<PAGE>
ANNUAL REPORT JULY 31, 2000
Prudential
Target Funds
(GRAPHIC)
This report is not authorized for distribution to
prospective investors unless preceded or accompanied by a
current prospectus.
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.
(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 with
different investment philosophies each manage
approximately 50% of the Fund's assets. This dual-manager
approach may enhance diversification.
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(LOGO) September 15, 2000
Dear Shareholder,
The nine-month period since the inception of the Target
Funds has been marked by a dramatic increase in
volatility, shifting investor preferences, and mixed
results in the financial markets. During the reporting
period, the Standard & Poor's 500 Composite Stock Price
Index (S&P 500 Index) and the Lehman Aggregate Bond Index
gained 5.89% and 4.42%, respectively. However, this
masked the gyrations that occurred in the markets.
Continued strong economic growth, inflationary pressures,
and rising interest rates were the main culprits, all of
which contributed to the
markets' sharp decline in mid-March. However, as we've
seen in recent years, the market correction was followed
by an impressive rally in many sectors, as investors
viewed lower prices as a buying opportunity.
The ramifications of the volatility in the United States
were felt abroad as well, causing the stocks in both developed and
emerging markets to fluctuate. As was the case in the
United States, technology-related stocks exhibited the
largest swings.
Above all, the last nine months have exemplified the
importance of diversification and a long-term outlook.
The Target Funds are managed with a commitment to adhere
to specific investment styles. This, in turn, allows
shareholders to effectively maintain a diversified
portfolio. While the performance of certain sectors and
investment styles will fluctuate over time, staying the
course with a well-diversified portfolio has historically
helped investors temper some of the impact that market
volatility can have on their investments.
We appreciate your investment in the Target Funds, and we
look forward to serving your investment needs in the
years to come.
Sincerely,
John R. Strangfeld, President
Target Funds
1
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Target Funds Large Capitalization Growth Fund
Performance at a Glance
Cumulative Total Returns1 As of 7/31/00
Since Inception2
(Without Sales Charge) (With Sales Charge)
Class A 31.90% 25.31%
Class B 31.10 26.10
Class C 31.10 28.79
Lipper Large-Cap
Growth Fund Avg.3 19.63 N/A
Past performance is not indicative of future results.
Principal and investment return will fluctuate so that an
investor's shares, when redeemed, may be worth more or
less than their original cost. The Fund's
performance was achieved by investing in technology
stocks during a period of unprecedented return in that
sector of the market. There can be no assurance that this
performance can be repeated in the future.
1 Source: Prudential Investments Fund Management LLC and
Lipper Inc. Since the Fund has been in existence less
than one year, returns are cumulative, and therefore 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. The Lipper
Large-Cap Growth Fund average includes funds that 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 of the
S&P(r) Mid-Cap 400 Index, 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, and 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.
Portfolio Composition
Sectors expressed as a percentage
of net assets as of 7/31/00
58.7% Technology
12.2 Business Services
7.6 Financial Services
6.2 Energy
5.9 Consumer Staples
4.5 Consumer Services
4.9 Cash & Equivalents
2
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www.prudential.com (800) 225-1852
Investment Advisers' Comments on Five Largest Holdings
Columbus Circle Investors As of 7/31/00*
1.9% Cisco Systems, Inc./Electronics
The leading manufacturer of data networking equipment.
Cisco provides most of the
Internet switching infrastructure for carriers and
corporate entry points, as well as internal corporate
networks.
1.6% Citigroup Inc./Financial Services
The largest financial services organization in the world.
Citigroup has cost-effectively integrated its various
acquisitions to expand its scope and revenue base.
1.5% PepsiCo, Inc./Food & Beverages
A major consumer products company, PepsiCo is undergoing
major restructuring that is yielding impressive results.
1.5% Calpine Corp./Utilities
The largest independent power producer in the United
States. Calpine is capitalizing on the deregulation in
the utilities sector to enhance its business.
1.4% CIENA Corp./Electronics
Develops systems that increase the carrying capacity and
speed of fiberoptic telecommunications networks.
Continues to demonstrate strong long-term growth
potential.
Oak Associates, Ltd. As of 7/31/00*
9.7% Cisco Systems, Inc./Electronics
Creates hardware and software solutions that link
computer networks. Oak continues to
believe that Cisco is the premier growth company in the
United States, and that its visionary management team
will maintain the success it has had with its aggressive
acquisition strategy.
5.4% Applied Materials, Inc./Electronic Components
A leading semiconductor equipment manufacturer, the
adviser believes Applied Materials is still in the early
stages of longer-term corporate growth.
4.9% Xilinx, Inc./Semiconductors & Equipment
The leading innovator of programmable logic chips, an
industry that is shielded by significant barriers to
entry. The communications sector is the source for the
majority of sales, but its products are gaining in
networking, wireless, and telecommunications.
4.1% Intel Corp./Semiconductors & Equipment
The world's largest semiconductor chip maker. Intel
supplies the computing and communications industries with
the chips, boards, systems, and software that are
integral parts of computers/
servers, networking and communications products. Intel
has been a long-term holding for the Fund, and is a
company in an industry that Oak views very positively.
4.1% EMC Corp./Computer Software & Services
Designs, manufactures, markets, and supports a wide range
of hardware and software,
and provides services for the storage, management,
protection, and sharing of electronic information.
* Expressed as a percentage of the Fund's net assets.
Holdings are subject to change.
3
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Target Funds Large Capitalization Growth Fund
Annual Report July 31, 2000
Investment Goals and Style
The 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
S&P 500 Index.
Growth Outperforms
Overall, during the nine-month reporting period, growth
stocks significantly outperformed their value stock
counterparts. While value stocks generated better
relative returns in five of the nine months, the dramatic
outperformance of growth stocks in the remaining four
months of the period tipped the scales in their favor.
As was the case in 1999, the technology component of the
growth index generated some of the strongest results.
Technology issues account for over half of the market
weight of the Russell 1000 Growth Index versus only
around 10% of the Russell 1000 Value Index. While
technology stocks fell sharply in the middle of the
reporting period, their superior returns at the beginning
and end of the period propelled the growth sector upward.
The Large Capitalization Growth Fund generated an
exceptional 31.90% return for Class A shares during the
reporting period-25.31% for investors paying the initial
Class A share sales charge. This compares very favorably
with the 5.89% and 19.63% returns generated by the S&P
500 Index and the Fund's Lipper Average, respectively.
4
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www.prudential.com (800) 225-1852
Columbus Circle Investors' (CCI) returns slightly lagged
the Index early in the reporting period, as a very narrow
range of stocks led the market rally. However, when
investors began to focus more on company fundamentals and
less on momentum, CCI's astute stock selection led to
superior results. The manager's scant exposure to lower-
quality technology issues helped CCI weather the
correction that began in March. In addition, its more
defensive holdings in
utilities, consumer goods, and energy stocks greatly
enhanced returns.
Oak Associates, Ltd. generated very strong returns from
its overweighting in the technology sector. Specifically,
semiconductor, networking, and fiber optics holdings
generated very positive results. In addition, by avoiding
the more speculative "dotcom" securities, Oak Associates
was able to sidestep much of the carnage that occurred in
the sector during the beginning of the second quarter.
While not every security yielded positive results-
Microsoft Corp. being a high-profile example-the majority
of the portfolio's tech-
nology stocks performed well during the reporting period.
Oak Associates believes that the technological revolution
is still in its early stages, and that tremendous
opportunities will continue to present themselves in the
coming years.
5
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Target Funds Large Capitalization Value Fund
Performance at a Glance
Cumulative Total Returns1 As of 7/31/00
Since Inception2
(Without Sales Charge) (With Sales Charge)
Class A -6.42% -11.10%
Class B -7.02 -12.02
Class C -7.02 -8.95
Lipper Large-Cap
Value Fund Avg.3 1.93 N/A
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, returns are cumulative, and
therefore 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 Value Fund category.
The Lipper average is unmanaged. The Lipper Large-Cap
Value Fund average includes funds that invest in a
variety of market capitalization ranges, generally have
between 25% and 75% of their equity assets in
companies with market capitalizations above 300% of the
dollar-weighted median of the S&P(r) Mid-Cap 400 Index,
invest in companies considered undervalued, and have
below-average price/earnings ratio,
price-to-book ratio, and three-year earnings growth
figure.
S&P(r) is a registered trademark of The McGraw-Hill
Companies, Inc.
Portfolio Composition
Sectors expressed as a percentage
of net assets as of 7/31/00
25.8% Financial Services
17.3 Consumer Cyclical
13.0 Technology
11.2 Basic Industries
11.1 Other
8.0 Utilities
6.9 Energy
6.8 Consumer Staples
-0.1 Cash & Equivalents
6
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www.prudential.com (800) 225-1852
Investment Advisers' Comments on Five Largest Holdings
Mercury Advisors (formerly Hotchkis and Wiley) As of 7/31/00*
1.4% Alcoa, Inc./Nonferrous Metals
World's leading producer of primary and fabricated
aluminum. Alcoa recently completed its merger with
Reynolds Metals and is realizing significant cost
savings. Aluminum inventory levels are low and demand
solid.
1.4% Philip Morris Companies, Inc./Tobacco
Major tobacco and consumer products company. Recently
enhanced its food division with the purchase of Nabisco.
Philip Morris's stock price has rebounded sharply this
year due to diminished tobacco litigation risk and its
proposal to spin off 10% of its food division with an
initial public offering.
1.3% Lockheed Martin Corp./Aerospace
A diversified global technology systems organization. A
new management team is leading a major restructuring
effort that has resulted in improving or eliminating
problem divisions.
1.2% Allstate Corp./Insurance
The adviser believes that Allstate's conservative
underwriting philosophy and aggressive loss-cost-
management capabilities will enable it to deliver greater
and more consistent earnings than its competitors.
1.2% Ford Motor Co./Automobiles
The world's largest truck maker and the second largest
maker of cars. The company has been hurt by rising
interest rates and concerns over slower economic growth.
However, its fundamentals remain solid, and it has a low
price/earnings ratio.
J.P. Morgan Investment Management Inc. As of 7/31/00*
2.5% Exxon Mobil Corp./International Oil
The fourth largest oil company in the world. The firm is
well established from reserves
to distribution, and has benefited from the recent
supply/demand environment.
2.5% Citigroup, Inc./Financial Services
The world's largest financial services organization.
Rising interest rates have been detrimental to its share
price, despite strong underlying fundamentals.
1.3% Verizon Communications/Telecommunications
An international telecommunications company whose
services include local telephone service, wireless
service, and domestic and international publishing
businesses.
1.0% Philip Morris Companies, Inc./Tobacco
Through subsidiaries, makes and sells various consumer
products, including tobacco products, packaged goods, and
beer. Due to litigation concerns, it sells for only nine
times earnings.
0.9% American International Group, Inc./Insurance
Engaged in a broad global range of insurance and
insurance-related activities and financial services.
Strong revenues drove a sharp stock rise during the
reporting period.
* Expressed as a percentage of the Fund's net assets.
Holdings are subject to change.
7
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Target Funds Large Capitalization Value Fund
Annual Report July 31, 2000
Investment Goals and Style
The Large Capitalization Value Fund, currently managed by
J.P. Morgan Investment Management, Inc. and Mercury
Advisors (formerly 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 are undervalued, given the
companies' sales, earnings, book value, cash flow, and
recent performance.
Growth Outperforms
Overall, during the nine-month reporting period, growth
stocks significantly outperformed their value stock
counterparts. While value stocks generated better
relative returns in five of the nine months, the dramatic
outperformance of growth stocks in the remaining four
months of the period tipped the scales in their favor.
As was the case in 1999, the technology component of the
growth index generated some of the strongest results.
Technology issues account for over half of the market
weight of the Russell 1000 Growth Index versus only
around 10% of the Russell 1000 Value Index. While
technology stocks fell sharply in the middle of the
reporting period, their superior returns at the beginning
and end of the period propelled the growth sector upward.
The Large Capitalization Value Fund's Class A shares fell
-6.42% during the reporting period-11.10% for investors
paying the initial Class A share sales charge. The Fund's
return underperformed the 5.89% return of the S&P 500
Index, and lagged the 1.93% return of its Lipper Average
largely because both managers adhere to a strict value
style.
8
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www.prudential.com (800) 225-1852
In general, Mercury Advisors' strong security selection
in the insurance and defense sectors helped performance.
However, basic industry holdings
created a drag on performance. Concern that slowing
economic growth would lead to falling demand hurt the
Fund's holdings in the natural resources, paper, and
chemical industries. Mercury Advisors believes that this
sector offers strong long-term appreciation potential,
given its extremely depressed valuations and low
inventory levels. In addition, the adviser believes the
fallout from this year's severe correction in growth
stocks will cause investors to again focus on company
fundamentals, which should aid value-oriented investing.
J.P. Morgan Investment Management, Inc. replaced INVESCO
Capital Management, Inc. on May 24, 2000. The adviser's
focus on the capital
markets sector has been the strongest contributor to
returns. Selective exposure to telecommunications
companies also enhanced results. However, holdings in
industrial cyclicals negatively impacted performance. A
key example is Honeywell, which did not meet earnings
estimates due to sluggish revenue growth and operational
issues.
9
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Target Funds Small Capitalization Growth Fund
Performance at a Glance
Cumulative Total Returns1 As of 7/31/00
Since Inception2
(Without Sales Charge) (With Sales Charge)
Class A 26.20% 19.89%
Class B 25.40 20.40
Class C 25.40 23.15
Lipper Small-Cap
Growth Fund Avg.3 37.96 N/A
Past performance is not indicative of future results.
Principal and investment return will fluctuate so that
an investor's shares, when redeemed, may be worth more or
less than their original cost. The Fund's
performance was achieved by investing in technology
stocks during a period of unprecedented return in that
sector of the market. There can be no assurance that this
performance can be repeated in the future.
1 Source: Prudential Investments Fund Management LLC and
Lipper Inc. Since the Fund has been in
existence less than one year, returns are cumulative, and
therefore 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. The Lipper Small-Cap
Growth Fund average includes funds that 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, invest
in companies with long-term earnings expected to grow
significantly faster than stocks represented in a major
unmanaged stock index, and have an above-average
price/earnings ratio, price-to-book ratio, and three-year
earnings growth figure.
S&P(r) is a registered trademark of The McGraw-Hill
Companies, Inc.
Portfolio Composition
Sectors expressed as a percentage
of net assets as of 7/31/00
33.5% Technology
13.5 Consumer Staples
12.5 Consumer Services
12.2 Financial Services
7.3 Basic Industry
6.2 Consumer Cyclical
5.0 Energy
3.8 Miscellaneous
1.0 Utilities
5.0 Cash & Equivalents
10
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www.prudential.com (800) 225-1852
Investment Advisers' Comments on Five Largest Holdings
Sawgrass Asset Management As of 7/31/00*
2.0% Avocent Corp./Telecommunications
Makers of switching systems that control many PCs and
servers from one location.
These systems allow management of multiple servers from a
single computer screen.
1.6% Chico's FAS, Inc./Retail Trade
Specialty retailer of exclusively designed private label
clothing, accessories, and other nonclothing gift items.
Chico's currently operates roughly 200 stores, and
expects to open 45 more units in the next 12 months.
1.6% Silicon Valley Bancshares/Banks
A provider of commercial lending and other financial
products to clients in the technology and life sciences
industries, as well as other target niches. A portion of
its revenue comes from warrants and capital initial
public offerings.
1.6% Silicon Valley Group, Inc./Electrical Equipment
Designs, manufactures, markets, and services
semiconductor processing equipment used
in the fabrication of integrated circuits. The firm's
stock performed extremely well during
the March market correction.
1.5% Actel Corp./Electronics
Designs, develops, and markets printed circuit boards,
field programmable systems and associated design and
development software, and programming hardware.
Chase Fleming Asset Management USA As of 7/31/00*
1.6% AmeriCredit Corp./Financial Services
A national lender specializing in automobile loans.
Through a network of auto dealers and banks, the company
purchases loans made by dealers to consumers who are
usually unable to obtain financing from traditional
sources.
1.4% Penton Media, Inc./Publishing
This business-to-business media company publishes trade
magazines, produces trade shows and conferences, and runs
websites primarily for one Internet/broadband, design/
engineering, electronics, natural products, food,
aviation, and hospitality industries.
1.2% APW, Inc./Industrial Machinery
Provides design services and manufacturing of integrated
electronic enclosure systems for original equipment
manufacturers. APW offers enclosures, power supplies, and
cabling for both standalone use and integrated custom
systems.
1.2% Advent Software, Inc./Software
A leading provider of software for asset management
organizations. The company provides
a variety of products for the front, middle, and back
office.
1.1% CSG Systems International, Inc./Business Services
The leading provider of customer care and billing
solutions to the cable TV and satellite industry. CSG
offers a full turnkey outsource processing service, as
well as software solutions. It has long-term contracts
with predictable cash flow streams.
* Expressed as a percentage of the Fund's net assets.
Holdings are subject to change.
11
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Target Funds Small Capitalization Growth Fund
Annual Report July 31, 2000
Investment Goals and Style
The Small Capitalization Growth Fund, managed by Sawgrass
Asset Management and Chase 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
will increase their earnings faster than the growth rate
of the U.S. economy.
Small-Cap Growth Excels
After several years of lagging the overall market, small-
cap stocks narrowly outperformed their larger-cap
counterparts in 1999. Despite a fluctuating market, small
caps have continued this trend, as the Russell 2000 Index
has generated relatively better results than the large-
cap S&P 500 Index during the first seven months of 2000.
This was largely due to the excellent performance
generated by certain technology and biotechnology stocks.
The Small Capitalization Growth Fund generated strong
results during the reporting period, and its Class A
shares returned 26.20%-19.89% for investors paying the
initial Class A share sales charge. However, the Fund
underperformed the 37.96% return of its Lipper Average.
As the Russell 2000 Growth Index was up only 20.37%, we
believe many of our peers enhanced results by also
investing in larger-capitalization stocks. In contrast,
the Small Capitalization Growth Fund invests solely in
smaller-cap growth issues.
12
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www.prudential.com (800) 225-1852
Investment advisers Sawgrass Asset Management and Chase
Fleming Asset Management USA focus on companies with
strong business plans that
possess the ability to generate solid earnings growth and
revenues. To a great extent, this approach was not
rewarded early in the reporting period.
A small group of small-cap growth issues with speculative
business plans and little, if any, earnings initially led
the market. However, when the stock market experienced a
sharp correction in April, these high-flying stocks fell
sharply. In contrast, both investment advisers
significantly outperformed the market.
In June, the market experienced a significant rebound,
and again both managers outperformed the overall small-
cap market. As contrasted with earlier in the period when
stock valuations were seemingly not a concern, investors
refocused on valuations. As a result, more reasonably
priced established companies generated the largest gains.
In particular, Sawgrass generated exceptional results
from its semiconductor stocks, and Fleming's selective
investments in technology issues enhanced performance.
13
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Target Funds Small Capitalization Value Fund
Performance at a Glance
Cumulative Total Returns1 As of 7/31/00
Since Inception2
(Without Sales Charge) (With Sales Charge)
Class A 10.80% 5.26%
Class B 10.10 5.10
Class C 10.10 8.00
Lipper Small-Cap
Value Fund Avg.3 16.12 N/A
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, returns are cumulative, and
therefore 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. The Lipper Small-Cap
Value Fund average includes funds that 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 of the S&P(r)
SmallCap 600 Index, invest in companies that are
considered undervalued relative to a major unmanaged
stock index, and have a below-average price/earnings
ratio, price-to-book ratio, and three-year earnings
growth figure.
S&P(r) is a registered trademark of The McGraw-Hill
Companies, Inc.
Portfolio Composition
Sectors expressed as a percentage
of net assets as of 7/31/00
21.9% Consumer Staples
18.4 Technology
13.9 Miscellaneous
15.9 Consumer Cyclical
10.2 Business Services
7.3 Financial Services
3.2 Utilities
2.5 Energy
6.7 Cash & Equivalents
14
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www.prudential.com (800) 225-1852
Investment Advisers' Comments on Five Largest Holdings
1.2% C&D Technologies, Inc./Electronics
Produces integrated reserve power systems and components
for telecommunications and control applications.
1.2% Cambrex Corp./Chemicals
Manufactures ingredients, chemicals, and cell culture
products for the biotechnology and pharmaceutical
industries. As these industries usually focus their
efforts in drug development, Cambrex helps them outsource
production of components.
1.2% Carlisle Companies, Inc./Diversified Industrials
Manufactures and distributes a wide variety of products
across a broad range of industries, including the
roofing, construction, trucking, automotive, food
service, industrial equipment, and aircraft manufacturing
fields.
1.1% Rogers Corp./Electronics
Manufactures specialty materials, focusing on polymer
laminates, for applications in the wireless
communication, computer, imaging, and consumer markets.
1.1% HSB Group, Inc./Insurance
A global provider of insurance products and engineering
management consulting services. HSB markets specialty
insurance, reinsurance, and technical consulting services
to businesses, industries, and institutions in more than
80 countries.
Lazard Asset Management As of 7/31/00*
1.0% Venator Group, Inc./Retail-Apparel
A global specialty retailer whose stores include Foot
Locker and Champs Sports. The firm operates primarily in
mall-based stores in North America. Venator has
restructured its operations, eliminating underperforming
businesses and locations.
0.7% Everest Re Group, Ltd./Insurance
A property and casualty reinsurance operation that
underwrites property and casualty reinsurance in the
United States and abroad. The firm's stock trades at a
low 12 times earnings, and it should benefit from more
attractive industry pricing and falling loss costs.
0.7% Invacare Corp./Drugs & Healthcare
Designs, manufactures, and distributes an extensive line
of healthcare products for home, healthcare, retail, and
extended care markets. Enjoys high margins and return on
equity.
0.7% Radian Group, Inc./Insurance
Provider of private mortgage insurance coverage on
residential mortgage loans. Radian continues to exhibit
excellent financial productivity, including a strong
return on equity.
0.7% Pennzoil-Quaker State Co./Auto-Related
Worldwide automotive after-market products and consumer
car care company, primarily in lubricants and car care
products. In the near future, Lazard expects the firm to
benefit from its significant cost reduction initiatives.
* Expressed as a percentage of the Fund's net assets.
Holdings are subject to change.
15
<PAGE>
Target Funds Small Capitalization Value Fund
Annual Report July 31, 2000
Investment Goals and Style
The Small Capitalization Value Fund, managed by Lazard
Asset Management and the Wood, Struthers & Winthrop
(formerly known as Wood, Struthers & Winthrop Management
Corp.), has above-average
capital appreciation as its investment objective. To
achieve this, the Fund invests in stocks of small
companies that its managers believe are undervalued,
given the companies' sales, earnings, book values, cash
flows, and recent performances.
Small-Cap Value Rebounds
After several years of lagging the overall market, small-
cap stocks narrowly outperformed their larger-cap
counterparts in 1999. Despite a fluctuating market, small
caps have continued this trend, as the Russell 2000 Index
has generated relatively better results than the large-
cap S&P 500 Index during the first seven months of 2000.
As the reporting period began, small-cap value stocks had
lower relative returns than their small-cap growth
counterparts. This was largely due to the excellent
performance generated by a handful of growth-oriented
technology and biotechnology stocks. However, as the
period progressed, small-cap value stocks generated
superior results. The high valuations of many growth
stocks concerned investors, particularly as profitability
remained elusive for many "new economy" firms. In
addition, a number of small-cap value companies were
acquired at a premium price, which helped to generate
investor interest in the sector.
The Small Capitalization Value Fund's Class A shares
generated a 10.80% return during the reporting period-
5.26% for investors paying the initial Class A sales
share charge. This compared to a 17.64% return for the
Russell 2000 Index. The Fund also lagged the 16.12%
return of its Lipper Average.
16
<PAGE>
www.prudential.com (800) 225-1852
Investment adviser Wood, Struthers & Winthrop's
overweight in the technology, healthcare, and energy
sectors enhanced performance. Holdings C&D Technologies,
Inc. (see Comments on Largest Holdings), Technitrol, and
Varian all doubled in price during the reporting period.
Healthcare-related holdings such as Cambrex Corp. (see
Comments on Largest Holdings), Pharmaceutical Product
Development, and Beckman Coulter also excelled. In the energy
sector, the Fund benefited from rising share prices in
its utilities and oil and gas holdings. An underweight in
the financial sector ultimately worked in the Fund's
favor, as performance was generally poor in this sector
due to the rising
interest rate environment. Performance was hurt by a
handful of holdings that did not meet expectations.
However, these disappointments were not focused on any
one sector, and a diversified portfolio helped to limit
their negative effect on overall returns.
Lazard Asset Management generated solid results from a
variety of holdings, including those in the insurance,
healthcare, and consumer discretionary sectors. In the
insurance area, Gallagher (Arthur J.) & Company and
Everest Re Group (see Comments on Largest Holdings) rose
sharply. Healthcare-related offerings, including
AmeriSource Health, Varian Medical Systems, and Dentsply
International, also excelled. Two of the Fund's consumer
discretionary holdings-Pier 1 Imports and Venator Group
(see Comments on Largest Holdings)-nearly doubled their
purchase price. However, the portfolio was hurt by its
exposure to the business services sector.
17
<PAGE>
Target Funds International Equity Fund
Performance at a Glance
Cumulative Total Returns1 As of 7/31/00
Since Inception2
(Without Sales Charge) (With Sales Charge)
Class A -0.50% -5.48%
Class B -1.10 -6.05
Class C -1.10 -3.07
Lipper International
Fund Avg.3 11.00 N/A
Past performance is not indicative of future results.
Principal and investment return will fluctuate so that an
investor's shares, when redeemed, may be worth more or
less than their original cost. The Fund will invest in
foreign securities, which are subject to risks of
currency fluctuation and the impact of social, political,
and economic change.
1 Source: Prudential Investments Fund Management LLC and
Lipper Inc. Since the Fund has been in
existence less than one year, returns are cumulative, and
therefore 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. The Lipper International
Fund average includes funds that invest their assets in
securities with primary trading markets outside the
United States.
Portfolio Composition
Sectors expressed as a percentage
of net assets as of 7/31/00
27.0% Financial Services
17.7 Consumer Staples
14.6 Consumer Services
6.8 Business Services
6.5 Miscellaneous
5.4 Energy
4.8 Consumer Cyclical
4.7 Utilities
4.6 Basic Industries
3.5 Technology
4.4 Cash & Equivalents
Geographic Concentration
Expressed as a percentage
of net assets as of 7/31/00
32.1% Other Continental Europe
22.2 United Kingdom
22.1 Japan
9.2 Germany
5.6 Scandinavia
4.4 Pacific Basin (excluding Japan)
4.4 Cash & Equivalents
18
<PAGE>
www.prudential.com (800) 225-1852
Investment Advisers' Comments on Five Largest Holdings
Lazard Asset Management As of 7/31/00*
2.6% Total Fina SA/Oil & Gas Producer
One of the world's largest integrated oil companies. The
firm was formed when Total purchased Elf Acquitaine. The
combined company has benefited from cost cutting and a
strong pricing environment.
2.4% TDK Corp./Diversified Electronics
A multinational manufacturer of recording media
(audiotapes, videotapes, floppy disks, and optical disks)
and other related products. The ongoing technological
revolution has helped the firm's sales and revenues.
2.4% Nissan Motor Co., Ltd./Automobiles
After many years of poor performance, Nissan has
rebounded sharply as the result of a major restructuring
effort. Its stock price has risen sharply on the back of
its revitalized product line and cost-cutting efforts.
2.3% Aventis SA/Pharmaceuticals
One of the world's largest drug companies, formed through
the merger of Hoechst and Rhone Poulenc. The combined
company has reduced costs by eliminating redundant
operations while enhancing its ability to develop and
market new products.
2.3% Allianz AG/Insurance
One of the world's largest global insurance firms. It
also has a growing asset management operation. Allianz
has performed well, due in part to the elimination of
German corporate capital gains tax.
19
* Expressed as a percentage of the Fund's net assets.
Holdings are subject to change.
<PAGE>
Target Funds International Equity Fund
Annual Report July 31, 2000
Investment Goals and Style
The 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
either developing or developed countries. The Fund 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.
The International Equity Fund's Class A shares fell 0.50%
during the reporting period-5.48% for investors paying
the initial Class A share sales charge. This return
underperformed the 3.65% return generated by the MSCI
EAFE Index and the 11.00% return of its Lipper Average.
The Fund's underperformance can largely be attributed to
two factors. First, overall, growth stocks outperformed
their value stock counterparts during the period. The
Fund's manager, Lazard Asset Management, is a value
manager, and therefore its investment style was not
rewarded. Second, riskier emerging market stocks excelled
at the beginning of the period.
In particular, the Fund's underexposure to growth-
oriented technology, media, and telecommunications (TMT)
stocks from November through early March was detrimental
to its performance. During that period, TMT stocks rose
dramatically, while most other sectors of the
international equity market fell. However, after an
abrupt change of market favor to so-called "old economy"
stocks in March, the Fund outperformed its benchmark
index from that time through the end of July. The change
occurred because of rising interest rates, a number of
highly publicized troubles at "dotcom" firms, and the
high cost associated with new U.K. cellular licensing
agreements. Afterward, the Fund's relative underweight in
media and telecommunications enhanced its relative
returns. In addition, it owned strong technology stocks,
including Alcatel, Philips, TDK Corp. (see Comments on
Largest Holdings), and Canon.
20
<PAGE>
Target Funds Total Return Bond Fund
Performance at a Glance
Cumulative Total Returns1 As of 7/31/00
Since Inception2
(Without Sales Charge) (With Sales Charge)
Class A 3.32% -0.82%
Class B 2.95 -2.05
Class C 2.95 0.92
Lipper Corporate
Debt BBB-Rated
Fund Avg.3 3.13 N/A
Five Largest Issuers
Expressed as a percentage of
net assets as of 7/31/00
49.3% Government National
Mortgage Association
23.3 U.S. Treasuries
8.1 Federal National
Mortgage Association
3.9 General Electronic Capital Corp.
3.9 CBA Finance, Inc.
Holdings are subject to change.
Portfolio Composition
Sectors expressed as a percentage of
total investments as of 7/31/00
41.9% Mortgage-Backed Securities
41.9 U.S. Corporate Bonds
14.9 U.S. Treasuries
1.3 Other
Distribution & Yields As of 7/31/00
Distributions Paid 30-Day
Since Inception SEC Yield
Class A $0.34 4.45%
Class B $0.30 4.13
Class C $0.30 4.09
Credit Quality
Expressed as a percentage of total long-term
investments as of 7/31/00
68.9% Aaa
3.8 Aa
16.6 A
9.4 Baa
1.3 Ba
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, returns are cumulative, and
therefore 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. The Lipper
Corporate Debt BBB-Rated Fund average includes funds that
invest at least 65% of their assets in corporate and
government debt issues rated in the top four grades.
21
<PAGE>
Target Funds Total Return Bond Fund
Annual Report July 31, 2000
Investment Goals and Style
The 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.
During the reporting period, the Total Return Bond Fund's Class A shares
generated a 3.32% return. This was -0.82% for investors
paying the initial Class A share sales charge. The Fund's
return trailed the 3.13% Lipper Average of competing
funds, and also lagged the 4.58% return of the Lehman
Brothers Government/Credit Bond Index.
Several strategies helped performance during the period.
These included an underweight position in investment-
grade corporate bonds. These securities underperformed
Treasuries due to concerns over potential economic
weakness. In addition, the Fund's modest holdings of
real-return bonds
outperformed Treasuries with similar durations, as their
increasing inflation-adjusted yields more than offset rising
interest rates.
Earlier in the reporting period, the Fund's overweight in
mortgage securities detracted from performance, as
increased market volatility led to falling prices.
However, the incremental yields provided by these
securities generally enhanced returns during the second half of the
period. The Fund's exposure to high-yield bonds hurt
performance, as credit concerns offset their yield
premium. Finally, a small weighting in emerging market
debt was a detriment, as U.S. Federal Reserve Board
policy had a negative ripple effect overseas.
Target Funds Management Team
22
<PAGE>
Target Funds
Annual Report July 31, 2000
Financial
Statements
<PAGE>
Target Funds Large Capitalization Growth Fund
Portfolio of Investments as of July 31, 2000
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C> <C>
-----------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 95.1%
Common Stocks 95.1%
-------------------------------------------------------------------------------------
Banks 1.5%
115,700 MBNA Corp. $ 3,861,488
-------------------------------------------------------------------------------------
Broadcasting 1.6%
23,900 AMFM Inc.(a) 1,707,356
19,500 Univision Communications Inc.(a) 2,422,875
--------------
4,130,231
-------------------------------------------------------------------------------------
Business Services 2.1%
29,000 Omnicom Group Inc. 2,465,000
25,000 Waters Corp. 2,965,625
--------------
5,430,625
-------------------------------------------------------------------------------------
Computers & Business Equipment 0.7%
68,300 Compaq Computer Corp. 1,916,669
-------------------------------------------------------------------------------------
Computer Software & Services 10.7%
63,000 BEA Systems, Inc. 2,712,937
23,500 Check Point Software Technologies Ltd. 2,726,000
123,750 EMC Corp.(a) 10,534,219
21,000 Foundry Networks, Inc. 1,718,063
62,100 Microsoft Corp.(a) 4,335,356
35,000 Oracle Systems Corp.(a) 2,631,562
21,000 Siebel Systems Inc.(a) 3,045,000
--------------
27,703,137
-------------------------------------------------------------------------------------
Drugs & Healthcare 9.6%
10,000 Affymetrix, Inc.(a) 1,365,469
100,000 HCA - The Healthcare Company 3,400,000
60,400 Medtronic, Inc. 3,084,175
47,800 Merck & Co., Inc. 3,426,662
29,000 PE Corp. 2,528,437
125,525 Pfizer, Inc. 5,413,266
</TABLE>
24 See Notes to Financial Statements
<PAGE>
Target Funds Large Capitalization Growth Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
43,000 Pharmacia Corporation $ 2,354,250
15,000 QLT Phototherapeutics(a) 988,125
38,000 Teva Pharmaceutical Industries Ltd. (ADR) (Israel) 2,308,500
--------------
24,868,884
-------------------------------------------------------------------------------------
Electronic Components 7.8%
214,200 Applied Materials, Inc.(a) 16,252,425
129,875 Atmel Corp.(a) 3,888,133
--------------
20,140,558
-------------------------------------------------------------------------------------
Electronics 17.4%
81,500 CIENA Corp. 11,583,188
459,100 Cisco Systems, Inc.(a) 30,042,356
52,000 Motorola, Inc. 1,719,250
48,000 Palm, Inc. 1,872,000
--------------
45,216,794
-------------------------------------------------------------------------------------
Entertainment 0.7%
47,000 Walt Disney Co. 1,818,313
-------------------------------------------------------------------------------------
Financial Services 6.2%
37,500 Chase Manhattan Corp. 1,863,281
104,150 Citigroup Inc. 7,349,084
57,300 Morgan Stanley Dean Witter & Co. 5,228,625
37,000 Wells Fargo & Co. 1,528,563
--------------
15,969,553
-------------------------------------------------------------------------------------
Food & Beverages 3.6%
42,000 Anheuser Busch Companies, Inc. 3,381,000
84,000 PepsiCo, Inc. 3,848,250
53,000 SYSCO Corp. 2,086,875
--------------
9,316,125
-------------------------------------------------------------------------------------
Insurance 2.2%
46,763 American International Group, Inc. 4,100,487
15,500 CIGNA Corp. 1,548,062
--------------
5,648,549
</TABLE>
See Notes to Financial Statements 25
<PAGE>
Target Funds Large Capitalization Growth Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Internet Software & Serivces 3.3%
39,000 America Online, Inc.(a) $ 2,079,187
14,300 Ariba Inc. 1,657,906
26,700 Digex, Inc. 1,683,769
42,000 Exodus Communications, Inc.(a) 1,866,375
10,000 Yahoo Inc. (a) 1,286,875
--------------
8,574,112
-------------------------------------------------------------------------------------
Oil & Gas 1.9%
29,000 Coastal Corp.(a) 1,674,750
43,000 Enron Corp. 3,165,875
--------------
4,840,625
-------------------------------------------------------------------------------------
Oil Field / Equipment & Services 1.5%
26,000 BJ Services Co.(a) 1,517,750
32,000 Schlumberger, Ltd. 2,366,000
--------------
3,883,750
-------------------------------------------------------------------------------------
Pollution Control 0.5%
77,000 Waste Management, Inc. 1,438,938
-------------------------------------------------------------------------------------
Retail Trade 2.3%
35,900 Home Depot, Inc. 1,857,825
36,000 Kohl's Corp.(a) 2,043,000
39,000 Wal-Mart Stores, Inc. 2,142,562
--------------
6,043,387
-------------------------------------------------------------------------------------
Semiconductors & Equipment 17.5%
206,950 Intel Corp. 13,813,913
162,000 Linear Technology Corp. 8,950,500
152,800 Maxim Integrated Products, Inc.(a) 10,094,350
168,100 Xilinx Inc.(a) 12,618,006
--------------
45,476,769
</TABLE>
26 See Notes to Financial Statements
<PAGE>
Target Funds Large Capitalization Growth Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Telecommunication 1.2%
21,500 Copper Mountain Networks, Inc.(a) $ 1,695,477
11,000 VoiceStream Wireless Corp. 1,410,750
--------------
3,106,227
-------------------------------------------------------------------------------------
Utilities 2.8%
66,000 AES Corp.(a) 3,526,875
53,000 Calpine Corp. 3,776,250
--------------
7,303,125
--------------
Total common stocks (cost $188,397,950) 246,687,859
--------------
SHORT-TERM INVESTMENTS 4.7%
<CAPTION>
Principal
Amount
(000)
<C> <S> <C> <C>
-------------------------------------------------------------------------------------
Repurchase Agreement 4.7%
$ 12,134 State Street Bank & Trust Co.,
5.25%, 7/31/00, due 8/1/00 in the amount of
$12,135,770 (cost $12,134,000; collateralized by
$5,055,000 U.S. Treasury Bonds, 6.75%, 8/15/26,
and by $4,375,000 U.S. Treasury Bonds, 11.25%,
2/15/15, value of collateral including accrued
interest is $12,382,195) 12,134,000
--------------
Total Investments 99.8%
(cost $200,531,950; Note 4) 258,821,859
Other assets in excess of liabilities 0.2% 411,290
--------------
Net Assets 100% $ 259,233,149
--------------
--------------
</TABLE>
------------------------------
(a) Non-income producing.
ADR--American Depository Receipt.
See Notes to Financial Statements 27
<PAGE>
Target Funds Large Capitalization Value Fund
Portfolio of Investments as of July 31, 2000
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C> <C>
-----------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 98.2%
Common Stocks 97.4%
-------------------------------------------------------------------------------------
Aerospace 4.3%
1,800 B.F. Goodrich Co. $ 64,238
2,100 Boeing Co. 102,900
2,900 Honeywell International, Inc. 97,512
13,430 Lockheed Martin Corp. 377,719
4,420 Northrop Grumman Corp. 314,096
5,570 TRW, Inc. 250,302
800 United Technologies Corp. 46,700
--------------
1,253,467
-------------------------------------------------------------------------------------
Airlines 0.1%
100 AMR Corp.(a) 3,306
500 Southwest Airlines Co. 11,813
--------------
15,119
-------------------------------------------------------------------------------------
Apparel & Textiles 0.4%
1,400 Jones Apparel Group, Inc.(a) 32,025
4,800 Russell Corp. 94,500
--------------
126,525
-------------------------------------------------------------------------------------
Auto Parts 1.9%
3,202 ArvinMeritor, Inc. 50,031
10,250 Dana Corp. 235,110
10,980 Delphi Automotive Systems Corp. 162,641
1,900 Goodyear Tire & Rubber Co. 37,881
2,120 Tenneco Automotive, Inc. 12,455
1,637 Visteon Corp. 22,918
1,000 W.W. Grainger, Inc. 31,750
--------------
552,786
-------------------------------------------------------------------------------------
Automobiles 3.7%
12,230 Ford Motor Co. 569,459
10,532 General Motors Corp. 520,177
--------------
1,089,636
</TABLE>
28 See Notes to Financial Statements
<PAGE>
Target Funds Large Capitalization Value Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Banks 6.0%
2,800 Bank America Corp. $ 132,650
10,860 Bank One Corp. 345,484
2,100 BankNorth Group, Inc. 32,156
1,800 Charter One Financial, Inc. 38,812
2,900 Dime Bancorp, Inc. 46,762
2,760 First Security Corp. 39,675
600 First Tennessee National Corp. 10,950
11,410 First Union Corp. 294,521
600 Firstar Corp. 11,850
300 Firstmerit Corp. 6,263
1,500 Fleet Boston Financial Corp. 53,719
2,300 GreenPoint Financial Corp. 54,050
2,000 Hibernia Corp. 21,875
8,970 KeyCorp 157,536
500 Marshall & Ilsley Corp. 22,625
1,300 Mercantile Bankshares Corp. 41,356
400 National Commerce Bancorp. 7,000
3,300 North Fork Bancorporation, Inc. 50,944
1,600 PNC Bank Corp. 81,400
1,100 Regions Financial Corp. 21,931
2,100 SouthTrust Corp. 51,712
2,200 Summit Bancorp. 54,037
1,300 TCF Financial Corp. 38,269
2,700 U.S. Bancorp. 51,806
4,020 UnionBanCal Corp. 76,380
300 Wells Fargo & Co. 12,394
--------------
1,756,157
-------------------------------------------------------------------------------------
Building & Construction 0.3%
3,030 Harsco Corp. 87,870
-------------------------------------------------------------------------------------
Business Services 0.7%
700 Automatic Data Processing, Inc. 34,694
11,320 Xerox Corp. 168,385
--------------
203,079
-------------------------------------------------------------------------------------
Chemicals 2.2%
1,700 Air Products & Chemicals, Inc. 56,737
8,780 Dow Chemical Co. 252,425
</TABLE>
See Notes to Financial Statements 29
<PAGE>
Target Funds Large Capitalization Value Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
4,030 Eastman Chemical Co. $ 188,906
1,500 PPG Industries, Inc. 61,031
1,000 Praxair, Inc. 39,563
1,500 Rohm & Haas Co. 39,000
--------------
637,662
-------------------------------------------------------------------------------------
Computers & Business Equipment 1.2%
200 Advanced Micro Devices, Inc.(a) 14,387
1,000 Apple Computer, Inc. 50,812
900 Cisco Systems, Inc.(a) 58,894
2,300 Compaq Computer Corp. 64,544
300 EMC Corp.(a) 25,537
500 Hewlett-Packard Co. 54,594
200 Lexmark International Group, Inc.(a) 9,013
600 Seagate Technology, Inc.(a) 30,412
500 Sun Microsystems, Inc.(a) 52,719
--------------
360,912
-------------------------------------------------------------------------------------
Conglomerate 0.6%
1,900 General Electric Co. 97,731
1,500 ITT Industries, Inc. 49,313
600 Tyco International Ltd. 32,100
--------------
179,144
-------------------------------------------------------------------------------------
Consumer Products 3.4%
4,460 American General Corp. 297,426
8,100 Eastman Kodak Co. 444,488
5,150 Fortune Brands, Inc. 115,875
16,990 Pactiv Corp.(a) 157,158
--------------
1,014,947
-------------------------------------------------------------------------------------
Cosmetics & Toiletries 0.9%
300 Estee Lauder Cos., Inc. 13,200
1,200 Gillette Co. 35,025
3,700 Procter & Gamble Co. 210,438
--------------
258,663
</TABLE>
30 See Notes to Financial Statements
<PAGE>
Target Funds Large Capitalization Value Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Domestic Oil 1.1%
455 Anadarko Petroleum Corp. $ 21,755
100 Apache Corp. 4,975
700 Conoco, Inc. 23,063
1,000 Conoco, Inc., (Class B) 15,662
100 Devon Energy Corp. 4,575
980 Sunoco, Inc. 23,888
9,860 USX - Marathon Group 239,721
--------------
333,639
-------------------------------------------------------------------------------------
Drugs & Healthcare 4.4%
2,400 Abbott Laboratories 99,900
800 ALZA Corp.(a) 51,800
1,400 American Home Products Corp. 74,287
1,850 Baxter International, Inc. 143,837
1,200 Becton, Dickinson & Co. 30,300
1,800 Bristol-Myers Squibb Co. 89,325
800 C.R. Bard, Inc. 40,050
200 Cardinal Health, Inc. 14,700
700 CIGNA Corp. 69,913
500 Eli Lilly & Co. 51,938
100 Genzyme Corp. 6,944
1,000 HCA-The Healthcare Corp. 34,000
100 Human Genome Sciences, Inc. 12,081
2,400 Johnson & Johnson 223,350
2,500 Merck & Co., Inc. 179,219
1,700 Pharmacia Corporation 93,075
300 St. Jude Medical, Inc.(a) 12,375
1,900 Tenet Healthcare Corp.(a) 57,831
100 Vertex Pharmaceuticals, Inc. 9,794
--------------
1,294,719
-------------------------------------------------------------------------------------
Electric Utilities 7.7%
600 Allegheny Energy, Inc. 18,825
700 Ameren Corp. 25,331
4,714 American Electric Power Co., Inc. 154,678
1,300 Cinergy Corp. 33,800
</TABLE>
See Notes to Financial Statements 31
<PAGE>
Target Funds Large Capitalization Value Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
4,670 CMS Energy Corp. $ 119,377
200 Consolidated Edison, Inc. 6,063
2,200 CP&L Energy, Inc. 73,563
7,090 DTE Energy Co. 222,449
4,720 Dynegy, Inc. (Class A) 332,170
4,530 Edison International 89,184
4,400 Entergy Corp. 119,350
500 FPL Group, Inc. 24,125
4,240 General Public Utilities Corp. 112,360
4,410 PECO Energy Co. 188,252
2,000 PG&E Corp. 51,750
1,600 Pinnacle West Capital Corp. 63,300
5,670 PPL Corp. 153,090
3,740 Public Service Enterprise Group, Inc. 125,758
4,973 SCANA Corp. 130,852
5,440 TXU Corp. 170,000
2,800 Wisconsin Energy Corp. 55,650
--------------
2,269,927
-------------------------------------------------------------------------------------
Electrical Equipment 0.5%
1,700 Cooper Industries, Inc. 54,506
400 Emerson Electric Co. 24,425
1,100 Johnson Controls, Inc. 57,132
--------------
136,063
-------------------------------------------------------------------------------------
Electronics 0.4%
3,310 Rockwell International Corp. 116,057
100 Solectron Corp.(a) 4,031
--------------
120,088
-------------------------------------------------------------------------------------
Entertainment 0.6%
1,000 Fox Entertainment Group, Inc. 30,625
3,600 Walt Disney Co. (The) 139,275
--------------
169,900
-------------------------------------------------------------------------------------
Financial Services 10.4%
100 Ameritrade Holding Corp. 1,281
1,900 Associates First Capital Corp. 49,756
</TABLE>
32 See Notes to Financial Statements
<PAGE>
Target Funds Large Capitalization Value Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
1,300 AXA Financial, Inc. $ 49,725
1,300 Bear Stearns Cos., Inc. 70,038
1,000 Capital One Financial 58,625
1,900 CIT Group (The)(a) 35,150
10,300 Citigroup, Inc. 726,794
700 E*Trade Group, Inc. 10,500
700 Edwards (A.G.), Inc. 37,013
900 Federal Home Loan Mortgage Corp. 35,494
8,350 Federal National Mortgage Association 416,456
1,100 Franklin Resources, Inc. 39,463
1,200 Goldman Sachs Group, Inc. 118,725
5,830 Household International, Inc. 259,799
900 Lehman Brothers Holdings, Inc. 101,137
1,200 MBIA, Inc. 66,825
1,100 MBNA Corp. 36,713
1,800 Merrill Lynch & Co., Inc. 232,650
2,500 Morgan Stanley Dean Witter & Co. 228,125
100 PaineWebber Group, Inc. 6,925
700 Providian Financial Corp. 71,356
800 Schwab (Charles) Corp. 28,900
1,000 TD Waterhouse Group, Inc. 18,250
11,570 Washington Mutual, Inc. 371,686
--------------
3,071,386
-------------------------------------------------------------------------------------
Food & Beverages 2.0%
2,260 Anheuser Busch Companies, Inc. 181,930
100 Bestfoods 6,962
1,000 General Mills, Inc. 34,375
2,100 H.J. Heinz Co. 83,869
2,100 Kellogg Co. 54,469
1,900 McDonald's Corp. 59,850
1,200 Quaker Oats Co. 80,700
1,000 Ralston Purina Co. 20,187
1,500 Unilever NV (Netherlands) 66,375
--------------
588,717
</TABLE>
See Notes to Financial Statements 33
<PAGE>
Target Funds Large Capitalization Value Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Forest Products 2.8%
16,220 Georgia-Pacific Corp. $ 449,869
2,000 Kimberly-Clark Corp. 114,875
5,800 Weyerhaeuser Co. 264,987
--------------
829,731
-------------------------------------------------------------------------------------
Gas & Pipeline Utilities 0.3%
700 El Paso Energy Corp. 33,863
1,100 Williams Companies, Inc. (The) 45,925
--------------
79,788
-------------------------------------------------------------------------------------
Hotels 0.3%
1,200 Marriott International, Inc. 48,000
1,300 Starwood Hotels & Resort Worldwide, Inc. 44,362
--------------
92,362
-------------------------------------------------------------------------------------
Household Appliances & Home Furnishings 0.3%
2,300 Whirlpool Corp. 99,331
-------------------------------------------------------------------------------------
Industrial Machinery 0.8%
1,700 Caterpillar, Inc. 57,906
200 Deere & Co. 7,713
800 Eaton Corp. 54,250
800 Ingersoll-Rand Co. 31,400
900 PACCAR, Inc. 40,106
1,200 Parker-Hannifin Corp. 42,675
--------------
234,050
-------------------------------------------------------------------------------------
Insurance 8.7%
5,100 Aetna, Inc. 283,050
400 AFLAC, Inc. 20,775
17,900 Allstate Corp. 493,369
2,850 American International Group, Inc. 249,909
1,300 Aon Corp. 46,800
1,400 Hartford Financial Services Group 89,950
900 Jefferson-Pilot Corp. 54,900
1,900 John Hancock Financial Services, Inc. 44,888
7,130 Lincoln National Corp. 311,046
9,590 Metlife, Inc. 201,390
3,720 ReliaStar Financial Corp. 197,858
</TABLE>
34 See Notes to Financial Statements
<PAGE>
Target Funds Large Capitalization Value Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
6,550 SAFECO Corp. $ 151,059
8,250 St. Paul Companies, Inc. 366,609
2,200 Torchmark Corp. 54,725
--------------
2,566,328
-------------------------------------------------------------------------------------
International Oil 5.0%
2,600 Chevron Corp. 205,400
9,100 Exxon Mobil Corp. 728,000
12,070 Occidental Petroleum Corp. 244,418
2,100 Phillips Petroleum Co. 106,706
1,100 Royal Dutch Petroleum Co. 64,075
2,450 Texaco, Inc. 121,122
--------------
1,469,721
-------------------------------------------------------------------------------------
Machinery 0.5%
19,930 CNH Global NV (Netherlands) 155,703
-------------------------------------------------------------------------------------
Media 1.6%
300 AMFM, Inc. 21,431
200 Clear Channel Communications, Inc.(a) 15,237
2,800 Comcast Corp. 95,244
1,900 Gannett Co., Inc. 102,362
1,000 Knight-Ridder, Inc. 52,125
1,200 New York Times Co. 49,425
1,500 Seagram Co., Ltd. 84,094
700 Time Warner, Inc. 53,681
--------------
473,599
-------------------------------------------------------------------------------------
Mining 0.4%
100 Minnesota Mining & Manufacturing Co. 9,006
2,670 Phelps Dodge Corp. 108,636
--------------
117,642
-------------------------------------------------------------------------------------
Non-Ferrous Metals 1.8%
400 Alcan Aluminum Ltd. 13,125
17,172 Alcoa, Inc. 519,453
--------------
532,578
-------------------------------------------------------------------------------------
Oil Field Equipment & Services 0.8%
1,600 Baker Hughes, Inc. 55,400
</TABLE>
See Notes to Financial Statements 35
<PAGE>
Target Funds Large Capitalization Value Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
300 Cooper Cameron Corp.(a) $ 19,388
1,000 Global Marine, Inc.(a) 28,312
6,070 Ultramar Diamond Shamrock 138,851
--------------
241,951
-------------------------------------------------------------------------------------
Paper & Related Products 1.5%
100 Fort James Corp. 3,056
11,240 International Paper Co. 382,160
1,000 Smurfit-Stone Container Corp.(a) 12,437
900 Temple-Inland, Inc. 39,094
--------------
436,747
-------------------------------------------------------------------------------------
Pollution Control 0.5%
7,440 Waste Management, Inc. 139,035
-------------------------------------------------------------------------------------
Railroads & Equipment 1.4%
2,100 Burlington Northern, Inc. 51,319
100 C H Robinson Worldwide, Inc. 6,377
2,000 CSX Corp. 49,625
12,900 Norfolk Southern Corp. 240,262
1,600 Union Pacific Corp. 69,100
--------------
416,683
-------------------------------------------------------------------------------------
Real Estate Invesetment Trust 0.5%
1,400 Crescent Real Estate Equities, Inc. 30,887
1,000 Equity Office Properties Trust 30,500
400 Equity Residential Properties Trust 19,950
100 Prologis Trust 2,331
1,100 Public Storage, Inc. 28,188
1,200 Vornado Realty Trust 46,950
--------------
158,806
-------------------------------------------------------------------------------------
Retailing 3.2%
200 Best Buy Co., Inc. 14,550
200 Circuit City Stores, Inc. 4,588
1,600 Federated Department Stores, Inc.(a) 38,500
500 Gap, Inc. 17,906
1,400 Kroger Co.(a) 28,962
600 Lowe's Companies, Inc. 25,313
11,350 May Department Stores Co. 269,562
</TABLE>
36 See Notes to Financial Statements
<PAGE>
Target Funds Large Capitalization Value Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
7,100 Penney (J.C.) Co., Inc. $ 114,487
7,080 Sears, Roebuck & Co. 211,515
3,400 Target Corp. 98,600
1,400 The Limited, Inc. 28,613
2,400 TJX Companies, Inc. 40,200
700 Wal-Mart Stores, Inc. 38,456
--------------
931,252
-------------------------------------------------------------------------------------
Semiconductors & Equipment 0.4%
200 Applied Materials, Inc.(a) 15,175
800 Intel Corp. 53,400
100 Lattice Semiconductor Corp.(a) 5,488
200 National Semiconductor Corp.(a) 7,237
400 Texas Instruments, Inc. 23,475
--------------
104,775
-------------------------------------------------------------------------------------
Software 1.0%
100 Adobe Systems, Inc. 11,450
100 BMC Software Corp.(a) 1,888
600 Citrix Systems, Inc.(a) 9,150
8,000 Computer Associates International, Inc. 198,500
200 Doubleclick, Inc.(a) 7,187
400 Electronic Data Systems Corp. 17,200
400 Microsoft Corp.(a) 27,925
100 Siebel Systems, Inc.(a) 14,500
200 Symantec Corp.(a) 10,250
--------------
298,050
-------------------------------------------------------------------------------------
Steel 0.6%
1,200 Allegheny Technologies, Inc. 24,825
700 Nucor Corp. 26,425
6,780 USX Corp.-U.S. Steel Group 121,616
--------------
172,866
-------------------------------------------------------------------------------------
Telecommunication 9.5%
300 Allegiance Telecom, Inc.(a) 16,669
4,050 ALLTEL Corp. 249,581
17,375 AT&T Corp. 537,540
6,200 AT&T Corp.-Liberty Media 137,950
2,600 BellSouth Corp. 103,512
</TABLE>
See Notes to Financial Statements 37
<PAGE>
Target Funds Large Capitalization Value Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
200 Exodus Communications, Inc.(a) $ 8,888
1,200 Global Crossing, Ltd.(a) 29,175
200 Level 3 Communications, Inc.(a) 13,688
3,200 Motorola, Inc. 105,800
300 Nortel Networks Corp. 22,313
2,675 Qwest Communications International, Inc.(a) 125,558
14,210 SBC Communications, Inc. 604,813
900 Sprint Corp. 45,800
100 Tellabs, Inc. 6,500
14,175 Verizon Communications 666,225
3,400 WorldCom, Inc. 132,812
--------------
2,806,824
-------------------------------------------------------------------------------------
Tobacco 2.4%
27,540 Philip Morris Companies, Inc. 695,385
-------------------------------------------------------------------------------------
Toys & Amusements
1,000 Hasbro, Inc. 11,375
-------------------------------------------------------------------------------------
Trucking & Freight Forwarding 0.3%
600 FedEx Corp. 23,775
2,500 Ryder System, Inc. 52,188
--------------
75,963
--------------
Total common stocks (cost $30,030,338) 28,660,951
--------------
</TABLE>
38 See Notes to Financial Statements
<PAGE>
Target Funds Large Capitalization Value Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Rights(a)
18,330 CNH Global NV
expires 8/4/00
(cost $0) $ 0
-------------------------------------------------------------------------------------
Common Stock Unit 0.8%
1,625 S&P 500 Depository Receipts
(cost $224,088) 232,222
--------------
Total long-term investments (cost $30,254,426) 28,893,173
--------------
SHORT-TERM INVESTMENTS 1.9%
<CAPTION>
Principal
Amount
(000)
<C> <S> <C> <C>
-------------------------------------------------------------------------------------
$ 567 Seven Seas Series Government Fund
6.24%*
(cost $567,194) 567,194
--------------
Total Investments 100.1%
(cost $30,821,620; Note 4) 29,460,367
Liabilities in excess of other assets (0.1%) (34,966)
--------------
Net Assets 100% $ 29,425,401
--------------
--------------
</TABLE>
------------------------------
* Rate represents yield at purchase date.
(a) Non-income producing security.
NV--Naamkee Vennootachap (Dutch Corporation)
See Notes to Financial Statements 39
<PAGE>
Target Funds Small Capitalization Growth Fund
Portfolio of Investments as of July 31, 2000
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C> <C>
-----------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 96.1%
Common Stocks 96.1%
-------------------------------------------------------------------------------------
Audio/Visual 0.9%
2,000 Polycom, Inc.(a) $ 189,719
-------------------------------------------------------------------------------------
Automobile & Trucks 0.3%
1,960 Oshkosh Truck Corp. 66,395
-------------------------------------------------------------------------------------
Banks 1.9%
1,400 Greater Bay Bancorp 75,337
7,600 Silicon Valley Bancshares 332,975
--------------
408,312
-------------------------------------------------------------------------------------
Business Services 8.8%
5,640 Acxiom Corp.(a) 120,203
4,800 Affiliated Managers Group, Inc.(a) 227,700
4,820 AnswerThink Consulting Group, Inc.(a) 81,036
4,610 CSG Systems International, Inc.(a) 245,194
3,680 ChoicePoint, Inc.(a) 160,080
1,385 Critical Path, Inc.(a) 77,127
8,110 Daisytek International, Corp.(a) 53,729
5,300 Hall, Kinion & Associates, Inc.(a) 207,362
2,905 Iron Mountain, Inc.(a) 101,675
5,460 net.Genesis Corp.(a) 52,553
17,775 Pegasus Systems, Inc.(a) 181,083
1,300 Plexus Corp.(a) 146,656
3,695 ProBusiness Services, Inc.(a) 85,447
5,600 Spherion Corp.(a) 107,100
--------------
1,846,945
-------------------------------------------------------------------------------------
Commercial Services 4.1%
7,440 ACNielson Corp.(a) 182,280
14,270 Grubb & Ellis Co. 81,161
10,130 On Command Corp.(a) 124,093
11,688 Pfsweb, Inc.(a) 50,405
3,220 Quintiles Transnational Corp.(a) 50,514
3,930 Ritchie Bros. Auctioneers, Inc.(a) 87,443
</TABLE>
40 See Notes to Financial Statements
<PAGE>
Target Funds Small Capitalization Growth Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
8,470 Trammell Crow Co.(a) $ 87,876
4,775 Vicor Corp.(a) 199,058
--------------
862,830
-------------------------------------------------------------------------------------
Computers & Business Equipment 1.6%
2,675 CDW Computer Centers, Inc.(a) 128,902
2,100 Insight Enterprises, Inc.(a) 97,125
2,370 Tech Data Corp.(a) 105,465
--------------
331,492
-------------------------------------------------------------------------------------
Consumer Products 1.1%
6,940 Scotts Company (The) 226,418
-------------------------------------------------------------------------------------
Drugs & Healthcare 11.3%
1,460 Abgenix, Inc.(a) 73,183
3,560 Aclara Biosciences, Inc.(a) 149,520
3,800 Alpharma Inc. 248,900
2,075 Aurora Biosciences Corp.(a) 167,037
3,500 First Health Group Corp.(a) 107,187
3,990 Genzyme Transgenics Corp.(a) 119,949
3,700 IMPATH, Inc.(a) 221,306
3,800 Lexicon Genetics, Inc.(a) 129,675
6,200 LifePoint Hospitals, Inc.(a) 165,850
1,030 Myriad Genetics, Inc.(a) 136,797
10,900 Oxford Health Plans, Inc.(a) 260,919
2,000 Quest Diagnostics, Inc.(a) 201,875
7,000 SICOR Inc.(a) 66,063
7,820 STAAR Surgical Co.(a) 109,969
3,020 Ventana Medical Systems, Inc.(a) 62,099
1,440 Vertex Pharmaceuticals, Inc.(a) 141,030
--------------
2,361,359
-------------------------------------------------------------------------------------
Educational Services 1.1%
2,900 Learning Tree International, Inc.(a) 130,863
8,270 Sylvan Learning Systems, Inc.(a) 93,554
--------------
224,417
</TABLE>
See Notes to Financial Statements 41
<PAGE>
Target Funds Small Capitalization Growth Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Electrical Equipment 6.6%
8,200 Anixter International, Inc.(a) $ 238,313
2,800 Brooks Automation, Inc.(a) 138,950
15,500 FSI International, Inc.(a) 254,781
3,100 Littelfuse Inc.(a) 109,275
500 Power-One, Inc.(a) 59,031
12,900 Silicon Valley Group, Inc.(a) 327,338
500 Technitrol, Inc. 55,125
4,100 Varian Semiconductor Equipment Associates, Inc.(a) 199,106
--------------
1,381,919
-------------------------------------------------------------------------------------
Electronics 10.1%
8,400 Actel Corp.(a) 312,375
4,700 Cognex Corp.(a) 230,594
4,172 Cyberoptics Corp.(a) 138,197
2,900 Electro Scientific Industries, Inc.(a) 131,769
5,180 Electronics for Imaging, Inc.(a) 112,989
4,400 Integrated Silicon Solution, Inc.(a) 92,400
3,600 International Rectifier Corp.(a) 199,125
1,860 Jabil Circuit, Inc.(a) 93,116
14,240 KEMET Corp.(a) 341,760
6,700 Kent Electronics Corp.(a) 208,537
4,900 Merix Corp.(a) 245,000
--------------
2,105,862
-------------------------------------------------------------------------------------
Financial Services 6.8%
16,220 AmeriCredit Corp.(a) 336,565
2,625 Brown & Brown, Inc.(a) 126,000
4,700 Investment Technology Group 228,537
4,400 Metris Companies, Inc. 128,975
320 M & T Bank Corp. 151,180
2,850 T. Rowe Price Associates, Inc. 116,494
5,030 Texas Regional Bancshares, Inc. 119,777
6,650 Waddell & Reed Financial, Inc. 217,787
--------------
1,425,315
</TABLE>
42 See Notes to Financial Statements
<PAGE>
Target Funds Small Capitalization Growth Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Hotels & Restaurants 1.6%
11,100 Aztar Corp.(a) $ 169,275
5,750 The Cheesecake Factory, Inc.(a) 174,297
--------------
343,572
-------------------------------------------------------------------------------------
Industrial Machinery 2.7%
6,210 APW, Inc. 245,683
1,000 DuPont Photomasks, Inc.(a) 59,875
5,500 Shaw Group, Inc.(a) 259,187
--------------
564,745
-------------------------------------------------------------------------------------
Insurance 0.4%
4,990 Mutual Risk Management, Ltd. 77,345
-------------------------------------------------------------------------------------
Manufacturing 0.8%
3,960 Mettler-Toledo International, Inc.(a) 160,380
-------------------------------------------------------------------------------------
Medical & Dental Supplies 0.1%
1,710 Henry Schein, Inc.(a) 24,047
-------------------------------------------------------------------------------------
Miscellaneous 0.4%
9,786 Hollywood.com, Inc.(a) 92,967
-------------------------------------------------------------------------------------
Office Furnishings 0.2%
4,920 Falcon Products, Inc. 47,048
-------------------------------------------------------------------------------------
Oil & Gas 3.2%
2,680 Devon Energy Corp. 122,610
10,320 Newfield Exploration Co.(a) 351,525
10,300 Vintage Petroleum, Inc. 185,400
--------------
659,535
-------------------------------------------------------------------------------------
Oil Field/Equipment & Services 2.2%
2,960 CARBO Ceramics, Inc. 102,490
2,300 FEI Company(a) 61,094
3,600 Helmerich & Payne, Inc. 115,200
6,900 Valero Energy Corp. 178,968
--------------
457,752
</TABLE>
See Notes to Financial Statements 43
<PAGE>
Target Funds Small Capitalization Growth Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Publishing 3.4%
6,050 Information Holdings, Inc.(a) $ 210,994
8,680 Penton Media, Inc. 300,545
9,860 Primedia, Inc.(a) 200,897
--------------
712,436
-------------------------------------------------------------------------------------
Real Estate Investment Trust 0.8%
5,310 SL Green Realty Corp. 157,640
-------------------------------------------------------------------------------------
Recreation 0.8%
9,540 American Classic Voyages Co. 176,490
-------------------------------------------------------------------------------------
Retail Trade 5.1%
11,600 Chico's FAS, Inc.(a) 342,200
4,700 Factory 2-U Stores, Inc.(a) 195,050
5,300 Hot Topic, Inc.(a) 170,925
3,200 Stein Mart, Inc.(a) 35,200
2,900 Talbots, Inc. 146,450
5,128 Tractor Supply Co.(a) 74,997
2,880 Tweeter Home Entertainment Group, Inc.(a) 104,040
--------------
1,068,862
-------------------------------------------------------------------------------------
Software 8.7%
4,400 Advent Software, Inc.(a) 248,600
3,235 Digital Islands, Inc.(a) 92,804
4,400 Dset Corp.(a) 129,250
4,010 Kana Communications, Inc.(a) 147,367
6,185 Mcafee.com Corp.(a) 179,365
14,300 Mentor Graphics Corp.(a) 285,106
1,900 Packeteer, Inc.(a) 73,150
8,010 Rainbow Technologies, Inc.(a) 347,434
1,525 Rational Software Corp.(a) 155,169
5,529 Wind River Systems, Inc.(a) 162,069
--------------
1,820,314
-------------------------------------------------------------------------------------
Telecommunication 9.4%
6,200 Andrew Corp.(a) 174,763
9,215 Avocent Corp.(a) 411,363
</TABLE>
44 See Notes to Financial Statements
<PAGE>
Target Funds Small Capitalization Growth Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
7,600 Cable Design Technologies Corp.(a) $ 267,900
7,105 Cabletron Systems, Inc.(a) 185,618
3,820 Choice One Communications, Inc.(a) 107,915
4,200 Dycom Industries, Inc.(a) 179,550
6,630 ITC Deltacom(a) 111,467
3,280 Northeast Optic Network, Inc.(a) 137,965
5,550 Quanta Services, Inc.(a) 253,912
1,360 Stratos Lightwave, Inc.(a) 51,000
1,900 Tekelec(a) 74,575
--------------
1,956,028
-------------------------------------------------------------------------------------
Transportation 1.7%
9,865 American Freightways Corp.(a) 171,096
2,080 Expeditors International of Washington, Inc. 104,520
4,880 Swift Transportation Co., Inc.(a) 78,995
--------------
354,611
--------------
Total common stocks (cost $18,608,687) 20,104,755
--------------
SHORT-TERM INVESTMENTS 5.0%
<CAPTION>
Principal
Amount
(000)
<C> <S> <C> <C>
-------------------------------------------------------------------------------------
$ 1,052 Seven Seas Money Market Fund
6.33%,(b)
(cost $1,051,579) 1,051,579
--------------
Total Investments 101.1%
(cost $19,660,266; Note 4) 21,156,334
Liabilities in excess of other assets (1.1%) (241,962)
--------------
Net Assets 100% $ 20,914,372
--------------
--------------
</TABLE>
------------------------------
(a) Non-income producing security.
(b) Rate represents yield at purchase date.
See Notes to Financial Statements 45
<PAGE>
Target Funds Small Capitalization Value Fund
Portfolio of Investments as of July 31, 2000
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C> <C>
-----------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 93.3%
Common Stocks 93.3%
-------------------------------------------------------------------------------------
Airlines 0.4%
2,000 Alaska Air Group, Inc.(a) $ 54,875
-------------------------------------------------------------------------------------
Apparel & Textiles 0.1%
2,600 Culp, Inc. 14,788
-------------------------------------------------------------------------------------
Auto Related 3.3%
2,000 Borg Warner, Inc. 67,875
4,900 Modine Manufacturing Co. 132,300
7,400 Myers Industries, Inc. 98,975
7,300 Pennzoil-Quaker State Co. 91,250
4,300 Tower Automotive, Inc.(a) 52,406
--------------
442,806
-------------------------------------------------------------------------------------
Banks and Savings & Loan 6.8%
2,710 Associated Banc-Corp. 61,822
2,400 Bank United Corp., Cl.A 87,450
1,800 Chittenden Corp. 46,688
4,800 FirstMerit Corp. 100,200
4,257 Hudson United Bancorp 101,636
7,200 Independent Bank Corp. 83,250
3,300 People's Bank 65,175
2,400 Queens County Bancorp, Inc. 55,500
1,900 Southwest Bancorporation of Texas, Inc.(a) 49,756
3,400 Staten Island Bancorp, Inc. 61,200
6,000 Susquehanna Bancshares, Inc. 89,250
3,800 Webster Financial Corp. 85,025
900 Wilmington Trust Corp. 39,431
--------------
926,383
-------------------------------------------------------------------------------------
Brewery 0.3%
700 Coors (Adolph) Co., Cl.B 44,100
-------------------------------------------------------------------------------------
Building & Construction 2.9%
1,250 Dycom Industries, Inc. 53,437
</TABLE>
46 See Notes to Financial Statements
<PAGE>
Target Funds Small Capitalization Value Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
1,500 Granite Construction, Inc. $ 36,188
2,400 Hughes Supply, Inc. 45,450
1,700 Insituform Technologies, Inc., Cl.A(a) 41,013
5,000 JLG Industries, Inc. 50,937
1,400 Kaufman & Broad Home Corp. 27,388
1,500 Martin Marietta Materials, Inc. 63,281
3,300 Toll Brothers, Inc.(a) 79,819
--------------
397,513
-------------------------------------------------------------------------------------
Business Services 6.6%
3,200 ACNielsen Corp.(a) 78,400
2,700 Acxiom Corp.(a) 57,544
2,400 American Management Systems, Inc.(a) 60,150
600 Bisys Group, Inc.(a) 38,100
900 Black Box Corp.(a) 40,725
6,700 Brightpoint, Inc.(a) 36,431
1,700 CDI Corp.(a) 33,788
600 ChoicePoint, Inc.(a) 26,100
3,800 Gartner Group, Inc., Cl.A 53,675
1,700 Maximus, Inc.(a) 40,588
846 MedQuist, Inc.(a) 18,189
1,700 National Data Corp. 46,750
1,400 Paradyne Networks, Inc.(a) 39,900
1,300 Pittston Brink's Group 15,600
3,600 Profit Recovery Group International, Inc.(a) 33,300
3,500 R.H. Donnelley Corp.(a) 70,219
2,300 Spherion Corp.(a) 43,987
1,100 Standard Register Co. 14,094
3,800 Tetra Tech, Inc.(a) 95,237
1,900 United Stationers, Inc.(a) 55,337
--------------
898,114
-------------------------------------------------------------------------------------
Chemicals 4.4%
3,600 Cambrex Corp. 162,675
3,200 Ferro Corp. 74,400
</TABLE>
See Notes to Financial Statements 47
<PAGE>
Target Funds Small Capitalization Value Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
1,500 Fuller (H.B.) Co. $ 57,938
7,600 Hanna (M.A.) Co. 60,800
400 Minerals Technologies, Inc. 19,175
3,000 OM Group, Inc. 142,312
8,600 RPM, Inc. 80,087
--------------
597,387
-------------------------------------------------------------------------------------
Computers & Business Equipment 1.4%
1,800 Diebold, Inc. 50,962
3,900 Micron Electronics, Inc.(a) 41,194
6,300 MTS Systems Corp. 41,344
1,800 Quantum Corp.-Hard Disk Drive(a) 14,850
3,100 Storage Technology Corp.(a) 39,913
--------------
188,263
-------------------------------------------------------------------------------------
Computer Services 1.4%
700 Affiliated Computer Services, Inc., Cl.A(a) 31,544
1,000 Answerthink, Inc.(a) 16,812
2,800 Bell & Howell Co.(a) 57,400
3,850 Metro Information Services, Inc.(a) 28,875
1,000 Radisys Corp.(a) 61,500
--------------
196,131
-------------------------------------------------------------------------------------
Diversified Industrials 3.4%
3,600 Brady Corp., Cl.A 109,575
3,500 Carlisle Cos., Inc. 158,375
500 Circor International, Inc. 3,500
2,400 Roper Industries, Inc. 66,300
3,600 Teleflex, Inc. 130,500
--------------
468,250
-------------------------------------------------------------------------------------
Drugs & Healthcare 4.7%
1,600 Amerisource Health Corp., Cl.A(a) 55,900
5,200 Apria Healthcare Group, Inc.(a) 77,675
900 Hooper Holmes, Inc. 11,025
9,900 Invacare Corp. 228,937
1,950 Jones Pharma, Inc. 63,741
</TABLE>
48 See Notes to Financial Statements
<PAGE>
Target Funds Small Capitalization Value Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
3,100 Manor Care, Inc.(a) $ 30,613
6,000 Pharmaceutical Product Development, Inc.(a) 128,250
5,400 Steris Corp.(a) 48,600
--------------
644,741
-------------------------------------------------------------------------------------
Educational Services 0.2%
1,600 ITT Educational Services, Inc.(a) 30,400
-------------------------------------------------------------------------------------
Electrical Equipment 3.4%
6,800 Ametek, Inc. 141,525
2,100 Anixter International, Inc.(a) 61,031
1,700 Belden, Inc. 42,713
2,400 Littelfuse, Inc. 84,600
5,800 Woodhead Industries, Inc. 125,787
--------------
455,656
-------------------------------------------------------------------------------------
Electronics 11.0%
1,900 Allen Telecom, Inc.(a) 33,250
900 Antec Corp.(a) 34,031
2,100 Benchmark Electronics, Inc.(a) 86,363
4,100 C&D Technologies, Inc. 166,050
2,400 Dallas Semiconductor Corp. 100,500
2,400 Electro Scientific Industries, Inc.(a) 109,050
1,700 Electronics for Imaging, Inc.(a) 37,081
2,200 General Semiconductor, Inc.(a) 33,000
1,300 Harman International Industries, Inc. 82,225
1,800 Kemet Corp.(a) 43,200
4,500 Mentor Graphics Corp.(a) 89,719
2,100 Methode Eletronics, Inc., Cl.A 95,419
7,300 Pioneer-Standard Electronics, Inc. 98,550
2,400 Polaroid Corp. 43,500
4,200 Rogers Corp.(a) 150,150
4,700 Sensormatic Electronics Corp.(a) 60,806
1,200 Technitrol, Inc. 132,300
2,300 Varian, Inc.(a) 96,887
--------------
1,492,081
</TABLE>
See Notes to Financial Statements 49
<PAGE>
Target Funds Small Capitalization Value Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Financial Services 0.5%
2,900 Heller Financial, Inc. $ 69,600
-------------------------------------------------------------------------------------
Foods 4.2%
1,354 American Italian Pasta Co., Cl.A(a) 26,742
4,000 Flowers Industries, Inc. 85,250
2,700 Lancaster Colony Corp. 63,450
4,200 Performance Food Group Co.(a) 138,337
2,800 Ralcorp Holdings, Inc.(a) 38,675
6,400 United Natural Foods, Inc.(a) 91,200
6,400 Universal Foods Corp. 124,800
--------------
568,454
-------------------------------------------------------------------------------------
Gas & Pipeline Utilities 2.0%
2,500 Equitable Resources, Inc. 130,156
2,800 National Fuel Gas Co. 138,075
--------------
268,231
-------------------------------------------------------------------------------------
Hotels & Restaurants 0.9%
1,500 Lone Star Steakhouse & Saloon, Inc. 13,406
6,300 Marcus Corp. 74,025
4,100 Prime Hospitality Corp.(a) 38,950
--------------
126,381
-------------------------------------------------------------------------------------
Household Appliances & Home Furnishings 2.2%
2,200 Bassett Furniture Industries, Inc. 29,700
5,500 Chromcraft Revington, Inc.(a) 60,500
2,100 Ethan Allen Interiors, Inc. 53,550
4,600 Furniture Brands International, Inc.(a) 68,137
7,300 Pier 1 Imports, Inc. 87,144
--------------
299,031
-------------------------------------------------------------------------------------
Industrial Machinery 1.6%
2,200 Crane Co. 48,400
</TABLE>
50 See Notes to Financial Statements
<PAGE>
Target Funds Small Capitalization Value Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
5,200 Flowserve Corp. $ 80,600
2,400 Graco, Inc. 81,600
--------------
210,600
-------------------------------------------------------------------------------------
Insurance 5.5%
2,700 Brown & Brown, Inc. 129,600
2,500 Everest Re Group, Ltd. 99,219
1,400 Gallagher (Arthur J.) & Co. 68,688
1,500 HCC Insurance Holdings, Inc. 30,750
6,100 Horace Mann Educators Corp. 85,019
4,200 HSB Group, Inc. 149,100
3,500 Protective Life Corp. 94,937
1,500 Radian Group, Inc. 91,312
--------------
748,625
-------------------------------------------------------------------------------------
Manufacturing 2.4%
4,900 Aptargroup, Inc. 122,194
3,600 Federal Signal Corp. 71,550
700 Polaris Industries, Inc. 21,175
3,200 Regal-Beloit Corp. 51,600
1,900 Snap-on, Inc. 57,356
--------------
323,875
-------------------------------------------------------------------------------------
Medical & Dental Supplies 5.0%
3,600 Arrow International, Inc. 122,850
1,600 Beckman Coulter, Inc. 106,600
6,050 Dentsply International, Inc. 204,566
2,100 Inamed Corp.(a) 69,037
11,500 Meridian Diagnostics, Inc. 76,187
1,500 Varian Medical Systems, Inc.(a) 64,500
2,000 Vital Signs, Inc. 32,375
--------------
676,115
</TABLE>
See Notes to Financial Statements 51
<PAGE>
Target Funds Small Capitalization Value Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Office Equipment 0.5%
2,700 HON Industries, Inc. $ 72,056
-------------------------------------------------------------------------------------
Oil & Gas Exploration/Drilling 2.5%
2,100 Barrett Resources Corp.(a) 58,406
1,000 Devon Energy Corp. 45,750
2,500 Helmerich & Payne, Inc. 80,000
2,600 Louis Dreyfus Natural Gas Corp.(a) 67,600
8,700 Santa Fe Snyder Corp.(a) 87,000
--------------
338,756
-------------------------------------------------------------------------------------
Oil Field/Equipment & Services 0.5%
4,275 Varco International, Inc.(a) 73,744
-------------------------------------------------------------------------------------
Paper & Paper Products 0.9%
3,000 Longview Fibre Co. 36,000
4,600 Packaging Corp. of America(a) 52,325
4,300 Wausau-Mosinee Paper Corp. 38,969
--------------
127,294
-------------------------------------------------------------------------------------
Printing & Publishing 3.6%
12,000 Banta Corp. 231,750
4,300 Bowne & Co., Inc. 37,894
1,700 Houghton Mifflin Co. 80,537
3,500 Mail-Well, Inc.(a) 24,719
1,200 Pulitzer, Inc. 49,050
2,000 Valassis Communications, Inc.(a) 67,250
--------------
491,200
-------------------------------------------------------------------------------------
Real Estate 0.3%
2,500 Catellus Development Corp.(a) 43,125
</TABLE>
52 See Notes to Financial Statements
<PAGE>
Target Funds Small Capitalization Value Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Real Estate Investment Trust 2.3%
1,600 Chateau Communities, Inc. $ 45,100
900 Chelsea GCA Realty, Inc. 32,625
2,900 FelCor Lodging Trust, Inc. 63,438
1,900 Kilroy Realty Corp. 50,350
2,700 Liberty Property Trust 77,625
1,600 Mack-Cali Reality Corp. 41,900
--------------
311,038
-------------------------------------------------------------------------------------
Retail - Apparel 2.3%
1,300 Abercrombie & Fitch Co., Cl.A(a) 20,881
2,400 Lands' End, Inc.(a) 89,850
2,200 Men's Wearhouse, Inc. 57,063
9,800 Venator Group, Inc.(a) 138,425
--------------
306,219
-------------------------------------------------------------------------------------
Retail - Grocery 1.7%
6,800 Ruddick Corp. 72,250
5,200 Whitman Corp. 77,675
1,700 Whole Foods Market, Inc.(a) 75,969
--------------
225,894
-------------------------------------------------------------------------------------
Retail Trade 0.5%
5,000 Borders Group, Inc.(a) 64,375
-------------------------------------------------------------------------------------
Software 1.2%
300 Dendrite International, Inc.(a) 8,133
7,100 Progress Software Corp. 106,943
2,500 Transaction Systems Architects, Inc., Cl.A(a) 44,219
--------------
159,295
</TABLE>
See Notes to Financial Statements 53
<PAGE>
Target Funds Small Capitalization Value Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Trucking & Freight Forwarding 1.2%
2,300 CNF Transportation, Inc. $ 58,506
7,000 Werner Enterprises, Inc. 101,500
--------------
160,006
-------------------------------------------------------------------------------------
Utilities 1.2%
3,300 Sierra Pacific Resources 46,613
4,700 Washington Gas Light Co. 115,737
--------------
162,350
--------------
Total common stocks (cost $11,865,537) 12,677,752
--------------
SHORT-TERM INVESTMENTS 8.1%
<CAPTION>
Principal
Amount
(000)
<C> <S> <C> <C>
-------------------------------------------------------------------------------------
U.S. Government Securities 5.4%
United States Treasury Bills
$ 45 5.51%, 8/31/00 44,795
35 5.57%, 8/31/00 34,838
25 5.65%, 8/31/00 24,884
20 5.75%, 8/31/00 19,905
65 5.795%, 8/31/00 64,687
90 5.81%, 8/31/00 89,563
10 5.83%, 8/31/00 9,952
20 5.87%, 8/31/00 19,903
90 5.90%, 8/31/00 89,564
55 5.92%, 8/31/00 54,735
20 5.94%, 8/31/00 19,903
140 5.95%, 8/31/00 139,320
15 5.98%, 8/31/00 14,927
30 5.99%, 8/31/00 29,854
45 5.96%, 10/12/00 44,467
30 5.985%, 10/12/00 29,641
--------------
730,938
--------------
</TABLE>
54 See Notes to Financial Statements
<PAGE>
Target Funds Small Capitalization Value Fund
Portfolio of Investments as of July 31, 2000
<TABLE>
<CAPTION>
Principal
Amount
(000) Description Value (Note 1)
<C> <S> <C> <C>
-----------------------------------------------------------------------------------------
Investment Company 2.7%
$ 373 Seven Seas Money Market Fund
6.33%,(b) $ 373,512
--------------
Total short-term investments (cost $1,104,406) 1,104,450
--------------
Total Investments 101.4%
(cost $12,969,943; Note 4) 13,782,202
Liabilities in excess of other assets (1.4%) (186,246)
--------------
Net Assets 100% $ 13,595,956
--------------
--------------
</TABLE>
------------------------------
(a) Non-income producing security.
(b) Rate represents yield at purchase date.
See Notes to Financial Statements 55
<PAGE>
Target Funds International Equity Fund
Portfolio of Investments as of July 31, 2000
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
<C> <S> <C> <C>
-----------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 95.6%
Common Stocks 95.6
-------------------------------------------------------------------------------------
Australia 1.2%
24,000 Broken Hill Proprietary Co., Ltd. $ 253,712
-------------------------------------------------------------------------------------
Denmark 1.1%
3,800 Tele Danmark A.S. 233,762
-------------------------------------------------------------------------------------
Finland 0.9%
7,400 UPM-Kymmene Oyj 182,412
-------------------------------------------------------------------------------------
France 13.4%
5,600 Alcatel 413,086
6,225 Aventis SA 479,380
1,730 Axa SA 262,923
2,500 Banque Nationale de Paris 246,734
1,300 Compagnie de Saint-Gobain 190,946
2,300 Lagardere SCA 148,879
1,530 Suez Lyonnaise des Eaux 250,251
3,600 Total Fina SA, Ser. B 533,445
3,100 Vivendi SA 247,633
--------------
2,773,277
-------------------------------------------------------------------------------------
Germany 9.2%
1,260 Allianz AG 467,068
7,000 Bayerische Vereinsbank AG 406,404
11,400 Deutsche Lufthansa AG(a) 281,012
1,700 Deutsche Telekom AG(a) 74,059
5,900 E.On AG 329,692
1,510 Siemens AG 233,686
6,700 Thyssen Krupp AG(a) 114,989
--------------
1,906,910
</TABLE>
56 See Notes to Financial Statements
<PAGE>
Target Funds International Equity Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Italy 2.8%
6,748 Alleanza Assicurazioni $ 84,108
40,800 ENI SpA 228,368
15,800 Sao Paolo Imi SpA 267,946
--------------
580,422
-------------------------------------------------------------------------------------
Japan 22.1%
900 Acom Co., Ltd.(a) 68,104
8,000 Canon, Inc. 355,928
21,000 Fuji Bank, Ltd. 135,552
10,000 Fujitsu, Ltd. 280,804
9,000 Hitachi, Ltd. 107,490
27,000 Industrial Bank of Japan, Ltd. 173,050
9,000 Kao Corp. 265,852
18,000 Nippon Paper Industries Co., Ltd. 131,285
28 Nippon Telegraph & Telephone Corp. 334,412
98,000 Nissan Motor Co., Ltd.(a) 488,727
8 NTT Mobile Communications Network, Inc. 200,574
2,200 Orix Corp. 283,813
46,000 Sakura Bank, Ltd. 266,308
8,000 Sankyo Co., Ltd.(a) 187,446
4,400 Sony Corp. 403,957
8,000 Sumitomo Electric Industries, Ltd. 129,389
39,000 Sumitomo Trust & Banking Co., Ltd. 251,028
4,000 TDK Corp. 499,613
--------------
4,563,332
-------------------------------------------------------------------------------------
Netherlands 7.0%
6,000 Akzo Nobel NV 266,834
12,700 Getronics NV(a) 214,197
5,100 Heineken NV 291,605
6,200 ING Groep NV 414,483
5,500 Koninklijke Philips Electronics NV 249,134
--------------
1,436,253
-------------------------------------------------------------------------------------
Portugal 1.5%
28,000 Portugal Telecom SA 304,884
</TABLE>
See Notes to Financial Statements 57
<PAGE>
Target Funds International Equity Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
Singapore 3.2%
40,000 Overseas-Chinese Banking Corp., Ltd. $ 290,716
51,896 United Overseas Bank, Ltd. 371,188
--------------
661,904
-------------------------------------------------------------------------------------
Spain 3.0%
19,100 Endesa SA 396,302
10,720 Telefonica de Espana SA 225,507
--------------
621,809
-------------------------------------------------------------------------------------
Sweden 3.6%
11,100 Electrolux AB, Ser. B 165,229
22,700 Investor AB 329,237
16,700 Svenska Handelsbanken AB 251,319
--------------
745,785
-------------------------------------------------------------------------------------
Switzerland 4.4%
2,500 ABB, Ltd. 298,208
28 Roche Holdings AG 263,166
614 Zurich Allied AG 331,235
--------------
892,609
-------------------------------------------------------------------------------------
United Kingdom 22.2%
6,700 AstraZeneca Group PLC(a) 288,768
39,600 BP Amoco PLC 346,572
47,000 British Aerospace PLC 316,954
20,400 British Energy PLC 73,372
17,900 British Telecommunications PLC 236,596
36,600 Cadbury Schweppes PLC 236,810
34,900 Diageo PLC 306,485
11,700 GKN PLC 149,825
33,700 Great Universal Stores PLC 222,970
18,700 Halifax Group PLC(a) 146,565
23,600 HSBC Holdings PLC 319,541
13,800 Imperial Chemical Industries PLC 99,164
72,800 Invensys PLC 261,017
24,400 National Grid Group PLC 200,381
14,400 Prudential Corp. PLC 196,593
</TABLE>
58 See Notes to Financial Statements
<PAGE>
Target Funds International Equity Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Shares Description Value (Note 1)
-----------------------------------------------------------------------------------------
<C> <S> <C> <C>
28,900 Reed International PLC $ 231,057
28,000 SmithKline Beecham PLC 360,863
93,200 Tesco PLC 307,273
66,800 Vodafone AirTouch PLC 295,314
--------------
4,596,120
--------------
Total common stocks (cost $19,736,924) 19,753,191
--------------
SHORT-TERM INVESTMENTS 3.2%
<CAPTION>
Principal
Amount
(000)
<C> <S> <C> <C>
-------------------------------------------------------------------------------------
U.S. Government Securities
United States Treasury Bills
$ 30 5.55%, 8/31/00 29,857
65 5.57%, 8/31/00 64,688
135 5.635%, 8/31/00 134,345
40 5.74%, 8/31/00 39,802
60 5.75%, 8/31/00 59,703
30 5.83%, 8/31/00 29,850
35 5.87%, 8/31/00 34,823
150 5.90%, 8/31/00 149,238
55 5.99%, 8/31/00 54,716
30 5.96%, 10/12/00 29,614
40 5.985%, 10/12/00 39,521
--------------
Total short-term investments (cost $666,281) 666,157
--------------
Total Investments 98.8% (cost $20,403,205; Note
4) 20,419,348
Other assets in excess of liabilities 1.2% 243,911
--------------
Net Assets 100% $ 20,663,259
--------------
--------------
</TABLE>
------------------------------
(a) Non-income producing security.
AB--Antiebolay (Swedish Stock Company).
AG--Aktiengesellschaft (German Stock Company).
NV--Naamkee Vennootachap (Dutch Corporation).
PLC--Public Limited Company (British Corporation).
SA--Sociedad Anonima (Spanish Corporation) or Societe Anonyme (French
Corporation).
SpA--Societa par Atione (Italian Corporation).
See Notes to Financial Statements 59
<PAGE>
Target Funds International Equity Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
The industry classification of portfolio holdings and other assets in excess of
liabilities shown as a percentage of net assets as of July 31, 2000 was as
follows:
<TABLE>
<S> <C>
Banks..................................................................... 12.9%
Telecommunications........................................................ 12.2
Insurance................................................................. 8.5
Pharmaceuticals........................................................... 7.6
Electronics............................................................... 6.1
Oil & Gas Exploration/Production.......................................... 5.4
Utilities................................................................. 4.7
Financial Services........................................................ 4.2
Food & Beverages.......................................................... 4.0
Industrial Conglomerates.................................................. 3.3
U.S. Treasury Securities.................................................. 3.2
Automobiles & Trucks...................................................... 3.1
Engineering & Equipment................................................... 2.7
Retail.................................................................... 2.6
Chemicals................................................................. 1.8
Office Equipment & Supplies............................................... 1.7
Paper & Forest Products................................................... 1.5
Aerospace/Defense......................................................... 1.5
Leasing................................................................... 1.4
Computers................................................................. 1.4
Airlines.................................................................. 1.4
Diversfied Consumer Products.............................................. 1.3
Natural Resources......................................................... 1.2
Publishing................................................................ 1.1
Computer Services......................................................... 1.0
Containers & Packaging.................................................... 0.9
Consumer Durable Goods.................................................... 0.8
Diversified Operations.................................................... 0.7
Wire & Cable.............................................................. 0.6
-----
98.8
Other assets in excess of liabilities..................................... 1.2
-----
100.0%
-----
-----
</TABLE>
60 See Notes to Financial Statements
<PAGE>
Target Funds Total Return Bond Fund
Portfolio of Investments as of July 31, 2000
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS 131.8%
Corporate Bonds 40.7%
-------------------------------------------------------------------------------------
Banking 7.5%
Bank Tokyo Mitsubishi Ltd.
A3 $ 400 8.40%, 4/15/10 $ 404,349
Deutsche Bank Capital Trust
A1 500 8.58%, 12/22/49 503,500
Korea Development Bank
Baa2 500 7.625%, 10/1/02 498,698
United States Bancorp M.T.N.
A3 500 7.091%, 3/6/03 500,000
---------------
1,906,547
-------------------------------------------------------------------------------------
Commercial Services 2.3%
Cox Enterprises, Inc.
Baa1 600 7.552%, 5/1/03 598,710
-------------------------------------------------------------------------------------
Communications 2.0%
Sprint Capital Corp. M.T.N.
Baa1 500 7.01%, 11/15/01 499,966
-------------------------------------------------------------------------------------
Financial Services 21.8%
American General Finance Corp. M.T.N.
A2 400 6.875%, 12/14/01 396,469
Bayview Financial Mortgage Loan Trust
AAA 400 7.00%, 5/1/20 400,000
Bears Stearns Cos., Inc.
A2 800 7.357%, 11/30/04 801,146
Ford Motor Credit Corp.
A2 500 6.75%, 5/15/05 481,970
A2 500 7.007%, 5/23/02 500,000
General Motors Acceptance Corp. M.T.N.
A2 500 6.27%, 11/12/02 500,312
Halifax Group Euro Finance
Aa3 300 7.627%, 12/29/49 278,817
Heller Financial Inc., M.T.N.
A3 200 6.50%, 7/22/02 196,210
</TABLE>
See Notes to Financial Statements 61
<PAGE>
Target Funds Total Return Bond Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lehman Brothers Holdings, Inc.
A3 $ 500 7.35%, 12/12/02 $ 500,086
Merrill Lynch & Company, Inc.
Aa3 500 6.991%, 8/1/03, F.R.N. 499,726
Morgan Stanley Dean Witter, Inc.
Aa3 500 6.837%, 1/28/02 500,560
Protective Life Insurance Co.
A1 500 7.09%, 1/17/03 499,250
---------------
5,554,546
-------------------------------------------------------------------------------------
Oil & Gas Exploration/Production 2.0%
Petroleos Mexicanos
Baa3 500 9.375%, 12/2/08 512,500
-------------------------------------------------------------------------------------
Paper 2.0%
Temple Inland, Inc.
Baa2 500 9.00%, 5/1/01 503,870
-------------------------------------------------------------------------------------
Utilities-Electric & Gas 3.1%
Carolina Power & Light Co.
A3 300 7.235%, 7/29/02 300,000
Central Power & Light Co.
Baa1 500 6.701%, 11/23/01 499,778
---------------
799,778
---------------
Total corporate bonds (cost $10,380,790) 10,375,917
---------------
-------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY MORTGAGE BACKED SECURITIES 59.1%
Federal Home Loan Mortgage Corp.,
Aaa 500 5.50%, 12/31/99 443,201
Federal National Mortgage Assn.,
Aaa 1,400 6.00%, 12/31/99 1,284,500
Aaa 300 7.00%, 12/31/99 289,689
Aaa 400 7.50%, 12/31/99 394,124
Aaa 100 8.00%, 12/31/99 100,281
Government National Mortgage Assn.,
Aaa 1,261 6.50%, 11/20/29 1,253,982
Aaa 6,700 7.50%, 12/15/99 - 12/31/99 6,638,353
</TABLE>
62 See Notes to Financial Statements
<PAGE>
Target Funds Total Return Bond Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aaa $3,400 8.00%, 12/31/99 $ 3,425,098
Aaa 1,200 8.50%, 12/31/99 1,225,128
---------------
Total U.S. government agency mortgage
backed securities
(cost $15,041,241) 15,054,356
---------------
COLLATERALIZED MORTGAGE OBLIGATIONS 6.5%
-------------------------------------------------------------------------------------
Financial Services 1.8%
Norwest Asset Securites Corp.
AAAPound 491 6.75%, 10/25/28 454,866
-------------------------------------------------------------------------------------
Real Estate Investment Trust 4.7%
Countrywide Mortgage Backed Security
Aaa 769 7.50%, 4/25/27 750,186
Starwood Commercial Mortgage Trust
Aaa 451 6.60%, 2/3/09 438,955
---------------
1,189,141
Total collateralized mortgage
obligations
(cost $1,645,162) 1,644,007
---------------
-------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES 23.3%
United States Treasury Bonds,
Aaa 2,500 8.00%, 11/15/21 3,057,425
Aaa 300 8.75%, 8/15/20 389,952
United States Treasury Notes,
Aaa 749 3.625%, 7/15/02 745,891
Aaa 1,060 3.625%, 1/15/08 1,031,799
Aaa 700 6.50%, 10/15/06 710,171
---------------
Total U.S. Government Securities (cost
$5,819,483) 5,935,238
---------------
-------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS 2.2%
German Government Bonds,
Aaa 20 6.25%, 1/4/24 20,322
Aaa 70 6.25%, 1/4/30 72,944
</TABLE>
See Notes to Financial Statements 63
<PAGE>
Target Funds Total Return Bond Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Poland Government Bonds,
Baa1 $ 70 3.50%, 10/27/24 $ 43,519
Republic of Philippines
Ba1 500 6.50%, 12/1/17 422,428
---------------
Total foreign government obligations
(cost $572,741) 559,213
---------------
Total long-term investments
(cost $33,459,417) 33,568,731
---------------
SHORT-TERM INVESTMENTS 24.9%
Corporate Bonds
-------------------------------------------------------------------------------------
Automobiles 3.8%
Daimlerchrysler
P1 1,000 6.51%, 11/1/00 983,363
-------------------------------------------------------------------------------------
Communications 1.2%
Dominion Resources
P2 300 6.195%, 1/26/01 300,021
-------------------------------------------------------------------------------------
Computers & Business Equipment 2.7%
International Business Machines Corp.
P1 700 6.51%, 11/1/00 688,354
-------------------------------------------------------------------------------------
Electrical Utilities 1.6%
Edison Mission Midwest Hldg.
P2 400 6.79%, 8/8/00 399,472
-------------------------------------------------------------------------------------
Financial Services 11.6%
American Express Co.
P1 1,000 6.61%, 11/15/00 980,537
CBA Finance, Inc. (Delaware)
P1 1,000 6.53%, 10/23/00 984,945
General Electric Capital Corp.
P1 900 6.52%, 10/25/00 886,145
P1 100 6.55%, 9/13/00 99,218
---------------
2,950,845
-------------------------------------------------------------------------------------
Foods 0.4%
Conagra, Inc.
P2 100 6.91%, 8/23/00 99,578
-------------------------------------------------------------------------------------
Leisure 1.1%
ITT Corp.,
Ba1 300 6.25%, 11/15/00 297,669
</TABLE>
64 See Notes to Financial Statements
<PAGE>
Target Funds Total Return Bond Fund
Portfolio of Investments as of July 31, 2000 Cont'd.
<TABLE>
<CAPTION>
Principal
Moody's Amount
Rating (000) Description Value (Note 1)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Machinery 0.8%
Ingersoll Rand Company
P2 $ 200 6.74%, 8/18/00 $ 199,364
-------------------------------------------------------------------------------------
Oil & Gas-Production/Pipeline 0.8%
Williams Cos, Inc.
P2 200 7.231%, 4/10/01 200,067
-------------------------------------------------------------------------------------
Repurchase Agreement 0.9%
State Street Bank & Trust Co.,
Repurchase Agreement, 2.00%, dated
7/31/00, due 8/1/00 in the amount of
$221,000 (cost $221,000
collateralized by $220,000 U.S.
Treasury notes 7.00%, 7/15/06, value
of collateral including accrued
221 interest is $228,954) 221,000
---------------
Total short-term investments
(cost $6,340,699) 6,339,733
---------------
Total Investments 156.7%
(cost US$39,800,116; Note 4) 39,908,464
Liabilities in excess of other
assets (56.7%) (14,446,030)
---------------
Net Assets 100% $ 25,462,434
---------------
---------------
</TABLE>
------------------------------
Pound Standard & Poor's Rating.
F.R.N.--Floating Rate Note.
M.T.N.--Medium-Term Notes.
The Fund's current Statement of Additional Information contains a desciption of
Moody's and Standard & Poor's ratings.
See Notes to Financial Statements 65
<PAGE>
Target Funds As of July 31, 2000
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Large
Capitalization
Growth Fund
<S> <C> <C>
--------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $200,531,950) $258,821,859
Cash 1,408
Receivable for investments sold 1,619,191
Receivable for Fund shares sold 987,601
Dividends and interest receivable 18,409
Deferred offering expenses and other assets 73,693
------------
Total assets 261,522,161
------------
LIABILITIES
Payable for investments purchased 1,555,403
Payable for Fund shares repurchased 312,737
Distribution fee payable 199,598
Management fee payable 157,079
Accrued expenses and other liabilities 64,195
------------
Total liabilities 2,289,012
------------
NET ASSETS $259,233,149
------------
------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 19,756
Paid-in capital, in excess of par 208,334,766
------------
208,354,522
Net realized loss (7,411,282)
Net unrealized appreciation 58,289,909
------------
Net assets, July 31, 2000 $259,233,149
------------
------------
</TABLE>
66 See Notes to Financial Statements
<PAGE>
Target Funds As of July 31, 2000 Cont'd.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Large
Capitalization
Growth Fund
<S> <C> <C>
--------------------------------------------------------------------------------------
Class A:
Net assets $ 38,227,092
Shares of beneficial interest issued and outstanding 2,898,715
Net asset value and redemption price per share $13.19
Maximum sales charge (5% of offering price) .69
------------
Maximum offering price to public $13.88
------------
------------
Class B:
Net Assets $ 75,819,321
Shares of beneficial interest issued and outstanding 5,783,021
Net asset value, offering price and redemption price per share $13.11
------------
------------
Class C:
Net Assets $145,186,736
Shares of beneficial interest issued and outstanding 11,074,587
Net asset value and redemption price per share $13.11
Sales charge (1% of offering price) .13
------------
Offering price to public $13.24
------------
------------
</TABLE>
See Notes to Financial Statements 67
<PAGE>
Target Funds As of July 31, 2000 Cont'd.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Large
Capitalization
Value Fund
<S> <C> <C>
--------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $30,821,620) $ 29,460,367
Receivable for Fund shares sold 226,713
Receivable for investments sold 62,061
Dividends and interest receivable 45,773
Deferred offering expenses and other assets 12,979
------------
Total assets 29,807,893
------------
LIABILITIES
Payable to Custodian 5,078
Payable for investments purchased 217,201
Accrued expenses 98,043
Payable for Fund shares repurchased 22,812
Distribution fee payable 21,810
Management fee payable 17,548
------------
Total liabilities 382,492
------------
NET ASSETS $ 29,425,401
------------
------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 3,169
Paid-in capital, in excess of par 31,184,259
------------
31,187,428
Undistributed net investment income 21,669
Net realized loss on investments (422,443)
Net unrealized depreciation (1,361,253)
------------
Net assets, July 31, 2000 $ 29,425,401
------------
------------
</TABLE>
68 See Notes to Financial Statements
<PAGE>
Target Funds As of July 31, 2000 Cont'd.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Large
Capitalization
Value Fund
<S> <C> <C>
--------------------------------------------------------------------------------------
Class A:
Net assets $ 5,161,543
Shares of beneficial interest issued and outstanding 553,234
Net asset value and redemption price per share $9.33
Maximum sales charge (5% of offering price) .49
------------
Maximum offering price to public $9.82
------------
------------
Class B:
Net Assets $ 11,418,395
Shares of beneficial interest issued and outstanding 1,230,999
------------
Net asset value, offering price and redemption price per share $9.28
------------
------------
Class C:
Net Assets $ 12,845,463
Shares of beneficial interest issued and outstanding 1,384,859
Net asset value and redemption price per share $9.28
Sales charge (1% of offering price) .09
------------
Offering price to public $9.37
------------
------------
</TABLE>
See Notes to Financial Statements 69
<PAGE>
Target Funds As of July 31, 2000 Cont'd.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Small
Capitalization
Growth Fund
<S> <C> <C>
--------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $19,660,266) $ 21,156,334
Cash 66
Receivable for investments sold 298,178
Receivable for Fund shares sold 93,523
Dividends and interest receivable 5,872
Deferred offering expenses and other assets 14,605
------------
Total assets 21,568,578
------------
LIABILITIES
Payable for investments purchased 550,242
Payable for Fund shares repurchased 11,328
Distribution fee payable 15,528
Management fee payable 12,876
Accrued expenses and other liabilities 64,232
------------
Total liabilities 654,206
------------
NET ASSETS $ 20,914,372
------------
------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 1,665
Paid-in capital, in excess of par 17,626,787
------------
17,628,452
Net realized gain on investments 1,789,852
Net unrealized appreciation on investments 1,496,068
------------
Net assets, July 31, 2000 $ 20,914,372
------------
------------
</TABLE>
70 See Notes to Financial Statements
<PAGE>
Target Funds As of July 31, 2000 Cont'd.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Small
Capitalization
Growth Fund
<S> <C> <C>
--------------------------------------------------------------------------------------
Class A:
Net assets $ 4,666,941
Shares of beneficial interest issued and outstanding 369,696
Net asset value and redemption price per share $12.62
Maximum sales charge (5% of offering price) .66
------------
Maximum offering price to public $13.28
------------
------------
Class B:
Net Assets $ 8,588,146
Shares of beneficial interest issued and outstanding 684,757
Net asset value, offering price and redemption price per share $12.54
------------
------------
Class C:
Net Assets $ 7,659,285
Shares of beneficial interest issued and outstanding 610,671
Net asset value and redemption price per share $12.54
Sales charge (1% of offering price) .13
------------
Offering price to public $12.67
------------
------------
</TABLE>
See Notes to Financial Statements 71
<PAGE>
Target Funds As of July 31, 2000 Cont'd.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Small
Capitalization
Value Fund
<S> <C> <C>
--------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $12,969,943) $ 13,782,202
Cash 1,067
Receivable for investments sold 69,095
Receivable for Fund shares sold 56,049
Deferred offering expenses and other assets 12,979
Dividends and interest receivable 12,949
------------
Total assets 13,934,341
------------
LIABILITIES
Payable for investments purchased 249,635
Accrued expenses and other liabilities 71,544
Distribution fee payable 8,469
Management fee payable 8,219
Payable for Fund shares repurchased 518
------------
Total liabilities 338,385
------------
NET ASSETS $ 13,595,956
------------
------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 1,232
Paid-in capital, in excess of par 12,295,968
------------
12,297,200
Net realized gain on investments 486,497
Net unrealized appreciation on investments 812,259
------------
Net assets, July 31, 2000 $ 13,595,956
------------
------------
</TABLE>
72 See Notes to Financial Statements
<PAGE>
Target Funds As of July 31, 2000 Cont'd.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Small
Capitalization
Value Fund
<S> <C> <C>
--------------------------------------------------------------------------------------
Class A:
Net assets $ 3,863,121
Shares of beneficial interest issued and outstanding 348,679
Net asset value and redemption price per share $11.08
Maximum sales charge (5% of offering price) .58
------------
Maximum offering price to public $11.66
------------
------------
Class B:
Net Assets $ 5,378,438
Shares of beneficial interest issued and outstanding 488,380
Net asset value, offering price and redemption price per share $11.01
------------
------------
Class C:
Net Assets $ 4,354,397
Shares of beneficial interest issued and outstanding 395,395
Net asset value and redemption price per share $11.01
Sales charge (1% of offering price) .11
------------
Offering price to public $11.12
------------
------------
</TABLE>
See Notes to Financial Statements 73
<PAGE>
Target Funds As of July 31, 2000 Cont'd.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
International
Equity Fund
<S> <C> <C>
--------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $20,403,205) $20,419,348
Foreign currency, at value (cost $99,577) 97,923
Cash 1,007
Receivable for Fund shares sold 56,303
Receivable for investments sold 324,613
Dividends and interest receivable 43,619
Deferred offering expenses and other assets 12,980
-----------
Total assets 20,955,793
-----------
LIABILITIES
Payable for investments purchased 158,189
Accrued expenses and other liabilities 93,120
Payable for Fund shares repurchased 9,988
Distribution fee payable 14,744
Management fee payable 14,205
Withholding tax payable 2,288
-----------
Total liabilities 292,534
-----------
NET ASSETS $20,663,259
-----------
-----------
Net assets were comprised of:
Shares of beneficial interest, at par $ 2,086
Paid-in capital, in excess of par 20,841,489
-----------
20,843,575
Net investment loss (90,642)
Net realized loss (101,277)
Net unrealized appreciation on investment and foreign currency
transactions 11,603
-----------
Net assets, July 31, 2000 $20,663,259
-----------
-----------
</TABLE>
74 See Notes to Financial Statements
<PAGE>
Target Funds As of July 31, 2000 Cont'd.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
International
Equity Fund
<S> <C> <C>
--------------------------------------------------------------------------------------
Class A:
Net assets $ 4,688,606
Shares of beneficial interest issued and outstanding 471,233
Net asset value and redemption price per share $9.95
Maximum sales charge (5% of offering price) .52
------------
Maximum offering price to public $10.47
------------
------------
Class B:
Net Assets $ 7,020,077
Shares of beneficial interest issued and outstanding 709,828
Net asset value, offering price and redemption price per share $9.89
------------
------------
Class C:
Net Assets $ 8,954,576
Shares of beneficial interest issued and outstanding 905,350
Net asset value and redemption price per share $9.89
Sales charge (1% of offering price) .10
------------
Offering price to public $9.99
------------
------------
</TABLE>
See Notes to Financial Statements 75
<PAGE>
Target Funds As of July 31, 2000 Cont'd.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Total Return
Bond Fund
<S> <C> <C>
--------------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $39,800,116) $ 39,908,464
Foreign currency, at value (cost $80) 79
Cash 144
Interest receivable 251,038
Receivable for Fund shares sold 230,564
Deferred expenses and other assets 12,819
Unrealized appreciation on swap 5,042
Unrealized appreciation on forward currency contracts 4,976
------------
Total assets 40,413,126
------------
LIABILITIES
Payable for investments purchased 14,769,163
Accrued expenses 113,523
Dividends payable 34,990
Distribution fee payable 11,896
Management fee payable 11,033
Payable for Fund shares reacquired 10,087
------------
Total liabilities 14,950,692
------------
NET ASSETS $ 25,462,434
------------
------------
Net assets were comprised of:
Shares of beneficial interest, at par $ 2,548
Paid-in capital, in excess of par 25,442,464
------------
25,445,012
Distribution in excess of net investment income (7,574)
Net realized loss (100,829)
Net unrealized appreciation on investments and foreign
currency transaction 125,825
------------
Net assets, July 31, 2000 $ 25,462,434
------------
------------
</TABLE>
76 See Notes to Financial Statements
<PAGE>
Target Funds As of July 31, 2000 Cont'd.
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Total Return
Bond Fund
<S> <C> <C>
--------------------------------------------------------------------------------------
Class A:
Net assets $ 9,874,731
Shares of beneficial interest issued and outstanding 988,356
Net asset value and redemption price per share $9.99
Maximum sales charge (4% of offering price) .42
------------
Maximum offering price to public $10.41
------------
------------
Class B:
Net assets $ 9,738,899
Shares of beneficial interest issued and outstanding 974,598
Net asset value, offering price and redemption price per share $9.99
------------
------------
Class C:
Net assets $ 5,848,804
Shares of beneficial interest issued and outstanding 585,338
Net asset value and redemption price per share $9.99
Sales charge (1% of offering price) .10
------------
Offering price to public $10.09
------------
------------
</TABLE>
See Notes to Financial Statements 77
<PAGE>
Target Funds November 3, 1999(a) through July 31, 2000
Statements of Operations
<TABLE>
<CAPTION>
Large
Capitalization
Growth Fund
<S> <C> <C>
--------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS)
Income
Interest $ 440,561
Dividends 488,611
Less: Foreign withholding taxes (1,219)
------------
Total income 927,953
------------
Expenses
Management fee 1,123,808
Distribution fee--Class A 53,289
Distribution fee--Class B 437,977
Distribution fee--Class C 954,308
Legal fees and expenses 4,000
Custodian's fees and expenses 78,000
Transfer agent's fees and expenses 90,000
Reports to shareholders 18,000
Registration fees 54,000
Trustees' fees and expenses 9,000
Amortization of offering expenses 78,721
Audit fees 14,000
Miscellaneous 300
------------
Total expenses 2,915,403
------------
Net investment income (loss) (1,987,450)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Investment transactions (7,411,282)
Foreign currency transactions --
Swaps --
------------
(7,411,282)
------------
Net unrealized appreciation (depreciation) on:
Investments 58,289,909
Foreign currency transactions --
Swaps --
------------
58,289,909
------------
Net gain (loss) 50,878,627
------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 48,891,177
------------
------------
</TABLE>
------------------------------
(a) Commencement of investment operations
78 See Notes to Financial Statements
<PAGE>
Target Funds November 3, 1999(a) through July 31, 2000 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> <C>
--------------------------------------------------------------------------------------
$ 71,084 $ 47,756 $ 36,928 $ 46,416 $ 1,256,523
505,702 19,860 132,217 300,843 --
(1,952) -- -- (40,389) --
------------ ------------ ------------ ------------ ------------
574,834 67,616 169,145 306,870 1,256,523
------------ ------------ ------------ ------------ ------------
132,716 88,879 64,391 113,679 95,287
7,625 8,884 9,409 8,233 22,009
65,111 43,544 26,392 44,625 41,008
93,983 47,890 27,960 64,543 35,896
12,000 12,000 5,000 12,000 12,000
103,000 81,000 93,500 120,000 72,000
24,000 15,000 13,000 18,000 33,000
32,000 32,000 26,000 31,000 35,000
36,000 20,000 12,000 14,000 12,000
8,000 7,000 8,100 9,000 11,000
37,021 37,021 37,021 37,021 37,021
14,000 14,000 14,000 20,000 14,000
401 2,350 2,400 1,148 2,000
------------ ------------ ------------ ------------ ------------
565,857 409,568 339,173 493,249 422,221
------------ ------------ ------------ ------------ ------------
8,977 (341,952) (170,028) (186,379) 834,302
------------ ------------ ------------ ------------ ------------
(422,443) 2,085,580 612,051 (100,650) (107,130)
-- -- -- (19,617) (38,012)
-- -- -- -- 7,215
------------ ------------ ------------ ------------ ------------
(422,443) 2,085,580 612,051 (120,267) (137,927)
------------ ------------ ------------ ------------ ------------
(1,361,253) 1,496,068 812,259 16,143 115,807
-- -- -- (4,540) 4,976
-- -- -- -- 5,042
------------ ------------ ------------ ------------ ------------
(1,361,253) 1,496,068 812,259 11,603 125,825
------------ ------------ ------------ ------------ ------------
(1,783,696) 3,581,648 1,424,310 (108,664) (12,102)
------------ ------------ ------------ ------------ ------------
$ (1,774,719) $ 3,239,696 $ 1,254,282 $ (295,043) $ 822,200
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
See Notes to Financial Statements 79
<PAGE>
Target Funds November 3, 1999(a) through July 31, 2000
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Large
Capitalization
Growth Fund
<S> <C> <C>
--------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment income (loss) $ (1,987,450)
Net realized gain (loss) on investment and foreign currency
transactions (7,411,282)
Net unrealized appreciation (depreciation) of investments 58,289,909
-------------
Net increase (decrease) in net assets resulting from
operations 48,891,177
-------------
Dividends and distributions
Dividends from net investment income
Class A --
Class B --
Class C --
-------------
Total dividends --
-------------
Distributions in excess of net investment income
Class A --
Class B --
Class C --
-------------
Total distributions --
-------------
Fund share transactions (net of share conversions; Note 5)
Net proceeds from shares sold 245,996,764
Net asset value of shares issued in reinvestment of dividends
and distributions --
Cost of shares reacquired (35,672,792)
-------------
Net increase in net assets from Fund share transactions 210,323,972
-------------
Total increase 259,215,149
NET ASSETS
Beginning of period 18,000
-------------
End of period $ 259,233,149
-------------
-------------
------------------------------
(a) Commenecment of investment operations.
</TABLE>
80 See Notes to Financial Statements
<PAGE>
Target Funds November 3, 1999(a) through July 31, 2000
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> <C>
-------------------------------------------------------------------------------------------
$ 8,977 $ (341,952) $ (170,028) $ (186,379) $ 834,302
(422,443) 2,085,580 612,051 (120,267) (137,927)
(1,361,253) 1,496,068 812,259 11,603 125,825
------------- ------------- ------------- ------------- -------------
(1,774,719) 3,239,696 1,254,282 (295,043) 822,200
------------- ------------- ------------- ------------- -------------
(8,977) -- -- -- (407,199)
-- -- -- -- (229,611)
-- -- -- -- (197,492)
------------- ------------- ------------- ------------- -------------
(8,977) -- -- -- (834,302)
------------- ------------- ------------- ------------- -------------
(393) -- -- -- (9,630)
(13,063) -- -- -- (4,481)
(23,337) -- -- -- (4,857)
------------- ------------- ------------- ------------- -------------
(36,793) -- -- -- (18,968)
------------- ------------- ------------- ------------- -------------
40,139,297 25,578,512 18,398,192 35,128,516 37,908,566
42,947 -- -- -- 721,940
(8,954,354) (7,921,836) (6,074,518) (14,188,214) (13,147,002)
------------- ------------- ------------- ------------- -------------
31,227,890 17,656,676 12,323,674 20,940,302 25,483,504
------------- ------------- ------------- ------------- -------------
29,407,401 20,896,372 13,577,956 20,645,259 25,452,434
18,000 18,000 18,000 18,000 10,000
------------- ------------- ------------- ------------- -------------
$ 29,425,401 $ 20,914,372 $ 13,595,956 $ 20,663,259 $ 25,462,434
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
See Notes to Financial Statements 81
<PAGE>
Target Funds November 3, 1999(a) through July 31, 2000
Financial Highlights
<TABLE>
<CAPTION>
Large Capitalization Growth Fund
------------------------------------
Class A Class B Class C
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE(d):
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00
-------- -------- --------
Income from investment operations
Net investment loss (0.06) (0.12) (0.12)
Net realized and unrealized gain on
investment transactions 3.25 3.23 3.23
-------- -------- --------
Total from investment operations 3.19 3.11 3.11
-------- -------- --------
Net asset value, end of period $ 13.19 $ 13.11 $ 13.11
-------- -------- --------
-------- -------- --------
TOTAL RETURN(b) 31.90% 31.10% 31.10%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 38,227 $ 75,819 $145,187
Average net assets (000) $ 28,788 $ 59,151 $128,884
Ratios to average net assets (c):
Expenses, including distribution and
service (12b-1) fees 1.17% 1.92% 1.92%
Expenses, excluding distribution and
service (12b-1) fees .92% .92% .92%
Net investment loss (0.62)% (1.36)% (1.32)%
Portfolio turnover rate 39% 39% 39%
</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.
(d) Calculated based upon average shares outstanding during the period.
82 See Notes to Financial Statements
<PAGE>
Target Funds November 3, 1999(a) through July 31, 2000 Cont'd.
Financial Highlights
<TABLE>
<CAPTION>
Large Capitalization Value Fund
------------------------------------
Class A Class B Class C
----------------------------------------------------------------------------------------
<S> <C> <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 0.05 --(d) --(d)
Net realized and unrealized loss on
investment transactions (0.69) (0.70) (0.70)
-------- -------- --------
Total from investment operations (0.64) (0.70) (0.70)
-------- -------- --------
Less distributions:
Dividends from net investment income (0.03) -- --
Dividends in excess of net investment
income -- (.02) (.02)
-------- -------- --------
Net asset value, end of period $ 9.33 $ 9.28 $ 9.28
-------- -------- --------
-------- -------- --------
TOTAL RETURN(b) (6.42)% (7.02)% (7.02)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 5,162 $ 11,418 $ 12,845
Average net assets (000) $ 4,119 $ 8,794 $ 12,693
Ratios to average net assets (c):
Expenses, including distribution and
service (12b-1) fees 2.36% 3.11% 3.11%
Expenses, excluding distribution and
service (12b-1) fees 2.11% 2.11% 2.11%
Net investment income .63% (.13)% (.02)%
Portfolio turnover rate 58% 58% 58%
</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.
(d) Less than $.005 per share.
See Notes to Financial Statements 83
<PAGE>
Target Funds November 3, 1999(a) through July 31, 2000 Cont'd.
Financial Highlights
<TABLE>
<CAPTION>
Small Capitalization Growth Fund
---------------------------------
Class A Class B Class C
-----------------------------------------------------------------------------------------
<S> <C> <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 (.20) (.19) (.23)
Net realized and unrealized gain on
investment transactions 2.82 2.73 2.77
------- ------- -------
Total from investment operations 2.62 2.54 2.54
------- ------- -------
Net asset value, end of period $ 12.62 $ 12.54 $ 12.54
------- ------- -------
------- ------- -------
TOTAL RETURN(b) 26.20% 25.40% 25.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 4,667 $ 8,588 $ 7,659
Average net assets (000) $ 4,799 $ 5,881 $ 6,468
Ratios to average net assets (c):
Expenses, including distribution and
service (12b-1) fees 2.69% 3.44% 3.44%
Expenses, excluding distribution and
service (12b-1) fees 2.44% 2.44% 2.44%
Net investment loss (2.10)% (2.94)% (2.90)%
Portfolio turnover rate 112% 112% 112%
</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.
84 See Notes to Financial Statements
<PAGE>
Target Funds November 3, 1999(a) through July 31, 2000 Cont'd.
Financial Highlights
<TABLE>
<CAPTION>
Small Capitalization Value Fund
------------------------------------
Class A Class B Class C
----------------------------------------------------------------------------------------
<S> <C> <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(d) (.11) (.16) (.17)
Net realized and unrealized gain on
investment transactions 1.19 1.17 1.18
-------- -------- --------
Total from investment operations 1.08 1.01 1.01
-------- -------- --------
Net asset value, end of period $ 11.08 $ 11.01 $ 11.01
-------- -------- --------
-------- -------- --------
TOTAL RETURN(b) 10.80% 10.10% 10.10%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 3,863 $ 5,379 $ 4,354
Average net assets (000) $ 5,083 $ 3,564 $ 3,776
Ratios to average net assets (c):
Expenses, including distribution and
service (12b-1) fees 3.24% 3.99% 3.99%
Expenses, excluding distribution and
service (12b-1) fees 2.99% 2.99% 2.99%
Net investment loss (1.37)% (2.20)% (2.16)%
Portfolio turnover rate 34% 34% 34%
</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 of less than one full year are not
annualized.
(c) Annualized.
(d) Calculated based upon average shares outstanding during the period.
See Notes to Financial Statements 85
<PAGE>
Target Funds November 3, 1999(a) through July 31, 2000 Cont'd.
Financial Highlights
<TABLE>
<CAPTION>
International Equity Fund
------------------------------------
Class A Class B Class C
----------------------------------------------------------------------------------------
<S> <C> <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(e) (0.05) (0.11) (0.11)
Net realized and unrealized loss on
investment and foreign currency
transactions --(d) --(d) --(d)
-------- -------- --------
Total from investment operations (0.05) (0.11) (0.11)
-------- -------- --------
Net asset value, end of period $ 9.95 $ 9.89 $ 9.89
-------- -------- --------
-------- -------- --------
TOTAL RETURN(b) (0.50)% (1.10)% (1.10)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 4,689 $ 7,020 $ 8,955
Average net assets (000) $ 4,447 $ 6,027 $ 8,717
Ratios to average net assets (c):
Expenses, including distribution and
service (12b-1) fees 2.89% 3.64% 3.64%
Expenses, excluding distribution and
service (12b-1) fees 2.64% 2.64% 2.64%
Net investment loss (0.74)% (1.45)% (1.50)%
Portfolio turnover rate 40% 40% 40%
</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.
(d) Less than $.005 per share.
(e) Calculation based upon average shares outstanding during the period.
86 See Notes to Financial Statements
<PAGE>
Target Funds November 3, 1999(a) through July 31, 2000 Cont'd.
Financial Highlights
<TABLE>
<CAPTION>
Total Return Bond Fund
------------------------------------
Class A Class B Class C
----------------------------------------------------------------------------------------
<S> <C> <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 0.33 0.29 0.29
Net realized and unrealized loss on
investment transactions --(d) --(d) --(d)
-------- -------- --------
Total from investment operations 0.33 0.29 0.29
-------- -------- --------
Less distributions:
Dividends from net investment income (0.33) (0.29) (0.29)
Dividends in excess of net investment
income (0.01) (0.01) (0.01)
-------- -------- --------
Total distributions (0.34) (0.30) (0.30)
-------- -------- --------
Net asset value, end of period $ 9.99 $ 9.99 $ 9.99
-------- -------- --------
-------- -------- --------
TOTAL RETURN(b) 3.32% 2.95% 2.95%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $ 9,875 $ 9,739 $ 5,849
Average net assets (000) $ 11,760 $ 7,304 $ 6,393
Ratios to average net assets (c):
Expenses, including distribution and
service (12b-1) 1.96% 2.46% 2.46%
Expenses, excluding distribution and
service (12b-1) 1.71% 1.71% 1.71%
Net investment income 4.66% 4.23% 4.16%
Portfolio turnover rate 423% 423% 423%
</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.
(d) Less than $.005 per share.
See Notes to Financial Statements 87
<PAGE>
Target Funds
Notes to Financial Statements
Target Funds 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 8, 1999 and
did not have any activity until September 2, 1999 when it issued Prudential
Investment Fund Management ('PIFM'), for $100,000, 600 Class A, Class B and
Class C shares of Large Capitalization Growth Fund, Large Capitalization Value
Fund, Small Capitalization Growth Fund, Small Capitalization Value Fund,
International Equity Fund and 334 Class A shares and 333 Class B and Class C
shares of Total Return Bond Fund. The Fund's investment operations commenced on
November 3, 1999.
The Funds' 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 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 adviser's
opinion, have growth faster than that of the U.S. economy in general; Small
Capitalization Value Fund--above average capital appreciation through investment
in small company common stocks that, in the investment 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
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
88
<PAGE>
Target Funds
Notes to Financial Statements 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 which mature in sixty days or less are valued at
amortized cost which approximates market value. The amortized cost method
involves valuing a security at its cost on the date of purchase and thereafter
assuming a constant amortization to maturity of the difference between the
principal amount due at maturity and cost. Short-term securities which mature in
more than sixty days are valued at current market quotations.
Repurchase Agreements: In connection with transactions in repurchase
agreements, it is the Fund'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. To the extent
that any repurchase transaction exceeds one business day the value of collateral
is marked to market on a daily basis to ensure the adequacy of collateral. If
the seller defaults, and the value of the collateral declines or, if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the 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 Funds amortize 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. Such
estimates could differ from actuals.
89
<PAGE>
Target Funds
Notes to Financial Statements Cont'd.
Foreign Currency Translation: The books and records of the Fund 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 Funds are presented at the foreign exchange
rates and market values at the close of the fiscal period, the Funds do 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
Funds do 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 period. 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 Fund'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 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 current
90
<PAGE>
Target Funds
Notes to Financial Statements Cont'd.
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.
The 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. The Fund, as purchaser
of an option, bears the risk of the potential inability of the counterparties to
meet the terms of their contracts.
Foreign Currency Forward Contracts: The International Equity and the
Total Return Bond Funds may enter into foreign currency forward contracts in
order to hedge their exposure to changes in foreign currency exchange rates on
their foreign portfolio holdings or on specific receivables and payables
denominated in a foreign currency. A foreign currency forward contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. The contracts are valued daily at current exchange
rates and any unrealized gain or loss is included in net unrealized appreciation
or depreciation on investments. Gain or loss is realized on the settlement date
of the contract equal to the difference between the settlement value of the
original and renegotiated forward contracts. This gain or loss, if any, is
included in net realized gain (loss) on foreign currency transactions. Risks may
arise upon entering into these contracts from the potential inability of the
counterparties to meet the terms of their contracts.
Interest Rate Swaps: The Target Total Return Bond Fund may enter into
interest rate swaps. In a simple interest rate swap, one investor pays a
floating rate of interest on a notional principal amount and receives a fixed
rate of interest on the same notional principal amount for a specified period of
time. Alternatively, an investor may pay a fixed rate and receive a floating
rate. Interest rate swaps were conceived as asset/liability management tools. In
more complex swaps, the notional principal amount may decline (or amortize) over
time.
During the term of the swap, changes in the value of the swap are
recognized as unrealized gains or losses by 'marking-to-market' to reflect the
market value of the swap. When the swap is terminated, the Fund will record a
realized gain or loss equal
91
<PAGE>
Target Funds
Notes to Financial Statements Cont'd.
to the difference between the proceeds from (or cost of) the closing transaction
and the Fund's basis in the contract, if any.
The Fund is exposed to credit loss in the event of non-performance by the
other party to the interest rate swap. However, the Fund does not anticipate
non-performance by any counterparty.
Reclassification of Capital Accounts: The Fund accounts for and reports
distributions to shareholders in accordance with American Institute of Certified
Public Accountants (AICPA) Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. For the period ended
July 31, 2000, the application of this statement resulted in the following
reclassifications:
<TABLE>
<CAPTION>
Undistributed Paid-in
Net Accumulated Capital in
Investment Net Realized excess of
Fund Ref. Income Gain/Loss par
---------------------------- ------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Large Capitalization
Growth.................... (b),(c) $ 1,987,450 $ -- $(1,987,450)
Large Capitalization
Value..................... (b) 58,462 -- (58,462)
Small Capitalization
Growth.................... (b),(c) 341,952 (295,728) (46,224)
Small Capitalization
Value..................... (b),(c) 170,028 (125,554) (44,474)
International Equity........ (a),(b),(c) 95,737 18,990 (114,727)
Total Return Bond........... (a),(b) 11,394 37,098 (48,492)
</TABLE>
------------------------------
(a) Reclass of net foreign currency gains/losses.
(b) Expenses not deductible for tax purposes.
(c) Reclass of net operating loss.
Net investment income, net realized gains and net assets were not affected
by this change.
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
92
<PAGE>
Target Funds
Notes to Financial Statements Cont'd.
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 Fund, which were
initially estimated at $300,000, were approximately $402,000. These have been
deferred and are being amortized over a 12 month period from the date the Funds'
commenced operations. Estimated organizational expenses of the Fund in the
amount of approximately $18,000 incurred prior to the offering of the Funds'
shares have been reimbursed by PIFM.
Note 2. Agreements
The Fund has a management agreement with PIFM. Pursuant to this agreement, PIFM
manages the investment operations of the Funds, administers the Funds' 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
Fund, occupancy and certain clerical and accounting costs of the Fund. The Fund
bears all other costs and expenses.
The advisers noted below each furnished investment advisory services in
connection with the management of the Fund. Effective May 24, 2000, J.P. Morgan
Investment Management, Inc. became the subadviser of the Large Capitalization
Value Fund and will serve this fund under the same terms and conditions as under
the agreement with INVESCO Capital Management, Inc. Effective July 1, 2000,
Hotchkis and Wiley, the subadviser from the Large Capitalization Value Fund,
changed their name to Mercury Advisors. 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 appropriate. In addition, there is a
periodic rebalancing of each Fund's assets to take account of market
fluctuations in
93
<PAGE>
Target Funds
Notes to Financial Statements Cont'd.
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................ J.P. Morgan Investment Management, Inc.
and Mercury Advisors
Small Capitalization Growth............... SawGrass Asset Management, L.L.C. and
Chase Fleming Asset Management USA
Small Capitalization Value................ Wood, Struthers & Winthrop and Lazard
Asset Management
International Equity...................... Lazard Asset Management
Total Return Bond......................... Pacific Investment Management Company
(PIMCO)
</TABLE>
The management fee paid to 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 Fund has entered into a distribution agreement with Prudential
Investment Management Services LLC (the Distributor or PIMS) for distribution of
the Funds' 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 Funds' 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
94
<PAGE>
Target Funds
Notes to Financial Statements Cont'd.
indirect and overhead costs of PSI and Prusec associated with the sale of Fund
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 July 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 July 31, 2000.
PIMS has advised the Fund of its receipt of front-end sales charges
resulting from sales of Class A and Class C shares during the period ended July
31, 2000 as follows:
<TABLE>
<CAPTION>
Fund Class A Class C
------------------------------------------------------------ -------- --------
<S> <C> <C>
Large Capitalization Growth................................. $523,200 $751,300
Large Capitalization Value.................................. 130,600 159,800
Small Capitalization Growth................................. 52,900 66,900
Small Capitalization Value.................................. 48,800 43,400
International Equity........................................ 116,500 99,000
Total Return Bond........................................... 71,600 79,300
</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 Fund that for the period ended July 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.................................. $126,600 $62,900
Large Capitalization Value................................... 34,200 21,800
Small Capitalization Growth.................................. 8,400 6,000
Small Capitalization Value................................... 3,800 3,900
International Equity......................................... 17,100 11,500
Total Return Bond............................................ 15,800 18,700
</TABLE>
95
<PAGE>
Target Funds
Notes to Financial Statements Cont'd.
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 Funds' transfer agent. The following amounts represent the fees
PMFS charged for the period ended July 31, 2000 as well as the fees due to PMFS
as of July 31, 2000.
<TABLE>
<CAPTION>
Amount incurred
for the Amount Due
period ended as of
July 31, July 31,
Fund 2000 2000
---------------------------------------------------- ---------------- ------------
<S> <C> <C>
Large Capitalization Growth......................... $ 82,100 $ 12,000
Large Capitalization Value.......................... 21,000 3,000
Small Capitalization Growth......................... 15,000 2,300
Small Capitalization Value.......................... 11,200 1,700
International Equity................................ 16,000 2,200
Total Return Bond................................... 11,400 1,700
</TABLE>
For the period ended July 31, 2000, PSI earned approximately $2,800 and
$3,000 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 July 31, 2000 were as follows:
<TABLE>
<CAPTION>
Fund Purchases Sales
----------------------------------------------------- ------------ ------------
<S> <C> <C>
Large Capitalization Growth.......................... $278,519,382 $ 82,710,150
Large Capitalization Value........................... 45,170,128 14,492,790
Small Capitalization Growth.......................... 35,244,008 18,719,537
Small Capitalization Value........................... 15,312,435 4,055,372
International Equity................................. 27,250,809 7,411,786
Total Return Bond.................................... 164,015,993 130,117,351
</TABLE>
96
<PAGE>
Target Funds
Notes to Financial Statements Cont'd.
The federal income tax basis and unrealized appreciation (depreciation) of
each of the Funds' investments, excluding written options as of July 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................ $200,723,819 $58,098,040 $ 63,387,842 $ 5,289,802
Large Capitalization
Value................. 30,932,275 (1,471,908) 1,721,777 3,193,685
Small Capitalization
Growth................ 19,673,773 1,482,561 2,940,731 1,458,170
Small Capitalization
Value................. 12,976,257 805,945 1,929,883 1,123,938
International Equity.... 20,504,829 (85,481) 1,436,549 1,522,030
Total Return Bond....... 39,800,116 108,348 174,538 66,190
</TABLE>
<TABLE>
<CAPTION>
Post October Post October
Currency Capital
Losses Deferred Losses Deferred
nine month period nine month period
ended ended
July 31, 2000 July 31, 2000
----------------- -----------------
<S> <C> <C>
Large Capitalization
Growth Fund................................... $ -- $ 7,219,400
International Equity............................ 19,600 70,700
Total Return
Bond Fund..................................... 32,100 100,800
</TABLE>
At July 31, 2000, the Total Return Bond Fund, had outstanding forward
currency contracts to sell foreign currencies, as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Value at
Sale Contract Receivable July 31, 2000 Appreciation
------------------------------------------ --------------- ------------- --------------
<S> <C> <C> <C>
Eurodollar,
expiring 8/14/00........................ $ 298,133 $ 293,157 $ 4,976
</TABLE>
97
<PAGE>
Target Funds
Notes to Financial Statements Cont'd.
The Total Return Bond Portfolio entered into interest rate swap
agreements. Under the agreements the Fund receives the excess, if any, of a
floating rate over a fixed rate. The Fund paid a transaction fee for the
agreements. Details of the swaps at July 31, 2000 are as follows:
<TABLE>
<CAPTION>
Notional Unrealized
Amount Fixed Floating Open Termination Appreciation
Type Counterparty (000) Rate Rate Date Date (Depreciation)
--------- -------------- --------- --------- -------- -------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest 6 month
rate Goldman Sachs $ 80 6.175% LIBOR 5/18/00 5/22/30 $(1,479)
Interest 6 month
rate J.P. Morgan 20 6.25% LIBOR 5/19/00 1/24/24 21
Interest 3 month
rate Goldman Sachs 2,600 7.75% LIBOR 5/31/00 9/13/00 6,500
---------------
$ 5,042
---------------
---------------
</TABLE>
Note 5. Capital
The Funds offer Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge of up to 5% for each of the Funds except Class A
shares of Total Return Bond Fund which are sold with a front-end sales charge of
up to 4%. Class B shares are sold with a contingent deferred sales charge which
declines from 5% to zero depending upon the period of time the shares are held.
Class C shares are sold with a front-end sales charge of 1% and a contingent
deferred sales charge of 1% during the first 18 months. Class B shares will
automatically convert to Class A shares on a quarterly basis approximately seven
years after purchase. A special exchange privilege is also available for
shareholders who qualify to purchase Class A shares at net asset value. The
Trust has authorized an unlimited number of shares of beneficial interest at
$.001 par value per share. Of the shares outstanding at July 31, 2000,
Prudential owns 412,016 Class A shares of Total Return Bond Fund.
98
<PAGE>
Target Funds
Notes to Financial Statements Cont'd.
Transactions in shares of beneficial interest during the period November
3, 1999 (commencement of investment operations) through July 31, 2000 were as
follows:
<TABLE>
<CAPTION>
Shares
Issued/
Reacquired
Shares Upon
Issued in Conversion Net Increase
Shares Reinvestment Shares From in Shares
Fund Sold of Dividends Reacquired Class B Outstanding
------------------ ---------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Shares
------------------
Large
Capitalization
Growth Fund
Class A 4,450,664 -- (1,762,780) 210,231 2,898,115
Class B 6,438,685 -- (445,235) (211,029) 5,782,421
Class C 11,894,580 -- (820,593) -- 11,073,987
Large
Capitalization
Value Fund
Class A 949,085 930 (403,292) 5,911 552,634
Class B 1,389,470 1,330 (154,469) (5,932) 1,230,399
Class C 1,782,911 2,265 (400,917) -- 1,384,259
Small
Capitalization
Growth Fund
Class A 897,431 -- (537,134) 8,799 369,096
Class B 737,708 -- (44,722) (8,829) 684,157
Class C 701,538 -- (91,467) 610,071
Small
Capitalization
Value Fund
Class A 816,794 -- (472,425) 3,710 348,079
Class B 534,302 -- (42,801) (3,721) 487,780
Class C 460,602 -- (65,807) -- 394,795
International
Equity Fund
Class A 1,576,885 -- (1,111,418) 5,166 470,633
Class B 841,721 -- (127,305) (5,188) 709,228
Class C 1,052,347 -- (147,597) -- 904,750
Total Return Bond
Fund
Class A 1,874,379 37,524 (930,165) 6,284 988,022
Class B 1,117,403 19,090 (155,944) (6,284) 974,265
Class C 812,573 16,547 (244,115) -- 585,005
</TABLE>
99
<PAGE>
Target Funds
Notes to Financial Statements Cont'd.
<TABLE>
<CAPTION>
Shares
Net Asset Issued/ Net Increase
Value Reacquired in Net
of Shares Upon Assets
Net Proceeds Issued in Cost of Conversion from Fund
from Shares Reinvestment Shares From Share
Fund Sold of Dividends Reacquired Class B Transactions
------------------- ------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Amount
-------------------
Large
Capitalization
Growth Fund
Class A $ 49,385,097 $ -- $ (19,857,242) $ 2,845,914 $ 32,373,769
Class B 71,707,297 -- (5,420,514) (2,845,914) 63,440,869
Class C 124,904,370 -- (10,395,036) -- 114,509,334
Large
Capitalization
Value Fund
Class A 9,189,979 8,830 (3,872,010) 55,601 5,382,400
Class B 13,412,052 12,619 (1,432,316) (55,601) 11,936,754
Class C 17,537,266 21,498 (3,650,028) -- 13,908,736
Small
Capitalization
Growth Fund
Class A 9,546,394 -- (6,296,098) 116,159 3,366,455
Class B 8,443,129 -- (532,825) (116,159) 7,794,145
Class C 7,588,989 -- (1,092,913) -- 6,496,076
Small
Capitalization
Value Fund
Class A 8,251,869 -- (4,948,450) 37,842 3,341,261
Class B 5,480,622 -- (444,194) (37,842) 4,998,586
Class C 4,665,701 -- (681,874) -- 3,983,827
International
Equity Fund
Class A 16,095,501 -- (11,436,452) 52,176 4,711,225
Class B 8,470,898 -- (1,265,561) (52,176) 7,153,161
Class C 10,562,117 -- (1,486,201) -- 9,075,916
Total Return Bond
Fund
Class A 18,691,963 370,194 (9,198,517) 62,205 9,925,845
Class B 11,109,119 188,477 (1,537,075) (62,205) 9,698,316
Class C 8,107,484 163,269 (2,411,410) -- 5,859,343
</TABLE>
100
<PAGE>
Target Funds
Report of Independent Accountants
To the Shareholders and Board of Trustees of
Target Funds
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial positions of Large Capitalization Growth Fund,
Large Capitalization Value Fund, Small Capitalization Growth Fund, Small
Capitalization Value Fund, International Equity Fund and Total Return Bond Fund
(constituting Target Funds, hereafter referred to as the 'Fund') at July 31,
2000, and the results of each of their operations, the changes in each of their
net assets and each of their financial highlights for the period November 3,
1999 (commencement of operations) through July 31, 2000, in conformity with
accounting principles generally accepted in the United States. These financial
statements and financial highlights (hereafter referred to as 'financial
statements') are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with auditing
standards generally accepted in the United States, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit, which included confirmation of securities at July 31,
2000 by correspondence with the custodian and brokers, provides a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
September 22, 2000
101
<PAGE>
Target Funds
Federal Tax Information (unaudited)
As required by the Internal Revenue Code, we wish to advise you as to the
federal tax status of dividends and distributions paid by the Fund during its
fiscal year ended July 31, 2000. Further, we wish to advise you of the
percentage of the ordinary income dividends paid in 2000 that qualify for the
corporate dividends received deduction available to corporate taxpayers.
Detailed below, please find the aggregate dividends and distributions, per
share, paid by each portfolio during the year ended July 31, 2000 as well as the
corporate dividend received deduction percentage:
<TABLE>
<CAPTION>
Ordinary Dividends*
----------------------------
Income Dividend
---------------------------- Received
Portfolio A B C Deduction
------------------------------ ------ ------ ------ ---------
<S> <C> <C> <C> <C>
Large Capitalization Growth $ -- $ -- $ -- 0%
Large Capitalization Value .03 .02 .02 100%
Small Capitalization Growth -- -- -- 0%
Small Capitalization Value -- -- -- 0%
International Equity -- -- -- 0%
Total Return Bond 0.34 0.30 0.30 0%
</TABLE>
* For federal income tax purposes, ordinary income dividends are taxable as
ordinary income.
The International Equity Fund has elected to give the benefit of foreign
tax credit to its shareholders. Accordingly, shareholders who must report their
gross income dividends and distributions in a federal income tax return will be
entitled to a foreign tax credit, or an itemized deduction in computing the
income tax liability. It is generally more advantageous to claim rather than
take a deduction. For the fiscal year ended July 31, 2000, the International
Equity Portfolio intends on passing through $38,003 of ordinary income
distributions as a foreign tax credit.
102
<PAGE>
Target Funds
Important Notice For Certain Shareholders (unaudited)
Many states do not tax the portion of mutual fund dividends attributed to
interest from U.S. Government obligations. Listed below is the percent interest
earned by the following Target funds from U.S. Government obligations for the
calendar year 2000.
To determine the amount of your dividends which may be exempt from state
and local tax, simply multiply the amount in Box 1 of your 1099-Div (Ordinary
Dividends) by the percentage listed below. These percentages do not apply to
taxable capital gain distributions paid by the portfolios.
<TABLE>
<CAPTION>
Percentage of Interest from
U.S. Government
Portfolio* obligations
---------------------------- ---------------------------
<S> <C>
Large Capitalization Growth 0%
Large Capitalization Value 0%
Small Capitalization Growth 0%
Small Capitalization Value 8.5%
International Equity 8.10%
Total Return Bond 19.45%
</TABLE>
* Due to certain minimum portfolio holding requirements in California,
Connecticut and New York, residents of those states will not be able to exclude
U.S. interest income from state and local taxes.
Please consult your tax adviser or state/local authorities to properly
report this informationon your tax return. If you have any questions concerning
amounts listed above, please call your Prudential Securities Financial Adviser.
103
<PAGE>
<PAGE>
Target Funds
Prudential Mutual Funds
Prudential offers a broad range of mutual funds designed
to meet your individual needs. For information about
these funds, contact your financial adviser or call us at
(800) 225-1852. Read the prospectus carefully before you
invest or send money.
STOCK FUNDS
Large Capitalization Stock Funds
Prudential 20/20 Focus Fund
Prudential Equity Fund, Inc.
Prudential Stock Index Fund
Prudential Tax-Managed Funds
Prudential Tax-Managed Equity Fund
Strategic Partners Focused Growth Fund
Target Funds
Large Capitalization Growth Fund
Large Capitalization Value Fund
The Prudential Investment Portfolios, Inc.
Prudential Jennison Growth Fund
Prudential Value Fund
Small- to Mid-Capitalization Stock Funds
Nicholas-Applegate Fund, Inc.
Nicholas-Applegate Growth Equity Fund
Prudential Small Company Fund, Inc.
Prudential Tax-Managed Small-Cap Fund, Inc.
Prudential U.S. Emerging Growth Fund, Inc.
Target Funds
Small Capitalization Growth Fund
Small Capitalization Value Fund
The Prudential Investment Portfolios, Inc.
Prudential Jennison Equity Opportunity Fund
Sector Stock Funds
Prudential Natural Resources Fund, Inc.
Prudential Real Estate Securities Fund
Prudential Sector Funds, Inc.
Prudential Financial Services Fund
Prudential Health Sciences Fund
Prudential Technology Fund
Prudential Utility Fund
Global/International Stock Funds
Global Utility Fund, Inc.
Prudential Europe Growth Fund, Inc.
Prudential Pacific Growth Fund, Inc.
Prudential World Fund, Inc.
Prudential Global Growth Fund
Prudential International Value Fund
Prudential Jennison International Growth Fund
Target Funds
International Equity Fund
BALANCED/ALLOCATION FUNDS
Prudential Diversified Funds
Conservative Growth Fund
Moderate Growth Fund
High Growth Fund
The Prudential Investment Portfolios, Inc.
Prudential Active Balanced Fund
<PAGE>
www.prudential.com (800) 225-1852
BOND FUNDS
Taxable Bond Funds
Prudential Government Income Fund, Inc.
Prudential Government Securities Trust
Short-Intermediate Term Series
Prudential High Yield Fund, Inc.
Prudential High Yield Total Return Fund, Inc.
Prudential Short-Term Corporate Bond Fund, Inc.
Income Portfolio
Prudential Total Return Bond Fund, Inc.
Target Funds
Total Return Bond Fund
Tax-Free Bond Funds
Prudential California Municipal Fund
California Series
California Income Series
Prudential Municipal Bond Fund
High Income Series
Insured Series
Prudential Municipal Series Fund
Florida Series
Massachusetts Series
New Jersey Series
New York Series
North Carolina Series
Ohio Series
Pennsylvania Series
Prudential National Municipals Fund, Inc.
Global/International Bond Funds
Prudential Global Total Return Fund, Inc.
Prudential International Bond Fund, Inc.
MONEY MARKET FUNDS
Taxable Money Market Funds
Cash Accumulation Trust
Liquid Assets Fund
National Money Market Fund
Prudential Government Securities Trust
Money Market Series
U.S. Treasury Money Market Series
Prudential Institutional Liquidity Portfolio, Inc.
Institutional Money Market Series
Prudential MoneyMart Assets, Inc.
Prudential Special Money Market Fund, Inc.
Money Market Series
Tax-Free Money Market Funds
Prudential California Municipal Fund
California Money Market Series
Prudential Municipal Series Fund
Connecticut Money Market Series
Massachusetts Money Market Series
New Jersey Money Market Series
New York Money Market Series
Prudential Tax-Free Money Fund, Inc.
Other Money Market Funds
Command Government Fund
Command Money Fund
Command Tax-Free Fund
<PAGE>
Target Funds
Getting the Most from Your Prudential Mutual Fund
How many times have you read these reports-or other
financial materials-and stumbled across a word that you
don't understand?
Many shareholders have run into the same problem. We'd
like to help. So we'll use this space from time to time
to explain some of the words you might have read, but not
understood. And if you have a favorite word that no one
can explain to your satisfaction, please write to us.
Basis Point: 1/100th of 1%. For example, one-half of one
percent is 50 basis points.
Collateralized Mortgage Obligations (CMOs): Mortgage-
backed bonds that separate mortgage pools into different
maturity classes called tranches. These instruments are
sensitive to changes in interest rates and homeowner
refinancing activity. They are subject to prepayment and
maturity extension risk.
Derivatives: Securities that derive their value from
other securities. The rate of return of these financial
instruments rises and falls-sometimes very suddenly-in
response to changes in some specific interest rate,
currency, stock, or other variable.
Discount Rate: The interest rate charged by the Federal
Reserve on loans to member banks.
Federal Funds Rate: The interest rate charged by one bank
to another on overnight loans.
Futures Contract: An agreement to purchase or sell a
specific amount of a commodity or financial instrument at a set price at a
specified date in the future.
<PAGE>
www.prudential.com (800) 225-1852
Leverage: The use of borrowed assets to enhance return.
The expectation is that the interest rate charged on
borrowed funds will be lower than the return on the
investment. While leverage can increase profits, it can
also magnify losses.
Liquidity: The ease with which a financial instrument (or
product) can be bought or sold (converted into cash) in
the financial markets.
Price/Earnings Ratio: The price of a share of stock
divided by the earnings per share for a 12-month period.
Option: An agreement to purchase or sell something, such
as shares of stock, by a certain time for a specified
price. An option need not be exercised.
Spread: The difference between two values; often used to
describe the difference between "bid" and "asked" prices of a
security, or between the yields of two similar maturity
bonds.
Yankee Bond: A bond sold by a foreign company or
government on the U.S. market and denominated in U.S.
dollars.
<PAGE>
Target Funds Large Capitalization Growth Fund
Class A Growth of a $10,000 Investment
(GRAPH)
Cumulative Returns as of 7/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge N/A N/A N/A 25.31%
Without Sales Charge N/A N/A N/A 31.90%
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. Since the Fund has been in
existence less than one year, returns are cumulative, and
therefore no average annual total returns are presented.
The graph compares a $10,000 investment in the Large
Capitalization Growth Fund (Class A shares) with a
similar investment in the Standard & Poor's 500 Composite
Stock Price Index (S&P 500 Index) by portraying the
initial account value at the commencement of operations
of Class A shares, and the account value at the end of
the current fiscal period (July 31), as measured on a
quarterly basis, beginning in November 1999 for Class A
shares. For purposes of the graph, and unless otherwise
indicated, it has been assumed that (a) the maximum
applicable front-end sales charge was deducted from the
initial $10,000 investment in Class A shares; (b) all
recurring fees (including management fees) were deducted;
and (c) all dividends and distributions were reinvested.
The S&P 500 Index is an unmanaged index of 500 stocks of
large U.S. companies. It gives a broad look
at how stock prices have performed. The S&P 500 Index
total returns include the reinvestment of all
dividends, but do not include the effect of sales charges
or operating expenses of a mutual fund. The securities
that comprise the Index may differ substantially from the
securities in the Fund. The Index is not the only one
that may be used to characterize performance of large-
capitalization stock funds. Other indexes may portray
different comparative performance. Investors cannot
invest directly in an index.
This graph is furnished to you in accordance with SEC
regulations.
<PAGE>
www.prudential.com (800) 225-1852
Class B Growth of a $10,000 Investment
(GRAPH)
Cumulative Returns as of 7/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge N/A N/A N/A 26.10%
Without Sales Charge N/A N/A N/A 31.10%
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. Since the Fund has been in
existence less than one year, returns are cumulative, and
therefore no average annual total returns are presented.
The graph compares a $10,000 investment in the Large
Capitalization Growth Fund (Class B shares) with a
similar investment in the Standard & Poor's 500 Composite
Stock Price Index (S&P 500 Index) by portraying the
initial account values at the commencement of operations
of Class B shares, and the account value at the end of
the current fiscal period (July 31), as measured on a
quarterly basis, beginning in November 1999 for Class B
shares. For purposes of the graph, and unless otherwise
indicated, it has been assumed that (a) the maximum
applicable contingent deferred sales charge was deducted
from the value of the investment in Class B shares,
assuming full redemption on July 31, 2000; (b) all
recurring fees (including management fees) were deducted;
and (c) all dividends and distributions were reinvested.
Class B shares will automatically convert to Class A
shares, on a quarterly basis, beginning approximately
seven years after purchase. This conversion feature is
not reflected in the graph.
The S&P 500 Index is an unmanaged index of 500 stocks of
large U.S. companies. It gives a broad look
at how stock prices have performed. The S&P 500 Index
total returns include the reinvestment of all
dividends, but do not include the effect of sales charges
or operating expenses of a mutual fund. The securities
that comprise the Index may differ substantially from the
securities in the Fund. The Index is not the only one
that may be used to characterize performance of large-
capitalization stock funds. Other indexes may portray
different comparative performance. Investors cannot
invest directly in an index.
This graph is furnished to you in accordance with SEC
regulations.
<PAGE>
Target Funds Large Capitalization Growth Fund
Class C Growth of a $10,000 Investment
(GRAPH)
Cumulative Returns as of 7/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge N/A N/A N/A 28.79%
Without Sales Charge N/A N/A N/A 31.10%
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. Since the Fund has been in
existence less than one year, returns are cumulative, and
therefore no average annual total returns are presented.
The graph compares a $10,000 investment in the Large
Capitalization Growth Fund (Class C shares) with a
similar investment in the Standard & Poor's 500 Composite
Stock Price Index
(S&P 500 Index) by portraying the initial account value
at the commencement of operations of Class C shares, and
the account value at the end of the current fiscal period
(July 31), as measured on a quarterly basis, beginning in
November 1999 for Class C shares. For purposes of the
graph, and unless otherwise indicated, it has been
assumed that (a) the maximum applicable front-end sales
charge was deducted from the initial $10,000 investment
in Class C shares; (b) the maximum applicable contingent
deferred sales charge was deducted from the value of the
investment in Class C shares, assuming full redemption on
July 31, 2000; (c) all recurring fees (including
management fees) were deducted; and (d) all dividends and
distributions were reinvested.
The S&P 500 Index is an unmanaged index of 500 stocks of
large U.S. companies. It gives a broad look
at how stock prices have performed. The S&P 500 Index
total returns include the reinvestment of all
dividends, but do not include the effect of sales charges
or operating expenses of a mutual fund. The securities
that comprise the Index may differ substantially from the
securities in the Fund. The Index is not the only one
that may be used to characterize performance of large-
capitalization stock funds. Other indexes may portray
different comparative performance. Investors cannot
invest directly in an index.
This graph is furnished to you in accordance with SEC
regulations.
<PAGE>
Target Funds Large Capitalization Value Fund
Class A Growth of a $10,000 Investment
(GRAPH)
Cumulative Returns as of 7/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge N/A N/A N/A -11.10%
Without Sales Charge N/A N/A N/A -6.42%
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. Since the Fund has been in
existence less than one year, returns are cumulative, and
therefore no average annual total returns are presented.
The graph compares a $10,000 investment in the Large
Capitalization Value Fund (Class A shares) with a similar
investment in the Standard & Poor's 500 Composite Stock
Price Index (S&P 500 Index) by portraying the initial
account value at the commencement of operations of Class
A shares, and the account value at the end of the current
fiscal period (July 31), as measured on a quarterly
basis, beginning in November 1999 for Class A shares. For
purposes of the graph, and unless otherwise
indicated, it has been assumed that (a) the maximum
applicable front-end sales charge was deducted from the
initial $10,000 investment in Class A shares; (b) all
recurring fees (including management fees) were deducted;
and (c) all dividends and distributions were reinvested.
The S&P 500 Index is an unmanaged index of 500 stocks of
large U.S. companies. It gives a broad look
at how stock prices have performed. The S&P 500 Index
total returns include the reinvestment of all
dividends, but do not include the effect of sales charges
or operating expenses of a mutual fund. The securities
that comprise the Index may differ substantially from the
securities in the Fund. The Index is not the only one
that may be used to characterize performance of large-
capitalization stock funds. Other indexes may portray
different comparative performance. Investors cannot
invest directly in an index.
This graph is furnished to you in accordance with SEC
regulations.
<PAGE>
Target Funds Large Capitalization Value Fund
Class B Growth of a $10,000 Investment
(GRAPH)
Cumulative Returns as of 7/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge N/A N/A N/A -12.02%
Without Sales Charge N/A N/A N/A -7.02%
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. Since the Fund has been in
existence less than one year, returns are cumulative, and
therefore no average annual total returns are presented.
The graph compares a $10,000 investment in the Large
Capitalization Value Fund (Class B shares) with a similar
investment in the Standard & Poor's 500 Composite Stock
Price Index (S&P 500 Index) by portraying the initial
account values at the commencement of operations of Class
B shares, and the account value at the end of the current
fiscal period (July 31), as measured on a quarterly
basis, beginning in November 1999 for Class B shares. For
purposes of the graph, and unless otherwise
indicated, it has been assumed that (a) the maximum
applicable contingent deferred sales charge was deducted
from the value of the investment in Class B shares,
assuming full redemption on July 31, 2000; (b) all
recurring fees (including management fees) were deducted;
and (c) all dividends and distributions were reinvested.
Class B shares will automatically convert to Class A
shares, on a quarterly basis, beginning approximately
seven years after purchase. This conversion feature is
not reflected in the graph.
The S&P 500 Index is an unmanaged index of 500 stocks of
large U.S. companies. It gives a broad look
at how stock prices have performed. The S&P 500 Index
total returns include the reinvestment of all
dividends, but do not include the effect of sales charges
or operating expenses of a mutual fund. The securities
that comprise the Index may differ substantially from the
securities in the Fund. The Index is not the only one
that may be used to characterize performance of large-
capitalization stock funds. Other indexes may portray
different comparative performance. Investors cannot
invest directly in an index.
This graph is furnished to you in accordance with SEC
regulations.
<PAGE>
www.prudential.com (800) 225-1852
Class C Growth of a $10,000 Investment
(GRAPH)
Cumulative Returns as of 7/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge N/A N/A N/A -8.95%
Without Sales Charge N/A N/A N/A -7.02%
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. Since the Fund has been in
existence less than one year, returns are cumulative, and
therefore no average annual total returns are presented.
The graph compares a $10,000 investment in the Large
Capitalization Value Fund (Class C shares) with a similar
investment in the Standard & Poor's 500 Composite Stock
Price Index (S&P 500 Index) by portraying the initial
account value at the commencement of operations of Class
C shares, and the account value at the end of the current
fiscal period (July 31), as measured on a quarterly
basis, beginning in November 1999 for Class C shares. For
purposes of the graph, and unless otherwise
indicated, it has been assumed that (a) the maximum
applicable front-end sales charge was deducted from the
initial $10,000 investment in Class C shares; (b) the
maximum applicable contingent deferred sales charge was
deducted from the value of the investment in Class C
shares, assuming full redemption on July 31, 2000; (c)
all recurring fees (including management fees) were
deducted; and (d) all dividends and distributions were
reinvested.
The S&P 500 Index is an unmanaged index of 500 stocks of
large U.S. companies. It gives a broad look
at how stock prices have performed. The S&P 500 Index
total returns include the reinvestment of all
dividends, but do not include the effect of sales charges
or operating expenses of a mutual fund. The securities
that comprise the Index may differ substantially from the
securities in the Fund. The Index is not the only one
that may be used to characterize performance of large-
capitalization stock funds. Other indexes may portray
different comparative performance. Investors cannot
invest directly in an index.
This graph is furnished to you in accordance with SEC
regulations.
<PAGE>
Target Funds Small Capitalization Growth Fund
Class A Growth of a $10,000 Investment
(GRAPH)
Cumulative Returns as of 7/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge N/A N/A N/A 19.89%
Without Sales Charge N/A N/A N/A 26.20%
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. Since the Fund has been in
existence less than one year, returns are cumulative, and
therefore no average annual total returns are presented.
The graph compares a $10,000 investment in the Small
Capitalization Growth Fund (Class A shares) with a
similar investment in the Russell 2000 Index (Russell
2000) by portraying the initial account value at the
commencement of operations of Class A shares, and the
account value at the end of the current fiscal period
(July 31), as measured on a quarterly basis, beginning in
November 1999 for
Class A shares. For purposes of the graph, and unless
otherwise indicated, it has been assumed that (a) the
maximum applicable front-end sales charge was deducted
from the initial $10,000 investment in Class A shares;
(b) all recurring fees (including management fees) were
deducted; and (c) all dividends and
distributions were reinvested.
The Russell 2000 is an unmanaged weighted index that
comprises the smallest 2,000 stocks among the largest
3,000 equity-capitalized U.S. corporations, and
represents approximately 10% of their aggregate market
value. The Russell 2000 total returns include the
reinvestment of all dividends, but do not include the
effect of sales charges or operating expenses of a mutual
fund. The securities that comprise the Russell 2000 may
differ substantially from the securities in the Fund. The
Russell 2000 Index is not the only one that may be used
to characterize performance of small-capitalization stock
funds. Other indexes may
portray different comparative performance. Investors
cannot invest directly in an index.
This graph is furnished to you in accordance with SEC
regulations.
<PAGE>
www.prudential.com (800) 225-1852
Class B Growth of a $10,000 Investment
(GRAPH)
Cumulative Returns as of 7/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge N/A N/A N/A 20.40%
Without Sales Charge N/A N/A N/A 25.40%
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. Since the Fund has been in
existence less than one year, returns are cumulative, and
therefore no average annual total returns are presented.
The graph compares a $10,000 investment in the Small
Capitalization Growth Fund (Class B shares) with a
similar investment in the Russell 2000 Index (Russell
2000) by portraying the
initial account value at the commencement of operations
of Class B shares, and the account value at the end of
the current fiscal period (July 31), as measured on a
quarterly basis, beginning in November 1999 for Class B
shares. For purposes of the graph, and unless otherwise
indicated, it has been assumed that (a) the maximum
applicable contingent deferred sales charge was deducted
from the value of the investment in Class B shares,
assuming full redemption on July 31, 2000; (b) all
recurring fees (including
management fees) were deducted; and (c) all dividends and
distributions were reinvested. Class B shares will
automatically convert to Class A shares, on a quarterly
basis, beginning approximately seven years after
purchase. This conversion feature is not reflected in the
graph.
The Russell 2000 is an unmanaged weighted index that
comprises the smallest 2,000 stocks among the largest
3,000 equity-capitalized U.S. corporations, and
represents approximately 10% of their aggregate market
value. The Russell 2000 total returns include the
reinvestment of all dividends, but do not include the
effect of sales charges or operating expenses of a mutual
fund. The securities that comprise the Russell 2000 may
differ substantially from the securities in the Fund. The
Russell 2000 is not the only one that may be used to
characterize performance of small-capitalization stock
funds. Other indexes may
portray different comparative performance. Investors
cannot invest directly in an index.
This graph is furnished to you in accordance with SEC
regulations.
<PAGE>
Target Funds Small Capitalization Growth Fund
Class C Growth of a $10,000 Investment
(GRAPH)
Cumulative Returns as of 7/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge N/A N/A N/A 23.15%
Without Sales Charge N/A N/A N/A 25.40%
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. Since the Fund has been in
existence less than one year, returns are cumulative, and
therefore no average annual total returns are presented.
The graph compares a $10,000 investment in the Small
Capitalization Growth Fund (Class C shares) with a
similar investment in the Russell 2000 Index (Russell
2000) by portraying the
initial account value at the commencement of operations
of Class C shares, and the account value at the end of
the current fiscal period (July 31), as measured on a
quarterly basis, beginning in November 1999 for Class C
shares. For purposes of the graph, and unless otherwise
indicated, it has been assumed that (a) the maximum
applicable front-end sales charge was deducted from the
initial $10,000 investment in
Class C shares; (b) the maximum applicable contingent
deferred sales charge was deducted from the value of the
investment in Class C shares, assuming full redemption on
July 31, 2000; (c) all recurring fees (including
management fees) were deducted; and (d) all dividends and
distributions were reinvested.
The Russell 2000 is an unmanaged weighted index that
comprises the smallest 2,000 stocks among the largest
3,000 equity-capitalized U.S. corporations, and
represents approximately 10% of their aggregate market
value. The Russell 2000 total returns include the
reinvestment of all dividends, but do not include the
effect of sales charges or operating expenses of a mutual
fund. The securities that comprise the Russell 2000 may
differ substantially from the securities in the Fund. The
Index is not the only one that may be used to
characterize performance of small-capitalization stock
funds. Other indexes may portray different comparative
performance. Investors cannot invest directly in an
index.
This graph is furnished to you in accordance with SEC
regulations.
<PAGE>
Target Funds Small Capitalization Value Fund
Class A Growth of a $10,000 Investment
(GRAPH)
Cumulative Returns as of 7/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge N/A N/A N/A 5.26%
Without Sales Charge N/A N/A N/A 10.80%
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. Since the Fund has been in
existence less than one year, returns are cumulative, and
therefore no average annual total returns are presented.
The graph compares a $10,000 investment in the Small
Capitalization Value Fund (Class A shares) with a similar
investment in the Russell 2000 Index (Russell 2000) by
portraying the
initial account value at the commencement of operations
of Class A shares, and the account value at the end of
the current fiscal period (July 31), as measured on a
quarterly basis, beginning in November 1999 for Class A
shares. For purposes of the graph, and unless otherwise
indicated, it has been assumed that (a) the maximum
applicable front-end sales charge was deducted from the
initial $10,000 investment in Class A shares; (b) all
recurring fees (including management fees) were deducted;
and (c) all dividends and distributions were reinvested.
The Russell 2000 is an unmanaged weighted index that
comprises the smallest 2,000 stocks among the largest
3,000 equity-capitalized U.S. corporations, and
represents approximately 10% of their aggregate market
value. The Russell 2000 total returns include the
reinvestment of all dividends, but do not include the
effect of sales charges or operating expenses of a mutual
fund. The securities that comprise the Russell 2000 may
differ substantially from the securities in the Fund. The
Russell 2000 Index is not the only one that may be used
to characterize performance of small-capitalization stock
funds. Other indexes may portray different comparative
performance. Investors cannot invest directly in an
index.
This graph is furnished to you in accordance with SEC
regulations.
<PAGE>
Target Funds Small Capitalization Value Fund
Class B Growth of a $10,000 Investment
(GRAPH)
Cumulative Returns as of 7/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge N/A N/A N/A 5.10%
Without Sales Charge N/A N/A N/A 10.10%
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. Since the Fund has been in
existence less than one year, returns are cumulative, and
therefore no average annual total returns are presented.
The graph compares a $10,000 investment in the Small
Capitalization Value Fund (Class B shares) with a similar
investment in the Russell 2000 Index (Russell 2000) by
portraying the
initial account value at the commencement of operations
of Class B shares, and the account value at the end of
the current fiscal period (July 31), as measured on a
quarterly basis, beginning in November 1999 for Class B
shares. For purposes of the graph, and unless otherwise
indicated, it has been assumed that (a) the maximum
applicable contingent deferred sales charge was deducted
from the value of the investment in Class B shares,
assuming full redemption on July 31, 2000; (b) all
recurring fees (including management fees) were deducted;
and (c) all dividends and distributions were reinvested.
Class B shares will automatically convert to Class A
shares, on a quarterly basis, beginning approximately
seven years after purchase. This conversion feature is
not reflected in the graph.
The Russell 2000 is an unmanaged weighted index that
comprises the smallest 2,000 stocks among the largest
3,000 equity-capitalized U.S. corporations, and
represents approximately 10% of their aggregate market
value. The Russell 2000 total returns include the
reinvestment of all dividends, but do not include the
effect of sales charges or operating expenses of a mutual
fund. The securities that comprise the Russell 2000 may
differ substantially from the securities in the Fund. The
Russell 2000 is not the only one that may be used to
characterize performance of small-capitalization stock
funds. Other indexes may
portray different comparative performance. Investors
cannot invest directly in an index.
This graph is furnished to you in accordance with SEC
regulations.
<PAGE>
www.prudential.com (800) 225-1852
Class C Growth of a $10,000 Investment
(GRAPH)
Cumulative Returns as of 7/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge N/A N/A N/A 8.00%
Without Sales Charge N/A N/A N/A 10.10%
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. Since the Fund has been in
existence less than one year, returns are cumulative, and
therefore no average annual total returns are presented.
The graph compares a $10,000 investment in the Small
Capitalization Value Fund (Class C shares) with a similar
investment in the Russell 2000 Index (Russell 2000) by
portraying the
initial account value at the commencement of operations
of Class C shares, and the account value at the end of
the current fiscal period (July 31), as measured on a
quarterly basis, beginning in November 1999 for Class C
shares. For purposes of the graph, and unless otherwise
indicated, it has been assumed that (a) the maximum
applicable front-end sales charge was deducted from the
initial $10,000 investment in Class C shares; (b) the
maximum applicable contingent deferred sales charge was
deducted from the value of the investment in Class C
shares, assuming full redemption on July 31, 2000; (c)
all recurring fees (including management fees) were
deducted; and (d) all dividends and distributions were
reinvested.
The Russell 2000 is an unmanaged weighted index that
comprises the smallest 2,000 stocks among the largest
3,000 equity-capitalized U.S. corporations, and
represents approximately 10% of their aggregate market
value. The Russell 2000 total returns include the
reinvestment of all dividends, but do not include the
effect of sales charges or operating expenses of a mutual
fund. The securities that comprise the Russell 2000 may
differ substantially from the securities in the Fund. The
Index is not the only one that may be used to
characterize performance of small-capitalization stock
funds. Other indexes may portray different comparative
performance. Investors cannot invest directly in an
index.
This graph is furnished to you in accordance with SEC
regulations.
<PAGE>
Target Funds International Equity
Class A Growth of a $10,000 Investment
(GRAPH)
Cumulative Returns as of 7/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge N/A N/A N/A -5.48%
Without Sales Charge N/A N/A N/A -0.50%
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. Since the Fund has been in
existence less than one year, returns are cumulative, and
therefore no average annual total returns are presented.
The graph compares a $10,000 investment in the
International Equity Fund
(Class A shares) with a similar investment in the Morgan
Stanley Capital International Europe, Australia, Far East
Index (MSCI EAFE Index) by portraying the initial account
value at the commencement of
operations of Class A shares, and the account value at
the end of the current fiscal period (July 31), as
measured on a quarterly basis, beginning in November 1999
for Class A shares. For purposes of the graph, and unless
otherwise indicated, it has been assumed that (a) the
maximum applicable front-end sales charge was deducted
from the initial $10,000 investment in Class A shares;
(b) all recurring fees (including management fees) were
deducted; and (c) all dividends and distributions were
reinvested.
The MSCI EAFE Index is an unmanaged weighted index of
performance that reflects stock price
movements in Europe, Australasia, and the Far East. The
MSCI EAFE Index total returns include the
reinvestment of all dividends, but do not include the
effect of sales charges or operating expenses of a mutual
fund. The securities that comprise the MSCI EAFE Index
may differ substantially from the securities in the Fund.
The MSCI EAFE Index is not the only one that may be used
to characterize performance of international stock funds.
Other indexes may portray different comparative
performance. Investors
cannot invest directly in an index.
This graph is furnished to you in accordance with SEC
regulations.
<PAGE>
www.prudential.com (800) 225-1852
Class B Growth of a $10,000 Investment
(GRAPH)
Cumulative Returns as of 7/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge N/A N/A N/A -6.05%
Without Sales Charge N/A N/A N/A -1.10%
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. Since the Fund has been in
existence less than one year, returns are cumulative, and
therefore no average annual total returns are presented.
The graph compares a $10,000 investment in the
International Equity Fund
(Class B shares) with a similar investment in the Morgan
Stanley Capital International Europe, Australia, Far East
Index (MSCI EAFE Index) by portraying the initial account
value at the commencement of
operations of Class B shares, and the account value at
the end of the current fiscal period (July 31), as
measured on a quarterly basis, beginning in November 1999
for Class B shares. For purposes of the graph, and unless
otherwise indicated, it has been assumed that (a) the
maximum applicable contingent deferred sales charge was
deducted from the value of the investment in Class B
shares, assuming full redemption on July 31, 2000; (b)
all recurring fees (including management fees) were
deducted; and (c) all dividends and distributions were
reinvested. Class B shares will automatically convert to
Class A shares, on a quarterly basis, beginning
approximately seven years after purchase. This conversion
feature is not reflected in the graph.
The MSCI EAFE Index is an unmanaged weighted index of
performance that reflects stock price
movements in Europe, Australasia, and the Far East. The
MSCI EAFE Index total returns include the
reinvestment of all dividends, but do not include the
effect of sales charges or operating expenses of a mutual
fund. The securities that comprise the MSCI EAFE Index
may differ substantially from the securities in the Fund.
The MSCI EAFE Index is not the only one that may be used
to characterize performance of international stock funds.
Other indexes may portray different comparative
performance. Investors
cannot invest directly in an index.
This graph is furnished to you in accordance with SEC
regulations.
<PAGE>
Target Funds International Equity
Class C Growth of a $10,000 Investment
(GRAPH)
Cumulative Returns as of 7/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge N/A N/A N/A -3.07%
Without Sales Charge N/A N/A N/A -1.10%
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. Since the Fund has been in
existence less than one year, returns are cumulative, and
therefore no average annual total returns are presented.
The graph compares a $10,000 investment in the
International Equity Fund
(Class C shares) with a similar investment in the Morgan
Stanley Capital International Europe, Australia, Far East
Index (MSCI EAFE Index) by portraying the initial account
value at the commencement of
operations of Class C shares, and the account value at
the end of the current fiscal period (July 31), as
measured on a quarterly basis, beginning in November 1999
for Class C shares. For purposes of the graph, and unless
otherwise indicated, it has been assumed that (a) the
maximum applicable front-end sales charge was deducted
from the initial $10,000 investment in Class C shares;
(b) the maximum applicable contingent deferred sales
charge was deducted from the value of the investment in
Class C shares, assuming full redemption on July 31,
2000; (c) all recurring fees (including management fees)
were deducted; and (d) all dividends and distributions
were reinvested.
The MSCI EAFE Index is an unmanaged weighted index of
performance that reflects stock price
movements in Europe, Australasia, and the Far East. The
MSCI EAFE Index total returns include the
reinvestment of all dividends, but do not include the
effect of sales charges or operating expenses of a mutual
fund. The securities that comprise the MSCI EAFE Index
may differ substantially from the securities in the Fund.
The MSCI EAFE Index is not the only one that may be used
to characterize performance of international stock funds.
Other indexes may portray different comparative
performance. Investors cannot invest directly in an
index.
This graph is furnished to you in accordance with SEC
regulations.
<PAGE>
Target Funds Total Return Bond Fund
Class A Growth of a $10,000 Investment
(GRAPH)
Cumulative Returns as of 7/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge N/A N/A N/A -0.82%
Without Sales Charge N/A N/A N/A 3.32%
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. Since the Fund has been in
existence less than one year, returns are cumulative, and
therefore no average annual total returns are presented.
The graph compares a $10,000 investment in the Total
Return Bond Fund (Class A shares) with a similar
investment in the Lehman Brothers Government/Credit Bond
Index (the Index) by portraying the initial account value
at the commencement of operations of Class A shares, and
the account value at the end of the current fiscal period
(July 31), as measured on a quarterly basis, beginning in
November 1999 for Class A shares. For purposes of the
graph, and unless otherwise indicated, it has been
assumed that (a) the maximum applicable front-end sales
charge was deducted from the
initial $10,000 investment in Class A shares; (b) all
recurring fees (including management fees) were
deducted; and (c) all dividends and distributions were
reinvested.
The Index is an unmanaged weighted index comprising
public, fixed-rate, nonconvertible domestic corporate
debt securities rated at least investment grade, and
public obligations of the U.S. Treasury. The Index total
returns include the reinvestment of all dividends, but do
not include the effect of sales charges or operating
expenses of a mutual fund. The securities that comprise
the Index may differ substantially from the securities in
the Fund. The Index is not the only one that may be used
to characterize performance of bond funds. Other indexes
may portray different comparative performance. Investors
cannot invest directly in an index.
This graph is furnished to you in accordance with SEC
regulations.
<PAGE>
Target Funds Total Return Bond Fund
Class B Growth of a $10,000 Investment
(GRAPH)
Cumulative Returns as of 7/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge N/A N/A N/A -2.05%
Without Sales Charge N/A N/A N/A 2.95%
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. Since the Fund has been in
existence less than one year, returns are cumulative, and
therefore no average annual total returns are presented.
The graph compares a $10,000 investment in the Total
Return Bond Fund
(Class B shares) with a similar investment in the Lehman
Brothers Government/Credit Bond Index (the Index) by
portraying the initial account value at the commencement
of operations of Class B shares, and the account value at
the end of the current fiscal period (July 31), as
measured on a quarterly basis, beginning in November 1999
for Class B shares. For purposes of the graph, and unless
otherwise indicated, it has been assumed that (a) the
maximum applicable contingent deferred sales charge was
deducted from the value of the investment in Class B
shares, assuming full redemption on July 31, 2000; (b)
all recurring fees (including management fees) were
deducted; and (c) all dividends and distributions were
reinvested. Class B shares will automatically convert to
Class A shares, on a quarterly basis, beginning
approximately seven years after purchase. This conversion
feature is not reflected in the graph.
The Index is an unmanaged weighted index comprising
public, fixed-rate, nonconvertible domestic corporate
debt securities rated at least investment grade, and
public obligations of the U.S. Treasury. The Index total
returns include the reinvestment of all dividends, but do
not include the effect of sales charges or operating
expenses of a mutual fund. The securities that comprise
the Index may differ substantially from the securities in
the Fund. The Index is not the only one that may be used
to characterize performance of bond funds. Other indexes
may portray different comparative performance. Investors
cannot invest directly in an index.
This graph is furnished to you in accordance with SEC
regulations.
<PAGE>
www.prudential.com (800) 225-1852
Class C Growth of a $10,000 Investment
(GRAPH)
Cumulative Returns as of 7/31/00
One Year Five Years Ten Years Since Inception
With Sales Charge N/A N/A N/A 0.92%
Without Sales Charge N/A N/A N/A 2.95%
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. Since the Fund has been in
existence less than one year, returns are cumulative, and
therefore no average annual total returns are presented.
The graph compares a $10,000 investment in the Total
Return Bond Fund
(Class C shares) with a similar investment in the Lehman
Brothers Government/Credit Bond Index (the Index) by
portraying the initial account value at the commencement
of operations of Class C shares, and the account value at
the end of the current fiscal period (July 31), as
measured on a quarterly basis, beginning in November 1999
for Class C shares. For purposes of the graph, and unless
otherwise indicated, it has been assumed that (a) the
maximum applicable front-end sales charge was deducted
from the initial $10,000 investment in Class C shares;
(b) the maximum applicable contingent deferred sales
charge was deducted from the value of the investment in
Class C shares, assuming full redemption on July 31,
2000; (c) all recurring fees (including management fees)
were deducted; and (d) all dividends and distributions
were reinvested.
The Index is an unmanaged weighted index comprising
public, fixed-rate, nonconvertible domestic corporate
debt securities rated at least investment grade, an
public obligations of the U.S. Treasury. The Index total
returns include the reinvestment of all dividends, but do
not include the effect of sales charges or operating
expenses of a mutual fund. The securities that comprise
the Index may differ substantially from the securities in
the Fund. The Index is not the only one that may be used
to characterize performance of bond funds. Other indexes
may portray different comparative performance. Investors
cannot invest directly in an index.
This graph is furnished to you in accordance with SEC
regulations.
<PAGE>
For More Information
Prudential Mutual Funds
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
(800) 225-1852
Visit Prudential's web site at:
http://www.prudential.com
Trustees
Eugene C. Dorsey
Saul K. Fenster, Ph.D.
Robert F. Gunia
Prof. Maurice F. Holmes
Robert E. LaBlanc
Douglas H. McCorkindale
W. Scott McDonald, Jr.
Thomas T. Mooney
David R. Odenath, Jr.
Stephen Stoneburn
John R. Strangfeld
Joseph Weber
Clay T. Whitehead
Officers
John R. Strangfeld, President
Robert F. Gunia, Vice President
David R. Odenath, Jr., Vice President
Grace C. Torres, Treasurer
William V. Healey, Assistant Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three, 100 Mulberry Street
Newark, NJ 07102-4077
Investment Advisers
Columbus Circle Investors
Metro Center, One Station Plaza
Stamford, CT 06902
Chase Fleming Asset Management USA
320 Park Avenue
New York, NY 10022
Mercury Advisors (formerly Hotchkis and Wiley)
725 South Figueroa Street, Suite 4000
Los Angeles, CA 90017
J.P. Morgan Investment Management, Inc.
522 Fifth Avenue
New York, NY 10036
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 LLC
840 Newport Center Drive
Newport Beach, CA 92660
Sawgrass Asset Management, LLC
4337 Pablo Oaks Court
Jacksonville, FL 32224
Wood, Struthers & Winthrop
Division of 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 8098
Philadelphia, PA 19101
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
Cusip Numbers
Class A Class B Class C
TLCG 87612T103 87612T202 87612T301
TLCV 87612T400 87612T509 87612T608
TSCG 87612T707 87612T806 87612T814
TSCV 87612T822 87612T830 87612T848
TIEF 87612T855 87612T863 87612T871
TTRB 87612T889 87612T780 87612T798
MF189E
(ICON) Printed on Recycled Paper
