TARGET INCOME FUND
Annual Report
October 31, 1995
<PAGE>
December 9, 1995
Dear Shareholder:
The Target Income Fund has now completed its third year of operations. It
continues to provide consistent performance and returns.
As has been the case since inception, the net asset value of your shares has
remained constant at $10.00 per share. And as always, it is the on-going intent
of the Fund to attempt to maintain this fixed share price at all times.
One of the potential benefits of the Target Income Fund is that it can
participate in changing interest rates. Since our last semi-annual report in the
spring of 1995, interest rates have flattened and in some cases declined.
Short-term money-market rates now start at 5.25% as reported in the December 20,
1995, edition of the Wall Street Journal.
Through October 31, 1995 (the Fund's fiscal year end), the Target Income Fund
has recorded a 12-month average annualized return of 7.66%. The Fund's portfolio
now holds approximately 45 short-term loans and credit-lines, representing a
diversified and balanced pool of assets. Assets of the Fund stand at $11 million
in total.
We hope you have been satisfied with the performance of the Fund and will let us
know if there is anything we can do to be of further assistance. Thank you for
your continued confidence and support of the Target Income Fund.
TARGET CAPITAL ADVISORS, INC.
<PAGE>
<TABLE>
<CAPTION>
TARGET INCOME FUND
Schedule of Investments
October 31, 1995
SENIOR COLLATERALIZED FLOATING RATE LOAN PARTICIPATIONS* - 93.20%
Principal Percent of
Amount Value* Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
AGRICULTURAL
Agricultural Products - 0.16%
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C>
17,824 Schaeffer's Nursery, Inc., due 12/25/95........................ $ 17,824 0.16%
MANUFACTURING
Commercial Printing - 4.67%
- ------------------------------------------------------------------------------------------------------------------------------------
504,513 Cal-Central Press, Inc., due 2/17/96........................... 504,513 4.67%
Computer Accessories - 1.43%
- ------------------------------------------------------------------------------------------------------------------------------------
154,015 Xtend Micro Products, Inc., due 1/18/96........................ 154,015 1.43%
Computer Peripheral Equipment - 0.28%
- ------------------------------------------------------------------------------------------------------------------------------------
30,000 Xtend Invent., due 11/7/96..................................... 30,000 0.28%
Electrical Signal Testing Instruments - 0.74%
- ------------------------------------------------------------------------------------------------------------------------------------
80,000 Structured Systems & Software, Inc., due 3/20/96............... 80,000 0.74%
Electronic Components - 0.55%
- ------------------------------------------------------------------------------------------------------------------------------------
59,242 Spinneret, Inc., due 9/25/96................................... 59,242 0.55%
Electronic Computers - 1.35%
- ------------------------------------------------------------------------------------------------------------------------------------
14,286 Intellicom, Inc., due 12/24/95................................. 14,286 0.13%
131,682 Vision Computer Technologies, Inc., due 1/9/96................. 131,682 1.22%
- ------------------------------------------------------------------------------------------------------------------------------------
Total electronic computers..................................... 145,968
Food Preparation - 13.78%
- ------------------------------------------------------------------------------------------------------------------------------------
931,000 Food Specialties Service Corp., due 12/30/95................... 931,000 8.63%
556,024 Western Commerce Corporation, due 4/20/96...................... 556,024 5.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Total food preparation......................................... 1,487,024
Nitrogenous Fertilizers - 0.95%
- ------------------------------------------------------------------------------------------------------------------------------------
102,055 Actagro, Inc., due 12/10/95.................................... 102,055 0.95%
Printed Circuit Boards - 2.17%
- ------------------------------------------------------------------------------------------------------------------------------------
233,883 Super Technologies, Inc., due 12/29/95......................... 233,883 2.17%
Stereo Speakers - 0.23%
- ------------------------------------------------------------------------------------------------------------------------------------
25,043 Triad Speakers, Inc., due 9/29/96.............................. 25,043 0.23%
Surgical & Medical Instruments - 2.93%
- ------------------------------------------------------------------------------------------------------------------------------------
315,905 Advanced Materials, Inc., due 5/1/96........................... 315,905 2.93%
<PAGE>
Schedule of Investments, Continued
Principal Percent of
Amount Value* Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Wine - 0.47%
- ------------------------------------------------------------------------------------------------------------------------------------
51,282 Chateau Potelle, Inc., due 12/7/95............................. $ 51,282 0.47%
Wood Products - 1.85%
- ------------------------------------------------------------------------------------------------------------------------------------
200,000 The Studio Resource, Inc., due 4/27/96......................... 200,000 1.85%
SERVICES
Auto Repairs - 0.20%
- ------------------------------------------------------------------------------------------------------------------------------------
21,923 Zeke's Metro Auto Body, Inc., due 1/3/96....................... 21,923 0.20%
Computer Repairs - 1.73%
- ------------------------------------------------------------------------------------------------------------------------------------
186,666 The Main Source Electronics, Inc., due 3/31/96................. 186,666 1.73%
Employment Agencies - 32.79%
- ------------------------------------------------------------------------------------------------------------------------------------
1,451,573 Corporate Personnel Network, Inc., due 12/1/96 ................ 1,451,573 13.45%
66,822 FS Temporary Personnel, Inc., due 12/1/96...................... 66,822 0.62%
2,020,807 Labor Ready of Southern California, Inc., due 4/30/96.......... 2,020,807 18.72%
- ------------------------------------------------------------------------------------------------------------------------------------
Total employment agencies...................................... 3,539,202
Freight Transportation Arrangement - 4.80%
- ------------------------------------------------------------------------------------------------------------------------------------
517,605 Logistics Management, Inc., due 4/7/96 ....................... 517,605 4.80%
Help Supply - 1.33%
- ------------------------------------------------------------------------------------------------------------------------------------
44,749 Agostini and Associates, Inc., due 12/24/95.................... 44,749 0.41%
99,318 Variety Employment Services, Inc., due 11/27/95................ 99,318 0.92%
- ------------------------------------------------------------------------------------------------------------------------------------
Total help supply.............................................. 144,067
Management Services - 0.75%
- ------------------------------------------------------------------------------------------------------------------------------------
81,138 Shared Telecommunication Systems, Inc., due 9/30/96............ 81,138 0.75%
Motion Picture Production - 1.09%
- ------------------------------------------------------------------------------------------------------------------------------------
117,362 Red Car, Inc., due 3/31/96..................................... 117,362 1.09%
Reseller of Computer Graphic Designs - 0.93%
- ------------------------------------------------------------------------------------------------------------------------------------
100,000 Vast Tech, Inc., due 2/10/96................................... 100,000 0.93%
Security - 0.49%
- ------------------------------------------------------------------------------------------------------------------------------------
52,732 Thomas J. Forbrizzio, due 12/17/95............................. 52,732 0.49%
Surveying Services - 0.37%
- ------------------------------------------------------------------------------------------------------------------------------------
40,000 Mountain Pacific Surveys, Inc., due 1/3/96..................... 40,000 0.37%
<PAGE>
Schedule of Investments, Continued
Principal Percent of
Amount Value* Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Testing Laboratories - 0.01%
- ------------------------------------------------------------------------------------------------------------------------------------
1,490 Omni Environmental Services, Inc., due 11/15/95................ $ 1,490 0.01%
WHOLESALE TRADE
Fish & Seafoods - 0.33%
- ------------------------------------------------------------------------------------------------------------------------------------
35,896 Pacific Rim Cuisine, due 4/10/96............................... 35,896 0.33%
Ice & Ice Products - 0.33%
- ------------------------------------------------------------------------------------------------------------------------------------
35,462 Arizona Ice Man, Inc., due 12/9/95............................. 35,462 0.33%
Jewelry & Metals - 5.91%
- ------------------------------------------------------------------------------------------------------------------------------------
637,404 Jupiter Imports, Inc., due 1/17/96............................. 637,404 5.91%
Leather Cases - 0.16%
- ------------------------------------------------------------------------------------------------------------------------------------
17,047 Leatex, Inc., due 1/20/96...................................... 17,047 0.16%
Meats & Meat Products - 10.42%
- ------------------------------------------------------------------------------------------------------------------------------------
1,125,000 Nikabar, Inc., due 7/17/96..................................... 1,125,000 10.42%
Total investment in senior collateralized floating rate loan
participations (cost $10,059,748+) (Notes 1A and 3)......... 10,059,748 93.20%
Other assets less liabilities, net............................. 733,438 6.80%
------- ----
Total net assets......................................... $10,793,186 100.00%
=========== ======
<FN>
* Senior collateralized floating rate loan participations bear interest at rates
that float periodically at a margin above the LIBOR Rate as specified in the
participation agreement.
+ Cost for federal income tax purposes is $10,059,748.
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TARGET INCOME FUND
Statement of Assets and Liabilities
October 31, 1995
ASSETS
<S> <C>
Investments in Floating Rate Loans, at value (cost $10,059,748) (Note 1A and 3) ........... $10,059,748
Cash ........................................................................................ ....1,065,843
Accrued interest receivable................................................................ 463
Prepaid expenses........................................................................... 4,717
Due from advisor (Note 2).................................................................. 6,833
Deferred organizational costs (Note 1C).................................................... 26,258
- ------
Total assets ........................................................................ 11,163,862
----------
LIABILITIES
Redemptions payable........................................................................ 266,280
Accrued expenses .......................................................................... 33,351
Dividends payable to shareholders.......................................................... 71,045
------
Total liabilities.................................................................... 370,676
-------
NET ASSETS, consisting of:
Common stock, $.01 par value, 100,000,000 shares authorized................................ 10,793
Capital paid in excess of par value........................................................ 10,782,393
----------
Total Net Assets..................................................................... $10,793,186
===========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
$10,793,186/1,079,319 shares of $.01 par value outstanding................................. $10.00
=========== ========= ==== ======
COMPUTATION OF OFFERING PRICE PER SHARE
(Net asset value $10.00/.970).............................................................. $10.31
====== ==== ======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
TARGET INCOME FUND
Statement of Operations
For the Year Ended October 31, 1995
INCOME
<S> <C>
Interest income ........................................................................... $ 1,089,235
-----------
EXPENSES
Investment advisory fees (Note 2) ......................................................... 81,140
Administration fee (Note 2)................................................................ 30,000
Fund accounting fees (Note 2).............................................................. 24,000
Custodian fees ............................................................................ 2,427
Transfer agent fees........................................................................ 26,434
Legal fees................................................................................. 59,437
Auditing fees.............................................................................. 23,000
Printing costs............................................................................. 5,897
Filing and registration costs.............................................................. 3,191
Directors fees ............................................................................ 17,493
Amortization of deferred organization costs (Note 1C)...................................... 12,596
Other ..................................................................................... 14,509
------
Total expenses....................................................................... 300,124
Less:
Reimbursement by Advisor (Note 2).......................................................... (29,659)
- -------
Net expenses......................................................................... 270,465
-------
NET INVESTMENT INCOME ................................................................... $ 818,770
============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
TARGET INCOME FUND
Statement of Changes in Net Assets
Year Ended Year Ended
October 31, 1995 October 31, 1994
OPERATIONS:
<S> <C> <C>
Net investment income............................................... $ 818,770 $ 691,047
Distributions to shareholders:
Distributions from net investment income
($.76 and $.75 per share, respectively)............................. (818,770) (691,047)
Capital share transactions:
Increase in net assets derived from capital share transactions (a) 327,943 4,177,737
Net assets:
Beginning of year .................................................. 10,465,243 6,287,506
---------- ---------
End of year......................................................... $10,793,186 $10,465,243
=========== ===========
</TABLE>
(a) A summary of capital shares transactions is as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1995 October 31, 1994
Shares Value Shares Value
<S> <C> <C> <C> <C>
Shares sold.............................. 53,570 $ 535,699 497,367 $4,973,673
Shares issued in connection with the
reinvestment of distributions......... 70,678 706,778 56,176 561,759
------ ------- ------ -------
124,248 1,242,477 553,543 5,535,432
Shares redeemed ......................... (91,453) (914,534) (135,770) (1,357,695)
------- -------- -------- ----------
Net increase ............................ 32,795 $ 327,943 417,773 $4,177,737
====== ========= ======= ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
TARGET INCOME FUND
Statement of Cash Flows
Year Ended October 31, 1995
NCREASE (DECREASE) IN CASH
Cash flows from operating activities:
<S> <C>
Interest received.................................................................... $ 1,089,327
Operating expenses paid.................................................................... (242,746)
Purchases of portfolio securities.................................................... (78,688,934)
Proceeds from disposition of portfolio securities.................................... 78,909,901
----------
Net cash provided by operating activities...................................... 1,067,548
---------
Cash flows from financing activities:
Proceeds from shares sold............................................................ 535,699
Payments on shares redeemed.......................................................... (653,326)
Distributions paid................................................................... (125,004)
--------
Net cash used by financing activities.......................................... (242,631)
--------
Net increase in cash....................................................................... 824,917
Cash at beginning of year............................................................ 240,926
-------
Cash at end of year.................................................................. $ 1,065,843
===========
Reconciliation of net increase in net assets from operations to cash provided by
operating activities:
Net increase in net assets resulting from operations................................. $ 818,770
---------
Adjustments to reconcile the net increase in net assets from operations to net cash..
provided by operating activities:
Decrease in investment in securities........................................... 220,967
Decrease in interest receivable................................................ 92
Decrease in receivable from advisor............................................ 3,040
Decrease in prepaid expenses................................................... 5,050
Decrease in deferred organization expenses..................................... 12,596
Increase in accrued expenses................................................... 7,033
-----
Total adjustments.............................................................. 248,778
-------
Net cash provided by operating activities.............................. $ 1,067,548
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
TARGET INCOME FUND
Financial Highlights
Year Ended Year Ended For the Period from
October 31, October 31, November 24, 1992*
1995 1994 to October 31, 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period ..................... $10.00 $10.00 $10.00
Income from investment operations:
Net investment income............................... 0.76 0.75 0.68
---- ---- ----
Total from investment operations.............. 0.76 0.75 0.68
---- ---- ----
Less distributions:
Distributions from net investment income............ (0.76) (0.75) (0.68)
----- ----- -----
Total distributions........................... (0.76) (0.75) (0.68)
----- ----- -----
Net asset value, end of period ........................... $10.00 $10.00 $10.00
====== ====== ======
Total return (a) ......................................... 7.9% 7.7% 7.0%+
Ratios/supplemental data:
Net assets, end of period (000's)......................... $10,793 $10,465 $6,288
Ratio of expenses to average net assets................... 2.5%(1) 2.5%(1) 2.5%(1)+
Ratio of net investment income to average net assets...... 7.6%(1) 7.5%(1) 7.7%(1)+
<FN>
(a) Exclusive of deduction of a sales charge on investments.
(1) Prior to reimbursement and waiver of expenses, the annualized ratio of
expenses to average net assets was 2.8%, 2.9% and 4.4%, respectively, and the
annualized ratio of net investment income to average net assets was 7.3%, 6.9%
and 3.1%, respectively.
*Commencement of operations.
+Annualized.
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
TARGET INCOME FUND
Notes to Financial Statements
October 31, 1995
1. Significant Accounting Policies
Target Income Fund, Inc. (the "Fund") was incorporated in Maryland on
December 27, 1991, and commenced operations on November 24, 1992. It is
registered under the Investment Company Act of 1940 (the "1940 Act") as a
non-diversified, closed-end management investment company. The following is a
summary of significant accounting policies consistently followed by the Fund in
preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles:
A. Investment Valuation - The Fund's investments in senior
collateralized floating rate loan participations are valued at fair
value by the Fund's Advisor, Target Capital Management, Inc. (the
"Advisor"), under procedures established by the Directors. In valuing
senior collateralized floating rate loan participations, the Advisor
will consider relevant factors, data, and information, including: (i)
the characteristics of and fundamental analytical data relating to the
senior collateralized floating rate loan maturity and base lending rate
of the senior collateralized floating rate loan participations, the
terms and the position of the senior collateralized floating rate loan
participations in the borrower's debt structure; (ii) the nature,
adequacy and value of the collateral, including the Fund's rights,
remedies and interests with respect to the collateral; (iii) the
creditworthiness of the borrower, based on an evaluation of its
financial condition, financial statements and information about the
borrower's business, cash flows, capital structure and future
prospects; (iv) information relating to the market for the senior
collateralized floating rate loan participations, (including price
quotation, if any, that are considered reliable), and trading in the
senior collateralized floating rate loan participations and interests
in similar loans and the market environment and investor attitudes
towards the senior collateralized floating rate loan participations and
similar loans; (v) the reputation and financial condition of any
lending agent or other intermediate participant; and (vi) general
economic and market conditions affecting the fair value of the senior
collateralized floating rate loan participations. Other portfolio
securities may be valued on the basis of (i) prices furnished by a
pricing service, (ii) at the last sales price on the exchange that is
the primary market for such securities, or (iii) at the last quoted bid
price for those securities, for which the over-the-counter market is
the primary market or, in the case of listed securities, for which
there were no sales during the day. Short-term obligations (which may
include senior collateralized floating rate loan participations)
maturing in sixty days or less are valued at fair value as determined
in good faith by the Board of Directors.
B. Federal Taxes - The Fund's policy is to comply with the
provisions of the Internal Revenue Code available to regulated
investment companies and to distribute to shareholders all of its
taxable income. Accordingly, no provision for federal income tax is
required.
C. Deferred Organization Costs - Cost incurred in connection
with the organization of the Fund are being amortized on a
straight-line basis through November, 1997.
D. Other - Investment transactions are accounted for on the trade date.
Interest income is recorded on the accrual basis. Dividends to shareholders from
net investment income are declared daily and paid monthly.
<PAGE>
TARGET INCOME FUND
Notes to Financial Statements, Continued
October 31, 1995
2. Investment Advisory and Administration Fees
The Fund has entered into an investment advisory agreement with Target
Capital Management, Inc., effective November 1, 1995. The Advisor receives a
monthly fee at an annual rate of 0.75% of the Fund's average net assets. The
previous Investment Advisor had the same fee arrangement. Investment Company
Administration Corporation (the "Administrator") receives a monthly fee at an
annual rate of 0.25% of the Fund's average net assets, subject to an annual
minimum fee of $30,000, for providing certain administrative services to the
Fund. The Fund also pays the Administrator $24,000 per year for maintaining the
Fund's accounting records. Certain employees of the Advisor and Administrator
serve as officers of the Fund.
The Advisors have agreed to limit the Fund's expenses to 2.50% of the
Fund's average net assets and have waived advisory fees in the amount of $29,659
for the year ended October 31, 1995.
3. Investments
For the year ended October 31, 1995, the cost of purchases and the
proceeds for repayments of senior collateralized floating rate loan
participations aggregated $78,688,934 and $78,909,901, respectively.
At October 31, 1995, the Fund held senior collateralized floating rate
loan participation interests valued at $10,059,748 representing 93.20% of its
net assets. These participation interests, while exempt from registration under
the Federal Securities Act of 1933 (the "1933 Act"), contain certain
restrictions on resale and cannot be sold publicly. The fair value of these
participations is determined daily as described in Note 1A. The cost of each
senior collateralized loan participation was equal to the principal amount of
the loan on the dates of acquisition.
A substantial majority of the Fund's senior collateralized floating
rate loan participations are with issuers located in the State of California.
Such concentration may subject the Fund to economic changes occurring within
California.
The Fund may be the sole investor in a given senior collateralized
floating rate loan participation, or it may act as co-lender with other firms,
such as commercial banks, thrift institutions, insurance companies, finance
companies or other financial institutions. Issuers of senior collateralized
floating rate loan participations may use the services of financial institutions
as Lending Agents. Such Lending Agents perform administrative functions such as
computing outstanding loan balances, amounts of unfunded credit commitments,
issuer's compliance with the terms of such credit facilities including
collection of accounts receivable, and monitoring credit quality. For these
services, the issuers typically pay Lending Agents an administrative and
servicing fee. Before investing in a senior collateralized floating rate loan
participation where an issuer makes use of a Lending Agent, the Advisor will
evaluate the Lending Agent based on factors such as minimum asset size and
capacity, experience in administering revolving credit facilities, and default
rates on past loan experience. Also, the financial condition of co-lenders or
lending agents or other intermediaries may affect the ability of the Fund to
receive payments, inasmuch as they may be responsible for the administration and
enforcement of the senior collateralized floating rate loan participation and
its terms. Default of a co-lender or other intermediary could adversely affect
the Fund's ability to receive payments.
<PAGE>
TARGET INCOME FUND
Notes to Financial Statements, Continued
October 31, 1995
4. Commitments
As of October 31, 1995 the Fund had unfunded loan commitments
pursuant to the terms of the following loan participation agreements:
<TABLE>
<S> <C>
Actagro, Inc............................................................................... $ 167,945
Advanced Materials, Inc.................................................................... 334,095
Agostini & Associates, Inc................................................................. 7,251
Arizona Ice Man, Inc....................................................................... 64,538
Cal-Central Press, Inc..................................................................... 328,812
Chateau Potelle, Inc....................................................................... 12,718
Corporate Personnel Network, Inc........................................................... 48,427
Food Specialties Service Corp.............................................................. 319,000
Thomas J. Forbrizzio....................................................................... 27,267
FS Temporary Personnel, Inc................................................................ 433,178
Hemdale Home Video, Inc.................................................................... 1,800,000
Intellicom, Inc............................................................................ 135,714
Jupiter Imports, Inc....................................................................... 698,596
Labor Ready Of Southern California, Inc.................................................... 679,193
Leatex, Inc................................................................................ 99,619
Logistics Management, Inc.................................................................. 7,395
The Main Source Electronics, Inc........................................................... 13,333
Nikabar, Inc............................................................................... 125,000
Omni Environmental Services, Inc........................................................... 248,510
Pacific Rim Cuisine........................................................................ 4,104
Profco, Inc................................................................................ 1,080,000
Red Car, Inc............................................................................... 82,638
Safety Signal Systems...................................................................... 133,333
Schaeffer's Nursery, Inc................................................................... 232,176
Shared Telecommunication Systems, Inc...................................................... 118,862
Spinneret, Inc............................................................................. 15,758
Super Technologies, Inc.................................................................... 1,266,117
Triad Speakers, Inc........................................................................ 24,957
Variety Employment Services, Inc........................................................... 680,682
Vast Tech, Inc............................................................................. 130,000
Vision Computer Technologies, Inc.......................................................... 243,318
Western Commerce Corp...................................................................... 343,976
Xtend Micro Products, Inc.................................................................. 45,985
Zeke's Metro Auto Body, Inc................................................................ 178,077
-------
$10,130,574
</TABLE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Target Income Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
Target Income Fund, Inc., as of October 31, 1995, and the related statements of
operations and cash flows for the year then ended, and the statement of changes
in net assets for each of the two years in the period then ended and financial
highlights for each of the two years in the period then ended and for the period
November 24, 1992 (commencement of operations) to October 31, 1993. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian, lending agents and
borrowers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Target Income Fund, Inc. as of October 31, 1995 and the results of
its operations and its cash flows for the year then ended, the changes in its
net assets for each of the two years in the period then ended and the financial
highlights for each of the two years in the period then ended and for the period
November 24, 1992 (commencement of operations) to October 31, 1993, in
conformity with generally accepted accounting principles.
As discussed in Note 1A and 3, the financial statements include senior
collateralized loan participation interests valued at $10,059,748 (93.20% of net
assets), whose fair value is determined under procedures approved by Target
Income Fund, Inc.'s Board of Directors, in the absence of readily ascertainable
market values. We have reviewed the procedures adopted by the Board of Directors
in determining fair value and have inspected underlying documentation, and in
the circumstances we believe the procedures are reasonable and the documentation
appropriate. However, because the market value of these securities can only be
established by negotiation between parties in a sales transaction, and because
of the uncertainty inherent in the valuation process, the fair values as
determined may differ significantly from the values that would have been used
had a ready market for these securities existed.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
December 21, 1995
<PAGE>
This report is intended for the shareholders of
the Target Income Fund and should not be
used as sales literature unless accompanied
or preceeded by the Fund's current prospectus.
