THE
TARGET PORTFOLIO
TRUST
ANNUAL REPORT
DECEMBER 31, 1995
<PAGE>
The Target Portfolio Trust
Table of Contents
Page
Shareholder Letter 2
Portfolio of Investments:
Large Capitalization Growth Portfolio 7
Large Capitalization Value Portfolio 9
Small Capitalization Growth Portfolio 13
Small Capitalization Value Portfolio 17
International Equity Portfolio 22
International Bond Portfolio 25
Total Return Bond Portfolio 27
Intermediate-Term Bond Portfolio 30
Mortgage Backed Securities Portfolio 33
U.S. Government Money Market Portfolio 35
Statements of Assets and Liabilities 36
Statements of Operations 38
Statements of Changes in Net Assets 40
Financial Highlights 42
Notes to Financial Statements 46
1
<PAGE>
Dear Target Investor:
Many investors enjoyed one of the best years ever in 1995. Falling
interest rates, modest economic growth, low inflation, and improved
productivity contributed to strong stock and bond market returns.
It was also a year in which taking risk paid-off.
It was also a good year for Target as many investors in the
program
earned 20-25%, before the advisory fee. The most conservative
allocation
(all bonds) rose 13.0%, and the most aggressive (all stocks), rose
26.8%,
before fees. The allocations usually contain between five and eight
separate portfolios and, importantly, offer tremendous
diversification:
stocks and bonds, large caps and small caps, growth and value,
foreign
and domestic. While some portfolios did do better than others,
that
was expected. No one knows what specific investment will do best,
but a proper overall allocation offers you a good chance at
long-term
success.
<TABLE>
Performance Summary as of December 31, 1995
<CAPTION>
12/31/94 12/31/95 12 Month**
# of
Portfolio NAV* NAV* Total
Return Funds@
<S> <C> <C> <C>
<C>
Large Capitalization Growth 9.74 12.13 25.76%
Lipper Growth Fund Avg 30.80
646
Large Capitalization Value 10.02 12.57 32.08
Growth & Income Avg 30.81
495
Small Capitalization Growth 11.59 14.15 24.62
Small Company Avg 31.60
356
Small Capitalization Value 11.07 13.07 19.21
Small Company Avg 31.60
356
International Equity 11.95 13.64 15.38
International Avg 9.41
296
International Bond 9.57 10.19 14.66
General World Income Avg 18.04
135
Total Return Bond 9.48 10.62 19.63
Corporate Debt BBB Avg 20.07
82
Intermediate-Term Bond 9.56 10.51 16.85
Intermediate Investment Grade 16.61
157
Mortgage Backed Securities 9.51 10.31 16.18
U.S. Mortgage Avg 16.23
58
U.S. Government Money Market 1.00 1.00 5.25
U.S. Money Fund Avg 5.26
105
</TABLE>
@ Represents the number of funds in each respective Lipper
category.
* NAV = Net Asset Value
** Source: Lipper Analytical Services. Target total returns are in
bold face
type. These returns assume the reinvestment of all dividends and
distributions and take into account all charges and expenses
applicable
to an investment in each portfolio except the annual Target
advisory fee.
For retail accounts, the maximum annual advisory fee is 1.5% of
equity
portfolio assets and 1.0% of bond and money market portfolio
assets.
For retirement accounts, the maximum advisory fees are 1.25% and
1.35%,
respectively.
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. An
investment in these portfolios is neither insured nor guaranteed
by the U.S. Government and there can be no assurance that the U.S.
Government Money Market Portfolio will be able to maintain a stable
net asset value.
Stocks Soared
U.S. stocks set many records as the Dow Jones Industrial Average
finished
at 5117, up from 3834 on December 31, 1994. The S&P 500, a broader
market
index, returned 37.5% for the year, sixth best since 1925, and
highest
since 1958. For perspective, indices like the S&P 500 and the Dow,
which have no expenses, were extremely hard to beat. Most mutual
funds
and money managers who did beat them probably bet heavily on
technology
or finance, which, in retrospect, was a good move.
Gains were broad-based, as winners outpaced losers 3.5:1 on the
New
York Stock Exchange. While the technology sector (+40%) certainly
gained
most of the glory, it started to fade late in the year, and the top
spot
went to the
2
<PAGE>
financial sector (+50%), according to Dow Jones. Smaller
subsets of the Dow Jones component sectors posted even more
spectacular
gains: biotech (+80%), aerospace and defense (+71%), and oil
drilling
(+72%). Trucking (-14%) and steel(-9%) brought up the rear.
For the year, "value" and "growth" stocks did about the same,
though
until technology started to falter, growth was ahead. In 1994
growth
won, and in 1993, value won. These styles tend to go in and out of
favor. Generally, growth stocks exhibit higher price to earnings
ratios (P/Es) and revenue growth than value stocks. In addition,
large company stocks outperformed small company stocks as the
Russell
2000 index rose "only" 28.4%.
Target's investment advisers built
their reputations by investing prudently, in a diversified manner,
and always looking long-term. Since Target began, they've been held
to that task and, overall, they've delivered. For example, the
Target Large Cap Value Portfolio rose 32% for the year, to lead
our pack. One co-manager, INVESCO, generally focused on financial
and healthcare issues. The other co-manager, Hotchkis & Wiley,
favored financial and consumer non-durables (beverages, retail,
tobacco). Of note: due to technology's huge advance, such "pricey"
issues rarely are found in value portfolios. These issues often are
found, however, in growth portfolios. Technology is a major sector
holding for both Large Cap Growth advisers: Columbus Circle and
Oak Associates. Like most Small Cap Funds, the Target Small Cap
Growth and Value portfolios posted strong absolute returns, but
still lagged their Large Cap counterparts.
Growth & Value Stocks Tend To Be Countercyclical.
(GRAHP)
Source: Frank Russell Co. Past performance is not indicative
of future results. Performance reflects the total return of "value
stocks" and "growth stocks."
One way to manage risk is to diversify across investment styles.
While the styles go in and out of favor, both have performed
comparable over the long term. Trying to time the markets and
invest in the "hot" style is hard to do. Instead, you probably
should invest in an overall portfolio that employs both a "growth"
and "value" philosophy. That will help you manage risk and smooth
out your returns. Target offers you access to both styles of
investing since there are growth and value versions of the
Target Large Cap and Small Cap Portfolios.
Bonds Also Did Well
Bonds turned-in one of their best years in history. The Lehman
Brothers Aggregate Index returned 18.5% and the yield on the
bellwether 30-year Treasury fell to 5.9%, from 7.9%. This is near
its
record low of 5.8%, set in late 1993. The
3
<PAGE>
main reason for the huge rise in bond prices (and drop in
yields) was the continuing news that inflation remained low.
Like stocks, bonds rewarded risk takers in 1995. The longer
the maturity (and hence, the more risk you took), the better your
return: prices of thirty-year zero-coupon bonds rose over 60%,
according to Merrill Lynch. These bonds, however, are very risky
and, in fact, were 1994's worst performers.
Treasury bonds bettered corporate bonds, which bettered
mortgage-backed
securities. When interest rates fall, generally, higher quality
issues
do best, since their prices are only tied to interest rate
movements.
By contrast, corporate bonds, generally, move with rates and the
perceived
quality of the bond's issuing company. Because of their structure,
mortgages tend to lag when rates drop significantly.
With regard to Target, the Total Return and Intermediate-Term
Portfolios,
managed by PIMCO, beat their Lehman Brothers benchmarks. Versus
their
Lipper averages, they were competitive, but that's only part of the
story. PIMCO is an active manager and generally avoids riskier,
very
long-term bonds such as 20-30 year issues. Many other funds in the
same categories, however, do buy these longer-term issues. These
two
Target portfolios are prime examples of how Target seeks to provide
competitive returns, but with less risk.
The Mortgage Backed Securities Portfolio capped-off another
strong
year. According to Lipper, the average mortgage fund rose a
cumulative
19.7% for the past three years, while Target's Portfolio, run by
Wellington, returned 25.5% for the same period! That 5.8 percentage
point out-performance is no small feat, as bond fund returns
normally
are in a narrow range. The Money Market Portfolio also did well
and,
like Mortgage Backed, has a three-year record that is ahead of its
Lipper average (12.0% vs 11.8%, cumulative). That portfolio is
managed
by Wellington as well.
International Returns Were Modest
International Stocks
The Morgan Stanley EAFE index rose 11.6% for the year. Normally,
that
would be a nice return, except that it paled in comparison to the
S&P
500's 37.5% figure. The EAFE is dominated by Japanese issues, and
Japan's
market severely lagged most other major markets.
European markets, overall, did well in local and U.S. Dollar
terms.
In U.S. Dollars, Switzerland led (+43%) while Italy lagged (-6%).
In
the Americas, Canada did well, though Mexico collapsed in U.S.
Dollar
terms (-27%) due to currency and economic problems. The Asian
markets
were uninspiring, as the Dow Jones Asia/Pacific Index, with and
without
Japan, rose a
4
<PAGE>
meager 0.3% and 10.3%, respectively. Hong Kong, Australia,
and New Zealand did reasonably well, while Taiwan and the
Philippines
were down sharply.
Target's International Equity Portfolio had a solid year (15.4%),
beating both the EAFE (11.6%) and the Lipper International Fund
average (9.4%). At year-end, the Portfolio's largest country
allocations
were Japan (27.0%) and Great Britain (15.8%). Scandinavian and
European
countries comprised much of the rest. For most of the year,
performance
was helped by a relatively low exposure to Japan (which recently
was
increased) compared to the EAFE and similar funds.
International Bonds
It was also a good year for bonds as they rose 19.5%, judging by
the
Salomon Brothers Non-U.S. World Government Bond Index. As in the
U.S.,
most major markets saw a large decline in rates, which generated
large returns. In local terms, Canada had the strongest market,
and in U.S Dollar terms, France was best. In December, short-term
German interest rates were cut, and that was followed by similar
cuts in other countries.
Versus the major currencies, the U.S. Dollar ended about even
with
the Japanese yen and British pound, but down against the German
mark.
Currency fluctuations markedly affect international bond returns,
positively and negatively. As a result, these bonds are useful for
diversification purposes, in addition to their high return
potential.
By year-end, the Target International Bond Portfolio's largest
bond
allocation was in Japan (13.7%). European issues comprised 58% of
the
portfolio with Australia, Canada, and New Zealand representing the
balance. The portfolio is managed by Fiduciary International. While
Fiduciary is relatively unknown to mutual fund investors, large
institutions know them well. The firm has over $36 billion in
assets and has managed money since 1931.
The Outlook is Positive
Few people expect stocks to advance in 1996 like they did in 1995,
but generally, people are optimistic. For bonds, the consensus call
is for slightly lower rates along the entire yield curve by
year-end.
That would generate nice gains, but again, nowhere near last year's
gains. On the international front, both stocks and bonds seem
poised
for a solid year. The U.S. led the way in 1995, and often, the
foreign
markets follow soon after.
At 5,117, at year end, the next Dow milestone, 6,000, is only 17%
away, so it's easy to lose a sense of perspective. The market has
not
fallen more than 10% from a mid-year high in over five years,
judging
by the S & P 500. In fact, it fell by 20%, or more, 29 times this
century!
5
<PAGE>
From 1926-1995, the market averaged an annual return of 10.5%.
It
averaged 16.4% from 1982-1995. But in 1995, it rose a staggering
37.5%,
or 27 percentage points above its long-term average! Consequently,
the
question to ask is this: "Given my personal goals and resources, do
I
have the right exposure to low risk and high risk investments, to
stocks and bonds, to foreign and domestic?"
As usual, the prudent, long-term investor will use the techniques
of diversification and asset allocation to his or her advantage.
While there are no assurances that you will be successful in the
long-term, surely it's the best way to increase your chances.
As always, we appreciate your commitment to Target and having
the opportunity to report our activities to you.
Sincerely,
Richard A. Redeker
President
Your Allocation Mainly
Determines Your Returns
(PIE CHART)
Based on a study of 82 large pension funds.
Source: Financial Analysts Journal, May/June 1991.
Asset allocation is the process of designing an overall portfolio
that
reflects your personal risk and return requirements. It helps you
invest in specific amounts of different securities: i.e.,
corporates,
Treasurys, small caps, large caps, foreign, etc. Asset allocation
implies that, over the long-term, it's usually more important to
be in stocks and bonds as a whole than it is to pick individual
stocks and bonds. In fact, just over 91% of a portfolio's long-term
return is due to the initial allocation.
Target's asset allocations are designed for you once you complete
the Target Questionnaire. In this way, the Target program helps
ensure that your overall account reflects your personal investment
risk and return requirements.
6
<PAGE>
THE TARGET PORTFOLIO TRUST
Large Capitalization Growth Portfolio
Portfolio of Investments December 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--93.2%
Common Stocks--93.2%
Apparel & Textiles--0.5%
12,900 NIKE, Inc.................. $ 898,163
------------
Banks--4.0%
27,100 Bank of New York Co., 1,321,125
Inc......................
29,300 Chemical Banking Corp...... 1,721,375
27,000 Citicorp................... 1,815,750
35,000 NationsBank Corp........... 2,436,875
------------
7,295,125
------------
Broadcasting--1.1%
43,700 Viacom Inc.*............... 2,070,287
------------
Business Services--1.5%
35,900 General Motors Corp........ 1,866,800
12,500 Stratacom Inc.*............ 918,750
------------
2,785,550
------------
Chemicals--0.7%
17,300 Potash Corp................ 1,226,138
------------
Computers & Business Equipment--15.1%
121,300 3 Com Corp.*............... 5,655,612
75,000 Bay Networks*.............. 3,084,375
27,700 Boeing Co.................. 2,170,988
89,000 Cisco Systems, Inc.*....... 6,641,625
71,000 Compaq Computer Corp.*..... 3,408,000
21,100 Hewlett-Packard Co......... 1,767,125
100,000 Sun Microsystems, Inc.*.... 4,562,500
------------
27,290,225
------------
Construction & Mining Equipment--1.5%
45,000 Caterpillar Inc............ 2,643,750
------------
Domestic Oil--0.5%
18,200 Amerada Hess Corp.......... 964,600
------------
Drugs & Healthcare--19.6%
45,000 American Home Products $ 4,365,000
Corp....................
50,100 AMGEN Inc.*............... 2,974,687
89,500 Columbia Healthcare 4,542,125
Corp....................
65,600 Johnson & Johnson Co...... 5,617,000
39,500 Medtronic, Inc............ 2,207,063
118,600 Merck & Co., Inc.......... 7,797,950
69,000 Pfizer Inc................ 4,347,000
33,900 Smith Kline Beecham PLC 1,881,450
(ADR)...................
23,000 United Healthcare Corp.... 1,506,500
-----------
35,238,775
-----------
Electronics--12.7%
96,300 Ericsson (L.M.) Telephone
Co., Inc. B-free
(ADR)................... 1,877,850
41,800 General Motors Corp., 2,053,425
Class H.................
73,000 Intel Corp................ 4,142,750
15,300 KLA Instruments Corp.*.... 398,756
85,000 Linear Technology Corp.... 3,336,250
27,300 LSI Logic Corp.*.......... 894,075
80,000 Maxim Integrated Products, 3,080,000
Inc.*...................
65,000 Motorola, Inc............. 3,705,000
110,000 Xilinx Inc.*.............. 3,355,000
-----------
22,843,106
-----------
Financial Services--3.1%
41,300 American Express Co....... 1,708,788
43,892 First Data Corp........... 2,935,277
21,700 Fleet Financial Group, 884,275
Inc.....................
-----------
5,528,340
-----------
Food & Beverages--1.8%
56,600 PepsiCo Inc............... 3,162,525
-----------
Industrial & Machinery--2.6%
117,400 Applied Materials, 4,622,625
Inc.*...................
-----------
Insurance--8.2%
22,800 Aetna Life & Casualty 1,578,900
Co......................
68,700 American International 6,354,750
Group, Inc..............
18,100 CIGNA Corp................ 1,868,825
24,000 General Reinsurance 3,720,000
Corp....................
22,300 MGIC Investment Corp...... 1,209,775
-----------
14,732,250
-----------
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
7
<PAGE>
THE TARGET PORTFOLIO TRUST
Large Capitalization Growth Portfolio (cont'd)
Portfolio of Investments December 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Leisure Time--0.9%
26,600 Walt Disney Co............. $ 1,569,400
------------
Miscellaneous--1.5%
120,000 Atmel Corp.*............... 2,685,000
------------
Paper--2.0%
43,100 Kimberly-Clark Corp........ 3,566,525
------------
Petroleum Services--1.1%
10,890 British Petroleum Co., 1,112,141
PLC......................
13,600 Schlumberger Ltd........... 941,800
------------
2,053,941
------------
Retail Grocery--1.2%
42,300 Safeway Inc.*.............. 2,178,450
------------
Retail Trade--1.7%
45,700 Federated Department 1,256,750
Stores, Inc.*............
20,000 Home Depot, Inc............ 957,500
42,200 Office Depot, Inc.*........ 833,450
------------
3,047,700
------------
Software--7.1%
55,000 Adobe Systems, Inc......... 3,410,000
38,600 Computer Associates
International, Inc....... 2,195,375
30,000 Informix Corp.*............ 900,000
54,800 Microsoft Corp.*........... 4,808,700
35,600 Oracle Systems Corp.*...... 1,508,550
------------
12,822,625
------------
Telecommunication--1.8%
85,000 DSC Communications 3,134,375
Corp.*...................
2,300 United States Robotics *... 201,825
------------
3,336,200
------------
Telephone--3.0%
40,200 American Telephone & $ 2,602,950
Telegragh Co............
72,400 MCI Communications 1,891,450
Corp....................
33,100 Telecommunications, 889,562
Inc.*...................
-----------
5,383,962
-----------
Total common stocks 167,945,262
(cost $148,354,333).....
-----------
SHORT-TERM INVESTMENTS--8.3%
Principal
Amount
(000) Commercial Paper--4.4%
- ----------
Commerzbank Ag, New York
branch
1,500 5.79%, 1/11/96............ 1,497,587
Deutsche Bank Finance Inc.
2,000 5.72%, 1/8/96............. 1,997,776
Siemens Corp.
2,000 5.57%, 1/22/96............ 1,993,502
U.S. Central Credit Union
2,500 5.60%, 1/18/96............ 2,493,389
-----------
Total commercial paper 7,982,254
(cost $7,982,254).......
-----------
Repurchase Agreement--3.9%
State Street Bank and
Trust Co., 4.25%, dated
12/29/95, due 1/2/96 in
the amount of $6,918,265
(cost $6,915,000; value
of collateral including
accrued
6,915 interest--$7,119,816)... 6,915,000
-----------
Total short-term 14,897,254
investments
(cost $14,897,254)......
-----------
Total Investments--101.5%
(cost $163,251,587)....... 182,842,516
Liabilities in excess of
other
assets--(1.5%)............ (2,765,276)
-----------
Net Assets--100%.......... $180,077,240
-----------
-----------
</TABLE>
- ---------------
ADR--American Depository Receipts.
* Non-income producing securities.
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
8
<PAGE>
Large Capitalization Value Portfolio
Portfolio of Investments December 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG TERM INVESTMENTS--97.5%
Common Stocks--97.5%
Aerospace--3.8%
22,000 Boeing Co.................. $ 1,724,250
24,450 Lockheed Martin Corp....... 1,931,550
30,100 Rockwell International 1,591,537
Corp.....................
20,000 United Technologies 1,897,500
Corp.....................
------------
7,144,837
------------
Aluminum--1.4%
40,000 Aluminum Company of 2,115,000
America..................
8,000 Reynolds Metals Co......... 453,000
------------
2,568,000
------------
Agriculture Machinery--1.4%
76,500 Deere & Co................. 2,696,625
------------
Apparel & Textiles--3.0%
75,000 Liz Claiborne, Inc......... 2,081,250
45,000 Russell Corp............... 1,248,750
115,000 Shaw Industries, Inc....... 1,696,250
25,000 Unifi, Inc................. 553,125
------------
5,579,375
------------
Asset Management--0.8%
19,000 Morgan Stanley Group, 1,531,875
Inc......................
------------
Automobiles--3.4%
153,000 Ford Motor Co.............. 4,437,000
37,000 General Motors Corp........ 1,956,375
------------
6,393,375
------------
Auto Parts--1.1%
42,500 Arvin Industries Inc....... 701,250
46,200 Dana Corp.................. 1,351,350
------------
2,052,600
------------
Banks--7.7%
81,600 Ahmanson (H.F.) & Co...... $ 2,162,400
20,600 BankAmerica Corp.......... 1,333,850
40,000 Boatmen's Bancshares...... 1,635,000
15,500 Chase Manhattan Corp...... 939,688
1,700 Chemical Banking Corp..... 99,875
22,500 First America Bank 998,437
Corp....................
35,000 First Chicago Nbd 1,382,500
Corporation.............
41,600 Great Western Financial 1,060,800
Corp....................
25,000 Keycorp................... 906,250
25,000 National City Corp........ 828,125
20,300 NationsBank Corp.......... 1,413,387
35,000 Wachovia Corp............. 1,601,250
-----------
14,361,562
-----------
Business Services--0.5%
22,000 Donnelley (R.R.) & Sons, 866,250
Co......................
-----------
Chemicals--3.8%
46,000 Dow Chemical Co........... 3,237,250
20,000 Du Pont (E.I.) de Nemours 1,397,500
& Co....................
4,100 Monsanto Co............... 502,250
40,000 Nalco Chemical Co......... 1,205,000
10,600 Olin Corp................. 787,050
-----------
7,129,050
-----------
Computers & Business Equipment--2.1%
20,000 Compaq Computer Corp.*.... 960,000
18,000 Hewlett-Packard Co........ 1,507,500
30,000 Pitney Bowes, Inc......... 1,410,000
-----------
3,877,500
-----------
Conglomerates--3.3%
39,800 American Brands Inc....... 1,776,075
183,000 Hanson PLC (ADR).......... 2,790,750
25,000 Textron, Inc.............. 1,687,500
-----------
6,254,325
-----------
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
9
<PAGE>
THE TARGET PORTFOLIO TRUST
Large Capitalization Value Portfolio (cont'd)
Portfolio of Investments December 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Domestic Oil--2.4%
16,000 Atlantic Richfield Co...... $ 1,772,000
36,000 Tenneco Inc................ 1,786,500
5,000 Ultramar Corporation....... 128,750
46,200 USX Marathon Corp.......... 900,900
------------
4,588,150
------------
Drugs & Healthcare--8.9%
32,500 Abbott Laboratories........ 1,356,875
29,000 American Home Products 2,813,000
Corp.....................
31,500 Baxter International 1,319,062
Inc......................
45,000 Bristol Myers Squibb Co.... 3,864,375
35,000 Columbia Healthcare 1,776,250
Corp.....................
34,000 Lilly (Eli) & Co........... 1,912,500
32,000 Merck & Co., Inc........... 2,104,000
30,000 Schering Plough Corp....... 1,642,500
------------
16,788,562
------------
Electric Utilities--7.6%
60,000 Cinergy Corp............... 1,837,500
60,200 CMS Energy Corporation..... 1,798,475
12,000 Entergy Corporation........ 351,000
20,000 General Public Utilities 680,000
Corporation..............
53,500 New York State Electric &
Gas Corp................. 1,384,312
109,300 Niagara Mohawk Power 1,052,013
Corp.....................
30,000 PECO Energy Co............. 903,750
37,000 Public Service Enterprise 1,133,125
Inc......................
137,000 SCE Corp................... 2,431,750
80,000 Unicom Corp................ 2,620,000
------------
14,191,925
------------
Electrical Equipment--1.4%
20,000 Emerson Electric Co........ 1,635,000
15,000 General Electric Co........ 1,080,000
------------
2,715,000
------------
Electronics--1.0%
40,000 Raytheon Co................ 1,890,000
------------
Financial Services--2.2%
29,900 Beneficial Corp........... $ 1,394,088
Federal National Mortgage
10,400 Association............. 1,290,900
25,200 Household International, 1,489,950
Inc.....................
-----------
4,174,938
-----------
Food & Beverages--3.5%
52,500 Heinz (H.J.) Co........... 1,739,062
35,000 PepsiCo Inc............... 1,955,625
21,000 Ralston Purina Co......... 1,309,875
60,000 Tyson Foods, Inc.......... 1,567,500
-----------
6,572,062
-----------
Forest Products--0.8%
34,400 Weyerhaeuser Co........... 1,487,800
-----------
Gas & Pipeline Utilities--0.5%
25,000 Eastern Enterprises....... 881,250
-----------
Household Appliances & Home
Furnishings--0.8%
70,000 Maytag Corp............... 1,417,500
-----------
Insurance--7.8%
12,700 Aetna Life & Casualty 879,475
Co......................
55,000 American General Corp..... 1,918,125
25,700 Aon Corp.................. 1,281,787
10,000 General Reinsurance 1,550,000
Corp....................
30,000 Jefferson-Pilot Corp...... 1,395,000
20,200 Lincoln National Corp..... 1,085,750
19,000 Marsh & McLennan Cos...... 1,686,250
80,600 SAFECO Corp............... 2,780,700
19,838 The Allstate Corp......... 815,838
17,500 Transamerica Corp......... 1,275,313
1,400 USLIFE Corp............... 41,825
-----------
14,710,063
-----------
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
10
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
International Oil--5.1%
25,000 Amoco Corp................. $ 1,796,875
30,000 Chevron Corp............... 1,575,000
31,000 Exxon Corp................. 2,483,875
50,000 Repsol S.A. (ADR).......... 1,643,750
15,000 Royal Dutch Petroleum 2,116,875
Co.......................
------------
9,616,375
------------
Liquor--1.8%
49,300 Anheuser Busch Cos., 3,296,938
Inc......................
------------
Mining--1.4%
27,000 Minnesota Mining &
Manufacturing Co......... 1,788,750
15,000 Phelps Dodge Corp.......... 933,750
------------
2,722,500
------------
Paper--2.4%
7,000 Federal Paper Board Co., 363,125
Inc......................
42,000 International Paper Co..... 1,590,750
31,600 Union Camp Corp............ 1,504,950
37,500 Westvaco Corp.............. 1,040,625
------------
4,499,450
------------
Petroleum Services--0.6%
31,700 Ashland Incorporated....... 1,113,463
------------
Pollution Control--1.1%
32,000 Browning Ferris Industries, 944,000
Inc......................
40,000 WMX Technologies, Inc...... 1,195,000
------------
2,139,000
------------
Publishing--0.6%
16,000 Dun & Bradstreet Corp...... 1,036,000
------------
Railroads & Equipment--1.0%
28,000 Conrail, Inc............... 1,960,000
------------
Restaurants--1.0%
40,000 McDonald's Corp........... $ 1,805,000
-----------
Retail Grocery--0.5%
30,000 Giant Foods. Inc.......... 945,000
-----------
Retail Trade--4.1%
172,000 Kmart Corp................ 1,247,000
55,000 Melville Corp............. 1,691,250
30,000 Penney (J.C.) Co., Inc.... 1,428,750
31,400 Sears Roebuck & Co........ 1,224,600
6,500 Supervalue, Inc........... 204,750
38,400 May Department Stores 1,622,400
Co......................
22,500 Woolworth Corp............ 292,500
-----------
7,711,250
-----------
Steel--0.7%
40,000 USX-U.S. Steel Group, 1,230,000
Inc.....................
-----------
Tires & Rubber--0.9%
65,000 Cooper Tire & Rubber 1,600,625
Co......................
-----------
Telephone--2.4%
48,000 Pacific Telesis Group..... 1,614,000
Southern New England
Telecommunications,
40,000 Corp.................... 1,590,000
40,000 Telefonos de Mexico, S.A 1,275,000
(ADR)...................
3,000 US West, Inc.*............ 107,250
-----------
4,586,250
-----------
Tobacco--3.5%
52,000 Philip Morris Cos., 4,706,000
Inc.....................
55,000 UST, Inc.................. 1,835,625
-----------
6,541,625
-----------
Trucking & Freight Forwarding--1.2%
80,000 Hunt J.B.Transport 1,340,000
Services, Inc...........
35,000 Ryder System, Inc......... 866,250
-----------
2,206,250
-----------
Total common stocks
(cost $149,416,627)....... 182,882,350
-----------
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
11
<PAGE>
THE TARGET PORTFOLIO TRUST
Large Capitalization Value Portfolio (cont'd)
Portfolio of Investments December 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT/SHARES VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
SHORT-TERM INVESTMENTS--2.6%
U. S. Government Securities--1.4%
United States Treasury Bill
$ 2,700 5.29%, 5/2/96
(cost $2,651,597).......... $ 2,651,597
------------
Other--1.2%
2,174 Seven Seas Series
Government Fund,
(cost $2,174,371).......... 2,174,371
------------
Total short-term
investments
(cost $4,825,968).......... 4,825,968
------------
Total Investments--100.1%
(cost $154,242,595; Note 187,708,318
4).......................
Liabilities in excess of
other
assets--(0.1%)............. (112,115)
------------
Net Assets--100%........... $187,596,203
------------
------------
</TABLE>
- ---------------
*Non-income producing securities.
ADR--American Depository Receipts.
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
12
<PAGE>
Small Capitalization Growth Portfolio
Portfolio of Investments December 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--94.5%
Common Stocks--94.5%
Aerospace--0.6%
16,300 Watkins Johnson Co......... $ 713,125
------------
Aluminum--0.3%
6,700 Reynolds Metals Co......... 379,388
------------
Apparel & Textiles--4.3%
48,100 G & K Services............. 1,226,550
7,300 Jones Apparel Group, 287,438
Inc......................
31,350 Nautica Enterprises, 1,371,562
Inc.*....................
30,800 Reebok International, 870,100
Ltd......................
35,600 Unifi, Inc................. 787,650
27,200 Warnaco Group, Inc......... 680,000
------------
5,223,300
------------
Airlines--1.2%
19,400 Continental Airlines, 843,900
Inc.*....................
3,300 UAL Corp.*................. 589,050
------------
1,432,950
------------
Asset Management--1.0%
12,200 Alex, Brown Inc............ 512,400
26,750 Waterhouse Investor 662,063
Services Inc.............
------------
1,174,463
------------
Automobiles--1.1%
61,100 Wabash National Corp....... 1,359,475
------------
Banks--0.5%
23,300 North Fork Bancorporation, 588,325
Inc......................
------------
Broadcasting--0.9%
27,000 Heritage Media Corp........ 691,875
25,000 Sinclair Broadcast Group 431,250
Inc......................
------------
1,123,125
------------
Business Services--6.0%
22,500 Acclaim Entertainment, $ 278,438
Inc.*...................
35,350 CUC International Inc.*... 1,206,319
33,600 Fiserv, Inc............... 1,008,000
21,400 GTECH Holdings Corp....... 556,400
55,200 National Media Corp.*..... 1,159,200
35,600 Pinkertons, Inc.*......... 694,200
13,400 Robert Half International, 561,125
Inc.*...................
38,700 Rollins, Inc.............. 856,237
26,200 Stewart Enterprises, 969,400
Inc.....................
-----------
7,289,319
-----------
Containers & Glass--0.4%
20,400 Bemis Co., Inc............ 522,750
-----------
Chemicals--3.3%
12,200 Eastman Chemical Co*...... 764,025
74,700 Minerals Technologies, 2,726,550
Inc.....................
25,000 Schulman (A.), Inc........ 562,500
-----------
4,053,075
-----------
Communication--1.4%
14,000 Pairgain Technologies 766,500
Inc.*...................
56,900 Valassis Communications, 995,750
Inc.....................
-----------
1,762,250
-----------
Computers & Business Equipment--5.8%
18,600 Ascend Communications 1,508,925
Inc.*...................
32,600 Conner Peripherals, 684,600
Inc.*...................
28,000 DST Systems Inc........... 798,000
11,100 Komag Inc.*............... 511,987
9,800 Medic Computer Systems, 592,900
Inc.*...................
18,000 Safeguard Scientifics 891,000
Inc.....................
23,200 Sun Microsystems, Inc.*... 1,058,500
30,900 Tech Data Corp............ 463,500
21,800 Trident Microsystems 512,300
Inc.*...................
3,000 U.S. Data Corp............ 43,500
-----------
7,065,212
-----------
Construction & Mining Equipment--0.6%
24,200 JLG Industries, Inc....... 719,950
-----------
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
13
<PAGE>
THE TARGET PORTFOLIO TRUST
Small Capitalization Growth Portfolio (cont'd)
Portfolio of Investments December 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Construction Materials
1,100 Granite Construction $ 33,825
Inc......................
------------
Domestic Oil
400 Louisiana Land & 17,150
Exploration Co...........
------------
Drugs & Healthcare--7.2%
22,000 Cephalon, Inc.*............ 896,500
21,100 Community Health Systems 751,688
Inc......................
47,900 COR Therapeutics, Inc.*.... 401,163
30,000 Healthdyne, Inc............ 345,000
38,800 Jones Med Inds Inc......... 936,050
14,200 Lincare Holdings Inc.*..... 355,000
4,000 Medeva PLC. (ADR).......... 67,740
39,700 Neurogen Corp.*............ 1,066,937
49,700 Orthologic Corp.*.......... 720,650
45,900 Scherer (R.P.) Corp........ 2,254,837
42,000 Syncor International 283,500
Corp.*...................
15,000 Watson Pharmaceuticals
Inc.*.................... 735,000
------------
8,814,065
------------
Electrical Equipment--2.0%
14,700 Alliance Semiconductor*.... 170,888
15,800 Boston Scientific Corp.*... 774,200
51,000 Cellpro, Inc.*............. 816,000
34,800 Nu Horizons Electrs 617,700
Corp.*...................
------------
2,378,788
------------
Electronics--7.9%
17,800 Burr-Brown Corp.*.......... 453,900
16,700 Electro Scientific 488,475
Industries, Inc.*........
18,400 Electroglas Inc.*.......... 450,800
33,700 Empi Inc.*................. 859,350
44,400 Integrated Circuit Systems
Inc.*.................... 549,450
32,900 Integrated Device 423,588
Technology, Inc.*........
22,500 Kulicke & Soffa Inds 523,125
Inc.*....................
16,600 Maxim Integrated Products, 639,100
Inc.*....................
12,100 Micron Technology Inc.*.... 479,462
32,100 Photronics, Inc.*.......... 858,675
35,600 S3 Inc.*................... 627,450
25,200 Scientific Games Holdings $ 951,300
Corp.*..................
56,400 Sensormatic Electronics 979,950
Corp....................
19,300 Teradyne, Inc.*........... 482,500
13,700 Wyle Electronics.......... 481,212
13,500 Xilinx Inc.*.............. 411,750
-----------
9,660,087
-----------
Financial Services--2.9%
18,800 Bear Stearns Cos., Inc.... 373,650
12,800 Commercial Federal 483,200
Corp.*..................
15,000 First Merchants Acceptance 277,500
Corp....................
12,200 First USA, Inc............ 541,375
Lehman Brothers Holdings
25,000 Inc..................... 531,250
37,600 Olympic Financial Ltd.*... 611,000
22,400 Penncorp Financial Group, 658,000
Inc.....................
-----------
3,475,975
-----------
Food & Beverages--0.3%
30,000 Barefoot, Inc............. 315,000
-----------
Gas Exploration--2.5%
18,200 Anadarko Petroleum 985,075
Corp....................
80,000 Forcenergy Gas Expl Inc... 880,000
13,700 Newfield Exploration 369,900
Co......................
17,100 Sonat Offshore Drilling 765,225
Inc.....................
-----------
3,000,200
-----------
Homebuilders--1.6%
43,800 Champion Enterprises, 1,352,325
Inc.*...................
25,500 Lennar Corp............... 640,688
-----------
1,993,013
-----------
Hotels & Restaurants--3.8%
61,200 Boston Chicken............ 1,966,050
24,200 HFS Inc................... 1,978,350
30,000 Trump Hotels & Casino 645,000
Resorts.................
-----------
4,589,400
-----------
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
14
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Household Appliances & Home
Furnishings--1.0%
21,600 American Homestar Corp..... $ 445,500
28,000 Newell Co.................. 724,500
------------
1,170,000
------------
Industrial & Machinery--5.6%
7,300 Acme Cleveland Corp........ 136,875
14,600 Applied Materials, Inc.*... 574,875
22,600 Cognex Corp.*.............. 785,350
94,200 Danka Business Systems 3,485,400
PLC......................
14,100 Esterline Technologies 333,112
Corp.*...................
27,400 Synalloy Corp.............. 578,825
15,000 TriMas Corp................ 283,125
16,200 Tyco Laboratories, Inc..... 577,125
------------
6,754,687
------------
Insurance--2.8%
22,800 American Financial Group 698,250
Inc......................
20,600 Fremont General Corp....... 757,050
24,000 Progressive Corp........... 1,173,000
25,500 TIG Holdings, Inc.......... 726,750
------------
3,355,050
------------
Leisure Time--2.2%
24,000 Grand Casinos, Inc.*....... 558,000
122,800 Hammons (John Q.) Hotels 1,135,900
Inc......................
9,900 King World Productions, 384,862
Inc.*....................
30,100 Seattle Filmworks Inc.*.... 624,575
------------
2,703,337
------------
Mining--0.5%
10,400 Phelps Dodge Corp.......... 647,400
------------
Miscellaneous--6.3%
12,700 Advanced Semiconductor 625,475
Matls*...................
50,000 Amerin Corp................ 1,337,500
31,800 Atmel Corp.*............... 711,525
63,200 Atrium Inc.*............... 1,264,000
30,100 Camco Inc.................. 842,800
9,500 Cellstar Corp.*............ 247,000
18,000 Credence Systems Corp.*... $ 411,750
12,000 Loewen Group, Inc......... 303,750
11,400 Madge N.V.*............... 510,150
20,250 McAffee Associates, 888,469
Inc.*...................
30,000 Stone Energy Corp......... 461,250
-----------
7,603,669
-----------
Non-Ferrous Metals--0.6%
22,200 ASARCO, Inc............... 710,400
-----------
Paper--4.4%
48,900 Alco Standard Corp........ 2,231,062
23,000 Bowater Inc............... 816,500
10,200 Consolidated Papers 572,475
Inc.....................
14,040 Kimberly-Clark Corp....... 1,161,810
16,000 Rayonier Timberlands, 534,000
L.P.....................
-----------
5,315,847
-----------
Petroleum Services--2.7%
74,900 Petroleum Geo-Services A/S 1,872,500
(ADR)...................
57,000 Reading & Bates Corp.*.... 855,000
25,300 Valero Energy Corp........ 619,850
-----------
3,347,350
-----------
Pollution Control--0.3%
17,600 FSI International, 356,400
Inc.*...................
-----------
Publishing--1.0%
11,500 American Greetings 317,688
Corp....................
16,100 Devon Group, Inc.*........ 467,906
9,300 Houghton Mifflin Co....... 399,900
-----------
1,185,494
-----------
Retail Grocery--0.2%
11,085 Heartland Express Inc..... 218,929
-----------
Retail Trade--4.0%
27,200 Barnes & Noble, Inc.*..... 788,800
47,800 Harcourt General, Inc..... 2,001,625
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
15
<PAGE>
THE TARGET PORTFOLIO TRUST
Small Capitalization Growth Portfolio (cont'd)
Portfolio of Investments December 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Retail Trade (cont'd)
15,000 Heilig Meyers Co........... $ 275,625
39,500 Ross Stores Inc............ 755,437
13,900 Scholastic Corp............ 1,080,725
------------
4,902,212
------------
Software--2.3%
40,700 Cheyenne Software, Inc..... 1,063,287
11,700 Computer Associates
International, Inc....... 665,438
28,500 Henry Jack & Associates 705,375
Inc......................
15,185 Read-Rite Corp.*........... 353,051
------------
2,787,151
------------
Steel--1.1%
25,900 Castle A M Co.............. 728,438
23,000 Mueller Inds Inc.*......... 672,750
------------
1,401,188
------------
Tires & Rubber--0.3%
12,800 Cooper Tire & Rubber Co.... 315,200
------------
Telecommunication--0.6%
8,600 United States Robotics 754,650
Corp.*...................
------------
Telephone--1.9%
15,100 Century Telephone 479,425
Enterprises, Inc.........
88,200 LCI International, Inc..... 1,808,100
------------
2,287,525
------------
Trucking & Freight Forwarding--1.1%
23,700 American President Cos., 545,100
Ltd......................
25,000 Tidewater Inc.............. 787,500
------------
1,332,600
------------
Total long-term investments
(common stocks)
(cost $93,744,854)....... 114,833,299
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT/SHARES VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
SHORT TERM INVESTMENTS--5.3%
Commercial Paper--1.8%
$ 2,231 Philip Morris Capital Corp.
5.80%, 1/2/96
(cost $2,230,641)........ $ 2,230,641
------------
Other--3.5%
4,139 Seven Seas Series 4,139,172
Government Fund..........
61 Seven Seas Money Market 61,180
Fund.....................
------------
Total investment company
(cost $4,200,352)........ 4,200,352
------------
Total short-term
investments
(cost $6,430,993)........ 6,430,993
------------
Total Investments--99.8%
(cost $100,175,847)........ 121,264,292
Other assets in excess of
liabilities--0.2%........ 268,430
------------
Net Assets--100%........... $121,532,722
------------
------------
</TABLE>
- ------------------
ADR--American Depository Receipt.
* Non-income producing securities.
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
16
<PAGE>
Small Capitalization Value Portfolio
Portfolio of Investments December 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG TERM INVESTMENTS--97.8%
Common Stocks--97.7%
Aerospace--2.6%
5,000 Alliant Techsystems, $ 253,125
Inc.*....................
52,000 Coltec Industries, Inc.*... 604,500
43,700 Talley Industries, Inc.*... 376,913
18,800 Teleflex, Inc.............. 770,800
23,900 Whittaker Corp.*........... 519,825
------------
2,525,163
------------
Apparel & Textiles--2.7%
3,900 Interface, Inc............. 66,300
31,500 Jones Apparel Group, 1,240,312
Inc.*....................
19,200 Unitog Co. (New)........... 463,200
34,400 Warnaco Group, Inc......... 860,000
800 Westpoint Stevens, Inc..... 16,050
------------
2,645,862
------------
Asset Management--0.4%
63,600 Noel Group, Inc.*.......... 413,400
------------
Auto Parts--1.8%
18,800 Lear Seating Corp.*........ 545,200
44,900 Standard Motor Products, 673,500
Inc., Class A............
59,000 TBC Corp.*................. 508,875
------------
1,727,575
------------
Auto Related--3.1%
32,000 Amcast Industrial Corp..... 584,000
27,000 Armor All Products, 489,375
Corp.....................
11,900 First Brands Corp.......... 566,738
16,200 Modine Manufacturing Co.... 388,800
29,480 Myers Industries, Inc...... 482,735
15,300 Smith A O Corp............. 317,475
13,900 Thomson PBE, Inc.*......... 194,600
------------
3,023,723
------------
Banks--5.1%
20,000 Bay View Capital Corp..... $ 570,000
8,600 BayBanks, Inc............. 844,950
36,400 First American Corp....... 1,724,450
20,800 First Commerce Corp. 665,600
(L.A.)..................
18,500 Firstmerit Corp........... 555,000
27,400 Signet Banking Corp....... 650,750
-----------
5,010,750
-----------
Building & Construction--5.7%
20,600 Applied Power, Inc........ 618,000
18,200 Carlisle Co., Inc......... 734,825
26,650 Clarcor, Inc.............. 542,993
38,000 Commercial Intertech 688,750
Corp....................
27,800 Donaldson Co., Inc........ 698,475
40,500 Lydall, Inc.*............. 921,375
26,450 Osmonics, Inc.*........... 538,919
36,000 Regal Beloit Corp......... 783,000
-----------
5,526,337
-----------
Business Services--0.6%
28,500 Bowne & Company, Inc...... 570,000
-----------
Chemicals--5.2%
39,800 Arcadian Corp............. 771,125
76,900 Crompton & Knowles 1,018,925
Corp....................
21,700 Fuller (H.B.) Company..... 754,075
2,700 Furon Co.................. 54,000
30,800 Hanna (M. A.) Co.......... 862,400
24,300 Learonal, Inc............. 558,900
4,300 O Sullivan Corp........... 44,612
41,250 RPM, Inc., Ohio........... 680,625
21,900 Rock-Tenn Co., Class A.... 355,875
-----------
5,100,537
-----------
Communication--1.0%
24,400 Associated Group, Inc., 460,550
Class A*................
30,800 Bell Cablemedia PLC. 492,800
(ADR)*..................
-----------
953,350
-----------
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
17
<PAGE>
THE TARGET PORTFOLIO TRUST
Small Capitalization Value Portfolio (cont'd)
Portfolio of Investments December 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Computers & Business Equipment--2.6%
73,200 Intelligent Electronics, $ 439,200
Inc......................
16,900 Lexmark International 308,425
Group, Inc.*.............
26,700 Stratus Computer, Inc.*.... 924,487
54,500 Wang Laboratories, Inc.*... 906,063
------------
2,578,175
------------
Cosmetics & Toiletries--0.8%
1,700 Alberto Culver Co.......... 51,850
19,000 Maybelline, Inc............ 688,750
------------
740,600
------------
Diversified Industrials--0.7%
23,700 Brady (W. H.) Co........... 639,900
------------
Domestic Oil--1.4%
40,000 Cross Timbers Oil Co....... 705,000
25,400 Ultramar Corp.............. 654,050
------------
1,359,050
------------
Drugs & Healthcare--2.2%
30,400 Amerisource Health 1,003,200
Corp.*...................
10,500 FHP International Corp.*... 299,250
7,400 McKesson Corp.............. 374,625
18,500 West Co. Inc............... 434,750
------------
2,111,825
------------
Energy--0.5%
10,000 Addington Resources, 146,250
Inc.*....................
17,200 California Energy, Inc.*... 335,400
------------
481,650
------------
Electrical Equipment--3.9%
6,800 AptarGroup, Inc............ 254,150
19,950 Bearings, Inc.............. 583,537
46,200 Belden Helminway Co., 1,189,650
Inc......................
16,400 Core Industries, Inc....... 211,150
25,000 EG & G, Inc................ 606,250
41,100 Oak Industries, Inc.*...... 770,625
16,000 Woodhead Industries, 228,000
Inc......................
------------
3,843,362
------------
Electronics--2.2%
33,500 Amphenol Corp.*........... $ 812,375
22,500 Augat, Inc................ 385,313
39,750 Methode Eletronics, 566,437
Inc.....................
30,400 Pioneer Standard 402,800
Electronics, Inc........
-----------
2,166,925
-----------
Entertainment--0.7%
25,700 GTECH Holdings Corp.*..... 668,200
-----------
Financial Services--2.0%
22,000 Allied Capital Lending 291,500
Corp....................
11,000 CMAC Investment Corp...... 484,000
48,700 Rollins Truck Leasing 541,788
Corp....................
28,800 SEI Corp.................. 626,400
-----------
1,943,688
-----------
Foods--1.0%
42,900 Flowers Industries, 520,163
Inc.....................
1,600 Lancaster Colony Corp..... 59,600
9,400 Universal Foods Corp...... 377,175
-----------
956,938
-----------
Food-Service / Lodging--2.5%
32,600 Bob Evans Farms, Inc...... 619,400
28,800 Marcus Corp............... 788,400
47,600 Sbarro, Inc............... 1,023,400
-----------
2,431,200
-----------
Hospital Supplies & Service--2.8%
22,800 Beckman Instruments, 806,550
Inc.....................
43,600 Sierra Health Services, 1,384,300
Inc.*...................
17,300 SpaceLabs Medical, 497,375
Inc.*...................
-----------
2,688,225
-----------
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
18
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Household Appliances & Home
Furnishings--4.7%
4,400 Bush Industries, Inc....... $ 86,350
20,300 Chromcraft Revington, 540,488
Inc.*....................
19,700 Crown Crafts, Inc.......... 226,550
65,000 Ekco Group, Inc............ 381,875
32,600 Ethan Allen Interiors, 664,225
Inc.*....................
11,400 Hon Industries, Inc........ 265,050
30,100 Miller (Herman), Inc....... 903,000
39,500 Rival Co................... 873,937
21,900 Stanhome, Inc.............. 637,837
------------
4,579,312
------------
Industrial & Machinery--5.2%
26,400 Alltrista Corp.*........... 475,200
24,000 Briggs & Stratton Corp..... 1,041,000
32,100 BWIP Holding, Inc.......... 529,650
30,100 Crane Co................... 1,109,937
43,260 Mark IV Industries, Inc.... 854,385
33,100 Measurex Corp.............. 935,075
6,400 Medar, Inc.*............... 50,400
2,400 Watts Industries, Inc...... 55,800
------------
5,051,447
------------
Insurance--6.4%
24,600 20th Century Industries*... 488,925
17,900 Alexander & Alexander 340,100
Services, Inc............
8,800 Berkley (W. R.) Corp....... 473,000
20,500 Equitable of Iowa Cos...... 658,563
14,900 Hartford Steam Boiler
Inspection &
Insurance Co............. 745,000
21,400 HCC Insurance Holdings, 791,800
Inc.*....................
20,200 Horace Mann Educators 631,250
Corp.....................
6,700 NAC Re Corp................ 241,200
18,400 Poe & Associate, Inc....... 457,700
42,900 Western National Corp...... 691,762
62,200 Willis Corroon Group PLC. 723,075
(ADR)....................
------------
6,242,375
------------
Leisure Related--0.9%
36,500 Anthony Industries, Inc.... 839,500
------------
Manufacturing--1.5%
15,700 Pentair, Inc.............. $ 781,075
22,600 Trinova Corp.............. 646,925
-----------
1,428,000
-----------
Miscellaneous--0.2%
24,600 Big B, Inc................ 246,000
-----------
Oil & Gas--1.2%
21,400 Devon Energy Corp......... 545,700
20,000 Helmerich & Payne, Inc.... 595,000
-----------
1,140,700
-----------
Oil-Supplies & Construction--1.9%
7,400 BJ Services Co.*.......... 214,600
5,400 Input/Output, Inc.*....... 311,850
49,400 Lone Star Technologies, 543,400
Inc.*...................
25,500 Tidewater, Inc............ 803,250
-----------
1,873,100
-----------
Office Equipment & Services--1.8%
8,300 Data Research Associates, 155,625
Inc.*...................
38,500 Hunt Manufacturing Co..... 668,938
3,000 Wallace Computer Services, 163,875
Inc.....................
46,200 Zero Corp................. 820,050
-----------
1,808,488
-----------
Paper--0.4%
21,000 Caraustar Industries, 420,000
Inc.....................
-----------
Printing & Publishing--3.8%
28,600 ADVO System, Inc.......... 743,600
32,550 American Business 927,675
Products, Inc...........
31,900 Banta Corp................ 1,403,600
28,400 Lee Enterprises, Inc...... 653,200
-----------
3,728,075
-----------
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
19
<PAGE>
THE TARGET PORTFOLIO TRUST
Small Capitalization Value Portfolio (cont'd)
Portfolio of Investments December 31, 1995
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Professional Services--2.3%
30,700 CDI Corp.*................. $ 552,600
16,200 Interim Services, Inc.*.... 562,950
18,800 Jacobs Engineering Group, 470,000
Inc.*....................
20,000 Rollins, Inc............... 442,500
8,000 US Facilities Corp......... 171,000
------------
2,199,050
------------
Publishing--0.8%
17,900 Houghton Mifflin Co........ 769,700
------------
Real Estate--3.9%
12,700 Allied Capital Commercial 250,825
Corp.....................
18,000 Avalon Properties, Inc..... 387,000
16,600 Crescent Real Estate 566,475
Equities.................
8,792 HGI Realty, Inc............ 201,117
24,000 Irvine Apartment 462,000
Communities, Inc.........
20,700 Liberty Property........... 429,525
7,500 Prime Retail, Inc.......... 89,063
30,000 RFS Hotel Investors, 461,250
Inc......................
39,783 Security Capital Industrial 696,202
Trust....................
9,000 Sun Communities, Inc....... 237,375
------------
3,780,832
------------
Recreation--0.6%
21,000 Polaris Industries, Inc.... 616,875
------------
Retailing--2.8%
53,300 Carson Pirie Scott & 1,059,337
Co.*.....................
22,100 Heilig Meyers Co........... 406,088
21,900 Meyer (Fred), Inc.*........ 492,750
27,800 Revco DS, Inc.............. 785,350
------------
2,743,525
------------
Retail-Food & Drugs--1.5%
25,000 Hannaford Bros. Co......... 615,625
21,500 Luby's Cafeterias, Inc..... 478,375
29,200 Ruddick Corp............... 335,800
------------
1,429,800
------------
Retail Trade--0.4%
19,950 Arbor Drugs, Inc.......... $ 418,950
-----------
Steel--1.5%
40,300 J & L Specialty Steel, 755,625
Inc.....................
26,400 Lukens, Inc............... 759,000
-----------
1,514,625
-----------
Telecommunication--0.4%
29,800 Metromedia International 417,200
Group, Inc.*............
-----------
Telephone--0.5%
Cellular Communications
19,400 Puerto Rico, Inc.*...... 538,350
-----------
Trucking & Freight Forwarding--1.9%
22,300 Landstar Systems, Inc.*... 596,525
29,400 Pittston Services Group... 922,425
14,400 TNT Freightways Corp...... 289,800
-----------
1,808,750
-----------
Trucking & Shipping--1.0%
30,200 American Freightways 313,325
Corp.*..................
32,800 Werner Enterprises, 664,200
Inc.....................
-----------
977,525
-----------
Utilities--0.4%
12,800 Wicor, Inc................ 412,800
-----------
Wine--0.2%
6,900 Canandaigua Wine Co., 225,113
Inc.*...................
-----------
Total common stocks 95,316,527
(cost $85,600,901)......
-----------
Preferred Stocks--0.1%
8,000 Prime Retail, Inc.
(cost $139,000)........... 142,000
-----------
Total long-term 95,458,527
investments
(cost $85,739,901)......
-----------
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
20
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
PRINCIPAL
AMOUNT/SHARES VALUE
(000) DESCRIPTION (NOTE 1)
SHORT-TERM INVESTMENTS--2.3%
Other--1.1%
$ 1,022 Seven Seas Money Market
Fund
(cost $1,022,014).......... $ 1,022,014
------------
U. S. Government Securities--1.2%
1,045 Federal National Mortgage
Association
5.45%, 1/3/96............ 1,044,684
United States Treasury
bills
95 4.50%, 1/11/96............. 94,881
75 4.65%, 1/11/96............. 74,903
------------
Total U.S. Government
Securities
(cost $1,214,468)........ 1,214,468
------------
Total short-term
investments
(cost $2,236,482)........ 2,236,482
------------
Total Investments--100.1%
(cost $87,976,383; Note
4)....................... 97,695,009
Liabilities in excess of
other
assets--(0.1%)........... (100,530)
------------
Net Assets--100%........... $ 97,594,479
------------
------------
</TABLE>
- ---------------
ADR--American Depository Receipts.
* Non-income producing securities.
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
21
<PAGE>
THE TARGET PORTFOLIO TRUST
International Equity Portfolio
Portfolio of Investments December 31, 1995
<TABLE>
<CAPTION>
US$
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--97.0%
Common Stocks--95.7%
Australia--3.9%
205,300 News Corp. Ltd. (ADR) .... $ 3,952,025
(Publishing)
795,900 Westpac Bank Corp. ....... 3,525,765
(Banking) ------------
7,477,790
------------
Denmark--1.1%
40,200 Unidanmark A.S. .......... 1,990,995
(Banking) ------------
Finland--1.6%
117,200 Kymmene Corp. ............ 3,098,818
(Forest Products) ------------
France--12.2%
12,125 Accor .................... 1,569,788
(Consumer Services)
68,300 Alcatel Alsthom Compagnie
Generale d' Electricite.... 5,888,556
(Energy)
69,560 BQE National Paris ....... 3,137,800
(Banking)
29,600 Cie De St Gobain ......... 3,227,772
(Manufacturing)
35,500 Eaux Cie Generale ........ 3,544,201
(Utilities)
37,850 Roussel Uclaf (ADR) ...... 3,207,627
(Consumer Goods)
42,332 Total Francaise Petroleum, 2,856,999
Ltd. ................... ------------
(Oil & Gas-Domestic)
23,432,743
------------
Germany--8.3%
15,600 Hoechst A.G. ............. 4,230,324
(Steel)
11,200 Mannesmann A.G. (ADR) .... 3,573,759
(Industrials)
7,300 Siemens Aktiengesellschaft $ 3,994,772
.......................
(Industrials)
97,600 VEBA A.G. ............... 4,143,492
(Utilities) -----------
15,942,347
-----------
Hong Kong--2.1%
212,999 HSBC Holdings PLC ....... 3,222,875
(Banking)
587,000 Peregrine Investments ... 759,134
(Financial Services) -----------
3,982,009
-----------
Japan--26.2%
480 DDI Corp. ............... 3,719,128
(Consumer Goods)
256,000 Hitachi, Ltd. ........... 2,578,596
(Capital Goods)
232,000 Matsushita Electric 3,774,915
Industrial Co., Ltd. .
(Electrical Equipment)
682,000 Mazda Motor Corp.* ...... 2,899,738
(Automobiles)
542,000 Mitsubishi Heavy Inds. 4,320,252
.......................
(Electrical Equipment)
34,000 Nintendo Co., Ltd. ...... 2,584,988
(Software)
133,000 Omron Corp. ............. 3,065,763
(Manufacturing)
77,000 Orix Corp. .............. 3,169,491
(Leasing)
38,400 Promise Co., Ltd. ....... 1,848,407
(Financial Services)
89,000 Ricoh Corp., Ltd. ....... 974,044
(Office Equipment &
Supplies)
75,000 Rohm Co., Ltd. .......... 4,234,867
(Technology)
259,000 Sekisui Chemical Corp. 3,812,881
.......................
(Chemicals)
71,000 Sony Corp. .............. 4,256,562
(Consumer Durable Goods)
305,000 Sumitomo Trust & Banking 4,312,833
.......................
(Banking)
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
22
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
US$
VALUE
SHARES DESCRIPTION (NOTE 1)
Japan--(cont'd)
221,000 Toyota Motor Corp. ....... $ 4,687,554
(Automobiles) ------------
50,240,019
------------
Korea
1 Samsung Electronics, GDR 59
........................ ------------
(Technology)
Netherlands--7.6%
25,000 Heineken N.V. ............ 4,435,408
(Food & Beverage)
65,105 Internationale-Nederlanden 4,349,259
Group N.V.
(Financial Services)
61,600 Nedlloyd Groep N.V. ...... 1,397,295
(Transportation)
30,700 Royal Dutch Petroleum Co. 4,332,538
........................ ------------
(Energy)
14,514,500
------------
New Zealand--1.8%
797,200 Fletcher Challenge, Ltd. 1,839,773
........................
(Forest & Paper)
693,400 Lion Nathan Ltd. ......... 1,654,622
(Consumer Goods) ------------
3,494,395
------------
Norway--1.1%
172,400 Aker A.S. Class B ........ 2,095,767
(Industrials) ------------
Spain--2.6%
42,100 Banco Santander Sa ....... 2,113,677
(Banking)
50,600 Empresa Nac Electricid ... 2,865,804
(Energy) ------------
4,979,481
------------
Sweden--3.9%
90,800 Astra B Free ............. 3,596,608
(Health & Personal Care)
41,600 Electrolux AB ........... $ 1,707,306
(Consumer Durable Goods)
109,500 Volvo AB ................ 2,242,873
(Automobiles) -----------
7,546,787
-----------
Switzerland--8.0%
1,040 Baloise Hldgs. .......... 2,163,849
(Financial Services)
5,460 Ciba-Geigy Ltd. ......... 4,804,421
(Pharmaceuticals)
3,710 Nestle S.A. ............. 4,103,997
(Consumer Goods)
2,087 Societe Generale
Surveillance
Holding S.A............... 4,143,242
(Business & Public
Services)
-----------
15,215,509
-----------
United Kingdom--15.3%
236,800 Allied-Lyons PLC ........ 1,927,057
(Food & Beverage)
335,057 British Aerospace PLC ... 4,141,055
(Aerospace/Defense)
23,155 British Aerospace PLC 112,557
(Warrants)* ............
(Aerospace/Defense)
489,396 Cadbury Schweppes, PLC 4,039,664
.......................
(Food & Beverage)
272,600 Lloyds Abbey Life PLC* 1,905,109
.......................
(Insurance)
202,500 Midlands Electricity PLC 2,390,123
.......................
(Utilities)
668,200 Mirror Group PLC ........ 1,826,420
(Publishing)
163,822 National Grid Group PLC 506,299
.......................
(Utilities)
175,500 National Power PLC (Ord.) 1,225,148
.......................
(Utilities)
236,000 National Power PLCD ...... 564,435
(Utilities)
527,550 Rank Organization PLC ... 3,817,958
(Technology)
1,905,500 Sears PLC ............... 3,077,683
(Retail)
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
23
<PAGE>
THE TARGET PORTFOLIO TRUST
International Equity Portfolio (cont'd)
Portfolio of Investments December 31, 1995
<TABLE>
<CAPTION>
US$
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
United Kingdom--(cont'd)
160,000 Thorn EMI PLC ............ $ 3,768,287
(Entertainment) ------------
29,301,795
------------
Total common stocks
(cost $162,537,084)........ 183,313,014
------------
Preferred Stocks--1.3%
Italy--1.3%
1,374,400 Fiat Spa
(Automobiles)
(cost $3,729,704).......... 2,509,727
------------
Total long-term investments
(cost $166,266,788)........ 185,822,741
------------
<CAPTION>
PRINCIPAL US$
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
SHORT-TERM INVESTMENTS--3.3%
U. S. Government Securities--3.3%
Federal Home Loan Mortgage
Discount Notes
$ 5,135 5.60%, 1/2/96.............. $ 5,134,201
Federal National Mortgage
Association, Discount
Notes
1,145 Zero Coupon, 1/16/96....... 1,142,400
------------
Total U. S. Government
Securities
(cost $6,276,601).......... 6,276,601
------------
Total Investments--100.3%
(cost $172,543,389; Note 192,099,342
4).......................
Liabilities in excess of
other
assets--(0.3%)............. (501,776)
------------
Net Assets--100%........... $191,597,566
------------
------------
</TABLE>
- ------------------
ADR--American Depository Receipt.
GDR--Global Depository Receipt.
* Non-income producing securities.
D Partially Paid Security
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
24
<PAGE>
International Bond Portfolio
Portfolio of Investments December 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL US$
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--77.8%
Australia--1.1%
Australian Gov't. Bonds,
A$ 490 9.00%, 9/15/04............. $ 383,747
----------
Austria--1.1%
Austrian Gov't. Bonds,
ATS 3,660 7.00%, 2/14/00............. 387,299
----------
Belgium--1.5%
Belgium Gov't. Bonds,
BF 14,700 8.00%, 12/24/12............ 523,616
----------
Canada--3.6%
Canadian Gov't. Bonds,
C$ 21 6.50%, 6/1/04.............. 14,899
Province of Ontario,
Provincial Bond,
1,500 9.00%, 9/15/04............. 1,221,487
----------
1,236,386
----------
Denmark--3.5%
Danish Gov't. Bonds,
DKr 6,737 7.00%, 12/15/04............ 1,208,474
----------
France--12.6%
Credit Foncier de France,
Corporate Bond,
3,750 8.625%, 2/20/02............ 823,208
French Gov't. Bonds,
FF 8,640# 7.25%, 8/12/97............. 1,822,393
3,970 7.00%, 11/12/99............ 847,587
2,650 8.50%, 11/25/02............ 605,923
8,590 Zero Coupon, 10/25/19...... 287,678
----------
4,386,789
----------
Germany--13.4%
Deutsche Bundespost,
DM 2,000# 7.50%, 12/2/02............. 1,520,390
German Gov't. Bonds,
150 6.50%, 7/15/03............. 108,916
1,420 6.25%, 1/4/24.............. 922,084
German Unity Bonds,
830 8.00%, 1/21/02............. 652,081
PRINCIPAL US$
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
Treuhandanstalt,
DM1,900# 7.125%, 1/29/03............ $1,430,596
----------
4,634,067
----------
Italy--8.3%
Italian Gov't. Bonds,
L 2,990,000# 10.50%, 4/15/98............ 1,896,844
1,560,000 10.50%, 4/1/05............. 976,298
----------
2,873,142
----------
Japan--13.7%
Japanese Gov't. Bonds,
Y 86,000 6.50%, 3/20/01............. 1,011,510
245,700# 4.60%, 3/20/03............. 2,650,467
107,700 3.70%, 3/22/04............. 1,096,610
----------
4,758,587
----------
New Zealand--1.4%
New Zealand Gov't. Bonds,
NZ$ 700 10.00%, 7/15/97............ 470,587
----------
Spain--12.0%
Spanish Gov't. Bonds,
Pts 454,710# 10.25%, 11/30/98........... 3,835,233
36,200 12.25%, 3/25/00............ 326,251
----------
4,161,484
----------
United Kingdom--5.6%
European Investment Bank
Bonds,
BP 200 8.00%, 6/10/03............. 320,011
United Kingdom Treasury
Bonds,
120 8.00%, 12/7/00............. 195,508
200 9.75%, 8/27/02............. 352,927
600 7.75%, 9/8/06.............. 950,167
80 8.75%, 8/25/17............. 137,366
----------
1,955,979
----------
Total long-term investments
(cost US$26,196,445)....... 26,980,157
----------
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
25
<PAGE>
THE TARGET PORTFOLIO TRUST
International Bond Portfolio (cont'd)
Portfolio of Investments
December 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL US$
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
SHORT-TERM INVESTMENTS--19.2%
U.S. Government Securities--17.7%
United States Treasury
bills,*
US$ 1,500# 5.49%, 1/25/96............. $1,493,824
1,500# 5.59%, 2/29/96............. 1,487,870
1,600# 5.37%, 3/28/96............. 1,580,247
1,600# 5.44%, 4/25/96............. 1,574,338
----------
Total U.S. Government
Securities
(cost US$6,134,387)...... 6,136,279
----------
Repurchase Agreement--1.5%
510 State Street Bank & Trust
Company, 2.25%, dated
12/29/95, due 1/2/96 in
the amount of $510,128
(cost US$510,000; value
of collateral including
accrued
interest-US$523,628)..... 510,000
----------
Total short-term
investments
(cost US$6,644,387)...... 6,646,279
----------
Total Investments--97.0%
(cost US$32,840,832; Note 33,626,436
4).......................
Other assets in excess of
liabilities--3.0%........ 1,033,504
----------
Net Assets--100%........... $34,659,940
----------
----------
</TABLE>
- ------------------
# Principal amount segregated as collateral for forward currency
contracts.
Aggregate value of segregated securities--$19,292,202.
* Percentages quoted represent yield-to-maturity as of purchase
date.
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
26
<PAGE>
Total Return Bond Portfolio
Portfolio of Investments December 31, 1995
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
<C> <C> <S> <C>
LONG-TERM
[email protected]%
Corporate Bonds--21.5%
Agriculture & Equipment--0.7%
Varity Corp.,
Baa3 $ 300 11.375%, 11/15/98..... $ 312,954
-----------
Airlines--6.9%
American Airlines,
Inc.,
A3 1,000 9.78%, 11/26/11....... 1,197,965
AMR Corp.,
Baa3 100 10.00%, 2/1/01........ 114,880
Delta Airlines, Inc.,
Baa2 288 9.32%, 1/2/09......... 336,436
Baa2 691 9.875%, 4/30/08....... 800,761
United Airlines, Inc.,
Baa3 450 10.67%, 5/1/04........ 542,826
Baa3 100 11.21%, 5/1/14........ 132,365
-----------
3,125,233
-----------
Automobiles & Trucks--0.8%
Chrysler Financial
Corp.,
A3 250 10.34%, 5/15/08....... 253,878
Ford Motor Credit Co.,
A1 100 6.25%, 2/26/98........ 101,491
-----------
355,369
-----------
Banking--1.2%
Kansallis Osake
Pankki,
(Finland)
A3 500DD 8.65%, 12/29/49....... 534,297
-----------
Financial Services--2.1%
G.I. Holdings, Inc.,
Zero Coupon,
Ba3 885 10/1/98............. 682,556
PaineWebber Group,
Inc.,
Baa1 250 6.25%, 6/15/98........ 250,795
-----------
933,351
-----------
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
Miscellaneous--1.7%
CTC Mansfield Funding
Corp.,
Ba3 $ 300 11.125%, 9/30/16...... $ 319,380
PDV America, Inc.,
Baa3 450 7.25%, 8/1/98......... 436,558
-----------
755,938
-----------
Petroleum Services--2.3%
Occidental Petroleum
Corp.,
Baa3 1,000 11.75%, 3/15/11....... 1,058,850
-----------
Publishing--2.2%
Time Warner, Inc.,
Ba1 87DD 6.835%, 8/15/00....... 87,493
Ba1 600 7.45%, 2/1/98......... 616,710
Ba1 262 8.11%, 8/15/06........ 278,962
-----------
983,165
-----------
Tobacco--2.2%
RJR Nabisco, Inc.
Baa3 1,000 8.00%, 7/15/01........ 1,019,120
-----------
Utilities--1.4%
Cleveland Electric
Illuminating Co.,
Ba2 600 9.45%, 12/1/97........ 622,056
-----------
Total corporate bonds
(cost $9,444,973)... 9,700,333
-----------
U.S. Gov't Agency Mortgage Backed
Securities--48.6%
Federal Home Loan
Mortgage Corp.,
2,500 6.50%, 1/16/26........ 2,472,650
1,369 6.50%, 9/15/18, I/O... 163,627
6.50%, 12/15/21,
2,101 I/O................. 305,467
1,838DD 6.891%, 1/1/24........ 1,887,498
35 9.25%, 1/1/10......... 37,206
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
27
<PAGE>
<PAGE>
THE TARGET PORTFOLIO TRUST
Total Return Bond Portfolio (cont'd)
Portfolio of Investments December 31, 1995
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
<C> <C> <S> <C>
U.S. Gov't Agency Mortgage Backed
Securities--(cont'd)
Federal National Mortgage Assn.,
$ 1,000DD 6.36%, 1/24/26........ $ 1,011,250
2,285DD 6.383%, 11/1/27....... 2,313,642
Federal National Mortgage Corp.,
2,203DD 6.383%, 12/1/30....... 2,239,898
2,848DD 7.558%, 1/1/20........ 2,913,622
25 8.50%, 4/1/99......... 25,801
Government National
Mortgage Assn.,
563 5.00%, 8/20/25........ 558,988
1,448 5.00%, 9/20/25........ 1,431,295
1,522#/DD 5.50%, 7/20/25........ 1,521,983
216DD 6.50%, 1/20/24........ 219,717
1,666DD 7.00%, 1/20/24........ 1,707,346
465DD 7.25%, 9/20/24........ 474,340
605DD 7.375%, 6/20/21....... 616,387
798DD 7.375%, 6/20/23....... 810,224
Resolution Trust
Corp.,
Aa2 591DD 7.075%, 6/25/23....... 594,265
AAA* 50 7.75%, 4/25/28........ 50,453
AAA* 200 8.35%, 6/25/29........ 201,516
Aa2 128 8.625%, 7/25/30....... 131,228
Baa2 211 9.25%, 6/25/23........ 219,916
-----------
Total U.S. gov't
agency
mortgage backed
securities
(cost $21,787,635).... 21,908,319
-----------
Foreign Securities--15.6%
German Government
Bonds,
6.25%, 1/4/24
Aaa DM 9,500 (Germany)........... 6,144,413
Petroleas Mexicano
6.8125%, 3/8/99
Ba2 US$1,000 (Mexico)............ 890,000
-----------
Total foreign
securities
(cost US$6,869,722)... 7,034,413
-----------
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
Collateralized Mortgage
Obligations--9.5%
American Housing Trust
1,
Senior Mortgage Pass
Through Certificate
Series 1-5 Class A,
Aaa $ 29 8.625%, 8/25/18....... $ 29,853
Champion Home Loan
Equity,
Series 1995, Class
A2-3,
Aaa 1,971DD 6.624%, 2/25/28....... 2,010,468
Countrywide
Collateralized
Mortgage Obligation,
Aa1 765DD 7.662%, 11/25/24...... 784,262
Main Place Funding,
Mortgage Obligation
Series 95-1,
Aaa 1,000DD 6.107%, 10/25/00...... 1,000,000
PaineWebber Mortgage
Acceptance Corp.,
Aaa 329 7.00%, 10/25/23....... 327,886
Salomon Capital Access
Corp.,
Aaa 27 8.40%, 3/1/16......... 26,976
Sears Mortgage
Securities Corp.,
Aa2 113DD 8.702%, 5/25/32....... 114,539
-----------
Total collateralized
mortgage
obligations
(cost $4,294,831)... 4,293,984
-----------
Total long-term
investments
(cost $42,397,161).... 42,937,049
-----------
SHORT-TERM
INVESTMENTS--14.1%
Corporate Notes--3.5%
AMR Corp.,
Baa3 100 9.72%, 1/9/96......... 100,054
Banco Nacional,
Ba2 300DD 11.25%, 11/30/95...... 299,700
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
28
<PAGE>
<TABLE>
<C> <C> <S> <C>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
Corporate Notes--(cont'd)
Delta Airlines, Inc.,
Ba1 $ 500 8.25%, 5/15/96........ $ 503,255
Salomon, Inc.,
Baa1 200 4.95%, 1/12/96........ 193,313
Baa1 500 4.97%, 2/15/96........ 499,185
-----------
Total corporate notes
(cost $1,600,364)..... 1,595,507
-----------
Commercial Paper--6.0%
Abbott Laboratories,
P1 800 5.62%, 1/9/96......... 799,001
P1 500 5.65%, 1/22/96........ 498,352
Bellsouth
Telecommunications,
Inc.,
P1 1,400 5.75%, 1/12/96........ 1,397,540
-----------
Total commercial paper
(cost $2,694,893)..... 2,694,893
-----------
U. S. Treasury Obligations--0.5%
United States Treasury
bills,
5.305%, 2/22/96
210D (cost $208,391)..... 209,969
-----------
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
Private Placement--2.2%
Banco Latinoamericano
De Export,
Baa2 $ 1,000DD 6.6406%, 5/23/96,
(cost $999,746)..... $ 999,373
-----------
Repurchase Agreement--1.9%
State Street Bank &
Trust Company,
882 2.25%, dated 12/29/95,
due 1/2/96 in the
amount of $882,221
(cost $882,000;
value of collateral
including accrued
in-
terest-$908,997).... 882,000
-----------
Total short-term
investments
(cost $6,385,394)..... 6,381,742
-----------
Total Investments--109.3%
(cost $48,782,555;
Note 4)............. 49,318,791
Liabilities in excess
of other
assets--(9.3%)...... (4,201,061)
-----------
Net Assets--100%...... $45,117,730
-----------
-----------
</TABLE>
- ---------------
* Standard & Poor's Rating.
D Pledged as initial margin on financial futures
contracts.
DD Rate shown reflects current rate on variable rate
instrument.
# Entire principal amount pledged as collateral for
reverse repurchase agreements.
@ Principal amount of securities rated A or better
segregated as collateral for forward currency
contracts.
NR--Not Rated.
I/O--Interest Only Security.
The Fund's current Statement of Additional Information contains a
description
of
Moody's ratings.
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
29
<PAGE>
THE TARGET PORTFOLIO TRUST
Intermediate-Term Bond Portfolio
Portfolio of Investments
December 31, 1995
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
<C> <C> <S> <C>
LONG-TERM
[email protected]%
Corporate Bonds--20.8%
Agricultural Equipment--0.7%
Varity Corp.,
Baa3 $ 500 11.375%, 11/15/98..... $ 521,590
-----------
Airlines--3.7%
AMR Corp.,
Baa3 100 10.375%, 3/15/21...... 128,853
Delta AirLines, Inc.,
Baa2 479 9.32%, 1/2/09......... 560,727
Ba1 250 9.875%, 1/1/98........ 266,670
Baa2 1,086 9.875%, 4/30/08....... 1,258,652
United Airlines, Inc.,
Debenture Series B
Baa3 500 11.21%, 5/1/14........ 661,825
-----------
2,876,727
-----------
Financial Services--4.8%
Banponce Financial
Corp.,
Baa1 1,000 7.73%, 8/15/97........ 1,031,330
Chrysler Financial
Corp.,
A3 900 10.34%, 5/15/08....... 913,959
Ford Motor Credit Co.,
A1 500 6.25%, 2/26/98........ 507,455
General Motors Acceptance Corp.,
A3 1,000 6.875%, 6/10/97....... 1,018,010
A3 250 8.125%, 1/13/97....... 256,410
-----------
3,727,164
-----------
Miscellaneous--1.3%
PDV America, Inc.,
Baa3 1,050 7.25%, 8/1/98......... 1,018,637
-----------
Petroleum Services--1.4%
Occidental Petroleum
Corp.,
Baa3 1,000 11.75%, 3/15/11....... 1,058,850
-----------
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
Publishing--3.0%
Time Warner Inc.,
Ba1 $ 300DD 6.835%, 8/15/00....... $ 301,701
Ba1 1,000 7.45%, 2/1/98......... 1,027,850
Ba1 900 8.11%, 8/15/06........ 958,266
-----------
2,287,817
-----------
Tobacco--2.5%
RJR Nabisco, Inc.
Baa3 1,250 8.00%, 7/15/01........ 1,288,197
Baa3 600 8.625%, 12/1/02....... 623,154
-----------
1,911,351
-----------
Utilities--3.4%
Cleveland Electric
Illuminating Co.,
Ba2 1,500 9.45%, 12/1/97........ 1,555,140
CTC Mansfield Funding Corp.,
Ba3 1,000 11.125%, 9/30/16...... 1,064,600
-----------
2,619,740
-----------
Total corporate bonds
(cost
$15,700,981)........ 16,021,876
-----------
Collateralized Mortgage
Obligations--10.7%
Champion Home Loan
Equity,
Series 1995, Class A2
Aaa 2,957DD 6.624%, 2/25/28....... 3,015,702
Chase Mortgage Finance Corp.,
Aaa 336 7.50%, 11/25/23....... 335,933
CMO Countrywide,
Aaa 986 6.75%, 2/25/24........ 972,686
Aa1 765DD 7.66171%, 11/25/24.... 784,262
Main Place Funding,
Series 95,
Aaa 2,000DD 6.1075%, 10/25/00..... 2,000,000
PaineWebber Mortgage
Acceptance Corp.,
Aaa 657 7.00%, 10/25/23....... 655,772
Salomon Capital Access Corp.,
Aaa 137 8.40%, 3/1/16......... 137,995
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
30
<PAGE>
<TABLE>
<CAPTION>
<C> <C> <S> <C>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
Collateralized Mortgage
Obligations--(cont'd)
Sears Mortgage
Securities Corp.,
Aa2 $ 327DD 8.7082%, 5/25/32...... $ 330,187
-----------
Total collateralized
mortgage obligations
(cost $8,281,751)... 8,232,537
-----------
U.S. Gov't Agency Mortgage Backed
Securities--35.1%
Federal Home Loan
Mortgage Corp.,
160 6.00%, 4/1/24......... 154,869
2,243 6.50%, 9/15/18, I/O... 268,123
6.50%, 12/15/21,
3,502 I/O................. 509,112
2,750 6.50%, 1/16/26........ 2,719,915
177 9.25%, 1/1/10......... 187,888
Federal National
Mortgage Assn.,
3,428DD 6.383%, 11/1/27....... 3,471,120
2,937DD 6.383%, 12/1/30....... 2,986,529
2,975DD 6.955%, 8/1/25........ 3,071,920
79 8.50%, 4/1/99......... 80,961
75 8.50%, 7/1/99......... 77,447
Government National
Mortgage Assn.,
3,290DD 5.50%, 8/20/25........ 3,308,407
216DD 6.50%, 1/20/24........ 219,717
2,550DD 7.00%, 5/20/23........ 2,612,814
1,666DD 7.00%, 1/20/24........ 1,707,346
1,059DD 7.375%, 6/20/21....... 1,078,676
1,596DD 7.375%, 6/20/23....... 1,620,448
Resolution Trust
Corp.,
Aa2 934DD 7.075%, 6/25/23....... 938,939
AAA* 1,000 8.35%, 6/25/29........ 1,007,580
Aa2 642 8.625%, 7/25/30....... 656,138
Baa2 423 9.25%, 6/25/23........ 439,832
-----------
Total U.S. Gov't
agency mortgage
backed securities
(cost
$27,011,805)........ 27,117,781
-----------
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
Private Placement--3.2%
Cemex S.A.,
Ba3 $ 2,560 8.875%, 6/10/98
(cost $2,539,976)..... $ 2,457,600
-----------
Foreign Securities--14.0%
German Government
Bonds,
6.25%, 1/4/24
Aaa DM16,700 (Germany)
(cost
US$10,554,919)...... 10,801,232
-----------
Total long-term
investments
(cost
$64,089,432)........ 64,631,026
-----------
SHORT-TERM
INVESTMENTS--17.9%
Corporate Notes--3.9%
AMR Corp.,
Baa3 $ 500 9.72%, 1/9/96......... 500,265
Delta Airlines, Inc.,
Ba1 1,000 8.25%, 5/15/96........ 1,006,510
Salomon, Inc.,
Baa1 1,500 4.97%, 2/15/96........ 1,497,555
-----------
3,004,330
-----------
Total corporate notes
(cost $3,000,174)... 3,004,330
-----------
Commercial Paper--10.3%
Abbott Laboratories,
P1 300 5.60%, 1/23/96........ 298,974
Du Pont (E. I.) de Nemours & Co.
P1 1,800 5.74%, 1/19/96........ 1,794,340
General Electric Capital Corp.,
P1 1,400 5.69%, 1/24/96........ 1,394,579
Hewlett Packard
Company,
P1 500 5.44%, 3/14/96........ 493,916
P1 300 5.72%, 1/4/96......... 299,852
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
31
<PAGE>
THE TARGET PORTFOLIO TRUST
Intermediate-Term Bond Portfolio (cont'd)
Portfolio of Investments December 31, 1995
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
<C> <C> <S> <C>
Commercial Paper--(cont'd)
General Electric Capital Corp.,
P1 $ 1,600 5.70%, 1/19/96........ $ 1,595,231
Warner Lambert Co.,
P1 600 5.54%, 4/9/96......... 590,232
Wisconsin Electric
Power Company,
P1 1,500 5.70%, 1/17/96........ 1,496,021
-----------
Total commercial paper
(cost $7,965,559)... 7,963,145
-----------
U.S. Treasury Obligations--0.3%
United States Treasury
bills
130D 5.305%, 2/22/96....... 129,027
30D 5.325%, 2/29/96....... 29,775
20D 5.325%, 3/7/96........ 19,821
35D 5.38%, 2/8/96......... 34,795
-----------
Total U.S. Treasury
obligations
(cost $213,348)..... 213,418
-----------
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
Private Placement--2.6%
Banco Latinoamericano
De Export,
Baa2 $ 2,000DD 6.6406%, 5/23/96
(cost $1,999,492)..... $ 1,998,746
-----------
Repurchase Agreement--0.8%
State Street Bank & Trust Co.,
661 2.25%, dated 12/29/95,
due 1/2/96 in the
amount of $661,165
(cost $661,000;
value of collateral
including accrued
interest-$683,233).. 661,000
-----------
Total short-term
investments
(cost $13,839,573).... 13,840,639
-----------
Total
Investments--101.7%
(cost $77,929,005).... 78,471,665
Liabilities in excess
of other
assets--(1.7%)...... (1,346,954)
-----------
Net Assets--100%...... $77,124,711
-----------
-----------
</TABLE>
- ---------------
I/O--Interest Only Security.
* Standard & Poor's Rating.
D Pledged as initial margin on financial futures
contracts.
DD Rate shown reflects current rate on variable rate
instrument.
@ Principal amount of securities rated A or better
segregated as collateral for forward currency
contracts.
The Fund's current Statement of Additional Information contains a
description
of
Moody's ratings.
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
32
<PAGE>
Mortgage Backed Securities Portfolio
Portfolio of Investments December 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--98.1%
Collateralized Mortgage
Obligations--19.8%
Federal Home Loan Mortgage
Corp.,
$ 432 4.50%, 9/15/21 PAC......... $ 374,082
806 5.60%, 5/15/21............. 698,976
100 5.95%, 6/15/19 PAC......... 98,875
1,008 6.00%, 10/15/20 - 8/15/21 971,700
PAC......................
2,300 6.50%, 2/15/23 PAC I/O..... 637,531
500 6.50%, 8/15/06 PAC......... 505,465
10,266 7.50%, 6/15/22 PAC I/O..... 1,552,657
427 8.00%, 7/15/21 PAC......... 439,040
142 10.00% 6/15/19 PAC......... 147,794
Federal National Mortgage
Assn.,
1,796 5.00%, 8/25/10............. 1,634,569
230 6.00%, 10/25/21............ 224,538
875 6.50%, 7/25/20 PAC......... 865,428
4,625 7.00%, 9/25/19 PAC I/O..... 708,244
1,797 7.00%, 3/25/18............. 1,758,264
300 8.00% 8/25/06 PAC.......... 320,718
290 8.50%, 6/25/21............. 302,688
508 9.00%, 1/25/21 PAC......... 552,789
First Boston Mortgage
Securities,
1,674 Zero Coupon, 4/25/17 P/O... 1,332,130
1,674 8.99%, 4/25/17 I/O......... 435,152
885 10.97%, 5/25/17 I/O........ 247,325
----------
Total collateralized
mortgage
obligations (cost
$12,795,481)............. 13,807,965
----------
U.S. Government Securities--4.4%
United States Treasury
Bonds,
2,000 12.00%, 8/15/13
(cost $2,950,038)........ 3,081,560
----------
U.S. Government Agency Mortgage
Pass-Through Obligations--73.9%
Federal Home Loan Mortgage
Corp.,
7,086 6.50%, 1/1/98 - 2/1/25..... 7,009,096
6,666 7.00%, 2/1/99 - 10/1/25.... 6,791,062
48 7.25%, 7/1/06.............. 48,887
582 8.00%, 1/1/02 - 4/1/10..... 603,828
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
Federal Home Loan Mortgage
Corp.,
$ 198 8.25%, 12/1/05 - 5/1/08.... $ 204,878
665 8.50%, 6/1/03 - 7/1/21..... 696,663
207 8.75%, 12/1/08............. 217,837
1,561 9.00%, 1/1/02 - 3/1/11..... 1,652,381
70 10.00%, 1/1/04............. 72,901
179 10.50%, 11/1/19............ 198,007
85 11.50%, 3/1/16............. 95,477
64 12.75%, 11/1/13............ 72,547
29 13.25%, 5/1/13............. 33,258
47 14.00%, 9/1/10 - 6/1/11.... 55,423
Federal National Mortgage
Assn.,
1,024 7.00%, 12/1/00 - 6/1/25.... 1,033,345
2,224 7.56%, 10/1/24 ARM......... 2,267,338
29 8.00%, 3/1/07 - 6/1/07..... 30,562
299 8.50%, 6/1/10.............. 315,420
713 9.75%, 8/1/10 - 10/1/17.... 758,033
269 10.00%, 9/1/19............. 290,761
Government National
Mortgage Assn.,
554 6.50%, 7/15/08 - 559,076
11/15/10.................
4,049 7.00%, 7/15/08 - 4,131,041
10/15/25.................
4,723 7.50%, 3/15/17 - 4,865,346
10/15/25.................
4,789 8.00%, 3/15/17 - 5,013,851
11/15/25.................
2,061 8.50%, 3/15/05 - 6/15/24... 2,180,728
5,625 9.00%, 4/20/01 - 7/15/17... 6,010,902
3,439 9.50%, 9/15/02 - 1/15/21... 3,711,035
81 10.50%, 1/15/98 - 85,240
1/15/04..................
1,113 11.00%, 4/15/98 - 1,175,806
1/15/01..................
310 11.50%, 6/15/98 - 327,700
4/15/00..................
434 12.00%, 9/15/98 - 462,536
1/15/13..................
1 13.00%, 2/15/11............ 1,546
36 13.25%, 7/15/14............ 41,522
127 13.50%, 6/15/10 - 152,173
11/15/12.................
190 14.00%, 6/15/11 - 232,090
4/15/12..................
101 16.00%, 12/15/11 - 118,923
5/15/12..................
----------
Total U.S. Government 51,517,219
agency
mortgage pass-through
obligations
(cost $50,615,373).......
----------
Total long-term investments 68,406,744
(cost $66,360,892).......
----------
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
33
<PAGE>
THE TARGET PORTFOLIO TRUST
Mortgage Backed Securities Portfolio (cont'd)
Portfolio of Investments December 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
SHORT-TERM INVESTMENTS--1.6%
Swiss Bank Corp, Repurchase
$ 1,098 Agreement, 5.85%, dated
12/29/95, due 1/2/96 in
the amount $1,098,714
(cost $1,098,000; value
of collateral including
accrued interest--
$1,130,605).............. $1,098,000
----------
Contracts
(000)
- ----------
OUTSTANDING CALL OPTIONS
PURCHASED--0.1%
United States Treasury Bond
Future,
40 expiring 2/17/96 @ $112.00
(cost $67,280)............. 111,875
----------
Total Investments Before Outstanding
Call Options Written--99.8%
(cost $67,526,172; Note 69,616,619
4).......................
OUTSTANDING CALL OPTIONS
WRITTEND
United States Treasury
Notes,
40 expiring 2/17/96 @ $116.00
(premiums received
$14,595)................. (19,375)
----------
Total Investments, Net of
Outstanding Call Options
Written--99.8%........... 69,597,244
Other assets in excess of
other
liabilities--0.2%........ 161,826
----------
Net Assets--100%........... $69,759,070
----------
----------
</TABLE>
- ---------------
ARM--Adjustable Rate Mortgage.
I/O--Interest Only Security.
PAC--Planned Amortization Class.
P/O--Principal Only.
D Non-income producing security.
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
34
<PAGE>
U.S. Government Money Market Portfolio
Portfolio of Investments December 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
Federal Farm Credit Bank--18.4%
$ 2,000 5.54%, 2/14/96............. $ 1,986,458
1,500 5.38%, 3/12/96............. 1,484,084
------------
3,470,542
------------
Federal Home Loan Bank--5.3%
1,000 5.53%, 2/14/96............. 993,241
------------
Federal Home Loan Mortgage
Corporation--51.8%
460 5.58%, 1/24/96............. 458,360
1,290 5.58%, 2/8/96.............. 1,282,402
1,000 5.54%, 2/15/96............. 993,075
3,100 5.42%, 2/16/96............. 3,078,531
2,500 5.47%, 3/6/96.............. 2,475,309
1,500 5.47%, 3/11/96............. 1,484,046
------------
9,771,723
------------
Federal National Mortgage
Association--26.1%
25 5.60%, 1/18/96............. 24,934
500 5.55%, 2/13/96............. 496,685
950 5.54%, 2/28/96............. 941,521
2,000 5.52%, 3/8/96.............. 1,979,453
1,500 5.48%, 3/12/96............. 1,483,788
------------
4,926,381
------------
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
Repurchase Agreement--3.3%
Swiss Bank Corp., 5.85%,
dated 12/29/95, due
1/2/96 in the amount of
$615,400, (cost $615,000;
value of collateral
including accrued inter-
$ 615 est--$631,518)........... $ 615,000
----------
Total Investments--104.9%
(amortized cost 19,776,887
$19,776,887*)............
Liabilities in excess of
other
assets--(4.9%)............. (922,331)
----------
Net Assets--100%........... $18,854,556
----------
----------
</TABLE>
- ---------------
* Federal income tax basis of portfolio securities is the
same as for financial reporting purposes.
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page 46
35
<PAGE>
THE TARGET PORTFOLIO TRUST
Statements of Assets and Liabilities
December 31, 1995
<TABLE>
<CAPTION>
LARGE CAPITALIZATION
LARGE
CAPITALIZATION SMALL CAPITALIZATION
GROWTH PORTFOLIO
VALUE
PORTFOLIO GROWTH PORTFOLIO
<S> <C>
<C>
<C>
ASSETS
Investments, at value* $182,842,516
$187,708,318 $121,264,292
Cash 1,567
18,455 21,730
Foreign currency, at value --
-- --
Receivable for Fund shares sold 715,718
708,724 491,311
Receivable for investments sold 305,986
-- 1,708,330
Dividends and interest receivable 160,281
430,528 44,139
Deferred expenses and other assets 9,930
14,086 9,243
Due from broker - variation margin --
-- --
Forward currency contracts-net amount
receivable
from counterparties --
-- --
Total assets 184,035,998
188,880,111 123,539,045
LIABILITIES
Reverse repurchase agreements (Note 5) --
-- --
Payable for investments purchased 3,030,867
11,455 914,992
Payable for Fund shares reacquired 760,093
1,114,728 977,062
Accrued expenses and other liabilities 68,484
49,343 46,578
Dividends payable --
-- --
Outstanding options written (premiums
received
$14,595) --
-- --
Withholding taxes payable 1,548
8,050 1,205
Deferred trustees' fees 5,464
5,464 5,464
Due to Manager 92,302
94,868 61,022
Forward currency contracts-net amount
payable
to counterparties --
-- --
Total liabilities 3,958,758
1,283,908 2,006,323
NET ASSETS $180,077,240
$187,596,203 $121,532,722
Net assets were comprised of:
Shares of beneficial interest, at par $ 14,843
$
14,924 $ 8,586
Paid-in capital in excess of par 144,132,476
150,351,569 98,510,912
144,147,319
150,366,493 98,519,498
Under (over) distribution of net
investment
income (loss) 453,260
2,023,032 103,545
Accumulated net realized gains
(losses) 15,885,732
1,740,955 1,821,234
Net unrealized appreciation 19,590,929
33,465,723 21,088,445
Net assets, December 31, 1995 $180,077,240
$187,596,203 $121,532,722
Shares of beneficial interest issued
and outstanding 14,842,911
14,923,940 8,586,273
Net asset value per share $12.13
$12.57 $14.15
*Identified cost. $163,251,587
$154,242,595 $100,175,847
<CAPTION>
SMALL CAPITALIZATION
VALUE PORTFOLIO
<S> <C>
ASSETS
Investments, at value* $ 97,695,009
Cash 45,471
Foreign currency, at value --
Receivable for Fund shares sold 425,882
Receivable for investments sold 938,264
Dividends and interest receivable 135,612
Deferred expenses and other assets 9,004
Due from broker - variation margin --
Forward currency contracts-net amount
receivable
from counterparties --
Total assets 99,249,242
LIABILITIES
Reverse repurchase agreements (Note 5) --
Payable for investments purchased 914,572
Payable for Fund shares reacquired 610,231
Accrued expenses and other liabilities 73,841
Dividends payable --
Outstanding options written (premiums
received
$14,595) --
Withholding taxes payable 1,491
Deferred trustees' fees 5,464
Due to Manager 49,164
Forward currency contracts-net amount
payable
to counterparties --
Total liabilities 1,654,763
NET ASSETS $ 97,594,479
Net assets were comprised of:
Shares of beneficial interest, at par $ 7,470
Paid-in capital in excess of par 91,433,903
91,441,373
Under (over) distribution of net
investment
income (loss) 23,851
Accumulated net realized gains
(losses) (3,589,371)
Net unrealized appreciation 9,718,626
Net assets, December 31, 1995 $ 97,594,479
Shares of beneficial interest issued
and outstanding 7,469,911
Net asset value per share $13.07
*Identified cost. $ 87,976,383
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page
46
36
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL TOTAL RETURN
INTERMEDIATE-TERM MORTGAGE BACKED
EQUITY PORTFOLIO BOND PORTFOLIO BOND PORTFOLIO
BOND
PORTFOLIO SECURITIES PORTFOLIO
<S> <C> <C>
<C>
<C>
$192,099,342 $ 33,626,436 $ 49,318,791
$
78,471,665 $ 69,616,619
17,388 100 355
461 730
1,526,626 622,864 --
-- --
1,017,221 217,082 200,571
588,244 247,564
221,826 550,401 2,041,329
14,701 --
413,417 650,666 833,463
1,408,933 653,367
13,775 36,121 12,096
12,467 12,418
-- -- 39,375
48,657 --
-- 27,028 --
-- --
195,309,595 35,730,698 52,445,980
80,545,128 70,530,698
-- -- 1,473,000
-- --
2,303,345 534,148 5,482,734
2,706,602 138,433
1,152,491 118,268 229,339
510,378 377,259
131,184 35,575 63,042
69,161 88,076
-- 17,298 21,684
35,741 124,078
-- -- --
-- 19,375
6,471 14,042 --
-- --
5,464 3,776 5,464
5,464 5,464
113,074 5,013 15,899
27,942 18,943
-- 342,638 37,088
65,129 --
3,712,029 1,070,758 7,328,250
3,420,417 771,628
$191,597,566 $ 34,659,940 $ 45,117,730
$
77,124,711 $ 69,759,070
$ 14,050 $ 3,401 $ 4,249
$
7,339 $ 6,767
169,625,540 34,207,067 43,619,433
75,516,757 69,399,004
169,639,590 34,210,468 43,623,682
75,524,096 69,405,771
991,203 (103,798) 265,669
270,696 (124,078)
1,389,337 79,160 587,729
704,694 (1,608,290)
19,577,436 474,110 640,650
625,225 2,085,667
$191,597,566 $ 34,659,940 $ 45,117,730
$
77,124,711 $ 69,759,070
14,049,880 3,401,401 4,249,004
7,339,006 6,767,472
$13.64 $10.19 $10.62
$10.51 $10.31
$172,543,389 $ 32,840,832 $ 48,782,555
$
77,929,005 $ 67,526,172
<CAPTION>
U.S. GOVERNMENT MONEY
MARKET PORTFOLIO
<C>
$19,776,887
390
- --
196,600
- --
300
11,888
- --
- --
19,986,065
- --
- --
1,083,030
30,114
7,932
- --
- --
5,464
4,969
- --
1,131,509
$18,854,556
$ 18,855
18,835,701
18,854,556
- --
- --
- --
$18,854,556
18,854,556
$1.00
$19,776,887
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page
46
37
<PAGE>
THE TARGET PORTFOLIO TRUST
Statements of Operations
Year Ended December 31, 1995
<TABLE>
<CAPTION>
LARGE CAPITALIZATION
LARGE
CAPITALIZATION SMALL CAPITALIZATION
GROWTH PORTFOLIO
VALUE
PORTFOLIO GROWTH PORTFOLIO
<S> <C>
<C>
<C>
NET INVESTMENT INCOME
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Income
Interest $ 932,545
$
410,905 $ 348,030
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Dividends 1,794,834
5,345,902 708,711
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Less: Foreign withholding taxes (22,037)
(36,346) (4,878)
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Total income 2,705,342
5,720,461 1,051,863
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Expenses
Management fee 977,893
978,742 645,895
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Custodian's fees and expenses 99,000
64,000 98,000
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Transfer agent's fees and expenses 85,200
85,200 84,900
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Registration fees 44,000
50,800 34,000
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Reports to shareholders 23,000
23,500 18,000
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Audit fees and expenses 15,200
15,200 15,200
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Legal fees and expenses 6,000
6,000 6,000
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Trustees' fees and expenses 4,250
4,250 4,250
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Amortization of organization expenses 5,771
5,771 5,771
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Insurance 4,406
4,397 2,935
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Miscellaneous 2,418
4,475 5,268
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Total expenses 1,267,138
1,242,335 920,219
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Less: expense subsidy (Note 2) --
-- --
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Net expenses 1,267,138
1,242,335 920,219
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Net investment income 1,438,204
4,478,126 131,644
- -----------------------------------------------------------------
- ------------
- ----------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Net realized gain (loss) on:
Investment transactions 19,526,858
6,875,810 15,587,518
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Financial futures contracts --
-- --
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Foreign currency transactions --
512 --
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Options written --
-- --
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Total net realized gain (loss) 19,526,858
6,876,322 15,587,518
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Net change in unrealized
appreciation/depreciation on:
Investments 15,296,515
33,534,250 7,737,858
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Financial futures contracts --
-- --
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Foreign currencies --
-- --
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Options written --
-- --
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Net change in unrealized
appreciation/depreciation 15,296,515
33,534,250 7,737,858
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Net gain 34,823,373
40,410,572 23,325,376
- -----------------------------------------------------------------
- ------------
- ----------------------------------
NET INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS $ 36,261,577
$
44,888,698 $ 23,457,020
- -----------------------------------------------------------------
- ------------
- ----------------------------------
<CAPTION>
SMALL CAPITALIZATION
VALUE PORTFOLIO
<S> <C>
NET INVESTMENT INCOME
- -----------------------------------------------------------------
- ------------
- ------
Income
Interest $ 412,919
- -----------------------------------------------------------------
- ------------
- ---------------------------
Dividends 1,488,770
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Less: Foreign withholding taxes (13,946)
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Total income 1,887,743
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Expenses
Management fee 528,512
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Custodian's fees and expenses 120,000
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Transfer agent's fees and expenses 81,200
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Registration fees 37,000
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Reports to shareholders 74,000
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Audit fees and expenses 15,200
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Legal fees and expenses 6,000
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Trustees' fees and expenses 4,250
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Amortization of organization expenses 5,771
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Insurance 2,542
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Miscellaneous 5,863
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Total expenses 880,338
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Less: expense subsidy (Note 2) --
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Net expenses 880,338
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Net investment income 1,007,405
- -----------------------------------------------------------------
- ------------
- ----------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Net realized gain (loss) on:
Investment transactions (1,278,985)
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Financial futures contracts --
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Foreign currency transactions 2,600
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Options written --
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Total net realized gain (loss) (1,276,385)
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Net change in unrealized
appreciation/depreciation on:
Investments 15,684,311
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Financial futures contracts --
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Foreign currencies --
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Options written --
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Net change in unrealized
appreciation/depreciation 15,684,311
- -----------------------------------------------------------------
- ------------
- ----------------------------------
Net gain 14,407,926
- -----------------------------------------------------------------
- ------------
- ----------------------------------
NET INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS $ 15,415,331
- -----------------------------------------------------------------
- ------------
- ----------------------------------
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page
46
38
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL TOTAL RETURN
INTERMEDIATE-TERM MORTGAGE BACKED
EQUITY PORTFOLIO BOND PORTFOLIO BOND PORTFOLIO
BOND
PORTFOLIO SECURITIES PORTFOLIO
<S> <C> <C>
<C>
<C>
$ 453,103 $ 1,944,491 $ 2,619,577
$
4,718,976 $ 4,977,578
4,469,825 -- --
-- --
(623,587) (8,427) --
-- --
4,299,341 1,936,064 2,619,577
4,718,976 4,977,578
1,283,896 147,549 166,602
308,827 293,172
378,000 111,000 112,000
112,000 192,000
87,300 23,200 33,400
36,200 48,000
43,700 14,000 31,000
40,000 29,500
28,000 8,000 10,000
10,000 6,000
25,200 15,200 15,200
15,200 15,200
10,000 4,000 4,000
4,000 4,000
4,250 4,250 4,250
4,250 4,250
5,771 10,196 5,771
5,771 5,771
5,523 500 1,000
2,000 1,500
3,658 2,105 2,669
1,738 2,489
1,875,298 340,000 385,892
539,986 601,882
-- (44,839) (68,615)
-- (47,957)
1,875,298 295,161 317,277
539,986 553,925
2,424,043 1,640,903 2,302,300
4,178,990 4,423,653
6,577,180 1,847,152 245,115
683,032 2,221,947
-- -- 2,377,068
2,717,747 (207,971)
(820,929) (632,282) 57,279
109,488 --
-- 32,083 10,701
-- 118,660
5,756,251 1,246,953 2,690,163
3,510,267 2,132,636
17,874,417 913,970 1,487,923
2,871,208 3,289,532
-- -- 124,562
161,875 --
112,161 (251,704) (37,088)
(65,129) --
-- (7,744) --
-- (4,780)
17,986,578 654,522 1,575,397
2,967,954 3,284,752
23,742,829 1,901,475 4,265,560
6,478,221 5,417,388
26,166,872
$ $ 3,542,378 $ 6,567,860
$
10,657,211 $ 9,841,041
<CAPTION>
U.S. GOVERNMENT MONEY
MARKET PORTFOLIO
<S>
$ 1,195,600
- --
- --
1,195,600
50,432
53,500
7,200
19,500
7,500
6,200
4,000
4,250
5,771
- --
2,510
160,863
(9,401)
151,462
1,044,138
548
- --
- --
- --
548
- --
- --
- --
- --
- --
548
$ 1,044,686
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page
46
39
<PAGE>
THE TARGET PORTFOLIO TRUST
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
SMALL
CAPITALIZATION
LARGE CAPITALIZATION
LARGE CAPITALIZATION GROWTH
GROWTH PORTFOLIO
VALUE PORTFOLIO PORTFOLIO
- -------------------------------
- ------------------------------- --------------
Year Ended
Year Ended Year Ended
December 31,
December 31, December 31,
- -------------------------------
- ------------------------------- --------------
1995 1994
1995 1994 1995
<S> <C> <C>
<C>
<C> <C>
INCREASE (DECREASE)
IN NET ASSETS
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Operations
Net investment income $ 1,438,204 $
1,398,745 $
4,478,126 $ 3,421,545 $ 131,644
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Net realized gain (loss) on
investment and foreign currency
transactions 19,526,858
(3,326,414)
6,876,322 825,201 15,587,518
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Net change in unrealized
appreciation/
depreciation of investments 15,296,515
1,313,545
33,534,250 (1,289,846) 7,737,858
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Net increase (decrease) in net
assets
resulting from operations 36,261,577
(614,124)
44,888,698 2,956,900 23,457,020
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Net equalization (debits)/credits 23,852
284,936
137,234 678,432 5,006
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Dividends and Distributions
Dividends from net investment
income (1,438,204)
(1,398,745)
(4,180,840) (3,386,240) (126,023)
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Distributions in excess of net
investment
income (172,473)
- --
-- -- --
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Distributions from net
realized gains (146,425)
(49,742)
(5,166,575) (827,768) (2,310,413)
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Distributions in excess of net
realized gains --
- --
-- -- --
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Fund share transactions(b)
Net proceeds from shares sold 56,432,734
85,142,573
54,585,252 82,921,166 43,301,027
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Net asset value of shares issued to
shareholders in reinvestment of
dividends and distributions 1,723,164
1,424,557
9,096,375 4,133,634 2,409,004
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Cost of shares reacquired (54,679,344)
(40,805,667)
(53,982,606) (40,331,871) (41,665,163)
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Net increase/(decrease) in net
assets from Fund share
transactions 3,476,554
45,761,463
9,699,021 46,722,929 4,044,868
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Total increase/(decrease) 38,004,881
43,983,788
45,377,538 46,144,253 25,070,458
NET ASSETS
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Beginning of period 142,072,359
98,088,571
142,218,665 96,074,412 96,462,264
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
End of period $180,077,240
$142,072,359
$187,596,203 $142,218,665 $121,532,722
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
<CAPTION>
SMALL
CAPITALIZATION
VALUE PORTFOLIO
- -------------------------------
Year Ended
December 31,
- -------------------------------
1994 1995
1994
<S> <C> <C>
<C>
INCREASE (DECREASE)
IN NET ASSETS
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Operations
Net investment income $ 87,234 $
1,007,405 $
738,596
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Net realized gain (loss) on
investment and foreign currency
transactions (9,861,033)
(1,276,385)
(2,260,005)
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Net change in unrealized
appreciation/
depreciation of investments 7,066,817
15,684,311
(8,631,799)
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Net increase (decrease) in net
assets
resulting from operations (2,706,982)
15,415,331
(10,153,208)
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Net equalization (debits)/credits 34,440
(6,129)
31,111
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Dividends and Distributions
Dividends from net investment
income (83,251)
(1,001,120)
--
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Distributions in excess of net
investment
income --
- --
--
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Distributions from net
realized gains --
- --
(1,995,416)
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Distributions in excess of net
realized gains --
- --
--
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Fund share transactions(b)
Net proceeds from shares sold 63,789,055
33,516,882
58,638,475
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Net asset value of shares issued to
shareholders in reinvestment of
dividends and distributions 82,459
976,655
1,959,413
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Cost of shares reacquired (28,570,277)
(35,469,754)
(28,747,891)
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Net increase/(decrease) in net
assets from Fund share
transactions 35,301,237
(976,217)
31,849,997
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Total increase/(decrease) 32,545,444
13,431,865
19,732,484
NET ASSETS
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
Beginning of period 63,916,820
84,162,614
64,430,130
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
End of period $ 96,462,264 $
97,594,479 $
84,162,614
- -----------------------------------------------------------------
- ------------
- -------------------------------------------
</TABLE>
(a) Commencement of investment operations.
(b) Fund share transactions are at $1 per share for the U.S.
Government Money
Market Portfolio.
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page
46
40
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL
EQUITY BOND
TOTAL
RETURN INTERMEDIATE-TERM
PORTFOLIO PORTFOLIO
BOND
PORTFOLIO BOND PORTFOLIO
--------------------------- ----------------------------
- ------------------------- ---------------------------
May 17,
Year Ended 1994(a)
Year
Ended Year Ended
December 31, Year Ended Through
December 31, December 31,
--------------------------- December 31, December 31,
- ------------------------- ---------------------------
1995 1994 1995 1994
1995
1994 1995 1994
<S> <C> <C> <C>
<C>
<C> <C> <C>
$ 2,424,043 $ 844,536 $ 1,640,903 $ 466,822
$ 2,302,300
$ 1,526,429 $ 4,178,990 $ 3,520,673
5,756,251 11,963,921 1,246,953 (208,113)
2,690,163
(1,678,647) 3,510,267 (2,575,982)
17,986,578 (15,991,699) 654,522 (180,412)
1,575,397
(987,969) 2,967,954 (2,573,121)
26,166,872 (3,183,242) 3,542,378 78,297
6,567,860
(1,140,187) 10,657,211 (1,628,430)
(305,576) 572,620 -- --
--
-- -- --
(1,548,526) (130,893) (1,640,903) (466,822)
(2,138,946)
(1,429,962) (4,081,709) (3,324,163)
-- (13,724) (21,207) (406,000)
--
-- -- (18,798)
)
(493,586 (17,019,578) (642,900) --
(335,308)
-- (188,877) --
-- (45,216) -- --
--
-- -- --
140,908,056 133,399,208 20,469,941 24,525,854
23,640,083
25,309,731 29,966,150 49,642,553
1,993,113 17,108,354 2,145,942 840,517
2,334,835
1,313,753 4,022,268 3,132,792
(163,147,872) (69,783,053) (10,640,585) (3,124,572)
(16,141,734)
(18,779,619) (26,174,351) (45,530,874)
)
(20,246,703 80,724,509 11,975,298 22,241,799
9,833,184
7,843,865 7,814,067 7,244,471
3,572,481 60,904,476 13,212,666 21,447,274
13,926,790
5,273,716 14,200,692 2,273,080
188,025,085 127,120,609 21,447,274 --
31,190,940
25,917,224 62,924,019 60,650,939
$191,597,566 $188,025,085 $ 34,659,940 $21,447,274
$45,117,730
$31,190,940 $ 77,124,711 $62,924,019
<CAPTION>
U.S. GOVERNMENT
MORTGAGE BACKED MONEY
SECURITIES PORTFOLIO MARKET PORTFOLIO
---------------------------
- ---------------------------
Year Ended Year Ended
December 31, December 31,
---------------------------
- ---------------------------
1995 1994 1995
1994
<S> <C> <C> <C>
$ 4,423,653 $ 4,102,931 $ 1,044,138 $
606,938
2,132,636 (3,740,926 ) 548
(232 )
3,284,752 (832,326 ) --
--
9,841,041 (470,321 ) 1,044,686
606,706
-- -- --
--
(4,423,653) (4,102,931 ) (1,044,686)
(606,706 )
(196,430) (76,542 ) --
--
-- -- --
--
-- -- --
--
19,667,652 43,981,833 139,918,716
66,208,427
3,702,170 3,405,322 945,815
549,041
(20,802,368) (40,866,698 ) (143,448,009)
(48,316,420 )
2,567,454 6,520,457 (2,583,478)
18,441,048
7,788,412 1,870,663 (2,583,478)
18,441,048
61,970,658 60,099,995 21,438,034
2,996,986
$ 69,759,070 $61,970,658 $ 18,854,556
$21,438,034
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page
46
41
<PAGE>
THE TARGET PORTFOLIO TRUST
Financial Highlights
<TABLE>
<CAPTION>
LARGE
CAPITALIZATION
GROWTH PORTFOLIO(e)
- --------------------------------------------------------
January 5,
Year Ended
1993(a)
December 31,
Through
- ---------------------------------- December 31,
1995
1994 1993
<S> <C>
<C> <C>
PER SHARE OPERATING
PERFORMANCE:
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Net asset value, beginning of period $9.74
$9.91 $10.00
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Income from investment operations
Net investment income (loss) .10
.10 .07(c)
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Net realized and unrealized gains (losses) on
investment transactions 2.41
(.16) (.12)
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Total from investment
operations 2.51
(.06) (.05)
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Less distributions
Dividends from net investment
income
(.10)
(.10) (.04)
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Distributions in excess of net
investment income
(.01)
(.01) --
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Distributions from net realized gains
(.01)
-- --
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Distributions in excess of net realized
gains --
-- --
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Total distributions
(.12)
(.11) (.04)
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Net asset value, end of period $12.13
$9.74 $9.91
- -----------------------------------------------------------------
- ------------
- ------------------------------------
TOTAL RETURN(d) 25.76%
(.68)% (.46)%
- -----------------------------------------------------------------
- ------------
- ------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Net assets, end of period (000) $180,077
$142,072 $98,089
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Average net assets (000) $162,982
$129,687 $48,033
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Ratios to average net assets
Expenses
.78%
.81% 1.05%(b)(c)
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Net investment income (loss)
.88%
1.08% .84%(b)(c)
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Portfolio turnover rate
154%
24% 4%
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Average commission rate per share $ .0578
N/A N/A
- -----------------------------------------------------------------
- ------------
- ------------------------------------
<CAPTION>
LARGE
CAPITALIZATION
VALUE
PORTFOLIO(e)
- ------------------------------------------------------
January 5,
1993(a)
Year
Ended
Through
December 31,
December
- --------------------------------- 31,
1995
1994
1993
<S> <C>
<C>
<C>
PER SHARE OPERATING
PERFORMANCE:
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Net asset value, beginning of period $10.02
$10.11 $10.00
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Income from investment operations
Net investment income (loss) .33
.26 .21(c)
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Net realized and unrealized gains (losses) on
investment transactions 2.89
(.04) .02
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Total from investment
operations 3.22
.22 .23
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Less distributions
Dividends from net investment
income (.30)
(.25) (.11)
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Distributions in excess of net
investment income --
-- --
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Distributions from net realized gains (.37)
(.06) (.01)
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Distributions in excess of net realized
gains --
-- --
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Total distributions (.67)
(.31) (.12)
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Net asset value, end of period $12.57
$10.02 $10.11
- -----------------------------------------------------------------
- ------------
- ------------------------------------
TOTAL RETURN(d) 32.08%
2.18% 2.29%
- -----------------------------------------------------------------
- ------------
- ------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Net assets, end of period (000) $187,596
$142,219 $96,074
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Average net assets (000) $163,124
$128,865 $46,623
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Ratios to average net assets
Expenses .76%
.81% 1.05%(b)(c)
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Net investment income (loss) 2.83%
2.66% 2.12%(b)(c)
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Portfolio turnover rate 59%
6% 3%
- -----------------------------------------------------------------
- ------------
- ------------------------------------
Average commission rate per share $ .0514
N/A N/A
- -----------------------------------------------------------------
- ------------
- ------------------------------------
</TABLE>
(a) Commencement of investment operations.
(b) Annualized.
(c) Net of expense subsidies.
(d) 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 return for
periods
of less than a full year are not annualized.
(e) Calculated based upon average shares outstanding during the
period.
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page
46
42
<PAGE>
<TABLE>
<CAPTION>
SMALL CAPITALIZATION
SMALL
CAPITALIZATION
GROWTH
VALUE
INTERNATIONAL
PORTFOLIO(e)
PORTFOLIO(e)
EQUITY PORTFOLIO(e)
- ----------------------------------------------
- ----------------------------------------------
- -----------------------------
January 5,
January 5,
Year Ended 1993(a) Year
Ended
1993(a) Year Ended
December 31, Through December
31,
Through December 31,
- ----------------------------- December 31,
- -----------------------------
December 31, -----------------------------
1995 1994 1993 1995
1994
1993 1995 1994
<S> <C> <C> <C>
<C>
<C> <C> <C>
$11.59 $11.86 $10.00 $11.07
$12.72
$10.00 $11.95 $13.09
.02 .01 .01(c ) .14
.11
(.01)(c) .17 .06
2.84 (.27) 1.86 2.00
(1.49)
3.19 1.67 (.01)
2.86 (.26) 1.87 2.14
(1.38)
3.18 1.84 .05
(.02) (.01) (.01 ) (.14)
--
-- (.11) (.01)
-- -- -- --
--
-- -- --
(.28) -- -- --
(.27)
(.46) (.04) (1.07)
-- -- -- --
--
-- (.11)
(.30) (.01) (.01 ) (.14)
(.27)
(.46) (.15) (1.19)
$14.15 $11.59 $11.86 $13.07
$11.07
$12.72 $13.64 $11.95
24.62% (2.19)% 18.66 % 19.21%
(11.03)%
31.86% 15.38% .18%
$121,533 $96,462 $63,917 $97,594
$84,163
$64,430 $191,598 $188,025
$107,649 $87,403 $29,313 $88,085
$83,891
$29,039 $183,414 $179,614
.85% .93% 1.05% (b)(c) 1.00%
.93%
1.05%(b)(c) 1.02% 1.07%
.12% .10% .11% (b)(c) 1.14%
.88%
(.11)%(b)(c) 1.32% .47%
120% 97% 72 % 110%
97%
112% 76% 116%
$ .0586 N/A N/A $ .0561
N/A
N/A $ .0250 N/A
<CAPTION>
- ------------
January 5,
1993(a)
Through
December 31,
1993
<C>
$10.00
.07
3.16
3.23
(.01)
- --
(.05)
(.08)
(.14)
$13.09
32.38%
$127,121
$49,769
1.40%(b)
.64%(b)
65%
N/A
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page
46
43
<PAGE>
THE TARGET PORTFOLIO TRUST
Financial Highlights
<TABLE>
<CAPTION>
INTERNATIONAL
BOND
TOTAL RETURN
PORTFOLIO
BOND PORTFOLIO
- ---------------------------------
- --------------------------------------------------
May 17,
January 5,
1994(a)
Year Ended 1993(a)
Year Ended Through
December 31, Through
December 31, December
31,
- ------------------------------- December 31,
1995 1994
1995 1994 1993
<S> <C> <C>
<C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Net asset value, beginning of period $9.57
$10.00
$9.48 $10.28 $10.00
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Income from investment operations
Net investment income .57(c)
.27(c)
.62(c) .47(c) .44(c)
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Net realized and unrealized gains
(losses) on investment transactions .82
(.19)
1.18 (.82) .56
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Total from investment
operations 1.39
.08
1.80 (.35) 1.00
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Less distributions
Dividends from net investment
income (.57)
(.27)
(.58) (.45) (.44)
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Distributions in excess of net
investment income --
(.24)
-- -- (.02)
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Distributions from net realized
gains (.20)
- --
(.08) -- (.19)
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Distributions in excess of net
realized gains --
- --
-- -- (.07)
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Total distributions (.77)
(.51)
(.66) (.45) (.72)
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Net asset value, end of period $10.19
$9.57
$10.62 $9.48 $10.28
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
TOTAL RETURN(d) 14.66%
.71%
19.63% (3.54)% 10.18%
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Net assets, end of period (000) $34,660
$21,447
$45,118 $31,191 $25,917
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Average net assets (000) $29,510
$15,366
$37,023 $31,141 $12,594
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Ratios to average net assets
Expenses 1.00%(c)
1.00%(b)(c)
.85%(c) .85%(c) .85%(b)(c)
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Net investment income 5.56%(c)
4.84%(b)(c)
6.21%(c) 4.90%(c) 3.87%(b)(c)
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Portfolio turnover rate 456%
361%
141% 121% 171%
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
<CAPTION>
INTERMEDIATE-TERM
BOND
PORTFOLIO
- --------------------------------------------------
January 5,
Year Ended
1993(a)
December 31,
Through
- -------------------------------
December 31,
1995 1994
1993
<S> <C> <C>
<C>
PER SHARE OPERATING
PERFORMANCE:
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Net asset value, beginning of period $9.56 $10.26
$10.00
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Income from investment operations
Net investment income .63 .49
.46(c)
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Net realized and unrealized gains
(losses) on investment transactions .94
(.71)
.46
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Total from investment
operations 1.57
(.22)
.92
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Less distributions
Dividends from net investment
income (.60)
(.48)
(.45)
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Distributions in excess of net
investment income -- --
--
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Distributions from net realized
gains (.02) --
(.18)
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Distributions in excess of net
realized gains -- --
(.03)
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Total distributions (.62)
(.48)
(.66)
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Net asset value, end of period $10.51 $9.56
$10.26
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
TOTAL RETURN(d) 16.87%
(2.23)%
9.33%
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Net assets, end of period (000) $77,125 $62,924
$60,651
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Average net assets (000) $68,628 $69,602
$32,441
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Ratios to average net assets
Expenses .79%
.80%
.85%(b)(c)
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Net investment income 6.09%
5.06%
4.27%(b)(c)
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
Portfolio turnover rate 93%
77%
129%
- -----------------------------------------------------------------
- ------------
- ---------------------------------------------------
</TABLE>
(a) Commencement of investment operations.
(b) Annualized.
(c) Net of expense subsidies.
(d) 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 ofdividends and distributions. Total return for
periods of
less than a full year are not annualized.
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page
46
44
<PAGE>
<TABLE>
<CAPTION>
U.S.
GOVERNMENT
MORTGAGE BACKED
MONEY
SECURITIES PORTFOLIO
MARKET
PORTFOLIO
- ------------------------------------------------
- --------------------------------------------------
January 5,
January 5,
Year Ended 1993(a) Year
Ended
1993(a)
December 31, Through
December 31,
Through
- ----------------------------- December 31,
- ------------------------------- December 31,
1995 1994 1993 1995
1994
1993
<S> <C> <C> <C>
<C>
<C>
$9.51 $10.18 $10.00 $1.00
$1.00 $1.00
.68(c) .61(c) .57(c) .051(c)
.037(c) .025(c)
.83 (.66) .28 --
- -- --
1.51 (.05) .85 .051
.037 .025
(.68) (.61) (.57) (.051)
(.037) (.025)
(.03) (.01) (.02) --
- -- --
-- -- (.08) --
- -- --
-- -- -- --
- -- --
(.71) (.62) (.67) (.051)
(.037) (.025)
$10.31 $9.51 $10.18 $1.00
$1.00 $1.00
16.18% (.51)% 8.56% 5.25%
3.79% 2.56%
$69,759 $61,971 $60,100 $18,855
$21,438 $2,997
$65,149 $66,276 $29,710 $20,173
$15,048 $1,407
.85%(c) .85%(c) .85%(b)(c) .75%(c)
.50%(c) .50%(b)(c)
6.79%(c) 6.19%(c) 5.30%(b)(c) 5.18%(c)
4.03%(c) 2.51%(b)(c)
154% 380% 134% --
- -- --
</TABLE>
- -----------------------------------------------------------------
- ---------------
See Notes to Financial Statements beginning on page
46
45
<PAGE>
THE TARGET PORTFOLIO TRUST
Notes to Financial Statements
The Target Portfolio Trust (the ``Fund'') is an open-end
management
investment company. The Fund was established as a
Delaware business
trust on July 29, 1992 and consists of ten separate
portfolios (the
``Portfolio'' or ``Portfolios''): Large Capitalization
Growth
Portfolio, Large Capitalization
Value Portfolio, Small Capitalization Growth Portfolio, Small
Capitalization Value Portfolio, International Equity Portfolio,
International
Bond Portfolio, Total Return Bond Portfolio, Intermediate-Term Bond
Portfolio,
Mortgage Backed Securities Portfolio and U.S. Government Money
Market Portfolio.
All the Portfolios are diversified as defined under the Investment
Company Act
of 1940 except for International Bond Portfolio. Investment
operations commenced
on January 5, 1993 with the exception of the International Bond
Portfolio which
commenced on May 17, 1994.
The Portfolios' investment objectives are as follows: Large
Capitalization
Growth Portfolio--long-term capital appreciation through investment
primarily
in
equities that, in the investment adviser's opinion, have a growth
of earnings
potential greater than that of the S&P 500; Large Capitalization
Value
Portfolio--total return of capital appreciation and dividend income
through
investment primarily in equities that, in the adviser's opinion,
have above
average price appreciation potential; Small Capitalization Growth
Portfolio--maximum capital appreciation through investment
primarily in equities
of ``emerging growth'' companies; Small Capitalization Value
Portfolio--above
average capital appreciation through investment in equities that,
in the
adviser's opinion, are undervalued or overlooked in the
marketplace;
International Equity Portfolio--capital appreciation through
investment
primarily in equity securities of companies domiciled outside the
United States;
International Bond Portfolio--high total return through investment
primarily in
high quality foreign debt securities denominated primarily in
foreign
currencies; Total Return Bond Portfolio--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; Intermediate-Term
Bond
Portfolio--current income and reasonable stability of principal
through
investment primarily in high quality fixed-income securities of
varying
maturities with a dollar-weighted average portfolio maturity of
more than three
years but not more than ten years; Mortgage Backed Securities
Portfolio--high
current income and capital appreciation each consistent with the
protection of
capital through investment primarily in mortgage related
securities; U.S.
Government Money Market Portfolio--high current income, maintenance
of liquidity
and preservation of principal through investment exclusively in
short-term
securities issued or guaranteed by the U.S. Government, its
agencies or
instrumentalities.
The ability of issuers of debt securities (other than those
issued or
guaranteed by the U.S. Government) held by the Portfolios 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 Fund 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 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.
Securities held by the U.S. Government Money Market Portfolio
are valued
at amortized cost, which approximates market value. Short-term
securities held
by the other portfolios which mature in 60 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 held by the other
portfolios
which mature in more than 60 days are valued at current market
quotations.
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,
- -----------------------------------------------------------------
- ---------------
46
<PAGE>
<PAGE>
including accrued interest. If the seller defaults, and the value
of the
collateral declines or, if bankruptcy proceedings are commenced
with respect to
the seller of the security, realization of the collateral by the
Fund may be
delayed or limited.
All securities (except those of the U.S. Government Money
Market
Portfolio) are valued as of 4:15 P.M., New York time. The U.S.
Government Money
Market Portfolio calculates net asset value as of 4:30 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 Fund
amortizes premiums and discounts paid on purchases of portfolio
securities as
adjustments to interest income. Expenses are recorded on the
accrual basis which
may require the use of certain estimates by management. The cost of
portfolio
securities for federal income tax purposes is substantially the
same as for
financial reporting purposes.
Reverse Repurchase Agreements: Reverse repurchase agreements
involve the
sale of a portfolio-eligible security by the Fund, coupled with an
agreement to
repurchase the security at a specified date and price. The Fund
maintains
segregated assets consisting of cash, U.S. Government securities or
high grade
debt securities equal (on a daily mark-to-market basis) to its
obligations under
reverse repurchase agreements with broker-dealers (but not banks).
Reverse
repurchase agreements involve the risk that the market value of
securities
retained by the Fund may decline below the repurchase price of the
securities
sold by the Fund which it is obligated to repurchase. Reverse
repurchase
agreements are considered to be borrowings by the Fund, and are
subject to the
Fund's overall restriction on borrowing under which it must
maintain asset
coverage of at least 300%.
Financial Futures Contracts: A financial futures contract is
an agreement
to purchase (long) or sell (short) an agreed amount of securities
at a set price
for delivery on a future date. Upon entering into a financial
futures contract,
the Portfolio is required to pledge to the broker an amount of cash
and/or other
assets equal to a certain percentage of the contract amount. This
amount is
known as the ``initial margin.'' Subsequent payments, known as
``variation
margin,'' are made or received by the Portfolio each day, depending
on the daily
fluctuations in the value of the underlying security. Such
variation margin is
recorded for financial statement purposes on a daily basis as
unrealized gain
or
loss. When the contract expires or is closed, the gain or loss is
realized and
is presented in the statement of operations as net realized gain
(loss) on
financial futures contracts.
The Portfolio invests in financial futures contracts in order
to hedge its
existing portfolio securities, or securities the Portfolio intends
to purchase,
against fluctuations in value caused by changes in prevailing
interest rates.
Should interest rates move unexpectedly, the Portfolio may not
achieve the
anticipated benefits of the financial futures contracts and may
realize a loss.
The use of futures transactions involves the risk of imperfect
correlation in
movements in the price of futures contracts, interest rates and the
underlying
hedged assets. The International Equity Portfolio, International
Bond Portfolio,
Intermediate-Term Bond Portfolio, Mortgage-Backed Securities
Portfolio and Total
Return Bond Portfolio are the only portfolios that may invest in
financial
futures contracts.
Foreign Currency Translation: The books and records of the
Portfolios 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 Portfolios are presented at
the foreign
exchange rates and market values at the close of the fiscal year,
the Portfolios
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
year.
Similarly, the Portfolios 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 year.
Accordingly,
these realized foreign currency gains (losses) are included in the
reported net
realized gains (losses) on investment transactions.
Net realized gains (losses) on foreign currency transactions
represent net
foreign exchange gains (losses) from sales and maturities of
short-term
securities, holding of foreign currencies, currency gains or losses
realized
between the trade and settlement dates of securities transactions,
and the
difference between the amounts of dividends, interest and foreign
taxes recorded
on the 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 year 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.
Forward Currency Contracts: The International Equity
Portfolio,
International Bond Portfolio, Intermediate-Term Bond Portfolio and
Total Return
Bond Portfolio may enter into forward currency contracts in order
to hedge their
exposure to changes in foreign currency exchange rates on their
foreign
portfolio holdings. A forward currency contract is a commitment to
purchase or
sell a foreign currency at a future date at a negotiated forward
rate. The
Portfolio enters into forward currency contracts in order to hedge
its exposure
to changes in foreign currency exchange rates on its foreign
portfolio holdings
or on specific receivables and payables denominated in a foreign
currency. The
contracts are valued daily at current
- -----------------------------------------------------------------
- ---------------
47
<PAGE>
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 counter parties to meet the terms of their contracts.
Options: The International Equity Portfolio, the
International Bond
Portfolio, the Intermediate-Term Bond Portfolio, the Total Return
Bond Portfolio
and the Mortgage-Backed Securities Portfolio 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
Portfolio
currently owns or intends to purchase. When the Portfolio purchases
an option,
it pays a premium and an amount equal to that premium is recorded
as an
investment. When the Portfolio 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 market value of
the option.
If an option expires unexercised, the 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 the Portfolio 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 Portfolio, 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, the Portfolio bears the market risk of an unfavorable
change in the
price of the security or currency underlying the written option.
The Portfolio,
as purchaser of an option, bears the risk of the potential
inability of the
counterparties to meet the terms of their contracts.
Equalization: The Portfolios (except for the U.S. Government
Money Market
Portfolio) follow the accounting practice known as equalization by
which a
portion of the proceeds from sales and costs of reacquisitions of
Portfolio
shares, equivalent on a per share basis to the amount of
distributable net
investment income on the date of the transaction, is credited or
charged to
undistributed net investment income. As a result, undistributed net
investment
income per share is unaffected by sales or reacquisitions of
Portfolio shares.
Reclassification of Capital Accounts: The Fund accounts for
and reports
distributions to shareholders in accordance with AICPA Statement of
Position
93-2: Determination, Disclosure, and Financial Statement
Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment
Companies. The
effect of applying this Statement of Position, on the Small
Capitalization Value
Portfolio, International Equity Portfolio, Total Return Bond
Portfolio,
Intermediate-Term Bond Portfolio and International Bond Portfolio,
was to
reclassify $2,600, ($978,444), $109,323, $193,129 and $245,549,
respectively,
of
foreign currency gains (losses) to undistributed net investment
income from
accumulated net realized gains (losses). In addition, the Mortgage
Backed
Securities Portfolio reclassified $96,463 of overdistributed income
to paid-in
capital from overdistributed net investment income and the Small
Capitalization
Value Portfolio reclassified $736,006 of tax equalization to
paid-in capital
from underdistributed net investment income. Current year net
investment income,
net realized gains (losses) and net assets were not affected by
this statement.
Dividends and Distributions: The International Bond
Portfolio, Total
Return Bond Portfolio, Intermediate-Term Bond Portfolio and
Mortgage Backed
Securities Portfolio declare dividends of their net investment
income daily and
pay such dividends monthly. The U.S. Government Money Market
Portfolio declares
net investment income and any net capital gain (loss) daily and
pays such
dividends monthly. Each other Portfolio declares and pays a
dividend of its net
investment income, if any, at least annually. Each Portfolio except
for the U.S.
Government Money Market Portfolio 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 portfolio in the
Fund is
treated as a separate taxpaying entity. It is the intent of each
portfolio to
continue to meet the requirements of the Internal Revenue Code
applicable to
regulated investment companies and to distribute all of its taxable
net income
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 Portfolios' understanding of the applicable
country's tax
rules and rates.
Deferred Organizational Expenses: A total of $279,000 was
incurred in
connection with the organization of the Fund. These costs have been
deferred and
are being amortized ratably over a period of sixty months from the
date the
Portfolio commenced investment operations.
- ----------------------------------------------------------
Note 2. Agreements
The Fund has a management agreement with Prudential Mutual
Fund
Management, Inc. (``PMF'') pursuant to which PMF manages the
investment
operations of the Fund, administers the Fund's affairs and is
responsible for
the selection, subject to review and approval of the Trustees, of
the advisers.
PMF 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. PMF 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.
- -----------------------------------------------------------------
- ---------------
48
<PAGE>
<PAGE>
PMF has subadvisory agreements with the advisers noted below
pursuant to
which each adviser furnishes investment advisory services in
connection with the
management of the Portfolios. Each of the two Advisers of the
domestic equity
Portfolios--the Large Capitalization Growth Portfolio, Large
Capitalization
Value Portfolio, Small Capitalization Growth Portfolio and Small
Capitalization
Value Portfolio--manages approximately 50% of the assets of the
respective
Portfolio. 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)
will be divided between the two Advisers as the Manager deems it
appropriate.
In
addition, there will be a periodic rebalancing of each Portfolio's
assets to
take account of market fluctuations in order to maintain the
approximately equal
allocation. As a consequence, each Portfolio will allocate assets
from the
better performing of the two Advisers to the other.
<TABLE>
<CAPTION>
Portfolio Adviser
- ----------------- ------------------------------------------
<S> <C>
Large
Capitalization
Growth
Portfolio...... Oak Associates (effective 11/22/95) and
Columbus Circle Investors
Large
Capitalization
Value
Portfolio...... INVESCO MIM Inc. and
Hotchkis and Willey
Small
Capitalization
Growth
Portfolio...... Nicholas-Applegate Capital Management and
Investment Advisors, Inc.
Small
Capitalization
Value
Portfolio...... Wood, Struthers & Winthrop (effective
4/13/95) and
Lazard Freres Asset Management
International
Equity
Portfolio...... Lazard Freres Asset Management
International
Bond
Portfolio...... Fiduciary International, Inc.
Total Return Bond
and
Intermediate-Term
Bond
Portfolios..... Pacific Investment Management Co.
Mortgage Backed
Securities and
U.S. Government
Money Market
Portfolios..... Wellington Management Co.
</TABLE>
The management fee paid PMF is computed daily and payable
monthly, at an
annual rate of the average daily net assets of the Portfolios
specified below
and PMF, in turn, pays each adviser a fee for its services.
<TABLE>
<CAPTION>
Total
Portfolio Management Fee Adviser Fee
- ------------------------- -------------- -----------
<S> <C> <C>
Large Capitalization
Growth Portfolio....... .60% .30%
Large Capitalization
Value Portfolio........ .60% .30%
Small Capitalization
Growth Portfolio....... .60% .30%
Small Capitalization
Value Portfolio........ .60% .30%
International Equity
Portfolio.............. .70% .40%
International Bond
Portfolio.............. .50% .30%
Total Return Bond
Portfolio.............. .45% .25%
Intermediate-Term Bond
Portfolio.............. .45% .25%
Mortgage Backed
Securities Portfolio... .45% .25%
U.S. Government Money
Market Portfolio....... .25% .125%
</TABLE>
PMF has agreed to subsidize a portion of the operating
expenses of the
Portfolios until December 31, 1995. The Portfolios are not required
to reimburse
PMF for such subsidies. For the year ended December 31, 1995, PMF
subsidized the
following amounts:
<TABLE>
<CAPTION>
Annualized
Percentage of Per
Portfolio Amount Average Net Assets Share
- ------------------------- ------- ------------------ -----
<S> <C> <C> <C>
International Bond
Portfolio.............. $44,839 .15% $.02
Total Return Bond
Portfolio.............. 68,615 .19% .02
Mortgage Backed
Securities
Portfolio.............. 47,957 .07% .01
U.S. Government Money
Market Portfolio....... 9,401 .05% .001
</TABLE>
The Fund has entered into a distribution agreement with
Prudential
Securities Incorporated (``PSI'') for distribution of the Fund's
shares. PSI
serves the Fund without compensation.
PMF and PSI are indirect, wholly-owned subsidiaries of The
Prudential
Insurance Company of America.
- ----------------------------------------------------------
Note 3. Other Transactions
with Affiliates
Prudential Mutual Fund Services, Inc. (``PMFS''), a
wholly-owned
subsidiary of PMF, serves as the Fund's transfer agent. The
following amounts
represent the fees PMFS charged for the year ended December 31,
1995 as well as
the fees due PMFS as of December 31, 1995.
<TABLE>
<CAPTION>
Amount incurred
for the
year ended Amount Due
December 31, as of
Portfolio 1995 December 31, 1995
- --------------------- --------------- -----------------
<S> <C> <C>
Large Capitalization
Growth Portfolio... $85,200 $ 7,200
Large Capitalization
Value Portfolio.... 85,200 7,200
Small Capitalization
Growth Portfolio... 84,900 7,200
Small Capitalization
Value Portfolio.... 81,200 6,800
International Equity
Portfolio.......... 87,300 7,300
International Bond
Portfolio.......... 23,200 2,300
Total Return Bond
Portfolio.......... 33,400 2,900
Intermediate-Term
Bond Portfolio..... 36,200 3,100
Mortgage Backed
Securities
Portfolio.......... 48,000 4,000
U.S. Government Money
Market Portfolio... 7,200 600
</TABLE>
For the year ended December 31, 1995, PSI earned
approximately $28,400 and
$20,100 in brokerage commissions on behalf of certain portfolio
transactions
executed with the Large Capitalization Value Portfolio and the
Small
Capitalization Growth Portfolio, respectively.
- -----------------------------------------------------------------
- ---------------
49
<PAGE>
<PAGE>
- ----------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of portfolio securities, excluding
short-term
investments and written options, for the year ended December 31,
1995 were as
follows:
<TABLE>
<CAPTION>
Portfolio Purchases Sales
- ----------------------------- ------------ ------------
<S> <C> <C>
Large Capitalization Growth
Portfolio.................. $234,649,834 $226,512,935
Large Capitalization Value
Portfolio.................. 102,117,865 92,702,420
Small Capitalization Growth
Portfolio.................. 125,776,450 123,980,415
Small Capitalization Value
Portfolio.................. 109,444,010 90,359,206
International Equity
Portfolio.................. 132,053,915 152,588,435
International Bond
Portfolio.................. 108,266,083 96,780,805
Total Return Bond
Portfolio.................. 56,627,532 39,767,557
Intermediate-Term Bond
Portfolio.................. 41,726,354 55,562,278
Mortgage Backed Securities
Portfolio.................. 108,442,584 99,428,393
</TABLE>
The federal income tax basis and unrealized
appreciation/depreciation of
each of the Portfolios' investments, excluding written options as
of December
31, 1995, were as follows:
<TABLE>
<CAPTION>
Net
Unrealized Gross
Unrealized
Portfolio Basis Appreciation Appreciation
Depreciation
- ---------------- ------------ ------------- ------------
- ------------
<S> <C> <C> <C> <C>
Large
Capitalization
Growth
Portfolio..... $163,253,091 $19,589,425 $ 22,279,213 $
2,689,788
Large
Capitalization
Value
Portfolio..... 154,242,595 33,465,723 39,108,059
5,642,336
Small
Capitalization
Growth
Portfolio..... 100,304,134 20,960,158 26,031,359
5,071,201
Small
Capitalization
Value
Portfolio..... 87,984,547 9,710,462 12,970,539
3,260,077
International
Equity
Portfolio..... 172,627,730 19,471,612 25,877,996
6,406,384
International
Bond
Portfolio..... 32,840,832 785,604 886,875
101,271
Total Return
Bond
Portfolio..... 48,782,555 536,236 713,976
177,740
Intermediate-Term
Bond
Portfolio..... 77,929,005 542,660 1,023,792
481,132
Mortgage Backed
Securities
Portfolio..... 67,526,172 2,090,447 2,250,666
160,219
</TABLE>
For federal income tax purposes, the Small Capitalization
Value and
Mortgage Backed Securities portfolios had capital loss
carryforwards as of
December 31, 1995. Accordingly, no capital gain distributions are
expected to
be
paid to shareholders of these portfolios until future net gains
have been
realized in excess of such carryforwards. In addition, certain
portfolios have
either partially or fully utilized prior year capital losses and/or
are electing
to treat net currency losses incurred in the two month period ended
December 31,
1995 as having been incurred in the following year.
<TABLE>
<CAPTION>
Net
Losses
Utilization of
in two
Prior Year
months ended
Capital Loss Expiration Capital Loss
December 31,
Portfolio Carryforward Year Carryforward
1995
- ------------------ -------------- ---------- --------------
- ------------
<S> <C> <C> <C> <C>
Large
Capitalization
Growth
Portfolio....... -- -- $ 3,494,700
--
Small
Capitalization
Growth
Portfolio....... -- -- 10,623,600
--
Small
Capitalization
Value
Portfolio....... $1,755,000 2003 -- $
87,500
1,738,800 2002 --
--
International
Equity
Portfolio....... -- -- --
68,600
International Bond
Portfolio....... -- -- 236,800
268,300
Total Return
Bond
Portfolio....... -- -- 1,635,000
--
Intermediate-Term
Bond
Portfolio....... -- -- 2,427,300
--
Mortgage Backed
Securities
Portfolio....... 1,539,900 2002 1,637,200
--
- -----------------------------------------------------------------
- ----------
</TABLE>
At December 31, 1995, the Total Return and Intermediate-Term
Bond
Portfolios bought 148 and 230 financial futures contracts,
respectively, on U.S.
Treasury Notes expiring in March 1996. In addition, the Total
Return Portfolio
bought 16 financial futures contracts on U.S. Treasury Bonds
expiring in March
1996.
The unrealized appreciation on such contracts as of December 31,
1995 were as
follows:
<TABLE>
<CAPTION>
Value on
Value at December 31, Unrealized
Portfolio Disposition 1995 Appreciation
- ----------------------- ----------- ------------ ------------
<S> <C> <C> <C>
Total Return Bond
Portfolio............ $18,379,125 $18,526,500 $147,375
Intermediate-Term Bond
Portfolio............ 25,360,938 25,519,063 158,125
</TABLE>
- -----------------------------------------------------------------
- ---------------
50
<PAGE>
<PAGE>
At December 31, 1995, the International Bond Portfolio had
outstanding
forward currency contracts, both to purchase and sell foreign
currencies, as
follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current
Appreciation
Purchase Contracts Payable Value
(Depreciation)
- ------------------- --------------- -----------
- --------------
<S> <C> <C> <C>
British Pounds,
expiring
1/8/96........... $ 2,767,997 $ 2,771,688 $
3,691
Canadian Dollars,
expiring
2/16/96.......... 475,592 470,849
(4,743)
Danish Kroner,
expiring
2/16/96.......... 85,045 85,101
56
Deutschemarks,
expiring
2/16/96.......... 4,037,105 3,970,433
(66,672)
Italian Lira,
expiring
4/18/96.......... 1,232,442 1,240,602
8,160
Japanese Yen,
expiring
1/8/96........... 4,660,137 4,525,603
(134,534)
Spanish Pesetas,
expiring
2/6/96........... 382,331 382,807
476
--------------- -----------
- --------------
$13,640,649 $13,447,083 $
(193,566)
--------------- -----------
- --------------
--------------- -----------
- --------------
<CAPTION>
Value at
Foreign Currency Settlement Date Current
Appreciation
Sale Contracts Receivable Value
(Depreciation)
- ------------------- --------------- -----------
- --------------
<S> <C> <C> <C>
Australian Dollars,
expiring
1/16/96.......... $ 374,673 $ 376,539 $
(1,866)
Austrian Schilling,
expiring
5/15/96.......... 404,573 397,403
7,170
Belgian Francs,
expiring
1/12/96.......... 558,129 562,168
(4,039)
British Pounds,
expiring
1/8/96........... 29,966 29,503
463
Canadian Dollars,
expiring
2/16/96.......... 288,490 285,353
3,137
Danish Kroner,
expiring
2/12/96.......... 175,523 174,533
990
Deutschemarks,
expiring
2/16/96.......... 1,655,934 1,653,049
2,885
French Francs,
expiring
1/12/96.......... 2,823,977 2,873,058
(49,081)
Italian Lira,
expiring
4/18/96.......... 1,121,082 1,127,744
(6,662)
Spanish Pesetas,
expiring
2/6/96........... 4,598,982 4,674,023
(75,041)
--------------- -----------
- --------------
$12,031,329 $12,153,373 $
(122,044)
--------------- -----------
- --------------
--------------- -----------
- --------------
</TABLE>
At December 31, 1995, the Total Return Bond Portfolio had
outstanding
forward currency contracts to sell foreign currencies, as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current
Sale Contracts Receivable Value
Depreciation
- ------------------- --------------- -----------
- --------------
<S> <C> <C> <C>
Deutschemarks
expiring
12/9-12/16/96.... $ 6,543,418 $ 6,580,506 $
(37,088)
</TABLE>
At December 31, 1995, the Intermediate Term Bond Portfolio
had outstanding
forward currency contracts to sell foreign currencies, as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current
Sale Contracts Receivable Value
Depreciation
- ------------------- --------------- -----------
- --------------
<S> <C> <C> <C>
Deutschemarks
expiring
12/9-12/16/96.... $11,487,910 $11,553,039
$(65,129)
</TABLE>
Transactions in options written during the year ended
December 31, 1995,
were as follows:
<TABLE>
<CAPTION>
Number of
Contracts Premiums
International Bond Portfolio (000) Received
- -------------------------------------- --------- --------
<S> <C> <C>
Options outstanding at December 31,
1994................................ 84,366 $15,337
Options written....................... 134,123 63,474
Options terminated in closing purchase
transactions........................ (129,658 ) (38,829 )
Options expired....................... (88,831 ) (39,982 )
--------- --------
Options outstanding at December 31,
1995................................ -- $ --
--------- --------
--------- --------
<CAPTION>
Total Return Bond Portfolio
- --------------------------------------
<S> <C> <C>
Options outstanding at December 31,
1994................................ -- --
Options written....................... 57 $34,588
Options exercised..................... (37) (23,887 )
Options expired....................... (20) (10,701 )
--------- --------
Options outstanding at December 31,
1995................................ -- $ --
--------- --------
--------- --------
<CAPTION>
Mortgage Backed Securities Portfolio
- --------------------------------------
<S> <C> <C>
Options outstanding at December 31,
1994................................ -- --
Options written....................... 85 $32,581
Options terminated in closing purchase
transactions........................ (45) (17,986 )
--------- --------
Options outstanding at December 31,
1995................................ 40 $14,595
--------- --------
--------- --------
</TABLE>
- ----------------------------------------------------------
Note 5. Borrowings under Reverse
Repurchase Agreements
The amount of borrowings outstanding for the Total Return
Bond portfolio
during the period was $1,473,000 at an interest rate of 5.70%. On
December 31,
1995, securities valued at $1,521,983 were pledged as collateral
for reverse
repurchase agreements.
- -----------------------------------------------------------------
- ---------------
51
<PAGE>
<PAGE>
- -----------------------------------------------------------------
- ---------------
Note 6. Capital
The Fund has authorized an unlimited number of shares of
beneficial
interest at $.001 par value per share. Of the shares outstanding at
December 31,
1995, PMF owned 1,125 shares of each portfolio, except for the
International
Bond Portfolio, of which it owns 226,630 shares.
Transactions in shares of beneficial interest during the year
ended
December 31, 1995 were as follows:
<TABLE>
<CAPTION>
Shares
Issued in
Reinvestment
Increase/
of
Dividends
(Decrease)
Shares
and
Shares in Shares
Portfolio Sold
Distributions
Reacquired Outstanding
- -------------------------------------- -------------
- ------------
------------- -----------
<S> <C> <C>
<C> <C>
Large Capitalization Growth
Portfolio........................... 5,088,274
140,781
(4,979,073) 249,982
Large Capitalization Value
Portfolio........................... 4,775,800
734,989
(4,779,753) 731,036
Small Capitalization Growth
Portfolio........................... 3,325,532
172,318
(3,236,827) 261,023
Small Capitalization Value
Portfolio........................... 2,807,377
76,421
(3,018,792) (134,994)
International Equity Portfolio........ 11,209,899
150,197
(13,045,509) (1,685,413)
International Bond Portfolio.......... 1,976,236
208,497
(1,025,274) 1,159,459
Total Return Bond Portfolio........... 2,317,689
227,833
(1,588,241) 957,281
Intermediate-Term Bond Portfolio...... 2,958,764
396,173
(2,600,802) 754,135
Mortgage Backed Securities Portfolio.. 1,971,802
371,098
(2,094,123) 248,777
</TABLE>
Transactions in shares of beneficial interest during the
period ended
December 31, 1994 were as follows:
<TABLE>
<CAPTION>
Shares
Issued in
Reinvestment
of
Dividends
Increase
Shares
and
Shares in Shares
Portfolio Sold
Distributions
Reacquired Outstanding
- -------------------------------------- -------------
- ------------
---------- -----------
<S> <C> <C>
<C> <C>
Large Capitalization Growth
Portfolio........................... 8,762,398
151,227
(4,221,440) 4,962,185
Large Capitalization Value
Portfolio........................... 8,338,262
423,050
(4,070,874) 4,690,438
Small Capitalization Growth
Portfolio........................... 5,395,450
7,671
(2,468,500) 2,934,621
Small Capitalization Value
Portfolio........................... 4,791,105
165,073
(2,418,215) 2,537,963
International Equity Portfolio........ 9,846,776
1,400,029
(5,223,523) 6,023,282
International Bond Portfolio(a)....... 2,471,795
86,716
(316,569 ) 2,241,942
Total Return Bond Portfolio........... 2,568,158
135,120
(1,933,860) 769,418
Intermediate-Term Bond Portfolio...... 4,996,072
318,588
(4,639,643) 675,017
Mortgage Backed Securities Portfolio.. 4,438,423
349,104
(4,172,917) 614,610
- ---------------
(a) Investment operations commenced on May 17, 1994.
</TABLE>
- -----------------------------------------------------------------
- ---------------
52
<PAGE>
<PAGE>
THE TARGET PORTFOLIO TRUST
Independent Auditors' Report
The Shareholders and Trustees of
The Target Portfolio Trust:
We have audited the accompanying statements of assets and
liabilities,
including the portfolios of investments, of The Target Portfolio
Trust
(consisting of the Large Capitalization Growth Portfolio, Large
Capitalization
Value Portfolio, Small Capitalization Growth Portfolio, Small
Capitalization
Value Portfolio, International Equity Portfolio, International Bond
Portfolio,
Total Return Bond Portfolio, Intermediate-Term Bond Portfolio,
Mortgage Backed
Securities Portfolio and U.S. Government Money Market Portfolio) as
of December
31, 1995, the related statements of operations for the year then
ended and of
changes in net assets, and the financial highlights for each of the
periods
presented. 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 the securities
owned as of
December 31, 1995 by correspondence with the custodian and brokers;
where
replies were not received from brokers, we performed other auditing
procedures.
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, such financial statements and financial
highlights present
fairly, in all material respects, the financial position of each of
the
respective portfolios constituting The Target Portfolio Trust as of
December 31,
1995, the results of their operations, the changes in their net
assets, and
their financial highlights for the periods presented in conformity
with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
February 13, 1996
- -----------------------------------------------------------------
- ---------------
53
<PAGE>
THE TARGET PORTFOLIO TRUST
Federal Income Tax Information
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 period ended December 31, 1995. Further, we wish to advise
you of the
percentage of the ordinary income dividends (excluding long-term
capital gains
distributions) paid in 1995 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 period ended December 31,
1995 as well
as the corporate dividend received deduction percentage:
<TABLE>
<CAPTION>
Ordinary
Dividends*
Total Corporate
- ------------------------
Long-Term Dividends Dividend
Short-Term
Capital Gains and Received
Portfolio Income
Capital Gains
Distributions Distributions Deduction
- ------------------------------------------------ ------
- --------------
- ------------- ------------- ---------
<S> <C> <C>
<C> <C> <C>
Large Capitalization Growth Portfolio........... $0.110 --
$ 0.010 $ 0.120 100%
Large Capitalization Value Portfolio............ 0.296
$0.255
0.110 0.661 57%
Small Capitalization Growth Portfolio........... 0.015 --
0.275 0.290 100%
Small Capitalization Value Portfolio............ 0.135 --
-- 0.135 100%
International Equity Portfolio.................. 0.110 --
0.035 0.145 0%
International Bond Portfolio.................... 0.573
0.195
-- 0.768 0%
Total Return Bond Portfolio..................... 0.582
0.083
-- 0.665 0%
Intermediate-Term Bond Portfolio................ 0.597
0.026
-- 0.623 0%
Mortgage Backed Securities Portfolio............ 0.705 --
-- 0.705 0%
U.S. Government Money Market Portfolio.......... 0.051 --
-- 0.051 0%
</TABLE>
* For federal income tax purposes, ordinary income dividends and
short-term
capital gains distributions are taxable as ordinary income.
Long-term capital
gains distributions are taxable as capital gains income.
Important Notice For Certain
Shareholders
Many states do not tax the portion of mutual fund dividends
attributed to
interest from U.S. Treasury securities. Listed below is the
percentage of
interest earned by the following TARGET portfolios from U.S.
Treasury securities
for the calendar year 1995.
To determine the amount of your dividends which may be exempt
from state and
local tax, simply multiply the amount in Box 1b 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
Portfolio U.S. Treasury Securities
- ---------------------------- ---------------------------
<S> <C>
Large Capitalization
Growth*..................... 0.29%
Large Capitalization
Value*...................... 1.54%
Small Capitalization
Growth*..................... 3.61%
Small Capitalization Value
Portfolio*.................. 12.00%
International Equity
Portfolio*.................. 3.11%
International Bond
Portfolio*.................. 8.75%
Total Return Bond
Portfolio*.................. 4.91%
Intermediate-Term Bond
Portfolio*.................. 11.08%
Mortgage Backed Securities
Portfolio*.................. 12.27%
U.S. Government Money Market
Portfolio*.................. 13.67%
</TABLE>
* Due to certain minimum portfolio holding requirements in
California,
Connecticut, New York, and New Jersey, residents of those states
will not be
able to exclude 1995 U.S. interest income from state and local
taxes.
Please consult your tax adviser or state/local authorities to
properly report
this information on your tax return. If you have any questions
concerning the
amounts listed above, please call your Prudential Securities
Financial Advisor.
- -----------------------------------------------------------------
- ---------------
54
<PAGE>
Large Capitalization Value Portfolio
Average Annual Total Returns
With Advisory Fee One Year Since Inception
(1/5/93)
30.1% 9.8%
Without Advisory Fee One Year Since Inception
(1/5/93)
32.1% 11.4%
Comparison of Change in Value of a $10,000 Investment
(CHART)
Past performance is not predictive of future performance and an
investor's shares, when redeemed, may be worth more or less than
their original cost.
This graph is furnished to you in accordance with SEC regulations.
It compares a $10,000 investment in the Target Large Capitalization
Value Portfolio with a similar investment in the Standard & Poor's
500 Index (S&P 500) by portraying the initial account values on
commencement of operations and subsequent account values at the
end of each fiscal year (December 31), as measured on a quarterly
basis, beginning in 1993. The graph and the accompanying table take
into account the maximum quarterly investment advisory fee
associated
with the Prudential Securities Target Program of 1.50% annually.
For individual retirement plans and qualified employee benefit
plans, taking into account the maximum investment advisory fee
of 1.25%, the average annual total return since inception would
have been 10.0% and the growth of a $10,000 investment would
have been $13,340.
The S&P 500 is a capital-weighted index, representing the aggregate
market value of the common equity of 500 stocks primarily traded
on the New York Stock Exchange. The S&P 500 is an unmanaged index
and includes the reinvestment of all dividends. The securities
which comprise the S&P 500 may differ substantially from the
securities in the Portfolio. The S&P 500 is not the only index
which may be used to characterize performance of equity funds
and other indices may portray different comparative performance.
55
<PAGE>
Large Capitalization Growth Portfolio
Average Annual Total Returns
With Advisory Fee One Year Since Inception
(1/5/93)
23.9% 6.0%
Without Advisory Fee One Year Since Inception
(1/5/93)
25.8% 7.6%
Comparison of Change in Value of a $10,000 Investment
(CHART)
Past performance is not predictive of future performance and
an investor's shares, when redeemed, may be worth more or less
than their original cost.
This graph is furnished to you in accordance with SEC regulations.
It compares a $10,000 investment in the Target Large Capitalization
Growth Portfolio with a similar investment in the Standard & Poor's
500 Index (S&P 500) by portraying the initial
account values on commencement of operations and subsequent
account values at the end of each fiscal year (December 31),
as measured on a quarterly basis, beginning in 1993. The graph
and the accompanying table take into account the maximum
quarterly investment advisory fee associated with the Prudential
Securities Target Program of 1.50% annually. For individual
retirement plans and qualified employee benefit plans, taking
into account the maximum investment advisory fee of 1.25%, the
average annual total return since inception would have been 6.2%
and the growth of a $10,000 investment would have been $12,015.
The S&P 500 is a capital-weighted index, representing the aggregate
market value of the common equity of 500 stocks primarily traded
on the New York Stock Exchange. The S&P 500 is an unmanaged index
and includes the reinvestment of all dividends, but does not
reflect the payment of transaction costs. The securities which
comprise the S&P 500 may differ substantially from the securities
in the Portfolio. The S&P 500 is not the only index which may be
used to characterize performance of growth equity funds and other
indices may portray different comparative performance.
56
<PAGE>
Small Capitalization Value Portfolio
Average Annual Total Returns
With Advisory Fee One Year Since Inception
(1/5/93)
17.4% 10.2%
Without Advisory Fee One Year Since Inception
(1/5/93)
19.2 11.9%
Comparison of Change in Value of a $10,000 Investment
(CHART)
Past performance is not predictive of future performance and an
investor's shares, when redeemed, may be worth more or less than
their original cost.
This graph is furnished to you in accordance with SEC regulations.
It compares a $10,000 investment in the Target Small Capitalization
Value Portfolio with a similar investment in the Russell 2000 Index
(Russell 2000) by portraying the initial account values on
commencement
of operations and subsequent account values at the end of each
fiscal
year (December 31), as measured on a quarterly basis, beginning in
1993. The graph and the accompanying table take into account the
maximum
quarterly investment advisory fee associated with the Prudential
Securities Target Program of 1.50% annually. For individual
retirement
plans and qualified employee benefit plans, taking into account the
maximum investment advisory fee of 1.25%, the average annual total
return since inception would have been 10.5% and the growth of a
$10,000 investment would have been $13,515.
The Russell 2000 is a stock market index comprised of the 2,000
smallest U.S. domiciled publicly traded common stocks that are
included in the Russell 3000 Index. These common stocks represent
approximately 11% of the U.S. equity market. The Russell
3000 Index is comprised of the 3,000 largest U.S. domiciled
publicly-traded common stocks by market capitalization representing
approximately 98% of the U.S. publicly-traded equity market. The
Russell 2000 is an unmanaged index and includes the
reinvestment of all dividends, but does not reflect the payment
of transaction costs. The securities that comprise the Russell
2000 may differ substantially from the securities in the
Portfolio. The Russell 2000 is not the only index which may be
used to characterize performance of equity funds and other
indices may portray different comparative performance.
57
<PAGE>
Small Capitalization Growth Portfolio
Average Annual Total Returns
With Advisory Fee One Year Since Inception
(1/5/93)
22.8% 11.5%
Without Advisory Fee One Year Since Inception
(1/5/93)
24.6% 13.2%
Comparison of Change in Value of a $10,000 Investment
(CHART)
Past performance is not predictive of future performance and an
investor's shares, when redeemed, may be worth more or less than
their original cost.
This graph is furnished to you in accordance with SEC regulations.
It compares a $10,000 investment in the Target Small Capitalization
Growth Portfolio with a similar investment in the Russell 2000
Index
(Russell 2000) by portraying the initial account values on
commencement
of operations and subsequent account values at the end of each
fiscal
year (December 31), as measured on a quarterly basis, beginning in
1993.
The graph and the accompanying table take into account the maximum
quarterly investment advisory fee associated with the Prudential
Securities Target Program of 1.50% annually. For individual
retirement
plans and qualified employee benefit plans, taking into account the
maximum investment advisory fee of 1.25%, the average annual total
return since inception would have been 11.8% and the growth of a
$10,000 investment would have been $13,978.
The Russell 2000 is a stock market index comprised of the 2,000
smallest U.S. domiciled publicly traded common stocks that are
included
in the Russell 3000 Index. These common stocks represent
approximately
11% of the U.S. equity market. The Russell 3000 Index is comprised
of
the 3,000 largest U.S. domiciled publicly- traded common stocks by
market capitalization representing approximately 98% of the U.S.
publicly-traded equity market. The Russell 2000 is an unmanaged
index and includes the reinvestment of all dividends, but does not
reflect the payment of transaction costs. The securities that
comprise
the Russell 2000 may differ substantially from the securities in
the
Portfolio. The Russell 2000 is not the only index which may be
used to characterize performance of growth funds and other indices
may portray different comparative performance.
58
<PAGE>
International Bond Portfolio
Average Annual Total Returns
With Advisory Fee One Year Since Inception
(5/17/94)
13.5% 7.9%
Without Advisory Fee One Year Since Inception
(5/17/94)
14.7% 9.3%
Comparison of Change in Value of a $10,000 Investment
(CHART)
Past performance is not predictive of future performance and an
investor's shares, when redeemed, may be worth more or less than
their original cost.
This graph is furnished to you in accordance with SEC regulations.
It compares a $10,000 investment in the Target International Bond
Portfolio with a similar investment in the Salomon World Bond Index
(Salomon WB Index) by portraying the initial account values on
commencement of operations and subsequent account values at the
end of each fiscal year (December 31), as measured on a quarterly
basis, beginning in 1994. The graph and the accompanying table take
into account the maximum quarterly investment advisory fee
associated
with the Prudential Securities Target Program of 1.00% annually.
For
individual retirement plans and qualified employee benefit plans,
taking into account the maximum investment advisory fee of 1.35%,
the
average annual total return would have been 7.8% and the growth of
a $10,000 investment would have been $11,336.
The Salomon WB Index measures the total return performance of
high-quality securities in major sectors of the international
bond market. The index covers approximately 600 bonds from 10
currencies. Only high-quality, straight issues are included.
The index is calculated on both a weighted and an unweighted
basis. Generally, index samples for each market are restricted
to bonds with at least 5 years of remaining life. The Salomom
WB Index is an unmanaged index and includes the reinvestment of a
ll dividends, but does not reflect the payment of transaction
costs. The securities which comprise the Salomon WB Index may
differ substantially from the securities in the Portfolio. The
Salomon WB Index is not the only index that may be used to
characterize performance of international bond funds and other
indices may portray different comparative performance.
59
<PAGE>
International Equity Portfolio
Average Annual Total Returns
With Advisory Fee One Year Since Inception
(1/5/93)
13.7% 13.6%
Without Advisory Fee One Year Since Inception
(1/5/93)
15.4% 15.4%
Comparison of Change in Value of a $10,000 Investment
(CHART)
Past performance is not predictive of future performance and an
investor's shares, when redeemed, may be worth more or less than
their original cost.
This graph is furnished to you in accordance with SEC regulations.
It compares a $10,000 investment in the Target International Equity
Portfolio with a similar investment in the Morgan Stanley Capital
International Europe, Australia, Far East Index (EAFE Index) by
portraying the initial account values on commencement of operations
and subsequent account values at the end of each fiscal year
(December 31), as measured on a quarterly basis, beginning
in 1993. The graph and the accompanying table take into account
the maximum quarterly investment advisory fee associated with
the Prudential Securities Target Program of 1.50% annually. For
individual retirement plans and qualified employee benefit plans,
taking into account the maximum investment advisory fee of1.25%,
the average annual total return since inception would have been
13.9% and the growth of a $10,000 investment would have been
$14,786.
The EAFE Index is an arithmetical average weighted by market value
of the performance of 1023 non-U.S. companies representing 18 stock
markets in Europe, Australia, New Zealand and the Far East. The
EAFE Index is an unmanaged index and includes the reinvestment
of all dividends, but does not reflect the payment of transaction
costs. The securities which comprise the EAFE Index may differ
substantially from the securities in the Portfolio. The EAFE Index
is not the only index that may be used to characterize performance
of international equity funds and other indices may portray
different
comparative performance.
60
<PAGE>
Intermediate-Term Bond Portfolio
Average Annual Total Returns
With Advisory Fee One Year Since Inception
(1/5/93)
15.7% 6.7%
Without Advisory Fee One Year Since Inception
(1/5/93)
16.9% 7.8%
Comparison of Change in Value of a $10,000 Investment
(CHART)
Past performance is not predictive of future performance and an
investor's shares, when redeemed, may be worth more or less than
their original cost.
This graph is furnished to you in accordance with SEC regulations.
It compares a $10,000 investment in the Target Intermediate-Term
Bond Portfolio with a similar investment in the Lehman Intermediate
Government/Corporate Index (LIGC) by portraying the initial account
values on commencement of operations and subsequent account values
at the end of each fiscal year (December 31), as measured on a
quarterly basis, beginning in 1993. The graph and the accompanying
table take into account the maximum quarterly investment advisory
fee associated with the Prudential Securities Target Program of
1.00% annually. For individual retirement plans and qualified
employee benefit plans, taking into account the maximum investment
advisory fee of 1.35%, the average annual total return since
inception would have been 6.3% and the growth of a $10,000
investment would have been $12,040.
The LIGC is a weighted index comprised of securities issued or
backed by the U.S. government and its agencies and securities
publicly issued by corporations with one to 9.99 years remaining
to maturity, rated investment grade and having $50 million
or more outstanding. The LIGC is an unmanaged index and includes
the reinvestment of all dividends, but does not reflect the payment
of transaction costs. The securities that comprise the LIGC may
differ substantially from the securities in the
Portfolio. The LIGC is not the only index that may be used to
characterize performance of intermediate-term bond funds and
other indices may portray different comparative performance.
61
<PAGE>
Total Return Bond Portfolio
Average Annual Total Returns
With Advisory Fee One Year Since
Inception (1/5/93)
18.5%
7.3%
Without Advisory Fee One Year Since
Inception (1/5/93)
19.6%
8.4%
Comparison of Change in Value of a $10,000 Investment
(CHART)
Past performance is not predictive of future performance and an
investor's shares, when redeemed, may be worth more or less than
their original cost.
This graph is furnished to you in accordance with SEC regulations.
It compares a $10,000 investment in the Target Total Return Bond
Portfolio with a similar investment in the Lehman
Government/Corporate
Index (LGCI) by portraying the initial account values on
commencement
of operations and subsequent account values at the end of each
fiscal
year (December 31), as measured on a quarterly basis, beginning in
1993. The graph and the accompanying table take into account the
maximum quarterly investment advisory fee associated with the
Prudential Securities Target Program of 1.00% annually. For
individual retirement plans and qualified employee benefit plans,
taking into account the maximum investment advisory fee of 1.35%,
the average annual total return since inception would have been
6.9% and the growth of a $10,000 investment would have been
$12,255.
The LGCI is a weighted index comprised of publicly traded
intermediate
and long-term government and corporate debt with an average
maturity
of 11 years. The LGCI is an unmanaged index and includes the
reinvestment
of all income, but does not reflect the payment of transaction
costs.
The securities that comprise the LGCI may differ substantially from
the securities in the Portfolio. The LGCI is not the only index
that
may be used to characterize performance of bond funds and other
indices may portray different comparative performance.
62
<PAGE>
Mortgage Backed
Securities Portfolio
Average Annual Total Returns
With Advisory Fee One Year Since Inception
(1/5/93)
15.0% 6.8%
Without Advisory Fee One Year Since Inception
(1/5/93)
16.2% 8.0%
Comparison of Change in Value of a $10,000 Investment
(CHART)
Past performance is not predictive of future performance and an
investor's shares, when redeemed, may be worth more or less than
their original cost.
This graph is furnished to you in accordance with SEC regulations.
It compares a $10,000 investment in the Target Mortgage-Backed
Securities Portfolio with a similar investment in the Salomon Bros.
Mortgages Index (Mortgage Index) by portraying the
initial account values on commencement of operations and subsequent
account values at the end of each fiscal year (December 31), as
measured on a quarterly basis, beginning in 1993. The graph and
the accompanying table take into account the maximum
quarterly investment advisory fee associated with the Prudential
Securities Target Program of 1.00% annually. For individual
retirement plans and qualified employee benefit plans, taking
into account the maximum investment advisory fee of 1.35%, the
average annual total return since inception would have been 6.6%
and the growth of a $10,000 investment would have been $12,126.
The Mortgage Index is comprised of mortgage-backed pass-through
securities consisting of 70% pass-through securities issued by
the Government National Mortgage Association, 23% by the Federal
Home Loan Mortgage Corporation, 5% by the Federal
National Mortgage Association and the balance a mixture of
conventional and Federal Housing Administration project mortgage
pools. The Mortgage Index is an unmanaged index and includes the
reinvestment of all dividends, but does not reflect the
payment of transaction costs. The securities which comprise the
Mortgage Index may differ substantially from the securities in
the Portfolio. The Mortgage Index is not the only index that may
be used to characterize performance of mortgage-backed
security funds and other indices may portray different comparative
performance.
63
<PAGE>
Target's Shareholder Services
Target strives to demonstrate that top managers can make a
difference,
asset allocation can limit volatility, and quality services are
worth
paying for. So here's a sampling of the services you receive as a
Target shareholder. This short list should confirm that your choice
to use Target was the right one for you and your family.
Consulting Services
1) Questionnaire process addresses your investment needs
2) Personalized investment policy statement (the Evaluation)
details your risk profile
3) 36 recommended asset allocations or unlimited number of
customized allocations are available
4) Access to top investment advisers who each manage or co-manage
a Target portfolio
5) Adviser monitoring helps ensure that they perform as expected
over the long term
6) Adviser changes are made if long-term performance is poor
7) Free, unlimited allocation changes help you react to changing
market conditions
8) Research services from Ibbotson Associates are used for
allocation construction
9) IRA analysis details your overall IRA allocation and suggests
a new one, if appropriate
10) Enhancements and new portfolios keep Target on the cutting-edge
11) Personalized 401(k) evaluation helps illustrate the benefits
of such a plan, if appropriate
12) A Financial Advisor's professional guidance to assist you.
Reporting Services
13) Customized quarterly reports
14) Detailed tax information including gains, losses and
average cost per share
15) Quarterly market commentary addresses stock, bond and
international markets
16) Quarterly adviser comments focus on their specific market
expertise
17) Detailed performance of most major market indices
64
<PAGE>
Trustees
Eugene C. Dorsey
Donald D. Lennox
Richard A. Redeker
Stanley E. Shirk
Robin B. Smith
Officers
Richard A. Redeker President
Robert F. Gunia Vice President
Grace Torres Treasurer
Stephen M. Ungerman Assistant Treasurer
S. Jane Rose Secretary
Marguerite E.H. Morrison Assistant Secretary
Manager
Prudential Mutual Fund
Management, Inc.
One Seaport Plaza
New York, NY 10292
Investment Advisers
Columbus Circle Investors
Metro Center
One Station Plaza
Stamford, CT 06902
Fiduciary International
Two World Trade Center
New York, NY 10048
Hotchkis and Wiley
800 West Sixth Street
Los Angeles, CA 90017
INVESCO Capital Management
1315 Peachtree Street
Suite 500
Atlanta, GA 30309
Investment Advisors, Inc.
3700 First Bank Place
P.O. Box 357
Minneapolis, MN 55440
Lazard Freres Asset Management
30 Rockefeller Plaza
New York, NY 10020
Oak Associates
3875 Embassy Parkway
Suite 250
Akron, OH 44333
Nicholas-Applegate
Capital Management
600 West Broadway
San Diego, CA 92101
Pacific Investment Management
Company
840 Newport Center Drive
Newport Beach, CA 92658
Wellington
Management Company
75 State Street
Boston, MA 02109
Wood, Struthers & Winthrop
277 Park Avenue
New York, NY 10172
Distributor
Prudential Securities
Incorporated
One Seaport Plaza
New York, NY 10292
Custodian
State Street Bank and
Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund Services,
Inc.
Raritan Plaza
Edison, NJ 08837
Independent Auditors
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281
Legal Counsel
Shereff, Friedman, Hoffman
& Goodman
919 Third Avenue
New York, NY 10022
Prudential Mutual Funds
One Seaport Plaza
New York, NY 10292
Toll Free (800) 225-1852
This report is not authorized for distribution to prospective
investors
unless preceded or accompanied by a current prospectus.
875921 87 6 875921 40 5 875921 88 4 875921 60 3
875921 20 7 875921 30 6 875921 80 1
875921 10 8 875921 50 4 875921 70 2 TMF 158 E
