(ICON)
The
Target Portfolio
Trust
(SYMBOL)
Annual
Report
December 31, 1998
(LOGO)
<PAGE>
(ICON)
<PAGE>
The Target Portfolio Trust
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
Shareholder Letter 2
Target's Shareholder Services 8
Portfolio of Investments:
Large Capitalization Growth Portfolio 9
Large Capitalization Value Portfolio 11
Small Capitalization Growth Portfolio 15
Small Capitalization Value Portfolio 19
International Equity Portfolio 24
International Bond Portfolio 27
Total Return Bond Portfolio 29
Intermediate-Term Bond Portfolio 32
Mortgage Backed Securities Portfolio 35
U.S. Government Money Market Portfolio 37
Statements of Assets and Liabilities 38
Statements of Operations 40
Statements of Changes in Net Assets 42
Financial Highlights 44
Notes to Financial Statements 51
Report of Independent Accountants 56
Federal Income Tax Information 57
</TABLE>
1
<PAGE>
Dear Target Shareholder:
Normally, the way to make money in financial markets is to
buy low and sell
high. But looking at last year's performance of stocks and
bonds, it appears
that the strategy that worked best in 1998 was "momentum
investing"--buying
more of the most popular, most expensive securities, and
holding on as their
prices became even more expensive. Companies with a history
of consistent
earnings and largest market capitalization--which were
already expensive at the
beginning of 1998--generated most of the year's stock market
gains, while
small-company and value stocks experienced sharp price
drops. The Federal
Reserve followed with three interest rate cuts, allowing
investors to focus on
the benefits of the lower-rate environment. This prompted a
significant
fourth-quarter rebound, which reversed most of the market's
losses.
The trouble began when the government of Thailand devalued
its currency, the
baht, in 1997. The currencies of several neighboring
countries also weakened
and investors grew concerned about the impact of an Asian
economic slowdown.
This prompted many investors to focus on a few large, well-
known companies,
which were expected to have more predictable earnings and
marketable stocks.
When the Russian turmoil erupted last August, the focus on
security
intensified, and was partially reversed toward the end of
the year.
Equities: A Tale of Two Markets
A comparison of benchmark indexes illustrates the point. The
Russell Top 200
Index, reflecting stocks of companies with the largest
capitalization, gained
a substantial 44% over the year. However, the small-cap
Russell 2000 Index
actually fell by about 3%. Similarly, the S&P/Barra Growth
Index returned 42%
for the year versus the S&P/Barra Value Index, which was up
only 15%--an
unusually wide 27 percentage-point difference between
returns for growth and
value approaches to the market.
Performance Summary as of December 31, 1998
<TABLE>
<CAPTION>
12/31/97 12/31/98
12-Month* # of
Portfolios NAV NAV
Total Return Funds**
<S> <C> <C>
<C> <C>
Large Capitalization Growth $13.58 $18.29
44.22%
Lipper Growth Fund Avg
23.01 972
Large Capitalization Value 16.21 15.87
10.25
Growth & Income Avg
15.61 770
Small Capitalization Growth 15.57 15.35
2.55
Small Company Avg
- -0.36 639
Small Capitalization Value 17.50 14.98
- -6.62
Small Company Avg
- -0.36 639
International Equity 14.27 15.54
15.49
International Avg
12.92 533
International Bond 9.17 9.52
8.55
International Income Avg
11.91 51
Total Return Bond 10.56 10.49
8.28
Corporate Debt BBB Avg
6.19 97
Intermediate-Term Bond 10.42 10.36
7.09
Intermediate Investment Grade
7.28 246
Mortgage Backed Securities 10.45 10.47
6.37
U.S. Mortgage Avg
6.15 69
U.S. Government Money Market 1.00 1.00
4.88
U.S. Government Money Fund Avg
4.89 114
</TABLE>
* Source: Lipper Analytical Services for Lipper averages,
and Prudential
Investments Fund Management for Target returns. Target
returns are in boldface
type. 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 and an investor's shares, when
redeemed, may be
worth more or less than their original cost.
**Represents the number of funds in each respective Lipper
category.
2
<PAGE>
In addition, gains in 1998 were intensely sector-specific,
further separating
winners from losers. The technology sector, driven by new
low-cost computers
and the prospect that Internet commerce will transform the
way we do business,
led the market in 1998. Inspired more by expectations than
by current earnings,
prices for computer-related stocks shot up to unprecedented
levels.
The consumer cyclicals sector came in a distant second for
the year, but still
averaged an impressive 44% gain. Prices for Gap Inc., Lowes
Corp., Home Depot,
and Wal-Mart all more than doubled.
In our view, the industrial sector of the U.S. economy
suffered a brief
recession in mid-1998. The Far East is a major user of
industrial products,
such as machinery and metals, and Asia's economic
contraction affected the
sector. Finally, the energy sector was plagued by low demand
throughout 1998
and a steep decline in oil prices toward the end of the
year. It eked out a
return of only 0.9%.
How Did Our Funds Perform?
The Large Capitalization Growth Portfolio, managed by
Columbus Circle Investors
and Oak Associates, benefited from the strength of growth
stocks in large
companies during the fourth quarter, and returned 44.22% for
the year. Oak
Associates' performance was broad based to the positive
side, with three
particular sectors--technology, financial services, and
health care--again
showing good relative performance in 1998. Notable gains
came from
semiconductor and computer hardware stocks during the fourth
quarter, with
several bank and drug issues also proving helpful. Columbus
Circle Investors
benefitted from technology holdings, as well as from
consumer cyclicals.
The Large Capitalization Value Portfolio, managed by INVESCO
and Hotchkis &
Wiley, returned 10.25%, bringing its three-year cumulative
performance to
70.54%. Finance was the big winner during the fourth quarter
and for the year
overall, as markets recovered from the summer's steep
decline. Both parts of
the Portfolio, however, were hampered by capital goods and
energy issues.
Technology stocks were
Average Annual Total Returns as of December 31, 1998
<TABLE>
<CAPTION>
Since
Portfolios One Year Five Years
Inception*
<S> <C> <C>
<C>
Large Capitalization Growth 42.07% 19.57%
15.71%
Large Capitalization Value 8.60 16.38
13.65
Small Capitalization Growth 1.02 10.75
11.77 (11.76)2
Small Capitalization Value -8.02 7.79
11.21 (11.20)2
International Equity 13.76 9.56
12.81
International Bond 7.47 N/A
3.63 (3.53)2
Total Return Bond 7.20 6.39
(6.33)2 6.85 (6.77)2
Intermediate-Term Bond 6.02 5.86
6.27 (6.25)2
Mortgage Backed Securities 5.31 6.08
(6.04)2 6.37 (6.29)2
</TABLE>
Note: The average annual return for the Target Portfolios
assumes the
imposition of the maximum Target advisory fee of 1.5%
for stock
portfolios and 1.00% for the bond portfolios.
1 The inception date for all portfolios is 1/5/93, except
for International
Bond, which is 5/17/94. Past performance is not indicative
of future results.
2 Without waiver of management fees and/or expense
subsidization, the
Portfolio's Average Annual Total returns would have been
lower, as indicated
in parentheses ( ).
3
<PAGE>
among the high points for INVESCO, but Hotchkis & Wiley,
which employs more of
a "deep" value style, did not find sufficient value among
any large-cap tech
names. With no allocation to this sector, H&W's performance
suffered.
Conversely, H&W enjoyed strength from its phone company
investments, while
INVESCO lost ground after shunning these issues. There is a
gap between the
Portfolio's performance and the indexes that overweight the
high-priced sectors
of the market. Both managers believe this performance gap
will close when
investors reassess the high prices they are paying for these
stocks.
A fourth year of large-cap domination of the markets held
the Small
Capitalization Growth Portfolio, managed by Nicholas-
Applegate Capital
Management and Investment Advisors, Inc. (IAI), to a total
return of 2.55% for
the year, and a cumulative total return of 79.60% over the
five years ended
December 31, 1998. Increased merger activity, sizzling
returns for technology
stocks, and the Federal Reserve's short-term interest rate
cuts helped the
Portfolio. Nicholas-Applegate's part of the Portfolio was
aided by its lack of
exposure to energy stocks, but suffered because its consumer
services stocks
trailed the sector. IAI's part of the Portfolio was hurt by
its energy
investments, but helped by exposure in transportation,
health care, and
consumer cyclicals. Both managers increased their technology
weightings during
the fourth quarter; IAI cut its capital goods and consumer
cyclicals holdings,
and increased the consumer staples weighting. The managers
believe investors
will continue to favor stocks with the potential to deliver
the strongest
earnings growth as the earnings growth rates and fundamental
valuations of
small-cap stocks remain stronger than large caps.
Hardest hit by market disparities was the Small
Capitalization Value Portfolio,
managed by Wood, Struthers & Winthrop Management Corp. and
Lazard Asset
Management. Mirroring a loss in the benchmark Russell 2000
Index, the Portfolio
gave up 6.62% in 1998, but has posted a cumulative total
return of 56.85% over
the five years ended December 31, 1998. The weakest
holdings were in financial
services, health care, and producer manufacturing. Energy
investments also
underperformed. Lazard added a REIT and several consumer
discretionary holdings
during the quarter; Wood, Struthers & Winthrop added to
energy, health care,
and technology holdings, and reduced their overweighted
positions in the more
cyclical capital goods and materials/processing sectors.
They expect to further
reduce their most cyclically exposed issues in favor of
companies with better
long-term growth prospects and reasonable valuations. Some
of the fourth
quarter's strongest performances came from technology
issues. Wood, Struthers
& Winthrop's part of the Portfolio also enjoyed gains from
capital goods
issues, while Lazard saw certain industrial stocks perform
well.
The World: A Tumultuous 12 Months
In 1998, the European stock markets took investors on a
tumultuous roller
coaster ride. They staged an incredible rally in the first
half of
4
<PAGE>
the year, returning 27% through the end of June, as measured
in U.S. dollars by
the Morgan Stanley Capital International (MSCI) Europe
Index. But investor
anxiety hit Europe hard in August. Double-digit declines
were almost universal
and many stock markets gave up almost half of the gains made
earlier in the
year.
Then in the last quarter of the year, central banks around
the world lowered
interest rates and enthusiasm built in Europe for the year-
end monetary union.
The Europe Index regained momentum, salvaging many of its
losses over the
summer to end the year up 29%. Finland's stock market alone
returned 123% in
1998, thanks in part to its strong telecommunications and
electronics
industries. Asian returns for the year, however, were
dominated by the
contraction of the region's economy.
The International Equity Portfolio, managed by Lazard Asset
Management,
participated in the year-end rebound, finishing up 15.49%.
Performance was
helped by an underweight position in Japan, as well as
strong stock selection
in Europe. Strong selection of finance issues was helpful,
as was an overweight
of consumer goods stocks. An overweight position in the
United Kingdom, France,
and Germany detracted from performance, as did poor stock
selection in Japan,
Italy, and Switzerland.
Bonds: Illiquidity and the Flight to Quality
During the volatile market conditions that characterized
much of the year,
fixed-income investors fled to the highest-quality
government securities--U.S.
Treasuries--even if it meant paying more and receiving lower
returns. As a
result of this "flight to quality," U.S. Treasuries, as
measured by the Lehman
Brothers Treasury Index, returned 10.03% in 1998, briefly
driving the yield on
the 30-year Treasury bond in October to its lowest level
since April 1967.
(Bond yields move in the opposite direction of price.)
Investors' desire to
avoid risk made it difficult to find buyers for the less
secure corporate
bonds. Consequently, high yield corporates trailed all other
sectors of the
U.S. bond market in 1998, returning just 1.60%, as measured
by the Lehman
Brothers Corporate High Yield Index.
Like U.S. Treasuries, major European government bond markets
were a safe port
in last year's global financial storm. Emerging market
bonds, however, took a
completely opposite path. In 1997, the sector was the top
performer among the
major Lehman Brothers bond indexes. But it trailed the pack
in 1998, losing
11.60% for the year. While the Russian bond market was the
major underperformer
by far--down 76.45% in 1998--the global financial crisis
also pressured many
emerging Latin American and European markets. Japan's bond
market fell almost
6% in the fourth quarter, finishing flat for the year.
The stampede away from most bonds was high among factors
that spurred the
Federal
5
<PAGE>
Reserve to action late in the year, cutting the key short-
term Federal funds
rate to 4.75%. The cuts worked, spurring lenders to provide
businesses with
money. By the end of the year, battered bond markets had
staged a respectable
recovery. Investors began to shift money out of Treasuries
back into
investment-grade and high-yield corporate bonds, as well as
emerging-market,
mortgage backed and asset-backed securities. Had the flight
to quality been
allowed to continue on its path, it would have threatened
the U.S. economic
expansion.
Amid this volatility, the International Bond Portfolio,
managed by Delaware
International Advisors, returned 8.55% in 1998 in a market
where a weak dollar
held average dollar-based returns to 3.5% for the year.
Australian and New
Zealand holdings hurt the Portfolio early in the year,
recovering somewhat in
the fourth quarter. Canadian bonds performed well, but were
hurt by the
weakness of the Canadian dollar. Japanese issues were
essentially flat for the
year, while German and Dutch holdings, both within the new
Eurozone market,
were positive. Delaware's current strategy is a zero
weighting in the Japanese
market, which it believes is fundamentally overvalued. It is
moderately
underweighting Europe, with positions in Germany, Sweden,
the Netherlands, and
Switzerland. It is selectively overweighting dollar-based
markets that appear
to offer better value, such as New Zealand, Canada, and
Australia. Given market
uncertainties, the Portfolio's duration is defensive and
moderately short of
its benchmark.
Pacific Investment Management Company's (PIMCO's) Total
Return Bond Portfolio
lagged its benchmark for the fourth quarter, returning
8.28%. As the flight to
quality reversed and interest rates rose, the Portfolio's
bonds with longer
maturities than the index average suffered. Exposure to
intermediate-maturity
issues also hurt returns as the yield curve flattened.
Mortgages modestly
underperformed the Portfolio's benchmark, as a still-low-
interest-rate
environment led investors to anticipate higher prepayments.
Corporates
outperformed the benchmark as yield premiums narrowed;
PIMCO's underweight of
this sector was thus negative as well. On the other hand,
holdings of
below-investment-grade bonds added to returns as Fed easing
calmed the markets
and made investors less wary of credit risk. Modest holdings
of higher-quality
emerging markets bonds detracted from relative performance
for the year, but
began to enhance returns in the fourth quarter as yield
premiums narrowed.
PIMCO's Intermediate-Term Bond Portfolio outperformed its
benchmark for the
last quarter of 1998, but trailed for the year, returning
7.09%. An allocation
to below-investment-grade debt was a strong positive as this
sector recovered
from its fall sell-off. Moreover, rate cuts from the U.K.
central bank sparked
a rally, which benefitted the Portfolio's small holdings of
U.K. short-term
instruments. Despite a cautious stance in emerging markets
debt and the strong
fourth-quarter rally, PIMCO's allocation to the sector
reduced returns for
1998. Concentrating on intermediate maturities, where yields
rose most, was
another slight negative for returns. However, corporates
outperformed for the
quarter, enhancing Portfolio returns.
6
<PAGE>
During the fourth quarter of 1998, mortgages were the
strongest-performing
high-quality bond sector, outpacing governments and
corporates by 88 and 20
basis points, respectively. The Mortgage Backed Securities
Portfolio, under
Wellington Management, returned 6.37% for the year. High-
quality spread
products, like mortgage-backed securities, should provide
substantial yield
advantages over Treasuries in the near term. Although the
Portfolio's duration
was increased modestly at year's end, no major changes were
made to the sector
allocation.
Over the course of the fourth quarter of 1998, Wellington
Management's U.S.
Government Money Market Portfolio was positioned to take
advantage of year-end
funding pressures, locking in relatively higher rates toward
the end of the
year. By buying U.S. agency securities into the new year,
the manager was able
to enhance the yield while maintaining a high level of
liquidity. As of
December 31, 1998, the Portfolio's seven-day current yield
was 4.51%.
Remaining on Target
Investors in 1998 markedly favored specific asset categories
(large-cap stocks
over small cap) as well as investment styles (growth over
value). Target, as
an asset allocation program, recognizes that these
disparities will
occur--sometimes dramatically--and therefore does not favor
any one category
at any given time. Rather than attempting to time these
market cycles, Target
recommends an allocation suited to each client's particular
investment
preferences and risk tolerance.
One of the most important components of the Target program
is the ongoing due
diligence and monitoring of our sub-advisers. We are pleased
to inform you that
we did not find it necessary to make any changes in the
management of the
Portfolios during the year.
A key factor we examine in our sub-advisers, in addition to
performance, is
style consistency. This is particularly important in an
asset allocation
program--to avoid duplication among portfolios and, even
more importantly, to
maintain exposure to the asset category and investment
discipline intended.
We appreciate your commitment to Target and having the
opportunity to report
to you.
Your Allocation Mainly
Determines Your Returns
Security Selection and Other 7%
(GRAPH)
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: corporates, Treasuries,
small caps, large
caps, foreign, etc. Asset allocation is important because,
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.
Brian M. Storms, President
Prudential Investments
7
<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) A Financial Advisor's professional guidance.
2) Questionnaire process addresses your investment needs.
3) Personalized investment policy statement (the
Evaluation) details your risk
profile.
4) Ninety recommended asset allocations or unlimited number
of customized
allocations are available.
5) Access to top investment advisers who manage Target
portfolios.
6) Adviser monitoring helps ensure that they perform as
expected over the long
term.
7) Adviser changes are made if long-term performance is
poor.
8) Free, unlimited allocation changes help you react to
changing market
conditions.
9) Research services from Ibbotson Associates are used for
allocation
construction.
10) IRA analysis details your overall IRA allocation and
suggests a new one,
if appropriate.
Reporting Services
1) Customized quarterly reports contain time-weighted and
dollar-weighted
returns.
2) Detailed tax information, including gains, losses and
average cost per
share.
3) Quarterly market commentaries address stock, bond and
international
markets.
4) Quarterly adviser comments focus on their specific
market expertise.
(LOGO)
8
<PAGE>
THE TARGET PORTFOLIO TRUST
Large Capitalization Growth
Portfolio
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--97.6%
Common Stocks--97.6%
Automobiles--0.6%
34,400 Ford Motor Co................. $ 2,018,850
------------
Banks--1.9%
76,000 BankAmerica Corp.............. 4,569,500
67,500 MBNA Corp..................... 1,683,281
------------
6,252,781
------------
Broadcasting--1.3%
75,793 Tele-Communications, Inc.*.... 4,192,300
------------
Business Services--0.8%
43,200 Omnicom Group................. 2,505,600
------------
Computers & Business Equipment--17.1%
141,000 3Com Corp.*................... 6,318,563
293,075 Cisco Systems, Inc.*.......... 27,201,023
395,200 Compaq Computer Corp.......... 16,573,700
13,400 International Business
Machines Corp............... 2,475,650
32,800 Pitney Bowes, Inc............. 2,166,850
90,000 Xylan Corp.*.................. 1,580,625
------------
56,316,411
------------
Drugs & Healthcare--12.5%
52,950 Cardinal Health, Inc.......... 4,017,581
49,800 Eli Lilly & Co................ 4,425,975
27,800 Guidant Corp.................. 3,064,950
62,000 Medtronic, Inc................ 4,603,500
62,600 Merck & Co., Inc.............. 9,245,238
79,600 Pfizer, Inc................... 9,984,825
60,800 Schering-Plough Corp.......... 3,359,200
36,000 Warner-Lambert Co............. 2,706,750
------------
41,408,019
------------
Electronics--12.9%
213,800 Ascend Communications,
Inc.*....................... 14,057,350
20,000 Aspect Telecommunications
Corp.*...................... 345,000
VALUE
SHARES DESCRIPTION (NOTE 1)
106,000 Linear Technology Corp....... $ 9,493,625
200,000 Maxim Integrated Products,
Inc.*...................... 8,737,500
34,700 Motorola, Inc................ 2,118,868
8,300 Perkin-Elmer Corp............ 809,769
110,000 Xilinx Inc.*................. 7,163,750
------------
42,725,862
------------
Financial Services--9.0%
55,400 Associates First Capital
Corp....................... 2,347,575
26,900 Capital One Financial
Corp....................... 3,093,500
55,900 Chase Manhattan Corp......... 3,804,694
145,550 Citigroup, Inc............... 7,204,725
39,000 Donaldson Lufkin & Jenrette,
Inc........................ 1,599,000
45,900 Fannie Mae................... 3,396,600
75,000 Morgan Stanley Dean
Witter*.................... 5,325,000
72,500 Wells Fargo & Co............. 2,895,469
------------
29,666,563
------------
Hotels & Restaurants--1.6%
35,300 McDonald's Corp.............. 2,704,863
50,400 Tricon Global Restaurants,
Inc........................ 2,526,300
------------
5,231,163
------------
Industrial Machinery--3.1%
239,800 Applied Materials, Inc.*..... 10,236,462
------------
Insurance--2.5%
65,250 American International Group,
Inc........................ 6,304,781
24,700 CIGNA Corp................... 1,909,619
------------
8,214,400
------------
Liquor--1.1%
54,900 Anheuser Busch, Inc.......... 3,602,813
------------
Media--1.3%
90,600 Chancellor Media Corp.*...... 4,337,475
------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
9
<PAGE>
THE TARGET PORTFOLIO TRUST
Large Capitalization Growth
Portfolio (cont'd)
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Miscellaneous--3.1%
257,200 Cendant Corp.*................ $ 4,902,875
48,000 Tyco International Ltd........ 3,621,000
36,322 Waste Management, Inc......... 1,693,513
------------
10,217,388
------------
Oil & Gas--1.7%
66,300 Enron Corp.,.................. 3,783,244
26,100 Exxon Corp.................... 1,908,562
------------
5,691,806
------------
Paper--0.5%
41,300 Champion International
Corp........................ 1,672,650
------------
Retail Trade--8.3%
57,600 Costco Companies, Inc.*....... 4,158,000
86,800 CVS Corp...................... 4,774,000
86,300 Home Depot, Inc............... 5,280,481
86,300 Safeway Inc.*................. 5,258,906
69,000 Staples, Inc.*................ 3,014,438
59,700 Wal-Mart Stores, Inc.......... 4,861,819
------------
27,347,644
------------
Semiconductors & Equipment--6.3%
170,000 Atmel Corp.*.................. 2,603,125
153,500 Intel Corp.................... 18,199,344
------------
20,802,469
------------
Software & Services--9.0%
36,200 America Online, Inc........... 5,792,000
166,900 HBO & Co...................... 4,787,944
93,800 Microsoft Corp.*.............. 13,008,887
180,000 Parametric Technology
Corp.*...................... 2,947,500
57,500 Synopsys, Inc.*............... 3,119,375
------------
29,655,706
------------
VALUE
SHARES DESCRIPTION (NOTE 1)
Telecommunication--2.3%
144,000 CIENA Corp.*................. $ 2,106,000
93,500 NEXTEL Communications,
Inc........................ 2,208,937
46,700 Tellabs, Inc.*............... 3,201,869
------------
7,516,806
------------
Tobacco--0.7%
44,400 Philip Morris Co., Inc....... 2,375,400
------------
Total common stocks
(cost $187,130,176)........ 321,988,568
------------
Principal
Amount
(000) SHORT-TERM INVESTMENTS--2.7%
- --------
Repurchase Agreements--2.7%
$7,025... State Street Bank & Trust
Co.,
4.25%, dated 12/31/98, due
01/04/99 in the amount of
$7,028,317 (cost
$7,025,000,
collateralized by
$6,720,000 U.S. Treasury
Notes, 5.75%, 8/15/03,
value of collateral
including accrued interest
is $7,166,248)............. 7,025,000
1,850... State Street Bank & Trust
Co.,
3.25%, dated 12/31/98, due
01/04/99 in the amount of
$1,850,668 (cost
$1,850,000,
collateralized by
$1,670,000 U.S. Treasury
Notes, 7.25%, 5/15/04,
value of collateral
including accrued interest
is $1,887,873)............. 1,850,000
------------
Total short-term investments
(cost $8,875,000).......... 8,875,000
------------
Total Investments--100.3%
(cost $196,005,176; Note
4)......................... 330,863,568
Liabilities in excess of
other
assets--(0.3%)............. (1,060,911)
------------
Net Assets--100%............. $329,802,657
------------
------------
</TABLE>
- ---------------
* Non-income producing.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
10
<PAGE>
Large Capitalization Value
Portfolio
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--98.9%%
Common Stocks--98.9%
Aerospace--3.6%
44,000 Boeing Co..................... $ 1,435,500
51,950 Lockheed Martin Corp.......... 4,402,762
48,800 Northrop Grumman Corp......... 3,568,500
12,900 TRW, Inc...................... 724,819
------------
10,131,581
------------
Agriculture Machinery--0.8%
10,000 Deere & Co.................... 331,250
150,900 New Holland NV................ 2,065,444
------------
2,396,694
------------
Airlines--0.6%
75,000 Southwest Airlines Co......... 1,682,812
------------
Aluminum--1.6%
39,000 Aluminum Company of America... 2,907,938
33,100 Reynolds Metals Co............ 1,743,956
------------
4,651,894
------------
Apparel & Textiles--2.8%
37,500 Intimate Brands, Inc.......... 1,120,312
35,000 Reebok International, Ltd.*... 520,625
114,700 Russell Corp.................. 2,329,844
115,000 Shaw Industries, Inc.......... 2,788,750
55,000 Unifi, Inc.................... 1,075,938
------------
7,835,469
------------
Auto Parts--1.2%
54,900 Dana Corp..................... 2,244,037
39,000 Genuine Parts Co.............. 1,304,063
------------
3,548,100
------------
Automobiles--4.0%
122,000 Ford Motor Co................. 7,159,875
58,000 General Motors Corp........... 4,150,625
------------
11,310,500
------------
VALUE
SHARES DESCRIPTION (NOTE 1)
Banks--7.5%
115,960 Bank One Corp................ $ 5,921,207
46,200 BankAmerica Corp............. 2,777,775
25,000 Chase Manhattan Corp......... 1,701,563
51,700 First Union Corp............. 3,144,006
40,000 Keycorp...................... 1,280,000
45,000 National City Corp........... 3,262,500
35,000 Wachovia Corp................ 3,060,313
------------
21,147,364
------------
Brewery--0.5%
21,100 Anheuser Busch Companies,
Inc........................ 1,384,687
------------
Building & Construction--0.3%
24,000 Harsco Corp.................. 730,500
------------
Building Products--0.9%
45,900 Georgia-Pacific Corp......... 1,092,994
35,000 York International Corp...... 1,428,437
------------
2,521,431
------------
Business Services--0.4%
35,000 First Data Corp.............. 1,109,063
------------
Chemicals--2.5%
42,500 Dow Chemical Co.............. 3,864,844
22,000 Du Pont (E.I.) De Nemours &
Co......................... 1,167,375
27,000 Eastman Chemical Co.......... 1,208,250
25,000 Nalco Chemical Co............ 775,000
------------
7,015,469
------------
Computers & Business Equipment--4.4%
80,000 Compaq Computer Corp......... 3,355,000
36,000 Hewlett-Packard Co........... 2,459,250
14,000 International Business
Machines Corp.............. 2,586,500
30,000 Pitney Bowes, Inc............ 1,981,875
25,000 Sun Microsystems, Inc........ 2,140,625
------------
12,523,250
------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
11
<PAGE>
THE TARGET PORTFOLIO TRUST
Large Capitalization Value
Portfolio (cont'd)
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Conglomerate--2.5%
59,200 Dover Corp.................... $ 2,168,200
38,300 Hanson PLC. (ADR)............. 1,493,700
44,100 Scana Corp.................... 1,422,225
28,000 Textron, Inc.................. 2,126,250
------------
7,210,375
------------
Consumer Products--1.3%
33,400 Eastman Kodak Co.............. 2,404,800
45,000 Fortune Brands, Inc........... 1,423,125
------------
3,827,925
------------
Domestic Oil--1.1%
20,000 Atlantic Richfield Co......... 1,305,000
56,600 USX - Marathon Group.......... 1,705,075
------------
3,010,075
------------
Drugs & Healthcare--7.4%
65,000 Abbott Laboratories........... 3,185,000
66,800 American Home Products
Corp........................ 3,761,675
66,666 Astra AB Class A (ADR)........ 1,379,153
13,000 Baxter International, Inc..... 836,063
28,000 Bristol Myers Squibb Co....... 3,746,750
80,000 Columbia/HCA Healthcare
Corp........................ 1,980,000
15,000 Merck & Co., Inc.............. 2,215,312
55,000 Mylan Laboratories............ 1,732,500
40,000 Schering Plough Corp.......... 2,210,000
------------
21,046,453
------------
Electric Utilities--5.2%
50,000 Central & South West Corp..... 1,371,875
24,000 CMS Energy Corp............... 1,162,500
40,000 DTE Energy Co................. 1,715,000
32,000 Edison International.......... 892,000
27,400 Entergy Corp.................. 852,825
21,000 General Public Utilities
Corp........................ 927,938
40,100 PacifiCorp.................... 844,606
36,000 PECO Energy Co................ 1,498,500
33,835 PP & L Resources, Inc......... 943,151
28,800 Public Service Enterprise
Group, Inc.................. 1,152,000
80,000 Southern Co................... 2,325,000
21,832 Texas Utilities Co............ 1,019,281
------------
14,704,676
------------
VALUE
SHARES DESCRIPTION (NOTE 1)
Electrical Equipment--1.2%
20,000 Emerson Electric Co.......... $ 1,210,000
40,000 Raytheon Co., Class B........ 2,130,000
------------
3,340,000
------------
Electronics--1.3%
25,000 Motorola, Inc................ 1,526,563
45,000 Rockwell International
Corp....................... 2,185,312
------------
3,711,875
------------
Energy--0.7%
74,000 Illinova Corp................ 1,850,000
------------
Financial Services--5.9%
60,050 Associates First Capital
Corp....................... 2,544,619
89,500 Federal National Mortgage
Association................ 6,623,000
48,265 Household International,
Inc........................ 1,912,501
40,000 Morgan Stanley Dean Witter
Discover & Co.............. 2,840,000
15,090 Waddell & Reed Financial,
Inc........................ 352,087
67,032 Washington Mutual, Inc....... 2,559,784
------------
16,831,991
------------
Food & Beverages--2.3%
150,215 Archer-Daniels Midland Co.... 2,581,820
50,000 PepsiCo, Inc................. 2,046,875
90,000 Tyson Foods, Inc. (Class
A)......................... 1,912,500
------------
6,541,195
------------
Forest Products--2.4%
20,700 Georgia-Pacific Corp......... 1,212,244
50,000 Kimberly-Clark Corp.......... 2,725,000
55,000 Weyerhaeuser Co.............. 2,794,687
------------
6,731,931
------------
Gas & Pipeline Utilities--0.4%
27,000 Eastern Enterprises, Inc..... 1,181,250
------------
Household Appliances & Home
Furnishings--1.5%
77,000 Whirlpool Corp............... 4,263,875
------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
12
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Industrial Machinery--0.5%
32,000 Caterpillar, Inc.............. $ 1,472,000
------------
Insurance--9.4%
75,458 American General Corp......... 5,885,724
19,000 Lincoln National Corp......... 1,554,438
15,000 Loews Corp.................... 1,473,750
57,000 Marsh & McLennan Companies,
Inc......................... 3,330,937
55,000 MGIC Investment Corp.......... 2,189,687
89,175 Old Republic International
Corp........................ 2,006,438
103,000 SAFECO Corp................... 4,422,562
31,000 St. Paul Companies, Inc....... 1,077,250
80,200 TIG Holdings, Inc............. 1,248,113
50,000 Torchmark Corp................ 1,765,625
14,000 Transamerica Corp............. 1,617,000
------------
26,571,524
------------
International Oil--4.6%
50,000 Amoco Corp.................... 3,018,750
116,200 Occidental Petroleum Corp..... 1,960,875
75,000 Phillips Petroleum Co......... 3,196,875
50,000 Repsol S.A. (ADR)............. 2,731,250
3,700 Texaco, Inc................... 195,638
65,000 YPF Sociedad Anonima (ADR).... 1,815,937
------------
12,919,325
------------
Mining--1.0%
55,500 Phelps Dodge Corp............. 2,823,562
------------
Miscellaneous--1.1%
82,900 Tenneco, Inc.................. 2,823,782
24,200 Usec, Inc..................... 335,775
------------
3,159,557
------------
Paper--1.3%
41,999 International Paper Co........ 1,882,080
26,000 Union Camp Corp............... 1,755,000
------------
3,637,080
------------
VALUE
SHARES DESCRIPTION (NOTE 1)
Petroleum Services--0.7%
40,000 Norsk Hydro A S.............. $ 1,367,500
25,600 Ultramar Diamond Shamrock.... 620,800
------------
1,988,300
------------
Plastics--0.2%
42,200 Tupperware Corp.............. 693,663
------------
Pollution Control--1.4%
39,961 Browning Ferris Industries,
Inc........................ 1,136,391
58,349 Waste Management, Inc........ 2,720,522
------------
3,856,913
------------
Railroads & Equipment--1.6%
14,000 CSX Corp..................... 581,000
125,000 Norfolk Southern Corp........ 3,960,937
------------
4,541,937
------------
Retail Trade--1.5%
27,200 May Department Stores Co..... 1,642,200
31,800 Penny (J.C.) Co., Inc........ 1,490,625
28,800 Sears, Roebuck & Co.......... 1,224,000
------------
4,356,825
------------
Software--0.5%
35,000 Computer Associates
International, Inc......... 1,491,875
------------
Steel--1.3%
35,000 Nucor Corp................... 1,513,750
100,100 USX-U.S. Steel Group, Inc.... 2,302,300
------------
3,816,050
------------
Telephone--3.3%
49,900 ALLTEL Corp.................. 2,984,644
49,300 AT&T Corp.................... 3,709,825
13,500 GTE Corp..................... 877,500
31,692 SBC Communications, Inc...... 1,699,483
------------
9,271,452
------------
Tires & Rubber--0.5%
65,000 Cooper Tire & Rubber Co...... 1,328,438
------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
13
<PAGE>
THE TARGET PORTFOLIO TRUST
Large Capitalization Value
Portfolio (cont'd)
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Tobacco--3.6%
193,000 Philip Morris Companies,
Inc......................... $ 10,325,500
------------
Toys & Amusements--0.5%
60,000 Mattel, Inc................... 1,368,750
------------
Trucking & Freight Forwarding--0.2%
20,000 Ryder System, Inc............. 520,000
------------
Technology & Services--1.4%
80,000 Electronic Data Systems
Corp........................ 4,020,000
------------
Total common stocks
(cost $200,131,346)......... 280,403,186
------------
SHORT-TERM INVESTMENTS--0.3%
956,726 Seven Seas Series Government
Fund
4.70%**, (cost $956,726).... 956,726
------------
Total Investments--99.2%
(cost $201,088,072; Note 4)... 281,359,912
Other assets in excess of
liabilities--0.8%........... 2,127,723
------------
Net Assets--100%.............. $283,487,635
------------
------------
</TABLE>
- ---------------
* Non-income producing.
** Rate represents yield at purchase date.
ADR--American Depository Receipts.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
14
<PAGE>
Small Capitalization Growth
Portfolio
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--96.5%
Common Stocks--96.5%
Aerospace--0.6%
17,200 Gulfstream Aerospace Corp.... $ 915,900
------------
Airlines--1.0%
12,100 America West Holdings
Corp.*..................... 205,700
43,200 SkyWest, Inc................. 1,412,100
------------
1,617,800
------------
Apparel & Textiles--3.6%
34,600 Jones Apparel Group, Inc.*... 763,363
31,650 Mohawk Industries, Inc.*..... 1,331,278
14,900 Nautica Enterprises, Inc.*... 223,500
55,400 Tarrant Apparel Group........ 2,202,150
34,000 The First Years, Inc......... 537,625
11,900 Tommy Hilfiger Corp.
(The)*..................... 714,000
------------
5,771,916
------------
Auto/Truck Equipment--1.1%
136,400 Aftermarket Technology
Corp*...................... 1,074,150
17,000 Arvin Industries, Inc........ 708,687
------------
1,782,837
------------
Banks--0.4%
24,300 Dime Community Bancshares.... 501,187
8,700 FirstFed Financial Corp.*.... 155,513
------------
656,700
------------
Broadcasting--3.9%
72,494 Clear Channel Communications,
Inc.*...................... 3,950,923
27,900 Echostar Communications
Corp....................... 1,349,662
44,700 Sinclair Broadcast Group,
Inc.*...................... 874,444
------------
6,175,029
------------
Building Products--0.8%
47,700 Service Experts, Inc.*....... 1,395,225
------------
Business Services--12.9%
24,600 ADVO, Inc.................... $ 648,825
107,900 American Management Systems,
Inc.*...................... 4,316,000
61,300 Billing Info Concepts
Corp....................... 674,300
32,900 BISYS Group, Inc. (The)*..... 1,698,462
38,100 Catalina Marketing Corp.*.... 2,605,087
109,800 CCC Information Services
Group, Inc.*............... 1,894,050
20,900 INSpire Insurance Solutions,
Inc.*...................... 384,038
14,000 Kronos, Inc.................. 620,375
53,850 Labor Ready, Inc.*........... 1,060,172
29,700 On Assignment, Inc*.......... 1,024,650
70,000 Quanta Services, Inc.*....... 1,544,375
11,400 Robert Half International,
Inc.*...................... 509,438
31,700 Scientific Games Holdings
Corp.*..................... 598,337
62,500 Telespectrum Worldwide
Inc.*...................... 613,281
40,300 UBICS, Inc.*................. 216,613
73,800 Zebra Technologies Corp.*.... 2,121,750
------------
20,529,753
------------
Chemicals--0.6%
6,300 Minerals Technologies,
Inc........................ 257,906
8,300 Waters Corp.................. 724,175
------------
982,081
------------
Commercial Services--0.3%
19,700 Ogden Corp................... 493,731
------------
Communication Equipment & Services--3.0%
63,200 Centennial Cellular Corp.*... 2,591,200
66,800 Tekelec*..................... 1,106,375
29,700 Xircom, Inc.................. 1,009,800
------------
4,707,375
------------
Computers & Business Equipment--8.6%
228,077 Artesyn Technologies, Inc.... 3,193,078
89,900 Black Box Corp.*............. 3,404,962
57,800 Computer Network
Technology................. 722,500
26,400 Cybex Computer Products
Corp.*..................... 775,500
52,400 InterVoice, Inc.............. 1,807,800
89,800 Mastech Corp.*............... 2,570,525
52,800 Spyglass, Inc................ 1,161,600
------------
13,635,965
------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
15
<PAGE>
THE TARGET PORTFOLIO TRUST
Small Capitalization Growth
Portfolio (cont'd)
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Contruction Materials--0.9%
17,800 Centex Construction Products, $
Inc........................ 723,125
21,000 Granite Construction, Inc.... 704,812
------------
1,427,937
------------
Drugs & Healthcare--6.8%
28,200 Allegiance Corp.............. 1,314,825
21,400 Alpharma Inc................. 755,688
35,767 Cardinal Health, Inc......... 2,713,821
40,500 First Commonwealth, Inc.*.... 536,625
9,500 IMPATH, Inc.*................ 251,750
8,200 Pacificare Health Systems.... 651,900
13,300 Pediatrix Medical Group,
Inc........................ 797,169
38,400 Resmed, Inc.................. 1,742,400
28,000 Roberts Pharmaceutical
Corp....................... 609,000
42,000 Sunquest Information Systems,
Inc.*...................... 593,250
24,200 Trigon Healthcare, Inc....... 902,962
------------
10,869,390
------------
Educational Services--4.3%
134,900 Apollo Group, Inc.*.......... 4,569,737
63,200 Strayer Education, Inc.*..... 2,227,800
------------
6,797,537
------------
Electronics--1.6%
13,600 Anaren Microwave, Inc.*...... 287,300
24,900 Cree Research, Inc.*......... 1,192,087
30,700 DSP Group, Inc.*............. 640,863
25,500 Tollgrade Communications,
Inc........................ 490,875
------------
2,611,125
------------
Energy--0.5%
24,200 Noble Affiliates, Inc........ 595,925
16,900 Nuevo Energy Co.*............ 194,350
------------
790,275
------------
Financial Services--5.8%
36,400 AmeriCredit Corp.*........... 502,775
58,800 CMAC Investment Corp......... 2,701,125
40,600 Eaton Vance Corp............. 847,525
47,000 Enhance Financial Services
Group, Inc................. 1,410,000
VALUE
SHARES DESCRIPTION (NOTE 1)
58,100 Federated Investors, Inc..... $ 1,053,062
54,700 Homegold Financial, Inc...... 27,350
14,000 Metris Companies, Inc........ 704,375
92,200 Right Management Consultants,
Inc.*...................... 1,359,950
85,300 Unicapital Corp.*............ 629,088
------------
9,235,250
------------
Food & Beverages--0.5%
13,800 Canandaigua Brands, Inc.*.... 797,813
------------
Homebuilders--2.2%
32,800 Lennar Corp.................. 828,200
27,700 Pulte Corp................... 770,406
31,100 Ryland Group, Inc.*.......... 898,013
64,575 Watsco, Inc.................. 1,081,631
------------
3,578,250
------------
Home Furnishings--0.5%
8,200 Ethan Allen Interiors,
Inc........................ 336,200
24,000 Stanley Furniture Company,
Inc.*...................... 438,000
------------
774,200
------------
Household Products--0.4%
78,300 WMS Industries, Inc.......... 577,463
------------
Industrial Machinery--1.8%
13,000 Briggs & Stratton Corp....... 648,375
21,800 Manitowoc Co., Inc.(The)..... 967,375
104,800 PPT Vision, Inc*............. 524,000
15,800 York International Corp...... 644,837
------------
2,784,587
------------
Insurance--2.6%
18,400 Amerin Corp.*................ 434,700
26,950 Fidelity National Financial,
Inc........................ 821,975
22,800 First American Financial
Corp....................... 732,450
19,588 MBIA, Inc.................... 1,284,238
4,700 Mutual Risk Management,
Ltd........................ 183,888
12,500 Stewart Information Services
Corp....................... 725,000
------------
4,182,251
------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
16
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Manufacturing--0.9%
34,900 Aptargroup, Inc.............. $ 979,381
93,100 Flanders Corp.*.............. 378,219
------------
1,357,600
------------
Media--2.2%
190,366 Nielsen Media Research,
Inc........................ 3,426,588
------------
Medical & Dental Supplies--7.9%
113,100 Mentor Corp.................. 2,650,781
32,200 Patterson Dental Co.*........ 1,400,700
31,900 Perclose, Inc.*.............. 1,056,688
152,800 Respironics, Inc.*........... 3,060,775
53,600 Safeskin Corp.*.............. 1,293,100
13,200 VISX, Inc.*.................. 1,154,175
61,950 Xomed Surgical Products,
Inc.*...................... 1,982,400
------------
12,598,619
------------
Miscellaneous--0.3%
42,000 JLK Direct Distribution,
Inc........................ 427,875
------------
Office Equipment & Services--1.3%
50,800 Miller (Herman), Inc......... 1,365,250
27,400 United Stationers, Inc.*..... 712,400
------------
2,077,650
------------
Oil Field/Equipment & Services--1.2%
23,900 Gerber Scientific, Inc....... 569,119
80,100 Petroleum Geo-Services ASA
(ADR)*..................... 1,261,575
------------
1,830,694
------------
Pollution Control Equipment &
Services--0.3%
24,800 Superior Services, Inc.*..... 497,550
------------
Printing & Publishing--1.7%
8,300 Banta Corp................... 227,213
48,300 Valassis Communications,
Inc.*...................... 2,493,487
------------
2,720,700
------------
VALUE
SHARES DESCRIPTION (NOTE 1)
Publishing--0.9%
16,000 Houghton Mifflin Co.......... $ 756,000
45,900 Ziff Davis Incorporated*..... 725,794
------------
1,481,794
------------
Restaurants--0.5%
37,000 Foodmaker, Inc*.............. 816,313
------------
Retail Trade--5.7%
10,800 American Eagle Outfitters,
Inc.*...................... 719,550
35,000 Ames Department Stores,
Inc.*...................... 945,000
39,600 Barnett, Inc.*............... 544,500
20,100 Best Buy Co., Inc............ 1,233,637
25,900 Intimate Brands, Inc......... 773,763
53,500 Lithia Motors, Inc.*......... 882,750
53,700 MSC Industrial Direct,
Inc........................ 1,214,962
49,500 Musicland Stores Corp.*...... 739,406
30,100 Ross Stores, Inc............. 1,185,188
42,300 Trans World Entertainment
Corp.*..................... 806,344
------------
9,045,100
------------
Semiconductors & Equipment--0.8%
28,400 Vitesse Semiconductor
Corp.*..................... 1,295,750
------------
Software--4.6%
16,350 Citrix Systems, Inc.*........ 1,586,972
5,000 Henry Jack & Associates,
Inc........................ 248,750
25,700 IMRglobal Corp............... 756,544
39,800 Keane, Inc.*................. 1,589,512
28,800 Siebel Systems Inc.*......... 977,400
30,300 The Learning Company,
Inc.*...................... 785,906
43,600 Timberline Software Corp..... 599,500
15,000 Transaction Systems
Architects, Inc.*.......... 750,000
------------
7,294,584
------------
Telecommunication--0.6%
23,600 International Telecomm.
Systems, Inc.*............. 348,100
30,300 Skytel Communications,
Inc.*...................... 670,388
------------
1,018,488
------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
17
<PAGE>
THE TARGET PORTFOLIO TRUST
Small Capitalization Growth
Portfolio (cont'd)
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Transportation--2.4%
84,300 Coach USA, Inc.*............. $ 2,924,156
23,300 Navistar International
Corp.*..................... 664,050
4,500 XTRA Corp.................... 186,188
------------
3,774,394
------------
Trucking & Freight--0.5%
16,200 Hertz Corp................... 739,125
------------
Total common stocks
(cost $118,802,226)........ 153,493,214
------------
SHORT-TERM INVESTMENTS--4.4%
Other--2.2%
456,000 Seven Seas Money Market Fund
4.89%**.................... 455,817
3,073,000 Seven Seas Series Government
Fund
4.69%**.................... 3,072,950
------------
Total other
(cost $3,528,767).......... 3,528,767
------------
Principal
Amount
(000) Commercial Paper--2.2%
- ----------
$ 3,507 Northern States Power. Co.,
5.05%, 1/4/99
(cost $3,505,524).......... 3,505,524
------------
Total short-term investments
(cost $7,034,291).......... 7,034,291
------------
Total Investments--100.9%
(cost $125,836,517; Note
4)......................... 160,527,505
Liabilities in excess of
other
assets--(0.9%)............. (1,545,069)
------------
Net Assets--100%............. $158,982,436
------------
------------
</TABLE>
- ------------------
* Non-income producing security.
** Rate represents yield at purchase date.
ADR--American Depository Receipt.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
18
<PAGE>
Small Capitalization Value
Portfolio
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--98.4%
Common Stocks--98.4%
Aerospace--0.1%
7,000 Aeroquip-Vickers, Inc......... $ 209,562
------------
Apparel & Textiles--1.6%
137 Albany International Corp.,
Cl. A....................... 2,595
57,100 Culp, Inc..................... 449,662
48,200 Oakley, Inc.*................. 454,887
51,000 Stride Rite Corp.............. 446,250
15,000 Unifi, Inc.................... 293,438
20,100 Unitog Co..................... 577,875
------------
2,224,707
------------
Auto Related--3.0%
21,800 Borg-Warner Automotive,
Inc......................... 1,216,712
35,600 Budget Group, Inc.*........... 565,150
29,800 Modine Manufacturing Co....... 1,080,250
49,648 Myers Industries, Inc......... 1,421,174
------------
4,283,286
------------
Automobiles--1.2%
13,100 Dura Automotive Systems,
Inc.*....................... 447,037
49,700 Tower Automotive, Inc.*....... 1,239,394
------------
1,686,431
------------
Banks--4.9%
16,100 Bank United Corp.............. 631,925
17,000 First American Corp........... 754,375
37,000 Firstmerit Corp............... 994,375
29,213 HUBCO, Inc.................... 880,042
45,000 Independent Bank Corp. -
Mass........................ 781,875
35,750 People's Bank................. 987,594
22,000 Southwest Bancorporation of 393,250
Texas, Inc.*................
10,700 Staten Islands Bancorp,
Inc......................... 213,331
VALUE
SHARES DESCRIPTION (NOTE 1)
35,550 Susquehanna Bancshares,
Inc........................ $ 727,664
42,400 The Colonial BancGroup,
Inc........................ 508,800
------------
6,873,231
------------
Broadcasting--0.5%
11,900 NTL, Inc..................... 671,606
------------
Building & Construction--3.3%
47,300 Apogee Enterprises, Inc...... 532,125
33,000 Carlisle Co., Inc............ 1,703,625
18,900 Hughes Supply, Inc........... 552,825
21,800 Jacobs Engineering Group,
Inc.*...................... 888,350
16,500 Martin Marietta Materials,
Inc........................ 1,026,094
------------
4,703,019
------------
Business Services--0.9%
70,600 Bowne & Co., Inc............. 1,261,975
------------
Chemicals--4.1%
36,600 Cambrex Corp................. 878,400
28,250 Ferro Corp................... 734,500
10,500 Fuller (H.B.) Co............. 505,313
33,050 Learonal, Inc................ 1,119,569
64,600 M.A. Hanna Co................ 795,387
57,662 RPM, Inc..................... 922,592
37,400 Schulman (A.), Inc........... 848,512
------------
5,804,273
------------
Communication--0.9%
72,200 Allen Telecom, Inc.*......... 482,837
32,700 Vanguard Cellular System,
Inc.*...................... 844,069
------------
1,326,906
------------
Computers & Business Equipment--1.5%
54,600 MTS Systems Corp............. 737,100
61,500 Planar Systems, Inc.*........ 418,969
32,800 Wang Laboratories, Inc.*..... 910,200
------------
2,066,269
------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
19
<PAGE>
THE TARGET PORTFOLIO TRUST
Small Capitalization Value
Portfolio (cont'd)
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Construction & Mining Equipment--0.6%
50,700 JLG Industries, Inc........... $ 792,188
------------
Contruction Materials--0.3%
13,200 Lone Star Industries, Inc..... 485,925
------------
Diversified Industrials--2.8%
35,500 Applied Power, Inc............ 1,340,125
25,200 Brady (W.H.) Co............... 678,825
41,400 Teleflex, Inc................. 1,888,875
------------
3,907,825
------------
Drugs & Healthcare--5.2%
7,900 ADAC Laboratories*............ 157,753
53,300 Apria Healthcare Group,
Inc.*....................... 476,369
25,500 Arrow International, Inc...... 800,062
15,800 Beckman Coulter, Inc.......... 857,150
21,700 Integrated Health Services,
Inc......................... 306,512
35,000 Invacare Corp................. 840,000
103,100 Perrigo Co.*.................. 908,569
45,100 Sun Healthcare Group, Inc.*... 295,969
49,500 Sunrise Medical, Inc.*........ 615,656
21,100 Vital Signs, Inc.............. 369,250
50,500 West Co., Inc................. 1,802,219
------------
7,429,509
------------
Electric Utilities--1.2%
31,200 Calpine Corp.*................ 787,800
23,000 Sierra Pacific Resources...... 874,000
------------
1,661,800
------------
Electrical Equipment--3.1%
64,100 Anixter International,
Inc.*....................... 1,302,031
27,900 Belden, Inc................... 591,131
20,800 Oak Industries, Inc.*......... 728,000
34,200 Technitrol, Inc............... 1,090,125
51,500 Woodhead Industries, Inc...... 669,500
------------
4,380,787
------------
Electronics--7.9%
29,800 Bell & Howell Co.*............ 1,126,812
39,800 Credence Systems Corp.*....... 736,300
VALUE
SHARES DESCRIPTION (NOTE 1)
27,700 Dallas Semiconductor Corp.... $ 1,128,775
12,950 Dynatech Corp.*.............. 35,613
18,000 Electro Scientific
Industries, Inc.*.......... 815,625
22,400 Electronics for Imaging,
Inc.*...................... 900,200
42,400 Esterline Technologies
Corp.*..................... 922,200
20,100 Harman International
Industries, Inc............ 766,313
66,400 Kemet Corp.*................. 747,000
21,700 Lam Research Corp.*.......... 386,531
17,400 Lattice Semiconductor
Corp.*..................... 798,769
56,050 Methode Eletronics, Inc...... 875,781
16,950 Nichols Research Corp.*...... 353,831
87,800 Pioneer Standard Electronics,
Inc........................ 823,125
67,200 VLSI Technology, Inc.*....... 735,000
------------
11,151,875
------------
Food - Service/Lodging--1.5%
31,700 Luby's Cafeterias, Inc....... 489,369
64,000 Marcus Corp.................. 1,040,000
23,400 Sbarro, Inc.................. 612,787
------------
2,142,156
------------
Foods--3.2%
24,800 American Italian Pasta
Co.*....................... 654,100
3,800 Aurora Foods, Inc.*.......... 75,287
7,200 International Multifoods
Corp....................... 185,850
24,150 Lancaster Colony Corp........ 775,819
16,100 Lance, Inc................... 320,994
17,500 Ralcorp Holdings, Inc.*...... 319,375
53,200 Universal Foods Corp......... 1,459,675
32,500 Vlasic Foods International,
Inc.*...................... 773,906
------------
4,565,006
------------
Gas & Pipeline Utilities--1.8%
17,200 KN Energy, Inc............... 625,650
21,600 National Fuel Gas Co......... 976,050
45,100 Wicor, Inc................... 983,744
------------
2,585,444
------------
Homebuilders--1.3%
12,400 Kaufman & Broad Home Corp.... 356,500
35,400 Toll Brothers, Inc.*......... 798,712
47,900 Walter Industries, Inc.*..... 733,469
------------
1,888,681
------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
20
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Hospital Supplies & Services--1.6%
47,100 Magellan Health Services,
Inc.*....................... $ 394,462
88,650 Sierra Health Services,
Inc.*....................... 1,867,191
------------
2,261,653
------------
Hotels & Restaurants--1.2%
53,400 Lone Star Steakhouse & Saloon,
Inc.*....................... 490,613
42,900 Prime Hospitality Corp.*...... 453,131
60,400 Ryan's Family Steak Houses,
Inc.*....................... 747,450
------------
1,691,194
------------
Household Appliances & Home
Furnishings--2.2%
24,000 Bassett Furniture Industries,
Inc......................... 579,000
40,900 Chromcraft Revington, Inc.*... 677,406
44,700 Furniture Brands
International, Inc.*........ 1,218,075
22,100 Libbey, Inc................... 639,519
------------
3,114,000
------------
Industrial & Machinery--8.1%
21,100 Briggs & Stratton Corp........ 1,052,362
39,225 Crane Co...................... 1,184,105
41,500 First Brands Corp............. 1,636,656
29,300 Graco, Inc.................... 864,350
12,000 Hussmann International,
Inc......................... 232,500
41,600 MagneTek, Inc.*............... 481,000
63,809 Mark IV Industries, Inc....... 829,517
22,500 OmniQuip International,
Inc......................... 337,500
32,700 Polaris Industries, Inc....... 1,281,431
50,200 Regal-Beloit Corp............. 1,154,600
36,900 Scotsman Industries, Inc...... 758,756
26,400 Standex International Corp.... 693,000
39,900 Watts Industries, Inc., Cl.
A........................... 663,338
27,800 Wyman-Gordon Co.*............. 284,950
------------
11,454,065
------------
Insurance--8.2%
46,300 Amerin Corp.*................. 1,093,837
12,900 Arthur J. Gallagher & Co...... 569,213
19,200 Blanch (E.W.) Holdings,
Inc......................... 910,800
7,628 Delphi Financial Group, Inc.,
Cl. A*...................... 399,993
31,200 Enhance Financial Services
Group, Inc.................. 936,000
VALUE
SHARES DESCRIPTION (NOTE 1)
7,600 Executive Risk, Inc.......... $ 417,525
31,490 Frontier Insurance Group,
Inc........................ 405,434
34,700 HCC Insurance Holdings,
Inc........................ 611,587
65,100 Horace Mann Educators
Corp....................... 1,855,350
37,700 NAC Re Corp.................. 1,769,544
3,400 Orion Capital Corp........... 135,363
25,000 Poe & Brown, Inc............. 873,437
33,200 Protective Life Corp......... 1,321,775
27,000 Reliance Group Holdings,
Inc........................ 347,625
------------
11,647,483
------------
Leisure And Recreation--0.0%
200 K2, Inc...................... 2,063
------------
Manufacturing--2.6%
31,800 ACX Technologies, Inc.*...... 421,350
30,625 Clarcor, Inc................. 612,500
40,000 Flowserve Corp............... 662,500
58,600 Lydall, Inc.*................ 695,875
20,350 Osmonics, Inc.*.............. 171,703
29,000 Roper Industries, Inc........ 590,875
36,500 Silicon Valley Group,
Inc.*...................... 465,375
------------
3,620,178
------------
Miscellaneous--1.4%
36,800 Aptargroup, Inc.............. 1,032,700
36,365 Nielsen Media Research,
Inc........................ 654,570
45,900 Unisource Worldwide, Inc..... 332,775
------------
2,020,045
------------
Office Equipment--0.4%
23,800 Hon Industries, Inc.......... 569,713
------------
Oil & Gas--1.6%
22,700 Devon Energy Corp............ 696,606
81,200 Helmerich & Payne, Inc....... 1,573,250
------------
2,269,856
------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
21
<PAGE>
THE TARGET PORTFOLIO TRUST
Small Capitalization Value
Portfolio (cont'd)
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Oil & Gas - Production/Pipeline--1.1%
31,900 Barrett Resources Corp.*...... $ 765,600
48,000 Snyder Oil Corp............... 639,000
23,900 Tuboscope, Inc.*.............. 194,188
------------
1,598,788
------------
Oil-Supplies & Construction--0.4%
50,000 Newpark Resources, Inc.*...... 340,625
12,700 Tidewater, Inc................ 294,481
------------
635,106
------------
Paper & Related Products--0.9%
5,200 Chesapeake Corp............... 191,750
62,200 Wausau Paper Co............... 1,100,163
------------
1,291,913
------------
Petroleum Services--0.6%
56,300 Varco International, Inc...... 436,325
43,000 Vintage Petroleum, Inc........ 370,875
------------
807,200
------------
Printing & Publishing--3.6%
36,350 American Business Products,
Inc......................... 854,225
82,450 Banta Corp.................... 2,257,069
28,800 Gibson Greetings, Inc.*....... 342,000
36,400 Lee Enterprises, Inc.......... 1,146,600
17,900 World Color Press, Inc.*...... 544,831
------------
5,144,725
------------
Professional Services--1.4%
35,900 CDI Corp.*.................... 724,731
29,000 HSB Group, Inc................ 1,190,813
------------
1,915,544
------------
Railroads & Equipment--0.2%
20,000 ABC Rail Products Corp.*...... 243,750
------------
Real Estate Investment Trust--3.1%
39,700 Catellus Development Corp.*... 568,206
17,500 Chateau Communities, Inc...... 512,969
30,000 Felcor Lodging Trust, Inc..... 691,875
33,700 Glenborough Realty Trust,
Inc......................... 686,637
4,800 JDN Realty Corp............... 103,500
22,200 Kilroy Realty Corp............ 510,600
VALUE
SHARES DESCRIPTION (NOTE 1)
28,600 Liberty Property Trust....... $ 704,275
18,100 Mack California Realty
Corp....................... 558,838
------------
4,336,900
------------
Retail - Apparel--1.3%
27,300 Lands End, Inc............... 735,394
19,400 Talbots, Inc................. 608,675
16,800 Wet Seal, Inc., Cl. A*....... 507,150
------------
1,851,219
------------
Retail - Food & Drugs--1.4%
34,300 General Nutrition Co.*....... 557,375
59,100 Ruddick Corp................. 1,359,300
------------
1,916,675
------------
Retail Trade--1.1%
21,900 Cole National Corp.*......... 375,038
22,700 Eagle Hardware & Garden,
Inc.*...................... 737,750
43,600 Pier 1 Imports, Inc.......... 422,375
------------
1,535,163
------------
Savings And Loan--2.1%
22,425 Astoria Financial Corp....... 1,025,944
65,211 Sovereign Bancorp, Inc....... 929,257
37,000 Webster Financial Corp....... 1,015,187
------------
2,970,388
------------
Toys & Amusements--0.5%
31,600 Russ Berrie & Co., Inc....... 742,600
------------
Trucking & Freight Forwarding--2.5%
32,200 Circle International Group,
Inc........................ 660,100
17,500 CNF Transportation, Inc...... 657,344
37,600 Pittston BAX Group........... 418,300
24,500 Pittston Brinks Group........ 780,938
57,000 Werner Enterprises, Inc...... 1,008,187
------------
3,524,869
------------
Total common stocks
(cost $123,035,577)........ 139,267,551
------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
22
<PAGE>
<TABLE>
<CAPTION>
VALUE
UNITS DESCRIPTION (NOTE 1)
<C> <S> <C>
Warrant*--0.0%
33,910 Wilshire Technologies, Inc.
expiring Nov. 28, 2002
(cost $0)................... $ 10,614
------------
Total long-term investments
(cost $123,035,577)......... 139,278,165
------------
SHORT-TERM INVESTMENTS--2.0%
Other--0.8%
1,215,896 Seven Seas Money Market Fund
4.89%**
(cost $1,215,896)............. 1,215,896
------------
<CAPTION>
Principal
Amount
(000) U.S. Government Securities--1.2%
- --------
<C> <S> <C>
United States Treasury Bills,
$ 50 3.87%, 4/8/99................. 49,417
30 3.99%, 4/8/99................. 29,650
55 4.10%, 4/8/99................. 54,358
260 4.18%, 4/8/99................. 256,963
185 4.28%, 4/8/99................. 182,838
15 4.31%, 4/8/99................. 14,825
335 4.33%, 4/8/99................. 331,082
195 4.35%, 4/8/99................. 192,720
55 4.36%, 4/8/99................. 54,357
380 4.38%, 4/8/99................. 375,555
115 4.46%, 4/8/99................. 113,654
------------
Total U.S. government
securities
(cost $1,655,605)........... 1,655,419
------------
Total short-term investments
(cost $2,871,501)........... 2,871,315
------------
Total Investments--100.4%
(cost $125,907,078; Note 4)... 142,149,480
Liabilities in excess of other
assets--(0.4%).............. (592,230)
------------
Net Assets--100%.............. $141,557,250
------------
------------
</TABLE>
- ---------------
* Non-income producing security.
** Rate represents yield at purchase date.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
23
<PAGE>
THE TARGET PORTFOLIO TRUST
International Equity Portfolio
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
US$
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--98.4%
Common Stocks--98.4%
Australia--2.2%
414,622 Broken Hill Proprietary Co.,
Ltd......................... $ 3,053,705
360,500 Westpac Banking Corp.......... 2,412,317
------------
5,466,022
------------
Denmark--1.3%
34,600 Unidanmark Series A........... 3,126,031
------------
Finland--1.2%
222,600 Merita, Ltd., Series A........ 1,405,711
50,280 UPM Kymmene OYJ*.............. 1,400,227
------------
2,805,938
------------
France--15.8%
27,830 Alcatel Alsthom (Cie
Generale)................... 3,404,707
31,170 Axa-UAP....................... 4,515,775
54,860 Banque Nationale de Paris..... 4,515,574
25,180 Cie De Saint Gobain........... 3,553,393
44,100 Compagnie Generale des
Etablissements Michelin,
Series B.................... 1,762,896
29,420 Cie Generale des Eaux......... 7,629,941
35,600 Elf Aquitaine S.A............. 4,113,325
102,477 Rhone-Poulenc SA, Series A.... 5,271,398
18,200 Suez Lyonnaise des Eaux....... 3,737,006
------------
38,504,015
------------
Germany--10.5%
9,212 Allianz A.G................... 3,377,254
36,783 DaimlerChrysler A.G.*......... 3,630,628
112,300 Hoechst A.G................... 4,656,144
75,680 Metro A.G..................... 6,039,506
57,000 Siemens A.G................... 3,676,647
9,360 Thyssen A.G................... 1,735,975
US$
VALUE
SHARES DESCRIPTION (NOTE 1)
4,395 Viag A.G.................... $ 2,576,452
-----------
25,692,606
-----------
Hong Kong--0.9%
90,935 HSBC Holdings PLC........... 2,265,276
-----------
Italy--6.1%
558,300 Eni SpA..................... 3,646,702
319,300 Instituto Bancario San Paolo
di Torino SpA............. 5,638,852
877,800 Telecom Italia SpA.......... 5,521,256
-----------
14,806,810
-----------
Japan--14.6%
203,000 Asahi Breweries, Ltd........ 2,989,783
421 Japan Tobacco, Inc.......... 4,208,138
167,000 Matsushita Electric
Industrial Co., Ltd....... 2,952,968
29,700 Nintendo Co., Ltd........... 2,876,736
260 Nippon Telegraph & Telephone
Corp...................... 2,005,484
411,000 Nissan Motor Co., Ltd....... 1,257,904
88 NTT Mobile Communication
Network, Inc.............. 3,619,637
98,000 Omron Corp.................. 1,341,920
53,100 Orix Corp................... 3,964,299
47,840 Promise Co., Ltd............ 2,488,273
370,000 Ricoh Corp., Ltd............ 3,410,349
41,900 Sony Corp................... 3,050,305
587,000 Sumitomo Trust & Banking
Co., Ltd.................. 1,557,718
-----------
35,723,514
-----------
Malaysia--0.3%
408,300 Genting Berhad.............. 620,345
-----------
Netherlands--3.7%
77,500 Heineken N.V................ 4,661,468
20,300 ING Groep N.V............... 1,237,212
45,450 Philips Electronics N.V..... 3,048,225
-----------
8,946,905
-----------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
24
<PAGE>
<TABLE>
<CAPTION>
US$
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Singapore--0.9%
342,000 United Overseas Bank, Ltd..... $ 2,195,760
------------
Spain--5.9%
184,400 Argentaria, Caja Postal y
Banco
Hipotecario de Espana,
S.A......................... 4,768,294
129,600 Endesa S.A.................... 3,428,764
142,545 Telefonica de Espana S.A...... 6,328,870
------------
14,525,928
------------
Sweden--7.2%
240,300 ABB AB, Series A.............. 2,558,334
224,833 Astra AB, Series B............ 4,565,952
194,100 Electrolux AB, Series B....... 3,332,630
205,900 Nordbanken Holding AB......... 1,317,792
90,600 Svenska Handelsbanken, Series
A........................... 3,813,657
87,000 Volvo AB, Series B............ 1,991,680
------------
17,580,045
------------
Switzerland--6.2%
1,286 Nestle S.A.................... 2,799,112
248 Roche Holdings A.G............ 3,025,755
1,730 The Swatch Group A.G. Series
B........................... 1,070,467
1,416 Societe Generale de
Surveillance
Holding S.A................. 1,386,416
9,420 Zurich
Versicherungs-Gesellschaft... 6,973,968
------------
15,255,718
------------
United Kingdom--21.6%
162,000 Allied Zurich PLC............. 2,434,441
734,428 British Aerospace PLC......... 6,259,538
394,400 British America Tobacco
Industries PLC.............. 3,472,869
287,500 British Petroleum Co. PLC..... 4,279,781
102,406 Cadbury Schweppes PLC......... 1,752,420
336,999 Diageo PLC.................... 3,737,279
206,740 EMI Group PLC................. 1,384,220
US$
VALUE
SHARES DESCRIPTION (NOTE 1)
220,700 Granada Group PLC........... $ 3,868,392
248,900 Great Universal Stores
PLC....................... 2,625,876
310,438 Imperial Chemical Industries
PLC....................... 2,689,706
448,000 Mirror Group PLC............ 1,118,325
244,000 National Westminster Bank
PLC....................... 4,722,712
295,739 Prudential Corp. PLC........ 4,511,359
453,600 Royal & Sun Alliance
Insurance Group PLC....... 3,692,707
819,800 Siebe PLC................... 3,221,178
272,200 Unilever PLC................ 3,061,628
-----------
52,832,431
-----------
Total long-term investments
(cost $191,248,598)....... $240,347,344
-----------
SHORT-TERM INVESTMENTS--1.7%
Rights Rights*--0.1%
- ----------
143 Telefonica S.A.
expiring 1/30/99
(cost $0)................. 126,377
-----------
Principal
Amount
(000) U.S. Government Securities--1.6%
- ----------
$ 4,035 United States Treasury
Bills,
Zero Coupon, 4/8/99
(cost $3,987,947)......... 3,988,196
-----------
Total short-term investments
(cost $3,987,947)......... 4,114,573
-----------
Total Investments--100.1%
(cost $195,236,545; Note
4)........................ 244,461,917
Liabilities in excess of
other
assets--(0.1%)............ (171,107)
-----------
Net Assets--100%............ $244,290,810
-----------
-----------
</TABLE>
- ------------------
* Non-income producing securities.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
25
<PAGE>
THE TARGET PORTFOLIO TRUST
International Equity Portfolio
(cont'd)
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
The industry classification of portfolio holdings and other
net assets shown as
a percentage of net assets as of December 31, 1998 was as
follows:
<S> <C>
Banking.......................................... 13.1%
Insurance........................................ 10.4
Telecommunications............................... 7.2
Food & Beverage.................................. 5.4
Manufacturing.................................... 4.9
Retail........................................... 4.6
Energy........................................... 4.5
Chemicals........................................ 3.3
Utilities........................................ 3.1
Automobiles...................................... 2.8
Aerospace/Defense................................ 2.6
Consumer Durable Goods........................... 2.6
Electrical Equipment............................. 2.5
Conglomerates.................................... 2.3
Steel - Producers................................ 1.9
Plantations...................................... 1.9
Intergrated Oil.................................. 1.8
Tobacco.......................................... 1.7
U.S Government Securities........................ 1.6
Leasing.......................................... 1.6
Diversified Industries........................... 1.6
Technology....................................... 1.6
Oil & Gas Services............................... 1.5
Industrials...................................... 1.5
Financial Services............................... 1.5
Office Equipment & Supplies...................... 1.4
Natural Resources Sector......................... 1.3
Software......................................... 1.2
Pharmaceuticals.................................. 1.2
Electronics...................................... 1.2
Consumer Goods................................... 1.1
Engineering & Equipment.......................... 1.0
Miscellaneous.................................... 4.2
-----
100.1
Liabilities in excess of other assets............ (0.1)
-----
100.0%
-----
-----
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
26
<PAGE>
International Bond Portfolio
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL US$
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--88.2%
Australia--8.3%
Commonwealth of Australia,
A$ 500 7.00%, 4/15/00.............. $ 315,277
KFW Int'l. Finance,
1,400 7.25%, 7/16/07.............. 950,119
New South Wales Treasury
Corp.,
2,000 8.00%, 12/1/01.............. 1,327,287
-----------
2,592,683
-----------
Canada--12.4%
Canadian Gov't. Bonds,
C$ 1,300 7.50%, 12/1/03.............. 949,591
1,000 8.75%, 12/1/05.............. 801,832
500 10.25%, 3/15/14............. 505,365
Deutsche Fin(Neth),
1,500 7.00%, 1/7/04............... 1,053,974
Province of Ontario,
750 8.00%, 3/11/03.............. 545,633
-----------
3,856,395
-----------
Germany--20.4%
Austrian Gov't. Bonds,
DM 1,000 7.25%, 5/3/07............... 726,029
Finland Gov't. Bonds,
2,000 5.50%, 2/9/01............... 1,226,449
German Gov't. Bonds,
600 6.00%, 1/5/06............... 408,436
1,000 6.00%, 7/4/07............... 689,728
1,000 6.25%, 1/4/24............... 728,729
Halifax PLC,
2,000 5.625%, 7/23/07............. 1,308,637
Nordic Invest. Bank,
2,000 4.875%, 3/1/01.............. 1,235,331
-----------
6,323,339
-----------
Netherlands--10.2%
Dutch Gov't. Bonds,
NLG 4,000 8.25%, 9/15/07.............. 2,785,969
500 7.50%, 1/15/23.............. 370,868
-----------
3,156,837
-----------
PRINCIPAL US$
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
New Zealand--11.2%
Int'l. Bank Recon. & Dev.,
NZ$ 2,500 7.25%, 5/27/03.............. $ 1,377,651
750 5.375%, 11/6/03............. 386,760
New Zealand Gov't. Bonds,
1,250 8.00%, 11/15/06............. 762,997
1,600 7.00%, 7/15/09.............. 942,539
-----------
3,469,947
-----------
Sweden--14.5%
Eksportfinans A/S,
SEK 7,000 6.875%, 2/9/04.............. 954,177
Kingdom of Sweden,
6,000 9.00%, 4/20/09.............. 1,030,918
Swedish Export Credit,
6,000 6.50%, 6/5/01............... 779,096
Swedish Gov't. Bonds,
6,000 6.00%, 2/9/05............... 819,786
Toyota Motor Credit,
7,000 7.50%, 8/6/01............... 927,038
-----------
4,511,015
-----------
Switzerland--3.1%
Swiss Gov't. Bonds,
CHF 600 4.50%, 7/8/02............... 476,523
600 4.50%, 10/7/04.............. 494,692
-----------
971,215
-----------
United States--8.1%
U. S. Treasury Notes,
US$ 922 3.625%, 7/15/02............. 914,626
1,035 3.375%, 1/15/07............. 1,000,428
609 3.625%, 1/15/08............. 597,428
-----------
2,512,482
-----------
Total long-term investments
(cost US$27,058,702)...... 27,393,913
-----------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
27
<PAGE>
THE TARGET PORTFOLIO TRUST
International Bond Portfolio
(cont'd)
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL US$
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
SHORT-TERM INVESTMENTS--9.5%
Australia--5.0%
Commonwealth of Australia,
A$ 1,700 6.25%, 3/15/99.............. $ 1,044,856
Queensland Treasury Corp.,
800 8.00%, 7/14/99.............. 498,560
-----------
1,543,416
-----------
Canada--2.6%
Canadian Gov't. Bonds,
C$ 1,250 4.75%, 9/15/99.............. 817,141
-----------
United States--1.9%
US$ 586 State Street Bank & Trust
Co.,
2.00%, dated 12/31/98, due
1/4/99 in the amount of
$586,130 (cost $586,000;
collateralized by $435,000
U.S. Treasury Bonds,
8.125%, 8/15/21,
approximate value of
collateral including ac-
crued interest is
$599,960)................. 586,000
-----------
Total short-term Investments
(cost US$2,955,363)....... 2,946,557
-----------
Total Investments--97.7%
(cost US$30,014,065; Note
4)........................ 30,340,470
Other assets in excess of
liabilities--2.3%......... 701,451
-----------
Net Assets--100%............ $31,041,921
-----------
-----------
</TABLE>
- ------------------
Portfolio securities are classified according to the
securities currency
denomination.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
28
<PAGE>
Total Return Bond Portfolio
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
<S> <C> <C> <C>
LONG-TERM
INVESTMENTS--88.7%
Corporate Bonds--27.4%
Airlines--2.9%
Continental Airlines,
Inc.,
Ba2 $ 600 9.50%, 12/15/01......... $
630,000
United Airlines, Inc.,
Baa1 1,000 10.85%, 2/19/15.........
1,309,170
-----------
- -
1,939,170
-----------
- -
Banking--5.8%
Asian Development Bank
AAAPoundPound 900 5.82%, 6/16/28..........
928,990
Gs Escrow Corporation
Ba1 1,300 6.75%, 8/1/01...........
1,282,057
Kansallis Osake Pankki,
(Finland),
A3 500 8.65%, 12/29/49.........
507,640
MBNA Bank, Inc.,
Baa1 100 DD 5.58%, 8/7/01...........
97,590
Baa1 1,100 6.06%, 12/10/02.........
1,094,417
-----------
- -
3,910,694
-----------
- -
Cable--1.2%
Tele-Communications,
Inc.,
Baa3 700 DD 5.81%, 3/12/01..........
692,275
Baa3 100 DD 5.99%, 2/2/00...........
99,559
-----------
- -
791,834
-----------
- -
Consumer Goods--1.8%
Westpoint Stevens, Inc.,
Ba3 1,200 7.88%, 6/15/05..........
1,218,000
-----------
- -
Energy--1.6%
Williams Cos., Inc.,
BBB-PoundPound 1,100 5.50%, 1/30/00..........
1,099,054
-----------
- -
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
Financial Services--6.8%
Goldman Sachs Group,
L.P.
A1 $ 1,000 5.87%, 1/25/01.......... $
997,750
Lehman Brothers
Holdings, Inc.,
Baa1 1,000DD 6.06%, 1/14/00..........
997,480
Baa1 1,100DD 6.21%, 9/3/02...........
1,101,660
Money Store Trust, Inc.,
Aaa 1,200 6.21%, 3/15/12..........
1,201,974
PaineWebber Group, Inc.,
Baa1 250 6.75%, 2/1/06...........
253,193
-----------
- -
4,552,057
-----------
- -
Health Care--0.6%
Columbia/HCA Healthcare
Corp.,
Ba2 450 6.88%, 7/15/01..........
446,598
-----------
- -
Railroad--1.8%
Union Pacific Railroad
Co.
NR 1,200 5.95%, 5/22/00..........
1,199,250
-----------
- -
Tobacco--1.5%
RJR Nabisco, Inc.,
Baa3 1,000 8.00%, 7/15/01..........
1,002,520
-----------
- -
Utilities--3.4%
California Energy Co.,
Inc.,
Ba1 1,100 9.88%, 6/30/03..........
1,231,824
Niagara Mohawk Power
Corp.,
Ba3 1,000 6.88%, 3/1/01...........
1,023,810
-----------
- -
2,255,634
-----------
- -
Total corporate bonds
(cost $18,244,246)....
18,414,811
-----------
- -
U.S. Government Agency Mortgage
Backed Securities--33.9%
Federal Home Loan
Mortgage Corp.,
6.00%, 5/15/28 -
5,337 7/1/28................
5,135,388
6.50%, 9/15/18 -
1,208 12/15/21..............
127,638
7.50%, 9/1/16 -
6,435 10/1/27...............
6,622,263
752 7.80%, 1/1/24...........
772,763
18 9.25%, 1/1/10...........
18,828
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
29
<PAGE>
THE TARGET PORTFOLIO TRUST
Total Return Bond Portfolio
(cont'd)
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
<S> <C> <C> <C>
U.S. Government Agency Mortgage
Backed Securities (cont'd.)
Federal National
Mortgage Assn.,
$ 1,102 6.143%, 5/1/36.......... $
1,108,132
712 6.64%, 3/1/26...........
721,390
1,480 7.08%, 1/1/20...........
1,509,148
Government National
Mortgage Assn.,
1,380 6.50%, 7/20/27..........
1,397,617
6.88%, 2/20/17 -
2,204 2/20/26...............
2,236,052
7.00%, 7/20/22 -
1,459 9/20/25...............
1,480,369
379 7.38%, 6/20/23..........
385,244
7.50%, 8/15/25 -
1,009 1/15/28...............
1,039,854
Resolution Trust Corp.,
160 9.25%, 6/25/23..........
159,732
-----------
- -
Total U.S. Government
agency
mortgage backed
securities
(cost $22,592,582)....
22,714,418
-----------
- -
Collateralized Mortgage
Obligations--7.9%
American Housing Trust
1,
Senior Mortgage Pass
Through Certificate,
Series 1-5 Class A,
Aaa 16 8.63%, 8/25/18..........
16,687
Champion Home Loan
Equity, Series 1995,
Class A2-3,
Aaa 611 8.57%, 2/25/28..........
618,755
Countrywide
Collateralized
Mortgage Obligation,
Aa1 112 8.14%, 11/25/24.........
114,423
GMAC Commercial Mortgage
Security, Inc.,
Aa2 677 6.81%, 4/15/08..........
706,155
Baa2 500 7.15%, 3/15/11..........
494,177
Headlands Mortgage
Security Inc.,
Mortgage Certificate,
Series 1998-2, Class
A1,
AAAPoundPound 3,345 6.75%, 12/25/28.........
3,344,948
-----------
- -
Total collateralized
mortgage obligations
(cost $5,273,259).....
5,295,145
-----------
- -
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
U.S. Government Securities--18.7%
United States Treasury
Notes,
3.625%, 7/15/02
$ 3,174 (TIPS)................ $
3,150,377
United States Treasury
Bonds,
203 3.63%, 4/15/28 (TIPS)...
196,695
1,700 6.00%, 2/15/26..........
1,854,326
1,900 8.00%, 11/15/21.........
2,540,357
400 8.125%, 8/15/19.........
534,188
3,000 9.25%, 2/15/16..........
4,304,070
-----------
- -
Total U.S. government
securities
(cost $12,451,006)....
12,580,013
-----------
- -
Foreign Government Bonds--0.8%
Republic of Argentina,
6.19%, 3/31/05
Ba3 592 (cost $547,170).......
500,409
-----------
- -
Total long-term
investments
(cost $59,108,263)....
59,504,796
-----------
- -
SHORT-TERM
INVESTMENTS--33.2%
Corporate Bonds--13.8%
Banking--3.4%
Capital One Bank,
Baa3 1,200 6.83%, 8/16/99..........
1,206,732
Baa3 1,100 7.20%, 7/19/99..........
1,102,376
-----------
- -
2,309,108
-----------
- -
Entertainment--1.7%
Six Flags Enertainment
Corp.,
Baa2 1,200 Zero Coupon, 12/15/99...
1,139,496
-----------
- -
Financial Services--6.4%
AT&T Capital Corp.
Baa3 2,400DD 5.96%, 2/16/99..........
2,400,456
Heller Financial, Inc.,
A3 800 6.25%, 1/15/99..........
800,168
A3 1,100 6.41%, 5/3/99...........
1,102,123
-----------
- -
4,302,747
-----------
- -
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
30
<PAGE>
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
<S> <C> <C> <C>
Telecommunications--1.5%
TCI Communications,
Inc.,
Baa3 $ 1,000 7.25%, 6/15/99.......... $
1,008,300
-----------
- -
Utilities--0.8%
El Paso Electric Co.,
Ba3 500 7.25%, 2/1/99...........
500,405
-----------
- -
Total corporate bonds
(cost $9,244,426)...
9,260,056
-----------
- -
U.S. Government Agency Mortgage
Backed Securities--15.6%
Federal Home Loan
Mortgage Corp.,
8,800 6.00%, 12/1/99..........
8,692,728
Federal National
Mortgage Assn.,
46.8 ound 8.50%, 4/1/99...........
47
Government National
Mortgage Assn.,
1,750 6.50%, 12/15/99.........
1,767,780
-----------
- -
Total U.S. Government
agency mortgage backed
securities
(cost $10,432,517)....
10,460,555
-----------
- -
U.S. Government Securities--1.0%
United States Treasury
Bills,
60 D 4.03%, 3/4/99...........
59,559
180 D 4.31%, 5/27/99..........
176,825
10 D 4.34%, 3/4/99...........
9,926
220 D 4.38%, 3/4/99...........
218,378
230 D 4.43%, 3/4/99...........
228,248
-----------
- -
Total U.S. government securities
(cost $692,948).........
692,936
-----------
- -
Foreign Securities--1.6%
Petroleas Mexicano,
6.67%, 3/8/99
Ba2 1,100 (cost $1,091,690).....
1,083,500
-----------
- -
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<S> <C> <C> <C>
Repurchase Agreement--1.2%
$ 774 State Street Bank & Trust Co.,
2.00%, dated 12/31/98
due 1/4/99 in the
amount of $774,172
(cost $774,000,
collateralized by
$580,000 U.S.
Treasury Notes,
8.125%, 8/15/19,
value of collateral
including accrued
interest is
$790,703)............ $ 774,000
------------
Total short-term
investments
(cost $22,235,581)... 22,271,047
------------
Total Investments, Before Outstanding
Options Written--121.9%
(cost $81,343,844; Note
4)................... 81,775,843
------------
OUTSTANDING CALL OPTIONS
Contracts WRITTEN*
---------
7 United States Treasury
Bond Futures, 8.00%
3/22/99
expiring 2/19/99
@$138.00............. (656)
OUTSTANDING PUT OPTIONS
WRITTEN*
4 United States Treasury
Bond Futures, 8.00%
3/22/99
expiring 2/19/99
@$120.00............. (688)
4 United States Treasury
Bond Futures, 8.00%
3/22/99
expiring 2/19/99
@$122.00............. (1,250)
------------
Total outstanding
options written
(premium received
$2,872).............. (2,594)
------------
Total Investments, Net of Outstanding
Options Written--121.9%
(cost $81,340,972)..... 81,773,249
Other liabilities in
excess of
other
assets--(21.9%)...... (14,695,087)
------------
Net Assets--100%....... $ 67,078,162
------------
------------
</TABLE>
- ---------------
* Non-income producing securities.
D Pledged as initial margin on financial futures
contracts.
DD Rate shown reflects current rate on variable
rate
instrument.
Pound Figures are actual and not rounded to the
nearest
thousand.
PoundPound Standard & Poor's Rating.
(TIPS)--Treasury inflation protection securities.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
31
<PAGE>
THE TARGET PORTFOLIO TRUST
Intermediate-Term Bond
Portfolio
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
<S> <C> <C> <C>
LONG-TERM
INVESTMENTS--93.1%
Corporate Bonds--32.2%
Airlines--1.8%
United Airlines, Inc.,
Baa1 $ 1,500 10.85%, 2/19/15.......... $ 1,963,755
------------
Banking--4.2%
MBNA America Bank,
Baa1 1,000 5.54%, 4/13/00........... 989,430
Baa1 2,000 5.62%, 12/10/02.......... 1,989,850
Sumitomo Trust & Banking
Co., Ltd.,
Baa1 1,500 9.40%, 12/29/49.......... 1,427,603
------------
4,406,883
------------
Financial Services--7.0%
Goldman Sachs Group,
L.P.,
A1PoundPound 1,900 5.38%, 1/25/01........... 1,895,725
Lehman Brothers Holdings,
Inc.,
Baa1 2,000 5.96%, 1/14/00........... 1,994,960
APoundPound 1,500 5.58%, 9/3/02............ 1,502,263
PaineWebber Group, Inc.,
Baa1 2,000 5.82%, 11/27/00.......... 2,003,100
------------
7,396,048
------------
Industrials--8.5%
Cox Communications, Inc.,
Baa2 300 6.15%, 8/1/03............ 305,553
GS Escrow Corp.,
Ba1 600 6.75%, 8/1/01............ 591,719
TCI Communications, Inc.,
Baa3 400 5.82%, 3/12/01........... 395,586
Baa3 1,800 6.46%, 3/6/00............ 1,822,626
Union Pacific Corp.,
NR 2,000 5.95%, 5/22/00........... 1,998,750
Westpoint Stevens, Inc.,
NR 1,800 7.88%, 6/15/05........... 1,827,000
Williams Companies, Inc.,
Baa 2,000 5.50%, 1/30/00........... 1,998,280
------------
8,939,514
------------
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
Tobacco--1.8%
RJR Nabisco, Inc.,
Baa3 $ 1,250 8.00%, 7/15/01........... $ 1,253,150
Baa3 600 8.63%, 12/1/02........... 609,576
------------
1,862,726
------------
Utilities--8.9%
California Energy Co.,
Inc.,
Ba1 2,000 9.88%, 6/30/03........... 2,239,680
Niagara Mohawk Power
Corp.,
Ba3 2,000 6.88%, 3/1/01............ 2,047,620
Texas Utilities Co.,
Baa 3,000 5.94%, 10/15/01.......... 3,017,490
Baa3 2,000 6.50%, 8/16/02........... 2,050,748
------------
9,355,538
------------
Total corporate bonds
(cost $33,731,738)..... 33,924,464
------------
U.S. Government Agency Mortgage
Backed Securities--34.7%
Federal Home Loan
Mortgage Corp.,
17,546 6.00%, 4/1/24 - 7/1/28... 17,529,144
6.50%, 9/15/18 -
2,001 12/15/21............... 211,727
5,970 7.50%, 4/1/25 - 9/1/28... 6,200,875
90 9.25%, 1/1/10............ 95,081
Federal National Mortgage
Assn.,
159 6.20%, 12/1/30........... 159,848
1,800 6.15%, 12/1/29........... 1,810,687
1,425 6.64%, 3/1/26............ 1,442,780
700 7.00%, 8/1/24............ 710,507
1,056 7.76%, 7/1/25............ 1,072,077
Government National
Mortgage Assn.,
6.88%, 5/20/23 -
3,332 2/20/26................ 3,380,407
906 7.00%, 10/20/24.......... 918,310
758 6.88%, 6/20/23........... 770,487
Resolution Trust Corp.,
321 9.25%, 6/25/23........... 319,468
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
32
<PAGE>
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
<S> <C> <C> <C>
U.S. Government Agency Mortgage
Backed Securities--(cont'd.)
Student Loan Marketing
Assn., Student Loan
Trust
$ 1,895 5.54%, 4/25/07........... $ 1,874,869
------------
Total U.S. Government
agency mortgage
backed securities
(cost $36,622,047)..... 36,496,267
------------
Collateralized Mortgage
Obligations--10.3%
Champion Home Loan
Equity, Series 1995,
Class A2-3,
AAAPoundPound 917 8.31%, 2/25/28...........
935,948
Countrywide
Collateralized
Mortgage Obligation,
Aa1 112 8.14%, 11/25/24.......... 114,422
Federal National Mortgage
Association Guaranteed,
633 6.00%, 12/25/08.......... 630,190
Federal National Mortgage
Association Guaranteed
Certificate, Remic
Trust 1997-1, Class A,
459 6.50%, 2/18/04........... 458,618
Government National
Mortgage Assn., Remic
Trust 1995- 2, Class
Kq,
3,000 8.50%, 3/20/25........... 3,163,359
Residential Accredit
Loans, Inc., Series
1997 Qs5, Class A9,
AAAPoundPound 3,000 7.25%, 6/25/27...........
3,057,708
Residential Asset
Securities Corp.,
Series 1996 Ks4, Class
A2,
Aaa 826 5.95%, 10/25/27.......... 799,209
Southern Pacific Secured
Assets Corp.,
AAAPoundPound 1,779 5.39%, 7/25/26...........
1,738,500
------------
Total collateralized
mortgage
obligations
(cost $10,947,244)..... 10,897,954
------------
Foreign Government Obligations--0.8%
Republic of Argentina,
Ba3 949 6.19%, 3/31/05......... 802,243
------------
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
U.S. Government Securities--15.1%
United States Treasury
Notes,
$ 5,120 3.625%, 7/15/02 (TIPS)... $ 5,081,650
United States Treasury
Bonds,
304 3.625%, 4/15/28 (TIPS)... 295,042
700 6.00%, 2/15/26........... 763,546
700 8.00%, 11/15/21.......... 935,921
1,800 8.875%, 8/15/17.......... 2,535,462
4,400 9.25%, 2/15/16........... 6,312,636
------------
Total U.S. government
securities
(cost $16,063,737)..... 15,924,257
------------
Total long-term
investments
(cost $97,364,766)..... 98,045,185
------------
SHORT-TERM
INVESTMENTS--13.3%
Corporate Bonds--10.8%
Banking--2.8%
Bank Of Tokyo Mitsubishi,
Ltd.,
A1 1,000 5.94%, 1/19/99........... 1,000,000
Capital One Bank,
Baa3 1,900 7.20%, 7/19/99........... 1,904,104
------------
2,904,104
------------
Financial Services--3.3%
AT&T Capital Corp.,
Baa3 100 5.96%, 2/16/99........... 100,019
Heller Financial, Inc.,
A3 1,500 6.25%, 1/15/99........... 1,500,315
A3 1,900 6.41%, 5/3/99............ 1,903,667
------------
3,504,001
------------
Industrials--1.8%
NWCG Holdings Corp.,
Ba2 2,000 Zero Coupon, 6/15/99..... 1,934,460
------------
Utilities--2.9%
Long Island Lighting Co.,
Baa3 1,535 7.30%, 7/15/99........... 1,552,453
Texas-New Mexico Power
Co.,
Baa3 1,500 12.50%, 1/15/99.......... 1,502,445
------------
3,054,898
------------
Total corporate bonds
(cost $11,390,611)..... 11,397,463
------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
33
<PAGE>
THE TARGET PORTFOLIO TRUST
Intermediate-Term Bond
Portfolio (cont'd)
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
<S> <C> <C> <C>
Corporate Note--0.4%
General Electric Capital
Corp.,
A1PoundPound $ 400 5.14%, 1/12/99........... $ 399,200
------------
U.S. Government Agency Mortgage
Backed Securities
Federal National Mortgage Assn.,
.2 8.50%, 4/1/99............ 147
2 8.50%, 7/1/99............ 1,889
------------
Total U.S. government
agency
mortgage backed
securities
(cost $2,135).......... 2,036
------------
U.S. Government Securities--1.0%
United States Treasury
Bills,
10 D 3.79%, 3/4/99............ 9,927
140 D 4.03%, 3/4/99............ 138,971
50 D 4.06%, 2/4/99............ 49,790
170 D 4.31%, 5/27/99........... 166,995
320 D 4.38%, 3/4/99............ 317,640
330 D 4.43%, 3/4/99............ 327,486
------------
Total U.S. government
securities
(cost $1,010,868)...... 1,010,809
------------
Repurchase Agreement--1.1%
State Street Bank & Trust
Co.,
1,167 3.25%, dated 12/31/98 due
1/4/99 in the amount of
$1,167,421 (cost
$1,167,000:
collateralized by
$845,000 U.S. Treasury
Notes, 8.50%, 2/15/20,
value of collateral
including accrued
interest -
$1,196,756)............ 1,167,000
------------
Total short-term
investments
(cost $13,972,468)..... 13,976,508
------------
Total Investments, Before Outstanding
Options Written--106.4%
(cost $111,337,234; Note
4)..................... 112,021,693
</TABLE>
<TABLE>
<CAPTION>
VALUE
CONTRACTS DESCRIPTION (NOTE 1)
<S> <C> <C> <C>
OUTSTANDING CALL OPTIONS
WRITTEN*
12 United States
Treasury Bond
Futures, 8.00%,
3/22/99
expiring 2/20/99
@$138.00........... $ (1,125)
OUTSTANDING PUT OPTIONS
WRITTEN*
6 United States
Treasury Bond
Futures, 8.00%,
3/22/99 expiring
2/20/99 @$122.00... (1,875)
6 United States
Treasury Bond
Futures, 8.00%,
3/22/99 expiring
2/20/99 @$120.00... (1,031)
------------
Total outstanding
options written
(premiums received
$4,340)............ (4,031)
------------
Total Investments, Net of
Outstanding Options
Written--106.4%
(cost
$111,332,894)...... 112,017,662
Other liabilities in
excess of other
assets--(6.4%)..... (6,735,069)
------------
Net Assets--100%..... $105,282,593
------------
------------
</TABLE>
- ---------------
* Non-income producing securities.
D Pledged as initial margin on futures contracts.
PoundPound--Standard & Poor's Rating.
(TIPS)--Treasury inflation protection securities.
L.P.--Limited Partnership.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
34
<PAGE>
Mortgage Backed Securities
Portfolio
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--99.2%
Collateralized Mortgage
Obligations--32.6%
Chase Commercial Mortgage
Securities Corp.,
$ 1,000 7.37%, 2/19/07.............. $ 1,079,075
Federal Home Loan Mortgage
Corp.,
221 5.50%, 8/15/21, PAC......... 216,372
350 5.80%, 8/15/19, PAC......... 349,563
100 5.95%, 6/15/19, PAC......... 100,343
3,719 6.00%, 5/15/08 - 5/15/23,
PAC....................... 3,698,487
1,560 6.50%, 8/15/06 - 11/15/22,
PAC....................... 1,576,036
359 7.00%, 3/15/23, PAC......... 375,715
289 7.25%, 1/15/07, PAC......... 291,917
4,454 7.50%, 6/15/22, PAC I/O..... 452,993
1,778 8.00%, 8/15/04 - 7/15/21,
PAC....................... 1,868,915
840 9.00%, 7/01/08 - 10/15/20... 883,141
Federal National Mortgage
Assn.,
1,482 5.00%, 10/25/20 - 3/25/21,
PAC....................... 1,438,301
862 5.941%, 1/25/09............. 858,756
1,733 6.00%, 4/25/08 - 10/25/22,
PAC....................... 1,710,739
800 6.25%, 1/25/09, PAC......... 799,000
1,023 6.50%, 2/25/06 - 12/25/23,
PAC....................... 1,018,742
2,704 7.00%, 9/25/19 - 9/25/20,
PAC/IO.................... 563,384
903 7.385%, 3/25/21............. 924,359
719 7.50%, 5/25/07 - 7/25/22.... 745,589
774 8.00%, 8/25/06 - 5/25/24.... 820,298
848 8.50%, 7/25/18 - 6/25/21,
PAC....................... 891,718
First Boston Mortgage
Securities,
775 Zero Coupon, 4/25/17, P/O... 664,544
887 6.96%, 6/20/29.............. 910,785
775 8.985%, 4/25/17, I/O........ 153,594
First Union-Lehman Brothers
Commerical Mortgage,
1,000 6.60%, 11/18/29............. 1,037,500
Salomon Brothers Mortgage Securities,
319 6.00%, 12/26/11............. 320,097
-----------
Total collateralized mortgage obligations
(cost $22,794,321).......... 23,749,963
-----------
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
U.S. Government Agency Mortgage
Pass-Through Obligations--65.0%
Federal Home Loan Mortgage
Corp.,
$ 341 6.00%, 5/01/11............... $ 342,809
389 6.50%, 2/01/04............... 392,358
14 7.25%, 7/01/06............... 14,278
161 7.50%, 3/01/08............... 164,288
75 8.25%, 12/01/05 - 5/01/08.... 78,805
314 8.50%, 6/01/03 - 7/01/21..... 331,497
124 8.75%, 12/01/08.............. 130,287
385 9.00%, 1/01/02 - 10/01/05.... 402,211
26 10.00%, 1/01/04.............. 27,456
48 10.50%, 11/01/19............. 53,198
48 11.50%, 3/01/16.............. 53,804
21 12.75%, 11/01/13............. 22,917
25 13.25%, 5/01/13.............. 29,270
5 14.00%, 6/01/11.............. 5,822
Federal National Mortgage
Assn.,
200 6.00%, 5/25/10............... 201,124
792 6.00%, 8/01/11............... 794,283
162 6.199%, 12/01/27............. 163,179
713 6.217%, 8/01/28.............. 716,750
500 6.447%, 1/01/08.............. 525,940
504 6.55%, 9/01/07............... 532,320
595 6.981%, 6/01/07.............. 634,175
284 7.024%, 6/01/07.............. 305,466
507 7.04%, 3/01/07............... 549,138
292 7.50%, 2/01/20............... 301,611
159 7.75%, 10/01/19.............. 165,422
1,032 8.00%, 3/01/07 - 12/01/22.... 1,072,766
1,510 8.50%, 1/01/07 - 6/01/10..... 1,565,973
204 9.75%, 8/01/10 - 11/01/16.... 216,901
Government National Mortgage
Assn.,
2,601 6.50%, 5/15/23 - 9/15/28..... 2,628,090
11,404 7.00%, 7/15/16 - 4/15/26..... 11,672,449
14,110 7.50%, 3/15/07 - 6/15/24..... 14,555,177
2,744 8.00%, 1/15/08 - 8/15/22..... 2,857,614
960 8.25%, 6/20/17 - 7/20/17..... 997,401
222 8.50%, 3/15/05 - 4/20/17..... 235,483
3,111 9.00%, 10/20/01 - 1/15/20.... 3,329,835
975 9.50%, 9/15/02 - 1/15/21..... 1,046,229
1 13.00%, 2/15/11.............. 797
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
35
<PAGE>
THE TARGET PORTFOLIO TRUST
Mortgage Backed Securities
Portfolio (cont'd)
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
U.S. Government Agency Mortgage
Pass-Through Obligations (cont'd.)
$ 76 13.50%, 6/15/10 -
11/15/12.................. $ 88,656
90 14.00%, 6/15/11 - 4/15/12... 105,284
40 16.00%, 4/15/12 - 5/15/12... 47,233
-----------
Total U.S. Government agency
mortgage pass-through
obligations
(cost $46,493,201)........ 47,358,296
-----------
U.S. Government Securities--1.6%
United States Treasury Bond,
775 12.00%, 8/15/13
(cost $1,194,204)......... 1,183,208
-----------
Total long-term investments
(cost $70,481,726)........ 72,291,467
-----------
SHORT-TERM INVESTMENT--0.4%
Repurchase Agreement--0.4%
Warburg Dillon Reed LLC,
252 4.65%, dated 12/31/98, due
1/4/99 in the amount of
$252,130 (cost $252,000;
collateralized by $212,000
U.S. Treasury Bonds,
7.25%, 5/15/16, value of
the collateral including
accrued interest is
$258,076)................. 252,000
-----------
Total Investments--99.6%
(cost $70,733,726; Note
4)........................ 72,543,467
Other assets in excess of
liabilities--0.4%......... 326,448
-----------
Net Assets--100%............ $72,869,915
-----------
-----------
</TABLE>
- ---------------
I/O--Interest Only Security.
PAC--Planned Amortization Class.
P/O--Principal Only.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
36
<PAGE>
U.S. Government Money Market
Portfolio
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
Federal Home Loan Bank--1.4%
$ 2,000 5.50%, 3/19/99................ $ 1,999,654
------------
Federal Home Loan Mortgage Corp.--68.2%
560 5.03%, 2/11/99................ 556,792
20,000 5.85%, 2/25/99................ 19,844,625
30,000 4.93%, 2/26/99................ 29,769,933
25,000 4.97%, 3/15/99................ 24,748,049
20,000 4.93%, 3/17/99................ 19,796,458
------------
94,715,857
------------
Federal National Mortgage Association--13.7%
11,584 5.04%, 1/26/99................ 11,543,456
5,520 5.02%, 2/19/99................ 5,482,283
2,000 5.625%, 5/6/99................ 1,999,178
------------
19,024,917
------------
Repurchase Agreements--27.0%
9,347 Lehman Brothers Hldgs., Inc.,
4.875%, dated 12/31/98, due
1/4/99 in the amount of
$9,352,063 (cost $9,347,000;
collateralized by
$29,400,000 U.S. Treasury
Strips, 2/15/19, value of
collateral including accrued
interest - $9,693,368)...... 9,347,000
9,347 PaineWebber Inc., 4.85%, dated
12/31/98, due 1/4/99 in the
amount of $9,352,037 (cost
$9,347,000; collateralized
by $8,950,000 U.S. Treasury
Notes, 5.75%, 8/15/03, value
of collateral including
accrued interest -
$9,526,688)................. 9,347,000
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
$ 9,347 Paribas, 4.80%, dated
12/31/98, due 1/4/99 in the
amount of $9,351,985 (cost
$9,347,000; collateralized
by $9,042,000 U.S. Treasury
Notes, 5.875%, 9/30/02,
value of collateral
including accrued interest
- $9,526,641).............. $ 9,347,000
9,347 Swiss Bank Corp., 4.65%,
dated 12/31/98, due 1/4/99
in the amount of $9,351,829
(cost $9,347,000;
collateralized by
$7,122,000 U.S. Treasury
Bonds, 7.875%, 2/15/21,
value of collateral
including accrued interest
- $9,553,495).............. 9,347,000
-----------
37,388,000
-----------
Total Investments--110.3%
(amortized cost
$153,128,428*)............. 153,128,428
Liabilities in excess of
other
assets--(10.3%)............ (14,279,941)
-----------
Net Assets--100%............. $138,848,487
-----------
-----------
</TABLE>
- ---------------
* Federal income tax basis of portfolio securities is the
same as for financial
reporting purposes.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
37
<PAGE>
THE TARGET PORTFOLIO TRUST
Statements of Assets and
Liabilities
December 31, 1998
<TABLE>
<CAPTION>
SMALL
LARGE CAPITALIZATION
LARGE CAPITALIZATION SMALL CAPITALIZATION
CAPITALIZATION
GROWTH PORTFOLIO
VALUE PORTFOLIO GROWTH PORTFOLIO VALUE
PORTFOLIO
<S> <C>
<C> <C> <C>
ASSETS
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Investments, at value* $330,863,568
$281,359,912 $160,527,505 $
142,149,480
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Cash 1,112
15,552 1,968 10,972
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Foreign currency, at value
(cost $14,790; $125,299; $77,610) --
- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Receivable for Fund shares sold 873,292
726,118 606,638 637,949
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Receivable for investments sold 829,753
2,394,728 1,212,700 161,801
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Dividends and interest receivable 98,340
490,521 43,714 153,250
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Deferred expenses and other assets 4,397
4,373 2,944 2,449
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Total assets 332,670,462
284,991,204 162,395,469 143,115,901
LIABILITIES
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Payable for investments purchased 1,737,636
610,660 2,792,191 967,400
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Payable for Fund shares reacquired 877,676
717,330 463,647 412,672
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Accrued expenses and other
liabilities 86,104
26,997 75,172 137,736
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Dividends payable --
- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Outstanding options written
(premium received $2,872 and
$4,340) --
- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Withholding taxes payable --
- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Deferred trustees' fees 6,541
6,541 6,541 6,541
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Due to Manager 159,848
142,041 75,482 34,302
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Due to broker-variation margin
payable --
- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Total liabilities 2,867,805
1,503,569 3,413,033 1,558,651
NET ASSETS $329,802,657
$283,487,635 $158,982,436 $
141,557,250
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net assets were comprised of:
Shares of beneficial interest,
at par $ 18,028
$ 17,866 $ 10,360 $
9,451
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Paid-in capital, in excess of
par 187,102,837
197,955,280 125,141,167 124,754,936
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
187,120,865
197,973,146 125,151,527 124,764,387
Under (over) distribution of net
investment
income (loss) --
331,461 -- 44,045
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Accumulated net realized gains
(losses) 7,823,400
4,911,188 (860,079) 506,416
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net unrealized
appreciation/depreciation 134,858,392
80,271,840 34,690,988 16,242,402
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net assets, December 31, 1998 $329,802,657
$283,487,635 $158,982,436 $
141,557,250
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Shares of beneficial interest
issued
and outstanding 18,028,136
17,866,011 10,360,162 9,450,715
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
Net asset value, offering price
and redemption price per share $18.29
$15.87 $15.35 $14.98
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---------
*Identified cost of investments. $196,005,176
$201,088,072 $125,836,517 $
125,907,078
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
38
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL
U.S. GOVERNMENT
EQUITY INTERNATIONAL TOTAL RETURN
INTERMEDIATE-TERM MORTGAGE BACKED
MONEY
PORTFOLIO BOND PORTFOLIO BOND PORTFOLIO
BOND PORTFOLIO SECURITIES PORTFOLIO MARKET
PORTFOLIO
<S> <C> <C> <C>
<C> <C>
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
$244,461,917 $ 30,340,470 $ 81,775,843 $
112,021,693 $ 72,543,467 $
153,128,428
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
3,074 189 225
959 723 --
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
13,132 -- 125,199
77,223 -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
265,926 81,826 248,360
290,253 92,860 10,338,811
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
-- -- --
- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
686,175 798,245 845,609
1,439,507 509,785 55,166
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
4,417 4,643 977
1,695 1,431 781
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
245,434,641 31,225,373 82,996,213
113,831,330 73,148,266
163,523,186
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
-- -- 15,459,534
8,173,391 -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
916,924 115,358 359,882
274,374 164,990 24,582,304
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
71,622 35,558 41,738
30,203 67,144 49,433
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
-- 11,753 9,273
15,471 11,698 1,517
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
-- -- 2,594
4,031 -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
7,997 2,386 --
- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
6,541 5,132 6,541
6,541 6,541 6,541
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
140,747 13,265 25,555
40,212 27,978 34,904
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
-- -- 12,934
4,514 -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
1,143,831 183,452 15,918,051
8,548,737 278,351 24,674,699
$244,290,810 $31,041,921 $67,078,162
$105,282,593 $72,869,915
$138,848,487
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
15,724
$ $ 3,261 $ 6,392 $
10,159 $ 6,960 $ 138,848
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
196,242,244 30,232,750 66,697,891
104,979,871 71,365,949
138,709,639
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
196,257,968 30,236,011 66,704,283
104,990,030 71,372,909
138,848,487
(179,460 ) (55,493) 137,282
(15,471) 167,819 --
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
(1,045,188 ) 533,458 (49,964)
(271,215) (480,554) --
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
49,257,490 327,945 286,561
579,249 1,809,741 --
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
$244,290,810 $31,041,921 $67,078,162
$105,282,593 $72,869,915
$138,848,487
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
15,724,520 3,261,234 6,392,408
10,159,386 6,960,553
138,848,487
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
$15.54 $9.52 $10.49
$10.36 $10.47 $1.00
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----
$195,236,545 $30,014,065 $81,343,844
$111,337,234 $70,733,726
$153,128,428
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
39
<PAGE>
THE TARGET PORTFOLIO TRUST
Statements of Operations
For The Year Ended December
31, 1998
<TABLE>
<CAPTION>
SMALL
LARGE CAPITALIZATION
LARGE CAPITALIZATION SMALL CAPITALIZATION
CAPITALIZATION
GROWTH PORTFOLIO
VALUE PORTFOLIO GROWTH PORTFOLIO VALUE
PORTFOLIO
<S> <C>
<C> <C> <C>
NET INVESTMENT INCOME
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Income
Interest $ 372,347
$ 154,546 $ 322,663 $
280,255
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Dividends 1,387,164
6,526,484 371,729 1,679,145
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Less: Foreign withholding taxes (1,054)
(36,458) (2,436) (1,176)
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Total income 1,758,457
6,644,572 691,956 1,958,224
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Expenses
Management fee 1,666,766
1,692,469 975,926 922,536
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Custodian's fees and expenses 85,000
96,000 92,000 100,700
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Transfer agent's fees and expenses 104,500
108,600 104,000 92,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Registration fees 2,000
36,000 20,500 35,800
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Reports to shareholders 10,000
29,000 33,000 33,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Audit fees and expenses 13,500
13,500 13,500 13,500
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Legal fees and expenses 7,000
7,000 7,000 7,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Trustees' fees and expenses 2,300
2,300 2,300 2,300
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Amortization of organization
expenses 81
81 81 81
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Insurance 4,600
4,800 2,900 1,900
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Miscellaneous 469
1,647 2,375 4,347
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Total expenses 1,896,216
1,991,397 1,253,582 1,213,164
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Net investment income (loss) (137,759)
4,653,175 (561,626) 745,060
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Net realized gain (loss) on:
Investment transactions 35,920,680
30,983,706 2,228,053 11,100,287
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Financial futures contracts --
- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Foreign currency transactions --
- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Total net realized gain (loss) 35,920,680
30,983,706 2,228,053 11,100,287
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Net change in unrealized appreciation/depreciation on:
Investments 67,508,676
(9,079,959) 1,353,560 (23,613,476)
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Financial futures contracts --
- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Foreign currencies --
- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Options written --
- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Net change in unrealized
appreciation/depreciation 67,508,676
(9,079,959) 1,353,560 (23,613,476)
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
Net gain (loss) 103,429,356
21,903,747 3,581,613 (12,513,189)
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $103,291,597
$ 26,556,922 $ 3,019,987 $
(11,768,129)
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
40
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL
U.S. GOVERNMENT
EQUITY INTERNATIONAL TOTAL RETURN
INTERMEDIATE-TERM MORTGAGE BACKED MONEY
PORTFOLIO BOND PORTFOLIO BOND PORTFOLIO
BOND PORTFOLIO SECURITIES PORTFOLIO MARKET
PORTFOLIO
<S> <C> <C>
<C> <C> <C>
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
$ 433,181 $ 1,516,220 $3,920,382
$ 6,447,203 $5,039,270 $5,749,917
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
5,912,254 -- --
- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
(615,167) (6,667) --
- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
5,730,268 1,509,553 3,920,382
6,447,203 5,039,270 5,749,917
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
1,724,342 153,602 278,041
455,487 331,815 266,250
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
296,000 145,000 112,000
96,000 79,000 74,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
102,000 36,000 42,500
47,000 51,400 19,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
52,000 25,000 25,000
28,000 13,000 186,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
21,000 69,000 15,000
15,000 12,000 24,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
20,000 13,500 13,500
13,500 13,500 5,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
7,000 12,000 7,000
7,000 7,000 7,000
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
2,300 2,300 2,300
2,300 2,300 2,300
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
81 10,596 81
81 81 81
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
4,400 600 300
1,200 1,000 900
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
2,159 3,975 3,877
3,083 2,828 2,422
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
2,231,282 471,573 499,599
668,651 513,924 586,953
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
3,498,986 1,037,980 3,420,783
5,778,552 4,525,346 5,162,964
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
19,759,420 504,219 1,421,793
128,797 708,087 (1,050)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
-- -- 676,591
1,595,922 (104,986) --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
(754,781) 229,666 (7,388)
9,565 -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
19,004,639 733,885 2,090,996
1,734,284 603,101 (1,050)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
13,709,952 892,569 (453,350)
(87,326) (603,723) --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
-- -- (155,867)
(243,988) -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
59,593 (123,677) (32,735)
(93,156) -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
-- -- 278
309 -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
13,769,545 768,892 (641,674)
(424,161) (603,723) --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
32,774,184 1,502,777 1,449,322
1,310,123 (622) (1,050)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
36,273,170
$ $ 2,540,757 $4,870,105
$ 7,088,675 $4,524,724 $5,161,914
- ------------------------------------------------------------
- ------------------------------------------------------------
- ---
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
41
<PAGE>
THE TARGET PORTFOLIO TRUST
Statements of Changes in Net
Assets
<TABLE>
<CAPTION>
LARGE CAPITALIZATION
LARGE CAPITALIZATION SMALL CAPITALIZATION
GROWTH PORTFOLIO
VALUE PORTFOLIO GROWTH PORTFOLIO
----------------------------- ---
- -------------------------- -----------------------------
Year Ended December 31,
Year Ended December 31, Year Ended December 31,
----------------------------- ---
- -------------------------- -----------------------------
1998 1997
1998 1997 1998 1997
<S> <C> <C> <C>
<C> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS
- ------------------------------------------------------------
- ------------------------------------------------------------
Operations
Net investment
income (loss) $ (137,759) $ (12,653) $
4,653,175 $ 4,815,417 $ (561,626) $
(556,708)
- ------------------------------------------------------------
- ------------------------------------------------------------
Net realized gain
(loss) on
investment and
foreign currency
transactions 35,920,680 24,436,720
30,983,706 25,006,548 2,228,053
24,119,898
- ------------------------------------------------------------
- ------------------------------------------------------------
Net change in
unrealized
appreciation/
depreciation of
investments 67,508,676 20,104,947
(9,079,959) 35,519,278 1,353,560
5,445,586
- ------------------------------------------------------------
- ------------------------------------------------------------
Net increase
(decrease) in net
assets
resulting from
operations 103,291,597 44,529,014
26,556,922 65,341,243 3,019,987
29,008,776
- ------------------------------------------------------------
- ------------------------------------------------------------
Dividends and
Distributions
Dividends from net
investment income -- (46,217)
(4,404,065) (4,345,386) -- -
- -
- ------------------------------------------------------------
- ------------------------------------------------------------
Dividends in excess
of net investment
income -- (60,960)
- -- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
Distributions from
net
realized gains (21,568,633) (31,971,788)
(27,679,090) (24,366,069) (6,691,785)
(21,977,874)
- ------------------------------------------------------------
- ------------------------------------------------------------
Tax return of
capital
distributions -- --
- -- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
Total distributions (21,568,633) (32,078,965)
(32,083,155) (28,711,455) (6,691,785)
(21,977,874)
- ------------------------------------------------------------
- ------------------------------------------------------------
Fund share
transactions(a)
Net proceeds from
shares sold 61,539,874 47,455,937
61,726,845 54,334,008 47,314,663
38,578,759
- ------------------------------------------------------------
- ------------------------------------------------------------
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends and
distributions 21,112,171 31,377,043
31,419,758 28,089,014 6,560,196
21,564,493
- ------------------------------------------------------------
- ------------------------------------------------------------
Cost of shares
reacquired (78,466,932) (68,170,878)
(79,225,934) (71,665,460) (57,118,761)
(48,745,293)
- ------------------------------------------------------------
- ------------------------------------------------------------
Net increase
(decrease) in net
assets from Fund
share
transactions 4,185,113 10,662,102
13,920,669 10,757,562 (3,243,902)
11,397,959
- ------------------------------------------------------------
- ------------------------------------------------------------
Total increase
(decrease) 85,908,077 23,112,151
8,394,436 47,387,350 (6,915,700) 18,428,861
NET ASSETS
- ------------------------------------------------------------
- ------------------------------------------------------------
Beginning of year 243,894,580 220,782,429
275,093,199 227,705,849 165,898,136
147,469,275
- ------------------------------------------------------------
- ------------------------------------------------------------
End of year(b) $329,802,657 $243,894,580
$283,487,635 $275,093,199 $158,982,436
$165,898,136
- ------------------------------------------------------------
- ------------------------------------------------------------
(a) Fund share transactions are at $1 per share for the U.S.
Government Money Market Portfolio.
(b) Under
distribution of
net investment
income $ -- -- $
331,461 $ 470,031 $ -- $ --
- ------------------------------------------------------------
- ------------------------------------------------------------
<CAPTION>
SMALL CAPITALIZATION
VALUE PORTFOLIO
--------------------------------
Year Ended December 31,
--------------------------------
1998 1997
<S> <C> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS
- -----------------------------------------------------------
Operations
Net investment
income (loss) $ 745,060 $ 655,639
- ------------------------------------------------------------
- ---
Net realized gain
(loss) on
investment and
foreign currency
transactions 11,100,287 17,387,992
- ------------------------------------------------------------
- -------
Net change in
unrealized
appreciation/
depreciation of
investments (23,613,476) 18,899,607
- ------------------------------------------------------------
- -----------
Net increase
(decrease) in net
assets
resulting from
operations (11,768,129) 36,943,238
- ------------------------------------------------------------
- ---------------
Dividends and
Distributions
Dividends from net
investment income (616,180) (664,037)
- ------------------------------------------------------------
- -------------------
Dividends in excess
of net investment
income -- (94,907)
- ------------------------------------------------------------
- -----------------------
Distributions from
net
realized gains (11,204,352) (17,432,911)
- ------------------------------------------------------------
- ---------------------------
Tax return of
capital
distributions -- --
- ------------------------------------------------------------
- -------------------------------
Total distributions (11,820,532) (18,191,855)
- ------------------------------------------------------------
- -----------------------------------
Fund share
transactions(a)
Net proceeds from
shares sold 51,340,282 44,917,116
- ------------------------------------------------------------
- ---------------------------------------
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends and
distributions 11,566,933 17,747,752
- ------------------------------------------------------------
- -------------------------------------------
Cost of shares
reacquired (61,175,473) (44,673,985)
- ------------------------------------------------------------
- -----------------------------------------------
Net increase
(decrease) in net
assets from Fund
share
transactions 1,731,742 17,990,883
- ------------------------------------------------------------
- ---------------------------------------------------
Total increase
(decrease) (21,856,919) 36,742,266
NET ASSETS
- ------------------------------------------------------------
- -------------------------------------------------------
Beginning of year 163,414,169 126,671,903
- ------------------------------------------------------------
- -----------------------------------------------------------
End of year(b) $141,557,250 $ 163,414,169
- ------------------------------------------------------------
- ------------------------------------------------------------
(a) Fund share transa
(b) Under
distribution of
net investment
income $ 44,045 --
- ------------------------------------------------------------
- ------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
42
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL
EQUITY BOND
TOTAL RETURN INTERMEDIATE-TERM
PORTFOLIO PORTFOLIO
BOND PORTFOLIO BOND PORTFOLIO
- ------------------------------ -------------------------
- ---- ----------------------------- -----------------
- -----------
Year Ended December 31, Year Ended December
31, Year Ended December 31, Year Ended
December 31,
- ------------------------------ -------------------------
- ---- ----------------------------- -----------------
- -----------
1998 1997 1998 1997
1998 1997 1998 1997
<S> <C> <C> <C>
<C> <C> <C> <C>
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
$ 3,498,986 $ 2,820,604 $ 1,037,980 $
1,560,613 $ 3,420,783 $ 2,668,018 $
5,778,552 $ 5,389,243
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
19,004,639 25,216,162 733,885
(2,969,114 ) 2,090,996 995,324
1,734,284 1,604,324
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
13,769,545 (1,064,582) 768,892
(880,530 ) (641,674) 580,802
(424,161) 772,378
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
36,273,170 26,972,184 2,540,757
(2,289,031 ) 4,870,105 4,244,144
7,088,675 7,765,945
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
(1,532,425) (2,820,604) (1,037,980)
- -- (3,376,862) (2,523,654 ) (5,900,704)
(5,281,003)
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
-- (3,343,171) (211,923)
(227,344 ) -- -- --
- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
(12,786,060) (25,343,801) (129,221)
(14,562 ) (2,089,757) (465,731 ) (1,685,532)
(1,471,335)
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
-- -- --
(1,320,129 ) -- --
- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
(14,318,485) (31,507,576) (1,379,124)
(1,562,035 ) (5,466,619) (2,989,385 )
(7,586,236) (6,752,338)
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
397,245,964 355,674,205 10,468,976
10,444,049 32,010,608 14,859,623
59,709,544 29,443,555
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
13,933,450 30,918,137 1,318,338
1,488,888 5,274,697 2,845,116
7,214,518 6,439,182
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
(426,694,187) (384,768,978) (13,095,621)
(18,672,976 ) (20,021,411) (17,766,511 )
(56,214,686) (42,217,583)
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
(15,514,773) 1,823,364 (1,308,307)
(6,740,039 ) 17,263,894 (61,772 )
10,709,376 (6,334,846)
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
6,439,912 (2,712,028) (146,674)
(10,591,105 ) 16,667,380 1,192,987
10,211,815 (5,321,239)
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
237,850,898 240,562,926 31,188,595
41,779,700 50,410,782 49,217,795
95,070,778 100,392,017
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
$244,290,810 $ 237,850,898 $ 31,041,921
$31,188,595 $ 67,078,162 $50,410,782
$105,282,593 $ 95,070,778
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
-- $ 316,826 --
- -- $ 137,282 $ 223,566 -- $
218,646
- ------------------------------------------------------------
- ------------------------------------------------------------
- -----------
<CAPTION>
U.S. GOVERNMENT
MORTGAGE BACKED
MONEY
SECURITIES PORTFOLIO
MARKET PORTFOLIO
----------------------------- ------------
- -----------------------
Year Ended December 31, Year
Ended December 31,
----------------------------- ------------
- -----------------------
1998 1997 1998
1997
<C> <C> <C>
<C>
- ------------------------------------------------------------
- --------------------
$ 4,525,346 $ 4,459,335 $
5,162,964 $ 1,850,349
- ------------------------------------------------------------
- --------------------
603,101 197,457
(1,050) (469)
- ------------------------------------------------------------
- --------------------
(603,723) 1,432,889
- -- --
- ------------------------------------------------------------
- --------------------
4,524,724 6,089,681
5,161,914 1,849,880
- ------------------------------------------------------------
- --------------------
(4,414,869) (4,425,133 )
(5,161,914) (1,849,880)
- ------------------------------------------------------------
- --------------------
-- --
- -- --
- ------------------------------------------------------------
- --------------------
-- --
- -- --
- ------------------------------------------------------------
- --------------------
-- --
- -- --
- ------------------------------------------------------------
- --------------------
(4,414,869) (4,425,133 )
(5,161,914) (1,849,880)
- ------------------------------------------------------------
- --------------------
17,198,222 13,448,142
3,570,979,025 1,070,854,061
- ------------------------------------------------------------
- --------------------
3,666,643 3,643,014
4,089,479 1,601,795
- ------------------------------------------------------------
- --------------------
(19,700,312) (21,027,273 )
(3,478,545,549) (1,057,527,680)
- ------------------------------------------------------------
- --------------------
1,164,553 (3,936,117 )
96,522,955 14,928,176
- ------------------------------------------------------------
- --------------------
1,274,408 (2,271,569 )
96,522,955 14,928,176
- ------------------------------------------------------------
- --------------------
71,595,507 73,867,076
42,325,532 27,397,356
- ------------------------------------------------------------
- --------------------
$ 72,869,915 $71,595,507 $
138,848,487 $ 42,325,532
- ------------------------------------------------------------
- --------------------
$ 167,819 $ 57,342
- -- --
- ------------------------------------------------------------
- --------------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
43
<PAGE>
THE TARGET PORTFOLIO TRUST
Financial Highlights
<TABLE>
<CAPTION>
LARGE CAPITALIZATION
GROWTH PORTFOLIO
---------------
- ---------------------------------------------
Year Ended December 31,
---------------
- ---------------------------------------------
1998
1997 1996 1995(b) 1994(b)
<S> <C>
<C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
- ------------------------------------------------------------
- ---------------------------------------------
Net asset value, beginning of year $13.58
$12.97 $12.13 $9.74 $9.91
- ------------------------------------------------------------
- ---------------------------------------------
Income from investment operations
Net investment income (loss) (.01)
- --(c) .02 .10 .10
- ------------------------------------------------------------
- ---------------------------------------------
Net realized and unrealized gains
(losses) on
investment transactions 6.00
2.61 2.33 2.41 (.16)
- ------------------------------------------------------------
- ---------------------------------------------
Total from investment
operations 5.99
2.61 2.35 2.51 (.06)
- ------------------------------------------------------------
- ---------------------------------------------
Less distributions
Dividends from net investment income --
(.01) (.02) (.10) (.10)
- ------------------------------------------------------------
- ---------------------------------------------
Distributions in excess of net
investment income --
- -- -- (.01) (.01)
- ------------------------------------------------------------
- ---------------------------------------------
Distributions from net realized gains (1.28)
(1.99) (1.49) (.01) --
- ------------------------------------------------------------
- ---------------------------------------------
Total distributions (1.28)
(2.00) (1.51) (.12) (.11)
- ------------------------------------------------------------
- ---------------------------------------------
Net asset value, end of year $18.29
$13.58 $12.97 $12.13 $9.74
- ------------------------------------------------------------
- ---------------------------------------------
TOTAL RETURN(a) 44.22%
20.77% 21.09% 25.76% (.68)%
- ------------------------------------------------------------
- ---------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- ------------------------------------------------------------
- ---------------------------------------------
Net assets, end of year (000) $329,803
$243,895 $220,782 $180,077 $142,072
- ------------------------------------------------------------
- ---------------------------------------------
Average net assets (000) $277,794
$242,233 $202,736 $162,982 $129,687
- ------------------------------------------------------------
- ---------------------------------------------
Ratios to average net assets
Expenses .68%
.73% .82% .78% .81%
- ------------------------------------------------------------
- ---------------------------------------------
Net investment income (loss) (.05)%
(.01)% .19% .88% 1.08%
- ------------------------------------------------------------
- ---------------------------------------------
Portfolio turnover rate 54%
82% 65% 154% 24%
- ------------------------------------------------------------
- ---------------------------------------------
</TABLE>
(a) Total return is calculated assuming a purchase of shares
on the first day
and a sale on the last day of each year reported and
includes reinvestment
of dividends and distributions.
(b) Calculated based upon average shares outstanding during
the year.
(c) Less than $.005 per share.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
44
<PAGE>
<TABLE>
<CAPTION>
LARGE CAPITALIZATION
SMALL CAPITALIZATION
VALUE PORTFOLIO
GROWTH PORTFOLIO
- ------------------------------------------------------------
- -----------------------------------------------------------
Year Ended December 31,
Year Ended December 31,
- ------------------------------------------------------------
- -----------------------------------------------------------
1998 1997 1996(b) 1995(b) 1994(b)
1998 1997 1996 1995(b) 1994(b)
<S> <C> <C> <C> <C>
<C> <C> <C> <C> <C>
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
$16.21 $13.97 $12.57 $10.02 $10.11
$15.57 $14.93 $14.15 $11.59 $11.86
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
.28 .31 .31 .33 .26
(.05) (.05) (.02) .02 .01
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
1.34 3.77 2.07 2.89
(.04) .48 3.02 2.63 2.84
(.27)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
1.62 4.08 2.38 3.22 .22
.43 2.97 2.61 2.86 (.26)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
(.27) (.28) (.31) (.30)
(.25) -- -- -- (.02)
(.01)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
-- -- (.03) -- --
- -- -- -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
(1.69) (1.56) (.64) (.37)
(.06) (.65) (2.33) (1.83) (.28)
- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
(1.96) (1.84) (.98) (.67)
(.31) (.65) (2.33) (1.83) (.30)
(.01)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
$15.87 $16.21 $13.97 $12.57 $10.02
$15.35 $15.57 $14.93 $14.15 $11.59
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
10.25% 29.80% 19.17% 32.08%
2.18% 2.55% 20.85% 18.88% 24.62%
(2.19)%
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
$283,488 $275,093 $227,706 $187,596 $142,219
$158,982 $165,898 $147,469 $121,533 $96,462
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
$282,078 $253,579 $208,898 $163,124 $128,865
$162,654 $156,570 $141,496 $107,649 $87,403
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
%
.71 .72% .77% .76%
.81% .77% .79% .89% .85%
.93%
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
1.65% 1.90% 2.33% 2.83%
2.66% (.35)% (.36)% (.32)% .12%
.10%
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
24% 21% 22% 59%
6% 69% 106% 108% 120%
97%
- ------------------------------------------------------------
- ------------------------------------------------------------
- ----
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
45
<PAGE>
THE TARGET PORTFOLIO TRUST
Financial Highlights
<TABLE>
<CAPTION>
SMALL CAPITALIZATION
VALUE PORTFOLIO(e)
---------------
- -------------------------------------------
Year Ended December 31,
---------------
- -------------------------------------------
1998
1997 1996 1995 1994
<S> <C>
<C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
- ------------------------------------------------------------
- -------------------------------------------
Net asset value, beginning of period $17.50
$15.22 $13.07 $11.07 $12.72
- ------------------------------------------------------------
- -------------------------------------------
Income from investment operations
Net investment income (loss) .08
.08 .11 .14 .11
- ------------------------------------------------------------
- -------------------------------------------
Net realized and unrealized gains
(losses) on
investment transactions (1.27)
4.37 2.71 2.00 (1.49)
- ------------------------------------------------------------
- -------------------------------------------
Total from investment
operations (1.19)
4.45 2.82 2.14 (1.38)
- ------------------------------------------------------------
- -------------------------------------------
Less distributions
Dividends from net investment income (.07)
(.08) (.11) (.14) --
- ------------------------------------------------------------
- -------------------------------------------
Distributions in excess of net
investment income --
(.01) -- -- --
- ------------------------------------------------------------
- -------------------------------------------
Distributions from net realized gains (1.26)
(2.08) (.56) -- (.27)
- ------------------------------------------------------------
- -------------------------------------------
Distributions in excess of net
realized gains --
- -- -- -- --
- ------------------------------------------------------------
- -------------------------------------------
Tax return of capital distributions --
- -- -- -- --
- ------------------------------------------------------------
- -------------------------------------------
Total distributions (1.33)
(2.17) (.67) (.14) (.27)
- ------------------------------------------------------------
- -------------------------------------------
Net asset value, end of period $14.98
$17.50 $15.22 $13.07 $11.07
- ------------------------------------------------------------
- -------------------------------------------
TOTAL RETURN(d) (6.62)%
29.98% 21.75% 19.21% (11.03)%
- ------------------------------------------------------------
- -------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- ------------------------------------------------------------
- -------------------------------------------
Net assets, end of period (000) $141,557
$163,414 $126,672 $97,594 $84,163
- ------------------------------------------------------------
- -------------------------------------------
Average net assets (000) $153,756
$144,160 $110,564 $88,085 $83,891
- ------------------------------------------------------------
- -------------------------------------------
Ratios to average net assets
Expenses .79%
.81% .92% 1.00% .93%
- ------------------------------------------------------------
- -------------------------------------------
Net investment income (loss) .48%
.45% .77% 1.14% .88%
- ------------------------------------------------------------
- -------------------------------------------
Portfolio turnover rate 39%
36% 60% 110% 97%
- ------------------------------------------------------------
- -------------------------------------------
</TABLE>
(a) Commencement of investment operations of the
International Bond Portfolio.
(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 year.
(f) Less than $.005 per share.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
46
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL
INTERNATIONAL
EQUITY PORTFOLIO
BOND PORTFOLIO
- ------------------------------------------------------------
- ------------------------------------------------------------
- -
May 17,
1994(a)
Year Ended December 31,
Year Ended December 31, Through
- ------------------------------------------------------------
- -------------------------------------------- December
31,
1998 1997 1996 1995(e) 1994(e)
1998 1997 1996 1995 1994
<C> <C> <C> <C> <C>
<C> <C> <C> <C> <C>
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
$14.27 $14.82 $13.64 $11.95 $13.09
$9.17 $10.17 $10.19 $9.57 $10.00
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
.23 .21 .25 .17 .06
.31 .42 .51 .57(c) .27(c)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
1.98 1.32 1.79 1.67
(.01) .45 (1.00) (.08) .82
(.19)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
2.21 1.53 2.04 1.84 .05
.76 (.58) .43 1.39 .08
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
(.10) (.41) (.22) (.11)
(.01) (.31) -- (.21) (.57)
(.27)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
-- -- -- -- --
(.06) (.06) -- -- (.24)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
(.84) (1.67) (.64) (.04)
(1.07) (.04) --(f) (.24) (.20)
- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
-- -- -- --
(.11) -- -- -- --
- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
-- -- -- -- --
- -- (.36) -- -- --
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
(.94) (2.08) (.86) (.15)
(1.19) (.41) (.42) (.45) (.77)
(.51)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
$15.54 $14.27 $14.82 $13.64 $11.95
$9.52 $9.17 $10.17 $10.19 $9.57
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
15.49% 10.60% 15.25% 15.38%
.18% 8.55% (5.73)% 4.45% 14.66%
.71%
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
$244,291 $237,851 $240,563 $191,598 $188,025
$31,042 $31,189 $41,780 $34,660 $21,447
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
$246,335 $245,536 $221,626 $183,414 $179,614
$30,720 $35,163 $38,788 $29,510 $15,366
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
%
.91 .93% .99% 1.02%
1.07% 1.54% 1.35% 1.34% 1.00%(c)
1.00%(b)(c)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
1.42% 1.15% 1.77% 1.32%
.47% 3.38% 4.44% 5.02% 5.56%(c)
4.84%(b)(c)
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
45% 37% 39% 76%
116% 110% 202% 226% 456%
361%
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
<CAPTION>
- --------
- --------
1998
<C>
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
$14.27
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
.23
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
1.98
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
2.21
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
(.10
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
--
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
(.84
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
--
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
--
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
(.94
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
$15.54
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
15.49
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
$244,291
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
$246,335
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
.91
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
1.42
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
45
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
47
<PAGE>
<TABLE>
<S> <C> <C>
THE TARGET PORTFOLIO TRUST
Financial Highlights
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN
BOND PORTFOLIO
- ------------------------------------------------------------
- ------------------------------------------
Year Ended December 31,
---------------
- ------------------------------------------
1998
1997 1996 1995 1994
<S> <C>
<C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
- ------------------------------------------------------------
- ------------------------------------------
Net asset value, beginning of year $10.56
$10.28 $10.62 $9.48 $10.28
- ------------------------------------------------------------
- ------------------------------------------
Income from investment operations
Net investment income .58
.57 .57 .62(a) .47(a)
- ------------------------------------------------------------
- ------------------------------------------
Net realized and unrealized gains
(losses) on
investment transactions .27
.35 (.09) 1.18 (.82)
- ------------------------------------------------------------
- ------------------------------------------
Total from investment
operations .85
.92 .48 1.80 (.35)
- ------------------------------------------------------------
- ------------------------------------------
Less distributions
Dividends from net investment income (.58)
(.54) (.56) (.58) (.45)
- ------------------------------------------------------------
- ------------------------------------------
Distributions in excess of net
investment income --
- -- -- -- --
- ------------------------------------------------------------
- ------------------------------------------
Distributions from net realized gains (.34)
(.10) (.26) (.08) --
- ------------------------------------------------------------
- ------------------------------------------
Distributions in excess of net
realized gains --
- -- -- -- --
- ------------------------------------------------------------
- ------------------------------------------
Total distributions (.92)
(.64) (.82) (.66) (.45)
- ------------------------------------------------------------
- ------------------------------------------
Net asset value, end of year $10.49
$10.56 $10.28 $10.62 $9.48
- ------------------------------------------------------------
- ------------------------------------------
TOTAL RETURN(b) 8.28%
9.23% 5.02% 19.63% (3.54)%
- ------------------------------------------------------------
- ------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- ------------------------------------------------------------
- ------------------------------------------
Net assets, end of year (000) $67,078
$50,411 $49,218 $45,118 $31,191
- ------------------------------------------------------------
- ------------------------------------------
Average net assets (000) $61,786
$48,123 $47,246 $37,023 $31,141
- ------------------------------------------------------------
- ------------------------------------------
Ratios to average net assets
Expenses .81%
.91% .94% .85%(a) .85%(a)
- ------------------------------------------------------------
- ------------------------------------------
Net investment income 5.54%
5.54% 5.67% 6.21%(a) 4.90%(a)
- ------------------------------------------------------------
- ------------------------------------------
Portfolio turnover rate 327%
323% 340% 141% 121%
- ------------------------------------------------------------
- ------------------------------------------
</TABLE>
(a) Net of expense subsidies.
(b) Total return is calculated assuming a purchase of shares
on the first day
and a sale on the last day of each year reported and
includes reinvestment
of dividends and distributions.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
48
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE-TERM
MORTGAGE BACKED
BOND PORTFOLIO
SECURITIES PORTFOLIO
- ----------------------------------------------------------
- --------------------------------------------------------
Year Ended December 31,
Year Ended December 31,
- ----------------------------------------------------------
- --------------------------------------------------------
1998 1997 1996 1995 1994
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C>
<C> <C> <C> <C> <C>
- ------------------------------------------------------------
- -----------------------------------------------------------
$ 10.42 $ 10.30 $ 10.51 $ 9.56 $ 10.26
$ 10.45 $ 10.21 $ 10.31 $ 9.51 $ 10.18
- ------------------------------------------------------------
- -----------------------------------------------------------
.63 .58 .59 .63 .49
.64 .64 .65 .68(a) .61(a)
- ------------------------------------------------------------
- -----------------------------------------------------------
.09 .28 (.07) .94 (.71)
.01 .23 (.12) .83 (.66)
- ------------------------------------------------------------
- -----------------------------------------------------------
.72 .86 .52 1.57 (.22)
.65 .87 .53 1.51 (.05)
- ------------------------------------------------------------
- -----------------------------------------------------------
(.61) (.57) (.59) (.60) (.48)
(.63) (.63) (.63) (.68) (.61)
- ------------------------------------------------------------
- -----------------------------------------------------------
-- -- -- -- --
- -- -- -- (.03) (.01)
- ------------------------------------------------------------
- -----------------------------------------------------------
(.17) (.17) (.14) (.02) --
- -- -- -- -- --
- ------------------------------------------------------------
- -----------------------------------------------------------
-- -- -- -- --
- -- -- -- -- --
- ------------------------------------------------------------
- -----------------------------------------------------------
(.78) (.74) (.73) (.62) (.48)
(.63) (.63) (.63) (.71) (.62)
- ------------------------------------------------------------
- -----------------------------------------------------------
$10.36 $10.42 $10.30 $10.51 $9.56
$10.47 $10.45 $10.21 $10.31 $9.51
- ------------------------------------------------------------
- -----------------------------------------------------------
7.09% 8.57% 5.22% 16.87% (2.23)%
6.37% 8.82% 5.56% 16.18% (.51)%
- ------------------------------------------------------------
- -----------------------------------------------------------
- ------------------------------------------------------------
- -----------------------------------------------------------
$105,283 $95,071 $100,392 $77,125 $62,924
$72,870 $71,596 $73,867 $69,759 $61,971
- ------------------------------------------------------------
- -----------------------------------------------------------
$101,219 $95,575 $81,723 $68,628 $69,602
$73,737 $71,757 $72,214 $65,149 $66,276
- ------------------------------------------------------------
- -----------------------------------------------------------
%
.66 .71% .73% .79% .80%
.70% .88% .91% .85%(a) .85%(a)
- ------------------------------------------------------------
- -----------------------------------------------------------
5.71% 5.64% 5.69% 6.09% 5.06%
6.14% 6.21% 6.44% 6.79%(a) 6.19%(a)
- ------------------------------------------------------------
- -----------------------------------------------------------
249% 249% 311% 93% 77%
24% 128% 102% 154% 380%
- ------------------------------------------------------------
- -----------------------------------------------------------
</TABLE>
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
49
<PAGE>
<TABLE>
<S> <C> <C>
THE TARGET PORTFOLIO TRUST
Financial Highlights
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT
MONEY
MARKET PORTFOLIO
---------------
- -------------------------------------------
Year Ended December 31,
---------------
- -------------------------------------------
1998
1997 1996 1995 1994
<S> <C>
<C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
- ------------------------------------------------------------
- -------------------------------------------
Net asset value, beginning of year $1.00
$1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------
- -------------------------------------------
Income from investment operations
Net investment income .048
.049 .045 .051(a) .037(a)
- ------------------------------------------------------------
- -------------------------------------------
Total from investment
operations .048
.049 .045 .051 .037
- ------------------------------------------------------------
- -------------------------------------------
Less distributions
Dividends from net investment income (.048)
(.049) (.045) (.051) (.037)
- ------------------------------------------------------------
- -------------------------------------------
Total distributions (.048)
(.049) (.045) (.051) (.037)
- ------------------------------------------------------------
- -------------------------------------------
Net asset value, end of year $1.00
$1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------
- -------------------------------------------
TOTAL RETURN(b) 4.88%
4.95% 4.53% 5.25% 3.79%
- ------------------------------------------------------------
- -------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- ------------------------------------------------------------
- -------------------------------------------
Net assets, end of year (000) $138,848
$42,326 $27,397 $18,855 $21,438
- ------------------------------------------------------------
- -------------------------------------------
Average net assets (000) $106,500
$37,675 $19,132 $20,173 $15,048
- ------------------------------------------------------------
- -------------------------------------------
Ratios to average net assets
Expenses .55%
.65% .89% .75%(a) .50%(a)
- ------------------------------------------------------------
- -------------------------------------------
Net investment income 4.85%
4.91% 4.49% 5.18%(a) 4.03%(a)
- ------------------------------------------------------------
- -------------------------------------------
</TABLE>
(a) Net of expense subsidies.
(b) Total return is calculated assuming a purchase of shares
on the first day
and a sale on the last day of each year reported and
includes reinvestment of
dividends and distributions.
Total return for periods of less than a full year are not
annualized.
- ------------------------------------------------------------
- --------------------
See Notes to Financial Statements beginning on
page 51
50
<PAGE>
<TABLE>
<S> <C>
THE TARGET PORTFOLIO TRUST
Notes to Financial Statements
</TABLE>
he 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
T
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 the 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
common stocks that, in the investment adviser's opinion,
should have earnings
growth faster than that of the S&P 500; Large Capitalization
Value
Portfolio--total return of capital appreciation and dividend
income through
investment primarily in common stocks that, in the adviser's
opinion, are
undervalued; Small Capitalization Growth Portfolio--maximum
capital appreciation
through investment primarily in small company common stocks
that in the
investment advisor's opinion should have earnings growth
faster than that of a
market average companies; Small Capitalization Value
Portfolio--above average
capital appreciation through investment in common small
company stocks that, in
the adviser's opinion, are undervalued or overlooked in the
marketplace;
International Equity Portfolio--capital appreciation through
investment
primarily in stocks of companies domiciled outside the
United States;
International Bond Portfolio--high total return through
investment primarily in
high quality foreign debt securities; 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 primarily and capital
appreciation secondarily
each consistent with the protection of capital through
investment primarily in
mortgage-related securities; U.S. Government Money Market
Portfolio--maximum
current income consistent with maintenance of liquidity and
preservation of
capital 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 sixty days or less
are valued at
amortized cost which approximates market value. The
amortized cost method
involves valuing a security at its cost on the date of
purchase and thereafter
assuming a constant amortization to maturity of the
difference between the
principal amount due at maturity and cost. Short-term
securities held by the
other portfolios which mature in more than sixty 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, 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.
- ------------------------------------------------------------
- --------------------
51
<PAGE>
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
period, 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
period. 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 period-end exchange rates are
reflected as a component
of net unrealized appreciation/depreciation on investments
and foreign
currencies.
Foreign security and currency transactions may involve
certain
considerations and risks not typically associated with those
of domestic origin
as a result of, among other factors, the level of
governmental supervision and
regulation of foreign securities markets and the possibility
of political or
economic instability.
Foreign Currency Forward Contracts: The International
Equity Portfolio,
International Bond Portfolio, Intermediate-Term Bond
Portfolio and Total Return
Bond Portfolio may enter into foreign currency forward
contracts in order to
hedge their exposure to changes in foreign currency exchange
rates on their
foreign portfolio holdings. A foreign currency forward
contract is a commitment
to purchase or sell a foreign currency at a future date at a
negotiated forward
rate. The Portfolio enters into foreign currency forward
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
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.
- ------------------------------------------------------------
- --------------------
52
<PAGE>
Reclassification of Capital Accounts: The Fund
accounts for and reports
distributions to shareholders in accordance with American
Institute of Certified
Public Accountants (AICPA) Statement of Position 93-2:
Determination,
Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and
Return of Capital Distributions by Investment Companies. Net
investment income,
net realized gains and net assets were not affected by this
change.
<TABLE>
<CAPTION>
Paid-in
Accumulated Net
Capital in Net Gain/
Investment
Portfolio Ref. excess of par Loss
Income
- --------------------- ------- --------------- ----------
- - -----------
<S> <C> <C> <C>
<C>
Large Capitalization
Growth............. c,d $ 2,634,615
$(2,772,374) $ 137,759
Large Capitalization
Value.............. d 3,001,151
(2,613,471) (387,680)
Small Capitalization
Growth............. c,d (207,970)
(353,656) 561,626
Small Capitalization
Value.............. d 1,662,180
(1,577,345) (84,835)
International
Equity............. a,d,e 9,655,686
(7,192,839) (2,462,847)
International Bond... a,b (400,824)
(70,413) 471,237
Total Return Bond.... a,b,d 340,514
(210,309) (130,205)
Intermediate-Term
Bond............... a,b,d 384,043
(272,078) (111,965)
- ---------------
(a) Reclass of net foreign currency gains/losses.
(b) Reclass of dividends in excess of net investment
income.
(c) Reclass of net operating losses.
(d) Reclass of distributions/redemption distributions.
(e) Reclass of passive foreign investment companies' gains.
</TABLE>
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 tax-paying 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's manager is Prudential Investments Fund
Management LLC ('PIFM')
pursuant to which PIFM 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. PIFM
supervises the
advisers' performance of advisory services and makes
recommendations to the
Trustees as to whether the advisers' contracts should be
renewed, modified or
terminated. PIFM pays for the costs pursuant to the advisory
agreements, the
cost of compensation of officers of the Fund, occupancy and
certain clerical and
accounting costs of the Fund. The Fund bears all other costs
and expenses.
The advisers noted below each furnishe 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) are divided between the two advisers as PIFM
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................. Oak Associates, Ltd., and
Columbus Circle Investors
Large Capitalization
Value.................. INVESCO Capital Management, Inc.
and
Hotchkis and Willey
Small Capitalization
Growth................. Nicholas-Applegate Capital
Management
and Investment Advisors, Inc.
Small Capitalization
Value.................. Wood, Struthers & Winthrop
Management
Corp. and Lazard Asset
Management
International Equity..... Lazard Asset Management
International Bond....... Delaware International Advisers
Ltd.
Total Return Bond and
Intermediate-Term
Bond................... Pacific Investment Management
Co.
Mortgage Backed
Securities and U.S.
Government Money
Market................. Wellington Management Company,
LLP
</TABLE>
The management fee paid PIFM is computed daily and
payable monthly, at an
annual rate of the average daily net assets of the
Portfolios specified below
and PIFM, in turn, pays each adviser a fee for its services.
<TABLE>
<CAPTION>
Total
Portfolio Management Fee Adviser
Fee
- -------------------------------- -------------- -------
- ----
<S> <C> <C>
Large Capitalization Growth..... .60%
.30%
Large Capitalization Value...... .60%
.30%
Small Capitalization Growth..... .60%
.30%
Small Capitalization Value...... .60%
.30%
International Equity............ .70%
.40%
International Bond.............. .50%
.30%
Total Return Bond............... .45%
.25%
Intermediate-Term Bond.......... .45%
.25%
Mortgage Backed Securities...... .45%
.25%
U.S. Government Money Market.... .25%
.125%
</TABLE>
The Fund had a distribution agreement with Prudential
Securities
Incorporated ('PSI') for distribution of the Fund's shares.
PSI served the Fund
without compensation. Effective June 1, 1998, Prudential
Investment Management
Services LLC ('PIMS') became the distributor of the Fund and
serves the Fund
under the same terms and conditions as under the agreement
with PSI.
PIFM, PSI and PIMS are indirect, wholly owned
subsidiaries of The
Prudential Insurance Company of America.
- ------------------------------------------------------------
- --------------------
53
<PAGE>
- ------------------------------------------------------------
- -------
Note 3. Other Transactions
with Affiliates
Prudential Mutual Fund Services LLC ('PMFS'), a wholly
owned subsidiary of
PIFM, serves as the Fund's transfer agent. The following
amounts represent the
fees PMFS charged for the year ended December 31, 1998 as
well as the fees due
PMFS as of December 31, 1998.
<TABLE>
<CAPTION>
Amount incurred
for the Amount
Due
year ended as
of
December 31,
December 31,
Portfolio 1998
1998
- -------------------------------- ---------------- -------
- -----
<S> <C> <C>
Large Capitalization Growth..... $104,000
$9,300
Large Capitalization Value...... 105,700
9,400
Small Capitalization Growth..... 104,000
9,000
Small Capitalization Value...... 89,000
9,000
International Equity............ 102,200
9,000
International Bond.............. 33,300
2,900
Total Return Bond............... 41,600
3,800
Intermediate-Term Bond.......... 46,000
4,400
Mortgage Backed Securities...... 49,100
4,400
U.S. Government Money Market.... 17,700
2,100
</TABLE>
For the year ended December 31, 1998, PSI earned
approximately $2,700 and
$10,500 in brokerage commissions on behalf of certain
portfolio transactions
executed with the Large Capitalization Growth Portfolio and
Large Capitalization
Value Portfolio, respectively.
- ------------------------------------------------------------
- -------
Note 4. Portfolio Securities
Purchases and sales of portfolio securities, excluding
short-term
investments and written options, for the year ended December
31, 1998 were as
follows:
<TABLE>
<CAPTION>
Portfolio Purchases
Sales
- ------------------------------------ ------------ -------
- -----
<S> <C> <C>
Large Capitalization Growth......... $145,083,038
$164,216,644
Large Capitalization Value.......... 65,756,716
75,890,819
Small Capitalization Growth......... 108,701,849
121,868,075
Small Capitalization Value.......... 58,289,278
61,097,158
International Equity................ 106,570,816
126,772,097
International Bond.................. 32,598,383
33,866,356
Total Return Bond................... 256,662,873
222,850,789
Intermediate-Term Bond.............. 286,908,180
254,829,589
Mortgage Backed Securities.......... 33,637,340
17,356,713
</TABLE>
The federal income tax basis and unrealized
appreciation/depreciation of
each of the Portfolios' investments, excluding written
options as of December
31, 1998, were as follows:
<TABLE>
<CAPTION>
Net
Unrealized
Gross Unrealized
Portfolio Basis Appreciation
Appreciation Depreciation
- ---------------------- ------------ ------------- -----
- ------- ------------
<S> <C> <C> <C>
<C>
Large Capitalization
Growth.............. $196,151,144 $ 134,712,424
$143,114,577 $ 8,402,153
Large Capitalization
Value............... 201,088,072 80,271,840
91,353,485 11,081,645
Small Capitalization
Growth.............. 125,836,517 34,690,988
41,038,381 6,347,393
Small Capitalization
Value............... 126,193,395 15,956,085
30,694,040 14,737,955
International
Equity.............. 197,621,727 46,840,190
62,270,909 15,430,719
International Bond.... 30,014,065 326,405
737,256 410,851
Total Return Bond..... 81,383,641 392,202
542,239 150,037
Intermediate-Term
Bond................ 111,341,635 680,058
1,080,305 400,247
Mortgage Backed
Securities.......... 70,733,726 1,809,741
2,086,796 277,055
</TABLE>
For federal income tax purposes, the Mortgage Backed
Securities Portfolio
had a capital loss carryforward as of December 31, 1998 of
approximately
$458,600 which expires in 2002. Such carryforward is after
utilization of
approximately $625,000 against net taxable gains realized
and recognized during
the year ended December 31, 1998. Accordingly, no capital
gain distributions are
expected to be paid to shareholders of the Mortgage Backed
Securities Portfolio
until future net gains have been realized in excess of such
carryforward. In
addition, the International Bond Portfolio and International
Equity Portfolio
are electing to treat net currency losses of approximately
$41,400 and $171,500,
respectively and the Small Capitalization Growth Portfolio,
the Total Return
Bond Portfolio, the Intermediate Term Bond Portfolio and the
Mortgage Backed
Portfolio are electing to treat net capital losses of
approximately $860,100,
$155,500, $374,100 and $22,000, respectively, incurred in
the two-month period
ended December 31, 1998 as having been incurred in the
following year.
At December 31, 1998, the Total Return and
Intermediate-Term Bond
Portfolios bought financial futures contracts. The
unrealized appreciation on
such contracts as of December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Total Return Bond Portfolio:
Value at
Value at Unrealized
Number of Expiration December 31,
Trade Appreciation
Contracts Type Date 1998
Date (Depreciation)
- ---------- --------------- ---------- ------------
- ----------- --------------
Long Positions:
<C> <S> <C> <C>
<C> <C>
123 5 yr. T-Note Mar. 1999 $13,941,281
$14,078,695 $ (137,414)
13 10 yr. T-Note Mar. 1999 1,549,031
1,569,242 (20,211)
7 Eurodollar Dec. 2000 1,657,600
1,656,513 1,087
7 Eurodollar Mar. 2001 1,658,913
1,656,800 2,113
7 Eurodollar Jun. 2001 1,658,388
1,655,863 2,525
3 Eurodollar Sept. 2001 710,550
712,163 (1,613)
1 Eurodollar Dec. 2001 236,488
235,475 1,013
1 Eurodollar Mar. 2002 236,688
235,525 1,163
1 Eurodollar Jun. 2002 236,625
235,463 1,162
12 90 day LIBOR Mar. 2000 2,360,924
2,356,366 4,558
- --------------
$ (145,617)
- --------------
- --------------
</TABLE>
- ------------------------------------------------------------
- --------------------
54
<PAGE>
<TABLE>
<CAPTION>
Intermediate-Term Bond Portfolio:
Value at
Value at Unrealized
Number of Expiration December 31,
Trade Appreciation
Contracts Type Date 1998
Date (Depreciation)
- ---------- --------------- ---------- ------------
- ----------- --------------
Long Positions:
<C> <S> <C> <C>
<C> <C>
200 5 yr. T-Note Mar. 1999 $22,668,750
$22,771,875 $ (103,125)
11 Eurodollar Mar. 2001 2,606,863
2,610,000 (3,137)
11 Eurodollar Jun. 2001 2,606,037
2,608,062 (2,025)
11 Eurodollar Sept. 2001 2,605,350
2,606,538 (1,188)
11 Eurodollar Dec. 2000 2,604,800
2,609,775 (4,975)
18 90 day LIBOR Mar. 2000 3,537,979
3,531,142 6,837
- --------------
$ (107,613)
- --------------
- --------------
</TABLE>
Transactions in options written during the year ended
December 31, 1998,
were as follows:
<TABLE>
<CAPTION>
Number of
Premiums
Target Total Return Contracts
Received
- ---------------------------------------- --------- ----
- ----
<S> <C> <C>
Options outstanding at December 31,
1997.................................. -- $
- --
Options written......................... 15
2,872
--------- ----
- ----
Options outstanding at December 31,
1998.................................. 15 $
2,872
--------- ----
- ----
--------- ----
- ----
<CAPTION>
Number of
Premiums
Intermediate-Term Bond Portfilio Contracts
Received
- ---------------------------------------- --------- ----
- ----
<S> <C> <C>
Options outstanding at December 31,
1997.................................. -- $
- --
Options written......................... 24
4,340
--------- ----
- ----
Options outstanding at December 31,
1998.................................. 24 $
4,340
--------- ----
- ----
--------- ----
- ----
</TABLE>
- ------------------------------------------------------------
- --------------------
Note 5. 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,
1998, PIFM and Prudential Bank & Trust owned 259,262 and
223,374 shares of the
International Bond Portfolio, respectively.
Transactions in shares of beneficial interest during
the year ended
December 31, 1998 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........................... 3,830,971
1,197,514 (4,954,992) 73,493
Large Capitalization Value
Portfolio........................... 3,668,396
1,982,225 (4,758,185) 892,436
Small Capitalization Growth
Portfolio........................... 3,052,747
408,882 (3,755,087) (293,458 )
Small Capitalization Value
Portfolio........................... 3,013,164
779,594 (3,677,883) 114,875
International Equity Portfolio........ 25,575,077
901,284 (27,414,057) (937,696 )
International Bond Portfolio.......... 1,135,046
142,350 (1,417,310) (139,914 )
Total Return Bond Portfolio........... 2,988,954
497,282 (1,866,519) 1,619,717
Intermediate-Term Bond Portfolio...... 5,691,190
690,608 (5,350,123) 1,031,625
Mortgage Backed Securities Portfolio.. 1,637,945
349,295 (1,876,495) 110,745
</TABLE>
Transactions in shares of beneficial interest during
the year ended
December 31, 1997 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........................... 3,273,409
2,367,133 (4,709,116) 931,426
Large Capitalization Value
Portfolio........................... 3,430,654
1,783,097 (4,539,037) 674,714
Small Capitalization Growth
Portfolio........................... 2,375,813
1,448,105 (3,049,714) 774,204
Small Capitalization Value
Portfolio........................... 2,564,741
1,051,562 (2,602,621) 1,013,682
International Equity Portfolio........ 23,121,459
2,177,188 (24,872,919) 425,728
International Bond Portfolio.......... 1,097,817
157,365 (1,963,982) (708,800)
Total Return Bond Portfolio........... 1,432,562
273,531 (1,719,713) (13,620)
Intermediate-Term Bond Portfolio...... 2,836,650
620,854 (4,075,790) (618,286)
Mortgage Backed Securities Portfolio.. 1,308,386
354,474 (2,049,370) (386,510)
</TABLE>
- ------------------------------------------------------------
- --------------------
55
<PAGE>
<TABLE>
<S> <C>
THE TARGET PORTFOLIO TRUST
Report of Independent
Accountants
</TABLE>
The Shareholders and Trustees of
The Target Portfolio Trust
In our opinion, the accompanying statements of assets and
liabilities, including
the portfolios of investments, and the related statements of
operations and of
changes in net assets and the financial highlights present
fairly, in all
material respects, the financial position 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 (constituting The Target Portfolio Trust,
hereafter referred to
as the 'Trust') at December 31, 1998, the results of each of
their operations
for the year then ended, and the changes in each of their
net assets and each of
their financial highlights for each of the two years in the
period then ended,
in conformity with generally accepted accounting principles.
These financial
statements and financial highlights (hereafter referred to
as 'financial
statements') are the responsibility of the Trust's
management; our
responsibility is to express an opinion on these financial
statements based on
our audits. We conducted our audits of these financial
statements in accordance
with generally accepted auditing standards which require
that we plan and
perform the audit to obtain reasonable assurance about
whether the financial
statements are free of material misstatement. An audit
includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial
statements, assessing the accounting principles used and
significant estimates
made by management, and evaluating the overall financial
statement presentation.
We believe that our audits, which included confirmation of
securities at
December 31, 1998 by correspondence with the custodian and
brokers, provide a
reasonable basis for our opinion expressed above. The
accompanying financial
highlights for the three periods in the period ended
December 31, 1996 were
audited by other independent accountants, whose opinion
dated February 21, 1997
was unqualified.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
February 19, 1999
- ------------------------------------------------------------
- --------------------
56
<PAGE>
<TABLE>
<S> <C> <C>
THE TARGET PORTFOLIO TRUST
Federal Income Tax Information
(Unaudited)
</TABLE>
As required by the Internal Revenue Code, we wish to
advise you as to the
federal tax status of dividends and distributions paid by
the Fund during its
fiscal year ended December 31, 1998. Further, we wish to
advise you of the
percentage of the ordinary income dividends (excluding long-
term capital gains
distributions) paid in 1998 that qualify for the corporate
dividends received
deduction available to corporate taxpayers.
Detailed below, please find the aggregate dividends and
distributions, per
share, paid by each portfolio during the year ended December
31, 1998 as well as
the corporate dividend received deduction percentage:
<TABLE>
<CAPTION>
Ordinary Dividends*
Redemptions as Distributions Corporate
------------------------ Long-Term
- ----------------------------------------- Dividend
Short-Term Capital Gains Total
Dividends Short-Term Long-Term
Received
Portfolio Income Capital Gains Distributions and
Distributions Income Capital Gains Capital Gains
Deduction
- ----- ------ -------------- -------------- ------
- ----------- ------ -------------- -------------
- ---------
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
Large
Capitalization
Growth
Portfolio... -- -- $1.280 $
1.280 -- -- $ 0.156
0%
Large
Capitalization
Value
Portfolio... $0.270 $0.075 1.618
1.963 $0.024 $0.002 0.159
96%
Small
Capitalization
Growth
Portfolio... -- 0.034 0.615
0.649 -- -- 0.035
0%
Small
Capitalization
Value
Portfolio... 0.070 0.071 1.190
1.331 0.010 0.009 0.170
93%
International
Equity
Portfolio... 0.100 0.239 0.596
0.935 0.082 0.147 0.424
0%
International
Bond
Portfolio... 0.370 -- 0.040
0.410 -- -- --
0%
Total
Return
Bond
Portfolio... 0.580 0.255 0.085
0.920 0.032 0.018 0.006
0%
Intermediate-Term
Bond
Portfolio... 0.610 0.06 0.110
0.780 0.028 0.004 0.006
0%
Mortgage
Backed
Securities
Portfolio.. 0.630 -- --
0.630 -- -- --
0%
U.S.
Government
Money
Market
Portfolio... 0.048 -- --
0.048 -- -- --
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.
Further, we wish to advise you that during 1998, the
International Equity
Portfolio passed through a foreign tax credit of $0.0389 per
share.
<TABLE>
<S> <C> <C>
Important Notice For Certain
Shareholders (Unaudited)
</TABLE>
Many states do not tax the portion of mutual fund
dividends attributed to
interest from U.S. Government obligations. Listed below is
the percentage of
interest earned by the following Target portfolios from U.S.
Government
obligations for the calendar year 1998.
To determine the amount of your dividends which may be
exempt from state and
local tax, simply multiply the amount in Box 1 of your 1099-
Div (Ordinary
Dividends) by the percentage listed below. These percentages
do not apply to
taxable capital gain distributions paid by the portfolios.
The International Equity Portfolio has elected to give
the benefit of foreign
tax credit to its shareholders. Accordingly, shareholders
who must report their
gross income dividends and distributions in a federal income
tax return will be
entitled to a foreign tax credit, or an itemized deduction
in computing their
U.S. income tax liability. It is generally more advantageous
to claim rather
than take a deduction. For the fiscal year ended December
31, 1998 the
International Equity Portfolio intends on passing through
$.0389 of ordinary
income distributions as a foreign tax credit.
<TABLE>
<CAPTION>
Percentage of Interest
from
U.S. Government
Portfolio* obligations
- ------------------------------- --------------------------
- -
<S> <C>
Small Capitalization Value
Portfolio.................... 8.64%
International Equity
Portfolio.................... 6.77%
International Bond Portfolio... 3.47%
Total Return Bond Portfolio.... 5.96%
Intermediate-Term Bond
Portfolio.................... 4.20%
U.S. Government Money Market
Portfolio.................... 8.87%
</TABLE>
* Due to certain minimum portfolio holding requirements
in California,
Connecticut and New York, residents of those states will not
be able to exclude
1998 U.S. interest income from state and local taxes.
Please consult your tax advisor 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.
- ------------------------------------------------------------
- --------------------
57
<PAGE>
Large Capitalization
Growth Portfolio
<TABLE>
<CAPTION>
Average Annual Total Returns
- ------------------------------------------------------------
- -----------
<S> <C> <C> <C>
With Advisory Fee One Year Five Years Since
Inception (1/5/93)
42.07% 19.57%
15.71%
- ------------------------------------------------------------
- -----------
Without Advisory Fee One Year Five Years Since
Inception (1/5/93)
44.22% 21.38%
17.48%
- ------------------------------------------------------------
- -----------
</TABLE>
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
- --Large Capitalization Growth Portfolio --S&P 500
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 16.00% and the growth of a $10,000
investment would
have been $24,332.
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 large-cap equity funds
and other indexes
may portray different comparative performance. Investors
cannot invest
directly in an index.
58
<PAGE>
Large Capitalization
Value Portfolio
<TABLE>
<CAPTION>
Average Annual Total Returns
- ------------------------------------------------------------
- -----------
<S> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
- ------------------------------------------------------------
- -----------
<S> <C> <C> <C>
With Advisory Fee One Year Five Years Since
Inception (1/5/93)
8.60% 16.38%
13.65%
Without Advisory Fee One Year Five Years Since
Inception (1/5/93)
10.25% 18.14%
15.38%
- ------------------------------------------------------------
- -----------
</TABLE>
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
- --Large Capitalization Value Portfolio --S&P 500
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 13.93% and the growth of a $10,000
investment would
have been $21,843.
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 large-cap equity funds
and other indexes
may portray different comparative performance. Investors
cannot invest directly
in an index.
59
<PAGE>
Small Capitalization
Growth Portfolio
<TABLE>
<CAPTION>
Average Annual Total Returns
- ------------------------------------------------------------
- -----------
<S> <C> <C> <C>
With Advisory Fee One Year Five Years Since
Inception (1/5/93)
1.02% 10.75% 11.77%
(11.76%)*
- ------------------------------------------------------------
- -----------
Without Advisory Fee One Year Five Years Since
Inception (1/5/93)
2.55% 12.42% 13.48%
(13.46%)*
- ------------------------------------------------------------
- -----------
</TABLE>
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
- --Small Capitalization Growth Portfolio --
Russell 2000
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 12.05% and the growth of a $10,000
investment would
have been $19,773.
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 10%
of the total market
capitalization of the Russell 3000 Index. 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 small-cap
equity funds and
other indexes may portray different comparative performance.
Investors cannot
invest directly in an index.
*Without Waiver of Management Fees and/or expense
subsidizations, the
Portfolio's Average Annual Total returns would have been
lower, as indicated
in parentheses ( ).
60
<PAGE>
Small Capitalization
Value Portfolio
<TABLE>
<CAPTION>
Average Annual Total Returns
- ------------------------------------------------------------
- -----------
<S> <C> <C> <C>
With Advisory Fee One Year Five Years Since
Inception (1/5/93)
-8.02% 7.79% 11.21%
(11.20%)*
- ------------------------------------------------------------
- -----------
Without Advisory Fee One Year Five Years Since
Inception (1/5/93)
-6.62% 9.42% 12.91%
(12.90%)*
- ------------------------------------------------------------
- -----------
</TABLE>
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
- --Small Capitalization Value Portfolio --Russell
2000
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 11.49% and the growth of a
$10,000 investment
would have been $19,189.
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 10%
of the total market
capitalization of the Russell 3000 Index. 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 small-cap
equity funds and
other indexes may portray different comparative performance.
Investors cannot
invest directly in an index.
*Without Waiver of Management Fees and/or expense
subsidizations, the
Portfolio's Average Annual Total returns would have been
lower, as indicated
in parentheses ( ).
61
<PAGE>
International Equity
Portfolio
<TABLE>
<CAPTION>
Average Annual Total Returns
- ------------------------------------------------------------
- -----------
<S> <C> <C> <C>
With Advisory Fee One Year Five Years Since
Inception (1/5/93)
13.76% 9.56%
12.81%
- ------------------------------------------------------------
- -----------
Without Advisory Fee One Year Five Years Since
Inception (1/5/93)
15.49% 11.22%
14.53%
- ------------------------------------------------------------
- -----------
</TABLE>
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
- --International Equity Portfolio --Morgan
Stanley EAFE Index
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
of 1.25%, the average annual total return since inception
would have been
13.09% and the growth of a $10,000 investment would have
been $20,899.
The EAFE Index is an arithmetical average weighted by market
value of the
performance of over 1,000 non-U.S. companies representing 20
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 indexes may portray
different comparative
performance. Investors cannot invest directly in an index.
62
<PAGE>
International Bond
Portfolio
<TABLE>
<CAPTION>
Average Annual Total Returns
- ------------------------------------------------------------
- -----------
<S> <C> <C>
With Advisory Fee One Year Since Inception
(5/17/94)
7.47% 3.63%
(3.53%)*
- ------------------------------------------------------------
- -----------
Without Advisory Fee One Year Since Inception
(5/17/94)
8.55% 4.67%
(4.58%)*
- ------------------------------------------------------------
- -----------
</TABLE>
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
- --International Bond Portfolio --Salomon Smith
Barney Non-U.S.
World
Government WB Index
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 Smith Barney Non-U.S. World
Government Bond Index
(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 since inception would have been 3.26%
and the growth of a
$10,000 investment would have been $11,604.
The WB Index measures the total return performance of high-
quality securities
in major sectors of the international bond market. The WB
index covers
approximately 600 bonds from 17 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 1 year of remaining life. The WB 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 WB
Index may differ
substantially from the securities in the Portfolio. The WB
Index is not the
only index that may be used to characterize performance of
international bond
funds and other indexes may portray different comparative
performance.
Investors cannot invest directly in an index.
*Without Waiver of Management Fees and/or expense
subsidizations, the
Portfolio's Average Annual Total returns would have been
lower, as indicated
in parentheses ( ).
63
<PAGE>
Total Return Bond
Portfolio
<TABLE>
<CAPTION>
Average Annual Total Returns
- ------------------------------------------------------------
- -----------
<S> <C> <C> <C>
With Advisory Fee One Year Five Years Since
Inception (1/5/93)
7.20% 6.39% (6.33%)*
6.85% (6.77%)*
- ------------------------------------------------------------
- -----------
Without Advisory Fee One Year Five Years Since
Inception (1/5/93)
8.28% 7.47% (7.40%)*
7.93% (7.85%)*
- ------------------------------------------------------------
- -----------
</TABLE>
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
- --Total Return Bond Portfolio --Lehman
Gov't/Corp. Index
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 6.48% and the growth of a
$10,000 investment
would have been $14,566.
The LGCI is a weighted index comprised of publicly traded
intermediate and
long-term government and corporate debt with an average
maturity of ten 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 indexes may portray
different comparative
performance. Investors cannot invest directly in an index.
*Without Waiver of Management Fees and/or expense
subsidizations, the
Portfolio's Average Annual Total returns would have been
lower, as indicated
in parentheses ( ).
64
<PAGE>
Intermediate-Term
Bond Portfolio
<TABLE>
<CAPTION>
Average Annual Total Returns
- ------------------------------------------------------------
- -----------
<S> <C> <C> <C>
With Advisory Fee One Year Five Years Since
Inception (1/5/93)
6.02% 5.86% 6.27%
(6.25%)*
- ------------------------------------------------------------
- -----------
Without Advisory Fee One Year Five Years Since
Inception (1/5/93)
7.09% 6.93% 7.34%
(7.33%)*
- ------------------------------------------------------------
- -----------
</TABLE>
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
- --Intermediate-Term Bond Portfolio --Lehman Int.
Gov't/Corp. Index
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
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 5.90% and the
growth of a $10,000
investment would have been $14,095.
The LIGC Index 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 10 years remaining to maturity,
rated investment grade
and having $50 million or more outstanding. The LIGC Index
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 Index may
differ substantially from the securities in the Portfolio.
The LIGC Index is
not the only index that may be used to characterize
performance of
intermediate-term bond funds and other indexes may portray
different
comparative performance. Investors cannot invest directly in
an index.
*Without Waiver of Management Fees and/or expense
subsidizations, the
Portfolio's Average Annual Total returns would have been
lower, as indicated
in parentheses ( ).
65
<PAGE>
Mortgage Backed
Securities Portfolio
<TABLE>
<CAPTION>
Average Annual Total Returns
- ------------------------------------------------------------
- -----------
<S> <C> <C> <C>
With Advisory Fee One Year Five Years Since
Inception (1/5/93)
5.31% 6.08% (6.04%)* 6.37%
(6.29%)*
- ------------------------------------------------------------
- -----------
Without Advisory Fee One Year Five Years Since
Inception (1/5/93)
6.37% 7.15% (7.11%)* 7.45%
(7.36%)*
- ------------------------------------------------------------
- -----------
</TABLE>
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
- --Mortgage Backed Securities Portfolio --Salomon Smith
Barney MBS Index
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 Smith Barney Mortgage
Backed Securities (MBS)
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 6.00%
and the growth of a
$10,000 investment would have been $14,179.
The Mortgage Index is comprised of 30- and 15- year GNMA,
FNMA and FHLMC
pass-through, and FNMA and FHLMC balloon mortgages. The
Mortgage Index is an
unmanaged index and includes the reinvestment of all cash
flows, 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
indexes may portray
different comparative performance. Investors cannot invest
directly in an
index.
*Without Waiver of Management Fees and/or expense
subsidizations, the
Portfolio's Average Annual Total returns would have been
lower, as indicated
in parentheses ( ).
66
<PAGE>
Trustees
Eugene C. Dorsey
Douglas H. McCorkindale
Thomas T. Mooney
Brian M. Storms
Officers
Brian M. Storms
President
Robert F. Gunia
Vice President
Grace C. Torres
Treasurer
Stephen M. Ungerman
Assistant Treasurer
David F. Connor
Secretary
Manager
Prudential Investments Fund Management LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Investment Advisers
Columbus Circle Investors
Metro Center One Station Plaza
Stamford, CT 06902
Delaware International
Advisers Ltd.
80 Cheapside
London, EC2V6EE
United Kingdom
Hotchkis and Wiley
800 West Sixth Street
Los Angeles, CA 90017
INVESCO Capital Management, Inc.
1315 Peachtree Street
Suite 500
Atlanta, GA 30309
Investment Advisers, Inc.
3700 First Bank Place
P.O. Box 357
Minneapolis, MN 55440
Lazard Asset Management
30 Rockefeller Plaza
New York, NY 10112
Oak Associates, Ltd.
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 92660
Wellington
Management Company
75 State Street
Boston, MA 02109
Wood, Struthers & Winthrop
Management Corp.
277 Park Avenue
New York, NY 10172
Distributor
Prudential Investment
Management Services LLC
Gateway Center Three
100 Mulberry Street
Newark, NJ 07102-4077
Custodian
State Street Bank and
Trust Company
One Heritage Drive
North Quincy, MA 02171
Transfer Agent
Prudential Mutual Fund
Services LLC
Raritan Plaza One
Edison, NJ 08837
Independent Accountants
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Legal Counsel
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
Chicago, IL 60610-4795
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
(LOGO)
