<PAGE>
(ICON)
The
Target Portfolio
Trust
(GRAPHIC)
Annual Report
December 31, 1999
(LOGO)
<PAGE>
(ICON)
<PAGE>
The Target Portfolio Trust
Table of Contents
Page
Shareholder Letter 2
Portfolio of Investments:
Large Capitalization Growth Portfolio 8
Large Capitalization Value Portfolio 10
Small Capitalization Growth Portfolio 14
Small Capitalization Value Portfolio 17
International Equity Portfolio 22
International Bond Portfolio 25
Total Return Bond Portfolio 27
Intermediate-Term Bond Portfolio 31
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
Supplementary Proxy Information 58
Target's Shareholder Services 61
1
<PAGE>
Dear Target Shareholder:
Economies around the world began to recover in 1999 as
a global financial crisis that had roiled financial
markets in 1997 and 1998 subsided. A flight of capital
away from emerging market countries had resulted in
economic recessions and weakened currencies in many
of these nations. But in 1999, the weaker currencies
helped boost their exports and revive their economies.
Because the world economy was more stable, investors
poured money into stocks and bonds of developing
markets, and stocks in Latin America, Eastern
Europe, and Asia rose dramatically. Japanese stocks
also rallied as that nation attacked its structural,
financial, and business problems.
<TABLE>
Average Annual Total Returns as of December 31, 1999
<CAPTION>
Since
Portfolios One Year Five Years Inception1
<S> <C> <C> <C>
Large Capitalization Growth 53.05% 30.76% 20.44%
Large Capitalization Value -5.80 14.85 10.64
Small Capitalization Growth 27.27 17.09 13.87 (13.86)2
Small Capitalization Value -0.12 10.64 9.52 (9.51)2
International Equity 21.46 14.20 14.01
International Bond -6.82 1.87 (1.85)2 1.69 (1.60)2
Total Return Bond -1.66 7.02 (7.00)2 5.59 (5.52)2
Intermediate-Term Bond 0.29 6.62 5.39 (5.38)2
Mortgage Backed Securities 0.52 6.51 (6.49)2 5.52 (5.44)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 1.0% 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 ( ).
The pickup in global economic demand boosted commodity
prices. The United States saw strong advances for
industrial cyclical stocks such as basic materials
and capital goods. Booming economies, however, often
lead to higher interest rates, so investors were
cautious about rising rates throughout the year.
Since the prices of existing bonds fall when current
yields rise, the overall return on bonds was very poor.
Growth stocks are normally interest-ratesensitive because rising
rates reduce the value of future earnings. In addition,
growth companies looking to expand may borrow from banks
or issue bonds. This year, however, a surging tech sector
provided an environment in which companies could raise
funds relatively easily by issuing stock. The tech-heavy
NASDAQ Composite Index closed at a record 4,069, an 86%
gain for the year. Many technology stocks had extraordinary
returns, whether they were giant companies like Cisco Systems
and Intel or initial public offerings (IPOs) of Internet
companies with no earnings.
Although some inexpensive sectors of the U.S. stock
market--capital goods, basic materials, consumer
cyclicals, and energy--had good returns in 1999,
value stocks overall trailed growth by a very broad
margin. Increases in prices of U.S. stocks were
highly concentrated. In the Russell 3000, which
reflects all market capitalization sectors, growth
stocks returned 34% while value stocks gained only
7%. The divergences were strongest among
smaller-cap stocks--the Russell Midcap Growth Index
gained 51%; the Russell 2000 (small-cap) Growth Index
2
<PAGE>
rose 43%. In contrast, both small-cap value and
mid-cap value stocks declined during 1999. At the
beginning of 1999, value stocks were
already much cheaper than growth stocks, and the
sharp difference in performance over the course of
the year increased these disparities in relative value.
Geographically broad-based stock gains
The improved commodities markets and lower
production costs due to currency devaluations made
an excellent environment for the stocks of many
developing countries. In Latin America, Mexico
benefited from the increased linkage of its economy
to the developed countries to its north; its stocks
soared 82% (in U.S. dollars). Brazil also had a strong
year. Both were rebounding from severe declines in 1998.
Among developed markets, the telecommunications sector
saw considerable jockeying for position, with merger
and takeover offers common. Telecom giant Nokia led
the Nordic region to an 88% return. Developed Europe,
as a whole, trailed the global markets, but picked up
toward the end of the year. The Japanese stock market
rose 62% in U.S. dollars (in part from the rise of the
yen with respect to the U.S. dollar).
How did our funds perform?
The Large Capitalization Growth Portfolio, managed
by Columbus Circle Investors and Oak Associates,
posted a substantial 55.37% gain for the year
primarily on the strength of their
focus on technology stocks. Both managers
<TABLE>
Performance Summary as of December 31, 1999
<CAPTION>
12/31/98 12/31/99 12-Month* No. of
Portfolios NAV NAV Total Return Funds**
<S> <C> <C> <C> <C>
Large Capitalization Growth $18.29 $25.68 55.37%
Lipper Large-Cap Growth Fund Avg 38.09 364
Large Capitalization Value 15.87 13.01 -4.37
Lipper Multi-Cap Value Fund Avg 7.78 490
Small Capitalization Growth 15.35 17.47 29.20
Lipper Small-Cap Growth Fund Avg 62.63 271
Small Capitalization Value 14.98 14.96 1.39
Lipper Small-Cap Value Fund Avg 6.33 312
International Equity 15.54 17.37 23.30
Lipper International Fund Avg 40.80 618
International Bond 9.52 8.48 -5.88
Lipper International Income Fund Avg -4.60 57
Total Return Bond 10.49 9.86 -0.67
Lipper Corp Debt BBB-Rated Fund Avg -1.68 132
Intermediate-Term Bond 10.36 9.92 1.30
Lipper Inter. Inv.-Grade Debt Fund Avg -1.31 279
Mortgage Backed Securities 10.47 9.97 1.54
Lipper U.S. Mortgage Fund Avg 0.65 62
U.S. Government Money Market 1.00 1.00 4.67
Lipper U.S. Gov't Money Fund Avg 4.47 122
</TABLE>
* Source: Lipper Inc. for Lipper averages and
Prudential Investments Fund Management LLC for
Target returns. Target returns are in boldface
type. Total 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 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.
The Lipper Average is unmanaged. Large-Cap Growth funds
normally invest in companies with long-term earnings
expected to grow significantly faster than the
earnings of stocks represented in a major unmanaged
stock index. Multi-Cap Value funds seek long-term
growth of capital by investing in companies that
are considered undervalued relative to a major
unmanaged stock index based on price-to-earnings,
book value, asset value, or other factors.
Small-Cap Growth funds normally invest in
companies with long-term earnings expected
to grow significantly faster than the earnings
of stocks represented in a major unmanaged stock
index. Small-Cap Value funds seek long-term growth
of capital by investing in companies that are
considered undervalued relative to a major unmanaged
stock index based on price-to-current earnings, book
value, asset value, or other factors. International
funds invest their assets in securities with primary
trading markets outside the United States. International
Income funds invest primarily in U.S. dollar and non-U.S.
dollar debt securities of issuers located in at least
three countries, excluding the United States, except
in periods of market weakness. Corporate Debt BBB-Rated
funds invest at least 65% of their assets in corporate
and government debt issues rated in the top four credit
quality grades. Intermediate Investment-Grade Debt funds invest at
least 65% of their assets in investment-grade debt issues
(rated in the top four credit quality grades) with
dollar-weighted average maturities of five to ten
years. U.S. Mortgage funds invest at least 65% of
their assets in mortgages/securities
issued or guaranteed as to principal and interest
by the U.S. government and certain federal agencies.
U.S. Government Money Market funds invest principally
in financial instruments issued or guaranteed by the
U.S. government, its agencies or
instrumentalities, with dollar-weighted average
maturities of less than 90 days. These money market
funds intend to keep a constant net asset value.
3
<PAGE>
also had focused on financial companies, which added
strong performance in the first half
of the year, but hurt in the second half as investors
became more concerned about the possibility of rising
interest rates. Consumer cyclicals and utilities had a
positive impact early in the year, each particularly
strong for one of the Portfolio's
segments, but hurt later when investors focused
narrowly on technology stocks. Oak Associates also
has a focus on healthcare, which performed poorly
in 1999 primarily because of regulatory concerns.
However, Oak was particularly well positioned to
benefit from the strong technology gains, and its
superior performance pulled the Portfolio well above
its large-cap growth peers.
The Large Capitalization Value Portfolio, managed by
INVESCO and Hotchkis and Wiley, had a negative return primarily
because value stocks were out of favor during most of
the year. Much of the markets' gains, particularly
toward the end of the year, were in technology stocks
that already were expensive on measures of value, such
as price-to-earnings ratios. However, the Portfolio's
4.37% loss was even poor when compared with value
mutual funds. Both managers follow their value
discipline strictly--an important characteristic
for an asset allocation plan. For example, Hotchkis
and Wiley continue to have no exposure to technology
because the enthusiasm for technology stocks has left
few opportunities to buy at a value price. After this
long period of value underperformance, many other
managers have shaded their discipline so they could share in
technology gains. The Portfolio's managers took some profits
on their good performers and took advantage of the
large value discrepancies in the market to purchase
stocks that offered compelling value. INVESCO has
added financials and retailers, while Hotchkis and
Wiley expects increased demand for basic commodities
and manufactured goods.
The Small Capitalization Growth Portfolio was in the
best-performing asset class of the year, so even its
high 29.20% return trailed its
benchmark significantly. Nicholas Applegate Capital
Management and Investment Advisors, Inc. were
replaced during the year by Sawgrass Asset
Management and Fleming Asset Management USA.
Sawgrass increased the Portfolio's exposure to energy
exploration and production companies and to
the semiconductor industry. Both new managers
refocused the technology holdings and benefited
from the fourth-quarter surge in technology small
caps. However, both focus on companies with rising earnings.
In 1999, the small-cap growth market rewarded
highly speculative stocks. Stocks of the Russell
2000 companies with no earnings appreciated an
average of 85%. IPOs (initial public offerings
of stock) rose 300% to 600% from their first-day closing
prices. The Portfolio's managers prefer solid,
growing companies that have a greater chance of
surviving. In 1999, this sensible strategy actually
hurt performance.
The Small Capitalization Value Portfolio, managed by
Lazard Asset Management and Wood Struthers & Winthrop,
was operating in the most neglected group of stocks. As
small-cap investors focused narrowly on technology firms, the
4
<PAGE>
primary driver of small-cap value performance throughout
the year was takeover activity. Business
rivals, company managers, and suppliers or customers
were in an excellent position to appreciate and take
advantage of the bargain prices on these neglected
companies. The 1.39% return of the Small Capitalization
Value Portfolio trailed its benchmark. We suspect it is
because its competitors allowed their holdings to creep
upward in capitalization and valuations, since the
benchmark Lipper Average was well above the return
of the unmanaged Russell 2000 Value Index. Again, investment
discipline hurt in 1999, as the least expensive
stocks in price-to-earnings ratios fared poorest
and the most expensive fared best.
The International Equity Portfolio, managed by
Lazard Asset Management, returned 23.30% in 1999, as investors
regained confidence in global economic growth. However, Lazard
believed that Japanese stocks soared before there was solid
evidence of either economic recovery or genuine commitment
to needed restructuring. The Portfolio trailed its benchmark in
part because it did not have an emphasis on Japan, although
its excellent selection among Japanese stocks was a
mitigating factor. Its telecommunications stocks also
performed well. However, its focus on strong global
consumer brands and retail stocks held down performance
throughout the year because investors favored technology
and telecommunications stocks around the world. Lazard
continues to believe that the strong earnings growth of
global brands will regain market favor.
A challenging year for U.S. bonds
1999 proved to be the worst year in the history of
the 30-year U.S. Treasury bond. An investor who
purchased this Treasury bond at a 5.10% yield at
the beginning of 1999 lost more than 14% by the end of the year.
Many investors sold Treasuries, believing they no
longer needed these conservative securities because
the global financial crisis had begun to fade in the
first quarter of 1999. Later in the year, Treasuries
sold off amid fear that inflation was
building in the domestic and global economies. Rising
inflation hurts bonds by eroding the value of their
fixed- interest payments.
Concerns about mounting inflation were well founded.
Crude oil prices more than doubled in 1999, albeit from their
lowest level in more than a decade. Furthermore, the
lowest U.S. unemployment rate in 30 years fueled fears
of growing wage pressures. Consumers and businesses
spent vigorously, threatening to boost the prices of
goods and services. With the U.S.
economy growing rapidly, the Federal Reserve was
bound to increase short-term interest rates to
slow economic growth and prevent spiraling inflation.
To compensate for the risk of rising short-term rates,
investors drove prices of Treasuries lower,
which caused their yields to climb. The Treasury
market was down 2.56% in 1999, as measured by the
Lehman Brothers U.S. Treasury index.
5
<PAGE>
In the rising interest-rate environment, other
fixed-income markets in the United States also sold off.
Their prices, however, did not decline as much
as the prices of Treasuries because investors
worried less about credit risks in 1999 than
during the global financial crisis of 1998 and
1997. As a result, spreads--or the differences
between the yields of other U.S. bond markets
and Treasuries--generally declined in 1999,
albeit with a fair amount of volatility. Among
the U.S. bond market sectors that performed
better than Treasuries in 1999 were investment-grade
corporate bonds, federal government
agency securities, high-yield (junk) bonds,
asset-backed securities, and mortgage-backed
securities. Although stronger-than-expected
economic growth hurt bond markets in the United
States, emerging market bonds benefited from the
resurgence in the global economy. As measured by
the Lehman Brothers Emerging Market Index, they
returned 23.07% for the year, beating all other
fixed-income markets.
The International Bond Portfolio, managed by
Delaware International Advisors, fell 5.88% as
evidence mounted that global growth was accelerating.
The Portfolio benefited from its focus on commodity-
related countries with sound fiscal policies and
relatively cheap currencies--Australia, New Zealand,
and Canada. However, it was hurt by its
underweight in Japanese bonds, which it thought to
be poor value and at risk from an overvalued yen.
The yen continued to climb, as did Japanese bonds.
The portfolio managers continue to believe that
Japanese bonds and the yen are overvalued, and
that there are better opportunities in Australia and New Zealand.
The Total Return Bond Portfolio, managed by Pacific
Investment Management Company (PIMCO), declined
0.67% in a difficult market. Although the rare
negative years on bonds are always
very disappointing, this was a better-than-average
performance for a U.S. bond portfolio. The threat
of rising interest rates, although it hurt most
bonds, helped mortgage-backed securities because
it reduced the threat that mortgage holders would
refinance. The Portfolio was somewhat more exposed
to rising rates from the average duration of its
bonds than its benchmark, but it also had a focus
on mortgage-backed bonds and emerging market bonds,
both of which had relatively strong
returns.
The Intermediate-Term Bond Portfolio, also managed
by PIMCO, returned a positive 1.30% despite its
negative environment. It did this by reducing its
exposure to interest-rate changes in the second
quarter of the year and by a focus on
mortgage-backed securities. Although the prices
of existing bonds fall when current interest
rates rise, the price of mortgage securities
often increase when interest rates go up because
fewer homeowners refinance their mortgages, and so their
interest-rate exposure is more stable. PIMCO
expects at least one additional interest-rate
increase in 2000, so they are keeping their
overall exposure to such moves at or slightly
below their benchmark.
6
<PAGE>
The Mortgage Backed Securities Portfolio, managed by
Wellington Management, was in the strongest-performing
U.S. high-quality bond sector. In one of the few
fixed-income markets to eke out a positive year,
the Portfolio's 1.54% return was above the Lipper
Average for U.S. mortgage funds. Wellington made
few changes in its strategy, continuing to focus
on agency pass-throughs. These are securities that
pool the cash flows of individual mortgages and
expose the purchaser to the fluctuations in exposure to interest
rates caused by mortgage prepayments. They perform
better when the risk of prepayments is lower, i.e.,
in rising interest-rate environments.
The U.S. Government Money Market Portfolio, also
managed by Wellington Management, returned 4.67%, an
above-average return for its peer group. In
anticipation of rising short-term interest
rates, Wellington decreased the Portfolio's
average maturity in the second quarter and
increased its positions in rapidly repricing
repurchase agreements. This
improved the Portfolio's tracking as the
interest rates on federal funds increased.
In the fourth quarter, Wellington reduced
its commitment to repurchase agreements and
agency securities and increased its holdings
of floating-rate notes, which
maintain its exposure to rising interest rates.
Maintaining your asset allocation
After a divergent market such as this, you may find
that the balance among your holdings has changed.
You may have a larger proportion in stocks than you are
comfortable with, or a larger proportion in growth
stocks. It is a good idea to rebalance your holdings
to restore the allocation that you decided was best
for you. Moreover, rebalancing may, over time, lead
you to buy more of asset classes when
they are cheap and sell some when they are
expensive--a sensible practice.
You should be comfortable with an allocation
that you have planned, rather than allowing
your assets to drift into a distribution that
you would not have chosen.
Our commitment to style consistency in the Target
program helps you to maintain the exposure profile
you have selected. As we mentioned in commenting on
individual portfolios, the current investment
environment, in which we have had several years of
superior performance from one style, has lured
many managers away from their disciplines. Since
such successful runs historically have always come
to an end, and these ends often come rapidly, a
diversified asset allocation is your best protection.
With Target, you can be confident that the investment
styles are as represented.
John R. Strangfeld
President
The Target Portfolio Trust
7
<PAGE>
THE TARGET PORTFOLIO TRUST
Large Capitalization Growth
Portfolio
Portfolio of Investments
December 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--96.5%
Common Stocks--96.5%
Banks--3.5%
114,000 Bank of America Corp.......... $ 5,721,375
444,900 MBNA Corp..................... 12,123,525
------------
17,844,900
------------
Broadcasting--1.6%
65,600 AMFM, Inc.*................... 5,133,200
32,700 Univision Communications, 3,341,531
Inc., Class A*..............
------------
8,474,731
------------
Business Services--3.1%
284,500 Cendant Corp.*................ 7,557,031
90,300 J.D. Edwards & Co.*........... 2,697,713
55,600 Omnicom Group, Inc............ 5,560,000
------------
15,814,744
------------
Computers & Business Equipment--1.6%
306,000 Compaq Computer Corp.......... 8,281,125
------------
Computer Software & Services--10.4%
42,000 Adobe Systems, Inc............ 2,824,500
27,400 Electronic Arts, Inc.*........ 2,301,600
162,000 EMC Corp.*.................... 17,698,500
169,000 Microsoft Corp.*.............. 19,730,750
251,200 Parametric Technology 6,798,100
Corp.*......................
57,500 Synopsys, Inc.*............... 3,838,125
------------
53,191,575
------------
Drugs & Healthcare--9.3%
86,200 Amgen, Inc.*.................. 5,177,387
233,200 Columbia/HCA Healthcare 6,835,675
Corp........................
46,400 Guidant Corp.................. 2,180,800
34,700 Johnson & Johnson, Inc........ 3,231,437
158,000 Medtronic, Inc................ 5,757,125
VALUE
SHARES DESCRIPTION (NOTE 1)
125,200 Merck & Co., Inc............. $ 8,396,225
43,900 PE Corp...................... 5,281,719
147,900 Pfizer, Inc.................. 4,797,506
140,100 Tenet Healthcare Corp.*...... 3,292,350
37,800 Warner-Lambert Co............ 3,097,238
------------
48,047,462
------------
Electronic Components--13.1%
239,800 Applied Materials, Inc.*..... 30,379,662
520,800 Atmel Corp.*................. 15,396,150
263,900 Intel Corp................... 21,722,269
------------
67,498,081
------------
Electronics--28.2%
83,000 Adaptec, Inc.*............... 4,139,625
57,100 Agilent Technologies, 4,414,544
Inc.*......................
254,300 CIENA Corp.*................. 14,622,250
560,650 Cisco Systems, Inc.*......... 60,059,631
212,000 Linear Technology Corp....... 15,171,250
400,000 Maxim Integrated Products, 18,875,000
Inc.*......................
54,900 Motorola, Inc................ 8,084,025
440,000 Xilinx Inc.*................. 20,006,250
------------
145,372,575
------------
Financial Services--6.0%
46,000 Chase Manhattan Corp......... 3,573,625
229,975 Citigroup Inc................ 12,777,986
75,000 Morgan Stanley Dean Witter & 10,706,250
Co.........................
96,100 Wells Fargo Co............... 3,886,044
------------
30,943,905
------------
Food & Beverages--2.5%
82,600 Anheuser Busch Companies, 5,854,275
Inc........................
121,000 PepsiCo, Inc................. 4,265,250
74,800 SYSCO Corp................... 2,959,275
------------
13,078,800
------------
Forest Products--1.2%
49,900 Kimberly-Clark Corp.......... 3,255,975
116,300 Smurfit-Stone Container 2,849,350
Corp.......................
------------
6,105,325
------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
8
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
VALUE
SHARES DESCRIPTION (NOTE 1)
Insurance--3.4%
81,562 American International Group, $ 8,818,891
Inc.........................
45,600 CIGNA Corp.................... 3,673,650
52,200 Providian Financial Corp...... 4,753,463
------------
17,246,004
------------
Internet--2.6%
90,600 America Online, Inc........... 6,834,637
15,300 Yahoo!, Inc.*................. 6,620,119
------------
13,454,756
------------
Non-Ferrous Metals--1.0%
63,200 Alcoa, Inc.................... 5,245,600
------------
Oil & Gas--1.1%
132,600 Enron Corp.................... 5,884,125
------------
Retail--2.5%
93,300 Home Depot, Inc............... 6,396,881
64,400 Wal-Mart Stores, Inc.......... 4,451,650
48,000 Williams-Sonoma, Inc.......... 2,208,000
------------
13,056,531
------------
Telecommunication--4.4%
20,000 Aspect Communications 782,500
Corp.*......................
127,800 Global TeleSystems Group, 4,425,075
Inc.........................
29,200 Nippon Telegraph & Telephone 2,514,850
Corp. (ADR).................
57,700 Research In Motion Ltd.*...... 2,665,019
110,000 Tellabs, Inc.*................ 7,060,625
38,000 VoiceStream Wireless Corp..... 5,407,875
------------
22,855,944
------------
VALUE
SHARES DESCRIPTION (NOTE 1)
Utilities--1.0%
65,600 AES Corp.*................... $ 4,903,600
------------
Total common stocks 497,299,783
(cost $220,436,971)........
------------
SHORT-TERM INVESTMENTS--3.5%
Principal
Amount
(000) Repurchase Agreements
- --------
$7,232... State Street Bank & Trust 7,232,000
Co.,
2.50%, dated 12/31/99, due
01/3/00 in the amount of
$7,233,507 (cost
$7,232,000,
collateralized by
$5,900,000 U.S. Treasury
Notes, 8.875%, 2/15/19,
value of collateral
including accrued interest
is $7,382,375).............
11,034.. State Street Bank & Trust 11,034,000
Co.,
2.50%, dated 12/31/99, due
01/3/00 in the amount of
$11,036,299, (cost
$11,034,000,
collateralized by
$10,735,000 U.S. Treasury
Notes, 8.75%, 8/15/00,
value of collateral
including accrued interest
is $11,258,331)............
------------
Total short-term investments 18,266,000
(cost $18,266,000).........
------------
Total Investments--100.0%
(cost $238,702,971; Note 515,565,783
4).........................
Liabilities in excess of (95,505)
other
assets.....................
------------
Net Assets--100%............. $515,470,278
------------
------------
</TABLE>
- ---------------
* Non-income producing.
ADR--American Depository Receipt.
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
9
<PAGE>
THE TARGET PORTFOLIO TRUST
Large Capitalization Value
Portfolio
Portfolio of Investments
December 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--98.7%
Common Stocks--98.7%
Aerospace--3.4%
156,700 Lockheed Martin Corp.......... $ 3,427,812
57,500 Northrop Grumman Corp......... 3,108,594
46,000 TRW, Inc...................... 2,389,125
------------
8,925,531
------------
Airlines--0.3%
56,000 Southwest Airlines Co......... 906,500
------------
Aluminum--1.7%
1,400 Alcoa Inc..................... 116,200
55,700 Reynolds Metals Co............ 4,268,012
------------
4,384,212
------------
Apparel & Textiles--1.1%
25,000 Liz Claiborne, Inc............ 940,625
54,700 Russell Corp.................. 916,225
30,000 V.F. Corp..................... 900,000
------------
2,756,850
------------
Auto Parts--1.8%
68,600 Dana Corp..................... 2,053,712
53,462 Delphi Automotive Systems 842,027
Corp........................
39,000 Genuine Parts Co.............. 967,687
35,000 Meritor Automotive, Inc....... 678,125
29,100 Tenneco Automotive, Inc....... 270,994
------------
4,812,545
------------
Automobiles--3.5%
113,000 Ford Motor Co................. 6,038,438
44,300 General Motors Corp........... 3,220,056
------------
9,258,494
------------
Banks--5.5%
46,200 Bank America Corp............. 2,318,662
84,560 Bank One Corp................. 2,711,205
30,300 First Security Corp........... 773,597
VALUE
SHARES DESCRIPTION (NOTE 1)
96,700 First Union Corp............. $ 3,172,969
52,000 Fleet Boston Financial 1,810,250
Corp.......................
43,200 KeyCorp...................... 955,800
90,000 National City Corp........... 2,131,875
16,500 UnionBanCal Corp............. 650,719
------------
14,525,077
------------
Brewery--0.5%
17,200 Anheuser Busch Companies, 1,219,050
Inc........................
------------
Building & Construction--0.3%
24,000 Harsco Corp.................. 762,000
------------
Building Products--0.8%
49,600 Georgia-Pacific Corp......... 1,221,400
35,000 York International Corp...... 960,313
------------
2,181,713
------------
Business Services--1.2%
133,500 Xerox Corp................... 3,028,781
------------
Chemicals--2.6%
29,400 Dow Chemical Co.............. 3,928,575
32,200 Eastman Chemical Co.......... 1,535,537
25,000 Praxair, Inc................. 1,257,813
------------
6,721,925
------------
Computers & Business Equipment--3.4%
80,000 Compaq Computer Corp......... 2,165,000
33,000 Hewlett-Packard Co........... 3,759,937
28,000 International Business 3,024,000
Machines Corp..............
------------
8,948,937
------------
Conglomerate--1.4%
19,000 Hanson PLC. (ADR)............ 768,313
11,000 Minnesota Mining & 1,076,625
Manufacturing Co...........
64,500 Scana Corp................... 1,733,437
------------
3,578,375
------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
10
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
VALUE
SHARES DESCRIPTION (NOTE 1)
Contruction Materials--1.8%
171,400 CNH Global N.V................ $ 2,281,762
65,000 Sherwin-Williams Co........... 1,365,000
25,000 Vulcan Materials Co........... 998,438
------------
4,645,200
------------
Consumer Products--2.7%
22,500 American Greetings Corp....... 531,563
30,000 Crown Cork & Seal Co., Inc.... 671,250
43,500 Eastman Kodak Co.............. 2,881,875
44,100 Fortune Brands, Inc........... 1,458,056
145,500 Pactiv Corp.*................. 1,545,937
------------
7,088,681
------------
Domestic Oil--1.3%
48,613 Conoco, Inc. (Class B)........ 1,209,248
14,900 Sunoco, Inc................... 350,150
80,200 USX - Marathon Group.......... 1,979,938
------------
3,539,336
------------
Drugs & Healthcare--5.3%
30,000 Abbott Laboratories........... 1,089,375
44,000 American Home Products 1,735,250
Corp........................
13,000 Baxter International, Inc..... 816,562
24,000 Bristol-Myers Squibb Co....... 1,540,500
80,000 Columbia/HCA Healthcare 2,345,000
Corp........................
20,000 Eli Lilly & Co................ 1,330,000
30,000 Merck & Co., Inc.............. 2,011,875
55,000 Mylan Laboratories............ 1,385,312
40,000 Schering-Plough Corp.......... 1,687,500
------------
13,941,374
------------
Electric Utilities--5.7%
50,000 Central & South West Corp..... 1,000,000
34,400 CMS Energy Corp............... 1,072,850
70,000 DTE Energy Co................. 2,196,250
32,000 Edison International.......... 838,000
27,400 Entergy Corp.................. 705,550
61,000 General Public Utilities 1,826,187
Corp........................
36,000 PECO Energy Co................ 1,251,000
VALUE
SHARES DESCRIPTION (NOTE 1)
33,835 PP & L Resources, Inc........ $ 773,976
28,800 Public Service Enterprise 1,002,600
Group Inc..................
23,258 Scottish Power Plc. (ADR).... 651,224
80,000 Southern Co.................. 1,880,000
50,000 Teco Energy, Inc............. 928,125
21,832 Texas Utilities Co........... 776,401
------------
14,902,163
------------
Electrical Equipment--1.5%
20,000 Emerson Electric Co.......... 1,147,500
30,000 Johnson Controls, Inc........ 1,706,250
40,000 Raytheon Co., ( Class B)..... 1,062,500
------------
3,916,250
------------
Electronics--1.5%
35,000 Intel Corp................... 2,880,938
20,000 Rockwell International 957,500
Corp.......................
------------
3,838,438
------------
Energy--1.1%
81,900 Illinova Corp................ 2,846,025
------------
Financial Services--7.3%
53,050 Associates First Capital 1,455,559
Corp.......................
25,000 Chase Manhattan Corp......... 1,942,187
25,000 Citigroup, Inc............... 1,389,063
89,500 Federal National Mortgage 5,588,156
Association................
68,265 Household International, 2,542,871
Inc........................
27,000 MBIA, Inc.................... 1,425,938
18,000 Morgan Stanley Dean Witter 2,569,500
Discover & Co..............
85,600 Washington Mutual, Inc....... 2,225,600
------------
19,138,874
------------
Foods--0.8%
55,000 Sara Lee Corp................ 1,213,438
45,000 SUPERVALU, Inc............... 900,000
------------
2,113,438
------------
</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, 1999
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Forest Products--3.0%
35,200 Georgia-Pacific Corp.......... $ 1,786,400
50,000 Kimberly-Clark Corp........... 3,262,500
39,600 Weyerhaeuser Co............... 2,843,775
------------
7,892,675
------------
Household Appliances & Home
Furnishings--1.1%
46,300 Whirlpool Corp................ 3,012,394
------------
Industrial Machinery--0.3%
16,000 Caterpillar, Inc.............. 753,000
------------
Insurance--8.5%
99,400 Allstate Corp................. 2,385,600
81,258 American General Corp......... 6,165,451
44,700 Lincoln National Corp......... 1,788,000
15,000 Loews Corp.................... 910,313
33,000 MGIC Investment Corp.......... 1,986,188
89,175 Old Republic International 1,215,009
Corp........................
106,900 SAFECO Corp................... 2,659,137
81,900 St. Paul Companies, Inc....... 2,759,006
80,000 Torchmark Corp................ 2,325,000
------------
22,193,704
------------
International Oil--5.3%
24,000 Chevron Corp.................. 2,079,000
28,000 Exxon Mobil Corp.............. 2,255,750
116,200 Occidental Petroleum Corp..... 2,512,825
100,800 Phillips Petroleum Co......... 4,737,600
40,000 Repsol S.A. (ADR)............. 930,000
26,300 Texaco, Inc................... 1,428,419
------------
13,943,594
------------
Manufacturing--0.3%
10,000 Illinois Tool Works, Inc...... 675,625
------------
Medical Devices--0.2%
35,000 Quintiles Transnational, 654,063
Corp.*......................
------------
Mining--0.9%
33,500 Phelps Dodge Corp............. 2,248,688
------------
VALUE
SHARES DESCRIPTION (NOTE 1)
Oil Field/Equipment & Services--0.5%
60,000 Cadence Design Systems, $ 1,440,000
Inc.*......................
------------
Paper--2.1%
98,114 International Paper Co....... 5,537,309
------------
Petroleum Services--0.7%
20,000 Norsk Hydro A S.............. 855,000
40,000 Ultramar Diamond Shamrock.... 907,500
------------
1,762,500
------------
Pollution Control--0.7%
100,000 Waste Management, Inc........ 1,718,750
------------
Publishing--0.9%
30,000 Gannett Co., Inc............. 2,446,875
------------
Railroads & Equipment--1.2%
16,300 CSX Corp..................... 511,413
135,000 Norfolk Southern Corp........ 2,767,500
------------
3,278,913
------------
Retail Trade--3.0%
40,000 Albertson's, Inc............. 1,290,000
35,000 Dillards, Inc., (Class A).... 706,562
43,700 May Department Stores Co..... 1,409,325
110,000 Penney (J.C.) Co., Inc....... 2,193,125
50,000 Rite Aid Corp................ 559,375
53,700 Sears, Roebuck & Co.......... 1,634,494
------------
7,792,881
------------
Software--1.7%
45,000 Computer Associates 3,147,187
International, Inc.........
35,000 Compuware Corp.*............. 1,303,750
------------
4,450,937
------------
Steel--2.0%
35,000 Nucor Corp................... 1,918,437
100,100 USX Corp.-U.S. Steel Group... 3,303,300
------------
5,221,737
------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
12
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
VALUE
SHARES DESCRIPTION (NOTE 1)
Telecommunications--7.1%
32,300 ALLTEL Corp................... $ 2,670,806
112,600 AT&T Corp..................... 5,714,450
40,000 Bell Atlantic Corp............ 2,462,500
13,500 GTE Corp...................... 952,594
40,500 MCI WorldCom, Inc.*........... 2,149,031
71,172 SBC Communications, Inc....... 3,469,635
15,000 US West, Inc.................. 1,080,000
------------
18,499,016
------------
Tires & Rubber--0.4%
65,000 Cooper Tire & Rubber Co....... 1,011,563
------------
Tobacco--1.9%
214,200 Philip Morris Companies, 4,966,762
Inc.........................
------------
Toys & Amusements--0.2%
50,000 Mattel, Inc................... 656,250
------------
Trucking & Freight Forwarding--0.2%
20,000 Ryder System, Inc............. 488,750
------------
Total common stocks
(cost $229,902,944)......... 258,625,755
------------
SHORT-TERM INVESTMENT--1.2%
3,200 Seven Seas Series Government 3,200,406
Fund
4.84%**, 1/3/00 (cost
$3,200,406).................
------------
Total Investments--99.9%
(cost $233,103,350; Note 4)... 261,826,161
Other assets in excess of
liabilities--0.1%........... 330,251
------------
Net Assets--100%.............. $262,156,412
------------
------------
</TABLE>
- ---------------
* Non-income producing.
** Rate represents yield at purchase date.
ADR--American Depository Receipts.
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
13
<PAGE>
THE TARGET PORTFOLIO TRUST
Small Capitalization Growth
Portfolio
Portfolio of Investments
December 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--98.0%
Common Stocks--98.0%
Apparel & Textiles--1.3%
75,700 Pacific Sunwear of $ 2,412,938
California, Inc.*..........
------------
Auto/Truck Equipment--0.6%
48,900 Keystone Automotive 287,288
Industries, Inc.*..........
30,500 Oshkosh Truck Corp........... 894,031
------------
1,181,319
------------
Business Services--14.8%
103,700 ACNielsen Corp.*............. 2,553,613
108,950 Acxiom Corp.*................ 2,614,800
68,200 ADVO, Inc.*.................. 1,619,750
20,600 AnswerThink Consulting Group, 705,550
Inc.*......................
29,350 CDW Computer Centers, 2,307,644
Inc.*......................
35,800 ChoicePoint, Inc.*........... 1,481,225
7,700 Critical Path, Inc.*......... 726,688
60,950 CSG Systems International, 2,430,381
Inc.*......................
98,050 Daisytek International 2,285,791
Corp.*.....................
61,400 Hooper Holmes, Inc........... 1,581,050
101,000 Interim Services, Inc.*...... 2,499,750
33,950 Pegasus Systems, Inc.*....... 2,047,609
14,300 ProBusiness Services, 514,800
Inc.*......................
58,100 Tech Data Corp.*............. 1,575,962
45,200 Zebra Technologies Corp.*.... 2,644,200
------------
27,588,813
------------
Cable & Pay Television--0.6%
15,700 Jones Intercable, Inc.*...... 1,088,206
------------
Commercial Services--7.1%
65,800 Coinmach Laundry Corp.*...... 699,125
71,200 Iron Mountain, Inc........... 2,799,050
144,800 Grubb & Ellis Co.*........... 678,750
84,550 On Command Corp.*............ 1,564,175
32,900 Quintiles Transnational 614,819
Corp.......................
36,400 Ritchie Bros. Auctioneers, 1,010,100
Inc.*......................
VALUE
SHARES DESCRIPTION (NOTE 1)
74,880 Trammell Crow Co.*........... $ 870,480
71,400 Vicor Corp.*................. 2,891,700
49,300 Zomax, Inc.*................. 2,230,825
------------
13,359,024
------------
Computers & Business Equipment--3.0%
51,200 Advanced Digital Information 2,489,600
Corp.*.....................
6,600 Black Box Corp.*............. 442,200
65,300 Cybex Computer Products 2,644,650
Corp.*.....................
------------
5,576,450
------------
Contruction Materials--1.0%
65,800 Insituform Technologies, 1,858,850
Inc.*......................
------------
Educational Services--0.8%
120,800 Sylvan Learning Systems, 1,570,400
Inc.*......................
------------
Electronics--18.9%
66,400 ACT Manufacturing, Inc.*..... 2,490,000
66,000 Audiovox Corp.*.............. 2,004,750
55,350 Burr-Brown Corp.*............ 1,999,519
51,300 Credence Systems Corp.*...... 4,437,450
51,000 Cymer, Inc.*................. 2,346,000
44,100 DII Group, Inc.*............. 3,129,722
36,300 Electro Scientific 2,649,900
Industries, Inc.*..........
75,500 Electroglas, Inc.*........... 1,915,812
8,450 Electronics for Imaging, 491,156
Inc.*......................
35,200 Integrated Device Technology, 1,020,800
Inc.*......................
117,800 International Rectifier 3,062,800
Corp.*.....................
13,350 Jabil Circuit, Inc.*......... 974,550
102,400 KEMET Corp.*................. 4,614,400
69,900 Mettler-Toledo International, 2,669,306
Inc.*......................
31,800 Pittway Corp................. 1,425,038
------------
35,231,203
------------
Financial Services--6.1%
222,550 AmeriCredit Corp.*........... 4,117,175
26,300 Brown & Brown, Inc........... 1,007,619
32,950 Investors Financial Services 1,515,700
Corp.......................
5,300 M & T Bank Corp.............. 2,195,525
28,790 T. Rowe Price Associates, 1,063,430
Inc........................
51,000 Texas Regional Bancshares, 1,479,000
Inc........................
------------
11,378,449
------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
14
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
VALUE
SHARES DESCRIPTION (NOTE 1)
Household Appliances & Home
Furnishings--0.4%
79,000 Falcon Products, Inc......... $ 681,375
------------
Household Products--4.1%
68,700 NBTY, Inc.*.................. 794,344
69,500 Salton, Inc.*................ 2,323,906
85,800 Scotts Company (The)*........ 3,453,450
97,500 Topps Company, Inc........... 1,011,562
------------
7,583,262
------------
Industrial Machinery--4.8%
69,400 Applied Power, Inc........... 2,550,450
44,200 Asyst Technologies, Inc.*.... 2,897,862
50,300 Helix Technology Corp........ 2,254,069
29,100 Kulicke & Soffa Industries, 1,238,569
Inc.*......................
------------
8,940,950
------------
Leisure Time--2.4%
65,500 American Classic Voyages 2,292,500
Co.*.......................
114,300 Aztar Corp.*................. 1,243,012
55,800 JAKKS Pacific, Inc........... 1,042,763
------------
4,578,275
------------
Medical & Dental Supplies--3.4%
98,550 Hanger Orthopedic Group, 985,500
Inc.*......................
58,300 Henry Schein, Inc.*.......... 776,119
56,450 King Pharmaceuticals, 3,164,728
Inc.*......................
45,100 PolyMedica Corp.*............ 1,042,937
47,400 STAAR Surgical Co.*.......... 462,150
------------
6,431,434
------------
Miscellaneous--0.7%
65,150 Hollywood.com, Inc.*......... 1,237,850
------------
VALUE
SHARES DESCRIPTION (NOTE 1)
Oil Field/Equipment--0.3%
30,000 CARBO Ceramics, Inc.......... $ 656,250
------------
Oil Field/Exploration and Production--1.7%
25,400 Devon Energy Corp............ 835,025
53,400 Newfield Exploration Co.*.... 1,428,450
72,800 Vintage Petroleum, Inc....... 878,150
------------
3,141,625
------------
Publishing--3.3%
35,150 Information Holdings, 1,021,547
Inc.*......................
147,000 Penton Media, Inc............ 3,528,000
100,100 PRIMEDIA Inc.*............... 1,651,650
------------
6,201,197
------------
Real Estate Investment Trust--1.6%
56,750 ProLogis Trust............... 1,092,438
87,360 SL Green Reality Corp........ 1,900,080
------------
2,992,518
------------
Retail Trade--6.5%
29,000 Copart, Inc.*................ 1,261,500
21,500 Cost Plus, Inc.*............. 765,938
73,000 Insight Enterprises, Inc.*... 2,965,625
33,000 PC Connection, Inc.*......... 1,138,500
104,300 Regis Corp................... 1,968,662
47,400 Sonic Corp.*................. 1,350,900
90,800 Spiegel, Inc................. 638,438
58,250 Tractor Supply Co.*.......... 932,000
22,500 Zale Corp.*.................. 1,088,437
------------
12,110,000
------------
Software--8.2%
34,000 Advent Software, Inc.*....... 2,190,875
74,900 Ardent Software, Inc.*....... 2,921,100
5,700 Genesys Telecommunications 307,800
Laboratories, Inc.*........
43,050 Integrated Systems, Inc.*.... 1,444,865
53,700 Midway Games, Inc.*.......... 1,285,444
15,300 NVIDIA Corp.*................ 718,144
27,300 Pinnacle Systems, Inc.*...... 1,110,769
</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, 1999
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Software (cont'd.)
9,400 Rational Software Corp.*..... $ 461,775
98,000 Santa Cruz Operation, Inc. 2,976,750
(The)*.....................
80,900 Sybase, Inc.*................ 1,375,300
33,500 Take-Two Interactive 433,406
Software, Inc.*............
------------
15,226,228
------------
Telecommunication--4.4%
45,100 Cabletron Systems, Inc.*..... 1,172,600
32,300 Carrier Access Corp.......... 2,174,194
37,700 Polycom, Inc.*............... 2,401,018
32,500 Xircom, Inc.*................ 2,437,500
------------
8,185,312
------------
Transportation--2.0%
67,800 American Freightways Corp.... 1,097,512
33,250 Expeditors International of 1,456,766
Washington, Inc............
62,200 Swift Transportation Co., 1,096,275
Inc........................
------------
3,650,553
------------
Total common stocks
(cost $143,977,765)........ 182,862,481
------------
SHORT-TERM INVESTMENTS--2.0%
3,717,730 Seven Seas Money Market Fund 3,717,730
5.35%**....................
2,524 Seven Seas Series Government 2,524
Fund
4.84%**, 1/3/00............
------------
Total short-term investments
(cost $3,720,254).......... 3,720,254
------------
Total Investments--100.0%
(cost $147,698,019; Note 186,582,735
4).........................
Other assets in excess of
liabilities................ 20,468
------------
Net Assets--100%............. $186,603,203
------------
------------
</TABLE>
- ------------------
* Non-income producing security.
** Rate represents yield at purchase date.
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
16
<PAGE>
Small Capitalization Value
Portfolio
Portfolio of Investments
December 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--98.5%
Common Stocks
Aerospace--.9%
24,600 AAR Corp...................... $ 441,262
11,100 Aviation Sales Co.*........... 183,150
17,500 Cordant Technologies, Inc..... 577,500
------------
1,201,912
------------
Apparel & Textiles--0.3%
31,300 Culp, Inc..................... 197,581
20,500 Nautica Enterprises, Inc.*.... 231,907
------------
429,488
------------
Auto Related--1.9%
19,100 Borg-Warner Automotive, 773,550
Inc.........................
31,800 Modine Manufacturing Co....... 795,000
54,512 Myers Industries, Inc......... 858,564
------------
2,427,114
------------
Automobiles--0.6%
49,700 Tower Automotive, Inc.*....... 767,244
------------
Banks--6.0%
31,807 AmSouth Bancorporation........ 614,273
19,200 Associated Banc Corp.......... 657,600
17,600 Bank United Corp.............. 479,600
14,800 Chittenden Corp............... 438,450
37,000 Firstmerit Corp............... 851,000
53,779 HUBCO, Inc.................... 1,374,726
51,600 Independent Bank Corp. - 645,000
Mass........................
31,750 People's Bank*................ 670,719
29,700 Southwest Bancorporation of 588,431
Texas, Inc.*................
VALUE
SHARES DESCRIPTION (NOTE 1)
31,400 Staten Island Bancorp, $ 565,200
Inc........................
48,150 Susquehanna Bancshares, 764,381
Inc........................
------------
7,649,380
------------
Building & Construction--1.9%
45,300 Apogee Enterprises, Inc...... 229,331
2,700 Dycom Industries, Inc.*...... 118,969
14,100 Granite Construction, Inc.... 259,969
22,500 Hughes Supply, Inc........... 485,156
18,800 Jacobs Engineering Group, 611,000
Inc.*......................
17,600 Martin Marietta Materials, 721,600
Inc........................
------------
2,426,025
------------
Business Services--5.2%
33,900 ACNielson Corp.*............. 834,787
20,800 Acxiom Corp.*................ 499,200
17,600 American Management Systems, 552,200
Inc.*......................
60,800 Bowne & Co., Inc............. 820,800
14,100 Gartner Group, Inc., Cl.A.... 215,025
24,800 Interim Services, Inc.*...... 613,800
35,800 ITT Educational Services, 552,662
Inc........................
33,000 Mastech Corp.*............... 816,750
50,450 Tetra Tech, Inc.............. 775,669
15,300 The Standard Register Co..... 296,438
20,800 United Stationers, Inc.*..... 594,100
------------
6,571,431
------------
Chemicals--4.1%
36,600 Cambrex Corp................. 1,260,412
28,550 Ferro Corp................... 628,100
13,400 Fuller (H.B.) Co............. 749,562
63,400 Hanna (M.A.) Co.............. 693,438
24,700 OM Group, Inc................ 850,606
72,287 RPM, Inc..................... 736,424
20,800 Schulman (A.), Inc........... 339,300
------------
5,257,842
------------
Communication--0.3%
32,600 Allen Telecom, Inc.*......... 376,938
------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
17
<PAGE>
THE TARGET PORTFOLIO TRUST
Small Capitalization Value
Portfolio (cont'd)
Portfolio of Investments
December 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Computers & Business Equipment--3.0%
49,200 Inacom Corp.*................. $ 359,775
60,200 MTS Systems Corp.............. 466,550
47,900 Mentor Graphics Corp.*........ 631,681
21,500 Progress Software Corp.*...... 1,220,125
103,200 Quantum Corp.*................ 715,950
22,000 Storage Technology Corp.*..... 405,625
------------
3,799,706
------------
Construction & Mining Equipment--0.8%
60,200 JLG Industries, Inc........... 959,438
------------
Diversified Industrials--3.6%
46,100 Applied Power, Inc............ 1,694,175
30,600 Brady (W.H.) Co............... 1,038,487
28,600 Carlisle Co., Inc............. 1,029,600
25,000 Teleflex, Inc................. 782,813
------------
4,545,075
------------
Drugs & Healthcare--7.6%
36,800 AmeriSource Health Corp., 558,900
Cl.A*.......................
42,000 Apria Healthcare Group, 753,375
Inc.*.......................
34,100 Arrow International, Inc...... 988,900
14,800 Beckman Coulter, Inc.......... 752,950
21,000 DENTSPLY International, 496,125
Inc.........................
85,600 Invacare Corp................. 1,717,350
27,000 Jones Pharmaceutical, Inc..... 1,172,812
86,200 Meridian Diognostic........... 624,950
25,000 Varian Medical Systems, 745,313
Inc.*.......................
21,100 Vital Signs, Inc.............. 482,663
42,300 West Pharmaceutical Services, 1,308,656
Inc.........................
------------
9,601,994
------------
Electric Utilities--0.9%
34,300 Avista Corp................... 529,506
33,120 Sierra Pacific Resources...... 573,390
------------
1,102,896
------------
VALUE
SHARES DESCRIPTION (NOTE 1)
Electrical Equipment--4.0%
43,700 Anixter International, $ 901,312
Inc.*......................
16,900 Belden, Inc.................. 354,900
10,800 Oak Industries, Inc.*........ 1,146,150
26,400 Polaroid Corp................ 496,650
27,500 Sensormatic Electronics 479,531
Corp.*.....................
26,200 Technitrol, Inc.............. 1,165,900
45,700 Woodhead Industries, Inc..... 531,263
------------
5,075,706
------------
Electronics--10.8%
40,300 Ametek Aerospace Prods, 768,219
Inc........................
29,800 Bell & Howell Co.*........... 948,013
27,100 C&D Technologies............. 1,151,750
4,200 Credence Systems Corp.*...... 363,300
16,100 Dallas Semiconductor Corp.... 1,037,444
18,000 Electro Scientific 1,314,000
Industries, Inc.*..........
8,500 Electronics for Imaging, 494,063
Inc.*......................
23,600 Harman International 1,324,550
Industries, Inc............
14,800 KEMET Corp.*................. 666,925
2,900 Lam Research Corp.*.......... 323,531
35,850 Methode Eletronics, Inc...... 1,151,681
71,100 Pioneer Standard Electronics, 1,026,506
Inc........................
20,200 Rogers Corp.*................ 772,650
30,100 Tektronix, Inc............... 1,170,137
53,000 Varian, Inc.................. 1,192,500
------------
13,705,269
------------
Food - Service/Lodging--0.7%
64,000 Marcus Corp.................. 860,000
------------
Foods--5.2%
28,800 American Italian Pasta Co., 885,600
Cl.A*......................
38,600 Aurora Foods, Inc.*.......... 359,463
44,800 Flowers Industries, Inc...... 714,000
26,650 Lancaster Colony Corp........ 882,781
12,300 Lance, Inc................... 123,000
36,800 Performance Food Group Co.... 897,000
38,400 Ralcorp Holdings, Inc.*...... 765,600
72,800 United Natural Foods, Inc.... 873,600
53,200 Universal Foods Corp......... 1,083,950
------------
6,584,994
------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
18
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
VALUE
SHARES DESCRIPTION (NOTE 1)
Gas & Pipeline Utilities--2.0%
20,600 Equitable Resources, Inc...... $ 687,525
20,600 National Fuel Gas Co.......... 957,900
31,700 Washington Gas Light Co....... 871,750
------------
2,517,175
------------
Homebuilders--1.0%
17,700 Kaufman & Broad Home Corp..... 428,119
47,500 Toll Brothers, Inc.*.......... 884,687
------------
1,312,806
------------
Hotels & Restaurants--0.8%
31,200 Lone Star Steakhouse & Saloon, 278,362
Inc.*.......................
10,000 Luby's Cafeterias, Inc........ 113,750
46,300 Prime Hospitality Corp.*...... 408,019
20,600 Ryan's Family Steak Houses, 175,100
Inc.*.......................
------------
975,231
------------
Household Appliances & Home
Furnishings--1.9%
24,000 Bassett Furniture Industries, 384,000
Inc.........................
45,000 Chromcraft Revington, Inc.*... 472,500
20,700 Ethan Allen Interiors, Inc.... 663,694
42,700 Furniture Brands 939,400
International, Inc.*........
------------
2,459,594
------------
Industrial Machinery--3.3%
4,300 Briggs & Stratton Corp........ 230,588
23,425 Crane Co...................... 465,572
24,900 Graco, Inc.................... 893,287
28,100 Hussmann International, 423,256
Inc.........................
23,209 Mark IV Industries, Inc....... 410,509
14,700 Polaris Industries, Inc....... 532,875
34,400 Regal-Beloit Corp............. 709,500
39,900 Watts Industries, Inc., 588,525
Cl.A........................
------------
4,254,112
------------
Insurance--5.1%
13,900 Arthur J. Gallagher & Co...... 900,025
11,700 Blanch (E.W.) Holdings, 716,625
Inc.........................
25,000 Brown & Brown, Inc............ 957,812
35,800 Enhance Financial Services 581,750
Group, Inc..................
26,000 Everest Reinsurance Holdings, 580,125
Inc.........................
VALUE
SHARES DESCRIPTION (NOTE 1)
17,800 HCC Insurance Holdings, $ 234,738
Inc........................
36,300 Horace Mann Educators 712,387
Corp.......................
33,200 Protective Life Corp......... 1,056,175
15,272 Radian Group, Inc............ 729,238
------------
6,468,875
------------
Manufacturing--1.8%
28,300 Federal Signal Corp.......... 454,569
16,900 Flowserve Corp............... 287,300
17,800 Lydall, Inc.*................ 117,925
18,200 Roper Industries, Inc........ 688,187
17,800 The Dexter Corporation....... 707,550
------------
2,255,531
------------
Miscellaneous--1.7%
31,800 American National Can Group, 413,400
Inc........................
36,800 AptarGroup, Inc.............. 924,600
19,950 CIRCOR International, 205,735
Inc.*......................
45,100 Whitman Corp................. 606,031
------------
2,149,766
------------
Office Equipment--0.4%
23,800 HON Industries, Inc.......... 522,113
------------
Oil & Gas--2.4%
20,700 CONSOL Energy, Inc........... 209,588
22,700 Devon Energy Corp............ 746,262
63,400 Helmerich & Payne, Inc....... 1,382,912
74,500 Pennzoil Quaker State 758,969
Company....................
------------
3,097,731
------------
Oil & Gas - Production/Pipeline--1.3%
27,600 Barrett Resources Corp.*..... 812,475
98,400 Santa Fe Snyder Corp......... 787,200
------------
1,599,675
------------
Oil-Supplies & Construction--0.4%
12,700 Tidewater, Inc............... 457,200
------------
</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, 1999
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
Paper & Paper Products--1.0%
21,300 Chesapeake Corp............... $ 649,650
52,500 Wausau Paper Co............... 613,594
------------
1,263,244
------------
Petroleum Services--0.5%
62,000 Varco International, Inc...... 631,625
------------
Printing & Publishing--3.7%
11,650 American Business Products, 136,159
Inc.........................
82,750 Banta Corp.................... 1,867,047
12,400 Houghton Mifflin Co........... 523,125
36,400 Lee Enterprises, Inc.......... 1,162,525
40,400 Mail-Well, Inc.*.............. 545,400
10,900 Pulitzer, Inc................. 439,406
------------
4,673,662
------------
Professional Services--2.0%
18,900 CDI Corp.*.................... 455,963
29,100 HSB Group, Inc................ 983,944
18,600 Keane, Inc.*.................. 590,550
28,100 R.H. Donnelley Corp.*......... 530,387
------------
2,560,844
------------
Real Estate Investment Trust--3.5%
52,400 Catellus Development Corp.*... 671,375
17,500 Chateau Communities, Inc...... 453,906
9,000 Chelsea GCA Realty, Inc....... 267,750
30,000 FelCor Lodging Trust, Inc..... 525,000
33,700 Glenborough Realty Trust, 450,738
Inc.........................
27,400 JDN Realty Corp............... 441,825
22,200 Kilroy Realty Corp............ 488,400
25,600 Liberty Property Trust........ 620,800
18,100 Mack California Realty 471,731
Corp........................
------------
4,391,525
------------
VALUE
SHARES DESCRIPTION (NOTE 1)
Retail - Apparel--1.2%
14,200 Lands End, Inc............... $ 493,450
8,100 Talbots, Inc................. 361,463
18,000 The Men's Wearhouse, Inc.*... 528,750
13,900 The Wet Seal, Inc., Cl.A*.... 170,275
------------
1,553,938
------------
Retail - Grocery--1.8%
38,300 Caseys General Stores, 399,756
Inc........................
25,300 Great Atlantic & Pacific Tea 705,238
Co., Inc...................
79,400 Ruddick Corp................. 1,230,700
------------
2,335,694
------------
Retail - Trade--1.7%
53,300 Borders Group, Inc.*......... 856,131
59,300 CompUSA Inc.*................ 303,913
66,100 Pier 1 Imports, Inc.......... 421,387
80,400 Venator Group, Inc.*......... 562,800
------------
2,144,231
------------
Savings & Loan--1.5%
22,425 Astoria Financial Corp....... 682,561
46,411 Sovereign Bancorp, Inc....... 345,907
36,800 Webster Financial Corp....... 867,100
------------
1,895,568
------------
Toys & Amusements--0.5%
25,405 Russ Berrie & Co., Inc....... 666,881
------------
Trucking & Freight Forwarding--1.2%
24,100 CNF Transportation, Inc...... 831,450
54,000 Werner Enterprises, Inc...... 759,375
------------
1,590,825
------------
Total common stocks 125,120,298
(cost $110,128,333)........
------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
20
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
VALUE
SHARES DESCRIPTION (NOTE 1)
Warrant*--0.0%
33,910 Wilshire Technologies, Inc. $ 0
expiring Nov. 28, 2002
(cost $0)...................
------------
Total long-term investments
(cost $110,128,333)......... 125,120,298
------------
SHORT-TERM INVESTMENTS--1.3%
Principal
Amount
(000) U.S. Government Securities
- --------
United States Treasury Bills,
$ 1,425 5.05%, 1/27/00................ 1,419,865
75 4.95%, 3/23/00................ 74,135
125 5.28%, 3/23/00................ 123,557
------------
Total short-term Investments
(cost $1,617,481)........... 1,617,557
------------
Total Investments--99.8%
(cost $111,745,814; Note 4)... 126,737,855
Other assets in excess of
liabilities--0.2%........... 272,144
------------
Net Assets--100%.............. $127,009,999
------------
------------
</TABLE>
- ---------------
* Non-income producing security.
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
21
<PAGE>
THE TARGET PORTFOLIO TRUST
International Equity Portfolio
Portfolio of Investments
December 31, 1999
<TABLE>
<CAPTION>
US$
VALUE
SHARES DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--99.0%
Common Stocks
Australia--1.9%
405,722 Broken Hill Proprietary Co., $ 5,327,397
Ltd.........................
------------
Denmark--1.7%
63,900 Tele Danmark A.S.............. 4,747,811
------------
Finland--1.4%
163,200 MeritaNondbaken OYJ........... 961,737
71,380 UPM Kymmene OYJ............... 2,876,184
------------
3,837,921
------------
France--14.7%
31,930 Alcatel....................... 7,333,545
56,414 Aventis SA*................... 3,273,329
68,877 Aventis SA (New).............. 4,003,412
27,470 Axa SA........................ 3,829,790
52,060 Banque Nationale de Paris..... 4,803,744
15,680 Cie de Saint Gobain........... 2,948,972
36,200 Michelin, Series B............ 1,422,176
16,500 Suez Lyonnaise des Eaux....... 2,644,444
44,185 Total Fina SA, Series B....... 5,897,541
45,601 Vivendi....................... 4,118,176
------------
40,275,129
------------
Germany--9.9%
10,999 Allianz A.G................... 3,695,126
40,383 DaimlerChrysler A.G........... 3,140,481
134,800 Deutsche Lufthansa A.G........ 3,136,766
23,032 Deutsche Telekom A.G.......... 1,640,330
61,180 Metro A.G..................... 3,291,023
52,100 Siemens A.G................... 6,628,592
97,600 Thyssen Krupp A.G............. 2,974,099
57,400 Veba A.G...................... 2,789,905
------------
27,296,322
------------
US$
VALUE
SHARES DESCRIPTION (NOTE 1)
Italy--2.6%
537,900 Eni SpA..................... $ 2,958,520
192,100 Sao Paolo Imi SpA........... 2,610,475
234,100 Telecom Italia SpA.......... 1,426,714
-----------
6,995,709
-----------
Japan--25.7%
241,000 Asahi Breweries, Ltd........ 2,637,154
159,000 Canon, Inc.................. 6,318,293
242,000 Fuji Bank, Ltd.............. 2,352,021
270 Japan Tobacco, Inc.......... 2,066,556
123,000 Kao Corp.................... 3,509,298
16,600 Nintendo Co., Ltd........... 2,758,814
291 Nippon Telegraph & Telephone 4,984,340
Corp......................
715,000 Nissan Motor Co., Ltd.*..... 2,813,253
205 NTT Mobile Communications 7,885,387
Network, Inc..............
32,900 Orix Corp................... 7,412,724
33,200 Promise Co., Ltd............ 1,689,733
101,000 Sankyo Co., Ltd............. 2,075,952
39,700 Sony Corp................... 11,773,613
533,000 Sumitomo Trust & Banking 3,599,589
Co., Ltd..................
44,000 TDK Corp.................... 6,076,539
292,000 The Industrial Bank of 2,815,112
Japan, Ltd................
-----------
70,768,378
-----------
Netherlands--4.2%
67,500 Heineken N.V................ 3,292,371
76,100 ING Groep N.V............... 4,594,959
26,934 Philips Electronics N.V..... 3,662,814
-----------
11,550,144
-----------
Portugal--1.0%
244,700 Portugal Telecom............ 2,684,368
-----------
Singapore--2.4%
360,850 Overseas Chinese Banking 3,314,924
Corp., Ltd................
383,328 United Overseas Bank, 3,383,321
Ltd.......................
-----------
6,698,245
-----------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
22
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <C>
US$
VALUE
SHARES DESCRIPTION (NOTE 1)
Spain--5.3%
217,400 Endesa S.A.................... $ 4,316,447
407,341 Telefonica S.A................ 10,176,303
------------
14,492,750
------------
Sweden--3.0%
142,700 Electrolux AB, Series B....... 3,588,882
205,900 Nordbanken Holding AB......... 1,209,895
189,800 Svenska Handelsbanken AB, 2,386,720
Series A....................
41,900 Volvo AB, Series B............ 1,083,324
------------
8,268,821
------------
Switzerland--3.8%
33,985 ABB A.G., Series A*........... 4,156,615
290 Roche Holdings A.G............ 3,442,191
4,920 Zurich Allied A.G............. 2,805,602
------------
10,404,408
------------
United Kingdom--21.4%
162,000 Allied Zurich PLC............. 1,910,254
98,783 Astrazeneca Group PLC......... 4,103,991
392,200 BP Amoco PLC.................. 3,958,998
577,128 British Aerospace PLC......... 3,794,196
346,500 British America Tobacco 1,958,955
Industries PLC..............
309,664 British Energy PLC............ 1,779,463
282,012 Cadbury Schweppes PLC......... 1,699,142
301,599 Diageo PLC.................... 2,406,634
78,800 GKN PLC....................... 1,290,677
414,600 Granada Group PLC............. 4,185,646
314,100 Great Universal Stores PLC.... 1,826,517
262,800 Halifax Group PLC............. 2,869,626
298,805 HSBC Holdings PLC............. 4,189,843
331,038 Imperial Chemical Industries 3,497,106
PLC.........................
461,500 Invensys PLC.................. 2,439,968
142,600 National Westminster Bank 3,063,546
PLC.........................
159,639 Prudential Corp. PLC.......... 3,115,008
378,400 Reed International PLC........ 2,842,218
375,000 Royal & Sun Alliance Insurance 2,810,622
Group PLC...................
US$
VALUE
SHARES DESCRIPTION (NOTE 1)
155,300 Smithkline Beecham PLC...... $ 1,969,220
373,200 Tesco PLC................... 1,133,320
284,592 Unilever PLC................ 2,091,642
-----------
58,936,592
-----------
Total long-term investments 272,283,995
(cost US$193,388,123).....
-----------
Principal
Amount
(000) SHORT-TERM INVESTMENTS--1.0%
- ----------
United States Treasury
Bills,
$ 795 5.01%, 1/27/00.............. 792,298
1,885 5.05%, 1/27/00.............. 1,878,397
65 4.95%, 3/23/00.............. 64,262
65 5.00%, 3/23/00.............. 64,262
-----------
Total short-term investments 2,799,219
(cost US$2,798,856).......
-----------
Total Investments--100.0%
(cost US$196,186,979; Note 275,083,214
4)........................
Liabilities in excess of (86,631)
other assets..............
-----------
Net Assets--100%............ $274,996,583
-----------
-----------
</TABLE>
- ------------------
* Non-income producing securities.
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
23
<PAGE>
THE TARGET PORTFOLIO TRUST
International Equity Portfolio
(cont'd)
Portfolio of Investments
December 31, 1999
The industry classification of portfolio holdings shown as a percentage of net
assets as of December 31, 1999 was as follows:
Banking.......................................... 12.7%
Telecommunications............................... 12.2
Electronics...................................... 8.9
Insurance........................................ 6.6
Energy........................................... 4.9
Food & Beverage.................................. 4.8
Oil & Gas Services............................... 4.7
Diversified Industries........................... 4.0
Automobiles...................................... 3.1
Chemicals........................................ 2.7
Leasing.......................................... 2.7
Manufacturing.................................... 2.7
Medical Products & Services...................... 2.7
Pharmaceuticals.................................. 2.7
Diversified Manufacturing........................ 2.4
Financial Services............................... 2.3
Computers........................................ 2.2
Natural Resources Sector......................... 1.9
Retail........................................... 1.9
Engineering & Equipment.......................... 1.5
Tobacco.......................................... 1.5
Aerospace/Defense................................ 1.4
Consumer Durable Goods........................... 1.3
Cosmetics/Toiletries............................. 1.3
Air Transportation............................... 1.1
Forest Products.................................. 1.0
Industrials...................................... 1.0
Publishing....................................... 1.0
U.S Government Securities........................ 1.0
Electrical Equipment............................. 0.9
Miscellaneous.................................... 0.9
-----
100.0%
-----
-----
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
24
<PAGE>
International Bond Portfolio
Portfolio of Investments
December 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL US$
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--98.1%
Australia--4.0%
New South Wales Treasury
Corp.,
A$ 800 6.50%, 5/1/06............... $ 506,293
Queensland Treasury Corp.,
800 8.00%, 8/14/01.............. 538,330
-----------
1,044,623
-----------
Canada--7.4%
Canadian Gov't. Bonds,
C$ 100 5.50%, 6/1/09............... 65,597
Deutsche Fin(Neth),
1,500 7.00%, 1/7/04............... 1,054,209
Province of Ontario,
1,150 8.00%, 3/11/03.............. 833,409
-----------
1,953,215
-----------
Eurobonds--46.8%
Deutschland Rep.,
EUR 2,700 4.00%, 7/4/09............... 2,450,579
Depfa Pfandriefbank,
1,700 5.00%, 2/3/05............... 1,699,651
Dutch Gov't. Bonds,
700 7.50%, 1/15/23.............. 835,949
Finnish Gov't. Bonds,
1,000 9.50%, 3/15/04.............. 1,176,685
French Gov't. Bonds,
1,500 4.00%, 10/25/09............. 1,344,812
French Treasury Note,
400 4.50%, 7/12/02.............. 403,544
German Gov't. Bonds,
307 6.00%, 1/5/06............... 323,399
200 6.00%, 7/4/07............... 210,234
Italian Gov't. Bonds,
1,300 4.50%, 5/1/09............... 1,215,267
PRINCIPAL US$
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
Obrig Do Tes Medio Prazo,
EUR 500 3.625%, 8/19/04............. $ 474,461
750 5.375%, 6/23/08............. 745,313
Spanish Gov't. Bonds,
1,000 5.15%, 7/30/09.............. 978,137
Treuhandanstalt,
500 6.875%, 6/11/03............. 536,666
-----------
12,394,697
-----------
Germany--9.9%
Austrian Gov't. Bonds,
DM 1,000 7.25%, 5/3/07............... 568,615
Halifax PLC,
2,000 5.625%, 7/23/07............. 1,023,404
Nordic Invest. Bank,
2,000 4.875%, 3/1/01.............. 1,037,310
-----------
2,629,329
-----------
Japan--7.4%
Japan - Gov't. 10-Yr.
Y 130,000 6.20%, 3/20/00.............. 1,287,213
Kingdom of Spain,
60,000 3.10%, 9/20/06.............. 660,076
-----------
1,947,289
-----------
New Zealand--15.8%
Int'l. Bank Recon. & Dev.,
NZ$ 2,500 7.25%, 5/27/03.............. 1,293,840
750 5.375%, 11/6/03............. 363,464
New Zealand Gov't. Bonds,
2,000 5.50%, 4/15/03.............. 1,001,110
3,000 7.00%, 7/15/09.............. 1,533,798
-----------
4,192,212
-----------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
25
<PAGE>
THE TARGET PORTFOLIO TRUST
International Bond Portfolio
(cont'd)
Portfolio of Investments
December 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL US$
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
Sweden--3.6%
Kingdom of Sweden,
SEK 5,000 9.00%, 4/20/09.............. $ 723,352
Swedish Gov't. Bonds,
2,000 6.00%, 2/9/05............... 240,428
-----------
963,780
-----------
United States--3.2%
U.S. Treasury Notes,
US$ 796 3.375%, 1/15/07 (TIPS)...... 750,151
104 3.625%, 1/15/08 (TIPS)...... 99,130
-----------
849,281
-----------
Total long-term investments
(cost US$27,761,696)...... 25,974,426
-----------
Total Investments--98.1%
(cost US$27,761,696; Note 25,974,426
4)........................
Other assets in excess of
liabilities--1.9%......... 517,149
-----------
Net Assets--100%............ $26,491,575
-----------
-----------
</TABLE>
- ------------------
(TIPS)--Treasury inflationary protection securities.
Portfolio securities are classified according to the securities currency
denomination.
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
26
<PAGE>
<TABLE>
Total Return Bond Portfolio
Portfolio of Investments
December 31, 1999
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
<S> <C> <C> <C>
LONG-TERM
INVESTMENTS--110.1%
Corporate Bonds--31.9%
Airlines--2.6%
Continental Airlines,
Inc.,
Ba2 $ 600 9.50%, 12/15/01......... $ 609,000
United Airlines, Inc.,
Baa1 1,000 10.85%, 2/19/15......... 1,151,520
------------
1,760,520
------------
Automobiles & Parts--1.2%
Federal-Mogul Corp.,
Ba1 850 7.75%, 7/1/06........... 788,198
------------
Banking--7.4%
Asian Development Bank,
Aaa 900 5.82%, 6/16/28.......... 817,012
Capital One Bank,
Baa2 1,200 6.91%, 7/28/03.......... 1,208,328
GS Escrow Corp.,
Ba1 1,300 6.75%, 8/1/01........... 1,253,443
MBNA Bank, Inc.,
Baa1 100 DD 6.33%, 8/7/01........... 99,820
Baa1 1,100 DD 6.50%, 12/10/02......... 1,082,292
Baa1 500 DD 6.88%, 7/15/04.......... 483,285
------------
4,944,180
------------
Cable--1.0%
Tele-Communications,
Inc.,
Aa3 700 DD 6.72%, 3/12/01.......... 701,048
------------
Financial Services--14.7%
Ford Credit Auto Owner
Trust,
Aaa 1,300 5.77%, 11/15/01......... 1,293,084
Ford Motor Credit Co.,
A1 1,200 5.75%, 2/23/04.......... 1,139,244
General Motors Acceptance Corp.,
AAAPoundPound 700 DD 6.34%, 4/5/04........... 698,311
A2 1,300 DD 6.34%, 4/5/04, (MTN).... 1,296,863
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
Goldman Sachs Group,
L.P.,
A1 $ 1,000DD 6.40%, 1/25/01.......... $ 1,001,080
Heller Financial, Inc.,
A3 1,100DD 6.46%, 4/28/03.......... 1,106,325
A3 800DD 6.50%, 7/22/02.......... 785,504
Lehman Brothers
Holdings, Inc.,
A2 1,100DD 6.42%, 9/3/02........... 1,101,494
A3 200DD 6.98%, 4/1/02........... 200,912
Orix Credit Alliance,
Inc.,
Baa1 1,300DD 6.79%, 4/16/01.......... 1,296,386
------------
9,919,203
------------
Health Care--0.7%
Columbia/HCA Healthcare
Corp.,
Ba1 450 6.88%, 7/15/01.......... 435,668
------------
Industrials--1.0%
Westpoint Stevens, Inc.,
Ba2 700 7.88%, 6/15/05.......... 637,000
------------
Oil & Gas Exploration Production--0.8%
R & B Falcon Corp.,
Ba3 600 6.50%, 4/15/03.......... 553,500
------------
Recreation--1.1%
Green Tree Recreational
Equipment,
Aaa 775 6.55%, 7/15/28.......... 766,155
------------
Utilities--1.4%
Niagara Mohawk Power
Corp.,
Baa1 1,000 6.88%, 3/1/01........... 997,970
------------
Total corporate bonds
(cost $21,868,067).... 21,503,442
------------
U.S. Government Agency Mortgage
Backed Securities--56.8%
Federal Home Loan
Mortgage Corp.,
900 5.50%, 12/31/29......... 792,842
6.00%,
7,300 5/15/28-12/1/29....... 6,609,263
6.50%, 9/15/18-12/15/21,
849 (I/O)................. 92,229
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
27
<PAGE>
THE TARGET PORTFOLIO TRUST
Total Return Bond Portfolio
(cont'd)
Portfolio of Investments
December 31, 1999
<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 Home Loan
Mortgage Corp.,
(cont'd.)
$ 459 6.90%, 1/1/24........... $ 463,117
1,897 7.20%, 11/1/06.......... 1,884,224
7.50%, 9/1/16 -
2,109 12/1/29............... 2,089,297
900 8.00%, 9/15/29.......... 881,299
12 9.25%, 1/1/10........... 12,899
Federal National
Mortgage Assn.,
2,300 5.50%, 12/31/29......... 2,023,641
895 5.82%, 5/1/36........... 876,909
1,091 DD 6.59%, 1/1/20........... 1,111,851
Government National
Mortgage Assn.,
6.38%, 2/20/17 -
1,789 2/20/26............... 1,815,713
4,950 6.50%, 12/15/29......... 4,645,278
6.75%, 7/20/22 -
1,773 7/20/27............... 1,788,584
10,230 7.00%, 12/15/29......... 9,878,395
7.50%, 2/15/27 -
3,309 12/31/29.............. 3,261,848
------------
Total U.S. government
agency
mortgage backed
securities
(cost $38,616,475).... 38,227,389
------------
Foreign Corporate Bonds--2.1%
Hellenic Finance, SCA,
Baa1 700 2.00%, 7/15/03.......... 705,250
Petroleos Mexicanos,
Ba2 700 DD 8.80%, 7/15/05, MTN..... 686,875
------------
Total foreign corporate
bonds
(cost $1,379,169)..... 1,392,125
------------
Collateralized Mortgage
Obligation--7.5%
Allied Capital
Commercial
Mortgage Trust,
AAAPoundPound 683 6.31%, 9/25/03.......... 672,190
American Housing Trust
1,
Senior Mortgage Pass
Through Certificate,
Series 1-5 Class A,
Aaa 13 8.63%, 8/25/18.......... 13,076
Champion Home Loan
Equity,
Series 1995, Class
A2-3,
Aaa 469 8.04%, 2/25/28.......... 478,996
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
Countrywide
Collateralized
Mortgage Obligation,
Aaa $ 30 8.02%, 11/25/24......... $ 30,683
GMAC Commercial Mortgage
Security, Inc.,
Aaa 1,205 6.15%, 5/15/35.......... 1,151,414
Aa2 677 6.81%, 4/15/08.......... 639,064
Residential Asset
Securitization Trust,
Aaa 1,166 6.50%, 10/25/14......... 1,124,201
Vendee Mortgage Trust,
Aaa 1,000 7.00%, 9/1/27........... 928,120
------------
Total collateralized
mortgage obligations
(cost $5,165,220)..... 5,037,744
------------
U.S. Government Securities--7.5%
United States Treasury
Bonds,
500 11.25%, 2/15/15......... 706,795
United States Treasury
Notes,
318 3.38%, 1/15/07.......... 300,060
3,465DD 3.63%, 7/15/02 (TIPS)... 3,429,894
615 3.88%, 1/15/09.......... 594,563
------------
Total U.S. government
securities
(cost $5,049,725)..... 5,031,312
------------
Foreign Government Bonds--4.3%
New Zealand Gov't.
Bonds,
Aaa 300 5.50%, 4/15/03.......... 150,861
Aaa 300 10.00%, 3/15/02......... 167,860
Poland Gov't. Bonds,
Baa1 1,750 3.50%, 10/27/24......... 1,078,000
Republic of Argentina,
Ba2 90,000 5.50%, 3/27/01.......... 869,240
United Mexican States,
Ba2 600DD 9.88%, 4/7/04........... 616,500
------------
Total foreign government
bonds
(cost $2,745,239)..... 2,882,461
------------
Total long-term
investments
(cost $74,823,895).... 74,074,473
------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
28
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
SHORT-TERM
INVESTMENTS--33.1%
Corporate Bonds--23.5%
Banking--4.1%
Capital One Bank,
Baa2 $ 700 6.88%, 4/24/00.......... $ 699,405
Korea Development Bank,
Baa2 2,000 9.60%, 12/1/00.......... 2,032,500
------------
2,731,905
------------
Cable--0.1%
Tele-Communications,
Inc.,
A2 100 6.29%, 2/2/00........... 99,965
------------
Electrical Power--1.9%
Kentucky Power Co.,
Baa2 1,300 7.13%, 11/2/00.......... 1,300,000
------------
Financial Services--6.9%
CBA Delaware Finance,
Inc.,
P1 200 5.85%, 4/3/00........... 196,021
General Electric Capital
Corp.,
A1+PoundPound 900 5.93%, 2/22/00.......... 888,968
KFW International
Finance, Inc.,
A1 2,300 5.85%, 3/13/00.......... 2,261,878
US West Capital Funding,
Inc.,
A2 1,300 5.90%, 3/24/00.......... 1,281,939
------------
4,628,806
------------
Industrials--1.9%
Florida Power Corp.,
P1 200 5.95%, 1/31/00.......... 199,008
Williams Cos., Inc.,
Baa3 1,100 DD 6.49%, 1/30/00.......... 1,100,341
------------
1,299,349
------------
Railroads--1.8%
Union Pacific Railroad
Corp.,
Baa2 1,200 DD 6.35%, 5/22/00.......... 1,197,750
------------
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
Telecommunication Services--6.4%
British
Telecommunications
Plc,
P1 $ 3,000 5.84%, 3/1/00........... $ 2,956,200
MCI Worldcom, Inc.,
A2 1,300 6.20%, 1/27/00.......... 1,294,216
------------
4,250,416
------------
Utilities--0.4%
Texas Utilities Co.,
A2 300 5.83%, 1/21/00.......... 298,989
------------
Total corporate bonds
(cost $15,852,643).... 15,807,180
------------
U.S. Government Agency Mortgage
Backed Securities--7.4%
Federal Home Loan Mortgage Corp.,
1,000 5.00%, 1/10/00.......... 998,611
3,000 5.91%, 1/26/00.......... 2,987,688
1,000 6.27%, 5/18/00.......... 1,000,221
------------
Total U.S. government
agency mortgage backed
securities
(cost $4,986,131)..... 4,986,520
------------
U.S. Government Securities--0.6%
United States Treasury
Bills,
50D 4.68%, 2/10/00.......... 49,712
40D 4.71%, 2/17/00.......... 39,735
190D 4.81%, 2/17/00.......... 188,739
United States Treasury
Notes,
100D 5.50%, 2/29/00.......... 100,016
------------
Total U.S. government securities
(cost $378,392) 378,202
------------
</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, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<S> <C> <C> <C>
Repurchase Agreement--1.6%
$ 1,090 State Street Bank & Trust Co.,
2.50%, dated 12/31/99
due 1/3/00 in the
amount of $1,090,227
(cost $1,090,000,
collateralized by
$1,105,000 U.S.
Treasury Notes,
6.50%, 5/31/01;
value of collateral
including accrued
interest is
$1,114,896)......... $ 1,090,000
------------
Total short-term
investments
(cost
$22,307,166)........ 22,261,902
------------
Total Investments, Before
Outstanding
Options Written--143.2%
(cost $97,131,061;
Note 4)............. $ 96,336,375
------------
<CAPTION>
OUTSTANDING CALL OPTIONS
Contracts WRITTEN*
---------
<S> <C> <C> <C>
United States Treasury
Bond Futures,
expiring 2/19/00
60 $98.00.............. (3,750)
OUTSTANDING PUT OPTIONS
WRITTEN*
Eurodollar Futures,
expiring 12/18/00
20 $93.50.............. (29,500)
</TABLE>
<TABLE>
<CAPTION>
VALUE
CONTRACTS DESCRIPTION (NOTE 1)
<S> <C> <C> <C>
United States Treasury
Bond Futures,
expiring 2/19/00
56 $88.00.............. $ (25,375)
United States Treasury
Bond Futures,
expiring 2/19/00
4 $90.00.............. (4,063)
------------
Total outstanding
options written
(premium received
$48,754)............ (62,688)
------------
Total Investments, Net of
Outstanding
Options Written--143.1%
(cost $97,082,756).... 96,273,687
Liabilities in excess
of
other
assets--(43.1%)..... (29,004,708)
------------
Net Assets--100%...... $ 67,268,979
------------
------------
</TABLE>
- ---------------
* Non-income producing securities.
D Pledged as initial margin on financial futures
contracts.
DD Rate shown reflects current rate on variable rate
instrument.
PoundPound Standard & Poor's Rating.
L.P.--Limited Partnership.
(I/O)--Interest Only.
(MTN)--Medium Term Notes.
(TIPS)--Treasury Inflation Protection Securities.
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
30
<PAGE>
Intermediate-Term Bond
Portfolio
Portfolio of Investments
December 31, 1999
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
<S> <C> <C> <C>
LONG-TERM INVESTMENTS--94.6%
Corporate Bonds--43.7%
Airlines--1.5%
United Airlines, Inc.,
Baa1 $ 1,500 10.85%, 2/19/15....... $ 1,727,280
------------
Auto & Truck--2.0%
Daimlerchrysler N.A.
Holding,
A1 2,300 6.67%, 9/25/01........ 2,292,916
------------
Banking--5.1%
Export-Import Bank
Korea,
Baa2 300 6.50%, 11/15/06....... 285,822
Korea Development
Bank,
Ba2 2,000 7.125%, 9/17/01....... 1,985,000
MBNA America Bank,
Baa1 2,000DD 6.50%, 12/10/02....... 1,967,804
Sumitomo Trust &
Banking Co., Ltd.,
Baa2 1,500DD 9.40%, 12/29/49....... 1,485,358
------------
5,723,984
------------
Financial Services--20.4%
AT&T Capital Corp.,
A1 2,200DD 6.35%, 4/9/01......... 2,200,750
Bear Stearns Co.,
Inc.,
A2 3,400DD 6.63%, 11/30/04....... 3,396,812
Chase Manhattan Corp.,
A1 500 7.625%, 1/15/03....... 506,865
Ford Motor Credit Co.,
A1 1,100DD 6.45%, 7/16/02........ 1,104,642
Fugi JGB Investment,
LLC.,
Ba1 300DD 9.87%, 12/29/49....... 297,794
General Motors
Acceptance Corp.,
A2 2,100DD 6.34%, 4/5/04......... 2,094,933
Goldman Sachs Group,
L.P.,
A1 1,900DD 6.40%, 1/25/01........ 1,902,052
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
Heller Financial Inc.,
A3 $ 1,900DD 6.46%, 4/28/03.......... $ 1,910,925
Household Finance Corp.,
A2 3,300DD 6.51%, 8/6/02........... 3,316,863
Lehman Brothers
Holdings, Inc.,
A3 1,500DD 6.42%, 9/3/02........... 1,502,037
A3 700DD 6.98%, 4/2/02........... 703,191
Orix Credit Alliance
Inc.,
Baa2 2,100 6.785%, 4/16/01......... 2,094,162
Transamerica Finance
Corp.,
A3 2,000DD 6.37%, 12/14/01......... 2,001,140
------------
23,032,166
------------
Health Care Services--1.0%
Columbia/HCA Healthcare
Corp.,
Ba2 300 6.91%, 6/15/05.......... 274,500
Hospital Corp.,
Ba2 1,000 Zero Coupon, 6/1/01..... 878,450
------------
1,152,950
------------
Industrials--6.0%
Cox Communications,
Inc.,
Baa2 300DD 6.15%, 8/1/03........... 287,256
Golden State Holdings,
Ba1 1,800 6.75%, 8/1/01........... 1,735,536
Ba1 400DD 7.21%, 8/1/03........... 381,274
KPNQwest N.V.,
Ba1 1,500 8.125%, 6/1/09.......... 1,447,500
Nuevo Grupo Iusacell
S.A.,
B1 1,250 14.25%, 12/1/06......... 1,296,875
TCI Communications,
Inc.,
A2 400DD 6.72%, 3/12/01.......... 400,599
Westpoint Stevens Inc.,
Ba3 1,300 7.875%, 6/15/05......... 1,183,000
------------
6,732,040
------------
Petroleum Services--1.4%
Occidental Petroleum
Corp.,
Baa3 1,600DD 6.40%, 4/1/03........... 1,542,624
------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
31
<PAGE>
THE TARGET PORTFOLIO TRUST
Intermediate-Term Bond
Portfolio (cont'd)
Portfolio of Investments
December 31, 1999
<TABLE>
<CAPTION>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
<S> <C> <C> <C>
Technology--0.2%
International Game
Technology,
Ba1 $ 200 7.875%, 5/15/04....... $ 193,000
------------
Utilities--6.1%
Niagara Mohawk Power
Corp.,
Baa2 2,000 6.875%, 3/1/01........ 1,995,940
Texas Utilities Co.,
Baa3 3,000DD 5.94%, 10/15/01....... 2,949,060
Baa3 2,000DD 6.50%, 8/16/02........ 1,978,026
------------
6,923,026
------------
Total corporate bonds
(cost
$49,768,533)........ 49,319,986
------------
U.S. Government Agency Mortgage
Backed Securities--30.4%
Federal Home Loan
Mortgage Corp.,
4,400 5.50%, 12/31/29....... 3,876,114
147 6.00%, 4/1/24......... 135,366
815 6.00%, 12/1/26........ 749,317
6,420 6.00%, 12/1/29........ 5,876,290
6.50%, 9/15/18 -
1,408 12/15/21 (I/O)...... 153,206
3,260 7.50%, 12/1/29........ 3,226,389
63 9.25%, 1/1/10......... 65,142
Federal National
Mortgage Assn.,
133 5.812%, 12/1/30....... 130,118
330 6.00%, 12/25/08....... 327,603
1,819 6.50%, 9/1/05......... 1,796,409
561 6.50%, 8/1/24......... 555,160
877 6.796%, 7/1/25........ 897,595
Government National
Mortgage Assn.,
703 6.125%, 10/20/24...... 715,107
6.375%, 5/20/23 -
2,909 2/20/26............. 2,949,549
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
Government National
Mortgage Assn.,
$ 5,300 6.50%, 12/15/29......... $ 4,973,732
5,000 7.00%, 12/15/29......... 4,828,150
1,000 7.50%, 12/31/29......... 985,630
2,026 8.50%, 3/20/25.......... 2,087,641
------------
Total U.S. government
agency mortgage backed
securities (cost
$34,609,712).......... 34,328,518
------------
Foreign Corporate Bonds--1.9%
Hellenic Finance S.C.A.,
A2 EURO1,200 2.00%, 7/15/03.......... 1,209,000
Petroleos Mexicanos,
Ba2 $ 1,000 8.80%, 7/15/05, MTN..... 981,250
------------
Total foreign corporate
bonds (cost
$2,180,991)........... 2,190,250
------------
Collateralized Mortgage
Obligations--8.9%
Champion Home Loan
Equity,
Aaa 704 8.57%, 2/25/28.......... 718,494
Countrywide
Collateralized
Mortgage Obligation,
Aa1 30 8.02%, 11/25/24......... 30,683
EQCC Home Equity Loan
Trust,
Aaa 3,000 5.765%, 3/20/29......... 2,917,031
Ford Credit Auto Owner
Trust,
Aaa 2,100 5.77%, 11/15/01......... 2,088,828
Residential Accredit
Loans Inc.,
AAAPoundPound 3,000 7.25%, 6/25/27.......... 2,913,405
Residential Asset
Securities Corp.,
Aaa 414DD 6.78%, 10/25/27......... 411,993
Southern Pacific Secured
Assets Corp.,
Aaa 962DD 6.64%, 6/25/28.......... 955,028
------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
32
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
Total collateralized
mortgage obligations
(cost
$10,273,977)........ $ 10,035,462
------------
Foreign Government Bonds--2.9%
New Zealand Gov't.
Bonds,
Aaa NZD 600 5.50%, 4/15/03........ 301,721
Aaa 600 10.00%, 3/15/02....... 335,720
Republic of Argentina,
Ba3 Y150,000 5.50%, 3/27/01........ 1,448,734
United Mexican States,
NR $ 1,200DD 9.88%, 4/7/04......... 1,233,000
------------
Total foreign
government bonds
(cost $3,059,421)... 3,319,175
------------
U.S. Government Securities--6.8%
United States Treasury
Notes,
531 3.375%, 1/15/07....... 500,100
3.625%, 7/15/02
5,564 (TIPS).............. 5,508,074
1,353 3.625%, 1/15/08....... 1,288,686
United States Treasury
Bonds,
300 11.125%, 8/15/03...... 343,875
------------
Total U.S. government
securities
(cost $7,659,971)... 7,640,735
------------
Total long-term
investments
(cost
$107,552,605)....... 106,834,126
------------
SHORT-TERM INVESTMENTS--29.7%
Corporate Bonds--25.3%
Banking--1.4%
MNBA America Bank,
Baa1 1,000DD 6.37%, 4/13/00........ 999,890
Oesterreichische,
NR 600 5.93%, 1/18/00........ 598,035
------------
1,597,925
------------
MOODY'S PRINCIPAL
RATING AMOUNT VALUE
(UNAUDITED) (000) DESCRIPTION (NOTE 1)
Financial Services--8.9%
Banco Latino America,
Baa1 $ 1,800 6.31%, 4/10/00.......... $ 1,795,500
Capital One Bank,
Baa2 2,000 8.125%, 3/1/00.......... 2,004,160
General Electric Capital
Corp.,
A1 2,700 5.93%, 2/22/00.......... 2,666,015
KFW International
Finance, Inc.,
A1 900 5.82%, 2/17/00.......... 889,803
PaineWebber Group, Inc.,
Baa1 2,000DD 6.72%, 11/27/00......... 2,004,360
US West Capital Funding
Inc.,
A1 700 5.957%, 3/24/00......... 690,043
------------
10,049,881
------------
Industrials--8.3%
Illinois Tool Works
Inc.,
A1 3,600 6.01%, 1/31/00.......... 3,580,768
TCI Communications,
Inc.,
A2 1,800 6.46%, 3/6/00........... 1,801,584
Union Pacific Corp.,
NR 2,000 5.95%, 5/22/00.......... 1,996,250
Williams Companies,
Inc.,
NR 2,000DD 6.49%, 1/30/00.......... 2,000,620
------------
9,379,222
------------
Telecommunication Services--1.9%
MCI Worldcom Inc.,
A2 2,200 5.36%, 1/27/00.......... 2,189,557
------------
Utilities--4.8%
Florida Power Corp.,
A1 5,000 5.95%, 2/9/00........... 4,960,656
Texas Utilities Co.,
A2 500 5.24%, 1/21/00.......... 498,170
------------
5,458,826
------------
Total corporate bonds
(cost $28,713,209).... 28,675,411
------------
</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, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<S> <C> <C> <C>
U.S. Government Agency Mortgage
Backed Securities--3.4%
Federal Home Loan
Mortgage Corp.,
$ 1,800 5.00%, 1/10/00......... $ 1,797,000
2,000 DD 6.27%, 5/18/00......... 2,000,442
------------
Total U.S. government
agency mortgage
backed securities
(cost $3,797,136).... 3,797,442
------------
U.S. Government Securities--0.4%
United States Treasury
Bills,
10 D 4.71%, 2/17/00......... 9,932
United States Treasury
Notes,
500 D 5.50%, 2/29/00......... 500,080
------------
Total U.S. government
securities
(cost $510,394)........ 510,012
------------
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
Repurchase Agreement--0.6%
$ 690,000
$ 690 State Street Bank &
Trust Co.,
2.00%, dated 12/31/99
due 1/3/00 in the
amount of $690,115
(cost $690,000,
collateralized by
$700,000 U.S.
Treasury Notes,
6.500%, 5/31/01;
value of collateral
including accrued
interest is
$706,125)............
------------
Total short-term
investments
(cost $33,710,739)... 33,672,865
------------
Total Investments--124.3%
(cost $141,263,344;
Note 4).............. 140,506,991
Liabilities in excess
of other
assets--(24.3%)...... (27,515,979)
------------
Net Assets--100%....... $112,991,012
------------
------------
</TABLE>
- ---------------
D-- Pledged as initial margin on financial futures contracts.
DD--Rate shown reflects current rate on variable rate instrument.
PoundPound--Standard & Poor's Rating.
LLC--Limited Liability Company.
L.P.--Limited Partnership.
S.A.--Sociedad Anonima (Spanish Corporation).
(I/O)--Interest Only.
(MTN)--Medium Term Notes.
(TIPS)--Treasury Inflation Protection Securities.
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
34
<PAGE>
Mortgage Backed Securities
Portfolio
Portfolio of Investments
December 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
LONG-TERM INVESTMENTS--99.2%
Collateralized Mortgage Obligation--28.1%
Chase Commercial Mortgage
Securities Corp.,
$ 1,000 7.37%, 2/19/07.............. $ 991,045
Federal Home Loan Mortgage
Corp.,
187 5.50%, 8/15/21, PAC......... 176,386
117 5.80%, 8/15/19, PAC......... 116,685
100 5.95%, 6/15/19, PAC......... 98,562
3,016 6.00%, 5/15/08 - 5/15/23.... 2,833,488
1,560 6.50%, 8/15/06 - 11/15/22, 1,495,882
PAC.......................
359 7.00%, 3/15/23, PAC......... 344,974
128 7.25%, 1/15/07, PAC......... 127,890
2,985 7.50%, 6/15/22, PAC I/O..... 281,914
1,606 8.00%, 8/15/04 - 7/15/21.... 1,621,280
611 9.00%, 6/01/09 - 10/15/20... 631,441
Federal National Mortgage
Assn.,
1,023 5.00%, 3/25/21, PAC......... 949,236
614 5.666%, 1/25/09............. 613,031
1,722 6.00%, 4/25/08 - 10/25/22... 1,598,844
800 6.25%, 1/25/09, PAC......... 769,248
654 6.50%, 12/25/19 - 12/25/23, 593,037
PAC.......................
1,495 7.00%, 9/25/19 - 9/25/20, 302,711
PAC I/O...................
790 7.385%, 3/25/21............. 785,514
775 7.50%, 5/25/07 - 7/25/22.... 760,663
683 8.00%, 8/25/06 - 5/25/24.... 688,983
577 8.50%, 7/25/18 - 6/25/21.... 587,874
First Boston Mortgage
Securities,
1,078 Zero Coupon, 4/25/17, P/O... 576,969
765 6.96%, 6/20/29.............. 761,061
First Union-Lehman Brothers
Commerical Mortgage,
1,000 6.60%, 5/18/07.............. 967,969
Salomon Brothers Mortgage Securities,
239 6.00%, 12/26/11............. 234,380
-----------
Total collateralized
mortgage obligation
(cost $18,920,619)........ 18,909,067
-----------
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
U.S. Government Agency Mortgage
Pass-Through Obligations--66.7%
Federal Home Loan Mortgage
Corp.,
$ 280 6.00%, 5/01/11............... $ 267,370
296 6.50%, 2/01/04............... 292,521
9 7.25%, 7/01/06............... 8,441
88 7.50%, 3/01/08............... 87,656
50 8.25%, 12/01/05 - 5/01/08.... 50,224
194 8.50%, 6/01/03 - 7/01/21..... 198,432
114 8.75%, 12/01/08.............. 117,396
248 9.00%, 1/01/02 - 10/01/05.... 256,338
18 10.00%, 1/01/04.............. 17,875
47 10.50%, 11/01/19............. 50,632
39 11.50%, 3/01/16.............. 42,268
17 12.75%, 11/01/13............. 17,944
24 13.25%, 5/01/13.............. 26,559
5 14.00%, 6/01/11.............. 5,388
Federal National Mortgage
Assn.,
998 5.50%, 2/01/29 - 6/01/29..... 885,423
855 6.00%, 5/25/10 - 8/01/11..... 816,055
89 6.18%, 7/01/08............... 82,606
49 6.295%, 6/01/08.............. 46,227
78 6.30%, 1/01/08............... 73,853
73 6.34%, 1/01/08............... 68,804
53 6.39%, 1/01/06............... 50,669
78 6.43%, 1/01/08............... 74,411
495 6.447%, 1/01/08.............. 470,209
315 6.527%, 5/25/30.............. 292,088
645 6.55%, 9/01/07............... 617,616
54 6.812%, 10/01/07............. 52,461
568 6.981%, 6/01/07.............. 557,244
1,938 7.00%, 4/01/29 - 12/01/29.... 1,874,210
313 7.024%, 6/01/07.............. 309,531
610 7.04%, 3/01/07............... 600,777
63 7.28%, 10/01/06.............. 63,131
257 7.50%, 2/01/20............... 256,192
96 7.75%, 10/01/19.............. 95,590
746 8.00%, 3/01/07 - 12/01/22.... 759,817
1,029 8.50%, 1/01/07 - 6/01/10..... 1,051,047
155 9.75%, 8/01/10 - 11/01/16.... 163,076
</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, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
Government National Mortgage
Assn.,
$ 6,377 6.50%, 5/15/23 - 8/15/29.... $ 5,995,165
10,562 7.00%, 7/15/16 - 6/15/29.... 10,223,247
12,981 7.50%, 3/15/07 - 8/15/29.... 12,897,942
930 8.00%, 1/15/08 - 5/15/17.... 949,934
712 8.25%, 6/20/17 - 7/20/17.... 719,280
194 8.50%, 3/15/05 - 4/20/17.... 201,032
2,244 9.00%, 10/20/01 - 1/15/20... 2,366,071
676 9.50%, 9/15/02 - 1/15/21.... 719,409
1 13.00%, 2/15/11............. 551
43 13.50%, 6/15/10 - 5/15/11... 49,307
69 14.00%, 6/15/11 - 4/15/12... 80,527
26 16.00%, 4/15/12 - 5/15/12... 31,095
-----------
Total U.S. government agency
mortgage pass-through
obligations
(cost $46,020,688)........ 44,933,641
-----------
U.S. Government Securities--4.4%
United States Treasury
Bonds,
600 8.125%, 8/15/19............. 683,718
1,000 8.875%, 2/15/19............. 1,217,190
820 12.00%, 8/15/13............. 1,094,954
-----------
Total U.S. government
securities
(cost $3,162,969)......... 2,995,862
-----------
Total long-term investments
(cost $68,104,276)........ 66,838,570
-----------
SHORT-TERM INVESTMENTS--0.7%
U.S. Government Security--0.7%
United States Treasury Bond,
482 2.80%, 1/03/00 482,000
(cost $482,000)...........
-----------
Total Investments--99.9%
(cost $68,586,276; Note 67,320,570
4)........................
Other assets in excess of
liabilities--0.1%......... 51,037
-----------
Net Assets--100%............ $67,371,607
-----------
-----------
</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, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
<C> <S> <C>
Federal Farm Credit Bank--5.8%
$ 5,000 4.82%, 3/11/00................ $ 4,999,533
------------
Federal Home Loan Bank--62.8%
5,000 4.90%, 1/14/00................ 4,999,989
3,000 4.835%, 1/28/00............... 2,999,858
5,000 4.895%, 2/4/00................ 4,999,860
25,000 5.48%, 2/9/00................. 24,851,583
3,000 4.80%, 4/5/00................. 2,999,618
5,000 5.92%, 10/4/00................ 4,994,851
5,000 5.32%, 10/25/00............... 4,995,184
3,000 5.90%, 12/20/00............... 2,996,373
------------
53,837,316
------------
Federal National Mortgage Association--17.4%
5,000 5.97%, 2/4/00................. 4,998,230
5,000 5.25%, 6/15/00................ 4,878,958
5,000 5.93%, 11/13/00............... 4,996,329
------------
14,873,517
------------
PRINCIPAL
AMOUNT VALUE
(000) DESCRIPTION (NOTE 1)
Repurchase Agreement--15.4%
$ 13,234 Paribas, 2.80%, dated $13,234,000
12/31/99 due 1/3/00 in the
amount of $13,237,088 (cost
$13,234,000; collateralized
by $13,465,000 U.S.
Treasury Notes, 4.50%,
1/31/01; value of
collateral including
accrued interest -
$13,493,906)...............
-----------
Total Investments--101.4%
(amortized cost 86,944,366
$86,944,366*)..............
Liabilities in excess of (1,221,961)
other
assets--(1.4%).............
-----------
Net Assets--100%............. $85,722,405
-----------
-----------
</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, 1999
<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* $515,565,783 $261,826,161 $186,582,735 $ 126,737,855
- ---------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Cash 781 6,667 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Foreign currency, at value
(cost $561,124; $28,852; $43,074) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 734,105 470,002 424,795 269,799
- ---------------------------------------------------------------------------------------------------------------------------------
Receivable for investments sold -- -- -- 827,167
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends and interest receivable 139,634 573,747 64,175 154,157
- ---------------------------------------------------------------------------------------------------------------------------------
Due from Manager -- -- -- 10,420
- ---------------------------------------------------------------------------------------------------------------------------------
Deferred expenses and other assets 6,616 5,584 3,439 2,926
- ---------------------------------------------------------------------------------------------------------------------------------
Forward currency contracts - net
amount receivable from
counterparties -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets 516,446,919 262,882,161 187,075,144 128,002,324
LIABILITIES
- ---------------------------------------------------------------------------------------------------------------------------------
Foreign currency bank overdraft
(cost $385,789) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Bank overdraft -- -- -- 648,177
- ---------------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Payable for Fund shares reacquired 676,375 539,967 334,700 191,480
- ---------------------------------------------------------------------------------------------------------------------------------
Accrued expenses and other
liabilities 54,188 46,744 41,420 144,744
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends payable -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Outstanding options written
(premium received
$48,754) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Withholding taxes payable -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Deferred trustees' fees -- 8,663 8,116 7,924
- ---------------------------------------------------------------------------------------------------------------------------------
Due to Manager 246,078 130,375 87,705 --
- ---------------------------------------------------------------------------------------------------------------------------------
Due to broker-variation margin
payable -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Forward currency contracts - Net
amount payable from counterparties -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 976,641 725,749 471,941 992,325
NET ASSETS $515,470,278 $262,156,412 $186,603,203 $ 127,009,999
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets were comprised of:
Shares of beneficial interest,
at par $ 20,073 $ 20,145 $ 10,679 $ 8,485
- ---------------------------------------------------------------------------------------------------------------------------------
Paid-in capital, in excess of
par 235,998,606 226,500,337 131,665,083 110,980,587
- ---------------------------------------------------------------------------------------------------------------------------------
236,018,679 226,520,482 131,675,762 110,989,072
Under (over) distribution of net
investment
income (loss) -- -- -- 7,255
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulated net realized gains
(losses) 2,588,787 6,913,119 16,042,725 1,021,631
- ---------------------------------------------------------------------------------------------------------------------------------
Net unrealized
appreciation/depreciation 276,862,812 28,722,811 38,884,716 14,992,041
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, December 31, 1999 $515,470,278 $262,156,412 $186,603,203 $ 127,009,999
- ---------------------------------------------------------------------------------------------------------------------------------
Shares of beneficial interest
issued
and outstanding 20,073,301 20,144,558 10,678,755 8,485,456
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, offering price
and redemption price per share $25.68 $13.01 $17.47 $14.97
- ---------------------------------------------------------------------------------------------------------------------------------
*Identified cost of investments. $238,702,971 $233,103,350 $147,698,019 $ 111,745,814
</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>
- -----------------------------------------------------------------------------------------------------------------------------
$275,083,214 $ 25,974,426 $ 96,336,375 $ 140,506,991 $ 67,320,570 $ 73,710,366
- -----------------------------------------------------------------------------------------------------------------------------
-- -- -- -- -- 13,234,000
- -----------------------------------------------------------------------------------------------------------------------------
213,830 -- 429 223 750 --
- -----------------------------------------------------------------------------------------------------------------------------
-- 572,974 29,319 43,778 -- --
- -----------------------------------------------------------------------------------------------------------------------------
359,462 64,356 184,467 204,598 98,253 3,217,467
- -----------------------------------------------------------------------------------------------------------------------------
-- -- 3,166,500 989,531 -- --
- -----------------------------------------------------------------------------------------------------------------------------
413,380 765,532 674,148 1,122,351 518,886 489,682
- -----------------------------------------------------------------------------------------------------------------------------
-- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
5,348 805 1,324 610 1,752 1,910
- -----------------------------------------------------------------------------------------------------------------------------
-- -- 39,899 1,590 -- --
- -----------------------------------------------------------------------------------------------------------------------------
276,075,234 27,378,093 100,432,461 142,869,672 67,940,211 90,653,425
- -----------------------------------------------------------------------------------------------------------------------------
381,179 -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
-- 680,178 -- -- -- 1,627
- -----------------------------------------------------------------------------------------------------------------------------
132,899 -- 32,162,965 28,730,131 -- --
- -----------------------------------------------------------------------------------------------------------------------------
274,086 55,126 745,773 993,287 435,400 4,781,038
- -----------------------------------------------------------------------------------------------------------------------------
110,536 107,845 74,700 24,514 87,277 96,791
- -----------------------------------------------------------------------------------------------------------------------------
-- 20,964 10,313 17,953 12,251 10,391
- -----------------------------------------------------------------------------------------------------------------------------
-- -- 62,688 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
14,759 5,032 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
8,635 5,940 7,596 7,842 7,596 8,307
- -----------------------------------------------------------------------------------------------------------------------------
156,557 11,433 26,143 43,551 26,080 32,866
- -----------------------------------------------------------------------------------------------------------------------------
-- -- 33,125 61,382 -- --
- -----------------------------------------------------------------------------------------------------------------------------
-- -- 40,179 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
1,078,651 886,518 33,163,482 29,878,660 568,604 4,931,020
$274,996,583 $26,491,575 $67,268,979 $112,991,012 $67,371,607 $85,722,405
- -----------------------------------------------------------------------------------------------------------------------------
15,835
$ $ 3,123 $ 6,824 $ 11,392 $ 6,757 $ 85,722
- -----------------------------------------------------------------------------------------------------------------------------
196,021,061 28,676,992 71,021,561 117,272,549 69,271,991 85,636,683
- -----------------------------------------------------------------------------------------------------------------------------
196,036,896 28,680,115 71,028,385 117,283,941 69,278,748 85,722,405
(2,469,090 ) (118,673) 107,366 (19,543) 95,753 --
- -----------------------------------------------------------------------------------------------------------------------------
2,538,096 (277,331) (2,877,563) (3,246,256) (737,188) --
- -----------------------------------------------------------------------------------------------------------------------------
78,890,681 (1,792,536) (989,209) (1,027,130) (1,265,706) --
- -----------------------------------------------------------------------------------------------------------------------------
$274,996,583 $26,491,575 $67,268,979 $112,991,012 $67,371,607 $85,722,405
- -----------------------------------------------------------------------------------------------------------------------------
15,834,915 3,123,086 6,824,232 11,392,442 6,757,009 85,722,405
- -----------------------------------------------------------------------------------------------------------------------------
$17.37 $8.48 $9.86 $9.92 $9.97 $1.00
- -----------------------------------------------------------------------------------------------------------------------------
$196,186,979 $27,761,696 $97,131,061 $141,263,344 $68,586,276 $86,944,366
</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, 1999
<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 $ 398,163 $ 213,843 $ 241,278 $ 193,643
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends 1,585,791 6,729,888 277,142 1,895,518
- ------------------------------------------------------------------------------------------------------------------------------------
Less: Foreign withholding taxes -- (34,939) -- (13)
- ------------------------------------------------------------------------------------------------------------------------------------
Total income 1,983,954 6,908,792 518,420 2,089,148
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fee 2,315,968 1,679,401 903,559 774,461
- ------------------------------------------------------------------------------------------------------------------------------------
Custodian's fees and expenses 99,000 106,000 100,000 121,000
- ------------------------------------------------------------------------------------------------------------------------------------
Transfer agent's fees and expenses 122,000 120,000 114,000 111,000
- ------------------------------------------------------------------------------------------------------------------------------------
Registration fees 19,000 32,000 22,000 30,000
- ------------------------------------------------------------------------------------------------------------------------------------
Reports to shareholders 30,000 71,000 33,000 20,000
- ------------------------------------------------------------------------------------------------------------------------------------
Audit fees and expenses 13,500 13,500 13,500 13,500
- ------------------------------------------------------------------------------------------------------------------------------------
Legal fees and expenses 10,000 10,000 10,000 10,000
- ------------------------------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 1,800 1,800 1,800 1,800
- ------------------------------------------------------------------------------------------------------------------------------------
Amortization of organization
expenses -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Miscellaneous 1,782 6,508 1,069 755
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 2,613,050 2,040,209 1,198,928 1,082,516
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (629,096) 4,868,583 (680,508) 1,006,632
- ------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investment transactions 39,273,492 34,792,274 38,143,040 1,354,411
- ------------------------------------------------------------------------------------------------------------------------------------
Financial futures contracts -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign currency transactions -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Options written -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Swaps -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total net realized gain (loss) 39,273,492 34,792,274 38,143,040 1,354,411
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation on:
Investments 142,004,420 (51,549,029) 4,193,728 (1,250,361)
- ------------------------------------------------------------------------------------------------------------------------------------
Financial futures contracts -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign currencies -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Options written -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation/depreciation 142,004,420 (51,549,029) 4,193,728 (1,250,361)
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) 181,277,912 (16,756,755) 42,336,768 104,050
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $180,648,816 $(11,888,172) $ 41,656,260 $ 1,110,682
- ------------------------------------------------------------------------------------------------------------------------------------
</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>
- ---------------------------------------------------------------------------------------------------------------------------
$ 458,469 $ 1,355,960 $4,188,480 $ 6,824,420 $4,996,501 $9,970,017
- ---------------------------------------------------------------------------------------------------------------------------
5,569,631 -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
(648,251) (7,089) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
5,379,849 1,348,871 4,188,480 6,824,420 4,996,501 9,970,017
- ---------------------------------------------------------------------------------------------------------------------------
1,723,039 146,497 296,600 487,094 316,095 492,130
- ---------------------------------------------------------------------------------------------------------------------------
299,000 115,000 115,000 110,000 130,000 71,000
- ---------------------------------------------------------------------------------------------------------------------------
114,000 37,000 50,000 60,000 55,000 46,000
- ---------------------------------------------------------------------------------------------------------------------------
51,000 6,000 24,000 19,000 13,000 180,000
- ---------------------------------------------------------------------------------------------------------------------------
68,000 31,000 26,000 25,000 20,000 30,000
- ---------------------------------------------------------------------------------------------------------------------------
20,000 13,500 13,500 13,500 13,500 5,000
- ---------------------------------------------------------------------------------------------------------------------------
10,000 10,000 10,000 10,000 10,000 10,000
- ---------------------------------------------------------------------------------------------------------------------------
1,800 1,800 1,800 1,800 1,800 1,800
- ---------------------------------------------------------------------------------------------------------------------------
-- 3,949 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
8,222 1,095 3,324 3,316 2,874 2,226
- ---------------------------------------------------------------------------------------------------------------------------
2,295,061 365,841 540,224 729,710 562,269 838,156
- ---------------------------------------------------------------------------------------------------------------------------
3,084,788 983,030 3,648,256 6,094,710 4,434,232 9,131,861
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
23,216,539 (277,331) (1,590,540) (1,734,014) (255,531) 2,539
- ---------------------------------------------------------------------------------------------------------------------------
-- -- (1,237,059) (1,384,753) (1,103) --
- ---------------------------------------------------------------------------------------------------------------------------
(420,857) (302,889) (28,829) (106,985) -- --
- ---------------------------------------------------------------------------------------------------------------------------
-- -- -- 79,748 -- --
- ---------------------------------------------------------------------------------------------------------------------------
-- -- -- 63,771 -- --
- ---------------------------------------------------------------------------------------------------------------------------
22,795,682 (580,220) (2,856,428) (3,082,233) (256,634) 2,539
- ---------------------------------------------------------------------------------------------------------------------------
29,670,863 (2,113,675) (1,226,685) (1,440,812) (3,075,447) --
- ---------------------------------------------------------------------------------------------------------------------------
-- -- (38,208) (171,996) -- --
- ---------------------------------------------------------------------------------------------------------------------------
(37,672) (6,806) 3,335 6,738 -- --
- ---------------------------------------------------------------------------------------------------------------------------
-- -- (14,212) (309) -- --
- ---------------------------------------------------------------------------------------------------------------------------
29,633,191 (2,120,481) (1,275,770) (1,606,379) (3,075,447) --
- ---------------------------------------------------------------------------------------------------------------------------
52,428,873 (2,700,701) (4,132,198) (4,688,612) (3,332,081) 2,539
- ---------------------------------------------------------------------------------------------------------------------------
55,513,661
$ $ (1,717,671) $ (483,942) $ 1,406,098 $1,102,151 $9,134,400
- ---------------------------------------------------------------------------------------------------------------------------
</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,
----------------------------- ----------------------------- -----------------------------
1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------
Operations
Net investment
income (loss) $ (629,096) $ (137,759) $ 4,868,583 $ 4,653,175 $ (680,508) $ (561,626)
- ------------------------------------------------------------------------------------------------------------------------
Net realized gain
(loss) on
investment and
foreign currency
transactions 39,273,492 35,920,680 34,792,274 30,983,706 38,143,040 2,228,053
- ------------------------------------------------------------------------------------------------------------------------
Net change in
unrealized
appreciation/
depreciation of
investments 142,004,420 67,508,676 (51,549,029) (9,079,959) 4,193,728 1,353,560
- ------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in net
assets
resulting from
operations 180,648,816 103,291,597 (11,888,172) 26,556,922 41,656,260 3,019,987
- ------------------------------------------------------------------------------------------------------------------------
Dividends and
Distributions
Dividends from net
investment income -- -- (5,225,370) (4,404,065) -- --
- ------------------------------------------------------------------------------------------------------------------------
Dividends in excess
of net investment
income -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Distributions from
net
realized gains (43,879,009) (21,568,633) (32,765,017) (27,679,090) (20,559,728) (6,691,785)
- ------------------------------------------------------------------------------------------------------------------------
Tax return of
capital
distributions -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Total distributions (43,879,009) (21,568,633) (37,990,387) (32,083,155) (20,559,728) (6,691,785)
- ------------------------------------------------------------------------------------------------------------------------
Fund share
transactions(a)
Net proceeds from
shares sold 114,931,932 61,539,874 77,536,152 61,726,845 54,990,278 47,314,663
- ------------------------------------------------------------------------------------------------------------------------
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends and
distributions 42,595,350 21,112,171 36,982,534 31,419,758 19,982,699 6,560,196
- ------------------------------------------------------------------------------------------------------------------------
Cost of shares
reacquired (108,629,468) (78,466,932) (85,971,350) (79,225,934) (68,448,742) (57,118,761)
- ------------------------------------------------------------------------------------------------------------------------
Net increase
(decrease) in net
assets from Fund
share
transactions 48,897,814 4,185,113 28,547,336 13,920,669 6,524,235 (3,243,902)
- ------------------------------------------------------------------------------------------------------------------------
Total increase
(decrease) 185,667,621 85,908,077 (21,331,223) 8,394,436 27,620,767 (6,915,700)
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------
Beginning of year 329,802,657 243,894,580 283,487,635 275,093,199 158,982,436 165,898,136
- ------------------------------------------------------------------------------------------------------------------------
End of year(b) $515,470,278 $329,802,657 $262,156,412 $283,487,635 $186,603,203 $158,982,436
- ------------------------------------------------------------------------------------------------------------------------
(a) Fund share transactions are at $1 per share for the U.S. Government Money Market Portfolio.
(b) Includes
undistributed net
investment income
of $ -- $ -- $ -- $ 331,461 $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SMALL CAPITALIZATION
VALUE PORTFOLIO
--------------------------------
Year Ended December 31,
--------------------------------
1999 1998
<S> <C> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS
- -----------------------------------------------------------
Operations
Net investment
income (loss) $ 1,006,632 $ 745,060
- ---------------------------------------------------------------
Net realized gain
(loss) on
investment and
foreign currency
transactions 1,354,411 11,100,287
- -------------------------------------------------------------------
Net change in
unrealized
appreciation/
depreciation of
investments (1,250,361) (23,613,476)
- -----------------------------------------------------------------------
Net increase
(decrease) in net
assets
resulting from
operations 1,110,682 (11,768,129)
- ---------------------------------------------------------------------------
Dividends and
Distributions
Dividends from net
investment income (1,036,917) (616,180)
- -------------------------------------------------------------------------------
Dividends in excess
of net investment
income -- --
- -----------------------------------------------------------------------------------
Distributions from
net
realized gains (845,701) (11,204,352)
- ---------------------------------------------------------------------------------------
Tax return of
capital
distributions -- --
- -------------------------------------------------------------------------------------------
Total distributions (1,882,618) (11,820,532)
- -----------------------------------------------------------------------------------------------
Fund share
transactions(a)
Net proceeds from
shares sold 43,989,353 51,340,282
- ---------------------------------------------------------------------------------------------------
Net asset value of
shares issued to
shareholders in
reinvestment of
dividends and
distributions 1,831,438 11,566,933
- -------------------------------------------------------------------------------------------------------
Cost of shares
reacquired (59,596,106) (61,175,473)
- -----------------------------------------------------------------------------------------------------------
Net increase
(decrease) in net
assets from Fund
share
transactions (13,775,315) 1,731,742
- ---------------------------------------------------------------------------------------------------------------
Total increase
(decrease) (14,547,251) (21,856,919)
NET ASSETS
- -------------------------------------------------------------------------------------------------------------------
Beginning of year 141,557,250 163,414,169
- -----------------------------------------------------------------------------------------------------------------------
End of year(b) $127,009,999 $ 141,557,250
- ------------------------------------------------------------------------------------------------------------------------
(a) Fund share transa
(b) Includes
undistributed net
investment income
of $ 13,760 $ 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,
- ------------------------------ ----------------------------- ----------------------------- -----------------------------
1999 1998 1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
$ 3,084,788 $ 3,498,986 $ 983,030 $ 1,037,980 $ 3,648,256 $ 3,420,783 $ 6,094,710 $ 5,778,552
- ------------------------------------------------------------------------------------------------------------------------------------
22,795,682 19,004,639 (580,220) 733,885 (2,856,428) 2,090,996 (3,082,233) 1,734,284
- ------------------------------------------------------------------------------------------------------------------------------------
29,633,191 13,769,545 (2,120,481) 768,892 (1,275,770) (641,674 ) (1,606,379) (424,161)
- ------------------------------------------------------------------------------------------------------------------------------------
55,513,661 36,273,170 (1,717,671) 2,540,757 (483,942) 4,870,105 1,406,098 7,088,675
- ------------------------------------------------------------------------------------------------------------------------------------
(3,084,788) (1,532,425) (728,282) (1,037,980 ) (3,649,343) (3,376,862 ) (5,989,108) (5,900,704)
- ------------------------------------------------------------------------------------------------------------------------------------
(2,677,890) -- (15,039) (211,923 ) -- -- (123,288) --
- ------------------------------------------------------------------------------------------------------------------------------------
(18,824,138) (12,786,060) (533,458) (129,221 ) -- (2,089,757 ) -- (1,685,532)
- ------------------------------------------------------------------------------------------------------------------------------------
-- -- (357,823) -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
(24,586,816) (14,318,485) (1,634,602) (1,379,124 ) (3,649,343) (5,466,619 ) (6,112,396) (7,586,236)
- ------------------------------------------------------------------------------------------------------------------------------------
510,600,358 397,245,964 9,337,260 10,468,976 30,284,247 32,010,608 51,530,513 59,709,544
- ------------------------------------------------------------------------------------------------------------------------------------
23,927,794 13,933,450 1,568,393 1,318,338 3,444,914 5,274,697 5,771,282 7,214,518
- ------------------------------------------------------------------------------------------------------------------------------------
(534,749,224) (426,694,187) (12,103,726) (13,095,621 ) (29,405,059) (20,021,411 ) (44,887,078) (56,214,686)
- ------------------------------------------------------------------------------------------------------------------------------------
(221,072) (15,514,773) (1,198,073) (1,308,307 ) 4,324,102 17,263,894 12,414,717 10,709,376
- ------------------------------------------------------------------------------------------------------------------------------------
30,705,773 6,439,912 (4,550,346) (146,674 ) 190,817 16,667,380 7,708,419 10,211,815
- ------------------------------------------------------------------------------------------------------------------------------------
244,290,810 237,850,898 31,041,921 31,188,595 67,078,162 50,410,782 105,282,593 95,070,778
- ------------------------------------------------------------------------------------------------------------------------------------
$274,996,583 $ 244,290,810 $ 26,491,575 $31,041,921 $ 67,268,979 $67,078,162 $112,991,012 $105,282,593
- ------------------------------------------------------------------------------------------------------------------------------------
$ -- $ -- $ -- $ -- $ 107,366 $ 137,282 $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
U.S. GOVERNMENT
MORTGAGE BACKED MONEY
SECURITIES PORTFOLIO MARKET PORTFOLIO
----------------------------- -----------------------------------
Year Ended December 31, Year Ended December 31,
----------------------------- -----------------------------------
1999 1998 1999 1998
<C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
$ 4,434,232 $ 4,525,346 $ 9,131,861 $ 5,162,964
- ------------------------------------------------------------------------------------------------------------------------------------
(256,634) 603,101 2,539 (1,050)
- ------------------------------------------------------------------------------------------------------------------------------------
(3,075,447) (603,723 ) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
1,102,151 4,524,724 9,134,400 5,161,914
- ------------------------------------------------------------------------------------------------------------------------------------
(4,506,298) (4,414,869 ) (9,134,400) (5,161,914)
- ------------------------------------------------------------------------------------------------------------------------------------
-- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
-- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
-- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
(4,506,298) (4,414,869 ) (9,134,400) (5,161,914)
- ------------------------------------------------------------------------------------------------------------------------------------
19,032,932 17,198,222 7,084,700,140 3,570,979,025
- ------------------------------------------------------------------------------------------------------------------------------------
3,919,458 3,666,643 5,438,487 4,089,479
- ------------------------------------------------------------------------------------------------------------------------------------
(25,046,551) (19,700,312 ) (7,143,264,709) (3,478,545,549)
- ------------------------------------------------------------------------------------------------------------------------------------
(2,094,161) 1,164,553 (53,126,082) 96,522,955
- ------------------------------------------------------------------------------------------------------------------------------------
(5,498,308) 1,274,408 (53,126,082) 96,522,955
- ------------------------------------------------------------------------------------------------------------------------------------
72,869,915 71,595,507 138,848,487 42,325,532
- ------------------------------------------------------------------------------------------------------------------------------------
$ 67,371,607 $72,869,915 $ 85,722,405 $ 138,848,487
- ------------------------------------------------------------------------------------------------------------------------------------
$ 95,753 $ 167,819 $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------------------
</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,
------------------------------------------------------------
1999 1998 1997 1996(b) 1995(b)
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
- ---------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $18.29 $13.58 $12.97 $12.13 $9.74
- ---------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income (loss) (.03) (.01) --(c) .02 .10
- ---------------------------------------------------------------------------------------------------------
Net realized and unrealized gains
(losses) on
investment transactions 9.79 6.00 2.61 2.33 2.41
- ---------------------------------------------------------------------------------------------------------
Total from investment
operations 9.76 5.99 2.61 2.35 2.51
- ---------------------------------------------------------------------------------------------------------
Less distributions
Dividends from net investment income -- -- (.01) (.02) (.10)
- ---------------------------------------------------------------------------------------------------------
Distributions in excess of net
investment income -- -- -- -- (.01)
- ---------------------------------------------------------------------------------------------------------
Distributions from net realized gains (2.37) (1.28) (1.99) (1.49) (.01)
- ---------------------------------------------------------------------------------------------------------
Total distributions (2.37) (1.28) (2.00) (1.51) (.12)
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of year $25.68 $18.29 $13.58 $12.97 $12.13
- ---------------------------------------------------------------------------------------------------------
TOTAL RETURN(a) 55.37% 44.22% 20.77% 21.09% 25.76%
- ---------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $515,470 $329,803 $243,895 $220,782 $180,077
- ---------------------------------------------------------------------------------------------------------
Average net assets (000) $385,995 $277,794 $242,233 $202,736 $162,982
- ---------------------------------------------------------------------------------------------------------
Ratios to average net assets
Expenses .68% .68% .73% .82% .78%
- ---------------------------------------------------------------------------------------------------------
Net investment income (loss) (.16)% (.05)% (.01)% .19% .88%
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover rate 50% 54% 82% 65% 154%
- ---------------------------------------------------------------------------------------------------------
</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,
- ------------------------------------------------------------ -----------------------------------------------------------
1999 1998 1997(b) 1996(b) 1995(b) 1999 1998 1997 1996(b) 1995(b)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
$15.87 $16.21 $13.97 $12.57 $10.02 $15.35 $15.57 $14.93 $14.15 $11.59
- ----------------------------------------------------------------------------------------------------------------------------
.27 .28 .31 .31 .33 (.06) (.05) (.05) (.02) .02
- ----------------------------------------------------------------------------------------------------------------------------
(1.00) 1.34 3.77 2.07 2.89 4.35 .48 3.02 2.63 2.84
- ----------------------------------------------------------------------------------------------------------------------------
(.73) 1.62 4.08 2.38 3.22 4.29 .43 2.97 2.61 2.86
- ----------------------------------------------------------------------------------------------------------------------------
(.29) (.27) (.28) (.31) (.30) -- -- -- -- (.02)
- ----------------------------------------------------------------------------------------------------------------------------
-- -- -- (.03) -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
(1.84) (1.69) (1.56) (.64) (.37) (2.17) (.65) (2.33) (1.83) (.28)
- ----------------------------------------------------------------------------------------------------------------------------
(2.13) (1.96) (1.84) (.98) (.67) (2.17) (.65) (2.33) (1.83) (.30)
- ----------------------------------------------------------------------------------------------------------------------------
$13.01 $15.87 $16.21 $13.97 $12.57 $17.47 $15.35 $15.57 $14.93 $14.15
- ----------------------------------------------------------------------------------------------------------------------------
(4.37)% 10.25% 29.80% 19.17% 32.08% 29.20% 2.55% 20.85% 18.88% 24.62%
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
$262,156 $283,488 $275,093 $227,706 $187,596 $186,603 $158,982 $165,898 $147,469 $121,533
- ----------------------------------------------------------------------------------------------------------------------------
$279,900 $282,078 $253,579 $208,898 $163,124 $150,593 $162,654 $156,570 $141,496 $107,649
- ----------------------------------------------------------------------------------------------------------------------------
.73% .71% .72% .77% .76% .80% .77% .79% .89% .85%
- ----------------------------------------------------------------------------------------------------------------------------
1.74% 1.65% 1.90% 2.33% 2.83% (.45)% (.35)% (.36)% (.32)% .12%
- ----------------------------------------------------------------------------------------------------------------------------
36% 24% 21% 22% 59% 207% 69% 106% 108% 120%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
45
<PAGE>
THE TARGET PORTFOLIO TRUST
Financial Highlights
<TABLE>
<CAPTION>
SMALL CAPITALIZATION
VALUE PORTFOLIO
----------------------------------------------------------
Year Ended December 31,
----------------------------------------------------------
1999 1998(c) 1997(c) 1996(c) 1995(c)
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
- -------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $14.98 $17.50 $15.22 $13.07 $11.07
- -------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income (loss) .11 .08 .08 .11 .14
- -------------------------------------------------------------------------------------------------------
Net realized and unrealized gains
(losses) on
investment transactions .10 (1.27) 4.37 2.71 2.00
- -------------------------------------------------------------------------------------------------------
Total from investment
operations .21 (1.19) 4.45 2.82 2.14
- -------------------------------------------------------------------------------------------------------
Less distributions
Dividends from net investment income (.12) (.07) (.08) (.11) (.14)
- -------------------------------------------------------------------------------------------------------
Distributions in excess of net
investment income -- -- (.01) -- --
- -------------------------------------------------------------------------------------------------------
Distributions from net realized gains (.10) (1.26) (2.08) (.56) --
- -------------------------------------------------------------------------------------------------------
Distributions in excess of net
realized gains -- -- -- -- --
- -------------------------------------------------------------------------------------------------------
Tax return of capital distributions -- -- -- -- --
- -------------------------------------------------------------------------------------------------------
Total distributions (.22) (1.33) (2.17) (.67) (.14)
- -------------------------------------------------------------------------------------------------------
Net asset value, end of year $14.97 $14.98 $17.50 $15.22 $13.07
- -------------------------------------------------------------------------------------------------------
TOTAL RETURN(b) 1.39% (6.62)% 29.98% 21.75% 19.21%
- -------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $127,010 $141,557 $163,414 $126,672 $97,594
- -------------------------------------------------------------------------------------------------------
Average net assets (000) $129,077 $153,756 $144,160 $110,564 $88,085
- -------------------------------------------------------------------------------------------------------
Ratios to average net assets
Expenses .87% .79% .81% .92% 1.00%
- -------------------------------------------------------------------------------------------------------
Net investment income (loss) .75% .48% .45% .77% 1.14%
- -------------------------------------------------------------------------------------------------------
Portfolio turnover rate 42% 39% 36% 60% 110%
- -------------------------------------------------------------------------------------------------------
</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 period reported and includes reinvestment
of dividends and distributions.
(c) Calculated based upon average shares outstanding during the year.
(d) Less than $.005 per share.
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
46
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL
EQUITY PORTFOLIO BOND PORTFOLIO
- ------------------------------------------------------------ -------------------------------------------------------------
Year Ended December 31, Year Ended December 31,
- ------------------------------------------------------------ -------------------------------------------------------------
1999 1998 1997 1996(c) 1995(c) 1999 1998 1997 1996 1995
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
$15.54 $14.27 $14.82 $13.64 $11.95 $9.52 $9.17 $10.17 $10.19 $9.57
- ------------------------------------------------------------------------------------------------------------------------------
.23 .23 .21 .25 .17 .30 .31 .42 .51 .57(a)
- ------------------------------------------------------------------------------------------------------------------------------
3.29 1.98 1.32 1.79 1.67 (.84) .45 (1.00) (.08) .82
- ------------------------------------------------------------------------------------------------------------------------------
3.52 2.21 1.53 2.04 1.84 (.54) .76 (.58) .43 1.39
- ------------------------------------------------------------------------------------------------------------------------------
(.23) (.10) (.41) (.22) (.11) (.23) (.31) -- (.21) (.57)
- ------------------------------------------------------------------------------------------------------------------------------
(.17) -- -- -- -- -- (.06) (.06) -- --
- ------------------------------------------------------------------------------------------------------------------------------
(1.29) (.84) (1.67) (.64) (.04) (.16) (.04) --(d) (.24) (.20)
- ------------------------------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
-- -- -- -- -- (.11) -- (.36) -- --
- ------------------------------------------------------------------------------------------------------------------------------
(1.69) (.94) (2.08) (.86) (.15) (.50) (.41) (.42) (.45) (.77)
- ------------------------------------------------------------------------------------------------------------------------------
$17.37 $15.54 $14.27 $14.82 $13.64 $8.48 $9.52 $9.17 $10.17 $10.19
- ------------------------------------------------------------------------------------------------------------------------------
23.30% 15.49% 10.60% 15.25% 15.38% (5.88)% 8.55% (5.73)% 4.45% 14.66%
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
$274,997 $244,291 $237,851 $240,563 $191,598 $26,492 $31,042 $31,189 $41,780 $34,660
- ------------------------------------------------------------------------------------------------------------------------------
$246,148 $246,335 $245,536 $221,626 $183,414 $29,300 $30,720 $35,163 $38,788 $29,510
- ------------------------------------------------------------------------------------------------------------------------------
.93% .91% .93% .99% 1.02% 1.25% 1.54% 1.35% 1.34% 1.00%(a)
- ------------------------------------------------------------------------------------------------------------------------------
1.25% 1.42% 1.15% 1.77% 1.32% 3.36% 3.38% 4.44% 5.02% 5.56%(a)
- ------------------------------------------------------------------------------------------------------------------------------
35% 45% 37% 39% 76% 132% 110% 202% 226% 456%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
47
<PAGE>
THE TARGET PORTFOLIO TRUST
Financial Highlights
<TABLE>
<CAPTION>
TOTAL RETURN
BOND PORTFOLIO
---------------------------------------------------------
Year Ended December 31,
---------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
- ------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $10.49 $10.56 $10.28 $10.62 $9.48
- ------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .56 .58 .57 .57 .62(a)
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gains
(losses) on
investment transactions (.63) .27 .35 (.09) 1.18
- ------------------------------------------------------------------------------------------------------
Total from investment
operations (.07) .85 .92 .48 1.80
- ------------------------------------------------------------------------------------------------------
Less distributions
Dividends from net investment income (.56) (.58) (.54) (.56) (.58)
- ------------------------------------------------------------------------------------------------------
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 (.56) (.92) (.64) (.82) (.66)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of year $9.86 $10.49 $10.56 $10.28 $10.62
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN(b) (.67)% 8.28% 9.23% 5.02% 19.63%
- ------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $67,269 $67,078 $50,411 $49,218 $45,118
- ------------------------------------------------------------------------------------------------------
Average net assets (000) $65,911 $61,786 $48,123 $47,246 $37,023
- ------------------------------------------------------------------------------------------------------
Ratios to average net assets
Expenses .82% .81% .91% .94% .85%(a)
- ------------------------------------------------------------------------------------------------------
Net investment income 5.54% 5.54% 5.54% 5.67% 6.21%(a)
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 368% 327% 323% 340% 141%
- ------------------------------------------------------------------------------------------------------
</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,
- ---------------------------------------------------------- --------------------------------------------------------
1999 1998 1997 1996 1995 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
$ 10.36 $ 10.42 $ 10.30 $ 10.51 $ 9.56 $ 10.47 $ 10.45 $ 10.21 $ 10.31 $ 9.51
- -----------------------------------------------------------------------------------------------------------------------
.56 .63 .58 .59 .63 .66 .64 .64 .65 .68(a)
- -----------------------------------------------------------------------------------------------------------------------
)
(.43 .09 .28 (.07) .94 (.50) .01 .23 (.12) .83
- -----------------------------------------------------------------------------------------------------------------------
.13 .72 .86 .52 1.57 .16 .65 .87 .53 1.51
- -----------------------------------------------------------------------------------------------------------------------
(.56) (.61) (.57) (.59) (.60) (.66) (.63) (.63) (.63) (.68)
- -----------------------------------------------------------------------------------------------------------------------
(.01) -- -- -- -- -- -- -- -- (.03)
- -----------------------------------------------------------------------------------------------------------------------
-- (.17) (.17) (.14) (.02) -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
(.57) (.78) (.74) (.73) (.62) (.66) (.63) (.63) (.63) (.71)
- -----------------------------------------------------------------------------------------------------------------------
$9.92 $10.36 $10.42 $10.30 $10.51 $9.97 $10.47 $10.45 $10.21 $10.31
- -----------------------------------------------------------------------------------------------------------------------
1.30% 7.09% 8.57% 5.22% 16.87% 1.54% 6.37% 8.82% 5.56% 16.18%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
$112,991 $105,283 $95,071 $100,392 $77,125 $67,372 $72,870 $71,596 $73,867 $69,759
- -----------------------------------------------------------------------------------------------------------------------
$108,243 $101,219 $95,575 $81,723 $68,628 $70,244 $73,737 $71,757 $72,214 $65,149
- -----------------------------------------------------------------------------------------------------------------------
.67% .66% .71% .73% .79% .80% .70% .88% .91% .85%(a)
- -----------------------------------------------------------------------------------------------------------------------
5.63% 5.71% 5.64% 5.69% 6.09% 6.31% 6.14% 6.21% 6.44% 6.79%(a)
- -----------------------------------------------------------------------------------------------------------------------
253% 249% 249% 311% 93% 14% 24% 128% 102% 154%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
49
<PAGE>
THE TARGET PORTFOLIO TRUST
Financial Highlights
<TABLE>
<CAPTION>
U.S. GOVERNMENT
MONEY
MARKET PORTFOLIO
----------------------------------------------------------
Year Ended December 31,
----------------------------------------------------------
1999 1998 1997 1996 1995
<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 .045 .048 .049 .045 .051(a)
- -------------------------------------------------------------------------------------------------------
Total from investment
operations .045 .048 .049 .045 .051
- -------------------------------------------------------------------------------------------------------
Less distributions
Dividends from net investment income (.045) (.048) (.049) (.045) (.051)
- -------------------------------------------------------------------------------------------------------
Total distributions (.045) (.048) (.049) (.045) (.051)
- -------------------------------------------------------------------------------------------------------
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------
TOTAL RETURN(b) 4.67% 4.88% 4.95% 4.53% 5.25%
- -------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $85,722 $138,848 $42,326 $27,397 $18,855
- -------------------------------------------------------------------------------------------------------
Average net assets (000) $196,853 $106,500 $37,675 $19,132 $20,173
- -------------------------------------------------------------------------------------------------------
Ratios to average net assets
Expenses .43% .55% .65% .89% .75%(a)
- -------------------------------------------------------------------------------------------------------
Net investment income 4.64% 4.85% 4.91% 4.49% 5.18%(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.
- --------------------------------------------------------------------------------
See Notes to Financial Statements beginning on page 51
50
<PAGE>
THE TARGET PORTFOLIO TRUST
Notes to Financial Statements
The Target Portfolio Trust (the 'Fund') is an open-end management
investment company. The Fund was established as a Delaware business
trust on July 29, 1992 and consists of ten separate portfolios (the
'Portfolio' or 'Portfolios'): Large Capitalization Growth Portfolio,
Large Capitalization Value Portfolio, Small Capitalization Growth
Portfolio, Small
Capitalization Value Portfolio, International Equity Portfolio, International
Bond Portfolio, Total Return Bond Portfolio, Intermediate-Term Bond Portfolio,
Mortgage Backed Securities Portfolio and U.S. Government Money Market Portfolio.
All the Portfolios are diversified, as defined under the Investment Company Act
of 1940, except for 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 adviser's opinion should have earnings growth faster than that of the
U.S. economy in general; 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.
Swaps: The Intermediate-Term Bond Portfolio may enter into a swap in order
to hedge against adverse movements in interest notes. A swap is an agreement
between two parties to exchange a series of cash flows at specified intervals.
Based on a notional amount, each party pays an interest rate or the change in
the value of a security. Dividends and interest on the securities in the swap
are included in the value of the exchange. The swaps are valued daily at current
market value and any unrealized gain or loss is included in net unrealized
appreciation or depreciation on investments. Gain or loss is realized on the
termination date of the swap and is equal to the difference between the
Portfolio's basis in the swap and the proceeds of the closing transaction,
including any fees. During the period that the swap agreement is open, the
Portfolio may be subject to risk from the potential inability of the
counterparty to meet the terms of the agreement.
- --------------------------------------------------------------------------------
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 $ -- $ (629,096) $ 629,096
Large Capitalization
Value.............. b -- (25,326) 25,326
Small Capitalization
Growth............. c -- (680,508) 680,508
Small Capitalization
Value.............. f -- 6,505 (6,505)
International
Equity............. a,e -- (5,167,364) 5,167,364
International Bond... a,b 60,015 302,889 (362,904)
Total Return Bond.... a -- 28,829 (28,829)
Intermediate-Term
Bond............... a,b (120,806) 107,192 13,614
- ---------------
(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.
(f) Reclass of real estate investment trust.
</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
were 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 advisery 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 advisery agreements, the
cost of compensation of officers of the Fund, occupancy and certain clerical and
accounting costs of the Fund. The Fund bears all other costs and expenses.
The advisers noted below each furnished investment advisery services in
connection with the management of the Portfolios. Effective May 28, 1999,
Sawgrass Asset Management, L.L.C. became the subadviser of the Small
Capitalization Growth Portfolio and will serve the portfolio under the same
terms and conditions as under the agreement with Nicholas-Applegate Capital
Management. Effective August 26, 1999, Fleming Asset Management USA became the
subadviser of the Small Capitalization Growth Portfolio and will serve the
portfolio under the same terms and conditions as under the agreement with
Investment Advisers, Inc. 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................. Sawgrass Asset Management, L.L.C.
and Fleming Asset Management USA
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................... PIMCO
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% .40%
Small Capitalization Value...... .60% .40%
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 has a distribution agreement with Prudential Investment
Management Services LLC ('PIMS'). PIMS serves the Fund without compensation.
PIFM 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, 1999 as well as the fees due
PMFS as of December 31, 1999.
<TABLE>
<CAPTION>
Amount incurred
for the Amount Due
year ended as of
December 31, December 31,
Portfolio 1999 1999
- -------------------------------- ---------------- ------------
<S> <C> <C>
Large Capitalization Growth..... $121,100 $ 11,300
Large Capitalization Value...... 118,600 10,400
Small Capitalization Growth..... 114,400 10,000
Small Capitalization Value...... 109,900 9,500
International Equity............ 112,500 9,900
International Bond.............. 36,100 3,000
Total Return Bond............... 48,000 4,200
Intermediate-Term Bond.......... 59,000 5,400
Mortgage Backed Securities...... 53,900 4,600
U.S. Government Money Market.... 29,000 2,700
</TABLE>
For the year ended December 31, 1999, Prudential Securities Incorporated
('PSI') earned approximately $1,100, $49,000 and $40,200 in brokerage
commissions on behalf of certain portfolio transactions executed with the Large
Capitalization Growth Portfolio, Large Capitalization Value Portfolio and Small
Capitalization Growth Portfolio, respectively.
- -------------------------------------------------------------------
Note 4. Portfolio Securities
Purchases and sales of portfolio securities, excluding short-term
investments and written options, for the period ended December 31, 1999 were as
follows:
<TABLE>
<CAPTION>
Portfolio Purchases Sales
- ------------------------------------ ------------ ------------
<S> <C> <C>
Large Capitalization Growth......... $189,728,682 $195,695,379
Large Capitalization Value.......... 99,535,211 104,555,886
Small Capitalization Growth......... 292,760,296 305,723,347
Small Capitalization Value.......... 54,793,721 68,880,486
International Equity................ 82,162,161 100,715,653
International Bond.................. 37,247,786 38,017,829
Total Return Bond................... 292,844,847 282,403,695
Intermediate-Term Bond.............. 302,773,045 278,551,793
Mortgage Backed Securities.......... 20,375,459 9,795,841
</TABLE>
The federal income tax basis and unrealized appreciation/depreciation of
each of the Portfolios' investments, excluding written options as of December
31, 1999, were as follows:
<TABLE>
<CAPTION>
Net
Unrealized
Appreciation Gross Unrealized
Portfolio Basis (Depreciation) Appreciation Depreciation
- --------------------- ------------ --------------- ------------ ------------
<S> <C> <C> <C> <C>
Large Capitalization
Growth............. $238,848,378 $ 276,717,405 $277,890,899 $ 1,173,494
Large Capitalization
Value.............. 233,103,350 28,722,811 56,654,071 27,931,260
Small Capitalization
Growth............. 147,943,401 38,639,334 44,179,878 5,540,544
Small Capitalization
Value.............. 111,947,950 14,789,905 23,800,905 9,011,000
International
Equity............. 202,982,450 72,100,764 81,875,961 9,775,197
International Bond... 27,824,050 (1,849,624) 182,556 2,032,180
Total Return Bond.... 97,131,061 (794,686) 342,380 1,137,066
Intermediate-Term
Bond............... 141,270,469 (763,478) 564,042 1,327,520
Mortgage Backed
Securities......... 68,591,575 (1,271,005) 714,617 1,985,622
</TABLE>
For federal income tax purposes, International Bond Portfolio, the Total
Return Bond Portfolio, Intermediate-Term Bond Portfolio and Mortgage Backed
Securities Portfolio had a capital loss carryforward as of December 31, 1999.
Accordingly, no capital gain distributions are expected to be paid to
shareholders of the International Bond Portfolio, Total Return Bond Portfolio
and Mortgage Backed Securities Portfolio until future net gains have been
realized in excess of such carryforward. In addition, certain portfolios have
either partially or fully utilized prior yer caital losses and/or are electing
to treat net currency losses incurred in the two-month period ended December 31,
1999 as having been incurred in the following year.
<TABLE>
<CAPTION>
Utilization Net Losses
of in two
Prior Year months ended
Capital Loss Expiration Capital Loss December 31,
Portfolio Carryforward Year Carryforward 1999
- ---------------------- ------------ ---------- ------------ -------------
<S> <C> <C> <C> <C>
International
Equity.............. $ -- -- $ -- $28,139
International Bond
Portfolio........... 211,700 2007 -- 95,861
Total Return Bond
Portfolio........... 2,722 2007 -- 352,900
Intermediate-Term Bond
Portfolio........... 3,241,758 2007 -- 276,982
Mortgage Backed
Securities
Portfolio........... 458,600 2002 2,718,500 --
237,400 2007 -- 35,900
</TABLE>
At December 31, 1999, the Total Return Bond and Intermediate-Term Bond
Portfolios bought financial futures contracts. The unrealized
appreciation/depreciation on such contracts as of December 31, 1999 were as
follows:
<TABLE>
<CAPTION>
Total Return Bond Portfolio:
Value at Value at Unrealized
Number of Expiration December 31, Trade Appreciation
Contracts Type Date 1999 Date (Depreciation)
- ---------- ---------------- ---------- ------------ ---------- --------------
Long Positions:
<C> <S> <C> <C> <C> <C>
48 5-yr. T-Note Mar. 2000 $ 4,704,750 $4,764,000 $ (59,250)
36 10-yr. T-Note Mar. 2000 3,450,938 3,534,750 (83,812)
19 Eurodollar Sept. 2000 4,432,700 4,456,575 (23,875)
13 Eurodollar Dec. 2000 3,025,587 3,042,475 (16,888)
--------------
$ (183,825)
--------------
--------------
</TABLE>
<TABLE>
<CAPTION>
Intermediate-Term Bond Portfolio:
Value at Value at Unrealized
Number of Expiration December 31, Trade Appreciation
Contracts Type Date 1999 Date (Depreciation)
- ---------- -------------------- ---------- ------------ ---------- --------------
Long Positions:
<C> <S> <C> <C> <C> <C>
94 10-yr. T-Note Mar. 2000 $9,010,781 $9,199,046 $ (188,265)
74 5-yr. T-Note Mar. 2000 7,253,156 7,344,500 (91,344)
--------------
$ (279,609)
--------------
--------------
</TABLE>
- --------------------------------------------------------------------------------
54
<PAGE>
At December 31, 1999, the Total Return Bond Portfolio had outstanding
forward currency contracts to sell foreign currencies, as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- ------------------------- --------------- ---------- --------------
<S> <C> <C> <C>
Eurodollar,
expiring 1/24/00....... $ 746,445 $ 706,546 $ 39,899
Japanese Yen,
expiring 2/14/00....... 869,546 909,725 (40,179)
--------------- ---------- --------------
$ 1,615,991 $1,616,271 $ (280)
--------------- ---------- --------------
--------------- ---------- --------------
</TABLE>
At December 31, 1999, the Intermediate-Term Bond Portfolio had outstanding
forward currency contracts to sell foreign currencies, as follows:
<TABLE>
<CAPTION>
Value at
Foreign Currency Settlement Date Current Appreciation
Sale Contracts Receivable Value (Depreciation)
- ------------------------- --------------- ---------- --------------
<S> <C> <C> <C>
Eurodollar,
expiring 1/24/00....... $ 1,279,620 $1,211,222 $ 68,398
Japanese Yen,
expiring 2/14/00....... 1,445,860 1,512,668 (66,808)
--------------- ---------- --------------
$ 2,725,480 $2,723,890 $ 1,590
--------------- ---------- --------------
--------------- ---------- --------------
</TABLE>
Transactions in options written during the period ended December 31, 1999,
were as follows:
<TABLE>
<CAPTION>
Number of Premiums
Total Return Bond Portfolio Contracts Received
- ---------------------------------------- --------- --------
<S> <C> <C>
Options outstanding at December 31,
1998.................................. 15 $ 2,872
Options written......................... 486 236,857
Options terminated in closing purchase
transactions.......................... (76) (61,935 )
Options expired......................... (285) (129,040)
--- --------
Options outstanding at December 31,
1999.................................. 140 $48,754
--- --------
--- --------
<CAPTION>
Number of Premiums
Intermediate-Term Bond Portfilio Contracts Received
- ---------------------------------------- --------- --------
<S> <C> <C>
Options outstanding at December 31,
1998.................................. 24 $ 4,340
Options written......................... 548 300,147
Options terminated in closing purchase
transactions (125) (101,704)
Options expired......................... (447) (202,783)
--- --------
Options outstanding at December 31,
1999.................................. 0 $ 0
--- --------
--- --------
</TABLE>
- --------------------------------------------------------------------------------
Note 5. Capital
The Fund has authorized an unlimited number of shares of beneficial
interest at $.001 par value per share.
Transactions in shares of beneficial interest during the year ended
December 31, 1999 were as follows:
<TABLE>
<CAPTION>
Shares
Issued in
Reinvestment Increase/
of Dividends (Decrease)
Shares and Shares in Shares
Portfolio Sold Distributions Reacquired Outstanding
- -------------------------------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Large Capitalization Growth
Portfolio........................... 5,316,176 1,844,182 (5,115,193) 2,045,165
Large Capitalization Value
Portfolio........................... 4,949,283 2,840,847 (5,511,583) 2,278,547
Small Capitalization Growth
Portfolio........................... 3,515,117 1,238,085 (4,434,609) 318,593
Small Capitalization Value
Portfolio........................... 2,990,699 127,626 (4,083,584) (965,259)
International Equity Portfolio........ 31,285,882 1,444,349 (32,619,836) 110,395
International Bond Portfolio.......... 1,036,333 173,070 (1,347,551) (138,148)
Total Return Bond Portfolio........... 2,983,019 340,231 (2,891,426) 431,824
Intermediate-Term Bond Portfolio...... 5,097,285 571,696 (4,435,925) 1,233,056
Mortgage Backed Securities Portfolio.. 1,860,018 384,091 (2,447,653) (203,544)
</TABLE>
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>
- --------------------------------------------------------------------------------
55
<PAGE>
THE TARGET PORTFOLIO TRUST
Report of Independent
Accountants
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, 1999, the results of each of their operations
for the year then ended, the changes in each of their net assets for each of the
two years in the period then ended and each of their financial highlights for
each of the three years in the period then ended, in conformity with accounting
principles generally accepted in the United States. These financial statements
and financial highlights (hereafter referred to as 'financial statements') are
the responsibility of the 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 auditing standards
generally accepted in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 1999 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion expressed above. The accompanying financial highlights for
the two 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 18, 2000
- --------------------------------------------------------------------------------
56
<PAGE>
THE TARGET PORTFOLIO TRUST
Federal Income Tax Information
(unaudited)
As required by the Internal Revenue Code, we wish to advise you as to the
federal tax status of dividends and distributions paid by the Fund during its
fiscal year ended December 31, 1999. Further, we wish to advise you of the
percentage of the ordinary income dividends (excluding long-term capital gains
distributions) paid in 1999 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, 1999 as well as
the corporate dividend received deduction percentage:
<TABLE>
<CAPTION>
Ordinary Dividends* Corporate
------------------------ Long-Term Dividend
Short-Term Capital Gains Total Dividends Received
Portfolio Income Capital Gains Distributions and Distributions Deduction
- -------------------------------------------------- ------ -------------- -------------- ----------------- ---------
<S> <C> <C> <C> <C> <C>
Large Capitalization Growth Portfolio............. -- $ 0.06 $2.314 $ 2.374 0%
Large Capitalization Value Portfolio.............. $.293 .008 1.833 2.134 100%
Small Capitalization Growth Portfolio............. -- -- 2.170 2.170 0%
Small Capitalization Value Portfolio.............. .120 .013 .085 .218 100%
International Equity Portfolio.................... 0.396 0.158 1.134 1.688 0%
International Bond Portfolio...................... .336 -- .165 .501 0%
Total Return Bond Portfolio....................... 0.560 -- -- 0.560 0%
Intermediate-Term Bond Portfolio.................. 0.570 -- -- 0.570 0%
Mortgage Backed Securities Portfolio.............. 0.66 -- -- 0.66 0%
U.S. Government Money Market
Portfolio....................................... 0.045 -- -- 0.045 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 1999, the International Equity
Portfolio passed through a foreign tax credit of $.0439 per share.
Important Notice For Certain
Shareholders (unaudited)
Many states do not tax the portion of mutual fund dividends attributed to
interest from U.S. Government obligations. Listed below is the percentage of
interest earned by the following Target portfolios from U.S. Government
obligations for the calendar year 1999.
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, 1999 the
International Equity Portfolio intends on passing through $.0439 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.................... 6.58%
International Equity
Portfolio.................... 6.33%
International Bond Portfolio... 5.66%
Total Return Bond Portfolio.... 5.81%
Intermediate-Term Bond
Portfolio.................... 5.91%
Mortgage Backed Securities
Portfolio.................... 1.94%
U.S. Government Money Market
Portfolio.................... 11.41%
</TABLE>
* Due to certain minimum portfolio holding requirements in California,
Connecticut and New York, residents of those states will not be able to exclude
1999 U.S. interest income from state and local taxes.
Please consult your tax adviser or state/local authorities to properly report
this information on your tax return. If you have any questions concerning the
amounts listed above, please call your Prudential Securities Financial Adviser.
- --------------------------------------------------------------------------------
57
<PAGE>
THE TARGET PORTFOLIO TRUST
Supplemental Proxy Information
(unaudited)
A Special Meeting of Shareholders of the Target Portfolio Trust was held on
November 8, 1999 at Prudential Plaza, 751 Broad Street, 24th Floor, Newark, New
Jersey 07102. The meeting was held for the following purposes:
(1) To elect Trustees as follows: Eugene C. Dorsey, Robert F. Gunia, Robert E.
LaBlanc, Douglas H. McCorkindale, Thomas T. Mooney, David R. Odenath, Jr.,
Stephen Stoneburn, John R. Strangfeld, Jr., Clay T. Whitehead.
(2) To ratify the selection of Board of Trustees of PricewaterhouseCoopers LLP
as independent accountants for the fiscal year ending December 31, 1999.
(3) through (12) To approve certain changes to the Fund's fundamental investment
restrictions.
The results of the proxy solicitation on the above matters were as follows:
<TABLE>
<CAPTION>
Votes for Votes against Abstentions
------------ ------------- -----------
<S> <C> <C> <C>
(1) Trustee/Matter
a) Eugene C. Dorsey............................... 231,616,946 -- 1,119,226
b) Robert F. Gunia................................ 231,648,358 -- 1,087,814
c) Robert E. LaBlanc.............................. 231,650,002 -- 1,086,170
d) Douglas H. McCorkindale........................ 231,620,925 -- 1,115,247
e) Thomas T. Mooney............................... 231,632,124 -- 1,104,048
f) David R. Odenath, Jr.......................... 231,646,587 -- 1,089,585
g) Stephen Stoneburn.............................. 231,648,684 -- 1,087,488
h) John R. Strangfeld, Jr......................... 231,655,779 -- 1,080,393
i) Clay T. Whitehead.............................. 231,644,722 -- 1,091,450
2) PricewaterhouseCoopers LLP 231,340,650 525,898 869,624
3) Approval of certain changes to the Large Capitalization Growth Portfolio's fundamental investment
restrictions regarding
a) Issuance of senior securities.................. 6,413,860 207,612 281,675
b) Diversification................................ 6,500,341 159,244 243,562
c) Unseasoned issuers............................. 6,358,852 283,277 261,018
d) Investment in shares of other investment
companies...................................... 6,331,717 323,041 248,389
e) Investments in oil, gas or other mineral
exploration or develop......................... 6,347,166 305,987 249,994
f) Securities lending............................. 6,339,877 297,700 265,570
g) Purchase and sale of commodities or commodity
contracts...................................... 6,284,790 363,297 255,060
4) Approval of certain changes to the Large Capitalization Value Portfolio's fundamental investment
restrictions regarding
a) Issuance of senior securities.................. 6,235,632 204,766 256,542
b) Diversification................................ 6,296,329 178,323 222,288
c) Unseasoned issuers............................. 6,184,162 275,089 237,689
d) Investment in shares of other investment
companies...................................... 6,170,149 304,726 222,065
e) Investments in oil, gas or other mineral
exploration or develop......................... 6,165,640 303,659 227,641
f) Securities lending............................. 6,168,412 278,042 250,486
g) Purchase and sale of commodities or commodity
contracts...................................... 6,122,518 358,356 216,066
</TABLE>
- --------------------------------------------------------------------------------
58
<PAGE>
<TABLE>
<CAPTION>
Votes for Votes against Abstentions
------------ ------------- -----------
<S> <C> <C> <C>
5) Approval of certain changes to the Small Capitalization Growth Portfolio's fundamental investment
restrictions regarding
a) Issuance of senior securities.................. 3,240,621 110,211 133,067
b) Diversification................................ 3,269,182 89,223 125,494
c) Unseasoned issuers............................. 3,212,159 142,217 129,523
d) Investment in shares of other investment
companies...................................... 3,203,846 154,620 125,433
e) Investments in oil, gas or other mineral
exploration or develop......................... 3,199,634 155,190 129,075
f) Securities lending............................. 3,197,347 156,699 129,853
g) Purchase and sale of commodities or commodity
contracts...................................... 3,163,605 188,844 131,450
6) Approval of certain changes to the Small Capitalization Value Portfolio's fundamental investment
restrictions regarding
a) Issuance of senior securities.................. 3,042,043 105,940 130,443
b) Diversification................................ 3,066,484 90,117 121,825
c) Unseasoned issuers............................. 3,021,468 132,950 124,008
d) Investment in shares of other investment
companies...................................... 2,999,446 156,354 122,626
e) Investments in oil, gas or other mineral
exploration or develop......................... 3,005,287 147,457 125,682
f) Securities lending............................. 3,009,417 141,700 127,309
g) Purchase and sale of commodities or commodity
contracts...................................... 2,968,890 186,941 122,595
7) Approval of certain changes to the International Equity Portfolio's fundamental investment
restrictions regarding
a) Issuance of senior securities.................. 5,067,985 148,744 195,508
b) Diversification 5,114,229 122,614 175,394
c) Unseasoned issuers............................. 5,022,088 208,728 181,421
d) Investment in shares of other investment
companies...................................... 5,006,327 226,412 179,498
e) Investments in oil, gas or other mineral
exploration or develop......................... 4,988,297 241,870 182,070
f) Securities lending............................. 5,019,952 211,402 180,883
g) Purchase and sale of commodities or commodity
contracts...................................... 4,975,861 261,051 175,325
8) Approval of certain changes to the International Bond Portfolio's fundamental investment
restrictions regarding
a) Issuance of senior securities.................. 1,178,234 21,957 33,955
c) Unseasoned issuers............................. 1,181,623 16,590 35,933
d) Investment in shares of other investment
companies...................................... 1,180,368 20,415 33,363
e) Investments in oil, gas or other mineral
exploration or develop......................... 1,172,702 29,373 32,071
f) Securities lending............................. 1,175,895 28,549 29,702
g) Purchase and sale of commodities or commodity
contracts...................................... 1,182,446 20,534 31,166
</TABLE>
- --------------------------------------------------------------------------------
59
<PAGE>
<TABLE>
<CAPTION>
Votes for Votes against Abstentions
------------ ------------- -----------
<S> <C> <C> <C>
9) Approval of certain changes to the Total Return Bond Portfolio's fundamental investment restrictions
regarding
a) Issuance of senior securities.................. 2,361,568 83,292 108,690
b) Diversification................................ 2,370,838 73,772 108,940
c) Unseasoned issuers............................. 2,374,030 71,067 108,453
d) Investment in shares of other investment
companies...................................... 2,324,754 123,878 104,918
e) Investments in oil, gas or other mineral
exploration or develop......................... 2,334,751 112,993 105,806
f) Securities lending............................. 2,353,447 91,017 109,086
g) Purchase and sale of commodities or commodity
contracts...................................... 2,329,896 114,160 109,494
10) Approval of certain changes to the Intermediate-Term Bond Portfolio's fundamental investment
restrictions regarding
a) Issuance of senior securities.................. 4,157,007 123,544 192,939
b) Diversification................................ 4,159,190 126,371 187,929
c) Unseasoned issuers............................. 4,097,770 186,991 188,729
d) Investment in shares of other investment
companies...................................... 4,081,326 205,083 187,081
e) Investments in oil, gas or other mineral
exploration or develop......................... 4,112,262 181,745 179,483
f) Securities lending............................. 4,126,452 163,598 183,440
g) Purchase and sale of commodities or commodity
contracts...................................... 4,102,581 193,141 177,768
11) Approval of certain changes to the Mortgage Backed Securities Portfolio's fundamental investment
restrictions regarding
a) Issuance of senior securities.................. 2,754,900 49,164 84,004
b) Diversification................................ 2,760,416 51,261 76,391
c) Unseasoned issuers............................. 2,729,869 78,009 80,190
d) Investment in shares of other investment
companies...................................... 2,719,630 92,507 75,931
e) Investments in oil, gas or other mineral
exploration or develop......................... 2,736,025 72,644 79,399
f) Securities lending............................. 2,737,120 74,904 76,044
g) Purchase and sale of commodities or commodity
contracts...................................... 2,719,863 89,943 78,262
12) Approval of certain changes to the U.S. Government Money Market Portfolio's fundamental investment
restrictions regarding
a) Issuance of senior securities.................. 105,938,549 1,338,019 818,909
b) Diversification................................ 106,194,607 1,114,507 786,363
c) Unseasoned issuers............................. 104,794,578 2,520,175 780,724
d) Investment in shares of other investment
companies...................................... 106,131,131 1,490,747 473,599
e) Investments in oil, gas or other mineral
exploration or develop......................... 104,820,368 2,615,253 659,856
f) Securities lending............................. 105,890,636 1,430,526 774,315
g) Purchase and sale of commodities or commodity
contracts...................................... 105,119,249 2,253,174 723,054
</TABLE>
- --------------------------------------------------------------------------------
60
<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.
(ICON)
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.
61
<PAGE>
Large Capitalization
Growth Portfolio
Average Annual Total Returns
With Advisory Fee One Year Five Years Since Inception (1/5/93)
53.05% 30.76% 20.44%
Without Advisory Fee One Year Five Years Since Inception (1/5/93)
55.37% 32.74% 22.28%
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
Past performance is not indicative of
future results. Principal and investment
return will fluctuate, so that an investor's
shares, when redeemed, may be worth more or
less than their original cost.
The graph compares a $10,000 investment in the
Target Large Capitalization Growth
Portfolio with a similar investment in the
Standard & Poor's 500 Composite Stock Price
Index (S&P 500 Index) by portraying the initial
account values at the commencement of operations
and at the end of the 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 20.74% and the growth
of a $10,000 investment would have been $37,332.
The S&P 500 Index is an unmanaged index of 500
stocks of large U.S. companies. It gives a broad
look at how stock prices have performed. The S&P
500 Index returns include the reinvestment of all
dividends, but do not include the effect of sales charges or
operating expenses of a mutual fund. The securities
in the Index may differ substantially from the
securities in the Portfolio. The Index is not the
only one that 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.
This graph is furnished to you in accordance with SEC regulations.
62
<PAGE>
Large Capitalization
Value Portfolio
Average Annual Total Returns
With Advisory Fee One Year Five Years Since Inception (1/5/93)
-5.80% 14.85% 10.64%
Without Advisory Fee One Year Five Years Since Inception (1/5/93)
-4.37% 16.59% 12.32%
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
Past performance is not indicative of future
results. Principal and investment return will
fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
The graph compares a $10,000 investment in the
Target Large Capitalization Value Portfolio with
a similar investment in the Standard & Poor's 500 Composite
Stock Price Index (S&P 500 Index) by portraying
the initial account values at the commencement of
operations and at the end of the fiscal year (December
31), as measured on a quarterly basis, beginning in 1993.
The graph and the accompanying table
take into account the maximum quarterly investment
advisory fee associated with the Prudential Securities
Target Program of 1.50% annually. For individual
retirement plans and qualified employee benefit
plans, taking into account the maximum
investment advisory fee of 1.25%, the average
annual total return since inception would have
been 10.91% and the growth of a $10,000 investment
would have been $20,628.
The S&P 500 Index is an unmanaged index of 500
stocks of large U.S. companies.
It gives a broad look at how stock prices have
performed. The S&P 500 Index returns include the
reinvestment of all dividends, but do not include
the effect of sales charges or operating expenses
of a mutual fund. The securities in the Index may
differ substantially from the securities in the
Portfolio. The Index is not the only one that 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.
This graph is furnished to you in accordance with SEC regulations.
63
<PAGE>
Small Capitalization
Growth Portfolio
Average Annual Total Returns
With Advisory Fee One Year Five Years Since Inception (1/5/93)
27.27% 17.09% 13.87% (13.86)
Without Advisory Fee One Year Five Years Since Inception (1/5/93)
29.20% 18.86% 15.61% (15.60)
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
Past performance is not indicative of future results.
Principal and investment return will fluctuate, so
that an investor's shares, when redeemed, may be
worth more or less than their original cost.
The graph 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 at the commencement of operations and at
the end of the 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
14.16% and the growth of a $10,000 investment
would have been $25,228. Without waiver of
management fees and/or expense subsidizations,
the Portfolio's average annual total returns
would have been lower, as indicated in parentheses ( ).
The Russell 2000 Index is a weighted index that
comprises the smallest 2,000 stocks among the
largest 3,000 equity-capitalized U.S. corporations
and represents approximately 10% of their aggregate
market value. The Russell 2000 is unmanaged and includes
the reinvestment of all dividends, but does not
reflect the payment of transaction costs and
advisory fees associated with an investment in
the Portfolio. The securities in the Index may
differ substantially from the securities in the Portfolio. The
Index is not the only one that 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.
This graph is furnished to you in accordance with SEC regulations.
64
<PAGE>
Small Capitalization
Value Portfolio
Average Annual Total Returns
With Advisory Fee One Year Five Years Since Inception (1/5/93)
-0.12% 10.64% 9.52% (9.51)
Without Advisory Fee One Year Five Years Since Inception (1/5/93)
1.39% 12.32% 11.18% (11.17)
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
Past performance is not indicative of future results.
Principal and investment return will fluctuate, so
that an investor's shares, when redeemed, may be
worth more or less than their original cost.
The graph 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 at the commencement of operations and at
the end of the 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 9.79% and the growth of
a $10,000 investment would have been
$19,213. Without waiver of management fees and/or
expense subsidizations, the Portfolio's average
annual total returns would have been lower, as
indicated in parentheses ( ).
The Russell 2000 Index is a weighted index that comprises the smallest
2,000 stocks among the largest 3,000 equity-capitalized
U.S. corporations and represents approximately 10% of
their aggregate market value. The Russell 2000 is
unmanaged and includes the reinvestment of all
dividends, but does not reflect the
payment of transaction costs and advisory fees
associated with an investment in the Portfolio.
The securities in the Index may differ substantially
from the securities in the Portfolio. The Index is
not the only one that 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.
This graph is furnished to you in accordance with SEC regulations.
65
<PAGE>
International Equity
Portfolio
Average Annual Total Returns
With Advisory Fee One Year Five Years Since Inception (1/5/93)
21.46% 14.20% 14.01%
Without Advisory Fee One Year Five Years Since Inception (1/5/93)
23.30% 15.93% 15.75%
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
Past performance is not indicative of future results.
Principal and investment return will fluctuate, so that
an investor's shares, when redeemed, may be worth more
or less than their original cost.
The graph 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 (MSCI EAFE Index) by portraying the initial account
values at the commencement of operations and at the end
of the 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 14.30% and the growth of a $10,000 investment would
have been $25,447.
The MSCI EAFE Index is a weighted index of
performance that reflects stock price movements
in Europe, Australasia, and the Far East. The
MSCI EAFE Index is unmanaged and includes the
reinvestment of all dividends, but does not
reflect the payment of transaction costs and
advisory fees associated with an investment in
the Portfolio. The securities in the Index may
differ substantially from the securities in the
Portfolio. The Index is not the only one 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.
This graph is furnished to you in accordance with SEC
regulations.
66
<PAGE>
International Bond
Portfolio
Average Annual Total Returns
With Advisory Fee One Year Five Years Since Inception (5/17/94)
-6.82% 1.87% (1.85) 1.69% (1.60)
Without Advisory Fee One Year Five Years Since Inception ( 5/17/94)
-5.88% 2.90% (2.87) 2.71% (2.63)
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
Past performance is not indicative of future results.
Principal and investment return will fluctuate, so
that an investor's shares, when redeemed, may be
worth more or less than their original cost.
The graph 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 at the commencement of operations and at
the end of the 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 1.33% and the growth of a $10,000
investment would have been $10,775. Without waiver
of management fees and/or expense subsidizations,
the Portfolio's average annual total returns would
have been lower, as indicated in parentheses ( ).
The WB Index is an index that 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, and comprises only high-quality,
straight issues. The Index is
calculated on both a weighted and an unweighted
basis. The WB Index is unmanaged and includes
the reinvestment of all dividends, but does not
reflect the payment of transaction costs and
advisory fees associated with an investment in the Portfolio.
The securities in the Index may differ substantially
from the securities in the Portfolio. The Index is
not the only one 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.
This graph is furnished to you in accordance with SEC regulations.
67
<PAGE>
Total Return Bond
Portfolio
Average Annual Total Returns
With Advisory Fee One Year Five Years Since Inception (1/5/93)
-1.66% 7.02% (7.00) 5.59% (5.52)
Without Advisory Fee One Year Five Years Since Inception (1/5/93)
-0.67% 8.10% (8.08) 6.66% (6.58)
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
Past performance is not indicative of future results.
Principal and investment return will
fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
The graph compares a $10,000 investment in the Target
Total Return Bond Portfolio with a similar investment
in the Lehman Brothers Government/Corporate Bond Index
(the Index) by portraying the initial account values
at the commencement of operations and at the end of
the 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 5.22% and the growth of a $10,000
investment would have been $14,273. Without waiver
of management fees and/or expense subsidizations, the
Portfolio's average annual total returns would have
been lower, as indicated in parentheses ( ).
The Index is a weighted index comprising publicly
traded intermediate and long-term government and
corporate debt with an average maturity of ten
years. The Index is unmanaged and includes the
reinvestment of all dividends, but does not
reflect the payment of transaction costs and
advisory fees associated with an investment in
the Portfolio. The securities in the Index may differ
substantially from the securities in the Portfolio.
The Index is not the only one 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.
This graph is furnished to you in accordance with SEC regulations.
68
<PAGE>
Intermediate-Term
Bond Portfolio
Average Annual Total Returns
With Advisory Fee One Year Five Years Since Inception (1/5/93)
0.29% 6.62% 5.39% (5.38)
Without Advisory Fee One Year Five Years Since Inception (1/5/93)
1.30% 7.69% 6.46% (6.44)
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
Past performance is not indicative of future results.
Principal and investment return will fluctuate, so
that an investor's shares, when redeemed, may be
worth more or less than their original cost.
The graph compares a $10,000 investment in the
Target Intermediate-Term Bond Portfolio with a
similar investment in the Lehman Brothers
Intermediate Government/Corporate Bond Index
(the Index) by portraying the initial
account values at the commencement of operations
and at the end of the 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 5.02% and the growth
of a $10,000 investment would have been $14,087.
Without waiver of management fees and/or expense
subsidizations, the Portfolio's average annual
total returns would have been lower, as indicated
in parentheses ( ).
The Index is a weighted index comprising 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 and rated investment
grade. The Index is unmanaged and includes the
reinvestment of all dividends, but does not
reflect the payment of transaction costs and
advisory fees associated with an investment in
the Portfolio. The securities in the Index may differ
substantially from the securities in the Portfolio.
The Index is not the only one 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.
This graph is furnished to you in accordance with SEC regulations.
69
<PAGE>
Mortgage Backed
Securities Portfolio
Average Annual Total Returns
With Advisory Fee One Year Five Years Since Inception (1/5/93)
0.52% 6.51% (6.49) 5.52% (5.44)
Without Advisory Fee One Year Five Years Since Inception (1/5/93)
1.54% 7.59% (7.56) 6.58% (6.51)
Comparison of Change in Value of a $10,000 Investment
(GRAPH)
Past performance is not indicative of future results.
Principal and investment return will fluctuate, so
that an investor's shares, when redeemed, may be worth
more or less than their original cost.
The graph compares a $10,000 investment in the Target
Mortgage Backed Securities Portfolio with a similar
investment in the Salomon Smith Barney Mortgage-Backed
Securities Index (the MBS Index) by portraying
the initial account values at the commencement of
operations and at the end of the 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
5.15% and the growth of a $10,000 investment would
have been $14,203. Without waiver of management fees
and/or expense subsidizations, the Portfolio's average
annual total returns would have been
lower, as indicated in parentheses ( ).
The MBS Index comprises 30-year and 15-year GNMA,
FNMA and FHLMC pass-through, and FNMA and FHLMC
balloon mortgages. The Index is unmanaged and
includes the reinvestment of all dividends, but does not
reflect the payment of transaction costs and
advisory fees associated with an investment in
the Portfolio. The securities in the Index may
differ substantially from the securities in the
Portfolio. The Index is not the only one 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.
This graph is furnished to you in accordance with SEC
regulations.
70
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(ICON)
<PAGE>
Trustees
Eugene C. Dorsey
Robert F. Gunia
Robert E. LaBlanc
Douglas H. McCorkindale
Thomas T. Mooney
David R. Odenath, Jr.
John R. Strangfeld
Stephen Stoneburn
Clay T. Whitehead
Officers
John R. Strangfeld
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
Fleming Asset Management USA
320 Park Avenue
New York, NY 10022
Hotchkis and Wiley
800 West Sixth Street
Los Angeles, CA 90017
INVESCO Capital Management, Inc.
1315 Peachtree Street
Suite 500
Atlanta, GA 30309
Lazard Asset Management
30 Rockefeller Plaza
New York, NY 10112
Oak Associates, Ltd.
3875 Embassy Parkway
Suite 250
Akron, OH 44333
Pacific Investment
Management Company
840 Newport Center Drive
Newport Beach, CA 92660
Sawgrass Asset Management, LLC
4337 Pablo Oaks Court
Jacksonville, FL 32224
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
(ICON)
This report is not authorized for distribution to
prospective investors unless preceded or accompanied by a current
prospectus.
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TMF 158 E
