January 31 were semiconductor
companies. The five largest contributors to its return were in the technology
sector. They were led by Aspect Communications, which makes systems for
responding to customer service requests. Applied Materials and Cisco Systems
(both described in the table of Five Largest Holdings) also were top
performers. Columbus Circle's gains were led by Enron and Ciena (both in its
Five Largest Holdings table). Although it had only a slight overweight of
technology, its return was dominated by its strong selection in the sector.
However, it also held the conglomerate Tyco, which lost considerable ground
over the period, and several financial firms that performed poorly. Columbus
Circle's more diversified style means it is likely to be less exposed when the
volatile technology sector has a difficult stretch.
Portfolio Composition
Sectors expressed as a percentage of net assets as of 1/31/00
56.0% Technology
10.4% Consumer Services
10.0% Financial Services
7.7% Business Services
5.1% Consumer Staples
4.1% Energy
3.5% Basic Industries
3.2% Cash & Equivalents
2
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www.prudential.com (800) 225-1852
Performance at a Glance
INVESTMENT GOALS AND STYLE
Large Capitalization Growth Fund, managed by Columbus Circle Investors and Oak
Associates, Ltd., has long-term capital appreciation as its investment
objective. It purchases stocks of large companies that the managers believe
will have faster earnings growth than that of the Standard & Poor's 500 Stock
Index (S&P 500).
Cumulative Total Returns1 As of 1/31/00
<TABLE>
<CAPTION>
Since Inception2
(Without Sales Charge) (With Sales Charge)
<S> <C> <C>
Class A 16.00% 10.20%
Class B 15.90 10.90
Class C 15.90 13.74
Lipper Large-Cap Growth Fund Avg.3 13.35 N/A
</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. Since the
Fund has been in existence less than one year, no average annual total returns
are presented. The Fund charges a maximum front-end sales charge of 5% for
Class A shares. Class B shares are subject to a declining contingent deferred
sales charge (CDSC) of 5%, 4%, 3%, 2%, 1%, and 1% for six years. Class B shares
will automatically convert to Class A shares, on a quarterly basis,
approximately seven years after purchase. Class C shares are subject to a
front-end sales charge of 1% and a CDSC of 1% for 18 months.
2 Inception date: Class A, B, and C, 11/3/99.
3 The Lipper Since Inception return is for all funds in each share class in the
Large-Cap Growth Fund category. The Lipper average is unmanaged. Large-Cap
Growth funds, by portfolio practice, invest at least 75% of their equity assets
in companies with market capitalizations (on a three-year weighted basis)
greater than 300% of the dollar-weighted median market capitalization of the
S&P(R) Mid-Cap 400 Index. Large-Cap Growth funds normally invest in companies
with long-term earnings expected to grow significantly faster than the earnings
of the stocks represented in a major unmanaged stock index. These funds will
normally have an above-average price/earnings ratio, price-to-book ratio, and
three-year earnings growth figure, compared to the U.S. diversified large-cap
funds universe average.
S&P(R) is a registered trademark of The McGraw-Hill Companies, Inc.
<PAGE>
Target Funds Large Capitalization Growth Fund
Five Largest Holdings expressed as a percentage of the Fund's net assets
Columbus Circle Investors As of 1/31/00
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10.8% Cisco Systems/Networking
Leading manufacturer of data networking equipment. Provides most of
the Internet switching infrastructure for both carriers and corporate
entry points, as well as internal corporate networks. It is moving into
the telecommunications service market.
3.2% Microsoft/Computer Software
World's largest software company. The biggest profit beneficiary of the
cheap PC boom, while its corporate business should receive a boost from
Windows 2000.
3.1% Ciena Corp./Electronics
Makes systems that increase the carrying capacity of fiberoptic telecom
networks. Its core business is rebounding. Ciena offers the prospect of
continued long-term growth.
1.9% Enron/Energy
The largest buyer and seller of natural gas in the United States, Enron
has strong potential for earnings growth from the national fiberoptic
network its communications arm is building.
1.5% Motorola/Electronics
World's third largest maker of semiconductors and second largest maker
of mobile phones. A continued turnaround in its wireless telephone and
electronic infrastructure businesses and a good new product pipeline
make Motorola an attractive growth proposition.
Oak Associates, Ltd. As of 1/31/00
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10.8% Cisco Systems/Networking
Creates hardware and software solutions that link computer networks. We
believe that Cisco is the premier growth company in the United States.
Its highly talented, visionary management team has an aggressive
acquisition strategy.
5.6% Applied Materials/Semiconductor Capital Equipment
The leader in the semiconductor equipment business, which is in the
early stages of long-term growth. The DRAM (computer memory chip)
outlook continues to be favorable, but the drivers of the industry now
also include the communications, consumer, and server markets.
4.7% Intel/Semiconductors
The dominant provider of central processing chips for personal
computers, Intel has created a new business unit to focus on the
wireless telecommunications industry. Intel's financial, manufacturing,
and marketing muscle makes it a strong long-term growth story.
3.4% Xilinx/Semiconductors
The leading innovator in complete programmable logic chips, a market
segment protected by significant barriers to entry. The communications
sector provides most of Xilinx's sales, but its products are gaining in
networking, telecommunications, and wireless.
3.4% Linear Technology/Semiconductors
Makes semiconductor chips that translate analog data--such as sound,
pressure, temperature, and voltage--into digital information. A shortage
of high-end analog products has brought production rates near their
historical highs. Growth in 2000 should benefit from the robust demand
for cellular telephones.
4
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Target Funds Large Capitalization Value Fund
Performance Review
A GROWTH MARKET
In the three months between the inception of Large Capitalization Value Fund on
November 3, 1999, and the end of the fiscal period on January 31, 2000, there
was a large market gain that was narrowly concentrated in technology growth
stocks and then a swift decline in January by many of the stocks and sectors
that had led the advances. Among S&P 500 companies, growth stocks fell more
than twice as far, on average, as value stocks, but didn't erase their lead for
the entire period. Technology stocks still finished almost 18 percentage points
ahead of the next highest-performing sector over this period.
Large Capitalization Value Fund had a -6.63% return primarily because value
stocks were deeply out of favor during this period. It trailed the -1.15%
Lipper Average because both managers adhered to a strict value style. Including
sales charges, the Fund's Class A shares returned -11.29%. INVESCO attributed
its poor performance primarily to an underrepresentation of stocks with price
momentum. Hotchkis and Wiley's underperformance was primarily due to the
absence of any technology stocks among its selections and to the poor
performance of its financial and energy stocks (such as Phillips Petroleum)
over this period. Hotchkis and Wiley also selected Philip Morris, which
suffered from the investing public's aversion to tobacco-related stocks. In
the opinion of many analysts, the non-tobacco businesses of Philip Morris are
worth more than its current stock price.
Portfolio Composition
Sectors expressed as a percentage of net assets as of 1/31/00
19.1% Utilities
17.9% Financial Services
11.7% Other
10.7% Consumer Staples
9.9% Consumer Cyclical
9.1% Basic Industries
8.2% Energy
7.9% Technology
5.5% Cash & Equivalents
5
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Target Funds Large Capitalization Value Fund
Performance at a Glance
INVESTMENT GOALS AND STYLE
Large Capitalization Value Fund, managed by INVESCO Capital Management, Inc.
and Hotchkis and Wiley, has total return as its investment objective. Total
return consists of capital appreciation and dividend income. The Fund seeks
investments that will increase in value and also pay the Fund dividends. It
invests in large company stocks that its managers believe to be undervalued,
given the companies' sales, earnings, book value, cash flow, and recent
performance.
Cumulative Total Returns1 As of 1/31/00
<TABLE>
<CAPTION>
Since Inception2
(Without Sales Charge) (With Sales Charge)
<S> <C> <C>
Class A -6.63% -11.29%
Class B -6.92 -11.92
Class C -6.92 -8.85
Lipper Multi-Cap Value Fund Avg.3 -1.15 N/A
</TABLE>
Past performance is not indicative of future results. Principal and investment
return will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
1Source: Prudential Investments Fund Management LLC and Lipper Inc. Since the
Fund has been in existence less than one year, no average annual total returns
are presented. The Fund charges a maximum front-end sales charge of 5% for
Class A shares. Class B shares are subject to a declining contingent deferred
sales charge (CDSC) of 5%, 4%, 3%, 2%, 1%, and 1% for six years. Class B shares
will automatically convert to Class A shares, on a quarterly basis,
approximately seven years after purchase. Class C shares are subject to a
front-end sales charge of 1% and a CDSC of 1% for 18 months.
2 Inception date: Class A, B, and C, 11/3/99.
3 The Lipper Since Inception return is for all funds in each share class in the
Multi-Cap Value Fund category. The Lipper average is unmanaged. Multi-Cap Value
funds, by portfolio practice, invest in a variety of market capitalization
ranges, without concentrating 75% of their equity assets in any one market
capitalization range over an extended period of time. Multi-Cap funds will
generally have between 25% and 75% of their assets invested in companies with
market capitalizations (on a three-year weighted basis) more than 300% of the
dollar-weighted median market capitalization of the S&P(R) Mid-Cap 400 Index.
Multi-Cap Value funds seek long-term growth of capital by investing in
companies that are considered undervalued relative to a major unmanaged stock
index based on below-average price/earnings ratio, price-to-book ratio, and
three-year earnings growth figure, compared to the U.S. diversified multi-cap
funds universe average.
S&P(R) is a registered trademark of The McGraw-Hill Companies, Inc.
6
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Target Funds Large Capitalization Value Fund
Five Largest Holdings expressed as a percentage of the Fund's net assets
INVESCO As of 1/31/00
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2.9% AT&T Corp./Telecommunications
Communication services and products, including voice, data, and
telecommunication services. Margins as well as numbers of subscribers in
both their data and local voice services are increasing rapidly. Wireless
revenues also have risen substantially.
2.3% Ford Motor Company/Automobiles
World's second largest auto manufacturer. Although industry sales are
expected to retreat slightly, Ford's earnings should continue to grow
because its favorable light truck mix appeals to consumers. Ford is
trading at only eight times estimated 2000 earnings.
1.3% Exxon Mobil Corporation/Oil
Exxon bought Mobil to form the world's largest oil company, and the
fourth largest U.S. company by sales. Exxon Mobil is well established
from reserves to distribution.
1.3% Bank of America/Banking
The holding company for Bank of America and Nationsbank, it is the
largest U.S. bank and the first to operate coast to coast. Both banks had
been aggressive acquisitors and the combination is well established, yet
it sells for only nine times earnings.
0.7% Citigroup/Financial Services
The world's largest financial services firm, formed by the merger of
Citicorp and Travelers Group. A strong global position in banking and the
second largest U.S. credit-card issuer.
Hotchkis and Wiley As of 1/31/00
- -------------------------------------------------------------------------------
2.9% AT&T Corp./Telecommunications
Communication services and products, including voice, data, and
telecommunication services. Margins as well as numbers of subscribers in
both their data and local voice services are increasing rapidly. Wireless
revenues also have risen substantially.
2.3% Ford Motor Company/Automobiles
World's second largest auto manufacturer. Although industry sales are
expected to retreat slightly, Ford's earnings should continue to grow
because its favorable light truck mix appeals to consumers. Ford is
trading at only eight times estimated 2000 earnings.
1.6% General Motors Corp./Automobiles
World's largest automotive company. Has been reducing costs and
increasing operating efficiency. Its technology assets--such as Hughes
and promising Internet investments--should be passed on to investors by
GM's shareholder-friendly management, leaving a powerful
cash-flow-generating global automotive company.
1.6% International Paper/Forest Products
A paper and forest product industry leader, benefiting from positive
industry pricing and volume and a favorable long-term supply/demand
outlook. Is realizing merger synergies from its Union Camp acquisition,
and continually brings its costs of doing business lower.
1.5% Reynolds Metals Co./Metals
Produces a variety of aluminum, plastic, and other products. We expect
greater profitability as industry consolidation shifts pricing power to
the producers, while worldwide economic strength increases demand.
Selling at a very low multiple of next year's earnings.
7
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Target Funds Small Capitalization Growth Fund
Performance Review
A VERY NARROW MARKET
Small Capitalization Growth Fund returned 12.30% in the three months between
its inception on November 3, 1999, and the end of the fiscal period on January
31, 2000. Nonetheless, it trailed the Lipper Small-Cap Growth Fund Average of
32.98% because the market gains were narrowly concentrated in "new economy"
growth stocks (technology, telecommunications, and biotechnology). Including
sales charges, the Fund's Class A shares returned 6.69%. Only 12 stocks
contributed half of the January gains of the Russell 2000 Index. Both managers,
Sawgrass Asset Management and Fleming Asset Management USA, focus on companies
with rising earnings, but the small-cap growth market has been rewarding highly
speculative stocks, such as initial public offerings (IPOs) of stock, even
though they have no earnings. The Fund's preference for solid, growing
companies that have a greater chance of surviving has actually hurt its
relative short-term performance.
For a few years now, small-cap stocks have been trailing those of larger firms.
However, in 1999, the small-cap Russell 2000 Index edged ahead of the large-cap
S&P 500 at the very end of the year, but the gains were focused in growth
stocks; the Russell 2000 Value Index declined over the year. Although the
Russell 2000 Value Index was positive over the three months ended January 31,
2000, the Russell Growth Index had far superior returns. By and large, the
improved performance of small-cap stocks represented many investors' broader
search among technology and biotechnology firms to include the more speculative
start-ups and small companies, while they narrowed their focus to exclude
non-technology companies.
Portfolio Composition
Sectors expressed as a percentage of net assets as of 1/31/00
41.9% Technology
15.7% Consumer Cyclical
12.9% Miscellaneous
12.2% Business Services
5.6% Financial Services
4.2% Consumer Staples
2.2% Utilities
0.8% Consumer Services
4.5% Cash & Equivalents
8
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www.prudential.com (800) 225-1852
Performance at a Glance
INVESTMENT GOALS AND STYLE
Small Capitalization Growth Fund, managed by Sawgrass Asset Management and
Fleming Asset Management USA, has maximum capital appreciation as its
investment objective. To achieve that objective, the Fund invests in the
stocks of small companies that the managers expect to increase their earnings
faster than the growth rate of the U.S. economy.
Cumulative Total Returns1 As of 1/31/00
<TABLE>
<CAPTION>
Since Inception2
(Without Sales Charge) (With Sales Charge)
<S> <C> <C>
Class A 12.30% 6.69%
Class B 12.10 7.10
Class C 12.10 9.98
Lipper Small-Cap Growth Fund Avg.3 32.98 N/A
</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. Since the
Fund has been in existence less than one year, no average annual total returns
are presented. The Fund charges a maximum front-end sales charge of 5% for
Class A shares. Class B shares are subject to a declining contingent deferred
sales charge (CDSC) of 5%, 4%, 3%, 2%, 1%, and 1% for six years. Class B shares
will automatically convert to Class A shares, on a quarterly basis,
approximately seven years after purchase. Class C shares are subject to a
front-end sales charge of 1% and a CDSC of 1% for 18 months.
2 Inception date: Class A, B, and C, 11/3/99.
3 The Lipper Since Inception return is for all funds in each share class in the
Small-Cap Growth Fund category. The Lipper average is unmanaged. Small-Cap
Growth funds, by portfolio practice, invest at least 75% of their equity assets
in companies with market capitalizations (on a three-year weighted basis) less
than 250% of the dollar-weighted median market capitalization of the S&P(R)
SmallCap 600 Index. Small-Cap Growth funds normally invest in companies with
long-term earnings expected to grow significantly faster than the earnings of
the stocks represented in a major unmanaged stock index. These funds will
normally have an above-average price/earnings ratio, price-to-book ratio, and
three-year earnings growth figure, compared to the U.S. diversified small-cap
funds universe average.
S&P(R) is a registered trademark of The McGraw-Hill Companies, Inc.
9
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Target Funds Small Capitalization Growth Fund
Five Largest Holdings expressed as a percentage of the Fund's net assets
Sawgrass Asset Management As of 1/31/00
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2.3% Salton/Consumer Products
Designs and markets, but does not manufacture, home appliances that are
sold under such brand names as Salton, Farberware, White-Westinghouse,
and Toastmaster. With a single-digit price/earnings ratio, the stock rose
43% over our reporting period.
2.0% Electro Scientific Industries, Inc./Capital Equipment
Manufactures and tests equipment for the electronics industry. Its
products support the rapidly growing personal computer and cellular
telephone industries. Its stock rose 52% over our reporting period.
2.0% Credence Systems/Electronic Measuring Instruments
Tests equipment for semiconductor integrated circuits. Its stock rose 69%
over our reporting period.
1.8% International Rectifier/Semiconductors
Makes power semiconductors, which convert line power to a usable form
for power supplies, motor drives, and lighting ballasts.
1.8% Zebra Technologies/Capital Equipment
A leading maker of bar code labeling equipment and plastic card printers
for the personal identification market. It also supplies the software for
automatic identification and data collection.
Fleming Asset Management USA As of 1/31/00
- -------------------------------------------------------------------------------
2.3% AmeriCredit/Financial Services
The only sub-prime auto lender to survive the 4- to 5-year shakeout. A
specialist in sub-prime lending, AmeriCredit now has little competition.
Credit quality is improving while originations are growing at about 40%
a year.
1.5% Scotts Company/Consumer Products
Lawn and garden care products under brand names such as Scotts, Ortho,
Miracle-Gro, and Roundup.
1.5% Penton Media/Advertising Services
Publishes 50 trade magazines and provides marketing services, such as
trade shows and websites, for 10 industries, including engineering and
electronics.
1.4% Acxiom/Business Services
A data warehouse with a database encompassing more than 95% of U.S.
households. Provides analytical targeting services. Sales rose 28% in
1999. Excellent long-term growth potential because it increases the
productivity of marketing activity.
1.3% Interim Services/Human Resources
A large placement and temporary personnel firm that we believe has strong
long-term growth potential. Benefits from the trends toward greater
career movement and outsourcing of human resource services.
10
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www.prudential.com (800) 225-1852
Performance Review (Cont'd)
Sawgrass had the stronger performance because of its sharp focus on technology
stocks and excellent selection among healthcare stocks, such as King
Pharmaceuticals. Among its largest positions, Credence Systems, Salton, and
International Rectifier (see table of Five Largest Holdings) also were among
the largest contributors to the Fund's return. Moreover, it had underweighted
the poor-performing financial sector, which suffered from expectations of
rising interest rates. However, Sawgrass' technology selections underperformed
the sector, which included some very speculative stocks with extraordinary
returns over this period. Sawgrass also suffered from its larger representation
of consumer cyclicals, such as Cost Plus and Spiegel.
Fleming's return was hurt primarily by its underweight in technology and
healthcare, particularly in the biotechnology sector that contributed most to
the index gains. However, late in the period, it identified biotechnology firms
(such as Aurora Biosciences and Genzyme Transgenics) that fit its selection
criteria. It benefited from its holdings of consumer cyclicals, such as TV
Guide. Acxiom and Interim Services (see table of Five Largest Holdings) were
also strong contributors.
11
<PAGE>
Target Funds Small Capitalization Value Fund
Performance Review
THE MOST NEGLECTED ARENA
Small Capitalization Value Fund was operating in the most neglected group of
stocks. In the three months between the inception of Target Small
Capitalization Value Fund on November 3, 1999, and the end of the fiscal period
on January 31, 2000, the Fund's Class A shares lost 1.70%, while the Lipper
Small-Cap Value Average returned 5.11%. Including sales charges, the Fund's
Class A shares returned -6.62%. Most investors focused narrowly on technology
firms during this period. We suspect the Fund's competitors allowed their
holdings to creep upward in capitalization and valuations, since the benchmark
Lipper Average was well above the return of the unmanaged Russell 2000 Value
Index. The Target Fund managers, of course, are required to maintain style
discipline. Much of the gains among companies with inexpensive stock was due
to takeover activity. Business rivals, company managers, and suppliers or
customers were in an excellent position to appreciate and take advantage of the
bargain prices on neglected companies.
For a few years now, small-cap stocks have been trailing those of larger firms.
However, in 1999, the small-cap Russell 2000 Index edged ahead of the large-cap
S&P 500 at the very end of the year, but the gains were focused in growth
stocks; the Russell 2000 Value Index declined over the year. Although the
Russell 2000 Value Index was positive over the three months ended January 31,
2000, the Russell 2000 Growth Index had far superior returns. By and large, the
improved performance of small-cap stocks represented many investors' broader
search among technology and biotechnology firms to include the more speculative
start-ups and small companies, while they narrowed their focus to exclude
non-technology companies.
Portfolio Composition
Sectors expressed as a percentage of net assets as of 1/31/00
17.6% Technology
16.0% Consumer Staples
12.6% Financial Services
12.3% Miscellaneous
11.7% Consumer Cyclical
9.9% Consumer Services
6.7% Energy
6.0% Business Services
2.0% Utilities
5.2% Cash & Equivalents
12
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
INVESTMENT GOALS AND STYLE
Small Capitalization Value Fund, managed by Lazard Asset Management and DLJ
Asset Management, Inc. (formerly known as Wood, Struthers & Winthrop), has
above-average capital appreciation as its investment objective. To achieve
this, the Fund invests in stocks of small companies that its managers believe
to be undervalued, given the companies' sales, earnings, book values, cash
flows, and recent performances.
Cumulative Total Returns1 As of 1/31/00
<TABLE>
<CAPTION>
Since Inception2
(Without Sales Charge) (With Sales Charge)
<S> <C> <C>
Class A -1.70% -6.62%
Class B -1.90 -6.90
Class C -1.90 -3.88
Lipper Small-Cap Value Fund Avg.3 5.11 N/A
</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. Since the
Fund has been in existence less than one year, no average annual total returns
are presented. The Fund charges a maximum front-end sales charge of 5% for
Class A shares. Class B shares are subject to a declining contingent deferred
sales charge (CDSC) of 5%, 4%, 3%, 2%, 1%, and 1% for six years. Class B shares
will automatically convert to Class A shares, on a quarterly basis,
approximately seven years after purchase. Class C shares are subject to a
front-end sales charge of 1% and a CDSC of 1% for 18 months.
2 Inception date: Class A, B, and C, 11/3/99.
3 The Lipper Since Inception return is for all funds in each share class in the
Small-Cap Value Fund category. The Lipper average is unmanaged. Small-Cap Value
funds, by portfolio practice, invest at least 75% of their equity assets in
companies with market capitalizations (on a three-year weighted basis) less
than 250% of the dollar-weighted median market capitalization of the S&P(R)
SmallCap 600 Index. Small-Cap Value funds seek long-term growth of capital by
investing in companies that are considered undervalued relative to a major
unmanaged stock index based on price-to-current earnings ratio, book value, or
other factors. These funds will normally have a below-average price/earnings
ratio, price-to-book ratio, and three-year earnings growth figure, compared to
the U.S. diversified small-cap funds universe average.
S&P(R) is a registered trademark of The McGraw-Hill Companies, Inc.
13
<PAGE>
Target Funds Small Capitalization Value Fund
Five Largest Holdings expressed as a percentage of the Fund's net assets
DLJ Asset Management, Inc. As of 1/31/00
- -------------------------------------------------------------------------------
1.2% Varian, Inc./Electronics
A manufacturer of scientific instruments and equipment, formed in 1999
when Varian Associates split into separate medical, semiconductor, and
instrument companies. We expect their margins to improve as they reduce
costs. Moreover, investors are paying more attention to companies exposed
to the healthcare and semiconductor markets.
1.1% Cambrex Corp./Chemicals
Manufactures ingredients, chemicals, and cell culture products for the
biotech and pharmaceutical industries. As these industries focus on their
core competencies in drug development, Cambrex helps them outsource the
production of components.
1.0% Electro Scientific Industries, Inc./Electronics
A diversified electronics firm that makes equipment used in the
production of components for pagers, cellular phones, personal computers,
and other electronic products. Benefiting from rebounding demand as it
helps its customers produce products faster and cheaper.
1.0% C&D Technologies/Electronics
Produces power supply equipment for the telecommunications market,
including battery chargers for cellular telephones as well as for
industrial batteries. Explosive growth in the telecommunications markets
is driving strong demand. The company also has interesting applications
in standby power markets, such as electric vehicles, with great potential.
1.0% Jones Pharma, Inc./Drugs & Healthcare
A specialty pharmaceutical manufacturer that specializes in revitalizing
compounds that are too small for the major manufacturers to focus
attention on. The company has a strong franchise in the endocrine area.
Sales in 1999 were 28% above 1998.
Lazard Asset Management As of 1/31/00
- -------------------------------------------------------------------------------
0.7% Helmerich & Payne, Inc./Oil & Gas
Operates land and offshore oil and gas drilling rigs. Attractively
valued; its premium-quality rig fleet should be in greater demand with
the recent rise in energy prices.
0.7% Bell & Howell Co./Electronics
Offers a database of periodicals, newspapers, dissertations, research
collections, and abstracts in electronic and microfilm formats and other
document/electronics services. Its current operations seem stable; future
plans favor niche acquisitions.
0.7% Pennzoil-Quaker State Co./Oil & Gas
Makes the two largest brands of motor oil in the United States, and owns
the nation's largest chain of oil-change centers--Jiffy Lube. Is
inexpensively valued relative to its peers, and has solid cash flow.
0.7% Fuller (H.B.) Co./Chemicals
Adhesives, sealants, and coatings used in a wide variety of products from
shoes to cars. In 1998, began restructuring to bring down its costs. Net
income in 1999 was 171% higher.
0.6% Tektronix, Inc./Electronics
Commands a solid market share in the office color printer market. This is
an attractive business where unit numbers seem to be rapidly growing.
14
<PAGE>
www.prudential.com (800) 225-1852
Performance Review (Cont'd)
Lazard's strong stock selection in the consumer discretionary, utilities, and
energy sectors produced a positive return over our reporting period, despite
its de-emphasis of technology and telecommunications and the poor performance
of its healthcare stocks. It had particularly good results from Pier 1 (which
benefited from strong holiday sales figures), Harman International, and
Credence Systems. Its shares of Varian Medical, the leading manufacturer of
cancer radiation equipment, moved up sharply in January upon announcement of a
joint venture with General Electric.
DLJ Asset Management, Inc. benefited from its strong focus on technology firms
compared to the Russell 2000 Value Index, but nonetheless, its selections held
back the Fund's return. Among the largest contributors to its performance were
Methode Electronics (which has an optoelectronics division with strong growth
potential), DII Group (which was sold after the stock rose upon receipt of a
takeover offer), and Electro Scientific Industries (see table of Five Largest
Holdings). Its second heaviest focus was healthcare, which included Jones
Pharma (see table of Five Largest Holdings), the best performer over the
reporting period. The return suffered particularly from its financial services
holdings (Horace Mann, Bank United, and First Merit), which were hurt by rising
interest rates; by Land's End, which reported disappointing holiday sales; and
by ITT Educational, which is moving to a networking-focused curriculum.
Investors are worried about the impact of the transition on earnings. DLJ
Asset Management, Inc. believes these are all temporary concerns, and has
confidence in these holdings.
15
<PAGE>
Target Funds International Equity Fund
Performance Review
A GLOBAL GROWTH-STOCK ENVIRONMENT
International Equity Fund declined 1.20% (Class A shares) between its inception
on November 3, 1999, and the end of the fiscal period on January 31, 2000,
while the Lipper International Fund Average gained 14.16%. Including sales
charges, the Fund's Class A shares returned -6.14%. Many funds in the Lipper
universe invested a large portion of their assets in developing market
countries, which had been depressed by the Asian recession. They rebounded
sharply over our reporting period. The Fund has stayed in developed markets,
which tend to be less volatile. Moreover, over the reporting period, growth
stocks beat value stocks by a significant margin, as measured by Morgan Stanley
Capital International (MSCI) All-Country World Growth and Value Indexes.
Lazard's value style of management was at a disadvantage.
The Fund's performance also suffered from a January decline in Sony stock, its
second largest holding at period end. (However, Sony reached a three-year high
at the end of February, after our reporting period, in anticipation of a strong
reception for Playstation 2.) Poor performance by the Fund's consumer goods and
U.K. holdings also hurt its return. However, stock selection in the consumer
staples, finance, and materials sectors helped. Particularly strong
contributions came from Heineken, which continued to capture share of the
global beer market, and two telecommunications service companies--NTT Mobile
Communications (Japan) and Telefonica (Spain).
Portfolio Composition
Sectors expressed as a percentage of net assets as of 1/31/00
23.7% Financial Services
16.8% Consumer Services
15.5% Miscellaneous
8.7% Technology
6.9% Consumer Staples
6.0% Energy
5.0% Consumer Cyclical
4.7% Utilities
3.4% Basic Industries
2.2% Business Services
7.1% Cash & Equivalents
Geographic Concentration
Sectors expressed as a percentage of net assets as of 1/31/00
30.3% Other Continental Europe
24.0% Japan
19.6% United Kingdom
9.7% Germany
5.1% Scandinavia
4.2% Pacific Basin (excluding Japan)
7.1% Cash & Equivalents
16
<PAGE>
www.prudential.com (800) 225-1852
Performance at a Glance
INVESTMENT GOALS AND STYLE
International Equity Fund, managed by Lazard Asset Management, has capital
appreciation as its investment objective. It purchases stocks of foreign
companies to achieve this objective. These companies may be based in countries
with either developing or developed economies. It may also invest in American
Depositary Receipts, American Depositary Shares, Global Depositary Receipts,
and European Depositary Receipts, which are certificates representing an equity
investment in a foreign company.
Cumulative Total Returns1 As of 1/31/00
<TABLE>
<CAPTION>
Since Inception2
(Without Sales Charge) (With Sales Charge)
<S> <C> <C>
Class A -1.20% -6.14%
Class B -1.40 -6.40
Class C -1.40 -3.39
Lipper International Fund Avg.3 14.16 N/A
</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. Since the
Fund has been in existence less than one year, no average annual total returns
are presented. The Fund charges a maximum front-end sales charge of 5% for
Class A shares. Class B shares are subject to a declining contingent deferred
sales charge (CDSC) of 5%, 4%, 3%, 2%, 1%, and 1% for six years. Class B shares
will automatically convert to Class A shares, on a quarterly basis,
approximately seven years after purchase. Class C shares are subject to a
front-end sales charge of 1% and a CDSC of 1% for 18 months.
2 Inception date: Class A, B, and C, 11/3/99.
3 The Lipper Since Inception return is for all funds in each share class in the
International Fund category. The Lipper average is unmanaged. International
funds invest their assets in securities with primary trading markets outside
the United States.
17
<PAGE>
Target Funds International Equity Fund
Five Largest Holdings expressed as a percentage of the Fund's net assets
Lazard Asset Management As of 1/31/00
- -------------------------------------------------------------------------------
3.1% Telefonica de Espana SA/Telecommunications
The former telephone monopoly in Spain. Now, a quarter of its sales are
from outside Spain, including Portugal, South America, and the United
States. Has strong management that often improves service in the markets
into which it moves. Potential reduction in debt ratio from current 50%
could create additional value.
2.6% Sony Corp./Electronics
Second largest electronics manufacturer in the world, with the
best-selling Playstation home video game system. Has one of the best
managements in Japan and low-profile investments in satellite TV,
Internet service providers, and media content that will soon reveal their
value. Sony Playstation 2 has already been unveiled, and launches are
planned throughout the world during 2000.
2.5% NTT Mobile Communications Network, Inc./Telecommunications
Benefiting from both the rapid change from wired lines to wireless and
from voice traffic to data and Internet, with ties to Sun Microsystems
and Microsoft on next-generation wireless Internet technology. Now
inexpensive for a global cellular business, yet controls a dominant above
60% market share in Japan's wireless market.
2.5% Aventis SA/Pharmaceuticals
World's largest drug company, formed through the merger of Hoechst and
Rhone Poulenc. Has an increasingly focused management selling off
chemical operations to specialize in life sciences. We expect future
growth from several divisions in drugs and agricultural products.
2.4% Siemens AG/Industrial Conglomerate
German-based conglomerate manufactures both industrial and consumer
products, including electronic components, communications systems, and
power plants. Siemens is restructuring its operations, spinning off some
businesses and entering alliances in others. Is inexpensively valued
relative to its peers.
18
<PAGE>
Target Funds Total Return Bond Fund
Performanc Review
The overall bond market, as measured by the Lehman Aggregate Bond Index, fell
during our three-month reporting period. Total Return Bond Fund's -1.63% return
for Class A shares trailed the -0.35% Lipper Average of competing funds.
Including sales charges, the Fund's Class A shares returned -5.57%. Performance
was hurt by the Fund's focus on mortgage-backed securities--a sector where bond
prices were particularly volatile--and by its underweighting of
investment-grade corporate bonds. The prices of corporate bonds held up
relatively well because rapid economic growth eased credit concerns and because
companies were reluctant to issue new bonds (which helps meet demand) as we
neared the changeover to the year 2000. However, the Fund benefited because its
below-Index sensitivity to interest-rate changes buffered the impact as
interest rates rose during the period. Rising interest rates result in falling
prices for existing bonds. The Fund's underweighting of intermediate
maturities, which were affected most, also helped.
Portfolio Composition
Expressed as a percentage of total investments as of 1/31/00
40.4% Mortgage Backed Securities
37.9% U.S. Corporate Bonds
18.7% U.S. Treasuries
3.0% Other
Credit Quality
Sectors expressed as a percentage of total long-term investments as of 1/31/00
70.1% Aaa
16.9% A
9.9% Baa
3.1% NR
19
<PAGE>
Target Funds Total Return Bond Fund
Performance at a Glance
INVESTMENT GOALS AND STYLE
Total Return Bond Fund, managed by Pacific Investment Management Company
(PIMCO), has total return as its investment objective. Total return includes
both current income and capital appreciation. To achieve this, it invests in
debt obligations issued or guaranteed by the U.S. government and its agencies,
as well as debt obligations issued by U.S. companies, foreign companies, and
foreign governments and their agencies.
Cumulative Total Returns1 As of 1/31/00
<TABLE>
<CAPTION>
Since Inception2
(Without Sales Charge) (With Sales Charge)
<S> <C> <C>
Class A -1.63% -5.57%
Class B -1.74 -6.74
Class C -1.74 -3.72
Lipper Corporate Debt BBB-Rated Fund Avg.3 -0.35 N/A
</TABLE>
Distribution & Yields As of 1/31/00
<TABLE>
<CAPTION>
Distributions Paid 30-Day
Since Inception SEC Yield
<S> <C> <C>
Class A $0.11 4.32%
Class B $0.10 4.00%
Class C $0.10 3.96%
</TABLE>
Five Largest Issuers
Expressed as a percentage of net assets as of 1/31/00
52.0% Gov't National Mortgage Assoc.
26.0% U.S. Treasuries
4.0% Florida Power Corp.
4.0% KFW International Finance
4.0% Swedbank
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. Since the
Fund has been in existence less than one year, no average annual total returns
are presented. The Fund charges a maximum front-end sales charge of 4% for
Class A shares. Class B shares are subject to a declining contingent deferred
sales charge (CDSC) of 5%, 4%, 3%, 2%, 1%, and 1% for six years. Class B shares
will automatically convert to Class A shares, on a quarterly basis,
approximately seven years after purchase. Class C shares are subject to a
front-end sales charge of 1% and a CDSC of 1% for 18 months.
2 Inception date: Class A, B, and C, 11/3/99.
3 The Lipper Since Inception return is for all funds in each share class in the
Corporate Debt BBB-Rated Fund category. The Lipper average is unmanaged.
Corporate Debt BBB-Rated funds invest at least 65% of their assets in corporate
and government debt issues rated in the top four grades.
20
<PAGE>
Target Funds Large Capitalization Growth Fund
Portfolio of Investments as of January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- -------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 96.8%
Common Stocks
- -------------------------------------------------------------------------------------
Banks 4.1%
37,900 Bank America Corp. $ 1,835,781
165,650 MBNA Corp. 4,182,663
23,200 Providian Financial Corp. 1,957,500
--------------
7,975,944
- -------------------------------------------------------------------------------------
Broadcasting 1.9%
29,100 AMFM Inc.* 2,269,800
13,800 Univision Communications Inc.* 1,478,325
--------------
3,748,125
- -------------------------------------------------------------------------------------
Business Services 5.2%
126,000 Cendant Corp.* 2,543,625
17,900 Healtheon/WebMD Corp.* 1,163,500
43,500 J.D. Edwards & Co. 1,296,844
24,400 Omnicom Group Inc. 2,285,975
18,100 SAP AG (ADR)(Germany) 1,179,894
22,700 Waters Corp. 1,676,962
--------------
10,146,800
- -------------------------------------------------------------------------------------
Computers & Business Equipment 2.1%
150,400 Compaq Computer Corp. 4,117,200
- -------------------------------------------------------------------------------------
Computer Software & Services 9.0%
3,700 Adobe Systems, Inc.* 203,731
29,900 America Online, Inc.* 1,702,431
53,875 EMC Corp.* 5,737,687
63,100 Microsoft Corp.* 6,175,913
59,800 Parametric Technology Corp.* 1,281,963
19,100 Synopsys, Inc.* 882,181
5,100 Yahoo Inc.* 1,642,519
--------------
17,626,425
- -------------------------------------------------------------------------------------
Cosmetics & Toiletries 0.7%
21,200 Kimberly-Clark Corp. 1,313,075
</TABLE>
See Notes to Financial Statements 21
<PAGE>
Target Funds Large Capitalization Growth Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
Drugs & Healthcare 9.7%
31,200 Amgen, Inc.* $ 1,987,050
99,600 Columbia/HCA Healthcare Corp. 2,720,325
3,600 Incyte Pharmaceuticals, Inc.* 395,100
52,550 Medtronic, Inc. 2,404,163
41,600 Merck & Co., Inc. 3,278,600
15,300 PE Corp. 2,291,175
49,200 Pfizer Inc. 1,789,650
68,600 Tenet Healthcare Corp.* 1,560,650
15,000 Teva Pharmaceutical Industries Ltd. (ADR) (Israel) 981,562
16,000 Warner-Lambert Co. 1,519,000
--------------
18,927,275
- -------------------------------------------------------------------------------------
Electronics 27.4%
36,900 Adaptec, Inc.* 1,932,637
23,400 Agilent Technologies Inc. 1,548,788
90,600 CIENA Corp.* 5,945,625
192,700 Cisco Systems, Inc.* 21,100,650
70,500 Linear Technology Corp. 6,675,469
133,000 Maxim Integrated Products, Inc.* 6,666,625
21,000 Motorola, Inc. 2,871,750
146,300 Xilinx Inc.* 6,693,225
--------------
53,434,769
- -------------------------------------------------------------------------------------
Financial Services 5.9%
19,800 Chase Manhattan Corp. 1,592,662
87,250 Citigroup Inc. 5,011,422
49,900 Morgan Stanley, Dean Witter, Discover & Co. 3,305,875
40,900 Wells Fargo & Co. 1,636,000
--------------
11,545,959
- -------------------------------------------------------------------------------------
Food & Beverages 3.1%
34,800 Anheuser Busch Companies, Inc. 2,349,000
32,400 Coca-Cola Enterprises Inc. 818,100
51,300 PepsiCo, Inc. 1,750,612
32,700 SYSCO Corp. 1,162,894
--------------
6,080,606
</TABLE>
22 See Notes to Financial Statements
<PAGE>
Target Funds Large Capitalization Growth Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
Insurance 2.5%
27,125 American International Group, Inc. $ 2,824,391
28,000 CIGNA Corp. 2,009,000
--------------
4,833,391
- -------------------------------------------------------------------------------------
Leisure 0.6%
32,000 Disney, (Walt) Co. 1,162,000
- -------------------------------------------------------------------------------------
Non-Ferrous Metals 1.0%
27,500 Alcoa, Inc. 1,916,406
- -------------------------------------------------------------------------------------
Oil & Gas 2.5%
55,800 Enron Corp. 3,763,013
17,000 Schlumberger, Ltd. 1,038,063
--------------
4,801,076
- -------------------------------------------------------------------------------------
Retail 2.0%
40,500 Home Depot, Inc. 2,293,313
27,900 Wal-Mart Stores, Inc. 1,527,525
--------------
3,820,838
- -------------------------------------------------------------------------------------
Semiconductors 13.3%
79,750 Applied Materials, Inc.* 10,945,687
184,175 Atmel Corp.* 5,720,936
93,175 Intel Corp. 9,218,502
--------------
25,885,125
- -------------------------------------------------------------------------------------
Telecommunication 4.2%
6,650 Aspect Communications, Inc. 325,019
55,200 Global TeleSystems Group, Inc. 1,376,550
12,500 Nippon Telegraph & Telephone Corp. (ADR) (Japan) 949,218
24,800 Research In Motion, Ltd.* 1,630,600
36,600 Tellabs, Inc. 1,976,400
16,400 VoiceStream Wireless Corp. 1,924,950
--------------
8,182,737
</TABLE>
See Notes to Financial Statements 23
<PAGE>
Target Funds Large Capitalization Growth Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- -----------------------------------------------------------------------------------------
Utilities 1.7%
28,700 AES Corp. $ 2,299,587
13,400 Calpine Corp. 979,875
--------------
3,279,462
--------------
Total common stocks (cost $162,850,281) 188,797,213
--------------
SHORT-TERM INVESTMENTS 2.6%
Principal
Amount
(000)
- -------------------------------------------------------------------------------------
Repurchase Agreement
$ 5,140 State Street Bank & Trust Co.,
2.00%, dated 1/31/00, due 2/1/00 in the amount of
$5,140,286 (cost $5,140,000, collateralized by
$5,000,000 U.S. Treasury Notes, 8.125%, 8/15/19,
value of collateral including accrued interest is
$5,971,888) 5,140,000
--------------
Total investments 99.4% (cost $167,990,281; Note 4) 193,937,213
Other assets in excess of liabilities 0.6% 1,183,647
--------------
Net Assets 100% $ 195,120,860
--------------
--------------
</TABLE>
- ------------------------------
* Non-income producing security.
ADR--American Depository Receipt
24 See Notes to Financial Statements
<PAGE>
Target Funds Large Capitalization Value Fund
Portfolio of Investments as of January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C>
- -----------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 94.5%
Common Stocks
- -------------------------------------------------------------------------------------
Aerospace 3.0%
13,930 Lockheed Martin Corp. $ 261,188
5,520 Northrop Grumman Corp. 277,380
4,970 TRW, Inc. 217,748
--------------
756,316
- -------------------------------------------------------------------------------------
Airlines 0.2%
3,000 Southwest Airlines Co. 47,813
- -------------------------------------------------------------------------------------
Aluminum 1.5%
120 Alcoa Inc. 8,363
5,600 Reynolds Metals Co. 373,800
--------------
382,163
- -------------------------------------------------------------------------------------
Apparel & Textiles 1.0%
2,800 Liz Claiborne, Inc. 94,675
4,200 Russell Corp. 62,737
3,700 V.F. Corp. 95,969
--------------
253,381
- -------------------------------------------------------------------------------------
Auto Parts 1.7%
7,350 Dana Corp. 172,725
5,780 Delphi Automotive Systems Corp. 100,066
2,600 Genuine Parts Co. 62,725
3,670 Meritor Automotive, Inc. 61,473
2,120 Tenneco Automotive Inc. 21,068
--------------
418,057
- -------------------------------------------------------------------------------------
Automobiles 3.9%
11,430 Ford Motor Co. 568,643
5,050 General Motors Corp. 406,209
--------------
974,852
</TABLE>
See Notes to Financial Statements 25
<PAGE>
Target Funds Large Capitalization Value Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
Banks 6.8%
6,500 Bank America Corp. $ 314,844
7,810 Bank One Corp. 232,836
2,200 Chase Manhattan Corp. 176,962
1,600 Comerica, Inc. 70,700
2,660 First Security Corp. 68,827
11,110 First Union Corp. 372,879
4,900 Fleet Boston Financial Corp. 154,044
4,570 KeyCorp 95,970
6,800 National City Corp. 147,050
1,420 UnionBanCal Corporation 50,499
--------------
1,684,611
- -------------------------------------------------------------------------------------
Building & Construction 0.3%
2,730 Harsco Corp. 73,539
- -------------------------------------------------------------------------------------
Business Services 1.2%
14,520 Xerox Corp. 303,105
- -------------------------------------------------------------------------------------
Chemicals 2.3%
2,660 Dow Chemical Co. 309,890
3,530 Eastman Chemical Co. 140,758
3,100 Praxair, Inc. 125,744
--------------
576,392
- -------------------------------------------------------------------------------------
Commercial Services 0.4%
3,500 Quintiles Transnational Corp. 92,531
- -------------------------------------------------------------------------------------
Computers & Business Equipment 1.6%
4,000 Compaq Computer Corp. 109,500
1,100 Hewlett-Packard Co. 119,075
1,400 International Business Machines Corp. 157,062
--------------
385,637
</TABLE>
26 See Notes to Financial Statements
<PAGE>
Target Funds Large Capitalization Value Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
Conglomerate 1.5%
1,500 Hanson PLC (ADR) (United Kingdom) $ 54,000
1,300 Minnesota Mining & Manufacturing Co. 121,713
6,930 Scana Corp 188,410
--------------
364,123
- -------------------------------------------------------------------------------------
Construction Materials 1.8%
1,400 Illinois Tool Works, Inc. 81,900
7,300 Sherwin-Williams Co. 128,663
3,600 Vulcan Materials Co. 152,325
3,700 York International Corp. 89,031
--------------
451,919
- -------------------------------------------------------------------------------------
Consumer Products 2.5%
1,500 American Greetings Corp. 33,188
5,000 Crown Cork & Seal Co., Inc. 101,563
4,100 Eastman Kodak Co. 253,687
4,550 Fortune Brands, Inc. 131,950
10,990 Pactiv Corp.* 101,657
--------------
622,045
- -------------------------------------------------------------------------------------
Cosmetics & Toiletries 0.5%
1,900 Kimberly-Clark Corp. 117,681
- -------------------------------------------------------------------------------------
Domestic Oil 2.5%
2,400 Atlantic Richfield Co. 184,800
5,230 Conoco Inc. (Class B) 123,232
1,880 Sunoco Inc. 43,358
9,960 USX - Marathon Group 255,847
--------------
607,237
- -------------------------------------------------------------------------------------
Drugs & Healthcare 3.5%
4,000 Abbott Laboratories 130,500
3,200 American Home Products Corp. 150,600
1,350 Baxter International, Inc. 86,231
5,800 Columbia/HCA Healthcare Corp. 158,412
1,900 Eli Lilly & Co. 127,063
1,700 Merck & Co., Inc. 133,981
2,600 Mylan Laboratories 69,225
--------------
856,012
</TABLE>
See Notes to Financial Statements 27
<PAGE>
Target Funds Large Capitalization Value Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
Electric Utilities 6.8%
5,490 Central & South West Corp. $ 110,829
3,670 CMS Energy Corp. 110,100
10,490 DTE Energy Co. 364,527
3,530 Edison International 102,370
3,000 Entergy Corp. 74,813
7,240 General Public Utilities Corp. 209,960
3,810 PECO Energy Co. 158,591
3,670 PP & L Resources, Inc. 85,098
3,140 Public Service Enterprise Group Inc. 107,938
1,772 ScottishPower PLC (ADR) (United Kingdom) 49,062
4,000 Southern Co. 102,500
6,400 Teco Energy Inc. 125,600
2,240 Texas Utilities Co. 79,240
--------------
1,680,628
- -------------------------------------------------------------------------------------
Electrical Equipment 1.7%
2,900 Emerson Electric Co. 159,681
3,200 Johnson Controls, Inc. 176,800
4,000 Raytheon Co. 91,250
--------------
427,731
- -------------------------------------------------------------------------------------
Electronics 0.4%
2,110 Rockwell International Corp. 104,313
- -------------------------------------------------------------------------------------
Energy 1.2%
7,020 Illinova Corp. 307,125
- -------------------------------------------------------------------------------------
Financial Services 6.1%
3,000 Associates First Capital Corp. 60,000
2,900 Citigroup Inc. 166,569
7,250 Federal National Mortgage Association 434,547
8,230 Household International, Inc. 290,107
2,200 MBIA, Inc. 110,137
3,200 Morgan Stanley, Dean Witter, Discover & Co. 212,000
9,170 Washington Mutual, Inc. 232,689
--------------
1,506,049
</TABLE>
28 See Notes to Financial Statements
<PAGE>
Target Funds Large Capitalization Value Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
Food & Beverages 1.5%
1,960 Anheuser Busch Companies, Inc. $ 132,300
7,000 Sara Lee Corp. 129,063
6,600 SUPERVALU, Inc. 118,800
--------------
380,163
- -------------------------------------------------------------------------------------
Forest Products 2.0%
3,200 Georgia-Pacific Group 130,400
6,120 Georgia-Pacific Corp. (Timber Group) 132,728
4,200 Weyerhaeuser Co. 240,975
--------------
504,103
- -------------------------------------------------------------------------------------
Household Appliances & Home Furnishings 0.9%
3,900 Whirlpool Corp. 227,175
- -------------------------------------------------------------------------------------
Insurance 6.8%
600 Aetna, Inc. 31,950
14,500 Allstate Corp. 336,219
6,360 American General Corp. 390,742
4,430 Lincoln National Corp. 163,633
1,200 Loews Corp. 67,200
2,200 MGIC Investment Corp. 102,438
8,150 SAFECO Corp. 199,675
9,650 St. Paul Companies, Inc. 291,309
4,000 Torchmark Corp. 100,750
--------------
1,683,916
- -------------------------------------------------------------------------------------
International Oil 5.5%
2,000 Chevron Corp. 167,125
4,000 Exxon Mobil Corp. 334,000
11,070 Occidental Petroleum Corp. 220,016
9,300 Phillips Petroleum Co. 380,137
4,900 Repsol SA (ADR) (Spain) 93,100
3,250 Texaco, Inc. 171,844
--------------
1,366,222
</TABLE>
See Notes to Financial Statements 29
<PAGE>
Target Funds Large Capitalization Value Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
Machinery 1.3%
2,600 Caterpillar, Inc. $ 110,338
16,130 CNH Global NV 223,804
--------------
334,142
- -------------------------------------------------------------------------------------
Media 0.6%
2,100 Gannett Co., Inc. 145,950
- -------------------------------------------------------------------------------------
Mining 0.8%
3,370 Phelps Dodge Corp. 195,881
- -------------------------------------------------------------------------------------
Paper 1.6%
8,440 International Paper Co. 401,955
- -------------------------------------------------------------------------------------
Petroleum Services 0.8%
1,800 Norsk Hydro ASA (ADR) (Norway)* 71,550
5,370 Ultramar Diamond Shamrock 117,469
--------------
189,019
- -------------------------------------------------------------------------------------
Pollution Control 0.7%
10,340 Waste Management, Inc. 180,950
- -------------------------------------------------------------------------------------
Railroads & Equipment 1.6%
5,000 Burlington Northern, Inc. 120,313
5,400 CSX Corp. 157,950
7,600 Norfolk Southern Corp. 129,200
--------------
407,463
- -------------------------------------------------------------------------------------
Retail 3.3%
4,800 Albertson's, Inc. 147,000
3,300 Dillard's, Inc. (Class A) 63,319
12,400 Penney (J.C.) Co., Inc. 243,350
4,850 May Department Stores Co. 150,956
5,000 Rite Aid Corp. 35,312
5,780 Sears, Roebuck & Co. 178,819
--------------
818,756
- -------------------------------------------------------------------------------------
Semiconductors 0.9%
2,100 Intel Corp. 207,769
</TABLE>
30 See Notes to Financial Statements
<PAGE>
Target Funds Large Capitalization Value Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
Software 1.5%
3,200 Computer Associates International, Inc. $ 219,800
7,000 Compuware Corp.* 148,312
--------------
368,112
- -------------------------------------------------------------------------------------
Steel 1.5%
3,600 Nucor Corp. 179,100
7,780 USX Corp.-U.S. Steel Group 193,527
--------------
372,627
- -------------------------------------------------------------------------------------
Telecommunications 8.4%
3,750 ALLTEL Corp. 250,312
13,640 AT&T Corp. 719,510
3,000 Bell Atlantic Corp. 185,813
3,280 GTE Corp. 240,465
3,900 MCI WorldCom, Inc.* 179,156
6,110 SBC Communications, Inc. 263,494
1,900 Sprint Corp. 122,906
1,700 US West Communications Group 113,050
--------------
2,074,706
- -------------------------------------------------------------------------------------
Tires & Rubber 0.3%
6,700 Cooper Tire & Rubber Co. 87,519
- -------------------------------------------------------------------------------------
Tobacco 1.7%
20,140 Philip Morris Companies, Inc. 421,681
- -------------------------------------------------------------------------------------
Toys & Amusements 0.4%
8,000 Mattel, Inc. 83,500
--------------
Total common stocks (cost $25,203,890) 23,444,869
--------------
SHORT-TERM INVESTMENTS 6.8%
- -------------------------------------------------------------------------------------
Investment Company
1,691,203 Seven Seas Series Government Fund
(cost $1,691,203) 1,691,203
--------------
Total Investments 101.3% (cost $26,895,093; Note 4) 25,136,072
Liabilities in excess of other assets (1.3%) (328,429)
--------------
Net Assets 100% $ 24,807,643
--------------
--------------
</TABLE>
- ------------------------------
* Non-income producing security.
ADR--American Depository Receipt
See Notes to Financial Statements 31
<PAGE>
Target Funds Small Capitalization Growth Fund
Portfolio of Investments as of January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
LONG-TERM INVESTMENTS 95.5%
Common Stocks
- -------------------------------------------------------------------------------------
Audio/Visual 1.4%
3,500 Polycom, Inc.* $ 211,313
- -------------------------------------------------------------------------------------
Auto/Truck Equipment 1.2%
6,200 Copart, Inc.* 105,400
3,000 Keystone Automotive Industries Inc.* 16,125
2,390 Oshkosh Truck Corp. 69,310
--------------
190,835
- -------------------------------------------------------------------------------------
Building & Construction 0.9%
5,400 Insituform Technologies, Inc.* 139,725
- -------------------------------------------------------------------------------------
Business Services 12.2%
8,510 Acxiom Corp.* 215,675
5,330 ADVO, Inc.* 138,580
2,360 AnswerThink Consulting Group, Inc.* 76,848
1,500 Asyst Technologies, Inc.* 108,750
2,800 Carrier Access Corp.* 123,200
4,840 CSG Systems International Inc.* 183,013
7,880 Interim Services Inc.* 197,492
5,560 Iron Mountain Inc.* 182,785
3,975 Pegasus Systems, Inc.* 107,325
10,180 Penton Media, Inc.* 226,505
2,640 ProBusiness Services, Inc.* 72,930
5,500 Zomax Inc.* 247,500
--------------
1,880,603
- -------------------------------------------------------------------------------------
Commercial Services 0.8%
4,800 Coinmach Laundry Corp.* 48,000
3,000 Quintiles Transnational Corp.* 79,313
--------------
127,313
- -------------------------------------------------------------------------------------
Computers & Business Equipment 13.1%
3,600 Advanced Digital Information Corp.* 176,400
1,800 Black Box Corp.* 106,425
</TABLE>
32 See Notes to Financial Statements
<PAGE>
Target Funds Small Capitalization Growth Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
1,900 Brooktrout Inc.* $ 50,944
3,520 Cabletron Systems, Inc.* 90,420
2,300 CDW Computer Centers, Inc.* 150,434
2,800 ChoicePoint Inc.* 98,000
3,600 Credence Systems Corp.* 305,550
620 Critical Path Inc.* 39,719
4,800 Cybex Computer Products Corp.* 252,000
7,860 Daisytek International Corp.* 159,165
5,900 Insight Enterprises, Inc.* 203,550
3,370 Integrated Systems, Inc.* 90,358
4,500 PC Connection, Inc.* 132,750
4,550 Tech Data Corp.* 101,379
1,500 Xircom, Inc.* 73,969
--------------
2,031,063
- -------------------------------------------------------------------------------------
Consumer Products 3.8%
7,600 Salton, Inc.* 348,650
6,700 Scotts Company (The)* 234,919
--------------
583,569
- -------------------------------------------------------------------------------------
Drugs & Healthcare 2.4%
1,200 Aurora Biosciences Corp.* 43,800
4,000 Hooper Holmes, Inc.* 77,750
11,200 NBTY, Inc.* 158,200
2,100 ResMed Inc.* 90,169
--------------
369,919
- -------------------------------------------------------------------------------------
Educational Services 0.8%
9,430 Sylvan Learning Systems, Inc.* 127,894
- -------------------------------------------------------------------------------------
Electronics 22.1%
6,500 ACT Manufacturing Inc.* 212,062
5,430 Applied Power Inc. 151,361
5,100 Audiovox Corp.* 242,250
6,050 Burr-Brown Corp.* 223,850
900 CTS Corp. 63,169
</TABLE>
See Notes to Financial Statements 33
<PAGE>
Target Funds Small Capitalization Growth Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
3,300 Cymer, Inc.* $ 181,913
3,100 DII Group, Inc.* 241,025
3,900 Electro Scientific Industries, Inc.* 312,487
675 Electronics for Imaging, Inc.* 31,641
3,700 Integrated Device Technology, Inc.* 105,450
8,300 International Rectifier Corp.* 275,975
1,050 Jabil Circuit, Inc.* 66,413
6,940 Kemet Corp.* 330,084
2,100 Kent Electronics Corp.* 48,431
4,900 Kulicke & Soffa Industries, Inc.* 256,331
6,775 On Command Corp.* 110,094
2,500 Pittway Corp.* 113,125
2,075 Rayovac Corp.* 44,872
6,000 Sensormatic Electronics Corp.* 109,125
7,090 Vicor Corp.* 288,917
--------------
3,408,575
- -------------------------------------------------------------------------------------
Financial Services 5.6%
21,820 AmeriCredit Corp.* 357,302
2,060 Brown & Brown Inc. 70,684
2,570 Investors Financial Services Corp. 98,302
420 M & T Bank Corp. 172,620
1,910 T. Rowe Price Associates, Inc. 74,251
3,990 Texas Regional Bancshares, Inc. 96,758
--------------
869,917
- -------------------------------------------------------------------------------------
Hotels & Restaurants 1.2%
8,300 Aztar Corp.* 79,369
3,710 Sonic Corp.* 106,662
--------------
186,031
- -------------------------------------------------------------------------------------
Manufacturing 2.9%
5,460 Mettler-Toledo International Inc.* 174,038
4,600 Zebra Technologies Corp.* 272,262
--------------
446,300
</TABLE>
34 See Notes to Financial Statements
<PAGE>
Target Funds Small Capitalization Growth Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
Media 1.5%
8,100 ACNielson Corp.* $ 166,050
1,020 Jones Intercable, Inc.* 64,133
--------------
230,183
- -------------------------------------------------------------------------------------
Medical & Dental Supplies 2.8%
7,690 Hanger Orthopedic Group, Inc.* 34,605
4,560 Henry Schein, Inc.* 60,135
3,050 King Pharmaceuticals, Inc.* 179,950
4,400 PolyMedica Corp.* 117,975
3,810 STAAR Surgical Co.* 43,815
--------------
436,480
- -------------------------------------------------------------------------------------
Miscellaneous 2.3%
3,300 Helix Technology Corp. 160,462
5,906 Hollywood.com, Inc.* 110,738
2,855 Ritchie Bros. Auctioneers Inc.* 76,371
--------------
347,571
- -------------------------------------------------------------------------------------
Office Furnishings 0.4%
6,180 Falcon Products Inc. 56,779
- -------------------------------------------------------------------------------------
Oil & Gas Exploration/Drilling 1.8%
2,360 Devon Energy Corp. 82,895
4,500 Newfield Exploration Co.* 123,750
6,170 Vintage Petroleum, Inc. 79,053
--------------
285,698
- -------------------------------------------------------------------------------------
Oil Field / Equipment & Services 0.3%
2,340 CARBO Ceramics Inc. 50,603
- -------------------------------------------------------------------------------------
Publishing 1.4%
2,870 Information Holdings Inc.* 76,772
7,820 Primedia Inc.* 137,339
--------------
214,111
</TABLE>
See Notes to Financial Statements 35
<PAGE>
Target Funds Small Capitalization Growth Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
Real Estate 2.4%
11,990 Grubb & Ellis Co.* $ 65,196
4,430 ProLogis Trust 84,447
6,830 SL Green Realty Corp. 148,552
5,940 Trammell Crow Co.* 66,082
--------------
364,277
- -------------------------------------------------------------------------------------
Recreation 0.9%
4,760 American Classic Voyages Co.* 141,610
- -------------------------------------------------------------------------------------
Retail Trade 4.3%
15,300 Charming Shoppes, Inc.* 104,231
8,000 Pacific Sunwear Of California, Inc.* 235,000
8,150 Regis Corp. 143,644
600 Spiegel, Inc.* 4,238
4,550 Tractor Supply Co.* 81,900
2,800 Zale Corp.* 100,100
--------------
669,113
- -------------------------------------------------------------------------------------
Software 4.9%
2,660 Advent Software, Inc.* 175,892
5,100 Ardent Software, Inc.* 219,300
3,100 InfoCure Corp.* 102,688
4,400 NVIDIA Corp.* 163,075
1,000 Rational Software Corp.* 52,000
1,100 Remedy Corp.* 44,481
--------------
757,436
- -------------------------------------------------------------------------------------
Telecommunication 0.4%
2,200 Davox Corp.* 62,975
- -------------------------------------------------------------------------------------
Toys/ Games/ Hobbies 1.1%
5,450 JAKKS Pacific, Inc.* 89,073
9,100 Topps Company, Inc.* 77,919
--------------
166,992
</TABLE>
36 See Notes to Financial Statements
<PAGE>
Target Funds Small Capitalization Growth Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
Transportation 2.6%
8,225 American Freightways Corp.* $ 112,066
3,400 Eagle USA Freight Inc.* 111,350
2,600 Expeditors International of Washington, Inc. 109,606
4,870 Swift Transportation Co., Inc.* 62,092
--------------
395,114
--------------
Total common stocks (cost $13,421,198) 14,751,999
--------------
SHORT-TERM INVESTMENT 5.9%
- -------------------------------------------------------------------------------------
Investment Company
912,200 Seven Seas Money Market Fund
5.48%, 2/1/00
(cost $912,200) 912,200
--------------
Total Investments 101.4% (cost $14,333,398; Note 4) 15,664,199
Liabilities in excess of other assets (1.4%) (215,064)
--------------
Net Assets 100% $ 15,449,135
--------------
--------------
</TABLE>
- ------------------------------
* Non-income producing security.
ADR--American Depository Receipt
See Notes to Financial Statements 37
<PAGE>
Target Funds Small Capitalization Value Fund
Portfolio of Investments as of January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
LONG-TERM INVESTMENTS 94.8%
Common Stocks
- -------------------------------------------------------------------------------------
Aerospace 0.9%
2,500 AAR Corp. $ 44,219
1,900 Cordant Technologies, Inc. 62,819
--------------
107,038
- -------------------------------------------------------------------------------------
Apparel & Textiles 0.1%
2,600 Culp, Inc. 15,925
- -------------------------------------------------------------------------------------
Auto Related 2.9%
900 Antec Corp. 35,212
500 Black Box Corp.* 29,563
1,600 Borg-Warner Automotive, Inc. 53,800
3,600 Modine Manufacturing Co. 89,100
6,000 Myers Industries, Inc. 79,500
4,300 Tower Automotive, Inc.* 61,812
--------------
348,987
- -------------------------------------------------------------------------------------
Banks 5.6%
1,900 Associated Banc Corp. 57,475
1,700 Bank United Corp. 44,094
1,800 Chittenden Corp. 50,963
3,800 Firstmerit Corp. 70,537
4,826 HUBCO, Inc. 112,808
5,300 Independent Bank Corp. - Mass 60,784
3,000 People's Bank* 62,062
3,400 Southwest Bancorporation of Texas, Inc.* 58,013
2,600 Staten Island Bancorp, Inc. 44,200
4,900 Susquehanna Bancshares, Inc. 71,356
600 Wilmington Trust Corp. 29,963
--------------
662,255
- -------------------------------------------------------------------------------------
Building & Construction 1.9%
3,200 Apogee Enterprises, Inc. 14,800
1,800 Florida Rock Industrials, Inc. 60,300
2,000 Hughes Supply, Inc. 35,250
</TABLE>
38 See Notes to Financial Statements
<PAGE>
Target Funds Small Capitalization Value Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
1,500 Martin Marietta Materials, Inc. $ 63,000
3,300 Toll Brothers, Inc. 56,100
--------------
229,450
- -------------------------------------------------------------------------------------
Business Services 5.1%
3,200 Acnielsen Corp. 65,600
1,900 Acxiom Corp.* 48,153
2,200 American Management Systems, Inc.* 67,650
5,300 Bowne & Co., Inc. 57,968
1,600 Gartner Group, Inc., CI.A 24,900
2,300 Interim Services, Inc.* 57,644
3,300 ITT Educational Services, Inc. 43,931
300 Maximus, Inc. 11,119
3,100 Medquist, Inc. 61,806
2,400 Metro Information Services, Inc. 55,500
2,500 R.H. Donnelley Corp. 44,219
1,400 The Standard Register Co. 21,700
1,900 United Stationers, Inc.* 49,400
--------------
609,590
- -------------------------------------------------------------------------------------
Chemicals 4.9%
3,400 American Material Can Group, Inc. 40,800
3,600 Cambrex Corp. 135,000
2,600 Ferro Corp. 50,700
1,200 Fuller (H.B.) Co. 78,000
5,900 Hanna (M.A.) Co. 67,481
200 Minerals Technologies, Inc. 9,025
2,700 Om Group, Inc. 101,588
7,000 RPM, Inc. 71,750
1,600 Schulman (A.), Inc. 22,900
--------------
577,244
- -------------------------------------------------------------------------------------
Communication 0.2%
2,200 Allen Telecom, Inc.* 28,875
</TABLE>
See Notes to Financial Statements 39
<PAGE>
Target Funds Small Capitalization Value Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
Computers & Business Equipment 2.6%
900 Diebold, Inc. $ 19,969
3,600 Federal Signal Corp. 56,475
2,200 Inacom Corp.* 10,450
3,100 Mastech Corp.* 75,562
4,300 MTS Systems Corp. 30,100
9,100 Quantum Corp.* 67,113
3,100 Storage Technology Corp.* 47,081
--------------
306,750
- -------------------------------------------------------------------------------------
Construction & Mining Equipment 1.0%
1,500 Granite Construction, Inc. 29,906
1,600 Jacobs Engineering Group, Inc. 47,200
5,200 JLG Industries, Inc. 43,550
--------------
120,656
<CAPTION>
Diversified Industrials 3.4%
3,100 Applied Power, Inc. 86,412
3,200 Brady (W.H.) Co. 91,000
2,800 Carlisle Co., Inc. 90,475
1,900 Roper Industries, Inc. 63,769
2,400 Teleflex, Inc. 76,200
--------------
407,856
- -------------------------------------------------------------------------------------
Drugs & Healthcare 7.9%
3,600 AmeriSource Health Corp., Cl.A* 65,250
3,800 Apria Healthcare Group, Inc.* 76,000
3,600 Arrow International, Inc. 114,525
1,400 Beckman Coulter, Inc. 73,237
2,500 DENTSPLY International, Inc. 61,875
8,500 Invacare Corp. 168,406
2,000 Jones Pharma, Inc. 116,125
8,200 Meridian Diognostic 53,044
1,900 Varian Medical Systems, Inc.* 72,438
2,000 Vital Signs, Inc. 44,000
3,100 West Pharmaceutical Services, Inc. 95,906
--------------
940,806
</TABLE>
40 See Notes to Financial Statements
<PAGE>
Target Funds Small Capitalization Value Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
Electric Utilities 0.5%
400 Avista Corp. $ 11,450
3,300 Sierra Pacific Resources 52,800
--------------
64,250
- -------------------------------------------------------------------------------------
Electrical Equipment 3.2%
3,500 Anixter International, Inc.* 68,906
1,700 Belden, Inc. 36,656
2,400 Littelfuse, Inc. 60,150
2,400 Polaroid Corp. 57,000
2,500 Technitrol, Inc. 105,313
4,200 Woodhead Industries, Inc. 52,500
--------------
380,525
- -------------------------------------------------------------------------------------
Electronics 10.9%
4,000 Ametek Aerospace Prods, Inc. 88,000
2,400 Bell & Howell Co.* 85,800
2,900 C&D Technologies 118,537
1,500 Dallas Semiconductor Corp. 100,219
1,500 Electro Scientific Industries, Inc.* 120,187
400 Electronics for Imaging, Inc.* 18,750
1,300 Harman International Industries, Inc. 75,888
1,300 KEMET Corp.* 61,831
4,500 Mentor Graphics Corp. 61,031
3,000 Methode Eletronics, Inc. 102,375
7,300 Pioneer-Standard Electronics, Inc. 99,577
2,000 Rogers Corp.* 76,000
3,100 Sensormatic Electronics Corp. 56,381
1,900 Tektronix, Inc. 77,069
5,100 Varian, Inc. 146,625
--------------
1,288,270
- -------------------------------------------------------------------------------------
Foods 4.6%
2,154 American Italian Pasta Co., CI.A* 58,966
2,900 Aurora Foods, Inc.* 25,012
4,300 Flowers Industries, Inc.* 52,406
</TABLE>
See Notes to Financial Statements 41
<PAGE>
Target Funds Small Capitalization Value Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
2,700 Lancaster Colony Corp. $ 85,725
3,900 Performance Food Group Co. 89,944
3,500 Ralcorp Holdings, Inc.* 51,844
7,100 United Natural Foods, Inc. 76,325
5,500 Universal Foods Corp. 101,062
--------------
541,284
- -------------------------------------------------------------------------------------
Gas & Pipeline Utilities 1.5%
2,500 Equitable Resources, Inc. 86,250
2,100 National Fuel Gas Co. 93,581
--------------
179,831
- -------------------------------------------------------------------------------------
Homebuilders 0.3%
1,400 Kaufman & Broad Home Corp. 30,363
- -------------------------------------------------------------------------------------
Hotels & Restaurants 1.2%
3,600 Lone Star Steakhouse & Saloon, Inc.* 32,400
6,300 Marcus Corp. 70,087
4,100 Prime Hospitality Corp.* 32,288
500 Ryan's Family Steak Houses, Inc.* 4,469
--------------
139,244
- -------------------------------------------------------------------------------------
Household Appliances & Home Furnishings 1.5%
2,200 Bassett Furniture Industries, Inc. 29,150
3,800 Chromcraft Revington, Inc. 35,388
2,100 Ethan Allen Interiors, Inc. 52,500
3,800 Furniture Brands International, Inc.* 64,600
--------------
181,638
- -------------------------------------------------------------------------------------
Industrial Machinery 2.8%
2,200 Crane Co. 43,038
2,900 Flowserve Corp. 44,406
2,400 Graco, Inc. 73,800
2,500 Hussmann International, Inc. 34,531
700 Polaris Industries, Inc. 22,663
3,200 Regal-Beloit Corp. 63,600
3,500 Watts Industries, Inc., CI.A 52,937
--------------
334,975
</TABLE>
42 See Notes to Financial Statements
<PAGE>
Target Funds Small Capitalization Value Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
Insurance 5.5%
1,300 Arthur J. Gallagher & Co. $ 69,875
1,200 Blanch (E.W.) Holdings, Inc. 58,050
2,400 Brown & Brown, Inc. 82,350
3,300 Enhance Financial Services Group, Inc. 45,994
2,500 Everest Reinsurance Holdings, Inc. 62,969
1,500 HCC Insurance Holdings, Inc. 19,969
4,300 Horace Mann Educators Corp. 80,356
2,800 HSB Group, Inc. 77,175
3,500 Protective Life Corp. 97,343
1,500 Radian Group, Inc. 60,469
--------------
654,550
- -------------------------------------------------------------------------------------
Manufacturing 0.7%
1,800 Dexter Corp. 66,938
1,500 Lydall, Inc.* 11,250
--------------
78,188
- -------------------------------------------------------------------------------------
Miscellaneous 0.9%
3,900 AptarGroup, Inc. 85,800
1,500 CIRCOR International, Inc.* 18,188
--------------
103,988
- -------------------------------------------------------------------------------------
Office Equipment 0.4%
2,400 HON Industries, Inc. 46,200
- -------------------------------------------------------------------------------------
Oil & Gas 3.0%
1,600 CONSOL Energy, Inc. 19,400
2,000 Devon Energy Corp. 70,250
3,700 Helmerich & Payne, Inc. 86,950
7,300 Pennzoil Quaker State Co. 83,494
3,500 Washington Gas Light Co. 87,937
--------------
348,031
- -------------------------------------------------------------------------------------
Oil & Gas - Production/Pipeline 1.5%
2,500 Barrett Resources Corp.* 73,906
2,100 Louis Dreyfus Natural Gas Corp.* 37,538
9,200 Santa Fe Snyder Corp. 67,275
--------------
178,719
</TABLE>
See Notes to Financial Statements 43
<PAGE>
Target Funds Small Capitalization Value Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
Oil Field / Equipment & Services 1.9%
1,600 Benchmark Electronics, Inc. $ 40,300
4,000 Progress Software Corp. 86,500
1,300 Transaction Systems Architects, Inc. 27,950
6,300 Varco International, Inc. 63,788
--------------
218,538
- -------------------------------------------------------------------------------------
Oil-Supplies & Construction 0.3%
1,100 Tidewater, Inc. 31,281
- -------------------------------------------------------------------------------------
Paper & Paper Products 1.0%
1,800 Chesapeake Corp. 46,912
2,100 Packaging Corp. of America 25,331
4,300 Wausau Paper Co. 42,463
--------------
114,706
- -------------------------------------------------------------------------------------
Printing & Publishing 4.1%
600 American Business Products, Inc. 11,850
7,800 Banta Corp. 148,200
1,600 Houghton Mifflin Co. 65,800
3,800 Lee Enterprises, Inc. 100,938
3,500 Mail-Well, Inc.* 38,281
1,200 Pulitzer, Inc. 49,725
5,200 Tetra Tech, Inc. 76,700
--------------
491,494
- -------------------------------------------------------------------------------------
Professional Services 0.9%
1,700 CDI Corp.* 39,631
1,600 Keane, Inc.* 43,200
1,300 Pittston Brink's Group 25,350
--------------
108,181
- -------------------------------------------------------------------------------------
Real Estate Investment Trust 3.1%
4,000 Catellus Development Corp.* 50,000
1,600 Chateau Communities, Inc. 42,000
900 Chelsea GCA Realty, Inc. 25,256
</TABLE>
44 See Notes to Financial Statements
<PAGE>
Target Funds Small Capitalization Value Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
2,900 FelCor Lodging Trust, Inc. $ 52,200
2,200 Glenborough Realty Trust, Inc. 29,975
2,100 JDN Realty Corp. 34,388
1,900 Kilroy Realty Corp. 36,931
2,400 Liberty Property Trust 55,950
1,600 Mack California Reality Corp. 40,700
--------------
367,400
- -------------------------------------------------------------------------------------
Retail - Apparel 1.2%
1,600 Lands End, Inc. 55,100
800 Men's Wearhouse, Inc.* 19,100
1,200 Nautica Enterprises, Inc.* 10,725
7,800 Venator Group, Inc.* 46,800
1,100 Wet Seal, Inc., CI.A 13,750
--------------
145,475
- -------------------------------------------------------------------------------------
Retail - Grocery 2.0%
2,600 Great Atlantic & Pacific Tea Co., Inc. 71,825
8,300 Ruddick Corp. 111,531
4,100 Whitman Corp. 51,506
--------------
234,862
- -------------------------------------------------------------------------------------
Retail Trade 1.8%
5,000 Borders Group, Inc.* 68,750
3,700 Casey's General Stores, Inc. 38,156
5,600 CompUSA, Inc.* 53,900
6,400 Pier 1 Imports, Inc. 52,800
--------------
213,606
- -------------------------------------------------------------------------------------
Savings And Loan 1.5%
2,100 Astoria Financial Corp. 61,163
4,300 Sovereign Bancorp, Inc. 29,428
3,800 Webster Financial Corp. 88,350
--------------
178,941
- -------------------------------------------------------------------------------------
Telecommunication 0.4%
1,100 Dycom Industries, Inc. 47,300
- -------------------------------------------------------------------------------------
Toys & Amusements 0.5%
2,200 Russ Berrie & Co., Inc. 54,038
</TABLE>
See Notes to Financial Statements 45
<PAGE>
Target Funds Small Capitalization Value Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
Trucking & Freight Forwarding 1.1%
2,300 CNF Transportation, Inc. $ 68,856
5,000 Werner Enterprises, Inc. 63,750
--------------
132,606
--------------
Total common stocks (cost $11,602,975) 11,243,916
--------------
SHORT-TERM INVESTMENTS 10.0%
Principal
Amount
(000)
- -------------------------------------------------------------------------------------
U.S. Government Securities 6.3%
United States Treasury Bills
$ 5,000 5.02%, 3/23/00 4,960
20,000 5.10%, 3/23/00 19,842
25,000 5.12%, 3/23/00 24,803
15,000 5.15%, 3/23/00 14,881
90,000 5.16%, 3/23/00 89,291
145,000 5.18%, 3/23/00 143,851
25,000 5.19%, 3/23/00 24,803
60,000 5.22%, 3/23/00 59,528
15,000 5.23%, 3/23/00 14,881
80,000 5.25%, 3/23/00 29,777
5,000 5.28%, 3/23/00 4,963
320,000 5.38%, 3/23/00 317,465
--------------
Total U.S. government securities (cost $749,369) 749,045
--------------
Shares
- -------------------------------------------------------------------------------------
Investment Company 3.7%
437,510 Seven Seas Money Market Fund
(cost $437,510) 437,510
--------------
Total short-term Investments (cost $1,186,879) 1,186,555
--------------
Total Investments 104.8% (cost $12,789,854; Note 4) 12,430,471
Liabilities in excess of other assets (4.8%) (568,917)
--------------
Net Assets 100% $ 11,861,554
--------------
--------------
</TABLE>
- ------------------------------
* Non-income producing security.
46 See Notes to Financial Statements
<PAGE>
Target Funds International Equity Fund
Portfolio of Investments as of January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
LONG-TERM INVESTMENTS 92.9%
Common Stocks
- -------------------------------------------------------------------------------------
Australia 1.8%
28,900 Broken Hill Proprietary Co., Ltd. $ 345,624
- -------------------------------------------------------------------------------------
Denmark 1.6%
4,300 Tele Danmark A/S 305,033
- -------------------------------------------------------------------------------------
Finland 1.4%
10,000 MeritaNordbanken Oyj 55,730
5,300 UPM-Kymmene Oyj 198,118
--------------
253,848
- -------------------------------------------------------------------------------------
France 13.5%
2,250 Alcatel 447,984
8,825 Aventis SA 465,974
2,000 AXA 251,613
2,500 Banque Nationale de Paris 198,250
1,300 Compagnie de Saint-Gobain 183,976
2,360 Compagnie Generale des Etablissements Michelin, Ser.
B 83,174
1,130 Suez Lyonnaise des Eaux SA 162,675
3,000 Total Fina SA, Ser. B 372,442
3,500 Vivendi 358,680
--------------
2,524,768
- -------------------------------------------------------------------------------------
Germany 9.7%
800 Allianz AG 262,193
2,900 Bayerische Hypotheken und Vereinsbank AG 172,654
3,000 DaimlerChrysler AG 194,419
9,700 Deutsche Lufthansa AG 200,421
3,050 Deutsche Telekom AG 206,590
3,300 Siemens AG 448,046
6,700 Thyssen Krupp AG 169,954
3,900 Veba AG 163,104
--------------
1,817,381
</TABLE>
See Notes to Financial Statements 47
<PAGE>
Target Funds International Equity Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
Italy 1.8%
34,200 ENI SpA $ 161,555
12,700 Sanpaolo IMI SpA 151,470
4,400 Telecom Italia SpA 29,760
--------------
342,785
- -------------------------------------------------------------------------------------
Japan 24.0%
500 Acom Co., Ltd. 58,278
18,000 Asahi Breweries, Ltd. 176,260
10,000 Canon, Inc. 409,019
18,000 Fuji Bank, Ltd. 178,776
23,000 Industrial Bank of Japan, Ltd. 221,364
9,000 Kao Corp. 245,691
1,000 Nintendo Co., Ltd. 184,105
3,000 Nippon Paper Industries Co., Ltd. 20,684
18 Nippon Telegraph & Telephone Corp. 271,686
71,000 Nissan Motor Co., Ltd.* 337,371
14 NTT Mobile Communications Network, Inc. 474,797
1,900 Orix Corp. 354,048
2,400 Promise Co., Ltd. 165,247
15,000 Sakura Bank, Ltd. 95,034
8,000 Sankyo Co., Ltd. 187,087
1,900 Sony Corp. 477,257
5,000 Sumitomo Electric Industries, Ltd. 66,244
40,000 Sumitomo Trust & Banking Co., Ltd. 248,579
3,000 TDK Corp. 317,805
--------------
4,489,332
- -------------------------------------------------------------------------------------
Netherlands 5.3%
4,200 Akzo Nobel N.V. 174,380
400 Getronics N.V. 25,864
4,300 Heineken N.V. 222,640
5,300 ING Groep N.V. 266,917
2,050 Koninklijke Philips Electronics N.V. 301,120
--------------
990,921
</TABLE>
48 See Notes to Financial Statements
<PAGE>
Target Funds International Equity Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
Portugal 1.7%
26,300 Portugal Telecom SA $ 313,159
- -------------------------------------------------------------------------------------
Singapore 2.4%
27,000 Oversea-Chinese Banking Corp., Ltd. 229,956
28,896 United Overseas Bank, Ltd. 212,159
--------------
442,115
- -------------------------------------------------------------------------------------
Spain 4.5%
14,000 Endesa SA 259,616
22,920 Telefonica de Espana SA 579,381
--------------
838,997
- -------------------------------------------------------------------------------------
Sweden 2.1%
11,100 Electrolux AB, Ser. B 236,345
13,400 Svenska Handelsbanken AB 156,734
--------------
393,079
- -------------------------------------------------------------------------------------
Switzerland 3.5%
2,400 ABB, Ltd. 265,599
22 Roche Holding AG 237,463
330 Zurich Allied AG 153,484
--------------
656,546
- -------------------------------------------------------------------------------------
United Kingdom 19.6%
6,700 AstraZeneca Group PLC 247,853
28,500 BP Amoco PLC 251,464
39,000 British Aerospace PLC 208,833
20,400 British Energy PLC 92,474
5,400 British Telecommunications PLC 105,017
22,100 Cadbury Schweppes PLC 122,900
21,600 Diageo PLC 160,859
6,300 GKN PLC 79,045
31,400 Granada Group PLC 313,144
22,000 Great Universal Stores PLC 141,399
18,700 Halifax Group PLC 162,573
22,800 HSBC Holdings PLC 270,330
</TABLE>
See Notes to Financial Statements 49
<PAGE>
Target Funds International Equity Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
- -----------------------------------------------------------------------------------------
<C> <S> <C>
20,700 Imperial Chemical Industries PLC $ 165,216
36,500 Invensys PLC 177,571
8,800 National Westminster Bank PLC* 168,824
11,800 Prudential PLC 218,736
28,900 Reed International PLC 247,975
27,600 Royal & Sun Alliance Insurance Group PLC 180,519
11,000 SmithKline Beecham PLC 131,783
32,700 Tesco PLC 86,556
20,700 Unilever PLC 127,263
--------------
3,660,334
--------------
Total common stocks (cost $17,514,544) 17,373,922
--------------
SHORT-TERM INVESTMENTS 7.0%
Principal
Amount
(000)
- -------------------------------------------------------------------------------------
U. S. Government Securities
United States Treasury Bills
$ 230 5.13%, 3/23/00 228,342
65 5.14%, 3/23/00 64,531
405 5.16%, 3/23/00 402,080
335 5.18%, 3/23/00 332,585
20 5.22%, 3/23/00 19,852
265 5.23%, 3/23/00 263,090
--------------
Total short-term investments (cost $1,310,325) 1,310,480
--------------
Total Investments 99.9% (cost $18,824,869; Note 4) 18,684,402
Other assets in excess of liabilities 0.1% 22,290
--------------
Net Assets 100% $ 18,706,692
--------------
--------------
</TABLE>
- ------------------------------
* Non-income producing security.
50 See Notes to Financial Statements
<PAGE>
Target Funds International Equity Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
The industry classification of portfolio holdings shown as a percentage of net
assets as of January 31, 2000 was as follows:
<TABLE>
<S> <C>
Telecommunications........................................................ 14.6%
Banks..................................................................... 11.2
Insurance................................................................. 7.1
U.S. Treasury Securities.................................................. 7.0
Pharmaceuticals........................................................... 6.8
Electronics............................................................... 5.9
Utilities................................................................. 4.7
Industrial Conglomerates.................................................. 4.2
Oil & Gas Exploration/Production.......................................... 4.2
Food & Beverages.......................................................... 3.6
Financial Services........................................................ 3.5
Automobiles & Trucks...................................................... 3.3
Engineering & Equipment................................................... 2.4
Office Equipment & Supplies............................................... 2.2
Diversified Consumer Products............................................. 2.0
Leasing................................................................... 1.9
Chemicals................................................................. 1.8
Natural Resources......................................................... 1.8
Leisure & Tourism......................................................... 1.7
Consumer Durable Goods.................................................... 1.3
Publishing................................................................ 1.3
Paper & Forest Products................................................... 1.2
Retail.................................................................... 1.2
Aerospace/Defense......................................................... 1.1
Airlines.................................................................. 1.1
Containers & Packaging.................................................... 1.0
Entertainment............................................................. 1.0
Rubber.................................................................... 0.4
Wire & Cable.............................................................. 0.3
Computer Services......................................................... 0.1
-----
99.9
Other assets in excess of liabilities..................................... 0.1
-----
100.0%
-----
-----
</TABLE>
See Notes to Financial Statements 51
<PAGE>
Target Funds Total Return Bond Fund
Portfolio of Investments as of January 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM INVESTMENTS 118.0%
Corporate Bonds 30.9%
- -------------------------------------------------------------------------------------
Banking 5.8%
Deutsche Bank Capital Trust
A1 $ 500 7.94%, 12/22/49 $ 500,000
First Security Corp. Delaware
A3 500 7.70%, 6/1/05 500,000
Korea Development Bank
Baa2 500 7.63%, 10/1/02 495,620
---------------
1,495,620
- -------------------------------------------------------------------------------------
Communications 3.1%
Dominion Resources
Baa1 300 6.20%, 1/26/01 299,925
Sprint Capital Corp. M.T.N.
Baa1 500 6.35%, 11/15/01 500,469
---------------
800,394
- -------------------------------------------------------------------------------------
Financial Services 16.0%
American General Finance Corp. M.T.N.
A2 800 6.88%, 12/14/01 793,097
Bears Stearns Cos.
A2 800 6.63%, 11/30/04 799,250
Ford Motor Credit Corp. M.T.N.
A1 500 6.29%, 5/23/02 500,079
General Mtrs Acceptance Corp. M.T.N.
A2 500 6.27%, 11/12/02 500,688
Lehman Brothers Holdings, Inc.
A3 500 6.67%, 12/12/02 499,531
Morgan Stanley Dean Witter, Inc.
A1 500 6.17%, 1/28/02 499,858
Protective Life Insurance Co.
A1 500 6.38%, 1/17/03 500,000
---------------
4,092,503
</TABLE>
52 See Notes to Financial Statements
<PAGE>
Target Funds Total Return Bond Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Oil & Gas 2.0%
Kerr Mcgee Corp.
BBB* $ 500 6.40%, 8/1/01 $ 499,825
- -------------------------------------------------------------------------------------
Oil & Gas Exploration/Production 2.0%
Petroleos Mexicanos
NR 500 9.38%, 12/2/08 511,250
- -------------------------------------------------------------------------------------
Utilities-Electric & Gas 2.0%
Central Power & Light Company
Baa1 500 6.70%, 11/23/01 500,210
---------------
Total corporate bonds (cost $7,913,534) 7,899,802
---------------
- -------------------------------------------------------------------------------------
U.S. GOV'T AGENCY MORTGAGE BACKED SECURITIES 51.9%
Government National Mortgage Assn.,
Aaa 10,000 7.00%, 02/22/2030 9,514,100
Aaa 2,500 8.00%, 02/22/2030 2,494,525
Government National Mortgage Assn.,
Aaa 1,295 6.50%, 11/20/29 1,287,783
---------------
Total U.S. Gov't Agency Mortgage Backed
Securities (cost $13,361,132) 13,296,408
---------------
COLLATERALIZED MORTGAGE OBLIGATIONS 4.6%
- -------------------------------------------------------------------------------------
Real Estate Investment Trust 4.6%
Countrywide Mortgage Backed Security
Aaa 774 7.50%, 4/25/27 737,098
Starwood Commercial Mortgage Trust
Aaa 470 6.60%, 2/3/09 451,658
---------------
Total collateralized mortgage
obligations
(cost $1,221,849) 1,188,756
---------------
- -----------------------------------------------------------------------------------
U.S. GOV'T SECURITIES 26.2%
United States Treasury Bonds,
Aaa 2,700 6.00%, 2/15/26 2,498,337
Aaa 900 7.88%, 11/15/04 939,933
United States Treasury Notes
Aaa 2,417 3.63%, 7/15/02 2,390,354
Aaa 1,000 4.75%, 11/15/08 870,000
---------------
Total U.S. Gov't Securities (cost
$6,651,119) 6,698,624
---------------
</TABLE>
See Notes to Financial Statements 53
<PAGE>
Target Funds Total Return Bond Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
- -----------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS 4.4%
<S> <C> <C> <C>
Republic of Columbia
Ba2 $ 700 9.75%, 4/23/09 $ 656,250
Republic of Poland
Baa1 70 3.50%, 10/27/24 42,700
Republic of Philippines
NR 500 6.50%, 12/1/17 428,750
---------------
Total foreign government obligations
(cost $1,139,108) 1,127,700
---------------
Total long-term investments (cost
$30,286,742) 30,211,290
---------------
SHORT-TERM INVESTMENTS 22.2%
Corporate Bonds
- -------------------------------------------------------------------------------------
Banking 7.8%
Bayerische Landesbank
P1 1,000 5.80%, 2/22/00 996,679
Swedbank
P1 1,000 5.82%, 2/18/00 997,307
---------------
1,993,986
- -------------------------------------------------------------------------------------
Drugs & Medical Supplies 0.8%
Becton Dickinson & Company
P1 200 5.82%, 2/28/00 199,142
- -------------------------------------------------------------------------------------
Financial Services 6.6%
General Electric Capital Corp.,
P1 700 5.85%, 2/4/00 699,668
KFW International Finance,
P1 1,000 5.82%, 2/17/00 997,466
---------------
1,697,134
- -------------------------------------------------------------------------------------
Leisure 1.1%
ITT Corp.
Ba1 300 6.25%, 11/15/00 294,228
- -------------------------------------------------------------------------------------
Leisure & Tourism 1.6%
Walt Disney Co.
P1 400 5.54%, 2/2/00 399,939
</TABLE>
54 See Notes to Financial Statements
<PAGE>
Target Funds Total Return Bond Fund
Portfolio of Investments as of January 31, 2000 (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Utilities 4.3%
Florida Power Corp.
P1 $1,000 5.74%, 3/6/00 $ 994,579
National Rural Utilities Cooperative
Finance Corp.,
P1 100 5.80%, 2/24/00 99,629
---------------
1,094,208
---------------
Total corporate bonds (cost $5,680,683) 5,678,637
---------------
- -------------------------------------------------------------------------------------
REPURCHASE AGREEMENT
State Street Bank & Trust Co.,
2.00%, dated 1/31/00, due 2/1/00 in the
amount of $4,000 (cost $4,000,
collateralized by $5,000 U.S.
Treasury Notes 8.125%, 8/15/19, value
of collateral including accrued
4 interest is $5,971) 4,000
---------------
Total short-term investments (cost
$5,684,683) 5,682,637
---------------
Total Investments Before Outstanding
Cross Currency Put Options
Written 140.2%
(cost US $35,971,425; Note 4) 35,893,927
---------------
Option
Contracts
- -------------------------------------------------------------------------------------
CROSS CURRENCY PUT OPTIONS WRITTEN
Euro, expiring 2/16/00
20D @ 0.98 per United States Dollar (32,540)
Euro, expiring 4/14/00
20D @ 0.98 per United States Dollar (46,473)
---------------
(Premium received US$18,222; Note 4) (79,013)
---------------
Total investments, net of outstanding
cross currency put options written
(cost US$35,953,203) 35,814,914
Liabilities in excess of other
assets (40.2%) (10,167,346)
---------------
Net Assets 100% $ 25,647,568
---------------
---------------
</TABLE>
- ------------------------------
D One contract relates to 100,000 local currency units.
M.T.N.--Medium-Term Notes
NR--Not rated by Moody's or Standard & Poor's
The Fund's current Statement of Additional Information contains a desciption of
Moody's and Standard & Poor's ratings.
See Notes to Financial Statements 55
<PAGE>
Target Funds As of January 31, 2000 (Unaudited)
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Large
Capitalization
Growth Fund
- ---------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at value (cost $167,990,281) $ 193,937,213
Cash 7,935
Receivable for investments sold 2,909,980
Receivable for Fund shares sold 1,395,295
Dividends and interest receivable 5,184
Deferred expenses and other assets 60,313
-------------
Total assets 198,315,920
-------------
LIABILITIES
Payable for investments purchased 2,490,795
Payable for Fund shares repurchased 443,247
Distribution fee payable 147,385
Management fee payable 113,633
-------------
Total liabilities 3,195,060
-------------
NET ASSETS $ 195,120,860
-------------
-------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 16,836
Paid-in capital, in excess of par 171,716,681
-------------
171,733,517
Net operating loss (414,258)
Net realized loss (2,145,331)
Net unrealized appreciation 25,946,932
-------------
Net assets, January 31, 2000 $ 195,120,860
-------------
-------------
</TABLE>
56 See Notes to Financial Statements
<PAGE>
Target Funds As of January 31, 2000 (Unaudited) Cont'd.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Large
Capitalization
Growth Fund
- ---------------------------------------------------------------------------------------
<S> <C>
Class A:
Net assets $ 24,046,107
Shares of beneficial interest issued and outstanding 2,071,841
Net asset value and redemption price per share $11.61
Maximum sales charge (5% of offering price) .61
-------------
Maximum offering price to public $12.22
-------------
-------------
Class B:
Net Assets $ 52,022,826
Shares of beneficial interest issued and outstanding 4,489,823
Net asset value, offering price and redemption price per share $11.59
-------------
-------------
Class C:
Net Assets $ 119,051,927
Shares of beneficial interest issued and outstanding 10,274,209
Net asset value and redemption price per share $11.59
Sales charge (1% of offering price) .12
-------------
Offering price to public $11.71
-------------
-------------
</TABLE>
See Notes to Financial Statements 57
<PAGE>
Target Funds As of January 31, 2000 (Unaudited) Cont'd.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Large
Capitalization
Value Fund
- ---------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at value (cost $26,895,093) $ 25,136,072
Receivable for investments sold 32,916
Receivable for Fund shares sold 364,350
Dividends and interest receivable 49,642
Deferred expenses and other assets 42,332
------------
Total assets 25,625,312
------------
LIABILITIES
Payable for investments purchased 687,669
Payable for Fund shares repurchased 44,759
Distribution fee payable 18,442
Management fee payable 14,528
Accrued expenses and other liabilities 52,272
Withholding tax payable 29
------------
Total liabilities 817,669
------------
NET ASSETS $ 24,807,643
------------
------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 2,668
Paid-in capital, in excess of par 26,496,280
------------
26,498,948
Distributions in excess of net investment income (28,882)
Net realized gains 96,598
Net unrealized depreciation (1,759,021)
------------
Net assets, January 31, 2000 $ 24,807,643
------------
------------
</TABLE>
58 See Notes to Financial Statements
<PAGE>
Target Funds As of January 31, 2000 (Unaudited) Cont'd.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Large
Capitalization
Value Fund
- ---------------------------------------------------------------------------------------
<S> <C>
Class A:
Net assets $ 3,780,822
Shares of beneficial interest issued and outstanding 406,149
Net asset value and redemption price per share $9.31
Maximum sales charge (5% of offering price) .49
------------
Maximum offering price to public $9.80
------------
------------
Class B:
Net Assets $ 7,993,648
Shares of beneficial interest issued and outstanding 860,038
Net asset value, offering price and redemption price per share $9.29
------------
------------
Class C:
Net Assets $ 13,033,173
Shares of beneficial interest issued and outstanding 1,402,190
Net asset value and redemption price per share $9.29
Sales charge (1% of offering price) .09
------------
Offering price to public $9.38
------------
------------
</TABLE>
See Notes to Financial Statements 59
<PAGE>
Target Funds As of January 31, 2000 (Unaudited) Cont'd.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Small
Capitalization
Growth Fund
<S> <C>
- ---------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $14,333,398) $ 15,664,199
Receivable for investments sold 353,077
Receivable for Fund shares sold 96,964
Dividends and interest receivable 9,294
Deferred expenses and other assets 42,242
------------
Total assets 16,165,776
------------
LIABILITIES
Payable for investments purchased 610,889
Payable for Fund shares repurchased 32,912
Distribution fee payable 9,678
Management fee payable 9,332
Accrued expenses and other liabilities 53,830
------------
Total liabilities 716,641
------------
NET ASSETS $ 15,449,135
------------
------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 1,377
Paid-in capital, in excess of par 14,038,063
------------
14,039,440
Net operating loss (77,151)
Net realized gains 156,045
Net unrealized appreciation 1,330,801
------------
Net assets, January 31, 2000 $ 15,449,135
------------
------------
</TABLE>
60 See Notes to Financial Statements
<PAGE>
Target Funds As of January 31, 2000 (Unaudited) Cont'd.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Small
Capitalization
Growth Fund
<S> <C>
- ---------------------------------------------------------------------------------------
Class A:
Net assets $ 5,072,413
Shares of beneficial interest issued and outstanding 451,635
Net asset value and redemption price per share $11.23
Maximum sales charge (5% of offering price) .59
-----------
Maximum offering price to public $11.82
-----------
-----------
Class B:
Net Assets $ 4,789,278
Shares of beneficial interest issued and outstanding 427,121
Net asset value, offering price and redemption price per share $11.21
-----------
-----------
Class C:
Net Assets $ 5,587,443
Shares of beneficial interest issued and outstanding 498,324
Net asset value and redemption price per share $11.21
Sales charge (1% of offering price) .11
-----------
Offering price to public $11.32
-----------
-----------
</TABLE>
See Notes to Financial Statements 61
<PAGE>
Target Funds As of January 31, 2000 (Unaudited) Cont'd.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Small
Capitalization
Value Fund
- ---------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at value (cost $12,789,854) $ 12,430,471
Cash 7,927
Receivable for Fund shares sold 52,693
Receivable for investments sold 42,504
Deferred expenses and other assets 42,242
Dividends and interest receivable 17,048
------------
Total assets 12,592,885
------------
LIABILITIES
Payable for Fund shares repurchased 516,420
Payable for investments purchased 135,007
Management fee payable 7,236
Distribution fee payable 6,806
Accrued expenses and other liabilities 65,862
------------
Total liabilities 731,331
------------
NET ASSETS $ 11,861,554
------------
------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 1,209
Paid-in capital, in excess of par 12,008,605
------------
12,089,814
Net operating loss (39,881)
Net realized gains 171,004
Net unrealized depreciation (359,383)
------------
Net assets, January 31, 2000 $ 11,861,554
------------
------------
</TABLE>
62 See Notes to Financial Statements
<PAGE>
Target Funds As of January 31, 2000 (Unaudited) Cont'd.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Small
Capitalization
Value Fund
- ---------------------------------------------------------------------------------------
<S> <C>
Class A:
Net assets $ 5,431,212
Shares of beneficial interest issued and outstanding 552,738
Net asset value and redemption price per share $9.83
Maximum sales charge (5% of offering price) .52
-----------
Maximum offering price to public $10.35
-----------
-----------
Class B:
Net Assets $ 2,922,584
Shares of beneficial interest issued and outstanding 298,006
Net asset value, offering price and redemption price per share $9.81
-----------
-----------
Class C:
Net Assets $ 3,507,758
Shares of beneficial interest issued and outstanding 357,662
Net asset value and redemption price per share $9.81
Sales charge (1% of offering price) .10
-----------
Offering price to public $9.91
-----------
-----------
</TABLE>
See Notes to Financial Statements 63
<PAGE>
Target Funds As of January 31, 2000 (Unaudited) Cont'd.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
International
Equity Fund
- ---------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at value (cost $18,824,869) $ 18,684,402
Foreign currency, at value (cost $159,706) 152,852
Cash 16,535
Receivable for Fund shares sold 84,119
Receivable for investments sold 52,636
Dividends and interest receivable 13,272
Deferred expenses and other assets 37,842
------------
Total assets 19,041,658
------------
LIABILITIES
Payable for investments purchased 197,920
Accrued expenses and other liabilities 72,028
Payable for Fund shares repurchased 37,532
Distribution fee payable 13,364
Management fee payable 13,078
Withholding tax payable 1,044
------------
Total liabilities 334,966
------------
NET ASSETS $ 18,706,692
------------
------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 1,897
Paid-in capital, in excess of par 19,065,364
------------
19,067,261
Net operating loss (99,156)
Net realized loss (113,332)
Net unrealized depreciation (148,081)
------------
Net assets, January 31, 2000 $ 18,706,692
------------
------------
</TABLE>
64 See Notes to Financial Statements
<PAGE>
Target Funds As of January 31, 2000 (Unaudited) Cont'd.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
International
Equity Fund
- ---------------------------------------------------------------------------------------
<S> <C>
Class A:
Net assets $ 4,391,636
Shares of beneficial interest issued and outstanding 444,571
Net asset value and redemption price per share $9.88
Maximum sales charge (5% of offering price) .52
-----------
Maximum offering price to public $10.40
-----------
-----------
Class B:
Net Assets $ 5,779,763
Shares of beneficial interest issued and outstanding 586,435
Net asset value, offering price and redemption price per share $9.86
-----------
-----------
Class C:
Net Assets $ 8,535,293
Shares of beneficial interest issued and outstanding 866,067
Net asset value and redemption price per share $9.86
Sales charge (1% of offering price) .10
-----------
Offering price to public $9.96
-----------
-----------
</TABLE>
See Notes to Financial Statements 65
<PAGE>
Target Funds As of January 31, 2000 (Unaudited) Cont'd.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Total Return
Bond Fund
- ---------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at value (cost $35,971,425) $ 35,893,927
Receivable for investments sold 1,593,457
Receivable for Fund shares sold 64,457
Dividends and interest receivable 219,092
Deferred expenses and other assets 214,098
------------
Total assets 37,985,031
------------
LIABILITIES
Payable for investments purchased 12,061,719
Accrued expenses and other liabilities 73,719
Payable for Fund shares repurchased 68,958
Dividends payable 31,982
Distribution fee payable 10,830
Management fee payable 11,242
Outstanding cross currency options written, at value (premiums
received $18,222) 79,013
------------
Total liabilities 12,337,463
------------
NET ASSETS $ 25,647,568
------------
------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 2,633
Paid-in capital, in excess of par 26,338,383
------------
26,341,016
Distributions in excess of net investment income (18,968)
Net realized loss (536,191)
Net unrealized depreciation (138,289)
------------
Net assets, January 31, 2000 $ 25,647,568
------------
------------
</TABLE>
66 See Notes to Financial Statements
<PAGE>
Target Funds As of January 31, 2000 (Unaudited) Cont'd.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Total Return
Bond Fund
- ---------------------------------------------------------------------------------------
<S> <C>
Class A:
Net assets $ 11,504,511
Shares of beneficial interest issued and outstanding 1,181,303
Net asset value and redemption price per share $9.74
Maximum sales charge (4% of offering price) .41
------------
Maximum offering price to public $10.15
------------
------------
Class B:
Net Assets $ 7,159,740
Shares of beneficial interest issued and outstanding 735,098
Net asset value, offering price and redemption price per share $9.74
------------
------------
Class C:
Net Assets $ 6,983,317
Shares of beneficial interest issued and outstanding 716,974
Net asset value and redemption price per share $9.74
Sales charge (1% of offering price) .10
------------
Offering price to public $9.84
------------
------------
</TABLE>
See Notes to Financial Statements 67
<PAGE>
Target Funds November 3, 1999(a) through January 31, 2000
(Unaudited)
Statements of Operations
<TABLE>
<CAPTION>
Large
Capitalization
Growth Fund
- ----------------------------------------------------------------------------------------
<S> <C>
NET INVESTMENT INCOME
Income
Interest $ 226,552
Dividends 112,189
Less: Foreign withholding taxes --
-------------
Total income 338,741
Expenses
Management fee 288,130
Distribution fee - Class A 11,917
Distribution fee - Class B 101,533
Distribution fee - Class C 262,412
Custodian's fees and expenses 21,200
Amortization of organization and offering cost 12,158
Reports to shareholders 12,700
Registration fees 13,800
Transfer agent's fees and expenses 17,400
Audit fees and expenses 4,600
Legal fees and expenses 3,900
Trustees' fees and expenses 3,000
Miscellaneous 249
-------------
Total expenses 752,999
Net investment income (loss) (414,258)
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Investment transactions (2,145,331)
Foreign currency transactions --
-------------
(2,145,311)
Net change in unrealized appreciation (depreciation) on:
Investments 25,946,932
Foreign currencies --
Written options --
-------------
25,946,932
-------------
Net gain (loss) 23,801,601
-------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 23,387,343
-------------
-------------
</TABLE>
- ------------------------------
(a) Commencement of investment operations
68 See Notes to Financial Statements
<PAGE>
Target Funds November 3, 1999(a) through January 31, 2000
(Unaudited) Cont'd.
Statements of Operations
<TABLE>
<CAPTION>
Large Small Small
Capitalization Capitalization Capitalization International Total Return
Value Fund Growth Fund Value Fund Equity Fund Bond Fund
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 42,314 $ 28,641 $ 20,584 $ 28,525 $ 396,531
127,468 5,834 42,233 27,847 --
(149) -- -- (3,093) --
- ------------ ------------ ------------ ------------ ------------
169,633 34,475 62,817 53,279 396,531
38,392 23,017 19,192 34,043 31,453
2,061 3,212 4,115 2,529 7,871
16,587 8,006 5,532 12,285 11,127
30,016 12,030 8,170 20,154 12,440
22,600 23,300 23,300 39,400 26,600
12,158 12,158 12,158 12,158 12,158
10,500 10,500 10,500 9,800 11,500
4,300 4,300 4,300 4,500 5,600
4,400 3,000 2,400 3,900 9,500
4,600 4,600 4,600 6,500 4,600
3,900 3,900 3,900 3,900 3,900
3,000 3,000 3,000 3,000 3,000
231 603 1,531 266 654
- ------------ ------------ ------------ ------------ ------------
152,745 111,626 102,698 152,435 140,403
16,888 (77,151) (39,881) (99,156) 256,128
- ------------ ------------ ------------ ------------ ------------
96,598 156,045 171,004 (125,756) (536,191)
-- -- -- 12,424 --
- ------------ ------------ ------------ ------------ ------------
96,598 156,045 171,004 (113,332) (536,191)
(1,759,021) 1,330,801 (359,383) (140,467) (77,498)
-- -- -- (7,614) --
-- -- -- -- (60,791)
- ------------ ------------ ------------ ------------ ------------
(1,759,021) 1,330,801 (359,383) (148,081) (138,289)
- ------------ ------------ ------------ ------------ ------------
(1,662,423) 1,486,846 (188,379) (261,413) (674,480)
- ------------ ------------ ------------ ------------ ------------
$ (1,645,535) $ 1,409,695 $ (228,260) $ (360,569) $ (418,352)
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
</TABLE>
See Notes to Financial Statements 69
<PAGE>
Target Funds November 3, 1999(a) through January 31, 2000
(Unaudited)
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Large
Capitalization
Growth Fund
- ----------------------------------------------------------------------------------------
<S> <C>
INCREASE IN NET ASSETS
Operations
Net investment income (loss) $ (414,258)
Net realized gain (loss) on investment and foreign currency
transactions (2,145,331)
Net change in unrealized appreciation (depreciation) of
investments 25,946,932
--------------
Net increase (decrease) in net assets resulting from
operations 23,387,343
--------------
Dividends and distributions
Dividends from net investment income
Class A --
Class B --
Class C --
--------------
Total dividends and distributions --
--------------
Fund share transactions(a)
Net proceeds from shares sold 190,125,296
Net asset value of shares issued in reinvestment of dividends --
Cost of shares reacquired (18,409,779)
--------------
Net increase in net assets from Fund share transactions 171,715,517
--------------
Total increase 195,102,860
NET ASSETS
Beginning of period 18,000
--------------
End of period $ 195,120,860
--------------
--------------
- ------------------------------
(a) Commencement of investment operations.
</TABLE>
70 See Notes to Financial Statements
<PAGE>
Target Funds November 3, 1999(a) through January 31, 2000
(Unaudited)
Statements of Changes in Net Assets Cont'd.
<TABLE>
<CAPTION>
Large Small Small
Capitalization Capitalization Capitalization International Total Return
Value Fund Growth Fund Value Fund Equity Fund Bond Fund
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 16,888 $ (77,151) $ (39,881) $ (99,156) $ 256,128
96,598 156,045 171,004 (113,332) (536,191)
(1,759,021) 1,330,801 (359,383) (148,081) (138,289)
- -------------- -------------- -------------- -------------- --------------
(1,645,535) 1,409,695 (228,260) (360,569) (418,352)
- -------------- -------------- -------------- -------------- --------------
(9,370) -- -- -- (145,122)
(13,063) -- -- -- (61,813)
(23,337) -- -- -- (68,161)
- -------------- -------------- -------------- -------------- --------------
(45,770) -- -- -- (275,096)
- -------------- -------------- -------------- -------------- --------------
30,381,716 17,680,767 13,648,564 29,292,094 31,329,117
42,947 -- -- -- 213,417
(3,943,715) (3,659,327) (1,576,750) (10,242,833) (5,211,518)
- -------------- -------------- -------------- -------------- --------------
26,480,948 14,021,440 12,071,814 19,049,261 26,331,016
- -------------- -------------- -------------- -------------- --------------
27,789,643 15,431,135 11,843,554 18,688,692 25,637,568
18,000 18,000 18,000 18,000 10,000
- -------------- -------------- -------------- -------------- --------------
$ 24,807,643 $ 15,449,135 $ 11,861,554 $ 18,706,692 $ 25,647,568
- -------------- -------------- -------------- -------------- --------------
- -------------- -------------- -------------- -------------- --------------
</TABLE>
See Notes to Financial Statements 71
<PAGE>
Target Funds November 3, 1999(a) through January 31, 2000
(Unaudited)
Financial Highlights
<TABLE>
<CAPTION>
Large Capitalization Growth Fund
-------------------------------------
Class A Class B Class C
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00
Income from investment operations
Net investment loss (0.01) (0.03) (0.03)
Net realized and unrealized gain on
investment transactions 1.62 1.62 1.62
Total from investment operations 1.61 1.59 1.59
Net asset value, end of period $ 11.61 $ 11.59 $ 11.59
TOTAL RETURN(b) 16.00% 15.90% 15.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 24,046 $ 52,023 $ 119,052
Average net assets (000) $ 19,604 $ 41,754 $ 107,913
Ratios to average net assets (c):
Expenses, including distribution fees 1.17% 1.92% 1.92%
Expenses, excluding distribution fees 0.92% 0.92% 0.92%
Net investment loss (0.39)% (1.13)% (1.07)%
Portfolio turnover rate 11% 11% 11%
</TABLE>
- ------------------------------
(a) Commencement of investment operations.
(b) 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 less than one full year are not
annualized.
(c) Annualized.
72 See Notes to Financial Statements
<PAGE>
Target Funds November 3, 1999(a) through January 31, 2000
(Unaudited) Cont'd.
Financial Highlights
<TABLE>
<CAPTION>
Large Capitalization Value Fund
------------------------------------
Class A Class B Class C
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00
Income from investment operations
Net investment income 0.02 0.01 0.01
Net realized and unrealized loss on
investment transactions (0.68) (0.70) (0,70)
Total from investment operations (0.66) (0.69) (0.69)
Less distributions:
Dividends from net investment income (0.03) (0.02) (0.02)
Net asset value, end of period $ 9.31 $ 9.29 $ 9.29
TOTAL RETURN(b) (6.63)% (6.92)% (6.92)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 3,781 $ 7,994 $ 13,033
Average net assets (000) $ 3,390 $ 6,821 $ 12,344
Ratios to average net assets (c):
Expenses, including distribution fees 2.15% 2.90% 2.90%
Expenses, excluding distribution fees 1.90% 1.90% 1.90%
Net investment income 0.90% 0.17% 0.22%
Portfolio turnover rate 6% 6% 6%
</TABLE>
- ------------------------------
(a) Commencement of investment operations.
(b) 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 less than one full year are not
annualized.
(c) Annualized.
See Notes to Financial Statements 73
<PAGE>
Target Funds November 3, 1999(a) through January 31, 2000
(Unaudited) Cont'd.
Financial Highlights
<TABLE>
<CAPTION>
Small Capitalization Growth Fund
------------------------------------
Class A Class B Class C
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00
Income from investment operations
Net investment loss (.05) (.06) (.06)
Net realized and unrealized gain on
investment transactions 1.28 1.27 1.27
Total from investment operations 1.23 1.21 1.21
Net asset value, end of period $ 11.23 $ 11.21 $ 11.21
TOTAL RETURN(b) 12.30% 12.10% 12.10%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 5,072 $ 4,789 $ 5,587
Average net assets (000) $ 5,283 $ 3,292 $ 4,947
Ratios to average net assets (c):
Expenses, including distribution fees 2.94% 3.69% 3.69%
Expenses, excluding distribution fees 2.69% 2.69% 2.69%
Net investment loss (1.86)% (2.67)% (2.63)%
Portfolio turnover rate 20% 20% 20%
</TABLE>
- ------------------------------
(a) Commencement of investment operations.
(b) 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 less than one full year are not
annualized.
(c) Annualized.
74 See Notes to Financial Statements
<PAGE>
Target Funds November 3, 1999(a) through January 31, 2000
(Unaudited) Cont'd.
Financial Highlights
<TABLE>
<CAPTION>
Small Capitalization Value Fund
------------------------------------
Class A Class B Class C
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00
Income from investment operations
Net investment loss (0.03) (0.04) (0.04)
Net realized and unrealized loss on
investment transactions (0.14) (0.15) (0.15)
Total from investment operations (0.17) (0.19) (0.19)
Net asset value, end of period $ 9.83 $ 9.81 $ 9.81
TOTAL RETURN(b) (1.70)% (1.90)% (1.90)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 5,431 $ 2,923 $ 3,508
Average net assets (000) $ 5,640 $ 2,275 $ 3,360
Ratios to average net assets (c):
Expenses, including distribution fees 3.40% 4.10% 4.10%
Expenses, excluding distribution fees 3.10% 3.10% 3.10%
Net investment loss (1.10)% (1.80)% (1.81)%
Portfolio turnover rate 5% 5% 5%
</TABLE>
- ------------------------------
(a) Commencement of investment operations.
(b) 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 less than one full year are not
annualized.
(c) Annualized.
See Notes to Financial Statements 75
<PAGE>
Target Funds November 3, 1999(a) through January 31, 2000
(Unaudited) Cont'd.
Financial Highlights
<TABLE>
<CAPTION>
International Equity Fund
------------------------------------
Class A Class B Class C
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00
Income from investment operations
Net investment loss (0.04) (0.05) (0.06)
Net realized and unrealized loss on
investment and foreign currency
transactions (0.08) (0.09) (0.08)
Total from investment operations (0.12) (0.14) (0.14)
Net asset value, end of period $ 9.88 $ 9.86 $ 9.86
TOTAL RETURN(b) (1.20)% (1.40)% (1.40)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 4,392 $ 5,780 $ 8,535
Average net assets (000) $ 4,160 $ 5,052 $ 8,288
Ratios to average net assets (c):
Expenses, including distribution fees 3.01% 3.76% 3.76%
Expenses, excluding distribution fees 2.76% 2.76% 2.76%
Net investment loss (1.78)% (2.51)% (2.49)%
Portfolio turnover rate 15% 15% 15%
</TABLE>
- ------------------------------
(a) Commencement of investment operations.
(b) 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 less than one full year are not
annualized.
(c) Annualized.
76 See Notes to Financial Statements
<PAGE>
Target Funds November 3, 1999(a) through January 31, 2000
(Unaudited) Cont'd.
Financial Highlights
<TABLE>
<CAPTION>
Total Return Bond Fund
------------------------------------
Class A Class B Class C
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00
Income from investment operations
Net investment income 0.11 0.10 0.10
Net realized and unrealized loss on
investment transactions (.26) (.26) (.26)
Total from investment operations (.15) (.16) (.16)
Less distributions:
Dividends from net investment income (0.11) (0.10) (0.10)
Net asset value, end of period $ 9.74 $ 9.74 $ 9.74
TOTAL RETURN(b) (1.63)% (1.74)% (1.74)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 11,505 $ 7,160 $ 6,983
Average net assets (000) $ 12,525 $ 5,902 $ 6,599
Ratios to average net assets (c):
Expenses, including distribution fees 2.07% 2.52% 2.52%
Expenses, excluding distribution fees 1.77% 1.77% 1.77%
Net investment income 4.40% 3.95% 3.90%
Portfolio turnover rate 92% 92% 92%
</TABLE>
- ------------------------------
(a) Commencement of investment operations.
(b) 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 less than one full year are not
annualized.
(c) Annualized.
See Notes to Financial Statements 77
<PAGE>
Target Funds
Notes to Financial Statements (Unaudited)
Target Funds (the 'Trust') is an open-end management investment company.
The Trust consists of six separate funds (the 'Fund' or 'Funds'): Large
Capitalization Growth Fund, Large Capitalization Value Fund, Small
Capitalization Growth Fund, Small Capitalization Value Fund, International
Equity Fund and Total Return Bond Fund. The Trust was established as a Delaware
business trust on July 28, 1999 and did not have any activity until September 2,
1999 when it sold $100,000 to Prudential Investments Fund Management LLC
('PIFM') for 600 Class A, Class B and Class C shares of each of the Funds except
Total Return Bond Fund for which it sold 334 Class A shares and 333 Class B and
Class C shares. All the Funds are diversified, as defined under the Investment
Company Act of 1940, and investment operations commenced on November 3, 1999.
The Trusts' investment objectives are as follows: Large Capitalization
Growth Fund--long-term capital appreciation through investment primarily in
common stocks that, in the investment adviser's opinion, should have earnings
growth faster than that of the S&P 500; Large Capitalization Value Fund--total
return of capital appreciation and dividend income through investment primarily
in common stocks that, in the adviser's opinion, are undervalued; Small
Capitalization Growth Fund--maximum capital appreciation through investment
primarily in small company common stocks that in the investment advisor's
opinion should have earnings growth faster than that of a market average
companies; Small Capitalization Value Fund--above average capital appreciation
through investment in common small company stocks that, in the adviser's
opinion, are undervalued or overlooked in the marketplace; International Equity
Fund--capital appreciation through investment primarily in stocks of companies
domiciled outside the United States; Total Return Bond Fund--total return of
current income and capital appreciation through investment primarily in
fixed-income securities of varying maturities with a dollar-weighted average
portfolio maturity of more than four years but not more than fifteen years;
The ability of issuers of debt securities (other than those issued or
guaranteed by the U.S. Government) held by the Funds to meet their obligations
may be affected by economic or political developments in a specific industry,
region or country.
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the
Trust, and the Funds in the preparation of its financial statements.
Securities Valuations: Securities, including options, futures contracts
and options thereon, for which the primary market is on a national securities
exchange, commodities exchange or board of trade are valued at the last sale
price on such
78
<PAGE>
Target Funds
Notes to Financial Statements (Unaudited) Cont'd.
exchange or board of trade, on the date of valuation or, if there was no sale on
such day, at the average of readily available closing bid and asked prices on
such day.
Securities, including options, that are actively traded in the
over-the-counter market, including listed securities for which the primary
market is believed to be over-the-counter, are valued at the average of the most
recently quoted bid and asked prices provided by a principal market maker or
dealer.
U.S. Government securities for which market quotations are available are
valued at a price provided by an independent broker/dealer or pricing service.
Quotations of foreign securities in a foreign currency are converted to
U.S. dollar equivalents at the current rate obtained from a recognized bank or
dealer.
Securities for which market quotations are not available, are valued in
good faith under procedures adopted by the Trustees.
Short-term securities are valued at cost if their original maturity was
sixty days or less. Short-term securities which mature in more than sixty days
are valued at current market quotations.
In connection with transactions in repurchase agreements, it is the
Trust's policy that its custodian take possession of the underlying collateral
securities, the value of which exceeds the principal amount of the repurchase
transaction, including accrued interest. 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
Funds may be delayed or limited.
All securities are valued as of 4:15 p.m., New York time.
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. Dividend income is
recorded on the ex-dividend date and interest income is recorded on the accrual
basis. The Trust amortizes premiums and discounts paid on purchases of portfolio
securities as adjustments to interest income. Expenses are recorded on the
accrual basis which may require the use of certain estimates by management.
79
<PAGE>
Target Funds
Notes to Financial Statements (Unaudited) Cont'd.
Foreign Currency Translation: The books and records of the Trust are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis:
(i) market value of investment securities, other assets and
liabilities--at the closing rates of exchange;
(ii) purchases and sales of investment securities, income and expenses--at
the rate of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Trust are presented at the foreign exchange
rates and market values at the close of the fiscal period, the Trust does not
isolate that portion of the results of operations arising as a result of changes
in the foreign exchange rates from the fluctuations arising from changes in the
market prices of securities held at the end of the fiscal period. Similarly, the
Trust does not isolate the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of long-term portfolio
securities sold during the fiscal year. Accordingly, these realized foreign
currency gains (losses) are included in the reported net realized gains (losses)
on investment transactions.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses) from sales and maturities of short-term
securities, holding of foreign currencies, currency gains or losses realized
between the trade and settlement dates of securities transactions, and the
difference between the amounts of dividends, interest and foreign taxes recorded
on the Trust's books and the U.S. dollar equivalent amounts actually received or
paid. Net currency gains and losses from valuing foreign currency denominated
assets and liabilities at period-end exchange rates are reflected as a component
of net unrealized appreciation (depreciation) on investments and foreign
currencies.
Foreign security and currency transactions may involve certain
considerations and risks not typically associated with those of domestic origin
as a result of, among other factors, the level of governmental supervision and
regulation of foreign securities markets and the possibility of political or
economic instability.
Options: The International Equity Funds and the Total Return Bond Funds
may either purchase or write options in order to hedge against adverse market
movements or fluctuations in value caused by changes in prevailing interest
rates or foreign currency exchange rates with respect to securities or
currencies which the Funds currently own or intend to purchase. When a Fund
purchases an option, it pays a premium and an amount equal to that premium is
recorded as an investment. When a Fund writes an option, it receives a premium
and an amount equal to that premium is recorded as a liability. The investment
or liability is adjusted daily to reflect the
80
<PAGE>
Target Funds
Notes to Financial Statements (Unaudited) Cont'd.
current market value of the option. If an option expires unexercised, a Fund
realizes a gain or loss to the extent of the premium received or paid. If an
option is exercised, the premium received or paid is an adjustment to the
proceeds from the sale or the cost basis of the purchase in determining whether
a Fund has realized a gain or loss. The difference between the premium and the
amount received or paid on effecting a closing purchase or sale transaction is
also treated as a realized gain or loss. Gain or loss on purchased options is
included in net realized gain (loss) on investment transactions. Gain or loss on
written options is presented separately as net realized gain (loss) on written
option transactions.
A Fund, as writer of an option, has no control over whether the underlying
securities or currencies may be sold (called) or purchased (put). As a result, a
Fund bears the market risk of an unfavorable change in the price of the security
or currency underlying the written option. A Fund, as purchaser of an option,
bears the risk of the potential inability of the counterparties to meet the
terms of their contracts.
Dividends and Distributions: The Total Return Bond Fund declares
dividends from net investment income daily and pays such dividends monthly. All
other Funds declare and pay a dividend from net investment income, if any, at
least annually. Each Fund declares and pays its net capital gains, if any, at
least annually.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles.
Taxes: For federal income tax purposes, each Fund is treated as a
separate tax-paying entity. It is the intent of each Fund to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
Withholding taxes on foreign interest and dividends have been provided for
in accordance with the Trust's understanding of the applicable country's tax
rules and rates.
Deferred Organizational and Offering Expenses: Certain costs incurred
in connection with the initial offering of shares of the Trust, estimated at
$510,000, have been deferred and are being amortized over a 12 month period from
the date the funds commenced operations. Estimated organizational expenses of
the Trust in the amount of approximately $18,000 incurred prior to the offering
of the Trust's shares have been reimbursed by the PIFM.
81
<PAGE>
Target Funds
Notes to Financial Statements (Unaudited) Cont'd.
Note 2. Agreements
The Trust has a management agreement with PIFM. Pursuant to this agreement, PIFM
manages the investment operations of the Trust, administers the Trust's affairs
and is responsible for the selection, subject to review and approval of the
Trustees, of the advisers. PIFM supervises the advisers' performance of advisory
services and makes recommendations to the Trustees as to whether the advisers'
contracts should be renewed, modified or terminated. PIFM pays for the costs
pursuant to the advisory agreements, the cost of compensation of officers of the
Trust, occupancy and certain clerical and accounting costs of the Trust. The
Trust bears all other costs and expenses.
The advisers noted below each furnished investment advisory services in
connection with the management of the Trust. Each of the two advisers of the
domestic equity Funds--the Large Capitalization Growth Fund, Large
Capitalization Value Fund, Small Capitalization Growth Fund and Small
Capitalization Value Fund--manages approximately 50% of the assets of the
respective Fund. In general, in order to maintain an approximately equal
division of assets between the two advisers, all daily cash inflows (i.e.,
subscriptions and reinvested distributions) and outflows (i.e., redemptions and
expenses items) are divided between the two advisers as PIFM deems it
appropriate. In addition, there will be a periodic rebalancing of each Fund's
assets to take account of market fluctuations in order to maintain the
approximately equal allocation. As a consequence, each Fund will allocate assets
from the better performing of the two advisers to the other.
<TABLE>
<CAPTION>
Fund Adviser
- ------------------------------------------ ------------------------------------------
<S> <C>
Large Capitalization Growth............... Oak Associates, Ltd., and
Columbus Circle Investors
Large Capitalization Value................ INVESCO Capital Management, Inc. and
Hotchkis and Willey
Small Capitalization Growth............... SawGrass Asset Management, L.L.C. and
Fleming Asset Management USA
Small Capitalization Value................ DLJ Asset Management, Inc. and Lazard
Asset Management
International Equity...................... Lazard Asset Management
Total Return Bond......................... PIMCO
</TABLE>
82
<PAGE>
Target Funds
Notes to Financial Statements (Unaudited) Cont'd.
The management fee paid PIFM is computed daily and payable monthly, at an
annual rate of the average daily net assets of the Funds as specified below and
PIFM, in turn, pays each adviser the following fees for its services.
<TABLE>
<CAPTION>
Total
Fund Management Fee Adviser Fee
- ---------------------------------------------------- -------------- -----------
<S> <C> <C>
Large Capitalization Growth......................... .70% .30%
Large Capitalization Value.......................... .70% .30%
Small Capitalization Growth......................... .70% .40%
Small Capitalization Value.......................... .70% .40%
International Equity................................ .80% .40%
Total Return Bond................................... .50% .25%
</TABLE>
The Trust has entered into a distribution agreement with Prudential
Investment Management Services LLC (the Distributor or PIMS) for distribution of
the Trust's shares.
Pursuant to separate Plans of Distribution (the Class A Plan, the Class B
Plan and the Class C Plan, collectively the Plans) adopted by the Trust under
Rule 12b-1 of the Investment Company Act of 1940, the Distributor incurs the
expenses of distributing the Fund's Class A, Class B and Class C shares. These
expenses include commissions and account servicing fees paid to, or on account
of financial advisers of Prudential Securities Incorporated ('PSI') and Pruco
Securities Corporation (Prusec), an affiliated broker-dealer, commissions paid
to, or on account of, other broker-dealers or certain financial institutions
which have entered into agreements with the Distributor, advertising expenses,
the cost of printing and mailing prospectuses to potential investors and
indirect and overhead costs of PSI and Prusec associated with the sale of Trust
shares, including lease, utility, communications and sales promotion expenses.
Pursuant to the Class A Plan, each Fund compensates the Distributor for
its expenses with respect to Class A shares at an annual rate of up to .30 of 1%
of the average daily net asset value of the Class A shares. Such expenses under
the Class A Plan were .25% of the average daily net assets of Class A shares for
the period ended January 31, 2000.
Pursuant to the Class B and Class C Plans, each Fund compensates the
Distributor for its distribution-related expenses with respect to Class B and
Class C shares at an annual rate of 1% of the average daily net assets of Class
B and Class C shares. With respect to the Total Return Bond Fund, such expenses
under the Class B and Class C Plans were .75 of 1% of the average daily net
assets of the Total Return Bond Fund's Class B and Class C shares for the period
ending January 31, 2000.
83
<PAGE>
Target Funds
Notes to Financial Statements (Unaudited) Cont'd.
PIMS has advised the Trust of its receipt of front-end sales charges
resulting from sales of Class A and Class C shares during the period ended
January 31, 2000 as follows:
<TABLE>
<CAPTION>
Fund Class A Class C
- ------------------------------------------------------------ -------- --------
<S> <C> <C>
Large Capitalization Growth................................. $401,200 $582,700
Large Capitalization Value.................................. 94,200 134,000
Small Capitalization Growth................................. 35,800 48,300
Small Capitalization Value.................................. 32,700 35,900
International Equity........................................ 99,700 85,200
Total Return Bond........................................... 48,600 74,500
</TABLE>
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 Trust that for the period ended January 31, 2000, it
received the following amounts in contingent deferred sales charges imposed upon
certain redemptions by certain Class B and Class C shareholders.
<TABLE>
<CAPTION>
Fund Class B Class C
- -------------------------------------------------------------- ------- -------
<S> <C> <C>
Large Capitalization Growth................................... $14,700 $11,500
Large Capitalization Value.................................... 5,000 2,600
Small Capitalization Growth................................... 2,300 1,300
Small Capitalization Value.................................... 1,400 900
International Equity.......................................... 3,300 1,900
Total Return Bond............................................. 1,100 1,400
</TABLE>
PIFM, PIMS and PSI are wholly owned subsidiaries of The Prudential
Insurance Company of America. ('Prudential')
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly owned subsidiary of PIFM,
serves as the Trust's transfer agent. The following amounts represent the fees
PMFS charged for the period ended January 31, 2000 as well as the fees due PMFS
as of January 31, 2000.
<TABLE>
<CAPTION>
Amount incurred
for the Amount Due
period ended as of
January 31, January 31,
Fund 2000 2000
- ---------------------------------------------------- ---------------- ------------
<S> <C> <C>
Large Capitalization Growth......................... $ 16,900 $8,800
Large Capitalization Value.......................... 4,300 2,300
</TABLE>
84
<PAGE>
Target Funds
Notes to Financial Statements (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Amount incurred
for the Amount Due
period ended as of
January 31, January 31,
Fund 2000 2000
- ---------------------------------------------------- ---------------- ------------
Small Capitalization Growth......................... $ 2,700 $1,500
<S> <C> <C>
Small Capitalization Value.......................... 2,100 1,100
International Equity................................ 3,500 1,800
Total Return Bond................................... 2,300 1,200
</TABLE>
For the period ended January 31, 2000, PSI earned approximately $2,500 and
$1,200 in brokerage commissions on behalf of certain portfolio transactions
executed with the Large Capitalization Value Fund and Small Capitalization
Growth Fund, respectively.
Note 4. Fund Securities
Purchases and sales of portfolio securities, excluding short-term investments
and written options, for the period ended January 31, 2000 were as follows:
<TABLE>
<CAPTION>
Fund Purchases Sales
- ----------------------------------------------------- ------------ ------------
<S> <C> <C>
Large Capitalization Growth.......................... $184,122,650 $ 19,127,038
Large Capitalization Value........................... 26,406,764 1,299,471
Small Capitalization Growth.......................... 15,831,974 2,566,819
Small Capitalization Value........................... 12,135,668 532,572
International Equity................................. 20,257,291 2,616,940
Total Return Bond.................................... 56,770,435 25,952,409
</TABLE>
The federal income tax basis and unrealized appreciation (depreciation) of
each of the Funds' investments, excluding written options as of January 31,
2000, were as follows:
<TABLE>
<CAPTION>
Net
Unrealized
Appreciation Gross Unrealized
Fund Basis (Depreciation) Appreciation Depreciation
- ----------------------------- ------------ --------------- ------------ ------------
<S> <C> <C> <C> <C>
Large Capitalization
Growth..................... $167,990,281 $ 25,946,932 $ 30,006,080 $ 4,059,148
Large Capitalization Value... 26,895,093 (1,759,021) 574,090 2,333,111
Small Capitalization
Growth..................... 14,333,398 1,330,801 2,069,680 738,879
Small Capitalization Value... 12,792,098 (361,627) 735,054 1,096,681
International Equity......... 18,842,153 (157,751) 316,504 474,255
Total Return Bond............ 35,971,425 (77,498) 82,556 160,054
</TABLE>
85
<PAGE>
Target Funds
Notes to Financial Statements (Unaudited) Cont'd.
Transactions in options written during the period ended January 31, 2000,
were as follows:
<TABLE>
<CAPTION>
Number of Premiums
Total Return Bond Fund Contracts Received
- ------------------------------------------------------------ --------- --------
<S> <C> <C>
Options written............................................. 40 $18,222
--
--------
Options outstanding at January 31, 2000..................... 40 $18,222
--
--
--------
--------
</TABLE>
Note 5. Capital
The Trust has authorized an unlimited number of shares of beneficial interest at
$.001 par value per share. Of the shares outstanding at January 31, 2000, PIFM
owned 600 Class A, B and C shares of each of the Funds except Total Return Bond
Fund for which it owned 334 Class A shares and 333 Class B and C shares. In
addition to the above, Prudential owns 209,063 Class A shares of Small
Capitalization Growth Fund, 330,835 Class A shares of Small Capitalization Value
Fund and 748,741 Class A shares of Total Return Bond Fund.
Transactions in shares of beneficial interest during the period November
3, 1999 (commencement of investment operations) through January 31, 2000 were as
follows:
<TABLE>
<CAPTION>
Shares
Issued in Increase
Shares Reinvestment Shares in Shares
Fund Sold of Dividends Reacquired Outstanding
- --------------------------------- ------------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
Shares
- ---------------------------------
Large Capitalization Growth
Fund........................... 18,531,023 -- (1,696,947) 16,834,076
Class A 3,400,986 -- (1,332,617) 2,068,369
Class B 4,663,376 -- (171,278) 4,492,098
Class C 10,466,661 -- (193,052) 10,273,609
Large Capitalization Value
Fund........................... 3,066,534 4,525 (404,482) 2,666,577
Class A 706,274 930 (301,655) 405,549
Class B 890,088 1,330 (31,980) 859,438
Class C 1,470,172 2,265 (70,847) 1,401,590
Small Capitalization Growth
Fund........................... 1,712,286 -- (337,006) 1,375,280
Class A 756,499 -- (305,464) 451,035
Class B 441,836 -- (15,315) 426,521
Class C 513,951 -- (16,227) 497,724
Small Capitalization Value
Fund........................... 1,367,016 -- (158,610) 1,208,406
Class A 677,782 -- (125,044) 552,738
Class B 314,917 -- (16,911) 298,006
Class C 374,317 -- (16,655) 357,662
</TABLE>
86
<PAGE>
Target Funds
Notes to Financial Statements (Unaudited) Cont'd.
<TABLE>
<CAPTION>
Shares
Issued in Net Increase
Shares Reinvestment Shares in Shares
Fund Sold of Dividends Reacquired Outstanding
- --------------------------------- ------------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
International Equity Fund........ 2,887,422 -- (992,149) 1,895,273
Class A 1,385,779 -- (941,871) 443,908
Class B 609,312 -- (23,414) 585,898
Class C 892,331 -- (26,864) 865,467
Total Return Bond Fund........... 3,139,546 21,742 (528,913) 2,632,375
Class A 1,616,144 11,957 (447,132) 1,180,969
Class B 763,970 4,623 (33,828) 734,765
Class C 759,432 5,162 (47,953) 716,641
</TABLE>
<TABLE>
<CAPTION>
Net Asset
Value Net Increase
of Shares in Net Assets
Net Proceeds Issued in Cost of from Fund
from Shares Reinvestment Shares Share
Fund Sold of Dividends Reacquired Transactions
- --------------------------------- ------------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
Amount
- ---------------------------------
Large Capitalization Growth
Fund........................... $ 190,125,296 $ -- $ (18,409,779) $ 171,715,517
Class A 35,682,668 -- (14,348,308) 21,334,360
Class B 48,375,800 -- (1,902,041) 46,473,759
Class C 106,066,828 -- (2,159,430) 103,907,398
Large Capitalization Value
Fund........................... 30,381,716 42,947 (3,943,715) 26,480,948
Class A 6,941,358 8,829 (2,946,630) 4,003,557
Class B 8,813,165 12,619 (310,669) 8,515,115
Class C 14,627,193 21,499 (686,416) 13,962,276
Small Capitalization Growth
Fund........................... 17,680,767 -- (3,659,327) 14,021,440
Class A 7,750,934 -- (3,317,404) 4,433,530
Class B 4,683,230 -- (167,434) 4,515,796
Class C 5,246,603 -- (174,489) 5,072,144
Small Capitalization Value
Fund........................... 13,648,564 -- (1,576,750) 12,071,814
Class A 6,770,071 -- (1,242,463) 5,527,608
Class B 3,142,429 -- (168,902) 2,973,527
Class C 3,736,064 -- (165,385) 3,570,679
International Equity Fund........ 29,292,094 -- (10,242,833) 19,049,261
Class A 14,185,977 -- (9,731,675) 4,454,302
Class B 6,148,015 -- (236,312) 5,911,703
Class C 8,958,102 -- (274,846) 8,683,256
Total Return Bond Fund........... 31,329,117 213,417 (5,211,518) 26,331,016
Class A 16,137,708 117,387 (4,407,155) 11,847,940
Class B 7,609,907 45,359 (332,544) 7,322,722
Class C 7,581,502 50,671 (471,819) 7,160,354
</TABLE>
87
<PAGE>
Target Funds
Getting the Most From Your Prudential Mutual Fund
Some mutual fund shareholders won't ever read this--they don't read annual and
semiannual reports. It's quite understandable. These annual and semiannual
reports are prepared to comply with federal regulations, and are often written
in language that is difficult to understand. So when most people run into those
particularly daunting sections of these reports, they don't read them.
WE THINK THAT'S A MISTAKE
At Prudential Mutual Funds, we've made some changes to our report to make it
easier to understand and more pleasant to read. We hope you'll find it
profitable to spend a few minutes familiarizing yourself with your investment.
Here's what you'll find in the report:
PERFORMANCE AT A GLANCE
Since an investment's performance is often a shareholder's primary concern, we
present performance information in two different formats. You'll find it first
on the "Performance at a Glance" page where we compare the Fund and the
comparable average calculated by Lipper Inc., a nationally recognized mutual
fund rating agency. We report both the cumulative total returns and the average
annual total returns. The cumulative total return is the total amount of income
and appreciation the Fund has achieved in various time periods. The average
annual total return is an annualized representation of the Fund's performance.
It gives you an idea of how much the Fund has earned in an average year for a
given time period. Under the performance box, you'll see legends that explain
the performance information, whether fees and sales charges have been included
in returns, and the inception dates for the Fund's share classes.
See the performance comparison charts at the back of the report for more
performance information. Please keep in mind that past performance is not
indicative of future results.
<PAGE>
www.prudential.com (800) 225-1852
PERFORMANCE REVIEW
The portfolio manager, who invests your money for you, reports on successful--
and not-so-successful--strategies in this section of your report. Look for
recent purchases and sales here, as well as information about the sectors the
portfolio manager favors, and any changes that are on the drawing board.
PORTFOLIO OF INVESTMENTS
This is where the report begins to appear technical, but it's really just a
listing of each security held at the end of the reporting period, along with
valuations and other information. Please note that sometimes we discuss a
security in the Performance Review that doesn't appear in this listing because
it was sold before the close of the reporting period.
STATEMENT OF ASSETS AND LIABILITIES
The balance sheet shows the assets (the value of the Fund's holdings),
liabilities (how much the Fund owes), and net assets (the Fund's equity or
holdings after the Fund pays its debts) as of the end of the reporting period.
It also shows how we calculate the net asset value per share for each class of
shares. The net asset value is reduced by payment of your dividend, capital
gain, or other distribution, but remember that the money or new shares are
being paid or issued to you. The net asset value fluctuates daily, along with
the value of every security in the portfolio.
STATEMENT OF OPERATIONS
This is the income statement, which details income (mostly interest and
dividends earned) and expenses (including what you pay us to manage your
money). You'll also see capital gains here--both realized and unrealized.
<PAGE>
Target Funds
Getting the Most From Your Prudential Mutual Fund
STATEMENT OF CHANGES IN NET ASSETS
This schedule shows how income and expenses translate into changes in net
assets. The Fund is required to pay out the bulk of its income to shareholders
every year, and this statement shows you how we do it (through dividends and
distributions) and how that affects the net assets. This statement also shows
how money from investors flowed into and out of the Fund.
NOTES TO FINANCIAL STATEMENTS
This is the kind of technical material that can intimidate readers, but it does
contain useful information. The Notes provide a brief history and explanation
of your Fund's objectives. In addition, they outline how Prudential Mutual
Funds prices securities. The Notes also explain who manages and distributes the
Fund's shares and, more importantly, how much they are paid for doing so.
Finally, the Notes explain how many shares are outstanding and the number
issued and redeemed over the period.
FINANCIAL HIGHLIGHTS
This information contains many elements from prior pages, but on a per-share
basis. It is designed to help you understand how the Fund performed, and to
compare this year's performance and expenses to those of prior years.
INDEPENDENT AUDITOR'S REPORT
Once a year, an outside auditor looks over our books and certifies that the
information is fairly presented and complies with generally accepted
accounting principles.
TAX INFORMATION
This is information that we report annually about how much of your total
return is taxable. Should you have any questions, you may want to consult a
tax adviser.
<PAGE>
www.prudential.com (800) 225-1852
PERFORMANCE COMPARISON
These charts are included in the annual report and are required by the
Securities Exchange Commission. Performance is presented here as a hypothetical
$10,000 investment in the Fund since its inception or for 10 years (whichever
is shorter). To help you put that return in context, we are required to include
the performance of an unmanaged, broad-based securities index as well. The
index does not reflect the cost of buying the securities it contains or the
cost of managing a mutual fund. Of course, the index holdings do not mirror
those of the Fund--the index is a broad-based reference point commonly used by
investors to measure how well they are doing. A definition of the selected
index is also provided. Investors cannot invest directly in an index.
<PAGE>
Target Funds
Getting the Most From Your Prudential Mutual Fund
When you invest through Prudential Mutual Funds, you receive financial advice
from a Prudential Securities Financial Advisor or 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. 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 available mutual funds to find the ones that fit your 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 should remind you that you're investing for the long
haul.
<PAGE>
www.prudential.com (800) 225-1852
FOR MORE INFORMATION
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Trustees
Eugene C. Dorsey
Robert F. Gunia
Robert E. LaBlanc
Douglas H. McCorkindale
Thomas T. Mooney
David R. Odenath, Jr.
Stephen Stoneburn
John R. Strangfeld
Clay T. Whitehead
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
David R. Odenath, Jr., Vice President
Grace C. Torres, Treasurer
David F. Connor, Secretary
William V. Healey, Assistant Secretary
Stephen M. Ungerman, Assistant Treasurer
Manager
Prudential Investments Fund Management LLC
Gateway Center Three, 100 Mulberry Street
Newark, NJ 07102-4077
Investment Adviser
Columbus Circle Investors
Metro Center, One Station Plaza
Stamford, CT 06902
Fleming Asset Management USA
320 Park Avenue, New York, NY 10022
Hotchkis and Wiley
800 West Sixth St., Los Angeles, CA 90017
INVESCO Capital Management, Inc.
1315 Peachtree Street, Suite 500
Atlanta, GA 30309
Lazard Asset Management
30 Rockefeller Plaza, New York, NY 10112
Oak Associates, Ltd.
3875 Embassy Parkway, Suite 250
Akron, OH 44333
Pacific Investment Management Company
840 Newport Center Drive, Newport Beach, CA 92660
Sawgrass Asset Management, LLC
4337 Pablo Oaks Court, Jacksonville, FL 32224
DLJ Asset Management, Inc.
277 Park Avenue, New York, NY 10172
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
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 January 31, 2000, were not audited
and, accordingly, no opinion is expressed on them.
<PAGE>
(LOGO)
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
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