UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: | 811-03981 | |
Exact name of registrant as specified in charter: | Prudential World Fund, Inc. | |
Address of principal executive offices: | Gateway Center 3, | |
100 Mulberry Street, | ||
Newark, New Jersey 07102 | ||
Name and address of agent for service: | Deborah A. Docs | |
Gateway Center 3, | ||
100 Mulberry Street, | ||
Newark, New Jersey 07102 | ||
Registrant’s telephone number, including area code: | 800-225-1852 | |
Date of fiscal year end: | 10/31/2013 | |
Date of reporting period: | 10/31/2013 |
Item 1 – Reports to Stockholders
PRUDENTIAL INVESTMENTS»MUTUAL FUNDS
PRUDENTIAL INTERNATIONAL EQUITY FUND
ANNUAL REPORT · OCTOBER 31, 2013
Fund Type
International Stock
Objective
Long-term growth of capital
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.
The views expressed in this report and information about the Fund’s portfolio holdings are for the period covered by this report and are subject to change thereafter.
Mutual funds are distributed by Prudential Investment Management Services LLC, a Prudential Financial company. Quantitative Management Associates, LLC (QMA) is a wholly owned subsidiary of Prudential Investment Management, Inc. (PIM). QMA and PIM are registered investment advisers and Prudential Financial companies. © 2013 Prudential Financial, Inc., and its related entities. Prudential Investments, Prudential, the Prudential logo, Bring Your Challenges, and the Rock symbol are service marks of Prudential Financial, Inc., and its related entities, registered in many jurisdictions worldwide.
December 16, 2013
Dear Shareholder:
We hope you find the annual report for the Prudential International Equity Fund informative and useful. The report covers performance for the 12-month period that ended October 31, 2013.
We recognize that ongoing market volatility may make it a difficult time to be an investor. We continue to believe a prudent response to uncertainty is to maintain a diversified portfolio of funds consistent with your tolerance for risk, time horizon, and financial goals.
Your financial advisor can help you create a diversified investment plan that may include funds covering all the basic asset classes and that reflects your personal investor profile and risk tolerance. Keep in mind, however, that diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.
Prudential Investments® is dedicated to helping you solve your toughest investment challenges—whether it’s capital growth, reliable income, or protection from market volatility and other risks. We offer the expertise of Prudential Financial’s affiliated asset managers* that strive to be leaders in a broad range of funds to help you stay on course to the future you envision. They also manage money for major corporations and pension funds around the world, which means you benefit from the same expertise, innovation, and attention to risk demanded by today’s most sophisticated investors.
Thank you for choosing the Prudential Investments family of funds.
Sincerely,
Stuart S. Parker, President
Prudential International Equity Fund
*Most of Prudential Investments’ equity funds are advised by Jennison Associates LLC, Quantitative Management Associates LLC (QMA), or Prudential Real Estate Investors. Prudential Investments’ fixed income and money market funds are advised by Prudential Investment Management, Inc. (PIM) through its Prudential Fixed Income unit. Jennison Associates, QMA, and PIM are registered investment advisers and Prudential Financial companies. Prudential Real Estate Investors is a unit of PIM.
Prudential International Equity Fund | 1 |
Your Fund’s Performance (Unaudited)
Performance data quoted represent past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the past performance data quoted. An investor may obtain performance data as of the most recent month-end by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852.
Cumulative Total Returns (Without Sales Charges) as of 10/31/13 | ||||||||||||||||
One Year | Five Years | Ten Years | Since Inception | |||||||||||||
Class A | 25.06 | % | 71.90 | % | 84.83 | % | — | |||||||||
Class B | 24.26 | 66.05 | 71.80 | — | ||||||||||||
Class C | 24.27 | 66.07 | 71.82 | — | ||||||||||||
Class F | 24.51 | 68.19 | N/A | –4.86% (12/18/06) | ||||||||||||
Class X | 24.05 | 66.05 | N/A | –7.25 (3/19/07) | ||||||||||||
Class Z | 25.36 | 74.09 | 89.08 | — | ||||||||||||
MSCI All Country World Ex-U.S. ND Index | 20.29 | 80.08 | 125.64 | — | ||||||||||||
MSCI EAFE ND Index* | 26.88 | 76.19 | 110.23 | — | ||||||||||||
Lipper International Multi-Cap Core Funds Average | 23.52 | 79.13 | 103.90 | — | ||||||||||||
Average Annual Total Returns (With Sales Charges) as of 9/30/13 | ||||||||||||||||
One Year | Five Years | Ten Years | Since Inception | |||||||||||||
Class A | 15.84 | % | 3.96 | % | 6.08 | % | — | |||||||||
Class B | 16.84 | 4.26 | 5.94 | — | ||||||||||||
Class C | 20.84 | 4.47 | 5.94 | — | ||||||||||||
Class F | 17.09 | 4.54 | N/A | –1.17% (12/18/06) | ||||||||||||
Class X | 15.84 | 3.92 | N/A | –1.87 (3/19/07) | ||||||||||||
Class Z | 22.90 | 5.43 | 6.94 | — | ||||||||||||
MSCI All Country World Ex-U.S. ND Index | 16.48 | 6.26 | 8.77 | — | ||||||||||||
MSCI EAFE ND Index* | 23.77 | 6.35 | 8.01 | — | ||||||||||||
Lipper International Multi-Cap Core Funds Average | 20.45 | 6.34 | 7.46 | — |
*The Fund no longer utilizes the MSCI EAFE ND Index, and instead utilizes the MSCI ACWI Ex-U.S. Index for performance comparisons, because the Fund’s investment Manager believes that the MSCI ACWI Ex-U.S. Index provides a more appropriate basis for Fund performance comparisons, due to the fact that the Fund’s investment policies recently changed to permit increased exposure to emerging markets securities, and the MSCI ACWI Ex-U.S. Index includes emerging markets securities while the MSCI EAFE ND Index does not include emerging markets securities.
2 | Visit our website at www.prudentialfunds.com |
Average Annual Total Returns (With Sales Charges) as of 10/31/13 |
| |||||||||||||||
One Year | Five Years | Ten Years | Since Inception | |||||||||||||
Class A | 18.18 | % | 10.19 | % | 5.74 | % | — | |||||||||
Class B | 19.26 | 10.54 | 5.56 | — | ||||||||||||
Class C | 23.27 | 10.68 | 5.56 | — | ||||||||||||
Class F | 19.51 | 10.83 | N/A | –0.72% (12/18/06) | ||||||||||||
Class X | 18.05 | 10.27 | N/A | –1.40 (3/19/07) | ||||||||||||
Class Z | 25.36 | 11.73 | 6.58 | — | ||||||||||||
Average Annual Total Returns (Without Sales Charges) as of 10/31/13 |
| |||||||||||||||
One Year | Five Years | Ten Years | Since Inception | |||||||||||||
Class A | 25.06 | % | 11.44 | % | 6.34 | % | — | |||||||||
Class B | 24.26 | 10.67 | 5.56 | — | ||||||||||||
Class C | 24.27 | 10.68 | 5.56 | — | ||||||||||||
Class F | 24.51 | 10.96 | N/A | –0.72% (12/18/06) | ||||||||||||
Class X | 24.05 | 10.67 | N/A | –1.13 (3/19/07) | ||||||||||||
Class Z | 25.36 | 11.73 | 6.58 | — |
Growth of a $10,000 Investment
The graph compares a $10,000 investment in the Prudential International Equity Fund (Class A shares) with a similar investment in the MSCI All Country World Ex-U.S. ND Index and the MSCI EAFE ND Index by portraying the initial account values at the beginning of the 10-year period for Class A shares (October 31, 2003) and the account values at the end of the current fiscal year (October 31, 2013) as measured on a quarterly basis. For purposes of the graph, and unless otherwise indicated, it has been assumed that (a) the maximum applicable front-end sales charge was deducted from the initial $10,000 investment in Class A shares; (b) all recurring
Prudential International Equity Fund | 3 |
Your Fund’s Performance (continued)
fees (including management fees) were deducted; and (c) all dividends and distributions were reinvested. The line graph provides information for Class A shares only. As indicated in the tables provided earlier, performance for Class B, Class C, Class F, Class X, and Class Z shares will vary due to the differing charges and expenses applicable to each share class (as indicated in the following paragraphs). Without waiver of fees and/or expense reimbursement, if any, the returns would have been lower.
Past performance does not predict future performance. Total returns and the ending account values in the graph include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown. The Fund’s total returns do not reflect the deduction of income taxes on an individual’s investment. Taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares.
Source: Prudential Investments LLC and Lipper Inc.
Inception returns are provided for any share class with less than 10 calendar years of returns.
The average annual total returns take into account applicable sales charges, which are described for each share class in the table below.
Class A | Class B | Class C | Class F | Class X | Class Z | |||||||
Maximum initial sales charge | 5.50% of the public offering price | None | None | None | None | None | ||||||
Contingent deferred sales charge (CDSC) (as a percentage of the lower of original purchase price or sale proceeds) | 1% on sales of $1 million or more made within 12 months of purchase | 5%(Yr.1) 4%(Yr.2) 3%(Yr.3) 2%(Yr.4) 1%(Yr.5) 1%(Yr.6) 0%(Yr.7) | 1% on sales made within 12 months of purchase | 5%(Yr.1) 4%(Yr.2) 3%(Yr.3) 2%(Yr.4) 1%(Yr.5) 1%(Yr.6) 0%(Yr.7) | 6%(Yr.1) 5%(Yr.2) 4%(Yr.3) 4%(Yr.4) 3%(Yr.5) 2%(Yr.6) 2%(Yr.7) 1%(Yr.8) 0%(Yr.9/10) | None | ||||||
Annual distribution and service (12b-1) fees (shown as a percentage of average daily net assets) | .30% | 1% | 1% | .75% | 1% | None |
Class X shares are closed to new initial purchases. Class X shares are only available through exchanges from the same class of shares of certain other Prudential Investments funds.
4 | Visit our website at www.prudentialfunds.com |
Benchmark Definitions
MSCI All Country World Ex-U.S. ND Index
The MSCI All Country World Ex-U.S. ND Index is an unmanaged and a free-float-adjusted market-capitalization- weighted index that is designed to measure the equity market performance of developed and emerging markets, excluding the U.S. MSCI All Country World Ex-U.S. ND Index Closest Month-End to Inception cumulative total returns as of 10/31/13 are 14.91% for Class F; and 10.75% for Class X. MSCI All Country World Ex-U.S. ND Index Closest Month-End to Inception average annual total returns as of 9/30/13 are 1.54% for Class F; and 1.02% for Class X.
Morgan Stanley Capital International Europe, Australasia, and Far East Net Dividend Index
The Morgan Stanley Capital International Europe, Australasia, and Far East Net Dividend (MSCI EAFE ND) Index is an unmanaged, weighted index of performance that reflects stock price movements of developed-country markets in Europe, Australasia, and the Far East. The ND version of the MSCI EAFE Index reflects the impact of the maximum withholding taxes on reinvested dividends. MSCI EAFE ND Index Closest Month-End to Inception cumulative total returns as of 10/31/13 are 10.59% for Class F; and 6.26% for Class X. MSCI EAFE ND Index Closest Month-End to Inception average annual total returns as of 9/30/13 are 1.01% for Class F; and 0.43% for Class X.
Lipper International Multi-Cap Core Funds Average
The Lipper International Multi-Cap Core Funds Average (Lipper Average) represents returns based on an average return of all funds in the Lipper International Multi-Cap Core Funds category: funds that, by portfolio practice, invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time. Lipper Average Closest Month-End to Inception cumulative total returns as of 10/31/13 are 10.99% for Class F; and 7.17% for Class X. Lipper Average Closest Month-End to Inception average annual total returns as of 9/30/13 are 0.93% for Class F; and 0.42% for Class X.
Investors cannot invest directly in an index or average. The returns for the Index would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes. Returns for the Lipper Average reflect the deduction of operating expenses, but not sales charges or taxes.
Five Largest Holdings in Long-Term Portfolio expressed as a percentage of net assets as of 10/31/13 | ||||
iShares MSCI EAFE Index Fund, Exchange Traded Fund | 2.1 | % | ||
Roche Holding AG, Pharmaceuticals | 2.0 | |||
HSBC Holdings PLC, Commercial Banks | 1.9 | |||
BP PLC, Oil, Gas & Consumable Fuels | 1.6 | |||
Nestle SA, Food Products | 1.6 |
Holdings reflect only long-term investments and are subject to change.
Five Largest Industries in Long-Term Portfolio expressed as a percentage of net assets as of 10/31/13 | ||||
Commercial Banks | 12.5 | % | ||
Pharmaceuticals | 7.5 | |||
Oil, Gas & Consumable Fuels | 7.4 | |||
Insurance | 5.7 | |||
Metals & Mining | 4.7 |
Industry weightings reflect only long-term investments and are subject to change.
Prudential International Equity Fund | 5 |
Strategy and Performance Overview
How did the Fund perform?
Prudential International Equity Fund’s Class A shares gained 25.06% for the 12-month reporting period ended October 31, 2013, outperforming the 20.29% return of the MSCI All Country World Ex-U.S. Net Dividend Index (MSCI ACWI Ex-U.S. ND Index) but lagging the 26.88% gain of the Morgan Stanley Capital International Europe, Australasia and Far East Net Dividend Index (MSCI EAFE ND Index). The Fund outperformed the 23.52% gain of the Lipper International Multi-Cap Core Funds Average.
How did international stock markets perform?
• | The beginning of the period was undermined by the lingering European debt crises, and the end of the period was upset by questions over the tapering of the Federal Reserve’s (the Fed) quantitative easing (QE) programs. Despite a very challenging economic and geopolitical environment, the international equity markets performed remarkably well over the past 12 months, as measured by the MSCI EAFE ND Index, which gauges stock markets of economically developed nations other than the United States and Canada. |
• | To a large extent, the sharp run-up in equity markets was fueled by expansive monetary policies throughout the developed markets: the Fed’s QE programs, the European Central Bank’s (ECB) buttressing of the European debt markets, and the Bank of Japan’s contributions to the simulative economic policies advocated by Shinzo Abe, the current prime minister. While the massive injection of liquidity may not have generated any sharp increase in real growth or any significant increase in inflation, it did fuel the significant rise in equity prices over the past year. |
• | Generally, gross domestic product (GDP) growth was sluggish and modestly lower than the previous year. In particular, there was no growth in Europe, the U.S. grew about 1.5%, and Japan led the way for the developed markets with about 2.0% growth. |
• | International equity markets maintained their positive trend in November and December as countries in the euro zone agreed to take steps to forge a closer political and fiscal union, concerns over a “hard-landing” in China eased after an earlier deceleration in GDP from double- to single-digit levels, and Japan embarked on the fifth largest stimulus program of the year in late December. |
• | In the first quarter of 2013, the performance of regional equity markets diverged, with Japan outperforming while Europe lagged as the sovereign debt drama accelerated. A financial crisis in Cyprus temporarily roiled markets, and in March, Cyprus closed its banks in hopes of a bailout from the European Union to avoid a banking collapse. |
6 | Visit our website at www.prudentialfunds.com |
• | In the second quarter, investors were cautious but generally had confidence in the Japanese administration’s stimulative policy measures. Policymakers in the euro zone addressed the limitations of austerity measures and sought ways to boost growth and fight unemployment. |
• | In the third quarter, investors became more optimistic that a global recovery appeared to be in place based on a strengthening U.S. economy, faster recovery in the euro zone, growth normalization in Japan, and economic stabilization in China. The optimism was largely based on confidence in supportive financial conditions, continued monetary expansion, and a lack of inflationary pressures in the developed world. |
• | For the reporting period, Japan outperformed both Europe and Asia-ex-Japan. However, Greece, with a 75% return, had the highest gains in the Index. As the ECB’s policies significantly reduced the potential for a near-term breakup of the European Union, it allowed Greece to rebound spectacularly from its depressed levels. |
• | The bulk of the value added in the Fund during the reporting period came in the United Kingdom, Australia, and Japan, while the Fund’s exposure to emerging market equities detracted from performance. |
How did international stock markets sectors perform?
• | There was wide variance in sector returns, although all sectors in the EAFE Index posted positive returns. Consumer discretionary and telecommunication services led with double-digit gains. The materials sector returned 16.5%, while the energy sector posted a single-digit gain. |
• | There was also a significant dispersion in Fund performance within various sectors. On the positive side, the Fund’s holdings in the industrials and consumer discretionary sectors outperformed their respective benchmark returns. However, the Fund’s holdings in the financials and materials sectors were much lower than their respective benchmark returns and thus detracted from performance. |
Among slowly and rapidly growing companies, which stocks or related groups of stocks contributed most and detracted most from the Fund’s return?
• | The Fund uses a well-diversified core strategy that seeks to pick the best stocks in each sector. The Fund maintains a balance between slow-growing value stocks and fast-growing growth stocks. |
• | QMA places a heavier emphasis on valuation factors, such as price-to-earnings (P/E) and price-to-book (P/B) ratios, when evaluating slower growing stocks. |
Prudential International Equity Fund | 7 |
Strategy and Performance Overview (continued)
For faster growing stocks, QMA’s process places a heavier weighting on news or information about earnings and sales growth. This allows the Fund to potentially add value throughout the full range of slow- to fast-growing companies. |
• | Over the past year, the news factors had a strong positive impact on the Fund’s performance. In contrast, the results of valuation factors were mixed, and on balance, had a neutral to negative impact on performance. |
• | If the Index is aligned in quintiles from fastest- to slowest-growing stocks, in absolute terms, the Fund’s slower-growing value stocks performed modestly better than the Index, and the faster-growing stocks did marginally worse. However, in terms of relative performance compared to the Index, the situation was reversed. |
• | The Fund’s positions in the slowest growing quintile underperformed, primarily due to a position in Kazakhmys PLC in the materials sector, which significantly negatively impacted the Fund’s returns. |
• | The Fund’s holdings in the three fastest growing quintiles each added about 0.5%, in excess return over the Index, mostly in the industrials sector, with companies such as Hino Motors and European Aeronautics providing solid contributions. |
Did the Fund hold derivatives, and did they affect performance?
• | The Fund held small positions in futures contracts on the MSCI EAFE Index and on countries in the index. |
• | QMA utilizes these instruments as a means of holding a very liquid position that is used for managing daily cash flows, and not as a means of adding to return. Subsequently, the effect on performance was minimal. |
8 | Visit our website at www.prudentialfunds.com |
Fees and Expenses (Unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemptions, as applicable, and (2) ongoing costs, including management fees, distribution, and/or service (12b-1) fees, and other Fund expenses, as applicable. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on May 1, 2013, at the beginning of the period, and held through the six-month period ended October 31, 2013. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
Actual Expenses
The first line for each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in
Prudential International Equity Fund | 9 |
Fees and Expenses (continued)
amount, or may be waived, based on your total account balance or the number of Prudential Investments funds, including the Fund, that you own. You should consider the additional fees that were charged to your Fund account over the six-month period when you estimate the total ongoing expenses paid over the period and the impact of these fees on your ending account value, as these additional expenses are not reflected in the information provided in the expense table. Additional fees have the effect of reducing investment returns.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Prudential International Equity Fund | Beginning Account Value May 1, 2013 | Ending Account October 31, 2013 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,069.70 | 1.56 | % | $ | 8.14 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,017.34 | 1.56 | % | $ | 7.93 | ||||||||||
Class B | Actual | $ | 1,000.00 | $ | 1,066.40 | 2.26 | % | $ | 11.77 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,013.81 | 2.26 | % | $ | 11.47 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,066.40 | 2.26 | % | $ | 11.77 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,013.81 | 2.26 | % | $ | 11.47 | ||||||||||
Class F | Actual | $ | 1,000.00 | $ | 1,067.90 | 2.01 | % | $ | 10.48 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,015.07 | 2.01 | % | $ | 10.21 | ||||||||||
Class X | Actual | $ | 1,000.00 | $ | 1,066.40 | 2.26 | % | $ | 11.77 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,013.81 | 2.26 | % | $ | 11.47 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,072.20 | 1.26 | % | $ | 6.58 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,018.85 | 1.26 | % | $ | 6.41 |
*Fund expenses (net of fee waivers or subsidies, if any) for each share class are equal to the annualized expense ratio for each share class (provided in the table), multiplied by the average account value over the period, multiplied by the 184 days in the six-month period ended October 31, 2013, and divided by the 365 days in the Fund’s fiscal year ended October 31, 2013 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying Funds in which the Fund may invest.
10 | Visit our website at www.prudentialfunds.com |
The Fund’s annual expense ratios for the year ended October 31, 2013 are as follows:
Class | Gross Operating Expenses | Net Operating Expenses | ||
A | 1.59% | 1.59% | ||
B | 2.29 | 2.29 | ||
C | 2.29 | 2.29 | ||
F | 2.04 | 2.04 | ||
X | 2.29 | 2.29 | ||
Z | 1.29 | 1.29 |
Net operating expenses shown above reflect any fee waivers and/or expense reimbursements. Additional information on Fund expenses and any fee waivers and/or expense reimbursements can be found in the “Financial Highlights” tables in this report and in the Notes to the Financial Statements in this report.
Prudential International Equity Fund | 11 |
Portfolio of Investments
as of October 31, 2013
Shares | Description | Value (Note 1) | ||||
LONG-TERM INVESTMENTS 99.6% | ||||||
COMMON STOCKS 97.1% | ||||||
Australia 7.1% | ||||||
9,249 | Australia & New Zealand Banking Group Ltd. | $ | 295,972 | |||
68,227 | BHP Billiton Ltd. | 2,412,063 | ||||
61,077 | Commonwealth Bank of Australia | 4,397,710 | ||||
112,966 | Dexus Property Group | 115,770 | ||||
41,690 | Flight Centre Travel Group Ltd.(a) | 2,046,707 | ||||
491,524 | Fortescue Metals Group Ltd. | 2,410,635 | ||||
308,467 | Insurance Australia Group Ltd. | 1,801,426 | ||||
6,965 | Macquarie Group Ltd. | 335,015 | ||||
54,028 | National Australia Bank Ltd. | 1,805,667 | ||||
3,679 | Ramsay Health Care Ltd. | 135,056 | ||||
71,208 | Sonic Healthcare Ltd. | 1,087,009 | ||||
100,629 | Telstra Corp. Ltd. | 492,407 | ||||
3,389 | Wesfarmers Ltd. | 137,522 | ||||
509,447 | Westfield Retail Trust | 1,486,333 | ||||
121,990 | Westpac Banking Corp. | 3,960,682 | ||||
5,581 | Woodside Petroleum Ltd. | 204,600 | ||||
13,052 | Woolworths Ltd. | 430,410 | ||||
|
| |||||
23,554,984 | ||||||
Austria 1.1% | ||||||
36,536 | OMV AG | 1,742,872 | ||||
37,634 | Voestalpine AG | 1,775,412 | ||||
|
| |||||
3,518,284 | ||||||
Belgium 1.8% | ||||||
47,797 | Ageas | 2,031,108 | ||||
3,784 | Anheuser-Busch InBev NV | 392,265 | ||||
54,246 | Belgacom SA(a) | 1,484,261 | ||||
28,175 | Delhaize Group SA | 1,799,390 | ||||
4,733 | KBC Groep NV | 257,862 | ||||
|
| |||||
5,964,886 | ||||||
Brazil 0.8% | ||||||
5,200 | Banco do Brasil SA | 69,056 | ||||
4,600 | BRF SA | 108,008 | ||||
1,600 | Cia de Bebidas das Americas | 59,602 | ||||
2,400 | Cielo SA | 72,851 | ||||
310,900 | JBS SA | 1,117,197 | ||||
19,800 | Petroleo Brasileiro SA* | 172,704 |
See Notes to Financial Statements.
Prudential International Equity Fund | 13 |
Portfolio of Investments
as of October 31, 2013 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) | ||||||
Brazil (cont’d.) | ||||||
5,600 | Souza Cruz SA | $ | 60,570 | |||
32,100 | Tractebel Energia SA | 545,938 | ||||
2,600 | Ultrapar Participacoes SA | 69,288 | ||||
12,300 | Vale SA | 196,288 | ||||
7,931 | Vale SA, ADR | 126,975 | ||||
5,100 | WEG SA | 66,249 | ||||
|
| |||||
2,664,726 | ||||||
China 1.6% | ||||||
156,000 | Agricultural Bank of China Ltd. (Class H Stock) | 75,176 | ||||
78,000 | ANTA Sports Products Ltd. | 111,883 | ||||
491,000 | Bank of China Ltd. (Class H Stock) | 230,533 | ||||
2,148,000 | Bank of Communications Co. Ltd. (Class H Stock) | 1,573,928 | ||||
85,000 | BOC Hong Kong Holdings Ltd. | 277,596 | ||||
78,000 | China Communications Construction Co. Ltd. (Class H Stock) | 63,665 | ||||
478,000 | China Construction Bank Corp. (Class H Stock) | 371,897 | ||||
326,000 | China Merchants Bank Co. Ltd. (Class H Stock) | 648,216 | ||||
51,000 | China Minsheng Banking Corp. Ltd (Class H Stock) | 58,443 | ||||
41,000 | China Mobile Ltd. | 426,058 | ||||
26,000 | China Overseas Land & Investment Ltd. | 80,575 | ||||
178,000 | China Petroleum & Chemical Corp. (Class H Stock) | 144,092 | ||||
60,500 | China Railway Construction Corp. Ltd. (Class H Stock) | 66,357 | ||||
374,000 | China Railway Group Ltd. (Class H Stock) | 211,196 | ||||
28,000 | China Resources Power Holdings Co. Ltd. | 73,295 | ||||
44,000 | China Unicom Hong Kong Ltd. | 68,839 | ||||
121,000 | CNOOC Ltd. | 246,111 | ||||
5,500 | Hengan International Group Co. Ltd. | 67,345 | ||||
58,000 | Huaneng Power International, Inc. (Class H Stock) | 60,541 | ||||
516,000 | Industrial & Commercial Bank of China Ltd. (Class H Stock) | 361,729 | ||||
40,000 | Want Want China Holdings Ltd. | 61,503 | ||||
|
| |||||
5,278,978 | ||||||
Denmark 1.4% | ||||||
13 | A.P. Moeller - Maersk A/S (Class A Stock) | 117,388 | ||||
30 | A.P. Moeller - Maersk A/S (Class B Stock) | 290,249 | ||||
1,107 | Coloplast A/S (Class B Stock) | 72,204 | ||||
18,882 | Novo Nordisk A/S (Class B Stock) | 3,144,847 | ||||
17,580 | TDC A/S | 158,734 | ||||
10,364 | Tryg A/S | 946,418 | ||||
|
| |||||
4,729,840 |
See Notes to Financial Statements.
14 |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) | ||||||
Finland 1.8% | ||||||
5,421 | Elisa OYJ | $ | 135,817 | |||
21,230 | Kone OYJ (Class B Stock) | 1,871,692 | ||||
79,886 | Pohjola Bank PLC (Class A Stock) | 1,454,787 | ||||
10,872 | Sampo OYJ (Class A Stock) | 514,255 | ||||
208,881 | Stora Enso OYJ (Class R Stock) | 1,939,650 | ||||
|
| |||||
5,916,201 | ||||||
France 8.2% | ||||||
108,335 | AXA SA | 2,699,225 | ||||
2,398 | BNP Paribas SA | 176,909 | ||||
29,930 | Cap Gemini SA | 1,962,758 | ||||
14,085 | Carrefour SA | 514,141 | ||||
16,083 | Casino Guichard Perrachon SA | 1,807,815 | ||||
36,635 | CNP Assurances | 645,368 | ||||
39,035 | Electricite de France SA | 1,366,149 | ||||
8,563 | European Aeronautic Defence and Space Co. NV | 586,778 | ||||
3,644 | Imerys SA | 292,322 | ||||
2,285 | JCDecaux SA | 91,802 | ||||
26,973 | Publicis Groupe SA | 2,243,069 | ||||
32,701 | Safran SA | 2,084,959 | ||||
17,340 | Sanofi | 1,848,853 | ||||
29,187 | Thales SA | 1,787,589 | ||||
71,093 | Total SA | 4,361,783 | ||||
8,669 | Unibail-Rodamco SE | 2,264,951 | ||||
39,433 | Vinci SA | 2,523,178 | ||||
|
| |||||
27,257,649 | ||||||
Germany 7.1% | ||||||
8,688 | Allianz SE | 1,458,743 | ||||
15,962 | BASF SE | 1,657,095 | ||||
11,896 | Bayer AG | 1,475,732 | ||||
3,629 | Continental AG | 663,627 | ||||
43,739 | Daimler AG | 3,581,138 | ||||
23,360 | Deutsche Post AG | 788,903 | ||||
65,248 | Deutsche Telekom AG | 1,025,358 | ||||
131,998 | E.ON SE | 2,406,136 | ||||
3,558 | Fresenius SE & Co. KGaA | 461,878 | ||||
16,027 | Hannover Rueck SE | 1,282,669 | ||||
11,212 | Henkel AG & Co. KGaA | 1,034,067 | ||||
39,342 | Infineon Technologies AG | 380,609 |
See Notes to Financial Statements.
Prudential International Equity Fund | 15 |
Portfolio of Investments
as of October 31, 2013 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) | ||||||
Germany (cont’d.) | ||||||
16,461 | K+S AG(a) | $ | 418,270 | |||
724 | Linde AG | 137,434 | ||||
1,645 | Muenchener Rueckversicherungs AG | 343,202 | ||||
15,463 | OSRAM Licht AG* | 801,273 | ||||
40,161 | ProSiebenSat. 1 Media AG | 1,909,343 | ||||
5,616 | Siemens AG | 717,684 | ||||
56,245 | Suedzucker AG | 1,809,301 | ||||
2,442 | United Internet AG | 96,328 | ||||
4,025 | Volkswagen AG | 984,302 | ||||
|
| |||||
23,433,092 | ||||||
Greece | ||||||
6,621 | OPAP SA | 82,218 | ||||
Hong Kong 3.3% | ||||||
233,000 | Bank of East Asia Ltd. | 1,009,759 | ||||
124,000 | Cheung Kong Infrastructure Holdings Ltd. | 862,882 | ||||
72,000 | China Resources Cement Holdings Ltd. | 48,177 | ||||
161,000 | Galaxy Entertainment Group Ltd.* | 1,201,846 | ||||
86,600 | Hang Seng Bank Ltd. | 1,443,424 | ||||
181,000 | Hutchison Whampoa Ltd. | 2,255,381 | ||||
362,000 | Hysan Development Co. Ltd. | 1,693,367 | ||||
389,000 | Link REIT (The) | 1,956,921 | ||||
24,500 | Shimao Property Holdings Ltd. | 61,575 | ||||
93,000 | Wheelock & Co. Ltd. | 474,609 | ||||
|
| |||||
11,007,941 | ||||||
India 0.3% | ||||||
3,200 | Infosys Ltd. ADR | 169,792 | ||||
4,048 | Reliance Industries Ltd., GDR, 144A | 120,914 | ||||
72,100 | Wipro Ltd., ADR(a) | 800,310 | ||||
|
| |||||
1,091,016 | ||||||
Indonesia | ||||||
104,000 | PT Indofood Sukses Makmur Tbk | 61,269 | ||||
Israel 1.0% | ||||||
24,675 | Bank Hapoalim BM | 132,097 | ||||
45,859 | Bezeq Israeli Telecommunication Corp. Ltd. (The) | 79,736 | ||||
2,724 | Delek Group Ltd. | 940,605 |
See Notes to Financial Statements.
16 |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) | ||||||
Israel (cont’d.) | ||||||
10,188 | Israel Chemicals Ltd. | $ | 84,227 | |||
58,268 | Teva Pharmaceutical Industries Ltd. | 2,165,147 | ||||
|
| |||||
3,401,812 | ||||||
Italy 1.2% | ||||||
8,958 | Atlantia SpA | 196,334 | ||||
60,824 | Eni SpA | 1,544,141 | ||||
204,752 | Fiat SpA* | 1,606,641 | ||||
98,654 | UniCredit SpA | 740,558 | ||||
|
| |||||
4,087,674 | ||||||
Japan 19.3% | ||||||
4,600 | Aisin Seiki Co. Ltd. | 186,872 | ||||
14,000 | Ajinomoto Co., Inc. | 195,902 | ||||
1,100 | Alfresa Holdings Corp. | 60,122 | ||||
240,000 | Asahi Kasei Corp. | 1,826,545 | ||||
11,700 | Central Japan Railway Co. | 1,517,158 | ||||
15,400 | Chubu Electric Power Co., Inc. | 227,967 | ||||
7,300 | Chugoku Electric Power Co., Inc. (The) | 111,899 | ||||
14,000 | Dai Nippon Printing Co. Ltd. | 147,084 | ||||
92,000 | Daicel Corp. | 775,448 | ||||
1,600 | Daito Trust Construction Co. Ltd. | 163,366 | ||||
213,000 | Daiwa Securities Group, Inc. | 1,945,495 | ||||
11,800 | Denso Corp. | 567,207 | ||||
2,800 | Electric Power Development Co. Ltd. | 89,482 | ||||
1,500 | Fast Retailing Co. Ltd. | 504,918 | ||||
50,000 | Fuji Electric Co. Ltd. | 224,146 | ||||
91,000 | Fuji Heavy Industries Ltd. | 2,488,080 | ||||
77,800 | FUJIFILM Holdings Corp. | 1,903,280 | ||||
139,000 | Hino Motors Ltd. | 1,964,009 | ||||
700 | Hirose Electric Co. Ltd. | 106,800 | ||||
4,100 | Hitachi Chemical Co. Ltd. | 62,901 | ||||
26,200 | Hoya Corp. | 628,259 | ||||
111,200 | ITOCHU Corp. | 1,337,085 | ||||
7,000 | Japan Airlines Co. Ltd. | 409,167 | ||||
78,500 | Japan Tobacco, Inc. | 2,840,419 | ||||
12,200 | JFE Holdings, Inc. | 277,363 | ||||
3,000 | JGC Corp. | 114,791 | ||||
50,600 | JX Holdings, Inc. | 250,200 | ||||
11,000 | Kaneka Corp. | 69,801 |
See Notes to Financial Statements.
Prudential International Equity Fund | 17 |
Portfolio of Investments
as of October 31, 2013 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) | ||||||
Japan (cont’d.) | ||||||
16,700 | Kansai Electric Power Co., Inc. (The)* | $ | 211,372 | |||
19,900 | KDDI Corp. | 1,077,714 | ||||
1,000 | Keyence Corp. | 428,590 | ||||
35,000 | Kirin Holdings Co. Ltd. | 511,542 | ||||
35,000 | Kobe Steel Ltd.* | 61,823 | ||||
11,000 | Konica Minolta, Inc. | 91,090 | ||||
26,000 | Kubota Corp. | 384,972 | ||||
10,600 | Kyushu Electric Power Co., Inc.* | 149,246 | ||||
242,722 | Marubeni Corp. | 1,900,379 | ||||
42,700 | Medipal Holdings Corp. | 575,763 | ||||
32,000 | Mitsubishi Corp. | 647,394 | ||||
129,000 | Mitsubishi Heavy Industries Ltd. | 819,830 | ||||
159,000 | Mitsubishi Materials Corp. | 622,074 | ||||
5,400 | Mitsubishi Tanabe Pharma Corp. | 76,160 | ||||
537,200 | Mitsubishi UFJ Financial Group, Inc. | 3,421,033 | ||||
989,200 | Mizuho Financial Group, Inc. | 2,076,393 | ||||
18,400 | Murata Manufacturing Co. Ltd. | 1,476,965 | ||||
600 | Nidec Corp. | 58,471 | ||||
21,000 | Nippon Express Co. Ltd. | 105,453 | ||||
4,000 | Nippon Meat Packers, Inc. | 58,565 | ||||
49,000 | Nippon Telegraph & Telephone Corp. | 2,547,036 | ||||
73,900 | Nomura Holdings, Inc. | 545,902 | ||||
36,500 | NTT DoCoMo, Inc. | 579,074 | ||||
19,000 | Oji Holdings Corp. | 86,831 | ||||
5,000 | Omron Corp. | 190,806 | ||||
5,100 | Oriental Land Co. Ltd. | 816,649 | ||||
69,400 | ORIX Corp. | 1,202,083 | ||||
500 | Otsuka Corp. | 64,852 | ||||
65,900 | Otsuka Holdings Co. Ltd. | 1,876,969 | ||||
117,200 | Panasonic Corp. | 1,201,225 | ||||
124,700 | Resona Holdings, Inc. | 648,656 | ||||
158,000 | Ricoh Co. Ltd. | 1,668,607 | ||||
5,100 | Secom Co. Ltd. | 307,236 | ||||
17,000 | Sekisui House Ltd. | 244,016 | ||||
4,300 | Shikoku Electric Power Co., Inc.* | 76,751 | ||||
7,200 | Shionogi & Co. Ltd. | 159,326 | ||||
113,700 | Showa Shell Sekiyu KK | 1,222,375 | ||||
10,500 | Softbank Corp. | 784,129 | ||||
39,300 | Sojitz Corp. | 76,312 | ||||
83,100 | Sony Corp. | 1,449,653 |
See Notes to Financial Statements.
18 |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) | ||||||
Japan (cont’d.) | ||||||
101,000 | Sumitomo Metal Mining Co. Ltd. | $ | 1,398,910 | |||
65,000 | Sumitomo Mitsui Financial Group, Inc. | 3,141,833 | ||||
22,000 | Taisei Corp. | 112,866 | ||||
10,800 | Tohoku Electric Power Co., Inc.* | 130,725 | ||||
32,500 | Tokyo Electric Power Co., Inc.* | 173,449 | ||||
11,900 | Tokyu Fudosan Holdings Corp.* | 116,906 | ||||
35,000 | Toray Industries, Inc. | 218,706 | ||||
139,000 | TOTO Ltd. | 1,965,772 | ||||
37,700 | Toyoda Gosei Co. Ltd. | 942,672 | ||||
51,134 | Toyota Motor Corp. | 3,315,436 | ||||
201,300 | Yahoo! Japan Corp. | 939,209 | ||||
19,000 | Yamaguchi Financial Group, Inc. | 179,049 | ||||
|
| |||||
64,134,616 | ||||||
Luxembourg |
| |||||
1,634 | Millicom International Cellular SA, SDR | 150,747 | ||||
Macau 0.1% |
| |||||
99,600 | MGM China Holdings Ltd. | 343,425 | ||||
Mexico 0.5% |
| |||||
1,335,600 | America Movil SAB de CV (Class L Stock) | 1,430,059 | ||||
12,400 | �� | Fomento Economico Mexicano SAB de CV | 115,900 | |||
35,400 | Wal-Mart de Mexico SAB de CV (Class V Stock) | 92,032 | ||||
|
| |||||
1,637,991 | ||||||
Netherlands 3.1% |
| |||||
199,686 | Aegon NV | 1,588,884 | ||||
21,531 | CNH Industrial NV* | 254,627 | ||||
20,998 | Heineken Holding NV | 1,333,690 | ||||
24,102 | Koninklijke Ahold NV | 458,098 | ||||
43,410 | Royal Dutch Shell PLC (Class A Stock) | 1,445,774 | ||||
106,779 | Royal Dutch Shell PLC (Class B Stock) | 3,696,721 | ||||
34,696 | Unilever NV, CVA | 1,375,544 | ||||
|
| |||||
10,153,338 | ||||||
New Zealand 0.4% |
| |||||
448,735 | Auckland International Airport Ltd. | 1,270,299 | ||||
Norway 1.8% |
| |||||
124,094 | DNB ASA | 2,199,755 |
See Notes to Financial Statements.
Prudential International Equity Fund | 19 |
Portfolio of Investments
as of October 31, 2013 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) | ||||||
Norway (cont’d.) |
| |||||
78,077 | Telenor ASA | $ | 1,876,004 | |||
43,667 | Yara International ASA | 1,880,622 | ||||
|
| |||||
5,956,381 | ||||||
Portugal 0.5% |
| |||||
474,875 | EDP - Energias de Portugal SA | 1,748,033 | ||||
Russia 0.9% |
| |||||
39,593 | Gazprom OAO, ADR | 370,590 | ||||
25,115 | Lukoil OAO, ADR | 1,647,544 | ||||
3,882 | Magnit OJSC, GDR, RegS | 249,419 | ||||
4,037 | MMC Norilsk Nickel OJSC, ADR | 61,120 | ||||
3,500 | Mobile Telesystems OJSC, ADR | 79,800 | ||||
8,756 | Rosneft OAO, GDR, RegS | 69,129 | ||||
9,749 | Sberbank of Russia, ADR | 124,495 | ||||
1,963 | Sistema JSFC, GDR, RegS | 52,608 | ||||
14,128 | Surgutneftegas OAO, ADR | 124,892 | ||||
1,676 | Tatneft OAO, ADR | 68,900 | ||||
2,377 | Uralkali OJSC, GDR, RegS | 63,490 | ||||
|
| |||||
2,911,987 | ||||||
Singapore 0.9% |
| |||||
162,000 | CapitaMall Trust | 263,120 | ||||
602,000 | ComfortDelGro Corp. Ltd. | 929,592 | ||||
26,000 | DBS Group Holdings Ltd. | 350,518 | ||||
168,000 | Golden Agri-Resources Ltd. | 81,121 | ||||
25,000 | Oversea-Chinese Banking Corp. Ltd. | 209,137 | ||||
367,000 | Wilmar International Ltd. | 1,020,825 | ||||
|
| |||||
2,854,313 | ||||||
South Africa 0.6% |
| |||||
28,806 | African Rainbow Minerals Ltd. | 551,515 | ||||
2,020 | Aspen Pharmacare Holdings Ltd. | 56,196 | ||||
54,193 | FirstRand Ltd. | 194,552 | ||||
34,471 | Liberty Holdings Ltd. | 426,179 | ||||
12,847 | Life Healthcare Group Holdings Ltd. | 52,400 | ||||
2,818 | Naspers Ltd. (Class N Stock) | 263,776 | ||||
3,656 | Sasol Ltd. | 186,814 | ||||
1,883 | Tiger Brands Ltd. | 55,242 | ||||
5,271 | Vodacom Group Ltd. | 60,461 | ||||
|
| |||||
1,847,135 |
See Notes to Financial Statements.
20 |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) | ||||||
South Korea 1.8% |
| |||||
1,094 | Coway Co. Ltd. | $ | 62,616 | |||
423 | Hyundai Mobis Co. Ltd. | 119,320 | ||||
1,063 | Hyundai Motor Co. | 253,253 | ||||
819 | Hyundai Steel Co. | 67,435 | ||||
23,810 | Kia Motors Corp. | 1,383,390 | ||||
9,752 | KT&G Corp. | 712,496 | ||||
322 | LG Chem Ltd. | 90,830 | ||||
170 | Lotte Shopping Co. Ltd. | 64,506 | ||||
407 | POSCO | 121,506 | ||||
1,902 | Samsung Electronics Co. Ltd. | 2,622,970 | ||||
438 | SK Holdings Co. Ltd. | 79,383 | ||||
3,260 | SK Hynix, Inc.* | 98,096 | ||||
1,812 | SK Telecom Co. Ltd. | 394,871 | ||||
|
| |||||
6,070,672 | ||||||
Spain 2.4% |
| |||||
81,207 | Abertis Infraestructuras SA(a) | 1,739,868 | ||||
50,241 | Amadeus IT Holding SA (Class A Stock) | 1,864,065 | ||||
146,537 | Banco Bilbao Vizcaya Argentaria SA | 1,712,574 | ||||
127,940 | Banco Santander SA | 1,134,227 | ||||
7,257 | Ferrovial SA | 138,332 | ||||
214,087 | Iberdrola SA | 1,343,797 | ||||
2,563 | Repsol SA | 68,716 | ||||
|
| |||||
8,001,579 | ||||||
Sweden 2.0% |
| |||||
9,157 | Atlas Copco AB (Class B Stock) | 227,540 | ||||
6,601 | Boliden AB | 93,754 | ||||
3,976 | Hennes & Mauritz AB (Class B Stock) | 171,810 | ||||
70,411 | Investor AB (Class B Stock) | 2,257,532 | ||||
111,542 | Securitas AB (Class B Stock) | 1,271,908 | ||||
176,681 | Skandinaviska Enskilda Banken AB (Class A Stock) | 2,136,968 | ||||
10,005 | SKF AB (Class B Stock) | 264,726 | ||||
6,240 | Svenska Handelsbanken AB (Class A Stock) | 282,214 | ||||
|
| |||||
6,706,452 | ||||||
Switzerland 7.1% | ||||||
24,619 | Actelion Ltd.* | 1,904,787 | ||||
11,965 | Adecco SA | 882,344 | ||||
12,327 | Cie Financiere Richemont SA | 1,260,433 |
See Notes to Financial Statements.
Prudential International Equity Fund | 21 |
Portfolio of Investments
as of October 31, 2013 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) | ||||||
Switzerland (cont’d.) | ||||||
2,563 | EMS-Chemie Holding AG | $ | 933,300 | |||
76 | Givaudan SA | 107,782 | ||||
20 | Lindt & Spruengli AG | 84,422 | ||||
72,407 | Nestle SA | 5,226,624 | ||||
32,115 | Novartis AG | 2,492,849 | ||||
24,106 | Roche Holding AG | 6,666,163 | ||||
1,017 | Swatch Group AG (The) | 113,154 | ||||
21,779 | Swiss Prime Site AG* | 1,649,067 | ||||
26,248 | Swiss Re AG | 2,304,120 | ||||
4,090 | UBS AG* | 79,105 | ||||
|
| |||||
23,704,150 | ||||||
Taiwan 0.7% | ||||||
70,000 | Advanced Semiconductor Engineering, Inc. | 68,925 | ||||
13,000 | Catcher Technology Co. Ltd. | 75,584 | ||||
50,184 | Cathay Financial Holding Co. Ltd. | 75,816 | ||||
110,210 | CTBC Financial Holding Co. Ltd. | 74,759 | ||||
45,000 | Eclat Textile Co. Ltd. | 494,887 | ||||
22,000 | Formosa Chemicals & Fibre Corp. | 63,587 | ||||
27,040 | Formosa Plastics Corp. | 73,482 | ||||
48,000 | Fubon Financial Holding Co. Ltd. | 70,347 | ||||
74,000 | Hon Hai Precision Industry Co. Ltd. | 188,130 | ||||
125,000 | Innolux Corp.* | 49,573 | ||||
27,000 | Largan Precision Co. Ltd. | 919,440 | ||||
7,000 | MediaTek, Inc. | 95,704 | ||||
74,000 | Mega Financial Holding Co. Ltd. | 64,076 | ||||
34,000 | Taiwan Cement Corp. | 49,483 | ||||
32,260 | Uni-President Enterprises Corp. | 61,434 | ||||
|
| |||||
2,425,227 | ||||||
Thailand 0.1% | ||||||
7,900 | Advanced Info Service PCL | 64,723 | ||||
8,100 | Airports of Thailand PCL | 55,126 | ||||
8,800 | PTT Exploration & Production PCL | 47,640 | ||||
25,400 | PTT Global Chemical PCL | 64,061 | ||||
5,300 | PTT PCL | 53,979 | ||||
10,800 | Siam Commercial Bank PCL (The) | 57,080 | ||||
|
| |||||
342,609 |
See Notes to Financial Statements.
22 |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) | ||||||
United Kingdom 18.1% | ||||||
99,262 | 3i Group PLC | $ | 593,264 | |||
104,711 | Anglo American PLC | 2,489,690 | ||||
69,377 | AstraZeneca PLC | 3,672,860 | ||||
311,208 | BAE Systems PLC | 2,270,123 | ||||
77,825 | BHP Billiton PLC | 2,401,581 | ||||
678,661 | BP PLC | 5,268,221 | ||||
16,474 | British American Tobacco PLC | 908,915 | ||||
553,969 | BT Group PLC | 3,351,889 | ||||
38,366 | Bunzl PLC | 846,322 | ||||
38,264 | Capita PLC | 604,888 | ||||
110,396 | Diageo PLC | 3,519,173 | ||||
83,852 | easyJet PLC | 1,756,474 | ||||
56,134 | GlaxoSmithKline PLC | 1,479,837 | ||||
576,343 | HSBC Holdings PLC | 6,317,542 | ||||
22,419 | International Consolidated Airlines Group SA* | 124,506 | ||||
826,022 | ITV PLC | 2,525,650 | ||||
322,768 | J Sainsbury PLC | 2,041,694 | ||||
663,307 | Legal & General Group PLC | 2,298,915 | ||||
75,532 | Lloyds Banking Group PLC* | 93,419 | ||||
51,439 | London Stock Exchange Group PLC | 1,352,032 | ||||
211,945 | National Grid PLC | 2,663,482 | ||||
17,535 | Next PLC | 1,531,290 | ||||
35,182 | Persimmon PLC* | 712,307 | ||||
22,807 | Prudential PLC | 466,424 | ||||
37,716 | Reckitt Benckiser Group PLC | 2,932,786 | ||||
41,492 | Schroders PLC | 1,712,485 | ||||
325,045 | TUI Travel PLC | 2,003,901 | ||||
635,823 | Vodafone Group PLC | 2,328,886 | ||||
415,580 | WM Morrison Supermarkets PLC | 1,875,123 | ||||
|
| |||||
60,143,679 | ||||||
United States 0.1% | ||||||
8,447 | Transocean Ltd. | 398,935 | ||||
|
| |||||
TOTAL COMMON STOCKS | 322,852,138 | |||||
|
| |||||
EXCHANGE TRADED FUND 2.1% | ||||||
United States | ||||||
104,500 | iShares MSCI EAFE Index Fund | 6,884,460 | ||||
|
|
See Notes to Financial Statements.
Prudential International Equity Fund | 23 |
Portfolio of Investments
as of October 31, 2013 continued
Shares | Description | Value (Note 1) | ||||
PREFERRED STOCKS 0.4% | ||||||
Brazil 0.3% | ||||||
7,400 | Banco Bradesco SA (PRFC)* | $ | 106,630 | |||
4,400 | Cia de Bebidas das Americas (PRFC) | 164,141 | ||||
6,994 | Cia Energetica de Minas Gerais (PRFC) | 62,222 | ||||
17,380 | Itausa - Investimentos Itau SA (PRFC) | 74,867 | ||||
28,000 | Petroleo Brasileiro SA (PRFC)* | 255,352 | ||||
12,800 | Vale SA (PRFC) | 187,640 | ||||
|
| |||||
850,852 | ||||||
Germany | ||||||
1,283 | Bayerische Motoren Werke AG (PRFC) | 107,094 | ||||
South Korea 0.1% | ||||||
637 | Hyundai Motor Co. - 1st Offering (PRFC) | 69,301 | ||||
681 | Hyundai Motor Co. - 2nd Offering (PRFC) | 76,966 | ||||
131 | Samsung Electronics Co. Ltd. (PRFC) | 126,280 | ||||
|
| |||||
272,547 | ||||||
|
| |||||
TOTAL PREFERRED STOCKS | 1,230,493 | |||||
|
| |||||
Units | ||||||
RIGHT* | ||||||
Taiwan | ||||||
5,891 | Mega Financial Holding Co. Ltd., expiring 12/06/13 | 790 | ||||
|
| |||||
TOTAL LONG-TERM INVESTMENTS | 330,967,881 | |||||
|
| |||||
SHORT-TERM INVESTMENTS 1.6% |
| |||||
AFFILIATED MONEY MARKET MUTUAL FUND 1.6% |
| |||||
5,267,047 | Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund | 5,267,047 | ||||
|
|
See Notes to Financial Statements.
24 |
Principal Amount (000)# | Description | Value (Note 1) | ||||
U.S. TREASURY OBLIGATION |
| |||||
150 | U.S. Treasury Bill, 0.005%, 12/19/13 | $ | 149,993 | |||
|
| |||||
TOTAL SHORT-TERM INVESTMENTS | 5,417,040 | |||||
|
| |||||
TOTAL INVESTMENTS 101.2% | 336,384,921 | |||||
Liabilities in excess of other assets(f) (1.2%) | (4,074,794 | ) | ||||
|
| |||||
NET ASSETS 100.0% | $ | 332,310,127 | ||||
|
|
The following abbreviations are used in the Portfolio descriptions:
144A—Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. Unless otherwise noted, 144A securities are deemed to be liquid.
RegS—Regulation S. Security was purchased pursuant to Regulation S and may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933.
ADR—American Depositary Receipt
CVA—Certificate Van Aandelan (Bearer)
DAX—Deutscher Aktien IndeX
EAFE—Europe, Australasia and Far East
GDR—Global Depositary Receipt
MSCI—Morgan Stanley Capital International
PRFC—Preference Shares
REIT—Real Estate Investment Trust
SDR—Swedish Depositary Receipt
TOPIX—Tokyo Stock Price Index
* | Non-income producing security. |
# | Principal amount shown in U.S. dollars unless otherwise stated. |
(a) | All or a portion of security is on loan. The aggregate market value of such securities, including those sold and pending settlement, is $4,930,189; cash collateral of $5,265,449 (included with liabilities) was received with which the Series purchased highly liquid short-term investments. |
(b) | Prudential Investments LLC, the manager of the Series, also serves as manager of the Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund. |
(c) | Represents security, or a portion thereof, purchased with cash collateral received for securities on loan. |
(d) | Represents security, or a portion thereof, segregated as collateral for futures contracts. |
(e) | Rate shown represents yield-to-maturity as of purchase date. |
See Notes to Financial Statements.
Prudential International Equity Fund | 25 |
Portfolio of Investments
as of October 31, 2013 continued
(f) | Includes net unrealized appreciation (depreciation) on the following derivative contracts held at reporting period end: |
Open futures contracts outstanding at October 31, 2013:
Number of Contracts | Type | Expiration Date | Value at Trade Date | Value at October 31, 2013 | Unrealized Appreciation | |||||||||||||||
Long Positions: | ||||||||||||||||||||
5 | Amsterdam Index | Nov. 2013 | $ | 516,554 | $ | 530,814 | $ | 14,260 | ||||||||||||
1 | DAX Index | Dec. 2013 | 292,112 | 306,598 | 14,486 | |||||||||||||||
4 | TOPIX Index | Dec. 2013 | 475,922 | 487,949 | 12,027 | |||||||||||||||
|
| |||||||||||||||||||
$ | 40,773 | |||||||||||||||||||
|
|
Various inputs are used in determining the value of the Series’ investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.
Level 2—other significant observable inputs including, but not limited to, quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates, and amortized cost.
Level 3—significant unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of October 31, 2013 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Common Stocks | ||||||||||||
Australia | $ | — | $ | 23,554,984 | $ | — | ||||||
Austria | — | 3,518,284 | — | |||||||||
Belgium | — | 5,964,886 | — | |||||||||
Brazil | 2,664,726 | — | — | |||||||||
China | — | 5,278,978 | — | |||||||||
Denmark | 158,734 | 4,571,106 | — | |||||||||
Finland | — | 5,916,201 | — | |||||||||
France | 91,802 | 27,165,847 | — | |||||||||
Germany | 801,273 | 22,631,819 | — |
See Notes to Financial Statements.
26 |
Level 1 | Level 2 | Level 3 | ||||||||||
Common Stocks (continued) | ||||||||||||
Greece | $ | — | $ | 82,218 | $ | — | ||||||
Hong Kong | — | 11,007,941 | — | |||||||||
India | 1,091,016 | — | — | |||||||||
Indonesia | — | 61,269 | — | |||||||||
Israel | — | 3,401,812 | — | |||||||||
Italy | — | 4,087,674 | — | |||||||||
Japan | 116,906 | 64,017,710 | — | |||||||||
Luxembourg | — | 150,747 | — | |||||||||
Macau | — | 343,425 | — | |||||||||
Mexico | 1,637,991 | — | — | |||||||||
Netherlands | 254,627 | 9,898,711 | — | |||||||||
New Zealand | — | 1,270,299 | — | |||||||||
Norway | — | �� | 5,956,381 | — | ||||||||
Portugal | — | 1,748,033 | — | |||||||||
Russia | 2,911,987 | — | — | |||||||||
Singapore | — | 2,854,313 | — | |||||||||
South Africa | — | 1,847,135 | — | |||||||||
South Korea | 777,002 | 5,293,670 | — | |||||||||
Spain | — | 8,001,579 | — | |||||||||
Sweden | — | 6,706,452 | — | |||||||||
Switzerland | 84,422 | 23,619,728 | — | |||||||||
Taiwan | — | 2,425,227 | — | |||||||||
Thailand | 176,424 | 166,185 | — | |||||||||
United Kingdom | — | 60,143,679 | — | |||||||||
United States | — | 398,935 | — | |||||||||
Exchange Traded Fund | ||||||||||||
United States | 6,884,460 | — | — | |||||||||
Preferred Stocks | ||||||||||||
Brazil | 850,852 | — | — | |||||||||
Germany | — | 107,094 | — | |||||||||
South Korea | — | 272,547 | — | |||||||||
Right | ||||||||||||
Taiwan | — | 790 | — | |||||||||
Affiliated Money Market Mutual Fund | 5,267,047 | — | — | |||||||||
U.S. Treasury Obligation | — | 149,993 | — | |||||||||
Other Financial Instruments* | ||||||||||||
Futures Contracts | 40,773 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 23,810,042 | $ | 312,615,652 | $ | — | ||||||
|
|
|
|
|
|
* | Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, such as futures, forwards and swaps contracts, which are recorded at the unrealized appreciation/depreciation on the instrument. |
See Notes to Financial Statements.
Prudential International Equity Fund | 27 |
Portfolio of Investments
as of October 31, 2013 continued
Fair value of Level 2 investments at October 31, 2012 was $149,980. Of that amount, $0 were classified as Level 2 investments as a result of fair valuing such foreign investments using third party vendor modeling tools. An amount of $173,453,318 was transferred from Level 1 into Level 2 at October 31, 2013 as a result of fair valuing such foreign securities using third-party vendor modeling tools. Such fair values are used to reflect the impact of market movements between the time at which the Series normally values its securities and the earlier closing of foreign markets. An amount of $344,630 was transferred from Level 1 to Level 2 as a result of using the local shares official close as a proxy to determine the fair value of the security.
It is the Series’ policy to recognize transfers in and transfers out at the fair value as of the beginning of period.
The industry classification of portfolio holdings and liabilities in excess of other assets shown as a percentage of net assets as of October 31, 2013 was as follows:
Commercial Banks | 12.5 | % | ||
Pharmaceuticals | 7.5 | |||
Oil, Gas & Consumable Fuels | 7.4 | |||
Insurance | 5.7 | |||
Metals & Mining | 4.7 | |||
Automobiles | 4.1 | |||
Diversified Telecommunication Services | 3.5 | |||
Food Products | 3.3 | |||
Food & Staples Retailing | 2.7 | |||
Chemicals | 2.5 | |||
Media | 2.2 | |||
Wireless Telecommunication Services | 2.1 | |||
Exchange Traded Fund | 2.1 | |||
Aerospace & Defense | 2.0 | |||
Beverages | 2.0 | |||
Diversified Financial Services | 1.9 | |||
Hotels, Restaurants & Leisure | 1.9 | |||
Electric Utilities | 1.9 | |||
Real Estate Investment Trusts | 1.9 | |||
Machinery | 1.8 | |||
Affiliated Money Market Mutual Fund (including 1.6% of collateral received for securities on loan) | 1.6 | |||
Capital Markets | 1.6 | |||
Multi-Utilities | 1.5 | |||
IT Services | 1.5 | |||
Trading Companies & Distributors | 1.5 | |||
Tobacco | 1.4 | |||
Electronic Equipment, Instruments & Components | 1.4 | |||
Real Estate Management & Development | 1.2 | |||
Household Products | 1.2 | |||
Household Durables | 1.1 | % | ||
Semiconductors & Semiconductor Equipment | 1.1 | |||
Transportation Infrastructure | 1.0 | |||
Construction & Engineering | 1.0 | |||
Auto Components | 0.9 | |||
Industrial Conglomerates | 0.9 | |||
Road & Rail | 0.8 | |||
Textiles, Apparel & Luxury Goods | 0.7 | |||
Healthcare Providers & Services | 0.6 | |||
Airlines | 0.6 | |||
Paper & Forest Products | 0.6 | |||
Building Products | 0.6 | |||
Biotechnology | 0.6 | |||
Office Electronics | 0.5 | |||
Commercial Services & Supplies | 0.5 | |||
Multiline Retail | 0.5 | |||
Professional Services | 0.5 | |||
Electronic Equipment & Instruments | 0.4 | |||
Electrical Equipment | 0.4 | |||
Internet Software & Services | 0.3 | |||
Specialty Retail | 0.3 | |||
Air Freight & Logistics | 0.2 | |||
Independent Power Producers & Energy Traders | 0.2 | |||
Marine | 0.1 | |||
Energy Equipment & Services | 0.1 | |||
Construction Materials | 0.1 | |||
|
| |||
101.2 | ||||
Liabilities in excess of other assets | (1.2 | ) | ||
|
| |||
100.0 | % | |||
|
|
See Notes to Financial Statements.
28 |
The Series invested in derivative instruments during the reporting period. The primary type of risk associated with these derivative instruments is equity risk. The effect of such derivative instruments on the Series’ financial position and financial performance as reflected in the Statement of Assets and Liabilities and Statement of Operations is presented in the summary below.
Fair values of derivative instruments as of October 31, 2013 as presented in the Statement of Assets and Liabilities:
Derivatives not accounted for | Asset Derivatives | Liability Derivatives | ||||||||||
Balance | Fair Value | Balance | Fair Value | |||||||||
Equity contracts | Due from broker—variation margin | $ | 40,773 | * | — | $ | — | |||||
|
|
|
|
* | Includes cumulative appreciation/depreciation as reported in the schedule of open futures. Only unsettled variation margin receivable (payable) is reported within the Statement of Assets and Liabilities. |
The effects of derivative instruments on the Statement of Operations for the year ended October 31, 2013 are as follows:
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income | ||||||||||||
Derivatives not accounted for as hedging | Futures | Rights | Total | |||||||||
Equity contracts | $ | 215,576 | $ | 101,832 | $ | 317,408 | ||||||
|
|
|
|
|
| |||||||
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income | ||||||||||||
Derivatives not accounted for as hedging | Futures | Rights | Total | |||||||||
Equity contracts | $ | 48,090 | $ | (32,577 | ) | $ | 15,513 | |||||
|
|
|
|
|
|
For the year ended October 31, 2013, the average value at trade date for futures long positions was $1,224,322.
See Notes to Financial Statements.
Prudential International Equity Fund | 29 |
Statement of Assets & Liabilities
as of October 31, 2013
Assets | ||||
Investments at value, including securities on loan of $4,930,189: | ||||
Unaffiliated investments (cost $265,831,068) | $ | 331,117,874 | ||
Affiliated investments (cost $5,267,047) | 5,267,047 | |||
Foreign currency, at value (cost $185,734) | 184,314 | |||
Tax reclaim receivable | 992,873 | |||
Dividends receivable | 782,515 | |||
Receivable for Series shares sold | 250,125 | |||
Due from broker—variation margin | 3,646 | |||
Prepaid expenses | 3,441 | |||
|
| |||
Total assets | 338,601,835 | |||
|
| |||
Liabilities | ||||
Payable to broker for collateral for securities on loan | 5,265,449 | |||
Payable for Series shares reacquired | 340,630 | |||
Accrued expenses | 279,522 | |||
Management fee payable | 233,919 | |||
Distribution fee payable | 80,870 | |||
Affiliated transfer agent fee payable | 71,867 | |||
Loan payable | 19,000 | |||
Payable to custodian | 451 | |||
|
| |||
Total liabilities | 6,291,708 | |||
|
| |||
Net Assets | $ | 332,310,127 | ||
|
| |||
Net assets were comprised of: | ||||
Common stock, at par | $ | 451,424 | ||
Paid-in capital in excess of par | 487,825,290 | |||
|
| |||
488,276,714 | ||||
Undistributed net investment income | 4,690,335 | |||
Accumulated net realized loss on investment and foreign currency transactions | (226,039,688 | ) | ||
Net unrealized appreciation on investments and foreign currencies | 65,382,766 | |||
|
| |||
Net assets, October 31, 2013 | $ | 332,310,127 | ||
|
|
See Notes to Financial Statements.
30 |
Class A | ||||
Net asset value and redemption price per share | $ | 7.37 | ||
Maximum sales charge (5.50% of offering price) | 0.43 | |||
|
| |||
Maximum offering price to public | $ | 7.80 | ||
|
| |||
Class B | ||||
Net asset value, offering price and redemption price per share | $ | 7.07 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share | $ | 7.07 | ||
|
| |||
Class F | ||||
Net asset value, offering price and redemption price per share | $ | 7.08 | ||
|
| |||
Class X | ||||
Net asset value, offering price and redemption price per share | $ | 7.07 | ||
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share | $ | 7.43 | ||
|
|
See Notes to Financial Statements.
Prudential International Equity Fund | 31 |
Statement of Operations
Year Ended October 31, 2013
Net Investment Income | ||||
Income | ||||
Unaffiliated dividend income (net of foreign withholding taxes of $843,249) | $ | 10,515,916 | ||
Affiliated income from securities loaned, net | 24,525 | |||
Interest income | 1,036 | |||
Affiliated dividend income | 852 | |||
|
| |||
Total income | 10,542,329 | |||
|
| |||
Expenses | ||||
Management fee | 2,603,835 | |||
Distribution fee—Class A | 663,883 | |||
Distribution fee—Class B | 56,903 | |||
Distribution fee—Class C | 183,408 | |||
Distribution fee—Class F | 3,174 | |||
Distribution fee—Class X | 4,494 | |||
Transfer agent’s fees and expenses (including affiliated expense of $282,400) (Note 3) | 805,000 | |||
Custodian’s fees and expenses | 245,000 | |||
Shareholders’ reports | 92,000 | |||
Registration fees | 75,000 | |||
Audit fee | 35,000 | |||
Legal fees and expenses | 22,000 | |||
Directors’ fees | 16,000 | |||
Insurance | 5,000 | |||
Loan interest expense (Note 7) | 2,600 | |||
Miscellaneous | 69,908 | |||
|
| |||
Total expenses | 4,883,205 | |||
|
| |||
Net investment income | 5,659,124 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investment And Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Investment transactions | 32,473,329 | |||
Futures transactions | 215,576 | |||
Foreign currency transactions | (141,041 | ) | ||
|
| |||
32,547,864 | ||||
|
| |||
Net change in unrealized appreciation on: | ||||
Investments | 30,116,380 | |||
Futures | 48,090 | |||
Foreign currencies | 45,356 | |||
|
| |||
30,209,826 | ||||
|
| |||
Net gain on investment and foreign currency transactions | 62,757,690 | |||
|
| |||
Net Increase In Net Assets Resulting From Operations | $ | 68,416,814 | ||
|
|
See Notes to Financial Statements.
32 |
Statement of Changes in Net Assets
Year Ended October 31, | ||||||||
2013 | 2012 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income | $ | 5,659,124 | $ | 6,127,882 | ||||
Net realized gain (loss) on investment and foreign currency transactions | 32,547,864 | (6,974,442 | ) | |||||
Net change in unrealized appreciation on investments and foreign currencies | 30,209,826 | 20,668,340 | ||||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 68,416,814 | 19,821,780 | ||||||
|
|
|
| |||||
Dividends from net investment income (Note 1) | ||||||||
Class A | (4,559,841 | ) | (4,099,544 | ) | ||||
Class B | (87,134 | ) | (85,513 | ) | ||||
Class C | (283,431 | ) | (268,526 | ) | ||||
Class F | (10,934 | ) | (23,756 | ) | ||||
Class L | — | (145,518 | ) | |||||
Class M | — | (8,376 | ) | |||||
Class X | (9,832 | ) | (19,252 | ) | ||||
Class Z | (1,229,773 | ) | (1,011,006 | ) | ||||
|
|
|
| |||||
(6,180,945 | ) | (5,661,491 | ) | |||||
|
|
|
| |||||
Series share transactions (Net of share conversions) (Note 6) | ||||||||
Net proceeds from shares sold | 24,830,694 | 14,167,452 | ||||||
Net asset value of shares issued in reinvestment of dividends | 6,043,937 | 5,514,066 | ||||||
Cost of shares reacquired | (45,385,832 | ) | (48,997,598 | ) | ||||
|
|
|
| |||||
Net decrease in net assets from Series share transactions | (14,511,201 | ) | (29,316,080 | ) | ||||
|
|
|
| |||||
Total increase (decrease) | 47,724,668 | (15,155,791 | ) | |||||
Net Assets: | ||||||||
Beginning of year | 284,585,459 | 299,741,250 | ||||||
|
|
|
| |||||
End of year(a) | $ | 332,310,127 | $ | 284,585,459 | ||||
|
|
|
| |||||
(a) Includes undistributed net investment income of: | $ | 4,690,335 | $ | 4,906,387 | ||||
|
|
|
|
See Notes to Financial Statements.
Prudential International Equity Fund | 33 |
Notes to Financial Statements
Prudential World Fund, Inc. (the “Fund”) is an open-end management investment company, registered under the Investment Company Act of 1940, as amended, (“1940 Act”) and currently consists of six series: Prudential International Equity Fund (the “Series”), Prudential Jennison Global Infrastructure Fund, Prudential International Value Fund, Prudential Jennison Global Opportunities Fund, Prudential Jennison International Opportunities Fund and Prudential Emerging Markets Debt Local Currency Fund. These financial statements relate to the Prudential International Equity Fund. The financial statements of the other series are not presented herein. The investment objective of the Series is long-term growth of capital.
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the Fund and the Series in the preparation of the financial statements.
Security Valuation: The Series holds securities and other assets that are fair valued at the close of each day the New York Stock Exchange (“NYSE”) is open for trading. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Board of Directors (the “Board”) has adopted Valuation Procedures for security valuation under which fair valuation responsibilities have been delegated to Prudential Investments LLC (“PI” or “Manager”). Under the current Valuation Procedures, the established Valuation Committee is responsible for supervising the valuation of portfolio securities and other assets. The Valuation Procedures permit the Series to utilize independent pricing vendor services, quotations from market makers, and alternative valuation methods when market quotations are either not readily available or not representative of fair value. A record of the Valuation Committee’s actions is subject to the Board’s review, approval, and ratification at its next regularly-scheduled quarterly meeting.
Various inputs determine how the Series’ investments are valued, all of which are categorized according to the three broad levels (Level 1, 2, or 3) detailed in the table following the Portfolio of Investments.
Common stocks, exchange-traded funds, and derivative instruments that are traded on a national securities exchange are valued at the last sale price as of the close of trading on the applicable exchange. Securities traded via NASDAQ are valued at the
34 |
NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQ official closing price; they are classified as Level 1 in the fair value hierarchy.
In the event that no sale or official closing price on valuation date exists, these securities are generally valued at the mean between the last reported bid and asked prices, or at the last bid price in the absence of an asked price. These securities are classified as Level 2 in the fair value hierarchy, as the inputs are observable and considered to be significant to the valuation.
Common stocks traded on foreign securities exchanges are valued using pricing vendor services that provide model prices derived using adjustment factors based on information such as local closing price, relevant general and sector indices, currency fluctuations, depositary receipts, and futures, as applicable. Securities valued using such model prices are classified as Level 2 in the fair value hierarchy, as the adjustment factors are observable and considered to be significant to the valuation.
Investments in open-end, non-exchange-traded mutual funds are valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Fixed income securities traded in the over-the-counter market are generally valued at prices provided by approved independent pricing vendors. The pricing vendors provide these prices after evaluating observable inputs including, but not limited to yield curves, yield spreads, credit ratings, deal terms, tranche level attributes, default rates, cash flows, prepayment speeds, broker/dealer quotations, and reported trades. Securities valued using such vendor prices are classified as Level 2 in the fair value hierarchy.
Over-the-counter derivative instruments are generally valued using pricing vendor services, which derive the valuation based on inputs such as underlying asset prices, indices, spreads, interest rates, and exchange rates. These instruments are categorized as Level 2 in the fair value hierarchy.
Securities and other assets that cannot be priced according to the methods described above are valued based on pricing methodologies approved by the Board of Directors. In the event that significant unobservable inputs are used when determining such valuations, the securities will be classified as Level 3 in the fair value hierarchy.
Prudential International Equity Fund | 35 |
Notes to Financial Statements
continued
When determining the fair value of securities, some of the factors influencing the valuation include: the nature of any restrictions on disposition of the securities; assessment of the general liquidity of the securities; the issuer’s financial condition and the markets in which it does business; the cost of the investment; the size of the holding and the capitalization of the issuer; the prices of any recent transactions or bids/offers for such securities or any comparable securities; any available analyst media or other reports or information deemed reliable by the investment adviser regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other mutual funds to calculate their net asset values.
Foreign Currency Translation: The books and records of the Series 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 current rates of exchange;
(ii) purchases and sales of investment securities, income and expenses at the rates of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Series are presented at the foreign exchange rates and market values at the close of the period, the Series does 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 long-term portfolio securities held at the end of the period. Similarly, the Series does 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 period. Accordingly, realized foreign currency gains or losses are included in the reported net realized gains or losses on investment transactions.
Net realized gains or losses on foreign currency transactions represent net foreign exchange gains or losses from holdings of foreign currencies, currency gains or losses realized between the trade and settlement dates on security transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Series’ books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains or losses from valuing foreign currency denominated assets and liabilities (other than investments) at period end
36 |
exchange rates are reflected as a component of net unrealized appreciation (depreciation) on 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 possibility of political and economic instability, or the level of governmental supervision and regulation of foreign securities markets.
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 Series 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 Series 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 or loss on financial futures transactions. The Series invested in financial futures contracts in order to hedge its existing portfolio securities, or securities the Series intends to purchase, against fluctuations in value caused by changes in prevailing interest rates, value of equities or foreign currency exchange rates. Should interest rates move unexpectedly, the Series 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.
Financial futures contracts involve elements of both market and credit risk in excess of the amounts reflected on the Statement of Assets and Liabilities.
With exchange-traded futures, there is minimal counterparty credit risk to the Series since the exchanges’ clearinghouse acts as counterparty to all exchange-traded futures and guarantees the futures contracts against default.
Securities Lending: The Series may lend its portfolio securities to banks and broker-dealers. The loans are secured by collateral at least equal to the market value of the securities loaned. Collateral pledged by each borrower is invested in a highly liquid short-term money market fund and is marked to market daily, based on the previous day’s market value, such that the value of the collateral exceeds the value of the loaned securities. Loans are subject to termination at the option of the borrower or the Series. Upon termination of the loan, the borrower will return to the Series securities identical to the loaned securities. Should the borrower of the securities fail financially,
Prudential International Equity Fund | 37 |
Notes to Financial Statements
continued
the Series has the right to repurchase the securities using the collateral in the open market. The Series recognizes income, net of any rebate and securities lending agent fees, for lending its securities, and any interest on the investment of cash received as collateral. The Series also continues to receive interest and dividends or amounts equivalent thereto, on the securities loaned and recognizes any unrealized gain or loss in the market price of the securities loaned that may occur during the term of the loan.
Warrants and Rights: The Series may hold warrants and rights acquired either through a direct purchase, included as part of a private placement, or pursuant to corporate actions. Warrants and rights entitle the holder to buy a proportionate amount of common stock, or such other security that the issuer may specify, at a specific price and time through the expiration dates. The Series holds such warrants and rights as long positions until exercised, sold or expired. Warrants and rights are valued at fair value in accordance with the Board of Directors’ approved fair valuation procedures.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains or losses from investment and currency transactions are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, including amortization of premium and accretion of discount on debt securities, as required, is recorded on the accrual basis. Expenses are recorded on the accrual basis, which may require the use of certain estimates by management, that may differ from actual.
Net investment income or loss (other than distribution fees which are charged directly to the respective class) and unrealized and realized gains or losses are allocated daily to each class of shares based upon the relative proportion of adjusted net assets of each class at the beginning of the day.
Dividends and Distributions: The Series expects to pay dividends from net investment income and distributions from net realized capital gains, if any, at least annually. Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-dividend date. Permanent book/tax differences relating to income and gains are reclassified amongst undistributed net investment income, accumulated net realized gain or loss and paid-in capital in excess of par, as appropriate.
38 |
Taxes: It is the Series’ policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net investment income and capital gains, if any, to its shareholders. Therefore, no federal income tax provision is required.
Withholding taxes on foreign dividends are recorded, net of reclaimable amounts, at the time the related income is earned.
Estimates: The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
Note 2. Agreements
The Fund has a management agreement for the Series with PI. Pursuant to this agreement, PI has responsibility for all investment advisory services and supervises the subadvisor’s performance of such services. PI entered into a subadvisory agreement with Quantitative Management Associates LLC (“QMA”). The subadvisory agreement provides that QMA furnishes investment advisory services in connection with the management of the Series. In connection therewith, QMA is obligated to keep certain books and records of the Series. PI pays for the services of QMA, the cost of compensation of officers of the Series, occupancy and certain clerical and bookkeeping costs of the Series. The Series bears all other costs and expenses.
The management fee paid to PI is computed daily and payable monthly, at an annual rate of .85% of the average daily net assets of the Series up to and including $300 million, .75% of the average daily net assets in excess of $300 million up to and including $1.5 billion and .70% of the Series’ average daily net assets over $1.5 billion. The effective management fee was .85% for the year ended October 31, 2013.
The Series has distribution agreements with Prudential Investment Management Services LLC (“PIMS”) and Prudential Annuities Distributors, Inc. (“PAD”). PIMS and PAD are both affiliates of PI and indirect, wholly-owned subsidiaries of Prudential. PIMS serves as the distributor of the Series’ Class A, Class B, Class C, Class F, and Class Z shares. PIMS, together with PAD, serves as co-distributor of the Series’ Class X shares.
The Series has adopted a separate Distribution and Service plan (each a “Plan” and collectively the “Plans”) for the Class A, Class B, Class C, Class F and Class X shares of the Series in accordance with Rule 12b-1 of the 1940 Act. No distribution or
Prudential International Equity Fund | 39 |
Notes to Financial Statements
continued
service fees are paid to PIMS as distributor for the Series’ Class Z shares. Under the Plans, the Series compensates PIMS and PAD a distribution and service fee at the annual rate of .30%, 1%, 1%, .75% and 1% of the average daily net assets of the Class A, B, C, F and X shares, respectively.
PIMS has advised the Series that they received $63,950 in front-end sales charges resulting from sales of Class A shares during the year ended October 31, 2013. From these fees, PIMS paid such sales charges to broker-dealers, which in turn paid commissions to salespersons and incurred other distribution costs.
PIMS has advised the Series that for the year ended October 31, 2013 it received $167, $6,782, $406, and $27 in contingent deferred sales charges imposed upon redemptions by certain Class A, Class B, Class C and Class F shareholders, respectively.
PI, QMA, PAD and PIMS are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PI and an indirect, wholly-owned subsidiary of Prudential, serves as the Series’ transfer agent. Transfer agent’s fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
Prudential Investment Management, Inc. (“PIM”), an indirect, wholly-owned subsidiary of Prudential, is the Series’ security lending agent. For the year ended October 31, 2013, PIM has been compensated approximately $7,100 for these services.
The Series invests in the Prudential Core Taxable Money Market Fund (the “Core Fund”), a series of the Prudential Investment Portfolios 2, registered under the 1940 Act, and managed by PI. Earnings from the Core Fund are disclosed on the Statement of Operations as affiliated dividend income.
Note 4. Portfolio Securities
Purchases and sales of portfolio securities, other than short-term investments, for the year ended October 31, 2013 aggregated $348,018,963 and $363,319,276, respectively.
40 |
Note 5. Distributions and Tax Information
Distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-dividend date. In order to present undistributed net investment income, accumulated net realized loss on investment and foreign currency transactions and paid-in capital in excess of par on the Statement of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to undistributed net investment income and accumulated net realized loss on investment and foreign currency transactions. For the fiscal year ended October 31, 2013, the adjustments were to increase undistributed net investment income and to increase accumulated net realized loss on investment and foreign currency transactions by $305,769, due to the differences in the treatment for book and tax purposes of certain transactions involving foreign securities and currencies and investments in passive foreign investment companies. Net investment income, net realized gain (loss) on investment, futures and foreign currency transactions and net assets were not affected by this change.
For the years ended October 31, 2013 and October 31, 2012, the tax character of dividends paid by the Fund were $6,180,945 and $5,661,491 of ordinary income, respectively.
As of October 31, 2013, the Series had undistributed ordinary income of $5,973,511 on a tax basis.
The United States federal income tax basis of the Series’ investments and the net unrealized appreciation as of October 31, 2013 were as follows:
Tax Basis | Appreciation | Depreciation | Net | Other Cost | Total Net | |||||
$275,052,015 | $64,036,635 | $(2,703,729) | $61,332,906 | $67,214 | $61,400,120 |
The differences between book basis and tax basis were primarily attributable to deferred losses on wash sales and investments in passive foreign investment companies. The other cost basis adjustments are primarily attributable to appreciation (depreciation) of foreign currency, futures and mark-to-market of receivables and payables.
Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), the Series are permitted to carryforward capital losses incurred in the fiscal year ended October 31, 2012 and October 31, 2013 (“post-enactment losses”) for an unlimited period. Post-enactment losses are required to be utilized before the utilization of
Prudential International Equity Fund | 41 |
Notes to Financial Statements
continued
losses incurred prior to the effective date of the Act. As a result of this ordering rule, capital loss carryforwards related to taxable years ending before October 31, 2012 (“pre-enactment losses”) may have an increased likelihood to expire unused. The Series utilized approximately $30,641,000 of its capital loss carryforward to offset net taxable gains realized in the fiscal year ended October 31, 2013. No capital gains distributions are expected to be paid to shareholders until net gains have been realized in excess of such losses. As of October 31, 2013, the pre and post-enactment losses were approximately:
Post-Enactment Losses: | $ | 0 | ||
|
| |||
Pre-Enactment Losses: | ||||
Expiring 2016 | $ | 30,926,000 | ||
Expiring 2017 | 184,077,000 | |||
Expiring 2018 | 8,337,000 | |||
|
| |||
$ | 223,340,000 | |||
|
|
Management has analyzed the Series’ tax positions taken on federal income tax returns for all open tax years and has concluded that no provision for income tax is required in the Series’ financial statements for the current reporting period. The Series’ federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
Note 6. Capital
The Series offers Class A, B, C, F, X and Z shares. Class A shares are sold with a front-end sales charge of up to 5.50%. All investors who purchase Class A shares in an amount of $1 million or more and sell these shares within 12 months of purchase are subject to a contingent deferred sales charge (CDSC) of 1%. The Class A CDSC is waived for purchases by certain retirement and/or benefit plans. Class B and F shares are sold with a CDSC which declines from 5% to zero depending on the period of time the shares are held. Class B and F shares will automatically convert to Class A shares on a quarterly basis approximately seven years after purchase. Class C shares are sold with a CDSC of 1% on shares redeemed within the first 12 months after purchase. As of April 13, 2012, the last conversion of Class M shares to Class A shares was completed. There are no Class M shares outstanding and Class M shares are no longer being offered for sale. As of August 24, 2012, the last conversion of Class L to
42 |
Class A shares was completed. There are no Class L shares outstanding and Class L shares are no longer being offered for sale. Class X shares are sold with a CDSC which declines from 6% to zero depending on the period of time the shares are held. Class X shares will automatically convert to Class A shares on a quarterly basis approximately ten years after purchase. A special exchange privilege is also available for shareholders who qualify to purchase Class A shares at net asset value. Class Z shares are not subject to any sales or redemption charge and are offered exclusively for sale to a limited group of investors.
Under certain circumstances, an exchange may be made from specified share classes of the Series to one or more other share classes of the Series as presented in the table of transactions in shares of common stock.
There are 1 billion authorized shares of common stock at $.01 par value per share, designated Class A, Class B, Class C, Class F, Class M, Class X, Class New X and Class Z, each of which consists of 275 million, 150 million, 150 million, 50 million, 50 million, 50 million, 50 million and 225 million authorized shares, respectively.
Transactions in shares of common stock were as follows:
Class A | Shares | Amount | ||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 1,007,911 | $ | 6,687,880 | |||||
Shares issued in reinvestment of dividends | 709,948 | 4,437,173 | ||||||
Shares reacquired | (4,910,399 | ) | (32,339,317 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (3,192,540 | ) | (21,214,264 | ) | ||||
Shares issued upon conversion from Class B, Class F, Class X and Class Z | 294,902 | 1,955,257 | ||||||
Shares reacquired upon conversion into Class Z | (78,700 | ) | (530,920 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (2,976,338 | ) | $ | (19,789,927 | ) | |||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 864,508 | $ | 4,905,840 | |||||
Shares issued in reinvestment of dividends | 728,075 | 3,975,267 | ||||||
Shares reacquired | (6,177,492 | ) | (34,983,562 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (4,584,909 | ) | (26,102,455 | ) | ||||
Shares issued upon conversion from Class B, F, L, M, X and Z | 1,928,338 | 11,103,809 | ||||||
Shares reacquired upon conversion into Class Z | (25,419 | ) | (142,616 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (2,681,990 | ) | $ | (15,141,262 | ) | |||
|
|
|
|
Prudential International Equity Fund | 43 |
Notes to Financial Statements
continued
Class B | Shares | Amount | ||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 140,384 | $ | 904,991 | |||||
Shares issued in reinvestment of dividends | 14,301 | 86,379 | ||||||
Shares reacquired | (105,231 | ) | (665,748 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 49,454 | 325,622 | ||||||
Shares reacquired upon conversion into Class A | (132,182 | ) | (844,219 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (82,728 | ) | $ | (518,597 | ) | |||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 111,371 | $ | 613,085 | |||||
Shares issued in reinvestment of dividends | 15,550 | 82,106 | ||||||
Shares reacquired | (179,800 | ) | (991,389 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (52,879 | ) | (296,198 | ) | ||||
Shares reacquired upon conversion into Class A | (228,345 | ) | (1,240,947 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (281,224 | ) | $ | (1,537,145 | ) | |||
|
|
|
| |||||
Class C | ||||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 194,985 | $ | 1,261,519 | |||||
Shares issued in reinvestment of dividends | 45,635 | 275,180 | ||||||
Shares reacquired | (537,568 | ) | (3,387,583 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (296,948 | ) | (1,850,884 | ) | ||||
Shares reacquired upon conversion into Class Z | (2,569 | ) | (17,777 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (299,517 | ) | $ | (1,868,661 | ) | |||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 82,903 | $ | 448,880 | |||||
Shares issued in reinvestment of dividends | 48,720 | 256,753 | ||||||
Shares reacquired | (953,320 | ) | (5,234,986 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (821,697 | ) | $ | (4,529,353 | ) | |||
|
|
|
|
44 |
Class F | Shares | Amount | ||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 16 | $ | 107 | |||||
Shares issued in reinvestment of dividends | 1,732 | 10,446 | ||||||
Shares reacquired | (10,025 | ) | (62,519 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (8,277 | ) | (51,966 | ) | ||||
Shares reacquired upon conversion into Class A | (90,014 | ) | (575,098 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (98,291 | ) | $ | (627,064 | ) | |||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | — | $ | — | |||||
Shares issued in reinvestment of dividends | 4,166 | 21,956 | ||||||
Shares reacquired | (35,112 | ) | (191,289 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (30,946 | ) | (169,333 | ) | ||||
Shares reacquired upon conversion into Class A | (136,961 | ) | (744,258 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (167,907 | ) | $ | (913,591 | ) | |||
|
|
|
| |||||
Class L | ||||||||
Period ended August 24, 2012*: | ||||||||
Shares sold | 3,145 | $ | 18,342 | |||||
Shares issued in reinvestment of dividends | 25,883 | 141,578 | ||||||
Shares reacquired | (216,083 | ) | (1,216,032 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (187,055 | ) | (1,056,112 | ) | ||||
Shares reacquired upon conversion into Class A | (1,322,525 | ) | (7,692,865 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (1,509,580 | ) | $ | (8,748,977 | ) | |||
|
|
|
| |||||
Class M | ||||||||
Period ended April 13, 2012**: | ||||||||
Shares sold | 68 | $ | 390 | |||||
Shares issued in reinvestment of dividends | 1,251 | 6,604 | ||||||
Shares reacquired | (6,526 | ) | (33,729 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (5,207 | ) | (26,735 | ) | ||||
Shares reacquired upon conversion into Class A | (129,902 | ) | (704,453 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (135,109 | ) | $ | (731,188 | ) | |||
|
|
|
|
Prudential International Equity Fund | 45 |
Notes to Financial Statements
continued
Class X | Shares | Amount | ||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 1,547 | $ | 9,653 | |||||
Shares issued in reinvestment of dividends | 1,618 | 9,773 | ||||||
Shares reacquired | (11,055 | ) | (70,470 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (7,890 | ) | (51,044 | ) | ||||
Shares reacquired upon conversion into Class A | (84,144 | ) | (533,747 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (92,034 | ) | $ | (584,791 | ) | |||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 1,009 | $ | 5,961 | |||||
Shares issued in reinvestment of dividends | 3,618 | 19,104 | ||||||
Shares reacquired | (38,488 | ) | (209,600 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (33,861 | ) | (184,535 | ) | ||||
Shares reacquired upon conversion into Class A | (129,227 | ) | (708,225 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (163,088 | ) | $ | (892,760 | ) | |||
|
|
|
| |||||
Class Z | ||||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 2,363,610 | $ | 15,966,544 | |||||
Shares issued in reinvestment of dividends | 194,751 | 1,224,986 | ||||||
Shares reacquired | (1,312,558 | ) | (8,860,195 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 1,245,803 | 8,331,335 | ||||||
Shares issued upon conversion from Class A and Class C | 80,644 | 548,697 | ||||||
Shares reacquired upon conversion into Class A | (341 | ) | (2,193 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 1,326,106 | $ | 8,877,839 | |||||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 1,463,078 | $ | 8,174,954 | |||||
Shares issued in reinvestment of dividends | 184,098 | 1,010,698 | ||||||
Shares reacquired | (1,067,476 | ) | (6,137,011 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 579,700 | 3,048,641 | ||||||
Shares issued upon conversion from Class A and C | 25,254 | 142,616 | ||||||
Shares reacquired upon conversion into Class A | (2,366 | ) | (13,061 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 602,588 | $ | 3,178,196 | |||||
|
|
|
|
* | As of August 24, 2012, the last conversion of Class L shares to Class A shares was completed. There are no Class L shares outstanding and Class L shares are no longer being offered for sale. |
** | As of April 13, 2012, the last conversion of Class M shares to Class A shares was completed. There are no Class M shares outstanding and Class M shares are no longer being offered for sale. |
46 |
Note 7. Borrowing
The Series, along with other affiliated registered investment companies (the “Funds”), is a party to a Syndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide an alternative source of temporary funding for capital share redemptions. The SCA provides for a commitment of $900 million for the period November 15, 2012 through November 4, 2013. The Funds pay an annualized commitment fee of 0.08% on the unused portion of the SCA. Prior to November 15, 2012, the Funds had another SCA with substantially similar terms. Interest on any borrowings under the SCA is paid at contracted market rates. The commitment fee for the unused amount is accrued daily and paid quarterly.
Subsequent to the fiscal year end, the SCA has been renewed effective November 5, 2013 at substantially similar terms through November 4, 2014.
The Series utilized the SCA during the year ended October 31, 2013. The average daily balance for the 189 days that the Series had loans outstanding during the period was approximately $344,000, borrowed at a weighted average interest rate of 1.45%. At October 31, 2013, the Series has an outstanding loan amount of $19,000.
Note 8. Ownership
As of October 31, 2013, approximately 35% of the Series was owned by three institutional shareholders for the beneficial interest of their underlying account holders.
Note 9. Dividends and Distributions to Shareholders
Subsequent to the fiscal year end, the Series declared ordinary income dividends on December 11, 2013 to shareholders of record on December 12, 2013. The ex-dividend date was December 13, 2013. The per share amounts declared were as follows:
Ordinary Income | ||||
Class A | $ | 0.13968 | ||
Class B | $ | 0.09442 | ||
Class C | $ | 0.09442 | ||
Class F | $ | 0.11165 | ||
Class X | $ | 0.09442 | ||
Class Z | $ | 0.16022 |
Prudential International Equity Fund | 47 |
Notes to Financial Statements
continued
Note 10. New Accounting Pronouncement
In January 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” which replaced ASU No. 2011-11 “Disclosures about Offsetting Assets and Liabilities”. The updates create new disclosure requirements requiring entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of Assets and Liabilities or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods. Management is currently evaluating the application of ASU No. 2013-01 and its impact, if any, on the Series’ financial statements.
48 |
Financial Highlights
Class A Shares | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $6.02 | $5.72 | $6.17 | $5.77 | $4.80 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .12 | .12 | .09 | .08 | .08 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 1.36 | .29 | (.46 | ) | .36 | 1.06 | ||||||||||||||
Total from investment operations | 1.48 | .41 | (.37 | ) | .44 | 1.14 | ||||||||||||||
Less Dividends: | ||||||||||||||||||||
Dividends from net investment income | (.13 | ) | (.11 | ) | (.11 | ) | (.10 | ) | (.17 | ) | ||||||||||
Capital Contributions(d): | - | - | .03 | .06 | - | |||||||||||||||
Net asset value, end of year | $7.37 | $6.02 | $5.72 | $6.17 | $5.77 | |||||||||||||||
Total Return(b): | 25.06% | 7.40% | (5.61)% | 8.78% | 24.65% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $234,668 | $209,568 | $214,610 | $260,555 | $275,993 | |||||||||||||||
Average net assets (000) | $221,300 | $204,088 | $247,859 | $257,553 | $240,744 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses | 1.59% | 1.67% | 1.64% | 1.57% | 1.54% | |||||||||||||||
Net investment income | 1.83% | 2.18% | 1.51% | 1.35% | 1.75% | |||||||||||||||
Portfolio turnover rate | 114% | 83% | 70% | 96% | 76% |
(a) Calculated based on average shares outstanding during the year.
(b) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions. Total investment returns may reflect adjustments to conform to generally accepted accounting principles.
(c) Does not include expenses of the underlying portfolios in which the Series invests.
(d) The Series received payments related to a former affiliate’s settlement of regulatory proceedings involving allegations of improper trading in Series shares during the fiscal years ended October 31, 2011 and October 31, 2010. The Series was not involved in the proceedings or in the calculation of the amount of settlement.
See Notes to Financial Statements.
Prudential International Equity Fund | 49 |
Financial Highlights
continued
Class B Shares | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $5.78 | $5.50 | $5.94 | $5.56 | $4.61 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .07 | .08 | .05 | .04 | .05 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 1.32 | .27 | (.45 | ) | .35 | 1.02 | ||||||||||||||
Total from investment operations | 1.39 | .35 | (.40 | ) | .39 | 1.07 | ||||||||||||||
Less Dividends: | ||||||||||||||||||||
Dividends from net investment income | (.10 | ) | (.07 | ) | (.07 | ) | (.07 | ) | (.12 | ) | ||||||||||
Capital Contributions(d): | - | - | .03 | .06 | - | |||||||||||||||
Net asset value, end of year | $7.07 | $5.78 | $5.50 | $5.94 | $5.56 | |||||||||||||||
Total Return(b): | 24.26% | 6.50% | (6.27)% | 8.11% | 23.82% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $6,066 | $5,439 | $6,720 | $9,160 | $9,976 | |||||||||||||||
Average net assets (000) | $5,690 | $5,823 | $8,320 | $9,246 | $9,229 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses | 2.29% | 2.37% | 2.34% | 2.27% | 2.24% | |||||||||||||||
Net investment income | 1.13% | 1.48% | .83% | .66% | 1.06% | |||||||||||||||
Portfolio turnover rate | 114% | 83% | 70% | 96% | 76% |
(a) Calculated based on average shares outstanding during the year.
(b) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions. Total investment returns may reflect adjustments to conform to generally accepted accounting principles.
(c) Does not include expenses of the underlying portfolios in which the Series invests.
(d) The Series received payments related to a former affiliate’s settlement of regulatory proceedings involving allegations of improper trading in Series shares during the fiscal years ended October 31, 2011 and October 31, 2010. The Series was not involved in the proceedings or in the calculation of the amount of settlement.
See Notes to Financial Statements.
50 |
Class C Shares | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $5.78 | $5.50 | $5.94 | $5.56 | $4.61 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .07 | .08 | .05 | .04 | .05 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 1.32 | .27 | (.45 | ) | .35 | 1.02 | ||||||||||||||
Total from investment operations | 1.39 | .35 | (.40 | ) | .39 | 1.07 | ||||||||||||||
Less Dividends: | ||||||||||||||||||||
Dividends from net investment income | (.10 | ) | (.07 | ) | (.07 | ) | (.07 | ) | (.12 | ) | ||||||||||
Capital Contributions(d): | - | - | .03 | .06 | - | |||||||||||||||
Net asset value, end of year | $7.07 | $5.78 | $5.50 | $5.94 | $5.56 | |||||||||||||||
Total Return(b): | 24.27% | 6.51% | (6.27)% | 8.11% | 23.83% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $19,472 | $17,658 | $21,310 | $26,625 | $29,326 | |||||||||||||||
Average net assets (000) | $18,341 | $19,019 | $25,128 | $26,974 | $26,677 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses | 2.29% | 2.37% | 2.34% | 2.27% | 2.24% | |||||||||||||||
Net investment income | 1.13% | 1.49% | .81% | .66% | 1.06% | |||||||||||||||
Portfolio turnover rate | 114% | 83% | 70% | 96% | 76% |
(a) Calculated based on average shares outstanding during the year.
(b) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions. Total investment returns may reflect adjustments to conform to generally accepted accounting principles.
(c) Does not include expenses of the underlying portfolios in which the Series invests.
(d) The Series received payments related to a former affiliate’s settlement of regulatory proceedings involving allegations of improper trading in Series shares during the fiscal years ended October 31, 2011 and October 31, 2010. The Series was not involved in the proceedings or in the calculation of the amount of settlement.
See Notes to Financial Statements.
Prudential International Equity Fund | 51 |
Financial Highlights
continued
Class F Shares | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $5.79 | $5.50 | $5.94 | $5.56 | $4.62 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .09 | .09 | .06 | .05 | .06 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 1.31 | .29 | (.44 | ) | .35 | 1.01 | ||||||||||||||
Total from investment operations | 1.40 | .38 | (.38 | ) | .40 | 1.07 | ||||||||||||||
Less Dividends: | ||||||||||||||||||||
Dividends from net investment income | (.11 | ) | (.09 | ) | (.09 | ) | (.08 | ) | (.13 | ) | ||||||||||
Capital Contributions(d): | - | - | .03 | .06 | - | |||||||||||||||
Net asset value, end of year | $7.08 | $5.79 | $5.50 | $5.94 | $5.56 | |||||||||||||||
Total Return(b): | 24.51% | 6.98% | (6.05)% | 8.35% | 24.04% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $137 | $681 | $1,572 | $3,355 | $5,226 | |||||||||||||||
Average net assets (000) | $423 | $1,044 | $2,442 | $4,064 | $5,769 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses | 2.04% | 2.12% | 2.09% | 2.02% | 1.99% | |||||||||||||||
Net investment income | 1.36% | 1.74% | 1.07% | .95% | 1.35% | |||||||||||||||
Portfolio turnover rate | 114% | 83% | 70% | 96% | 76% |
(a) Calculated based on average shares outstanding during the year.
(b) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions. Total investment returns may reflect adjustments to conform to generally accepted accounting principles.
(c) Does not include expenses of the underlying portfolios in which the Series invests.
(d) The Series received payments related to a former affiliate’s settlement of regulatory proceedings involving allegations of improper trading in Series shares during the fiscal years ended October 31, 2011 and October 31, 2010. The Series was not involved in the proceedings or in the calculation of the amount of settlement.
See Notes to Financial Statements.
52 |
Class L Shares | ||||||||||||||||||||||
Period Ended August 24, | Year Ended October 31, | |||||||||||||||||||||
2012(h) | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||
Net Asset Value, Beginning Of Period | $5.73 | $6.17 | $5.77 | $4.79 | $10.48 | |||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||
Net investment income | .10 | .08 | .07 | .07 | .14 | |||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | .09 | (.45 | ) | .36 | 1.06 | (5.38 | ) | |||||||||||||||
Total from investment operations | .19 | (.37 | ) | .43 | 1.13 | (5.24 | ) | |||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||
Dividends from net investment income | (.10 | ) | (.10 | ) | (.09 | ) | (.15 | ) | (.11 | ) | ||||||||||||
Distributions from net realized gains | - | - | - | - | (.34 | ) | ||||||||||||||||
Total dividends and distributions | (.10 | ) | (.10 | ) | (.09 | ) | (.15 | ) | (.45 | ) | ||||||||||||
Capital Contributions(d): | - | .03 | .06 | - | - | |||||||||||||||||
Net asset value, end of period | $5.82 | $5.73 | $6.17 | $5.77 | $4.79 | |||||||||||||||||
Total Return(b): | 3.42% | (5.62)% | 8.59% | 24.49% | (52.07)% | |||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||
Net assets, end of period (000) | $7,694 | $8,644 | $10,919 | $12,342 | $12,621 | |||||||||||||||||
Average net assets (000) | $8,019 | $10,189 | $11,216 | $11,250 | $24,942 | |||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||
Expenses | 1.90% | (e) | 1.84% | 1.77% | 1.74% | 1.65% | ||||||||||||||||
Net investment income | 2.22% | (e) | 1.31% | 1.16% | 1.56% | 1.68% | ||||||||||||||||
Portfolio turnover rate | 83% | (f)(g) | 70% | 96% | 76% | 74% |
(a) Calculated based on average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions. Total investment returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(c) Does not include expenses of the underlying portfolios in which the Series invests.
(d) The Series received payments related to a former affiliate’s settlement of regulatory proceedings involving allegations of improper trading in Series shares during the fiscal years ended October 31, 2011 and October 31, 2010. The Series was not involved in the proceedings or in the calculation of the amount of settlement.
(e) Annualized.
(f) Not annualized.
(g) Calculated as of October 31, 2012.
(h) As of August 24, 2012, the last conversion of Class L shares to Class A shares was completed. There are no Class L shares outstanding and Class L shares are no longer being offered for sale.
See Notes to Financial Statements.
Prudential International Equity Fund | 53 |
Financial Highlights
continued
Class M Shares | ||||||||||||||||||||||
Period Ended April 13, | Year Ended October 31, | |||||||||||||||||||||
2012(h) | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||||
Net Asset Value, Beginning Of Period | $5.50 | $5.94 | $5.56 | $4.61 | $10.09 | |||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||
Net investment income | .01 | .05 | .04 | .05 | .07 | |||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | .09 | (.45 | ) | .35 | 1.02 | (5.14 | ) | |||||||||||||||
Total from investment operations | .10 | (.40 | ) | .39 | 1.07 | (5.07 | ) | |||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||||
Dividends from net investment income | (.07 | ) | (.07 | ) | (.07 | ) | (.12 | ) | (.07 | ) | ||||||||||||
Distributions from net realized gains | - | - | - | - | (.34 | ) | ||||||||||||||||
Total dividends and distributions | (.07 | ) | (.07 | ) | (.07 | ) | (.12 | ) | (.41 | ) | ||||||||||||
Capital Contributions(d): | - | .03 | .06 | - | - | |||||||||||||||||
Net asset value, end of period | $5.53 | $5.50 | $5.94 | $5.56 | $4.61 | |||||||||||||||||
Total Return(b): | 1.90% | (6.27)% | 8.11% | 23.82% | (52.22)% | |||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||
Net assets, end of period (000) | $29 | $743 | $2,985 | $6,622 | $11,467 | |||||||||||||||||
Average net assets (000) | $342 | $1,768 | $4,441 | $7,957 | $34,319 | |||||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||||
Expenses | 2.40% | (e) | 2.34% | 2.27% | 2.24% | 2.15% | ||||||||||||||||
Net investment income | .26% | (e) | .76% | .68% | 1.09% | .92% | ||||||||||||||||
Portfolio turnover rate | 83% | (f)(g) | 70% | 96% | 76% | 74% |
(a) Calculated based on average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions. Total investment returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(c) Does not include expenses of the underlying portfolios in which the Series invests.
(d) The Series received payments related to a former affiliate’s settlement of regulatory proceedings involving allegations of improper trading in Series shares during the fiscal years ended October 31, 2011 and October 31, 2010. The Series was not involved in the proceedings or in the calculation of the amount of settlement.
(e) Annualized.
(f) Not annualized.
(g) Calculated as of October 31, 2012.
(h) As of April 13, 2012, the last conversion of Class M shares to Class A shares was completed. There are no Class M shares outstanding and Class M shares are no longer being offered for sale.
See Notes to Financial Statements.
54 |
Class X Shares | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $5.79 | $5.50 | $5.94 | $5.56 | $4.61 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .07 | .08 | .05 | .04 | .05 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 1.31 | .28 | (.45 | ) | .35 | 1.02 | ||||||||||||||
Total from investment operations | 1.38 | .36 | (.40 | ) | .39 | 1.07 | ||||||||||||||
Less Dividends: | ||||||||||||||||||||
Dividends from net investment income | (.10 | ) | (.07 | ) | (.07 | ) | (.07 | ) | (.12 | ) | ||||||||||
Capital Contributions(d): | - | - | .03 | .06 | - | |||||||||||||||
Net asset value, end of year | $7.07 | $5.79 | $5.50 | $5.94 | $5.56 | |||||||||||||||
Total Return(b): | 24.05% | 6.69% | (6.27)% | 8.11% | 23.82% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $214 | $707 | $1,569 | $3,067 | $5,957 | |||||||||||||||
Average net assets (000) | $449 | $1,077 | $2,351 | $4,020 | $6,611 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses | 2.29% | 2.37% | 2.34% | 2.27% | 2.24% | |||||||||||||||
Net investment income | 1.05% | 1.45% | .80% | .66% | 1.10% | |||||||||||||||
Portfolio turnover rate | 114% | 83% | 70% | 96% | 76% |
(a) Calculated based on average shares outstanding during the year.
(b) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions. Total investment returns may reflect adjustments to conform to generally accepted accounting principles.
(c) Does not include expenses of the underlying portfolios in which the Series invests.
(d) The Series received payments related to a former affiliate’s settlement of regulatory proceedings involving allegations of improper trading in Series shares during the fiscal years ended October 31, 2011 and October 31, 2010. The Series was not involved in the proceedings or in the calculation of the amount of settlement.
See Notes to Financial Statements.
Prudential International Equity Fund | 55 |
Financial Highlights
continued
Class Z Shares | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Operating Performance(a): | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $6.07 | $5.77 | $6.22 | $5.82 | $4.85 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .15 | .14 | .11 | .13 | .10 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 1.36 | .29 | (.46 | ) | .33 | 1.06 | ||||||||||||||
Total from investment operations | 1.51 | .43 | (.35 | ) | .46 | 1.16 | ||||||||||||||
Less Dividends: | ||||||||||||||||||||
Dividends from net investment income | (.15 | ) | (.13 | ) | (.13 | ) | (.12 | ) | (.19 | ) | ||||||||||
Capital Contributions(d): | - | - | .03 | .06 | - | |||||||||||||||
Net asset value, end of year | $7.43 | $6.07 | $5.77 | $6.22 | $5.82 | |||||||||||||||
Total Return(b): | 25.36% | 7.69% | (5.30)% | 8.98% | 24.95% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $71,753 | $50,531 | $44,573 | $44,833 | $229,771 | |||||||||||||||
Average net assets (000) | $60,981 | $45,946 | $46,529 | $149,685 | $184,038 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses | 1.29% | 1.37% | 1.34% | 1.27% | 1.24% | |||||||||||||||
Net investment income | 2.17% | 2.46% | 1.77% | 2.12% | 2.05% | |||||||||||||||
Portfolio turnover rate | 114% | 83% | 70% | 96% | 76% |
(a) Calculated based on average shares outstanding during the year.
(b) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions. Total investment returns may reflect adjustments to conform to generally accepted accounting principles.
(c) Does not include expenses of the underlying portfolios in which the Series invests.
(d) The Series received payments related to a former affiliate’s settlement of regulatory proceedings involving allegations of improper trading in Series shares during the fiscal years ended October 31, 2011 and October 31, 2010. The Series was not involved in the proceedings or in the calculation of the amount of settlement.
See Notes to Financial Statements.
56 |
Report of Independent Registered Public
Accounting Firm
The Board of Directors and Shareholders
Prudential World Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Prudential International Equity Fund, a series of Prudential World Fund, Inc. (hereafter referred to as the “Fund”), including the portfolio of investments, as of October 31, 2013, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2013, by correspondence with the custodian, transfer agent and brokers or by other appropriate auditing procedures when replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Fund as of October 31, 2013, and the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York
December 20, 2013
Prudential International Equity Fund | 57 |
Tax Information
(Unaudited)
For the year ended October 31, 2013, the Series reports, in accordance with Section 854 of the Internal Revenue Code, the following percentages of the ordinary income dividends paid as qualified dividend income (QDI):
QDI | ||||
Prudential International Equity Fund | 100% |
For the fiscal year ended October 31, 2013, the Series made an election to pass through the maximum amount of the portion of the ordinary income dividends paid derived from foreign source income as well as any foreign taxes paid by the Series in accordance with Section 853 of the Internal Revenue Code of the following amounts: $705,072 foreign tax credit from recognized foreign source income of $11,114,010.
In January 2014, you will be advised on IRS Form 1099-DIV or substitute 1099-DIV as to the federal tax status of dividends received by you in calendar year 2013.
58 | Visit our website at www.prudentialfunds.com |
INFORMATION ABOUT BOARD MEMBERS AND OFFICERS
(Unaudited)
Information about Board Members and Officers of the Fund is set forth below. Board Members who are not deemed to be “interested persons” of the Fund, as defined in the 1940 Act, are referred to as “Independent Board Members.” Board Members who are deemed to be “interested persons” of the Fund are referred to as “Interested Board Members.” The Board Members are responsible for the overall supervision of the operations of the Fund and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Board in turn elects the Officers, who are responsible for administering the day-to-day operations of the Fund.
Independent Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Ellen S. Alberding (55) Board Member Portfolios Overseen: 64 | President and Board Member, The Joyce Foundation (charitable foundation) (since 2002); Vice Chair, City Colleges of Chicago (community college system) (since 2011); Trustee, Skills for America’s Future (national initiative to connect employers to community colleges) (since 2011); Trustee, National Park Foundation (charitable foundation for national park system) (since 2009); Trustee, Economic Club of Chicago (since 2009). | None. | ||
Kevin J. Bannon (61) Board Member Portfolios Overseen: 64 | Managing Director (since April 2008) and Chief Investment Officer (since October 2008) of Highmount Capital LLC (registered investment adviser); formerly Executive Vice President and Chief Investment Officer (April 1993-August 2007) of Bank of New York Company; President (May 2003-May 2007) of BNY Hamilton Family of Mutual Funds. | Director of Urstadt Biddle Properties (since September 2008). | ||
Linda W. Bynoe (61) Board Member Portfolios Overseen: 64 | President and Chief Executive Officer (since March 1995) and formerly Chief Operating Officer (December 1989-February 1995) of Telemat Ltd. (management consulting); formerly Vice President (January 1985-June 1989) at Morgan Stanley & Co (broker-dealer). | Director of Simon Property Group, Inc. (retail real estate) (May 2003-May 2012); Director of Anixter International, Inc. (communication products distributor) (since January 2006); Director of Northern Trust Corporation (financial services) (since April 2006); Trustee of Equity Residential (residential real estate) (since December 2009). |
Prudential International Equity Fund
Independent Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Keith F. Hartstein (57) Board Member Portfolios Overseen: 64 | Formerly President and Chief Executive Officer (2005-2012), Senior Vice President (2004-2005), Senior Vice President of Sales and Marketing (1997-2004), and various executive management positions (1990-1997), John Hancock Funds, LLC (asset management); Chairman, Investment Company Institute’s Sales Force Marketing Committee (2003-2008). | None. | ||
Michael S. Hyland, CFA (68) Board Member Portfolios Overseen: 64 | Independent Consultant (since February 2005); formerly Senior Managing Director (July 2001-February 2005) of Bear Stearns & Co, Inc.; Global Partner, INVESCO (1999-2001); Managing Director and President of Salomon Brothers Asset Management (1989-1999). | None. | ||
Douglas H. McCorkindale (74) Board Member Portfolios Overseen: 64 | Formerly Chairman (February 2001-June 2006), Chief Executive Officer (June 2000-July 2005), President (September 1997-July 2005) and Vice Chairman (March 1984-May 2000) of Gannett Co. Inc. (publishing and media). | Director of Lockheed Martin Corp. (aerospace and defense) (since May 2001). | ||
Stephen P. Munn (71) Board Member Portfolios Overseen: 64 | Lead Director (since 2007) and formerly Chairman (1993-2007) of Carlisle Companies Incorporated (manufacturer of industrial products). | Lead Director (since 2007) of Carlisle Companies Incorporated (manufacturer of industrial products). | ||
James E. Quinn (61) Board Member Portfolios Overseen: 64 | Formerly President (2003-2012) and Director (2003-2008), and Vice Chairman and Director (1998-2003), Tiffany & Company (jewelry retailing); Director, Mutual of America Capital Management Corporation (asset management) (since 1996); Director, Hofstra University (since 2008); Vice Chairman, Museum of the City of New York (since 1984). | Director of Deckers Outdoor Corporation (footwear manufacturer) (since 2011). | ||
Richard A. Redeker (70) Board Member & Independent Chair Portfolios Overseen: 64 | Retired Mutual Fund Senior Executive (44 years); Management Consultant; Independent Directors Council (organization of 2,800 Independent Mutual Fund Directors)-Executive Committee, Chair of Policy Steering Committee, Governing Council. | None. |
Visit our website at www.prudentialfunds.com
Independent Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Robin B. Smith (74) Board Member Portfolios Overseen: 64 | Chairman of the Board (since January 2003) of Publishers Clearing House (direct marketing); Member of the Board of Directors of ADLPartner (marketing) (since December 2010); formerly Chairman and Chief Executive Officer (August 1996-January 2003) of Publishers Clearing House. | Formerly Director of BellSouth Corporation (telecommunications) (1992-2006). | ||
Stephen G. Stoneburn (70) Board Member Portfolios Overseen: 64 | Chairman, (since July 2011), President and Chief Executive Officer (since June 1996) of Quadrant Media Corp. (publishing company); formerly President (June 1995-June 1996) of Argus Integrated Media, Inc.; Senior Vice President and Managing Director (January 1993-1995) of Cowles Business Media; Senior Vice President of Fairchild Publications, Inc. (1975-1989). | None. | ||
Interested Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Stuart S. Parker (51) Board Member & President Portfolios Overseen: 59 | President of Prudential Investments LLC (since January 2012); Executive Vice President of Prudential Investment Management Services LLC (since December 2012); Executive Vice President of Jennison Associates LLC and Head of Retail Distribution of Prudential Investments LLC (June 2005 - December 2011). | None. | ||
Scott E. Benjamin (40) Board Member & Vice President Portfolios Overseen: 64 | Executive Vice President (since June 2009) of Prudential Investments LLC; Executive Vice President (June 2009-June 2012) and Vice President (since June 2012) of Prudential Investment Management Services LLC; Executive Vice President (since September 2009) of AST Investment Services, Inc.; Senior Vice President of Product Development and Marketing, Prudential Investments (since February 2006); Vice President of Product Development and Product Management, Prudential Investments (2003-2006). | None. |
Prudential International Equity Fund
(1) | The year that each Board Member joined the Funds’ Board is as follows: |
Ellen S. Alberding; 2013; Kevin J. Bannon, 2008; Linda W. Bynoe, 2005; Keith F. Hartstein, 2013; Michael S. Hyland, 2008; Douglas H. McCorkindale, 2003; Stephen P. Munn, 2008; James E. Quinn, 2013; Richard A. Redeker, 2003; Robin B. Smith, 1996; Stephen G. Stoneburn, 1996; Stuart S. Parker, Board Member and President since 2012; Scott E. Benjamin, Board Member since 2010 and Vice President since 2009.
Fund Officers(a) | ||||
Name, Address and Age Position with Fund | Principal Occupation(s) During Past Five Years | Length of Service as Fund Officer | ||
Raymond A. O’Hara (58) Chief Legal Officer | Vice President and Corporate Counsel (since July 2010) of Prudential Insurance Company of America (Prudential); Vice President (March 2011-Present) of Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey; Vice President and Corporate Counsel (March 2011-Present) of Prudential Annuities Life Assurance Corporation; Chief Legal Officer of Prudential Investments LLC (since June 2012); Chief Legal Officer of Prudential Mutual Fund Services LLC (since June 2012) and Corporate Counsel of AST Investment Services, Inc. (since June 2012); formerly Assistant Vice President and Corporate Counsel (September 2008-July 2010) of The Hartford Financial Services Group, Inc.; formerly Associate (September 1980-December 1987) and Partner (January 1988–August 2008) of Blazzard & Hasenauer, P.C. (formerly, Blazzard, Grodd & Hasenauer, P.C.). | Since 2012 | ||
Deborah A. Docs (55) Secretary | Vice President and Corporate Counsel (since January 2001) of Prudential; Vice President (since December 1996) and Assistant Secretary (since March 1999) of Prudential Investments LLC; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc. | Since 2004 | ||
Jonathan D. Shain (55) Assistant Secretary | Vice President and Corporate Counsel (since August 1998) of Prudential; Vice President and Assistant Secretary (since May 2001) of Prudential Investments LLC; Vice President and Assistant Secretary (since February 2001) of Prudential Mutual Fund Services LLC; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc. | Since 2005 | ||
Claudia DiGiacomo (39) Assistant Secretary | Vice President and Corporate Counsel (since January 2005) of Prudential; Vice President and Assistant Secretary of Prudential Investments LLC (since December 2005); Associate at Sidley Austin Brown & Wood LLP (1999-2004). | Since 2005 | ||
Andrew R. French (51) Assistant Secretary | Vice President and Corporate Counsel (since February 2010) of Prudential; formerly Director and Corporate Counsel (2006-2010) of Prudential; Vice President and Assistant Secretary (since January 2007) of Prudential Investments LLC; Vice President and Assistant Secretary (since January 2007) of Prudential Mutual Fund Services LLC. | Since 2006 |
Visit our website at www.prudentialfunds.com
Fund Officers(a) | ||||
Name, Address and Age Position with Fund | Principal Occupation(s) During Past Five Years | Length of Service as Fund Officer | ||
Amanda S. Ryan (35) Assistant Secretary | Director and Corporate Counsel (since March 2012) of Prudential; Director and Assistant Secretary (since June 2012) of Prudential Investments LLC; Associate at Ropes & Gray LLP (2008-2012). | Since 2012 | ||
Bruce Karpati (43) Chief Compliance Officer | Chief Compliance Officer of the Prudential Investments Funds, Target Funds, Advanced Series Trust, the Prudential Series Fund and Prudential’s Gibraltar Fund, Inc. (May 2013 - Present); formerly National Chief (May 2012 - May 2013) and Co-Chief (January 2010 - May 2012) of the Asset Management Unit, Division of Enforcement, of the U.S. Securities and Exchange Commission; Assistant Regional Director (January 2005 - January 2010) of the U.S. Securities and Exchange Commission. | Since 2013 | ||
Theresa C. Thompson (51) Deputy Chief Compliance Officer | Vice President, Compliance, Prudential Investments LLC (since April 2004); and Director, Compliance, Prudential Investments LLC (2001-2004). | Since 2008 | ||
Richard W. Kinville (45) Anti-Money Laundering Compliance Officer | Vice President, Corporate Compliance, Anti-Money Laundering Unit (since January 2005) of Prudential; committee member of the American Council of Life Insurers Anti-Money Laundering and Critical Infrastructure Committee (since January 2007); formerly Investigator and Supervisor in the Special Investigations Unit for the New York Central Mutual Fire Insurance Company (August 1994-January 1999); Investigator in AXA Financial’s Internal Audit Department and Manager in AXA’s Anti-Money Laundering Office (January 1999-January 2005); first chair of the American Council of Life Insurers Anti-Money Laundering and Critical Infrastructure Committee (June 2007-December 2009). | Since 2011 | ||
Grace C. Torres (54) Treasurer and Principal Financial and Accounting Officer | Assistant Treasurer (since March 1999) and Senior Vice President (since September 1999) of Prudential Investments LLC; Assistant Treasurer (since May 2003) and Vice President (since June 2005) of AST Investment Services, Inc.; Senior Vice President and Assistant Treasurer (since May 2003) of Prudential Annuities Advisory Services, Inc.; formerly Senior Vice President (May 2003-June 2005) of AST Investment Services, Inc. | Since 1998 | ||
M. Sadiq Peshimam (49) Assistant Treasurer | Vice President (since 2005) of Prudential Investments LLC. | Since 2006 | ||
Peter Parrella (55) Assistant Treasurer | Vice President (since 2007) and Director (2004-2007) within Prudential Mutual Fund Administration; formerly Tax Manager at SSB Citi Fund Management LLC (1997-2004). | Since 2007 |
(a) | Excludes Mr. Parker and Mr. Benjamin, interested Board Members who also serve as President and Vice President, respectively. |
Prudential International Equity Fund
Explanatory Notes to Tables:
• | Board Members are deemed to be “Interested,” as defined in the 1940 Act, by reason of their affiliation with Prudential Investments LLC and/or an affiliate of Prudential Investments LLC. |
• | Unless otherwise noted, the address of all Board Members and Officers is c/o Prudential Investments LLC, Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077. |
• | There is no set term of office for Board Members or Officers. The Board Members have adopted a retirement policy, which calls for the retirement of Board Members on December 31 of the year in which they reach the age of 75. |
• | “Other Directorships Held” includes only directorships of companies required to register or file reports with the SEC under the 1934 Act (that is, “public companies”) or other investment companies registered under the 1940 Act. |
• | “Portfolios Overseen” includes all investment companies managed by Prudential Investments LLC. The investment companies for which Prudential Investments LLC serves as manager include the Prudential Investments Mutual Funds, The Prudential Variable Contract Accounts, Target Mutual Funds, Prudential Short Duration High Yield Fund, Inc., Prudential Global Short Duration High Yield Fund, Inc., The Prudential Series Fund, Prudential’s Gibraltar Fund, Inc. and the Advanced Series Trust. |
Visit our website at www.prudentialfunds.com
Approval of Advisory Agreements
The Fund’s Board of Directors
The Board of Directors (the “Board”) of Prudential International Equity Fund (the “Fund”)1 consists of ten individuals, eight of whom are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Directors”).2 The Board is responsible for the oversight of the Fund and its operations, and performs the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Directors have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Director. The Board has established three standing committees: the Audit Committee, the Nominating and Governance Committee, and the Investment Committee. Each committee is chaired by, and composed of, Independent Directors.
Annual Approval of the Fund’s Advisory Agreements
As required under the 1940 Act, the Board determines annually whether to renew the Fund’s management agreement with Prudential Investments LLC (“PI”) and the Fund’s subadvisory agreement with Quantitative Management Associates LLC (“QMA”). In considering the renewal of the agreements, the Board, including all of the Independent Directors, met on June 4-6, 2013 and approved the renewal of the agreements through July 31, 2014, after concluding that the renewal of the agreements was in the best interests of the Fund and its shareholders.
In advance of the meetings, the Board requested and received materials relating to the agreements, and had the opportunity to ask questions and request further information in connection with their consideration. Among other things, the Board considered comparative fee information from PI and QMA. Also, the Board considered comparisons with other mutual funds in relevant Peer Universes and Peer Groups, as is further discussed below.
In approving the agreements, the Board, including the Independent Directors advised by independent legal counsel, considered the factors it deemed relevant, including the nature, quality and extent of services provided by PI and the subadviser, the performance of the Fund, the profitability of PI and its affiliates, expenses and fees, and the potential for economies of scale that may be shared with the Fund and its shareholders as the Fund’s assets grow. In their deliberations, the Directors did not identify any single factor which alone was responsible for the Board’s decision to approve the agreements with respect to the Fund. In connection with its deliberations,
1 | Prudential International Equity Fund is a series of Prudential World Fund, Inc. |
2 | Ms. Alberding and Messrs. Hartstein and Quinn were elected to the Board effective September 1, 2013. |
Prudential International Equity Fund
Approval of Advisory Agreements (continued)
the Board considered information provided by PI throughout the year at regular Board meetings, presentations from portfolio managers and other information, as well as information furnished at or in advance of the meetings on June 4-6, 2013.
The Directors determined that the overall arrangements between the Fund and PI, which serves as the Fund’s investment manager pursuant to a management agreement, and between PI and QMA, which serves as the Fund’s subadviser pursuant to the terms of a subadvisory agreement with PI, are in the best interests of the Fund and its shareholders in light of the services performed, fees charged and such other matters as the Directors considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the Directors’ reaching their determinations to approve the continuance of the agreements are separately discussed below.
Nature, Quality, and Extent of Services
The Board received and considered information regarding the nature, quality and extent of services provided to the Fund by PI and QMA. The Board considered the services provided by PI, including but not limited to the oversight of the subadviser for the Fund, as well as the provision of fund recordkeeping, compliance, and other services to the Fund. With respect to PI’s oversight of the subadviser, the Board noted that PI’s Strategic Investment Research Group (“SIRG”), which is a business unit of PI, is responsible for monitoring and reporting to PI’s senior management on the performance and operations of the subadviser. The Board also considered that PI pays the salaries of all of the officers and non-independent Directors of the Fund. The Board also considered the investment subadvisory services provided by QMA, as well as adherence to the Fund’s investment restrictions and compliance with applicable Fund policies and procedures. The Board considered PI’s evaluation of the subadviser, as well as PI’s recommendation, based on its review of the subadviser, to renew the subadvisory agreement.
The Board considered the qualifications, backgrounds and responsibilities of PI’s senior management responsible for the oversight of the Fund and QMA, and also considered the qualifications, backgrounds and responsibilities of QMA’s portfolio managers who are responsible for the day-to-day management of the Fund’s portfolio. The Board was provided with information pertaining to PI’s and QMA’s organizational structure, senior management, investment operations, and other relevant information pertaining to both PI and QMA. The Board also noted that it received favorable compliance reports from the Fund’s Chief Compliance Officer (“CCO”) as to both PI and QMA. The Board noted that QMA is affiliated with PI.
Visit our website at www.prudentialfunds.com
The Board concluded that it was satisfied with the nature, extent and quality of the investment management services provided by PI and the subadvisory services provided to the Fund by QMA, and that there was a reasonable basis on which to conclude that the Fund benefits from the services provided by PI and QMA under the management and subadvisory agreements.
Costs of Services and Profits Realized by PI
The Board was provided with information on the profitability of PI and its affiliates in serving as the Fund’s investment manager. The Board discussed with PI the methodology utilized in assembling the information regarding profitability and considered its reasonableness. The Board recognized that it is difficult to make comparisons of profitability from fund management contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser’s capital structure and cost of capital. The Board separately considered information regarding the profitability of the subadviser, an affiliate of PI. Taking these factors into account, the Board concluded that the profitability of PI and its affiliates in relation to the services rendered was not unreasonable.
Economies of Scale
The Board noted that the management fee schedule for the Fund includes breakpoints, which have the effect of decreasing the fee rate as net assets increase, but at the level of net assets at the time the analysis was done, the Fund did not realize the effect of those rate reductions. The Board received and discussed information concerning whether PI realizes economies of scale as the Fund’s net assets grow beyond current levels. The Board took note that the Fund’s fee structure would result in benefits to Fund shareholders when (and if) net assets reach the levels at which the fee rate is reduced. These benefits will accrue whether or not PI is then realizing any economies of scale. The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board’s understanding that most of PI’s costs are not specific to any individual funds, but rather are incurred across a variety of products and services.
Other Benefits to PI and QMA
The Board considered potential ancillary benefits that might be received by PI and QMA and their affiliates as a result of their relationship with the Fund. The Board concluded that potential benefits to be derived by PI included fees received by affiliates of PI for serving as the Fund’s securities lending agent, transfer agency fees received by the Fund’s transfer agent (which is affiliated with PI), and benefits to its reputation as well as other intangible benefits resulting from PI’s association with the
Prudential International Equity Fund
Approval of Advisory Agreements (continued)
Fund. The Board concluded that the potential benefits to be derived by QMA included its ability to use soft dollar credits, as well as the potential benefits consistent with those generally resulting from an increase in assets under management, specifically, potential access to additional research resources and benefits to its reputation. The Board concluded that the benefits derived by PI and QMA were consistent with the types of benefits generally derived by investment managers and subadvisers to mutual funds.
Performance of the Fund / Fees and Expenses
The Board considered certain additional specific factors and made related conclusions relating to the historical performance of the Fund for the one-, three-, five- and ten-year periods ended December 31, 2012.
The Board also considered the Fund’s actual management fee, as well as the Fund’s net total expense ratio, for the fiscal year ended October 31, 2012. The Board considered the management fee for the Fund as compared to the management fee charged by PI to other funds and the fee charged by other advisers to comparable mutual funds in a Peer Group. The actual management fee represents the fee rate actually paid by Fund shareholders and includes any fee waivers or reimbursements. The net total expense ratio for the Fund represents the actual expense ratio incurred by Fund shareholders.
The mutual funds included in the Peer Universe (the Lipper International Large-Cap Core Funds Performance Universe) and the Peer Group were objectively determined by Lipper Inc. (“Lipper”), an independent provider of mutual fund data. The comparisons placed the Fund in various quartiles, with the first quartile being the best 25% of the mutual funds (for performance, the best performing mutual funds and, for expenses, the lowest cost mutual funds).
The section below summarizes key factors considered by the Board and the Board’s conclusions regarding the Fund’s performance, fees and overall expenses. The table sets forth gross performance comparisons (which do not reflect the impact on performance of fund expenses, or any subsidies, expense caps or waivers that may be applicable) with the Peer Universe, actual management fees with the Peer Group (which reflect the impact of any subsidies or fee waivers), and net total expenses with the Peer Group, each of which were key factors considered by the Board.
Performance | 1 Year | 3 Years | 5 Years | 10 Years | ||||
1st Quartile | 2nd Quartile | 4th Quartile | 2nd Quartile | |||||
Actual Management Fees: 2nd Quartile | ||||||||
Net Total Expenses: 3rd Quartile |
Visit our website at www.prudentialfunds.com
• | The Board noted that the Fund outperformed its benchmark index over the one-, three-, and ten-year periods, and slightly underperformed its benchmark index over the five-year period. |
• | The Board concluded that, in light of the Fund’s competitive performance, it would be in the best interests of the Fund and its shareholders to renew the agreements. |
• | The Board concluded that the management fees (including subadvisory fees) and total expenses were reasonable in light of the services provided. |
* * *
After full consideration of these factors, the Board concluded that approval of the agreements was in the best interests of the Fund and its shareholders.
Prudential International Equity Fund
n MAIL | n TELEPHONE | n WEBSITE | ||
Gateway Center Three 100 Mulberry Street Newark, NJ 07102 | (800) 225-1852 | www.prudentialfunds.com |
PROXY VOTING |
The Board of Directors of the Fund has delegated to the Fund’s investment subadviser the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852 or by visiting the Securities and Exchange Commission’s website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the Securities and Exchange Commission’s website. |
DIRECTORS |
Ellen S. Alberding • Kevin J. Bannon • Scott E. Benjamin • Linda W. Bynoe • Keith F. Hartstein • Michael S. Hyland • Douglas H. McCorkindale • Stephen P. Munn • Stuart S. Parker • James E. Quinn • Richard A. Redeker • Robin B. Smith • Stephen G. Stoneburn |
OFFICERS |
Stuart S. Parker, President • Scott E. Benjamin, Vice President • Grace C. Torres, Treasurer and Principal Financial and Accounting Officer • Raymond A. O’Hara, Chief Legal Officer • Deborah A. Docs, Secretary • Bruce Karpati, Chief Compliance Officer • Theresa C. Thompson, Deputy Chief Compliance Officer • Richard W. Kinville, Anti-Money Laundering Compliance Officer • Jonathan D. Shain, Assistant Secretary • Claudia DiGiacomo, Assistant Secretary • Amanda S. Ryan, Assistant Secretary • Andrew R. French, Assistant Secretary • M. Sadiq Peshimam, Assistant Treasurer • Peter Parrella, Assistant Treasurer |
MANAGER | Prudential Investments LLC | Gateway Center Three 100 Mulberry Street Newark, NJ 07102 | ||
| ||||
INVESTMENT SUBADVISER | Quantitative Management Associates LLC | Gateway Center Two 100 Mulberry Street Newark, NJ 07102 | ||
| ||||
DISTRIBUTOR | Prudential Investment Management Services LLC | Gateway Center Three 100 Mulberry Street | ||
| ||||
CUSTODIAN | The Bank of New York Mellon | One Wall Street New York, NY 10286 | ||
| ||||
TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
| ||||
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
| ||||
FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 |
An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain a prospectus and summary prospectus by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
E-DELIVERY |
To receive your mutual fund documents online, go to www.prudentialfunds.com/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above. |
SHAREHOLDER COMMUNICATIONS WITH DIRECTORS |
Shareholders can communicate directly with the Board of Directors by writing to the Chair of the Board, Prudential International Equity Fund, Prudential Investments, Attn: Board of Directors, 100 Mulberry Street, Gateway Center Three, Newark, NJ 07102. Shareholders can communicate directly with an individual Director by writing to the same address. Communications are not screened before being delivered to the addressee. |
AVAILABILITY OF PORTFOLIO SCHEDULE |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation and location of the Public Reference Room may be obtained by calling (202) 551-8090. The Fund’s schedule of portfolio holdings is also available on the Fund’s website as of the end of each month. |
The Fund’s Statement of Additional Information contains additional information about the Fund’s Directors and is available without charge, upon request, by calling (800) 225-1852. |
Mutual Funds:
ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY | MAY LOSE VALUE | ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE |
PRUDENTIAL INTERNATIONAL EQUITY FUND
SHARE CLASS | A | B | C | F | X | Z | ||||||
NASDAQ | PJRAX | PJRBX | PJRCX | N/A | DEIQX | PJIZX | ||||||
CUSIP | 743969859 | 743969867 | 743969875 | 743969842 | 743969818 | 743969883 |
MF190E 0255304-00001-00
PRUDENTIAL INVESTMENTS»MUTUAL FUNDS
PRUDENTIAL INTERNATIONAL VALUE FUND
ANNUAL REPORT · OCTOBER 31, 2013
Fund Type
International Stock
Objective
Long-term growth of capital
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.
The views expressed in this report and information about the Fund’s portfolio holdings are for the period covered by this report and are subject to change thereafter.
Mutual funds are distributed by Prudential Investment Management Services LLC, a Prudential Financial company and member SIPC. © 2013 Prudential Financial, Inc., and its related entities. Prudential Investments, Prudential, the Prudential logo, the Rock symbol, and Bring Your Challenges are service marks of Prudential Financial, Inc., and its related entities, registered in many jurisdictions worldwide.
December 16, 2013
Dear Shareholder:
We hope you find the annual report for the Prudential International Value Fund informative and useful. The report covers performance for the 12-month period that ended October 31, 2013.
We recognize that ongoing market volatility may make it a difficult time to be an investor. We continue to believe a prudent response to uncertainty is to maintain a diversified portfolio of funds consistent with your tolerance for risk, time horizon, and financial goals.
Your financial advisor can help you create a diversified investment plan that may include funds covering all the basic asset classes and that reflects your personal investor profile and risk tolerance. Keep in mind, however, that diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.
Prudential Investments® is dedicated to helping you solve your toughest investment challenges—whether it’s capital growth, reliable income, or protection from market volatility and other risks. We offer the expertise of Prudential Financial’s affiliated asset managers* that strive to be leaders in a broad range of funds to help you stay on course to the future you envision. They also manage money for major corporations and pension funds around the world, which means you benefit from the same expertise, innovation, and attention to risk demanded by today’s most sophisticated investors.
Thank you for choosing the Prudential Investments family of funds.
Sincerely,
Stuart S. Parker, President
Prudential International Value Fund
*Most of Prudential Investments’ equity funds are advised by Jennison Associates LLC, Quantitative Management Associates LLC (QMA), or Prudential Real Estate Investors. Prudential Investments’ fixed income and money market funds are advised by Prudential Investment Management, Inc. (PIM) through its Prudential Fixed Income unit. Jennison Associates, QMA, and PIM are registered investment advisers and Prudential Financial companies. Prudential Real Estate Investors is a unit of PIM.
Prudential International Value Fund | 1 |
Your Fund’s Performance (Unaudited)
Performance data quoted represent past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the past performance data quoted. An investor may obtain performance data as of the most recent month-end by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852.
Cumulative Total Returns (Without Sales Charges) as of 10/31/13 |
| |||||||||||
One Year | Five Years | Ten Years | ||||||||||
Class A | 21.37 | % | 65.64 | % | 101.49 | % | ||||||
Class B | 20.43 | 59.51 | 86.69 | |||||||||
Class C | 20.45 | 59.57 | 86.73 | |||||||||
Class Z | 21.73 | 67.93 | 106.53 | |||||||||
MSCI EAFE ND Index | 26.88 | 76.19 | 110.23 | |||||||||
Lipper International Multi-Cap Core Funds Average | 23.52 | 79.13 | 103.90 | |||||||||
Lipper Customized Blend Funds Average | 23.84 | 76.73 | 105.34 | |||||||||
Average Annual Total Returns (With Sales Charges) as of 9/30/13 |
| |||||||||||
One Year | Five Years | Ten Years | ||||||||||
Class A | 12.82 | % | 3.91 | % | 6.86 | % | ||||||
Class B | 13.58 | 4.13 | 6.66 | |||||||||
Class C | 17.53 | 4.32 | 6.66 | |||||||||
Class Z | 19.75 | 5.38 | 7.74 | |||||||||
MSCI EAFE ND Index | 23.77 | 6.35 | 8.01 | |||||||||
Lipper International Multi-Cap Core Funds Average | 20.45 | 6.34 | 7.46 | |||||||||
Lipper Customized Blend Funds Average | 20.84 | 6.09 | 7.60 | |||||||||
Average Annual Total Returns (With Sales Charges) as of 10/31/13 |
| |||||||||||
One Year | Five Years | Ten Years | ||||||||||
Class A | 14.69 | % | 9.37 | % | 6.65 | % | ||||||
Class B | 15.43 | 9.65 | 6.44 | |||||||||
Class C | 19.45 | 9.80 | 6.44 | |||||||||
Class Z | 21.73 | 10.92 | 7.52 | |||||||||
Average Annual Total Returns (Without Sales Charges) as of 10/31/13 |
| |||||||||||
One Year | Five Years | Ten Years | ||||||||||
Class A | 21.37 | % | 10.62 | % | 7.26 | % | ||||||
Class B | 20.43 | 9.79 | 6.44 | |||||||||
Class C | 20.45 | 9.80 | 6.44 | |||||||||
Class Z | 21.73 | 10.92 | 7.52 |
2 | Visit our website at www.prudentialfunds.com |
Growth of a $10,000 Investment
The graph compares a $10,000 investment in the Prudential International Value Fund (Class A shares) with a similar investment in the MSCI EAFE ND Index by portraying the initial account values at the beginning of the 10-year period for Class A shares (October 31, 2003) and the account values at the end of the current fiscal year (October 31, 2013) as measured on a quarterly basis. For purposes of the graph, and unless otherwise indicated, it has been assumed that (a) the maximum applicable front-end sales charge was deducted from the initial $10,000 investment in Class A shares; (b) all recurring fees (including management fees) were deducted; and (c) all dividends and distributions were reinvested. The line graph provides information for Class A shares only. As indicated in the tables provided earlier, performance for Class B, Class C, and Class Z shares will vary due to the differing charges and expenses applicable to each share class (as indicated in the following paragraphs). Without waiver of fees and/or expense reimbursement, if any, the returns would have been lower.
Past performance does not predict future performance. Total returns and the ending account values in the graph include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown. The Fund’s total returns do not reflect the deduction of income taxes on an individual’s investment. Taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares.
Source: Prudential Investments LLC and Lipper Inc.
Prudential International Value Fund | 3 |
Your Fund’s Performance (continued)
The average annual total returns take into account applicable sales charges, which are described for each share class in the table below.
Class A | Class B | Class C | Class Z | |||||
Maximum initial sales charge | 5.50% of the public offering price | None | None | None | ||||
Contingent deferred sales charge (CDSC) (as a percentage of the lower of original purchase price or sale proceeds) | 1% on sales of $1 million or more made within 12 months of purchase | 5% (Yr. 1) 4% (Yr. 2) 3% (Yr. 3) 2% (Yr. 4) 1% (Yr. 5/6) 0% (Yr. 7) | 1% on sales made within 12 months of purchase | None | ||||
Annual distribution and service (12b-1) fees (shown as a percentage of average daily net assets) | .30% (.25% currently) | 1% | 1% | None |
Benchmark Definitions
Morgan Stanley Capital International Europe, Australasia, and Far East Net Dividend Index
The Morgan Stanley Capital International Europe, Australasia, and Far East Index (MSCI EAFE ND Index) is an unmanaged, weighted index of performance that reflects stock price movements of developed-country markets in Europe, Australasia, and the Far East. The Net Dividend (ND) version of the MSCI EAFE Index reflects the impact of the maximum withholding taxes on reinvested dividends.
Lipper International Multi-Cap Core Funds Average
Funds that, by portfolio practice, invest in a variety of market-capitalization ranges without concentrating 75% of their equity assets in any one market-capitalization range over an extended period of time. International multi-cap core funds typically have average characteristics compared to the MSCI EAFE Index.
Lipper Customized Blend Funds Average
The Lipper Customized Blend Funds Average is a 50/50 blend of the Lipper International Multi-Cap Core Funds and Lipper International Large-Cap Core Funds Averages.
Note: Although Lipper classifies the Prudential International Value Fund in the Lipper International Multi-Cap Core Funds Performance Universe, the Lipper Customized Blend Funds Performance Universe is utilized because the Fund’s investment manager believes that the funds included in this custom blend universe provide a more appropriate basis for Portfolio performance comparisons.
Investors cannot invest directly in an index or average. The returns for the Index would be lower if they included the effects of sales charges, operating expenses, or taxes. Returns for the Lipper Averages reflect the deduction of operating expenses of a mutual fund, but not sales charges or taxes.
4 | Visit our website at www.prudentialfunds.com |
Five Largest Holdings expressed as a percentage of net assets as of 10/31/13 | ||||
Royal Dutch Shell PLC (Class B Stock), Oil, Gas & Consumable Fuels | 1.5 | % | ||
Novartis AG, Pharmaceuticals | 1.5 | |||
Roche Holding AG, Pharmaceuticals | 1.4 | |||
Mitsubishi UFJ Financial Group, Inc., Banks | 1.4 | |||
Toyota Motor Corp., Automobile Manufacturers | 1.3 |
Holdings reflect only long-term investments and are subject to change.
Five Largest Industries expressed as a percentage of net assets as of 10/31/13 | ||||
Banks | 14.5 | % | ||
Pharmaceuticals | 8.1 | |||
Insurance | 7.9 | |||
Oil, Gas & Consumable Fuels | 7.5 | |||
Telecommunications | 7.3 |
Industry weightings reflect only long-term investments and are subject to change.
Prudential International Value Fund | 5 |
Strategy and Performance Overview
How did the Fund perform?
The Prudential International Value Fund’s Class A shares returned 21.37% for the 12-month reporting period ended October 31, 2013, underperforming the 26.88% return of the Morgan Stanley Capital International Europe, Australasia, and Far East Net Dividend Index (MSCI EAFE ND Index (“Index”)), the 23.52% gain of the Lipper International Multi-Cap Core Funds Average, and the 23.84% return of the Lipper Customized Blend Funds Average.
LSV Asset Management (LSV) and Thornburg Investment Management, Inc. (Thornburg) are co-subadvisers of the Fund.
How did international stock markets perform?
Over the reporting period, all international regions and sectors, as listed in the MSCI EAFE Index, turned in positive returns. Earlier in the year, markets pulled back as participants began digesting the possibility of a cutback in the U.S. Federal Reserve’s (the Fed) asset purchases through its quantitative easing (QE) program. Emerging markets stocks, bonds, and currencies were hit especially hard by the talk of tapering, in conjunction with slowing economic growth, fund outflows, and falling commodity prices.
As the period drew to a close, the Fed announced its asset purchases would remain intact. This came as a surprise to many who had anticipated the tapering; in response, markets touched five-year highs. Prospects in Europe began to show signs of improvement during the period and the financials sector continued to recover as investors became more comfortable with Europe’s sovereign debt and banking woes. On the other hand, emerging markets continued to lag, as more attention continued to be focused on the developed world.
What made the most positive and negative contributions to the Fund’s performance?
• | Although results were very strong, the Fund underperformed the Index during the period, primarily due to stock selection. An overweight position in the consumer discretionary sector (the Index’s best performing group) contributed to relative results; however, the Fund’s holdings failed to keep up with the group’s return within the Index. |
• | Similar results were witnessed in the healthcare and industrials sectors. The Fund earned positive results but failed to keep pace with each sector’s returns within the Index. An underweight to one of the Index’s worst performing groups, materials, contributed to relative performance. From a regional standpoint, the Fund’s stock selection in Western Europe benefited performance. However, holdings in the Pacific Rim fell behind the region’s returns within the Index. |
6 | Visit our website at www.prudentialfunds.com |
• | LSV’s portion of the Fund outperformed the Index, while Thornburg’s portion underperformed during the reporting period. LSV outperformed largely due to stock selection; its results were strongest in the financials, materials, and energy sectors. From a country perspective, holdings in the U.K., France, and Switzerland benefited the most. The Thornburg portion of the Fund underperformed primarily due to poor stock selection, as security selection was negative versus the Index in 8 of the 10 sectors. The largest areas of weakness were in the consumer discretionary and financials sectors. In financials, it is what the portfolio didn’t hold that hurt the most; Thornburg shied away from European commercial banks during the period and missed out on the group’s recent recovery. From a country allocation perspective, Thornburg’s underexposure to Japan detracted from relative results. Additionally, exposure to emerging markets regions (Brazil and Mexico) detracted significantly. |
• | From time-to-time, Thornburg will use currency forwards (a form of a derivative security) as a tool to hedge some of the currency risk from investing in non-U.S. stocks. This intermittent hedging strategy is not expected to have a significant impact on the performance of the overall Portfolio. During the reporting period, foreign exchange hedging had a slightly positive effect on the Portfolio. |
Prudential International Value Fund | 7 |
Fees and Expenses (Unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemptions, as applicable, and (2) ongoing costs, including management fees, distribution, and/or service (12b-1) fees, and other Fund expenses, as applicable. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on May 1, 2013, at the beginning of the period, and held through the six-month period ended October 31, 2013. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
Actual Expenses
The first line for each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of Prudential Investments funds, including the Fund, that you own. You should consider
8 | Visit our website at www.prudentialfunds.com |
the additional fees that were charged to your Fund account over the six-month period when you estimate the total ongoing expenses paid over the period and the impact of these fees on your ending account value, as these additional expenses are not reflected in the information provided in the expense table. Additional fees have the effect of reducing investment returns.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Prudential International Value Fund | Beginning Account Value May 1, 2013 | Ending Account Value October 31, 2013 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,077.60 | 1.82 | % | $ | 9.53 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,016.03 | 1.82 | % | $ | 9.25 | ||||||||||
Class B | Actual | $ | 1,000.00 | $ | 1,073.40 | 2.57 | % | $ | 13.43 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,012.25 | 2.57 | % | $ | 13.03 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,073.30 | 2.57 | % | $ | 13.43 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,012.25 | 2.57 | % | $ | 13.03 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,078.60 | 1.57 | % | $ | 8.23 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,017.29 | 1.57 | % | $ | 7.98 |
*Fund expenses (net of fee waivers or subsidies, if any) for each share class are equal to the annualized expense ratio for each share class (provided in the table), multiplied by the average account value over the period, multiplied by the 184 days in the six-month period ended October 31, 2013, and divided by the 365 days in the Fund’s fiscal year ended October 31, 2013 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
Prudential International Value Fund | 9 |
Fees and Expenses (continued)
The Fund’s annual expense ratios for the year ended October 31, 2013, are as follows:
Class | Gross Operating Expenses | Net Operating Expenses | ||
A | 1.84% | 1.79% | ||
B | 2.54 | 2.54 | ||
C | 2.54 | 2.54 | ||
Z | 1.54 | 1.54 |
Net operating expenses shown above reflect any fee waivers and/or expense reimbursements. Additional information on Fund expenses and any fee waivers and/or expense reimbursements can be found in the “Financial Highlights” tables in this report and in the Notes to the Financial Statements in this report.
10 | Visit our website at www.prudentialfunds.com |
Portfolio of Investments
as of October 31, 2013
Shares | Description | Value (Note 1) | ||||
LONG-TERM INVESTMENTS 97.6% | ||||||
COMMON STOCKS 97.1% | ||||||
Argentina 0.4% | ||||||
2,800 | MercadoLibre, Inc. | $ | 376,978 | |||
Australia 3.4% | ||||||
176,200 | Arrium Ltd. | 230,218 | ||||
42,900 | Ausdrill Ltd. | 61,987 | ||||
33,100 | Bendigo and Adelaide Bank Ltd. | 340,759 | ||||
29,500 | Bradken Ltd. | 174,035 | ||||
82,600 | Challenger Ltd. | 468,596 | ||||
71,625 | Downer EDI Ltd. | 332,770 | ||||
253,200 | Emeco Holdings Ltd. | 82,383 | ||||
13,500 | Leighton Holdings Ltd. | 228,702 | ||||
37,900 | Lend Lease Group | 408,710 | ||||
77,000 | Metcash Ltd. | 243,676 | ||||
13,600 | National Australia Bank Ltd. | 454,525 | ||||
88,300 | Pacific Brands Ltd. | 58,813 | ||||
4,700 | Rio Tinto Ltd. | 282,810 | ||||
38,800 | Toll Holdings Ltd. | 211,376 | ||||
|
| |||||
3,579,360 | ||||||
Austria 0.7% | ||||||
10,700 | OMV AG | 510,421 | ||||
5,700 | Voestalpine AG | 268,902 | ||||
|
| |||||
779,323 | ||||||
Belgium 1.0% | ||||||
32,700 | AGFA-Gevaert NV* | 77,697 | ||||
4,720 | Anheuser-Busch InBev NV | 489,295 | ||||
7,300 | Delhaize Group SA | 466,213 | ||||
4,935 | Dexia SA* | 335 | ||||
|
| |||||
1,033,540 | ||||||
Brazil 0.7% | ||||||
14,017 | Embraer SA, ADR | 411,960 | ||||
16,700 | Natura Cosmeticos SA | 333,970 | ||||
|
| |||||
745,930 | ||||||
Canada 1.9% | ||||||
4,946 | Canadian National Railway Co. | 543,389 | ||||
9,889 | Lululemon Athletica, Inc.* | 682,835 |
See Notes to Financial Statements.
Prudential International Value Fund | 11 |
Portfolio of Investments
as of October 31, 2013 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) | ||||||
Canada (cont’d.) | ||||||
16,150 | Potash Corp. of Saskatchewan, Inc. | $ | 502,265 | |||
10,205 | Teck Resources Ltd. (Class B Stock) | 273,073 | ||||
|
| |||||
2,001,562 | ||||||
China 3.6% | ||||||
7,087 | Baidu, Inc., ADR* | 1,140,298 | ||||
71,530 | China Mobile Ltd. | 743,315 | ||||
140,678 | CNOOC Ltd. | 286,135 | ||||
1,250,640 | Industrial & Commercial Bank of China Ltd. (Class H Stock) | 876,731 | ||||
3,900 | SINA Corp.* | 325,884 | ||||
152,862 | Sinopharm Group Co. Ltd. (Class H Stock) | 414,044 | ||||
|
| |||||
3,786,407 | ||||||
Denmark 1.0% | ||||||
6,343 | Novo Nordisk A/S (Class B Stock) | 1,056,443 | ||||
Finland 0.6% | ||||||
4,298 | Kone Oyj (Class B Stock) | 378,923 | ||||
13,700 | Tieto Oyj | 300,987 | ||||
|
| |||||
679,910 | ||||||
France 9.8% | ||||||
7,568 | Air Liquide SA | 1,028,599 | ||||
7,300 | Alstom SA | 270,984 | ||||
20,000 | AXA SA | 498,311 | ||||
8,100 | BNP Paribas | 597,565 | ||||
9,814 | Cie Generale des Etablissements Michelin (Class B Stock) | 1,022,603 | ||||
2,700 | Ciments Francais SA | 193,525 | ||||
37,707 | Credit Agricole SA* | 453,374 | ||||
6,540 | LVMH Moet Hennessy Louis Vuitton SA | 1,255,655 | ||||
10,744 | Publicis Groupe SA | 893,469 | ||||
4,600 | Renault SA | 401,353 | ||||
7,500 | Sanofi | 799,677 | ||||
8,900 | SCOR SE | 314,135 | ||||
5,863 | Societe Generale SA | 331,199 | ||||
5,900 | Thales SA | 361,352 | ||||
12,100 | Total SA | 742,374 | ||||
5,100 | Valeo SA | 504,541 | ||||
27,796 | Vivendi SA | 703,790 | ||||
|
| |||||
10,372,506 |
See Notes to Financial Statements.
12 |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) | ||||||
Germany 8.8% | ||||||
9,163 | Adidas AG | $ | 1,044,088 | |||
3,800 | Allianz SE | 638,032 | ||||
3,300 | Aurubis AG | 207,917 | ||||
6,200 | BASF SE | 643,653 | ||||
3,100 | Bayer AG | 384,564 | ||||
7,500 | Daimler AG | 614,064 | ||||
26,532 | Deutsche Bank AG | 1,282,274 | ||||
12,200 | E.ON SE | 222,389 | ||||
19,300 | Freenet AG* | 501,315 | ||||
14,049 | Fresenius Medical Care AG & Co. KGaA | 928,449 | ||||
2,600 | Hannover Rueckversicherung AG | 208,082 | ||||
2,600 | Lanxess AG | 182,603 | ||||
1,800 | Muenchener Rueckversicherungs-Gesellschaft AG | 375,540 | ||||
5,100 | Rheinmetall AG | 315,301 | ||||
7,300 | RWE AG | 268,948 | ||||
5,955 | SAP AG | 465,994 | ||||
3,400 | Stada Arzneimittel AG | 195,439 | ||||
3,300 | Volkswagen AG | 807,005 | ||||
|
| |||||
9,285,657 | ||||||
Hong Kong 2.7% | ||||||
188,424 | AIA Group Ltd. | 956,786 | ||||
17,000 | Cheung Kong Holdings Ltd. | 265,490 | ||||
192,000 | First Pacific Co. Ltd. | 218,312 | ||||
50,899 | Hong Kong Exchanges and Clearing Ltd. | 821,105 | ||||
354,000 | Huabao International Holdings Ltd. | 155,341 | ||||
69,720 | Kingboard Chemical Holdings Ltd. | 183,704 | ||||
16,200 | Sands China Ltd. | 115,183 | ||||
68,200 | Yue Yuen Industrial Holdings Ltd. | 187,269 | ||||
|
| |||||
2,903,190 | ||||||
Ireland 0.4% | ||||||
13,900 | Irish Life & Permanent Group Holdings PLC* | 538 | ||||
1,700 | Permanent TSB Group Holdings PLC* | 93 | ||||
16,100 | Smurfit Kappa Group PLC | 389,727 | ||||
|
| |||||
390,358 | ||||||
Israel 0.9% | ||||||
62,300 | Bank Hapoalim BM | 333,522 | ||||
6,200 | Elbit Systems Ltd. | 330,900 | ||||
9,100 | Teva Pharmaceutical Industries Ltd. | 338,142 | ||||
|
| |||||
1,002,564 |
See Notes to Financial Statements.
Prudential International Value Fund | 13 |
Portfolio of Investments
as of October 31, 2013 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) | ||||||
Italy 2.5% | ||||||
14,400 | Banco Popolare Societa Cooperativa* | $ | 28,607 | |||
124,700 | Enel SpA | 550,170 | ||||
35,100 | Eni SpA | 891,085 | ||||
15,200 | Finmeccanica SpA* | 111,386 | ||||
167,566 | Intesa Sanpaolo SpA | 415,712 | ||||
16,702 | Saipem SpA | 390,714 | ||||
251,900 | Telecom Italia SpA | 245,741 | ||||
|
| |||||
2,633,415 | ||||||
Japan 17.7% | ||||||
8,373 | Alpine Electronics, Inc. | 101,366 | ||||
11,400 | Aoyama Trading Co. Ltd. | 290,673 | ||||
19,379 | Bridgestone Corp. | 664,365 | ||||
3,501 | Fanuc Corp. | 561,587 | ||||
73,900 | Fukuoka Financial Group, Inc. | 333,323 | ||||
8,700 | Fuyo General Lease Co. Ltd. | 360,939 | ||||
17,600 | Heiwa Corp. | 295,086 | ||||
7,450 | Japan Exchange Group, Inc. | 173,199 | ||||
57,894 | JX Holdings, Inc. | 286,267 | ||||
17,700 | KDDI Corp. | 958,570 | ||||
9,400 | Keihin Corp. | 153,579 | ||||
38,898 | Komatsu Ltd. | 853,437 | ||||
40,223 | Kubota Corp. | 595,567 | ||||
15,800 | Kyorin Holdings, Inc. | 336,827 | ||||
25,600 | Kyowa Exeo Corp. | 303,988 | ||||
76,000 | Marubeni Corp. | 595,038 | ||||
3,900 | Miraca Holdings, Inc. | 175,726 | ||||
5,900 | Mitsubishi Corp. | 119,363 | ||||
230,479 | Mitsubishi UFJ Financial Group, Inc. | 1,467,752 | ||||
25,800 | Mitsui & Co. Ltd. | 368,577 | ||||
248,700 | Mizuho Financial Group, Inc. | 522,037 | ||||
66,000 | Morinaga Milk Industry Co. Ltd. | 205,791 | ||||
28,800 | Nichii Gakkan Co. | 288,653 | ||||
14,700 | Nippon Electric Glass Co. Ltd. | 75,613 | ||||
12,300 | Nippon Telegraph & Telephone Corp. | 639,358 | ||||
78,700 | Nishi-Nippon City Bank Ltd. (The) | 212,629 | ||||
30,000 | NTT DoCoMo, Inc. | 475,951 | ||||
12,100 | Otsuka Holdings Co. Ltd. | 344,633 | ||||
66,200 | Resona Holdings, Inc. | 344,355 | ||||
49,800 | Sankyu, Inc. | 178,256 |
See Notes to Financial Statements.
14 |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) | ||||||
Japan (cont’d.) | ||||||
29,400 | Seino Holdings Co. Ltd. | $ | 290,362 | |||
13,500 | Shimachu Co. Ltd. | 327,833 | ||||
25,400 | Shizuoka Gas Co. Ltd. | 168,211 | ||||
10,428 | SoftBank Corp. | 778,752 | ||||
38,600 | Sumitomo Corp. | 502,314 | ||||
17,900 | Sumitomo Mitsui Financial Group, Inc. | 865,213 | ||||
183,029 | Sumitomo Mitsui Trust Holdings, Inc. | 903,996 | ||||
52,600 | Toagosei Co. Ltd. | 238,525 | ||||
16,700 | Toppan Forms Co. Ltd. | 155,754 | ||||
20,883 | Toyota Motor Corp. | 1,354,016 | ||||
7,900 | Tsumura & Co. | 248,297 | ||||
5,800 | West Japan Railway Co. | 260,072 | ||||
36,900 | Yokohama Rubber Co. Ltd. (The) | 360,940 | ||||
|
| |||||
18,736,790 | ||||||
Liechtenstein 0.1% | ||||||
1,400 | Verwaltungs-und Privat-Bank AG | 135,934 | ||||
Mexico 0.4% | ||||||
167,649 | Wal-Mart de Mexico SAB de CV (Class V Stock) | 435,851 | ||||
Netherlands 4.2% | ||||||
18,800 | Aegon NV | 149,590 | ||||
7,645 | ASML Holding NV | 723,891 | ||||
88,734 | ING Groep NV, CVA* | 1,127,611 | ||||
40,800 | Koninklijke Ahold NV | 775,470 | ||||
46,900 | Royal Dutch Shell PLC (Class B Stock) | 1,623,692 | ||||
|
| |||||
4,400,254 | ||||||
New Zealand 0.4% | ||||||
279,800 | Air New Zealand Ltd. | 372,228 | ||||
Norway 0.8% | ||||||
20,700 | DnB ASA | 366,939 | ||||
9,700 | Statoil ASA | 229,514 | ||||
6,600 | Yara International ASA | 284,244 | ||||
|
| |||||
880,697 | ||||||
Russia 0.5% | ||||||
15,414 | Yandex NV (Class A Stock)* | 568,160 |
See Notes to Financial Statements.
Prudential International Value Fund | 15 |
Portfolio of Investments
as of October 31, 2013 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) | ||||||
Singapore 0.3% | ||||||
578,400 | Golden Agri-Resources Ltd. | $ | 279,287 | |||
South Korea 0.8% | ||||||
603 | Samsung Electronics Co. Ltd. | 831,573 | ||||
Spain 2.2% | ||||||
8,567 | Amadeus IT Holding SA (Class A Stock) | 317,857 | ||||
62,405 | Banco Bilbao Vizcaya Argentaria SA | 729,325 | ||||
60,096 | Banco Santander SA | 532,769 | ||||
20,300 | Repsol SA | 544,262 | ||||
12,200 | Telefonica SA* | 214,713 | ||||
|
| |||||
2,338,926 | ||||||
Sweden 2.1% | ||||||
25,500 | Boliden AB | 362,177 | ||||
20,401 | Hennes & Mauritz AB (Class B Stock) | 881,565 | ||||
5,500 | NCC AB (Class B Stock) | 169,176 | ||||
5,700 | Oriflame Cosmetics SA, SDR | 179,875 | ||||
11,000 | Swedbank AB (Class A Stock) | 286,290 | ||||
43,700 | TeliaSonera AB | 361,355 | ||||
|
| |||||
2,240,438 | ||||||
Switzerland 7.7% | ||||||
4,500 | Baloise Holding AG | 522,783 | ||||
13,112 | Credit Suisse Group AG* | 407,887 | ||||
500 | Georg Fischer AG* | 344,424 | ||||
12,296 | Julius Baer Group Ltd.* | 603,190 | ||||
2,400 | Lonza Group AG* | 214,231 | ||||
10,496 | Nestle SA | 757,643 | ||||
20,137 | Novartis AG | 1,563,086 | ||||
5,477 | Roche Holding AG | 1,514,584 | ||||
2,100 | Swiss Life Holding AG* | 416,389 | ||||
6,400 | Swiss Re AG* | 561,809 | ||||
1,636 | Syngenta AG | 660,317 | ||||
2,000 | Zurich Insurance Group AG* | 552,647 | ||||
|
| |||||
8,118,990 | ||||||
Taiwan 0.1% | ||||||
6,700 | Taiwan Semiconductor Manufacturing Co. Ltd., ADR | 123,347 |
See Notes to Financial Statements.
16 |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) | ||||||
United Kingdom 19.4% | ||||||
16,900 | Alent PLC | $ | 93,921 | |||
8,800 | AMEC PLC | 165,971 | ||||
18,572 | ARM Holdings PLC | 291,019 | ||||
18,200 | AstraZeneca PLC | 963,519 | ||||
60,800 | Aviva PLC | 436,481 | ||||
100,100 | BAE Systems PLC | 730,185 | ||||
85,481 | Barclays PLC | 359,661 | ||||
75,157 | Beazley PLC | 275,499 | ||||
116,400 | BP PLC | 903,575 | ||||
14,985 | British American Tobacco PLC | 826,763 | ||||
184,500 | BT Group PLC | 1,116,350 | ||||
21,357 | Burberry Group PLC | 524,821 | ||||
250,600 | Cable & Wireless Communications PLC | 188,009 | ||||
17,609 | Carnival PLC | 625,869 | ||||
49,700 | Centrica PLC | 281,092 | ||||
29,400 | Dairy Crest Group PLC | 253,194 | ||||
8,900 | GlaxoSmithKline PLC | 234,627 | ||||
40,400 | Home Retail Group PLC | 128,898 | ||||
83,900 | HSBC Holdings PLC | 917,430 | ||||
55,000 | Intermediate Capital Group PLC | 422,052 | ||||
97,500 | J. Sainsbury PLC | 616,744 | ||||
154,385 | Kingfisher PLC | 933,951 | ||||
187,000 | Legal & General Group PLC | 648,112 | ||||
7,700 | Liberty Global PLC (Class A Stock)* | 603,449 | ||||
48,900 | Marston’s PLC | 119,066 | ||||
11,000 | Mondi PLC | 196,417 | ||||
142,800 | Old Mutual PLC | 465,395 | ||||
25,956 | Pearson PLC | 542,874 | ||||
12,710 | Reckitt Benckiser Group PLC | 988,326 | ||||
40,190 | Rolls-Royce Holdings PLC* | 740,426 | ||||
100,287 | RSA Insurance Group PLC | 206,546 | ||||
12,275 | SABMiller PLC | 640,033 | ||||
37,527 | Standard Chartered PLC | 901,030 | ||||
82,300 | Tesco PLC | 480,071 | ||||
50,700 | Tullett Prebon PLC | 258,259 | ||||
9,745 | Tullow Oil PLC | 147,299 | ||||
38,100 | Vesuvius PLC | 296,200 | ||||
194,300 | Vodafone Group PLC | 711,680 | ||||
135,800 | WM Morrison Supermarkets PLC | 612,738 | ||||
30,202 | WPP PLC | 641,524 | ||||
|
| |||||
20,489,076 |
See Notes to Financial Statements.
Prudential International Value Fund | 17 |
Portfolio of Investments
as of October 31, 2013 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) | ||||||
United States 2.0% | ||||||
7,279 | Accenture PLC (Class A Stock) | $ | 535,007 | |||
9,207 | Schlumberger Ltd. | 862,880 | ||||
11,281 | Yum! Brands, Inc. | 762,821 | ||||
|
| |||||
2,160,708 | ||||||
|
| |||||
TOTAL COMMON STOCKS | 102,739,402 | |||||
|
| |||||
PREFERRED STOCKS 0.5% | ||||||
Brazil 0.5% | ||||||
34,585 | Itau Unibanco Holding SA, ADR (PRFC) | 532,955 | ||||
|
| |||||
United Kingdom | ||||||
3,456,340 | Rolls-Royce Holdings PLC (PRFC)*(b) | 5,542 | ||||
|
| |||||
TOTAL PREFERRED STOCKS | 538,497 | |||||
|
| |||||
TOTAL LONG-TERM INVESTMENTS | 103,277,899 | |||||
|
| |||||
SHORT-TERM INVESTMENT 1.3% | ||||||
AFFILIATED MONEY MARKET MUTUAL FUND | ||||||
1,359,254 | Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund | 1,359,254 | ||||
|
| |||||
TOTAL INVESTMENTS 98.9% | 104,637,153 | |||||
Other assets in excess of liabilities(c) 1.1% | 1,190,491 | |||||
|
| |||||
NET ASSETS 100% | $ | 105,827,644 | ||||
|
|
The following abbreviations are used in the Portfolio descriptions:
ADR— American Depositary Receipt
CVA—Certificate Van Aandelen (Bearer)
PRFC—Preference Shares
SDR—Special Drawing Rights
EUR—Euro
GBP—British Pound
JPY—Japanese Yen
* | Non-income producing security. |
See Notes to Financial Statements.
18 |
(a) | Prudential Investments LLC, the manager of the Portfolio, also serves as manager of the Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund. |
(b) | Includes a security or securities that have been deemed illiquid. |
(c) | Includes net unrealized appreciation (depreciation) on the following derivative contracts held at reporting period end: |
Forward foreign currency exchange contracts outstanding at October 31, 2013:
Purchase Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date Payable | Current Value | Unrealized Appreciation (Depreciation) | |||||||||||||
British Pound, | ||||||||||||||||||
Expiring 02/18/14 | State Street Bank | GBP | 1,044 | $ | 1,690,226 | $ | 1,673,152 | $ | (17,074 | ) | ||||||||
Japanese Yen, | ||||||||||||||||||
Expiring 01/06/14 | State Street Bank | JPY | 97,607 | 975,675 | 993,125 | 17,450 | ||||||||||||
|
|
|
|
|
| |||||||||||||
$ | 2,665,901 | $ | 2,666,277 | $ | 376 | |||||||||||||
|
|
|
|
|
| |||||||||||||
Sale Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date Receivable | Current Value | Unrealized Appreciation (Depreciation) | |||||||||||||
British Pound, | ||||||||||||||||||
Expiring 02/18/14 | State Street Bank | GBP | 1,044 | $ | 1,617,893 | $ | 1,673,152 | $ | (55,259 | ) | ||||||||
Euro, | ||||||||||||||||||
Expiring 04/28/14 | State Street Bank | EUR | 1,949 | 2,691,264 | 2,647,607 | 43,657 | ||||||||||||
Japanese Yen, | ||||||||||||||||||
Expiring 01/06/14 | State Street Bank | JPY | 466,131 | 4,700,651 | 4,742,752 | (42,101 | ) | |||||||||||
|
|
|
|
|
| |||||||||||||
$ | 9,009,808 | $ | 9,063,511 | $ | (53,703 | ) | ||||||||||||
|
|
|
|
|
|
Various inputs are used in determining the value of the Portfolio’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.
Level 2—other significant observable inputs including, but not limited to, quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates, and amortized cost.
Level 3—significant unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
See Notes to Financial Statements.
Prudential International Value Fund | 19 |
Portfolio of Investments
as of October 31, 2013 continued
The following is a summary of the inputs used as of October 31, 2013 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Common Stocks: | ||||||||||||
Argentina | $ | 376,978 | $ | — | $ | — | ||||||
Australia | — | 3,579,360 | — | |||||||||
Austria | — | 779,323 | — | |||||||||
Belgium | 78,032 | 955,508 | — | |||||||||
Brazil | 745,930 | — | — | |||||||||
Canada | 2,001,562 | — | — | |||||||||
China | 1,466,182 | 2,320,225 | — | |||||||||
Denmark | — | 1,056,443 | — | |||||||||
Finland | — | 679,910 | — | |||||||||
France | 193,525 | 10,178,981 | — | |||||||||
Germany | — | 9,285,657 | — | |||||||||
Hong Kong | — | 2,903,190 | — | |||||||||
Ireland | 631 | 389,727 | — | |||||||||
Israel | — | 1,002,564 | — | |||||||||
Italy | — | 2,633,415 | — | |||||||||
Japan | — | 18,736,790 | — | |||||||||
Liechtenstein | 135,934 | — | — | |||||||||
Mexico | 435,851 | — | — | |||||||||
Netherlands | — | 4,400,254 | — | |||||||||
New Zealand | — | 372,228 | — | |||||||||
Norway | — | 880,697 | — | |||||||||
Russia | 568,160 | — | — | |||||||||
Singapore | — | 279,287 | — | |||||||||
South Korea | — | 831,573 | — | |||||||||
Spain | — | 2,338,926 | — | |||||||||
Sweden | — | 2,240,438 | — | |||||||||
Switzerland | — | 8,118,990 | — | |||||||||
Taiwan | 123,347 | — | — | |||||||||
United Kingdom | 697,370 | 19,791,706 | — | |||||||||
United States | 2,160,708 | — | — | |||||||||
Preferred Stocks: | ||||||||||||
Brazil | 532,955 | — | — | |||||||||
United Kingdom | — | 5,542 | — | |||||||||
Affiliated Money Market Mutual Fund | 1,359,254 | — | — | |||||||||
Other Financial Instruments* | ||||||||||||
Forward Foreign Currency Exchange Contracts | — | (53,327 | ) | — | ||||||||
|
|
|
|
|
| |||||||
Total | $ | 10,876,419 | $ | 93,707,407 | $ | — | ||||||
|
|
|
|
|
|
* | Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, such as futures, forwards and swap contracts, which are recorded at the unrealized appreciation/depreciation on the instrument. |
See Notes to Financial Statements.
20 |
Fair Value of Level 2 investments at October 31, 2012 was $3,948. Such fair values are used to reflect the impact of significant market movements between the time at which the Fund normally values its securities and the earlier closing of foreign markets. An amount of $82,856,313 was transferred from Level 1 into Level 2 at October 31, 2013 as a result of fair valuing such foreign securities using third party vendor modeling tools.
It is the Series’ policy to recognize transfers in and transfers out at the fair value as of the beginning of the period.
The industry classification of investments and other assets in excess of liabilities shown as a percentage of net assets as of October 31, 2013 were as follows:
Banks | 14.5 | % | ||
Pharmaceuticals | 8.1 | |||
Insurance | 7.9 | |||
Oil, Gas & Consumable Fuels | 7.5 | |||
Telecommunications | 7.3 | |||
Food & Beverage | 4.9 | |||
Retail & Merchandising | 4.1 | |||
Chemicals | 3.9 | |||
Automobile Manufacturers | 3.1 | |||
Auto Parts & Equipment | 2.9 | |||
Apparel | 2.8 | |||
Aerospace & Defense | 2.5 | |||
Diversified Financial Services | 2.3 | |||
Internet Software & Services | 2.0 | |||
Machinery & Equipment | 1.9 | |||
Semiconductors | 1.9 | |||
Metals & Mining | 1.6 | |||
Distribution/Wholesale | 1.5 | |||
Advertising | 1.4 | |||
Transportation | 1.4 | |||
Affiliated Money Market Mutual Fund | 1.3 | |||
Media & Entertainment | 1.1 | |||
Agriculture | 1.1 | |||
Computer Services & Software | 1.0 | |||
Consumer Products & Services | 1.0 | |||
Utilities | 0.9 | % | ||
Healthcare Providers & Services | 0.9 | |||
Entertainment & Leisure | 0.9 | |||
Diversified Machinery | 0.8 | |||
Construction & Engineering | 0.7 | |||
Miscellaneous Manufacturing | 0.7 | |||
Real Estate | 0.6 | |||
Forest & Paper Products | 0.6 | |||
IT Services | 0.5 | |||
Commercial Services | 0.5 | |||
Cosmetics/Personal Care | 0.5 | |||
Beverages | 0.5 | |||
Airlines | 0.4 | |||
Internet | 0.3 | |||
Engineering & Construction | 0.3 | |||
Gas Distribution | 0.3 | |||
Building Materials | 0.2 | |||
Hotels, Restaurants & Leisure | 0.1 | |||
Home Furnishings | 0.1 | |||
Electronic Components & Equipment | 0.1 | |||
|
| |||
98.9 | ||||
Other assets in excess of liabilities | 1.1 | |||
|
| |||
100.0 | % | |||
|
|
The Series invested in various derivative instruments during the reporting period. The primary types of risk associated with these derivative instruments were equity risk and foreign exchange risk. The effect of such derivative instruments on the Series’ financial position and financial performance as reflected in the Statement of Assets and Liabilities and Statement of Operations is presented in the summary below.
See Notes to Financial Statements.
Prudential International Value Fund | 21 |
Portfolio of Investments
as of October 31, 2013 continued
Fair values of derivative instruments as of October 31, 2013 as presented in the Statement of Assets and Liabilities:
Derivatives not accounted for | Asset Derivatives | Liability Derivatives | ||||||||||
Balance | Fair Value | Balance | Fair Value | |||||||||
Foreign exchange contracts | Unrealized appreciation on forward foreign currency contracts | $ | 61,107 | Unrealized depreciation on forward foreign currency contracts | $ | 114,434 | ||||||
|
|
|
|
The effects of derivative instruments on the Statement of Operations for the year ended October 31, 2013 are as follows:
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income | ||||||||||||
Derivatives not accounted for as hedging | Rights | Forward Currency Contracts | Total | |||||||||
Foreign exchange contracts | $ | — | $ | 134,163 | $ | 134,163 | ||||||
Equity contracts | 28,323 | — | 28,323 | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 28,323 | $ | 134,163 | $ | 162,486 | ||||||
|
|
|
|
|
|
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income | ||||
Derivatives not accounted for as hedging | Forward Currency Contracts | |||
Foreign exchange contracts | $ | (86,695 | ) | |
|
|
For the year ended October 31, 2013, the Series’ average value at settlement date payable for forward foreign currency exchange purchase contracts was $2,138,151 and the Fund’s average value at settlement date receivable for forward foreign currency exchange sale contracts was $6,668,626.
See Notes to Financial Statements.
22 |
PRUDENTIAL INVESTMENTS»MUTUAL FUNDS
FINANCIAL STATEMENTS
ANNUAL REPORT · OCTOBER 31, 2013
Prudential International Value Fund
Statement of Assets and Liabilities
as of October 31, 2013
Assets | ||||
Investments at value: | ||||
Unaffiliated investments (cost $81,001,687) | $ | 103,277,899 | ||
Affiliated investments (cost $1,359,254) | 1,359,254 | |||
Foreign currency, at value (cost $805,354) | 807,004 | |||
Tax reclaim receivable | 289,150 | |||
Dividends and interest receivable | 269,083 | |||
Receivable for investments sold | 222,635 | |||
Unrealized appreciation on foreign currency forward contracts | 61,107 | |||
Receivable for Fund shares sold | 20,117 | |||
Prepaid expenses | 1,070 | |||
|
| |||
Total assets | 106,307,319 | |||
|
| |||
Liabilities | ||||
Accrued expenses | 139,501 | |||
Unrealized depreciation on foreign currency forward contracts | 114,434 | |||
Management fee payable | 89,169 | |||
Payable for Fund shares reacquired | 67,003 | |||
Payable for investments purchased | 38,315 | |||
Affiliated transfer agent fee payable | 18,000 | |||
Distribution fee payable | 13,253 | |||
|
| |||
Total liabilities | 479,675 | |||
|
| |||
Net Assets | $ | 105,827,644 | ||
|
| |||
Net assets were comprised of: | ||||
Common stock, at par value | $ | 45,878 | ||
Paid-in capital in excess of par | 104,477,839 | |||
|
| |||
104,523,717 | ||||
Undistributed net investment income | 1,054,326 | |||
Accumulated net realized loss on investment and foreign currency transactions | (21,990,053 | ) | ||
Net unrealized appreciation on investments and foreign currencies | 22,239,654 | |||
|
| |||
Net Assets, October 31, 2013 | $ | 105,827,644 | ||
|
|
See Notes to Financial Statements.
24 |
Class A: | ||||
Net asset value and redemption price per share ($36,919,781 ÷ 1,602,434 shares of common stock issued and outstanding) | $ | 23.04 | ||
Maximum sales charge (5.50% of offering price) | 1.34 | |||
|
| |||
Maximum offering price to public | $ | 24.38 | ||
|
| |||
Class B: | ||||
Net asset value, offering price and redemption price per share ($1,540,288 ÷ 70,227 shares of common stock issued and outstanding) | $ | 21.93 | ||
|
| |||
Class C: | ||||
Net asset value, offering price and redemption price per share ($4,869,862 ÷ 221,613 shares of common stock issued and outstanding) | $ | 21.97 | ||
|
| |||
Class Z: | ||||
Net asset value, offering price and redemption price per share ($62,497,713 ÷ 2,693,519 shares of common stock issued and outstanding) | $ | 23.20 | ||
|
|
See Notes to Financial Statements.
Prudential International Value Fund | 25 |
Statement of Operations
Year Ended October 31, 2013
Net Investment Income | ||||
Income | ||||
Unaffiliated dividend income (net of foreign withholding taxes of $240,450) | $ | 2,924,068 | ||
Interest income | 3,297 | |||
Affiliated dividend income | 3,050 | |||
|
| |||
Total income | 2,930,415 | |||
|
| |||
Expenses | ||||
Management fee | 1,002,438 | |||
Distribution fee—Class A | 87,624 | |||
Distribution fee—Class B | 14,676 | |||
Distribution fee—Class C | 48,019 | |||
Custodian’s fees and expenses | 196,000 | |||
Transfer agent’s fee and expenses (including affiliated expense of $99,400) (Note 3) | 160,000 | |||
Registration fees | 52,000 | |||
Reports to shareholders | 35,000 | |||
Audit fees | 29,000 | |||
Legal fees and expenses | 22,000 | |||
Directors’ fees | 12,000 | |||
Insurance fees | 1,800 | |||
Interest expense (Note 7) | 545 | |||
Miscellaneous | 35,752 | |||
|
| |||
Total expenses | 1,696,854 | |||
|
| |||
Net investment income | 1,233,561 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investment And Foreign Currencies | ||||
Net realized gain on: | ||||
Investment transactions | 4,523,865 | |||
Foreign currency transactions | 30,959 | |||
|
| |||
4,554,824 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 13,892,661 | |||
Foreign currencies | (68,566 | ) | ||
|
| |||
13,824,095 | ||||
|
| |||
Net gain on investments and foreign currencies | 18,378,919 | |||
|
| |||
Net Increase In Net Assets Resulting From Operations | $ | 19,612,480 | ||
|
|
See Notes to Financial Statements.
26 |
Statement of Changes in Net Assets
Year Ended October 31, | ||||||||
2013 | 2012 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income | $ | 1,233,561 | $ | 1,601,893 | ||||
Net realized gain (loss) on investment and foreign currency transactions | 4,554,824 | (23,959 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments and foreign currencies | 13,824,095 | 2,917,818 | ||||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 19,612,480 | 4,495,752 | ||||||
|
|
|
| |||||
Dividends and Distributions (Note 1) | ||||||||
Dividends from net investment income | ||||||||
Class A | (674,229 | ) | (610,527 | ) | ||||
Class B | (19,472 | ) | (17,304 | ) | ||||
Class C | (65,031 | ) | (53,269 | ) | ||||
Class Z | (1,269,401 | ) | (978,760 | ) | ||||
|
|
|
| |||||
(2,028,133 | ) | (1,659,860 | ) | |||||
|
|
|
| |||||
Series share transactions (Net of share conversions) (Note 6) | ||||||||
Net proceeds from shares sold | 11,093,355 | 11,836,699 | ||||||
Net asset value of shares issued in reinvestment of dividends and distributions | 2,004,448 | 1,623,732 | ||||||
Cost of shares reacquired | (21,607,276 | ) | (18,408,704 | ) | ||||
|
|
|
| |||||
Net decrease in net assets from Series share transactions | (8,509,473 | ) | (4,948,273 | ) | ||||
|
|
|
| |||||
Total increase (decrease) | 9,074,874 | (2,112,381 | ) | |||||
Net Assets | ||||||||
Beginning of year | 96,752,770 | 98,865,151 | ||||||
|
|
|
| |||||
End of year(a) | $ | 105,827,644 | $ | 96,752,770 | ||||
|
|
|
| |||||
(a) Includes undistributed net investment income of: | $ | 1,054,326 | $ | 1,817,939 | ||||
|
|
|
|
See Notes to Financial Statements.
Prudential International Value Fund | 27 |
Notes to Financial Statements
Prudential World Fund, Inc. (the “Fund”), is registered under the Investment Company Act of 1940, as amended, (“1940 Act”) as an open-end diversified management investment company and currently consists of six series: Prudential International Value Fund (the “Series”), Prudential Jennison Global Infrastructure Fund, Prudential International Equity Fund, Prudential Emerging Markets Debt Local Currency Fund, Prudential Jennison Global Opportunities Fund and Prudential Jennison International Opportunities Fund. These financial statements relate to Prudential International Value Fund. The financial statements of the other series are not presented herein. The investment objective of the Series is long-term growth of capital.
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of the financial statements.
Security Valuation: The Series holds securities and other assets that are fair valued at the close of each day the New York Stock Exchange (“NYSE”) is open for trading. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Board of Directors (the “Board”) has adopted Valuation Procedures for security valuation under which fair valuation responsibilities have been delegated to Prudential Investments LLC (“PI” or “Manager”). Under the current Valuation Procedures, the established Valuation Committee is responsible for supervising the valuation of portfolio securities and other assets. The Valuation Procedures permit the Series to utilize independent pricing vendor services, quotations from market makers, and alternative valuation methods when market quotations are either not readily available or not representative of fair value. A record of the Valuation Committee’s actions is subject to the Board’s review, approval, and ratification at its next regularly-scheduled quarterly meeting.
Various inputs determine how the Series’ investments are valued, all of which are categorized according to the three broad levels (Level 1, 2, or 3) detailed in the table following the Portfolio of Investments.
Common stocks, exchange-traded funds, and derivative instruments that are traded on a national securities exchange are valued at the last sale price as of the close of trading on the applicable exchange. Securities traded via NASDAQ are valued at the
28 |
NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQ official closing price; they are classified as Level 1 in the fair value hierarchy.
In the event that no sale or official closing price on valuation date exists, these securities are generally valued at the mean between the last reported bid and asked prices, or at the last bid price in the absence of an asked price. These securities are classified as Level 2 in the fair value hierarchy, as the inputs are observable and considered to be significant to the valuation.
Common stocks traded on foreign securities exchanges are valued using pricing vendor services that provide model prices derived using adjustment factors based on information such as local closing price, relevant general and sector indices, currency fluctuations, depositary receipts, and futures, as applicable. Securities valued using such model prices are classified as Level 2 in the fair value hierarchy, as the adjustment factors are observable and considered to be significant to the valuation.
Investments in open-end, non-exchange-traded mutual funds are valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Fixed income securities traded in the over-the-counter market are generally valued at prices provided by approved independent pricing vendors. The pricing vendors provide these prices after evaluating observable inputs including, but not limited to yield curves, yield spreads, credit ratings, deal terms, tranche level attributes, default rates, cash flows, prepayment speeds, broker/dealer quotations, and reported trades. Securities valued using such vendor prices are classified as Level 2 in the fair value hierarchy.
Over-the-counter derivative instruments are generally valued using pricing vendor services, which derive the valuation based on inputs such as underlying asset prices, indices, spreads, interest rates, and exchange rates. These instruments are categorized as Level 2 in the fair value hierarchy.
Securities and other assets that cannot be priced according to the methods described above are valued based on pricing methodologies approved by the Board of Directors. In the event that significant unobservable inputs are used when determining such valuations, the securities will be classified as Level 3 in the fair value hierarchy.
Prudential International Value Fund | 29 |
Notes to Financial Statements
continued
When determining the fair value of securities, some of the factors influencing the valuation include: the nature of any restrictions on disposition of the securities; assessment of the general liquidity of the securities; the issuer’s financial condition and the markets in which it does business; the cost of the investment; the size of the holding and the capitalization of the issuer; the prices of any recent transactions or bids/offers for such securities or any comparable securities; any available analyst media or other reports or information deemed reliable by the investment adviser regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other mutual funds to calculate their net asset values.
Foreign Currency Translation: The books and records of the Series 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 current rates of exchange.
(ii) Purchases and sales of investment securities, income and expenses—at the rates of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Series are presented at the foreign exchange rates and market values at the close of the fiscal period, the Series does 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 long-term securities held at the end of the fiscal period. Similarly, the Series does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of long-term portfolio securities sold during the fiscal period. Accordingly, realized foreign currency gains or losses are included in the reported net realized gains or losses on investment transactions.
Net realized gains or losses on foreign currency transactions represent net foreign exchange gains or losses from the holding of foreign currencies, currency gains or losses realized between the trade date and settlement date on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Series’ books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains or losses from
30 |
valuing foreign currency denominated assets and liabilities (other than investments) 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 possibility of political and economic instability or the level of governmental supervision and regulation of foreign securities markets.
Foreign Currency Contracts: A forward currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate between two parties. The Series enters into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings or specific receivables and payables denominated in a foreign currency. The contracts are valued daily at current forward exchange rates and any unrealized gain or loss is included in net unrealized appreciation or depreciation on foreign currencies. Gain or loss is realized on the settlement date of the contract equal to the difference between the settlement value of the original and negotiated forward contracts. This gain or loss, if any, is included in net realized gain (loss) on foreign currency transactions. Risks may arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts. Forward currency contracts involve elements of both market and credit risk in excess of the amounts reflected on the Statement of Assets and Liabilities. The Series’ maximum risk of loss from counterparty credit risk is the net value of the cash flows to be received from the counterparty at the end of the contract’s life. A master netting agreement between the Series and the counterparty permits the Series to offset amounts payable by the Series to the same counterparty against amounts to be received; and by the receipt of collateral from the counterparty by the Series to cover the Series’ exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable.
Warrants and Rights: The Series may hold warrants and rights acquired either through a direct purchase, included as part of a private placement, or pursuant to corporate actions. Warrants and rights entitle the holder to buy a proportionate amount of common stock at a specific price and time through the expiration dates. Such warrants and rights are held as long positions by the Series until exercised, sold or expired. Warrants and rights are valued at fair value in accordance with the Board of Directors’ approved fair valuation procedures.
Restricted and Illiquid Securities: The Series may invest up to 15% of its net assets in illiquid securities. Illiquid securities are those that, because of the absence of a readily available market or due to legal or contractual restrictions on resale, cannot be sold
Prudential International Value Fund | 31 |
Notes to Financial Statements
continued
within seven days in the ordinary course of business at approximately the amount at which the Series has valued the investment. Therefore, the Series may find it difficult to sell illiquid securities at the time considered most advantageous by its Subadviser and may incur expenses that would not be incurred in the sale of securities that were freely marketable. Certain securities that would otherwise be considered illiquid because of legal restrictions on resale to the general public may be traded among qualified institutional buyers under Rule 144A of the Securities Act of 1933. These Rule 144A securities, as well as commercial paper that is sold in private placements under Section 4(2) of the Securities Act, may be deemed liquid by the Series’ Subadviser under the guidelines adopted by the Series. However, the liquidity of the Series’ investments in Rule 144A securities could be impaired if trading does not develop or declines.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized and unrealized gains or losses from investment and currency transactions are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, including amortization of premium and accretion of discount on debt securities, as required, is recorded on an accrual basis. Expenses are recorded on the accrual basis, which may require the use of certain estimates by management, that may differ from actual.
Net investment income or loss, (other than distribution fees which are charged directly to the respective class) and unrealized and realized gains or losses are allocated daily to each class of shares based upon the relative proportion of adjusted net assets of each class at the beginning of the day.
Dividends and Distributions: The Series expects to pay dividends of net investment income and distributions of net realized capital gains, if any, annually. Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-dividend date. Permanent book/tax differences relating to income and gains are reclassified amongst undistributed net investment income, accumulated net realized gain or loss and paid-in capital in excess of par, as appropriate.
Taxes: For federal income tax purposes, each series in the Fund is treated as a separate taxpaying entity. It is the Series’ policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to
32 |
distribute all of its taxable net income and capital gains, if any, to shareholders. Therefore, no federal income tax provision is required.
Withholding taxes on foreign dividends are recorded, net of reclaimable amounts, at the time the related income is earned.
Estimates: The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
Note 2. Agreements
The Fund has a management agreement for the Series with Prudential Investments LLC (“PI”). Pursuant to this agreement, PI has responsibility for all investment advisory services and supervises the subadvisor’s performance of such services. PI has entered into subadvisory agreements with LSV Asset Management (“LSV”) and Thornburg Investment Management, Inc. (“Thornburg”) for the Series.
The subadvisory agreements provide that LSV and Thornburg furnish investment advisory services in connection with the management of the Series. In connection therewith, LSV and Thornburg are obligated to keep certain books and records of the Series. PI pays for the services of the subadvisors, the compensation of officers of the Series, occupancy and certain clerical and bookkeeping costs of the Series. The Series bears all other costs and expenses.
The management fee paid to PI is computed daily and payable monthly at an annual rate of 1% of the average daily net assets up to $300 million, .95% of the next $700 million of average daily net assets and .90% of average daily net assets in excess of $1 billion of the Series. The effective management fee was 1.00% for the year ended October 31, 2013.
The Fund has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”), which acts as the distributor of the Class A, Class B, Class C and Class Z shares of the Series. The Series compensates PIMS for distributing and servicing the Series’ Class A, Class B and Class C shares pursuant to plans of distribution (the “Class A, B and C Plans”), regardless of expenses actually incurred by PIMS. The distribution fees are accrued daily and payable monthly. No distribution or service fees are paid to PIMS as distributor of the Class Z shares of the Series.
Pursuant to the Class A, B and C Plans, the Series compensates PIMS for distribution related activities at an annual rate of up to .30%, 1% and 1% of the average daily net
Prudential International Value Fund | 33 |
Notes to Financial Statements
continued
assets of the Class A, B and C shares, respectively. For the year ended October 31, 2013, PIMS contractually agreed to limit such fee to .25% of the average daily net assets of the Class A shares.
PIMS has advised the Series that it received $30,288 in front-end sales charges resulting from sales of Class A shares, during the year ended October 31, 2013. From these fees, PIMS paid such sales charges to broker-dealers, which in turn paid commissions to salespersons and incurred other distribution costs.
PIMS advised the Series that for the year ended October 31, 2013, it received $196, $2,083 and $39 in contingent deferred sales charges imposed upon certain redemptions by Class A, Class B and Class C shareholders, respectively.
PI and PIMS are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PI and an indirect, wholly owned subsidiary of Prudential, serves as the Series’ transfer agent. The transfer agent fees and expenses in the Statement of Operations also include certain out-of-pocket expenses paid to non-affiliates, where applicable.
The Series invests in the Prudential Core Taxable Money Market Fund (the “Core Fund”), a portfolio of Prudential Investment Portfolios 2 registered under the 1940 Act, and managed by PI. Earnings from the Core Fund are disclosed on the Statement of Operations as affiliated dividend income.
Note 4. Portfolio Securities
Purchases and sales of investment securities, other than short-term investments, for the year ended October 31, 2013 were $20,476,817 and $29,690,153, respectively.
Note 5. Distributions and Tax Information
Distributions to shareholders, which are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles, are recorded on the ex-dividend date. In order to present undistributed net
34 |
investment income, accumulated net realized loss on investment and foreign currency transactions and paid-in capital in excess of par on the Statement of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to undistributed net investment income and accumulated net realized loss on investment and foreign currency transactions. For the tax year ended October 31, 2013 the adjustments were to increase undistributed net investment income and increase accumulated net realized loss on investment and foreign currency transactions by $30,959 due to the differences in the treatment for book and tax purposes of certain transactions involving foreign securities. Net investment income, net realized gain and net assets were not affected by this change.
For the years ended October 31, 2013 and October 31, 2012, the tax character of dividends paid as reflected in the Statement of Changes in Net Assets were $2,028,133 and $1,659,860 of ordinary income, respectively.
As of October 31, 2013, the accumulated undistributed earnings on a tax basis was $1,165,441 of ordinary income. This differs from the amount shown on the Statement of Assets and Liabilities primarily due to cumulative timing differences between financial and tax reporting.
The United States federal income tax basis of the Series’ investments and the net unrealized appreciation as of October 31, 2013 were as follows:
Tax Basis | Appreciation | Depreciation | Net | Other | Total Net | |||||
$83,023,644 | $27,422,873 | $(5,809,364) | $21,613,509 | $16,769 | $21,630,278 |
The difference between book basis and tax basis was primarily attributable to deferred losses on wash sales and investments in passive foreign investment companies.
Under the Regulated Investment Company Modernization Act of 2010 (“the Act”), the Series is permitted to carryforward capital losses incurred in the fiscal year ended October 31, 2012 and October 31, 2013 (“post-enactment losses”) for an unlimited period. Post-enactment losses are required to be utilized before the utilization of losses incurred prior to the effective date of the Act. As a result of this ordering rule, capital loss carryforwards related to taxable years ending before October 31, 2012 (“pre-enactment losses”) may have an increased likelihood to expire unused. The Series utilized approximately $4,553,000 of its capital loss carryforward to offset net taxable gains realized in the fiscal year ended October 31, 2013. No capital gains distributions are expected to be paid to shareholders until net gains have been
Prudential International Value Fund | 35 |
Notes to Financial Statements
continued
realized in excess of such losses. As of October 31, 2013, the pre and post-enactment losses were approximately:
Post-Enactment Losses: | $ | 0 | ||
|
| |||
Pre-Enactment Losses: | ||||
Expiring 2017 | 20,514,000 | |||
Expiring 2018 | 978,000 | |||
|
| |||
$ | 21,492,000 | |||
|
|
Management has analyzed the Series’ tax positions taken on federal income tax returns for all open tax years and has concluded that no provision for income tax is required in the Series’ financial statements for the current reporting period. The Series’ federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
Note 6. Capital
The Series offers Class A, Class B, Class C and Class Z shares. Class A shares are sold with a front-end sales charge of up to 5.50%. All investors who purchase Class A shares in an amount of $1 million or more and sell these shares within 12 months of purchase are subject to a contingent deferred sales charge (“CDSC”) of 1%, including investors who purchase their shares through broker-dealers affiliated with Prudential. Class B shares are sold with a CDSC which declines from 5% to zero depending upon the period of time the shares are held. Class C shares are sold with a CDSC of 1% during the first 12 months from the date of purchase. Class B shares will automatically convert to Class A shares on a quarterly basis approximately seven years after purchase. A special exchange privilege is also available for shareholders who qualify to purchase Class A shares at net asset value. Class Z shares are not subject to any sales or redemption charge and are offered exclusively for sale to a limited group of investors.
Under certain circumstances, an exchange may be made from specified share classes of the Series to one or more other share classes of the Series as presented in the table of transactions in shares of common stock.
There are 250 million authorized shares of $.01 par value common stock, divided into four classes, designated Class A, Class B, Class C and Class Z common stock,
36 |
each of which consists of 75 million, 50 million, 50 million and 75 million authorized shares, respectively.
Transactions in shares of common stock were as follows:
Class A | Shares | Amount | ||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 122,524 | $ | 2,555,126 | |||||
Shares issued in reinvestment of dividends and distributions | 32,904 | 653,810 | ||||||
Shares reacquired | (311,730 | ) | (6,480,038 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (156,302 | ) | (3,271,102 | ) | ||||
Shares issued upon conversion from Class B | 17,629 | 368,731 | ||||||
Shares reacquired upon conversion into Class Z | (2,840 | ) | (57,629 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (141,513 | ) | $ | (2,960,000 | ) | |||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 88,449 | $ | 1,631,363 | |||||
Shares issued in reinvestment of dividends and distributions | 32,651 | 585,430 | ||||||
Shares reacquired | (457,841 | ) | (8,354,606 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (336,741 | ) | (6,137,813 | ) | ||||
Shares issued upon conversion from Class B | 20,082 | 366,930 | ||||||
Shares reacquired upon conversion into Class Z | (6,033 | ) | (107,215 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (322,692 | ) | $ | (5,878,098 | ) | |||
|
|
|
| |||||
Class B | ||||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 17,604 | $ | 353,419 | |||||
Shares issued in reinvestment of dividends and distributions | 966 | 18,389 | ||||||
Shares reacquired | (8,813 | ) | (172,803 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 9,757 | 199,005 | ||||||
Shares reacquired upon conversion into Class A | (18,476 | ) | (368,731 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (8,719 | ) | $ | (169,726 | ) | |||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 8,208 | $ | 144,803 | |||||
Shares issued in reinvestment of dividends and distributions | 929 | 15,993 | ||||||
Shares reacquired | (19,508 | ) | (346,846 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (10,371 | ) | (186,050 | ) | ||||
Shares reacquired upon conversion into Class A | (20,816 | ) | (366,930 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (31,187 | ) | $ | (552,980 | ) | |||
|
|
|
|
Prudential International Value Fund | 37 |
Notes to Financial Statements
continued
Class C | ||||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 18,448 | $ | 377,849 | |||||
Shares issued in reinvestment of dividends and distributions | 3,380 | 64,459 | ||||||
Shares reacquired | (58,936 | ) | (1,181,776 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (37,108 | ) | $ | (739,468 | ) | |||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 20,549 | $ | 365,925 | |||||
Shares issued in reinvestment of dividends and distributions | 3,028 | 52,206 | ||||||
Shares reacquired | (95,948 | ) | (1,677,033 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (72,371 | ) | $ | (1,258,902 | ) | |||
|
|
|
| |||||
Class Z | ||||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 371,363 | $ | 7,806,961 | |||||
Shares issued in reinvestment of dividends and distributions | 63,485 | 1,267,790 | ||||||
Shares reacquired | (656,863 | ) | (13,772,659 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | (222,015 | ) | (4,697,908 | ) | ||||
Shares reacquired upon conversion into Class A | 2,824 | 57,629 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | (219,191 | ) | $ | (4,640,279 | ) | |||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 529,417 | $ | 9,694,608 | |||||
Shares issued in reinvestment of dividends and distributions | 53,865 | 970,103 | ||||||
Shares reacquired | (428,040 | ) | (8,030,219 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 155,242 | 2,634,492 | ||||||
Shares reacquired upon conversion into Class A | 6,006 | 107,215 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 161,248 | $ | 2,741,707 | |||||
|
|
|
|
Note 7. Borrowings
The Series, along with other affiliated registered investment companies (the “Funds”), is a party to a Syndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide an alternative source of temporary funding for capital share redemptions. The SCA provides for a commitment of $900 million for the period November 15, 2012 through November 4, 2013. The Funds pay an annualized commitment fee of .08% of the unused portion of the SCA. Prior to November 15, 2012, the Funds had another Syndicated Credit Agreement with substantially similar terms. Interest on any borrowings under the SCA is paid at contracted market rates. The commitment fee for the unused amount is accrued daily and paid quarterly.
38 |
Subsequent to the fiscal year end, the SCA has been renewed effective November 5, 2013 at substantially similar terms through November 4, 2014.
The Series utilized the SCA during the year ended October 31, 2013. The average daily balance for the 9 days the Series had loans outstanding during the period was $1,500,667, borrowed at a weighted average interest rate of 1.45%. At October 31, 2013, the Series did not have an outstanding loan amount.
Note 8. Notice of Dividends to Shareholders
The Series declared ordinary income dividends on December 16, 2013 to shareholders of record on December 17, 2013. The ex-dividend date was December 18, 2013. The per share amounts declared were as follows:
Ordinary Income | ||||
Class A | $ | 0.2388 | ||
Class B | $ | 0.1143 | ||
Class C | $ | 0.1143 | ||
Class Z | $ | 0.2829 |
Note 9. New Accounting Pronouncement
In January 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” which replaced ASU No. 2011-11 “Disclosures about Offsetting Assets and Liabilities”. The updates create new disclosure requirements requiring entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of Assets and Liabilities or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods. Management is currently evaluating the application of ASU No. 2013-01 and its impact, if any, on the Fund’s financial statements.
Prudential International Value Fund | 39 |
Financial Highlights
Class A Shares | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Operating Performance(b): | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $19.36 | $18.80 | $20.29 | $18.45 | $15.28 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .24 | .29 | .32 | .22 | .20 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 3.83 | .57 | (1.64 | ) | 1.71 | 3.59 | ||||||||||||||
Total from investment operations | 4.07 | .86 | (1.32 | ) | 1.93 | 3.79 | ||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.39 | ) | (.30 | ) | (.17 | ) | (.12 | ) | (.62 | ) | ||||||||||
Capital contributions(d) | - | - | - | .03 | - | |||||||||||||||
Net asset value, end of year | $23.04 | $19.36 | $18.80 | $20.29 | $18.45 | |||||||||||||||
Total Return(a): | 21.37% | 4.71% | (6.56)% | 10.68% | 26.03% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $36,920 | $33,759 | $38,858 | $45,598 | $45,945 | |||||||||||||||
Average net assets (000) | $35,050 | $34,669 | $44,169 | $44,626 | $39,582 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement(e) | 1.79% | 1.79% | 1.78% | 1.66% | 1.65% | |||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.84% | 1.84% | 1.83% | 1.71% | 1.70% | |||||||||||||||
Net investment income | 1.14% | 1.59% | 1.56% | 1.17% | 1.30% | |||||||||||||||
Portfolio turnover rate | 21% | 16% | 25% | 40% | 40% |
(a) Total return does not consider the effect of sales load. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles.
(b) Calculated based on the average shares outstanding during the year.
(c) Does not include expenses of the underlying portfolio in which the Series invests.
(d) The Series received payments related to a former affiliate’s settlement of regulatory proceedings involving allegations of improper trading in Series shares during the fiscal year ended October 31, 2010. The Series was not involved in the proceedings or in the calculation of the amount of the settlement.
(e) The distributor of the Fund has contractually agreed to limit its distribution and service (12b-1) fees to .25 of 1% of the average daily assets of Class A shares.
See Notes to Financial Statements.
40 |
Class B Shares | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Operating Performance(b): | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $18.46 | $17.93 | $19.37 | $17.64 | $14.58 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .08 | .15 | .16 | .08 | .08 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 3.65 | .54 | (1.56 | ) | 1.63 | 3.45 | ||||||||||||||
Total from investment operations | 3.73 | .69 | (1.40 | ) | 1.71 | 3.53 | ||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.26 | ) | (.16 | ) | (.04 | ) | (.01 | ) | (.47 | ) | ||||||||||
Capital contributions(d) | - | - | - | .03 | - | |||||||||||||||
Net asset value, end of year | $21.93 | $18.46 | $17.93 | $19.37 | $17.64 | |||||||||||||||
Total Return(a): | 20.43% | 3.91% | (7.26)% | 9.86% | 25.11% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $1,540 | $1,457 | $1,975 | $3,093 | $3,839 | |||||||||||||||
Average net assets (000) | $1,468 | $1,655 | $2,651 | $3,314 | $3,985 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 2.54% | 2.54% | 2.52% | 2.41% | 2.40% | |||||||||||||||
Expenses before waivers and/or expense reimbursement | 2.54% | 2.54% | 2.52% | 2.41% | 2.40% | |||||||||||||||
Net investment income | .40% | .83% | .81% | .43% | .58% | |||||||||||||||
Portfolio turnover rate | 21% | 16% | 25% | 40% | 40% |
(a) Total return does not consider the effect of sales load. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles.
(b) Calculated based on the average shares outstanding during the year.
(c) Does not include expenses of the underlying portfolio in which the Series invests.
(d) The Series received payments related to a former affiliate’s settlement of regulatory proceedings involving allegations of improper trading in Series shares during the fiscal year ended October 31, 2010. The Series was not involved in the proceedings or in the calculation of the amount of the settlement.
See Notes to Financial Statements.
Prudential International Value Fund | 41 |
Financial Highlights
continued
Class C Shares | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Operating Performance(b): | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $18.49 | $17.96 | $19.40 | $17.66 | $14.60 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .08 | .15 | .16 | .07 | .08 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 3.66 | .54 | (1.56 | ) | 1.65 | 3.45 | ||||||||||||||
Total from investment operations | 3.74 | .69 | (1.40 | ) | 1.72 | 3.53 | ||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.26 | ) | (.16 | ) | (.04 | ) | (.01 | ) | (.47 | ) | ||||||||||
Capital contributions(d) | - | - | - | .03 | - | |||||||||||||||
Net asset value, end of year | $21.97 | $18.49 | $17.96 | $19.40 | $17.66 | |||||||||||||||
Total Return(a): | 20.45% | 3.90% | (7.25)% | 9.91% | 25.08% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $4,870 | $4,784 | $5,947 | $6,828 | $7,507 | |||||||||||||||
Average net assets (000) | $4,802 | $5,132 | $6,690 | $6,760 | $6,807 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 2.54% | 2.54% | 2.53% | 2.41% | 2.40% | |||||||||||||||
Expenses before waivers and/or expense reimbursement | 2.54% | 2.54% | 2.53% | 2.41% | 2.40% | |||||||||||||||
Net investment income | .38% | .83% | .81% | .42% | .58% | |||||||||||||||
Portfolio turnover rate | 21% | 16% | 25% | 40% | 40% |
(a) Total return does not consider the effect of sales load. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles.
(b) Calculated based on the average shares outstanding during the year.
(c) Does not include expenses of the underlying portfolio in which the Series invests.
(d) The Series received payments related to a former affiliate’s settlement of regulatory proceedings involving allegations of improper trading in Series shares during the fiscal year ended October 31, 2010. The Series was not involved in the proceedings or in the calculation of the amount of the settlement.
See Notes to Financial Statements.
42 |
Financial Highlights
Class Z Shares | ||||||||||||||||||||
Year Ended October 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Per Share Operating Performance(b): | ||||||||||||||||||||
Net Asset Value, Beginning Of Year | $19.48 | $18.93 | $20.42 | $18.55 | $15.37 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income | .29 | .34 | .24 | .26 | .24 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 3.87 | .56 | (1.51 | ) | 1.74 | 3.62 | ||||||||||||||
Total from investment operations | 4.16 | .90 | (1.27 | ) | 2.00 | 3.86 | ||||||||||||||
Less Dividends and Distributions: | ||||||||||||||||||||
Dividends from net investment income | (.44 | ) | (.35 | ) | (.22 | ) | (.16 | ) | (.68 | ) | ||||||||||
Capital contributions(d) | - | - | - | .03 | - | |||||||||||||||
Net asset value, end of year | $23.20 | $19.48 | $18.93 | $20.42 | $18.55 | |||||||||||||||
Total Return(a): | 21.73% | 4.92% | (6.30)% | 11.01% | 26.41% | |||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of year (000) | $62,498 | $56,753 | $52,086 | $159,020 | $136,238 | |||||||||||||||
Average net assets (000) | $58,925 | $53,465 | $79,550 | $139,023 | $115,310 | |||||||||||||||
Ratios to average net assets(c): | ||||||||||||||||||||
Expenses after waivers and/or expense reimbursement | 1.54% | 1.54% | 1.47% | 1.41% | 1.40% | |||||||||||||||
Expenses before waivers and/or expense reimbursement | 1.54% | 1.54% | 1.47% | 1.41% | 1.40% | |||||||||||||||
Net investment income | 1.37% | 1.86% | 1.16% | 1.41% | 1.58% | |||||||||||||||
Portfolio turnover rate | 21% | 16% | 25% | 40% | 40% |
(a) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each year reported and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles.
(b) Calculated based on the average shares outstanding during the year.
(c) Does not include expenses of the underlying portfolio in which the Series invests.
(d) The Series received payments related to a former affiliate’s settlement of regulatory proceedings involving allegations of improper trading in Series shares during the fiscal year ended October 31, 2010. The Series was not involved in the proceedings or in the calculation of the amount of the settlement.
See Notes to Financial Statements.
Prudential International Value Fund | 43 |
Report of Independent Registered Public
Accounting Firm
The Board of Directors and Shareholders
Prudential World Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Prudential International Value Fund, a series of Prudential World Fund, Inc., (hereafter referred to as the “Fund”), including the portfolio of investments, as of October 31, 2013, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2013, by correspondence with the custodian, transfer agent and brokers or by other appropriate auditing procedures when replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Fund as of October 31, 2013, and the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York
December 20, 2013
44 |
Tax Information
(Unaudited)
For the year ended October 31, 2013, the Series reports 100% of the ordinary income dividends paid during the year as qualified dividend income in accordance with Section 854 of the Internal Revenue Code.
For the fiscal year ended October 31, 2013, the Series made an election to pass through the maximum amount of the portion of the ordinary income dividends paid derived from foreign source income as well as any foreign taxes paid by the Series in accordance with Section 853 of the Internal Revenue Code of the following amounts: $188,539 foreign tax credit from recognized foreign source income of $3,134,348.
In January 2014, you will be advised on IRS Form 1099-DIV or substitute 1099-DIV as to the federal tax status of distributions received by you in calendar year 2013.
Prudential International Value Fund | 45 |
INFORMATION ABOUT BOARD MEMBERS AND OFFICERS
(Unaudited)
Information about Board Members and Officers of the Fund is set forth below. Board Members who are not deemed to be “interested persons” of the Fund, as defined in the 1940 Act, are referred to as “Independent Board Members.” Board Members who are deemed to be “interested persons” of the Fund are referred to as “Interested Board Members.” The Board Members are responsible for the overall supervision of the operations of the Fund and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Board in turn elects the Officers, who are responsible for administering the day-to-day operations of the Fund.
Independent Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Ellen S. Alberding (55) Board Member Portfolios Overseen: 64 | President and Board Member, The Joyce Foundation (charitable foundation) (since 2002); Vice Chair, City Colleges of Chicago (community college system) (since 2011); Trustee, Skills for America’s Future (national initiative to connect employers to community colleges) (since 2011); Trustee, National Park Foundation (charitable foundation for national park system) (since 2009); Trustee, Economic Club of Chicago (since 2009). | None. | ||
Kevin J. Bannon (61) Board Member Portfolios Overseen: 64 | Managing Director (since April 2008) and Chief Investment Officer (since October 2008) of Highmount Capital LLC (registered investment adviser); formerly Executive Vice President and Chief Investment Officer (April 1993-August 2007) of Bank of New York Company; President (May 2003-May 2007) of BNY Hamilton Family of Mutual Funds. | Director of Urstadt Biddle Properties (since September 2008). | ||
Linda W. Bynoe (61) Board Member Portfolios Overseen: 64 | President and Chief Executive Officer (since March 1995) and formerly Chief Operating Officer (December 1989-February 1995) of Telemat Ltd. (management consulting); formerly Vice President (January 1985-June 1989) at Morgan Stanley & Co (broker-dealer). | Director of Simon Property Group, Inc. (retail real estate) (May 2003-May 2012); Director of Anixter International, Inc. (communication products distributor) (since January 2006); Director of Northern Trust Corporation (financial services) (since April 2006); Trustee of Equity Residential (residential real estate) (since December 2009). |
Prudential International Value Fund
Independent Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Keith F. Hartstein (57) Board Member Portfolios Overseen: 64 | Formerly President and Chief Executive Officer (2005-2012), Senior Vice President (2004-2005), Senior Vice President of Sales and Marketing (1997-2004), and various executive management positions (1990-1997), John Hancock Funds, LLC (asset management); Chairman, Investment Company Institute’s Sales Force Marketing Committee (2003-2008). | None. | ||
Michael S. Hyland, CFA (68) Board Member Portfolios Overseen: 64 | Independent Consultant (since February 2005); formerly Senior Managing Director (July 2001-February 2005) of Bear Stearns & Co, Inc.; Global Partner, INVESCO (1999-2001); Managing Director and President of Salomon Brothers Asset Management (1989-1999). | None. | ||
Douglas H. McCorkindale (74) Board Member Portfolios Overseen: 64 | Formerly Chairman (February 2001-June 2006), Chief Executive Officer (June 2000-July 2005), President (September 1997-July 2005) and Vice Chairman (March 1984-May 2000) of Gannett Co. Inc. (publishing and media). | Director of Lockheed Martin Corp. (aerospace and defense) (since May 2001). | ||
Stephen P. Munn (71) Board Member Portfolios Overseen: 64 | Lead Director (since 2007) and formerly Chairman (1993-2007) of Carlisle Companies Incorporated (manufacturer of industrial products). | Lead Director (since 2007) of Carlisle Companies Incorporated (manufacturer of industrial products). | ||
James E. Quinn (61) Board Member Portfolios Overseen: 64 | Formerly President (2003-2012) and Director (2003-2008), and Vice Chairman and Director (1998-2003), Tiffany & Company (jewelry retailing); Director, Mutual of America Capital Management Corporation (asset management) (since 1996); Director, Hofstra University (since 2008); Vice Chairman, Museum of the City of New York (since 1984). | Director of Deckers Outdoor Corporation (footwear manufacturer) (since 2011). | ||
Richard A. Redeker (70) Board Member & Independent Chair Portfolios Overseen: 64 | Retired Mutual Fund Senior Executive (44 years); Management Consultant; Independent Directors Council (organization of 2,800 Independent Mutual Fund Directors)-Executive Committee, Chair of Policy Steering Committee, Governing Council. | None. |
Visit our website at www.prudentialfunds.com
Independent Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Robin B. Smith (74) Board Member Portfolios Overseen: 64 | Chairman of the Board (since January 2003) of Publishers Clearing House (direct marketing); Member of the Board of Directors of ADLPartner (marketing) (since December 2010); formerly Chairman and Chief Executive Officer (August 1996-January 2003) of Publishers Clearing House. | Formerly Director of BellSouth Corporation (telecommunications) (1992-2006). | ||
Stephen G. Stoneburn (70) Board Member Portfolios Overseen: 64 | Chairman, (since July 2011), President and Chief Executive Officer (since June 1996) of Quadrant Media Corp. (publishing company); formerly President (June 1995-June 1996) of Argus Integrated Media, Inc.; Senior Vice President and Managing Director (January 1993-1995) of Cowles Business Media; Senior Vice President of Fairchild Publications, Inc. (1975-1989). | None. | ||
Interested Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Stuart S. Parker (51) Board Member & President Portfolios Overseen: 59 | President of Prudential Investments LLC (since January 2012); Executive Vice President of Prudential Investment Management Services LLC (since December 2012); Executive Vice President of Jennison Associates LLC and Head of Retail Distribution of Prudential Investments LLC (June 2005 - December 2011). | None. | ||
Scott E. Benjamin (40) Board Member & Vice President Portfolios Overseen: 64 | Executive Vice President (since June 2009) of Prudential Investments LLC; Executive Vice President (June 2009-June 2012) and Vice President (since June 2012) of Prudential Investment Management Services LLC; Executive Vice President (since September 2009) of AST Investment Services, Inc.; Senior Vice President of Product Development and Marketing, Prudential Investments (since February 2006); Vice President of Product Development and Product Management, Prudential Investments (2003-2006). | None. |
Prudential International Value Fund
(1) | The year that each Board Member joined the Funds’ Board is as follows: |
Ellen S. Alberding; 2013; Kevin J. Bannon, 2008; Linda W. Bynoe, 2005; Keith F. Hartstein, 2013; Michael S. Hyland, 2008; Douglas H. McCorkindale, 2003; Stephen P. Munn, 2008; James E. Quinn, 2013; Richard A. Redeker, 2003; Robin B. Smith, 1996; Stephen G. Stoneburn, 1996; Stuart S. Parker, Board Member and President since 2012; Scott E. Benjamin, Board Member since 2010 and Vice President since 2009.
Fund Officers(a) | ||||
Name, Address and Age Position with Fund | Principal Occupation(s) During Past Five Years | Length of Service as Fund Officer | ||
Raymond A. O’Hara (58) Chief Legal Officer | Vice President and Corporate Counsel (since July 2010) of Prudential Insurance Company of America (Prudential); Vice President (March 2011-Present) of Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey; Vice President and Corporate Counsel (March 2011-Present) of Prudential Annuities Life Assurance Corporation; Chief Legal Officer of Prudential Investments LLC (since June 2012); Chief Legal Officer of Prudential Mutual Fund Services LLC (since June 2012) and Corporate Counsel of AST Investment Services, Inc. (since June 2012); formerly Assistant Vice President and Corporate Counsel (September 2008-July 2010) of The Hartford Financial Services Group, Inc.; formerly Associate (September 1980-December 1987) and Partner (January 1988–August 2008) of Blazzard & Hasenauer, P.C. (formerly, Blazzard, Grodd & Hasenauer, P.C.). | Since 2012 | ||
Deborah A. Docs (55) Secretary | Vice President and Corporate Counsel (since January 2001) of Prudential; Vice President (since December 1996) and Assistant Secretary (since March 1999) of Prudential Investments LLC; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc. | Since 2004 | ||
Jonathan D. Shain (55) Assistant Secretary | Vice President and Corporate Counsel (since August 1998) of Prudential; Vice President and Assistant Secretary (since May 2001) of Prudential Investments LLC; Vice President and Assistant Secretary (since February 2001) of Prudential Mutual Fund Services LLC; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc. | Since 2005 | ||
Claudia DiGiacomo (39) Assistant Secretary | Vice President and Corporate Counsel (since January 2005) of Prudential; Vice President and Assistant Secretary of Prudential Investments LLC (since December 2005); Associate at Sidley Austin Brown & Wood LLP (1999-2004). | Since 2005 | ||
Andrew R. French (51) Assistant Secretary | Vice President and Corporate Counsel (since February 2010) of Prudential; formerly Director and Corporate Counsel (2006-2010) of Prudential; Vice President and Assistant Secretary (since January 2007) of Prudential Investments LLC; Vice President and Assistant Secretary (since January 2007) of Prudential Mutual Fund Services LLC. | Since 2006 |
Visit our website at www.prudentialfunds.com
Fund Officers(a) | ||||
Name, Address and Age Position with Fund | Principal Occupation(s) During Past Five Years | Length of Service as Fund Officer | ||
Amanda S. Ryan (35) Assistant Secretary | Director and Corporate Counsel (since March 2012) of Prudential; Director and Assistant Secretary (since June 2012) of Prudential Investments LLC; Associate at Ropes & Gray LLP (2008-2012). | Since 2012 | ||
Bruce Karpati (43) Chief Compliance Officer | Chief Compliance Officer of the Prudential Investments Funds, Target Funds, Advanced Series Trust, the Prudential Series Fund and Prudential’s Gibraltar Fund, Inc. (May 2013 - Present); formerly National Chief (May 2012 - May 2013) and Co-Chief (January 2010 - May 2012) of the Asset Management Unit, Division of Enforcement, of the U.S. Securities and Exchange Commission; Assistant Regional Director (January 2005 - January 2010) of the U.S. Securities and Exchange Commission. | Since 2013 | ||
Theresa C. Thompson (51) Deputy Chief Compliance Officer | Vice President, Compliance, Prudential Investments LLC (since April 2004); and Director, Compliance, Prudential Investments LLC (2001-2004). | Since 2008 | ||
Richard W. Kinville (45) Anti-Money Laundering Compliance Officer | Vice President, Corporate Compliance, Anti-Money Laundering Unit (since January 2005) of Prudential; committee member of the American Council of Life Insurers Anti-Money Laundering and Critical Infrastructure Committee (since January 2007); formerly Investigator and Supervisor in the Special Investigations Unit for the New York Central Mutual Fire Insurance Company (August 1994-January 1999); Investigator in AXA Financial’s Internal Audit Department and Manager in AXA’s Anti-Money Laundering Office (January 1999-January 2005); first chair of the American Council of Life Insurers Anti-Money Laundering and Critical Infrastructure Committee (June 2007-December 2009). | Since 2011 | ||
Grace C. Torres (54) Treasurer and Principal Financial and Accounting Officer | Assistant Treasurer (since March 1999) and Senior Vice President (since September 1999) of Prudential Investments LLC; Assistant Treasurer (since May 2003) and Vice President (since June 2005) of AST Investment Services, Inc.; Senior Vice President and Assistant Treasurer (since May 2003) of Prudential Annuities Advisory Services, Inc.; formerly Senior Vice President (May 2003-June 2005) of AST Investment Services, Inc. | Since 1998 | ||
M. Sadiq Peshimam (49) Assistant Treasurer | Vice President (since 2005) of Prudential Investments LLC. | Since 2006 | ||
Peter Parrella (55) Assistant Treasurer | Vice President (since 2007) and Director (2004-2007) within Prudential Mutual Fund Administration; formerly Tax Manager at SSB Citi Fund Management LLC (1997-2004). | Since 2007 |
(a) | Excludes Mr. Parker and Mr. Benjamin, interested Board Members who also serve as President and Vice President, respectively. |
Prudential International Value Fund
Explanatory Notes to Tables:
• | Board Members are deemed to be “Interested,” as defined in the 1940 Act, by reason of their affiliation with Prudential Investments LLC and/or an affiliate of Prudential Investments LLC. |
• | Unless otherwise noted, the address of all Board Members and Officers is c/o Prudential Investments LLC, Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077. |
• | There is no set term of office for Board Members or Officers. The Board Members have adopted a retirement policy, which calls for the retirement of Board Members on December 31 of the year in which they reach the age of 75. |
• | “Other Directorships Held” includes only directorships of companies required to register or file reports with the SEC under the 1934 Act (that is, “public companies”) or other investment companies registered under the 1940 Act. |
• | “Portfolios Overseen” includes all investment companies managed by Prudential Investments LLC. The investment companies for which Prudential Investments LLC serves as manager include the Prudential Investments Mutual Funds, The Prudential Variable Contract Accounts, Target Mutual Funds, Prudential Short Duration High Yield Fund, Inc., Prudential Global Short Duration High Yield Fund, Inc., The Prudential Series Fund, Prudential’s Gibraltar Fund, Inc. and the Advanced Series Trust. |
Visit our website at www.prudentialfunds.com
Approval of Advisory Agreements
The Fund’s Board of Directors
The Board of Directors (the “Board”) of Prudential International Value Fund (the “Fund”)1 consists of ten individuals, eight of whom are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Directors”).2 The Board is responsible for the oversight of the Fund and its operations, and performs the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Directors have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Director. The Board has established three standing committees: the Audit Committee, the Nominating and Governance Committee, and the Investment Committee. Each committee is chaired by, and composed of, Independent Directors.
Annual Approval of the Fund’s Advisory Agreements
As required under the 1940 Act, the Board determines annually whether to renew the Fund’s management agreement with Prudential Investments LLC (“PI”) and the Fund’s subadvisory agreements with each of LSV Asset Management (“LSV”) and Thornburg Investment Management, Inc. (“Thornburg”). In considering the renewal of the agreements, the Board, including all of the Independent Directors, met on June 4-6, 2013 and approved the renewal of the agreements through July 31, 2014, after concluding that the renewal of the agreements was in the best interests of the Fund and its shareholders.
In advance of the meetings, the Board requested and received materials relating to the agreements, and had the opportunity to ask questions and request further information in connection with its consideration. Among other things, the Board considered comparative fee information from PI, LSV and Thornburg. Also, the Board considered comparisons with other mutual funds in relevant Peer Universes and Peer Groups, as is further discussed below.
In approving the agreements, the Board, including the Independent Directors advised by independent legal counsel, considered the factors it deemed relevant, including the nature, quality and extent of services provided by PI and each subadviser, the performance of the Fund, the profitability of PI and its affiliates, expenses and fees, and the potential for economies of scale that may be shared with the Fund and its shareholders as the Fund’s assets grow. In their deliberations, the Directors did not identify any single factor which alone was responsible for the Board’s decision to approve the agreements with respect to the Fund. In connection with its deliberations,
1 | Prudential International Value Fund is a series of Prudential World Fund, Inc. |
2 | Ms. Alberding and Mssrs. Hartstein and Quinn were elected to the Board effective September 1, 2013. |
Prudential International Value Fund
Approval of Advisory Agreements (continued)
the Board considered information provided by PI throughout the year at regular Board meetings, presentations from portfolio managers and other information, as well as information furnished at or in advance of the meetings on June 4-6, 2013.
The Directors determined that the overall arrangements between the Fund and PI, which serves as the Fund’s investment manager pursuant to a management agreement, and between PI and each of LSV and Thornburg, which serve as the Fund’s subadvisers pursuant to the terms of subadvisory agreements with PI, are in the best interests of the Fund and its shareholders in light of the services performed, fees charged and such other matters as the Directors considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the Directors’ reaching their determinations to approve the continuance of the agreements are separately discussed below.
Nature, Quality, and Extent of Services
The Board received and considered information regarding the nature, quality and extent of services provided to the Fund by PI, LSV and Thornburg. The Board considered the services provided by PI, including but not limited to the oversight of the subadvisers for the Fund, as well as the provision of fund recordkeeping, compliance, and other services to the Fund. With respect to PI’s oversight of the subadvisers, the Board noted that PI’s Strategic Investment Research Group (“SIRG”), which is a business unit of PI, is responsible for screening and recommending new subadvisers when appropriate, as well as monitoring and reporting to the Board on the performance and operations of the subadvisers. The Board also considered that PI pays the salaries of all of the officers and non-independent Directors of the Fund. The Board also considered the investment subadvisory services provided by LSV and Thornburg, as well as adherence to the Fund’s investment restrictions and compliance with applicable Fund policies and procedures. The Board considered PI’s evaluations of the subadvisers, as well as PI’s recommendation, based on its review of each subadviser, to renew the subadvisory agreements.
The Board considered the qualifications, backgrounds and responsibilities of PI’s senior management responsible for the oversight of the Fund, LSV and Thornburg, and also considered the qualifications, backgrounds and responsibilities of the LSV and Thornburg portfolio managers who are responsible for the day-to-day management of the Fund’s portfolio. The Board was provided with information pertaining to PI’s, LSV’s and Thornburg’s organizational structure, senior management, investment operations, and other relevant information pertaining to PI, LSV and Thornburg. The Board also noted that it received favorable compliance
Visit our website at www.prudentialfunds.com
reports from the Fund’s Chief Compliance Officer (“CCO”) as to each of PI, LSV and Thornburg.
The Board concluded that it was satisfied with the nature, extent and quality of the investment management services provided by PI and the subadvisory services provided to the Fund by LSV and Thornburg, and that there was a reasonable basis on which to conclude that the Fund benefits from the services provided by PI, LSV and Thornburg under the management and subadvisory agreements.
Costs of Services and Profits Realized by PI
The Board was provided with information on the profitability of PI in serving as the Fund’s investment manager. The Board discussed with PI the methodology utilized in assembling the information regarding profitability and considered its reasonableness. The Board recognized that it is difficult to make comparisons of profitability from fund management contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser’s capital structure and cost of capital. Taking these factors into account, the Board concluded that the profitability of PI in relation to the services rendered was not unreasonable.
The Board considered information about the profitability of LSV and Thornburg, but concluded that the level of a subadviser’s profitability may not be as significant given the arm’s length nature of the process by which the subadvisory fee rates were negotiated by PI, LSV and Thornburg as well as the fact that PI compensates the subadvisers out of its management fee.
Economies of Scale
The Board received and discussed information concerning whether PI realizes economies of scale as the Fund’s assets grow beyond current levels. The Board noted that the management fee schedule for the Fund includes breakpoints, which have the effect of decreasing the fee rate as assets increase, but at the current level of assets the Fund does not realize the effect of those rate reductions. The Board took note that the Fund’s fee structure would result in benefits to Fund shareholders when (and if) assets reach the levels at which the fee rate is reduced. These benefits will accrue whether or not PI is then realizing any economies of scale. The Board also recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board’s understanding that most of PI’s costs are not specific to individual funds, but rather are incurred across a variety of products and services.
Prudential International Value Fund
Approval of Advisory Agreements (continued)
Other Benefits to PI, LSV, and Thornburg
The Board considered potential ancillary benefits that might be received by PI, LSV and Thornburg and their affiliates as a result of their relationship with the Fund. The Board concluded that potential benefits to be derived by PI included fees received by affiliates of PI for serving as the Fund’s securities lending agent, transfer agency fees received by the Fund’s transfer agent (which is affiliated with PI), and benefits to its reputation as well as other intangible benefits resulting from PI’s association with the Fund. The Board concluded that the potential benefits to be derived by LSV and Thornburg included their ability to use soft dollar credits, brokerage commissions received by affiliates of LSV or Thornburg, as well as the potential benefits consistent with those generally resulting from an increase in assets under management, specifically, potential access to additional research resources and benefits to their reputations. The Board concluded that the benefits derived by PI, LSV and Thornburg were consistent with the types of benefits generally derived by investment managers and subadvisers to mutual funds.
Performance of the Fund/Fees and Expenses
The Board considered certain additional specific factors and made related conclusions relating to the historical performance of the Fund for the one-, three-, five- and ten-year periods ended December 31, 2012.
The Board also considered the Fund’s actual management fee, as well as the Fund’s net total expense ratio, for the fiscal year ended October 31, 2012. The Board considered the management fee for the Fund as compared to the management fee charged by PI to other funds and the fee charged by other advisers to comparable mutual funds in a Peer Group. The actual management fee represents the fee rate actually paid by Fund shareholders and includes any fee waivers or reimbursements. The net total expense ratio for the Fund represents the actual expense ratio incurred by Fund shareholders.
The mutual funds included in the Peer Universe (a blend of the Lipper International Large-Cap Core Funds and International Multi-Cap Core Funds Performance Universes)3 and the Peer Group were objectively determined by Lipper Inc. (“Lipper”), an independent provider of mutual fund data. To the extent that PI deemed appropriate, and for reasons addressed in detail with the Board, PI may have provided supplemental data compiled by Lipper for the Board’s consideration. The comparisons
3 | Although Lipper classifies the Fund in its International Multi-Cap Core Funds Performance Universe, the International Large-Cap Core Funds and International Multi-Cap Core Funds Performance Universes were utilized because PI believes that the funds included in these Universes provide a more appropriate basis for Fund performance comparisons. |
Visit our website at www.prudentialfunds.com
placed the Fund in various quartiles, with the first quartile being the best 25% of the mutual funds (for performance, the best performing mutual funds and, for expenses, the lowest cost mutual funds).
The section below summarizes key factors considered by the Board and the Board’s conclusions regarding the Fund’s performance, fees and overall expenses. The table sets forth gross performance comparisons (which do not reflect the impact on performance of fund expenses, or any subsidies, expense caps or waivers that may be applicable) with the Peer Universe, actual management fees with the Peer Group (which reflect the impact of any subsidies or fee waivers), and net total expenses with the Peer Group, each of which were key factors considered by the Board.
Performance | 1 Year | 3 Years | 5 Years | 10 Years | ||||
3rd Quartile | 2nd Quartile | 3rd Quartile | 2nd Quartile | |||||
Actual Management Fees: 4th Quartile | ||||||||
Net Total Expenses: 4th Quartile |
• | The Board noted that the Fund outperformed its benchmark index over all periods. |
• | The Board considered that when it reviewed the Fund’s agreements a year earlier, the Fund ranked in the second quartile of its Peer Universe for all periods except the ten-year period. |
• | The Board concluded that, in light of the Fund’s competitive performance over time, it would be in the best interests of the Fund and its shareholders to renew the agreements. |
• | The Board concluded that the management fees (including subadvisory fees) and total expenses were reasonable in light of the services provided. |
* * *
After full consideration of these factors, the Board concluded that approval of the agreements was in the best interests of the Fund and its shareholders.
Prudential International Value Fund
n MAIL | n TELEPHONE | n WEBSITE | ||
Gateway Center Three 100 Mulberry Street Newark, NJ 07102 | (800) 225-1852 | www.prudentialfunds.com |
PROXY VOTING |
The Board of Directors of the Fund has delegated to the Fund’s investment subadvisers the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852 or by visiting the Securities and Exchange Commission’s website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the Securities and Exchange Commission’s website. |
DIRECTORS |
Ellen S. Alberding • Kevin J. Bannon • Scott E. Benjamin • Linda W. Bynoe • Keith F. Hartstein • Michael S. Hyland • Douglas H. McCorkindale • Stephen P. Munn • Stuart S. Parker • James E. Quinn • Richard A. Redeker • Robin B. Smith • Stephen G. Stoneburn |
OFFICERS |
Stuart S. Parker, President • Scott E. Benjamin, Vice President • Grace C. Torres, Treasurer and Principal Financial and Accounting Officer • Raymond A. O’Hara, Chief Legal Officer • Deborah A. Docs, Secretary • Bruce Karpati, Chief Compliance Officer • Theresa C. Thompson, Deputy Chief Compliance Officer • Richard W. Kinville, Anti-Money Laundering Compliance Officer • Jonathan D. Shain, Assistant Secretary • Claudia DiGiacomo, Assistant Secretary • Amanda S. Ryan, Assistant Secretary • Andrew R. French, Assistant Secretary • M. Sadiq Peshimam, Assistant Treasurer • Peter Parrella, Assistant Treasurer |
MANAGER | Prudential Investments LLC | Gateway Center Three 100 Mulberry Street Newark, NJ 07102 | ||
| ||||
INVESTMENT SUBADVISERS | LSV Asset Management | 155 North Wacker Drive 46th Floor Chicago, IL 60606 | ||
| ||||
Thornburg Investment Management, Inc. | 2300 North Ridgetop Road Santa Fe, NM 87506 | |||
| ||||
DISTRIBUTOR | Prudential Investment Management Services LLC | Gateway Center Three 100 Mulberry Street Newark, NJ 07102 | ||
| ||||
CUSTODIAN | The Bank of New York Mellon | One Wall Street New York, NY 10286 | ||
| ||||
TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
| ||||
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
| ||||
FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 |
An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain a prospectus and summary prospectus by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
E-DELIVERY |
To receive your mutual fund documents online, go to www.prudentialfunds.com/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above. |
SHAREHOLDER COMMUNICATIONS WITH DIRECTORS |
Shareholders can communicate directly with the Board of Directors by writing to the Chair of the Board, Prudential International Value Fund, Prudential Investments, Attn: Board of Directors, 100 Mulberry Street, Gateway Center Three, Newark, NJ 07102. Shareholders can communicate directly with an individual Director by writing to the same address. Communications are not screened before being delivered to the addressee. |
AVAILABILITY OF PORTFOLIO SCHEDULE |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation and location of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund’s schedule of portfolio holdings is also available on the Fund’s website as of the end of each month. |
The Fund’s Statement of Additional Information contains additional information about the Fund’s Directors and is available without charge, upon request, by calling (800) 225-1852. |
Mutual Funds:
ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY | MAY LOSE VALUE | ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE |
PRUDENTIAL INTERNATIONAL VALUE FUND
SHARE CLASS | A | B | C | Z | ||||
NASDAQ | PISAX | PISBX | PCISX | PISZX | ||||
CUSIP | 743969503 | 743969602 | 743969701 | 743969800 |
MF115E 0255243-00001-00
PRUDENTIAL INVESTMENTS»MUTUAL FUNDS
PRUDENTIAL EMERGING MARKETS DEBT LOCAL CURRENCY FUND
ANNUAL REPORT · OCTOBER 31, 2013
Fund Type
Emerging Market Bond
Objective
Total return, through a combination of current income and capital appreciation
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.
The views expressed in this report and information about the Fund’s portfolio holdings are for the period covered by this report and are subject to change thereafter.
Mutual funds are distributed by Prudential Investment Management Services LLC (PIMS). Prudential Fixed Income is a unit of Prudential Investment Management, Inc. (PIM), a registered investment advisor. PIMS and PIM are Prudential Financial companies. © 2013 Prudential Financial, Inc., and its related entities. Prudential Investments, Prudential, the Prudential logo, Bring Your Challenges, and the Rock symbol are service marks of Prudential Financial, Inc., and its related entities, registered in many jurisdictions worldwide.
December 16, 2013
Dear Shareholder:
We hope you find the annual report for the Prudential Emerging Markets Debt Local Currency Fund informative and useful. The report covers performance for the 12-month period that ended October 31, 2013.
We recognize that ongoing market volatility may make it a difficult time to be an investor. We continue to believe a prudent response to uncertainty is to maintain a diversified portfolio of funds consistent with your tolerance for risk, time horizon, and financial goals.
Your financial advisor can help you create a diversified investment plan that may include funds covering all the basic asset classes and that reflects your personal investor profile and risk tolerance. Keep in mind, however, that diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.
Prudential Investments® is dedicated to helping you solve your toughest investment challenges—whether it’s capital growth, reliable income, or protection from market volatility and other risks. We offer the expertise of Prudential Financial’s affiliated asset managers* that strive to be leaders in a broad range of funds to help you stay on course to the future you envision. They also manage money for major corporations and pension funds around the world, which means you benefit from the same expertise, innovation, and attention to risk demanded by today’s most sophisticated investors.
Thank you for choosing the Prudential Investments family of funds.
Sincerely,
Stuart S. Parker, President
Prudential Emerging Markets Debt Local Currency Fund
*Most of Prudential Investments’ equity funds are advised by Jennison Associates LLC, Quantitative Management Associates LLC (QMA), or Prudential Real Estate Investors. Prudential Investments’ fixed income and money market funds are advised by Prudential Investment Management, Inc. (PIM) through its Prudential Fixed Income unit. Jennison Associates, QMA, and PIM are registered investment advisers and Prudential Financial companies. Prudential Real Estate Investors is a unit of PIM.
Prudential Emerging Markets Debt Local Currency Fund | 1 |
Your Fund’s Performance (Unaudited)
Performance data quoted represent past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the past performance data quoted. An investor may obtain performance data as of the most recent month-end by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852.
Cumulative Total Returns (Without Sales Charges) as of 10/31/13 | ||||||
One Year | Since Inception | |||||
Class A | –3.23 | % | 1.72% (3/30/11) | |||
Class C | –3.85 | 0.60 (3/30/11) | ||||
Class Q | –3.06 | 2.63 (3/30/11) | ||||
Class Z | –2.98 | 2.64 (3/30/11) | ||||
JP Morgan Government Bond Index-Emerging Markets Global Diversified Index | –1.60 | 5.92 | ||||
Lipper Emerging Markets Local Currency Debt Funds Average | –2.58 | 5.04 | ||||
Average Annual Total Returns (With Sales Charges) as of 9/30/13 | ||||||
One Year | Since Inception | |||||
Class A | –10.03 | % | –2.46% (3/30/11) | |||
Class C | –7.16 | –1.06 (3/30/11) | ||||
Class Q | –5.41 | –0.26 (3/30/11) | ||||
Class Z | –5.42 | –0.25 (3/30/11) | ||||
JP Morgan Government Bond Index-Emerging Markets Global Diversified Index | –3.74 | 1.22 | ||||
Lipper Emerging Markets Local Currency Debt Funds Average | –4.35 | 0.94 | ||||
Average Annual Total Returns (With Sales Charges) as of 10/31/13 | ||||||
One Year | Since Inception | |||||
Class A | –7.59 | % | –1.11% (3/30/11) | |||
Class C | –4.75 | 0.23 (3/30/11) | ||||
Class Q | –3.06 | 1.01 (3/30/11) | ||||
Class Z | –2.98 | 1.01 (3/30/11) | ||||
Average Annual Total Returns (Without Sales Charges) as of 10/31/13 | ||||||
One Year | Since Inception | |||||
Class A | –3.23 | % | 0.66% (3/30/11) | |||
Class C | –3.85 | 0.23 (3/30/11) | ||||
Class Q | –3.06 | 1.01 (3/30/11) | ||||
Class Z | –2.98 | 1.01 (3/30/11) |
2 | Visit our website at www.prudentialfunds.com |
Growth of a $10,000 Investment
The graph compares a $10,000 investment in the Prudential Emerging Markets Debt Local Currency Fund (Class A shares) with a similar investment in the JP Morgan Government Bond Index-Emerging Markets Global Diversified Index by portraying the initial account values at the commencement of operations for Class A shares (March 30, 2011) and the account values at the end of the current fiscal year (October 31, 2013), as measured on a quarterly basis. For purposes of the graph, and unless otherwise indicated, it has been assumed that (a) the maximum applicable front-end sales charge was deducted from the initial $10,000 investment in Class A shares; (b) all recurring fees (including management fees) were deducted; and (c) all dividends and distributions were reinvested. The line graph provides information for Class A shares only. As indicated in the tables provided earlier, performance for Class C, Class Q, and Class Z shares will vary due to the differing charges and expenses applicable to each share class (as indicated in the following paragraphs). Without waiver of fees and/or expense reimbursement, if any, the returns would have been lower.
Past performance does not predict future performance. Total returns and the ending account values in the graph include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown. The Fund’s total returns do not reflect the deduction of income taxes on an individual’s investment. Taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares.
Source: Prudential Investments LLC and Lipper Inc.
Inception date: 3/30/11
Prudential Emerging Markets Debt Local Currency Fund | 3 |
Your Fund’s Performance (continued)
The average annual total returns take into account applicable sales charges, which are described for each share class in the table below.
Class A | Class C | Class Q | Class Z | |||||
Maximum initial sales charge | 4.50% of the public offering price | None | None | None | ||||
Contingent deferred sales charge (CDSC) (as a percentage of the lower of original purchase price or sale proceeds) | 1% on sales of $1 million or more made within 12 months of purchase | 1% on sales made within 12 months of purchase | None | None | ||||
Annual distribution and service (12b-1) fees (shown as a percentage of average daily net assets) | .30% (.25% currently) | 1% | None | None |
Benchmark Definitions
JP Morgan Government Bond Index-Emerging Markets Global Diversified Index
The JP Morgan Government Bond Index-Emerging Markets Global Diversified Index (GBI-EM Global Diversified), an unmanaged index, is a comprehensive emerging markets debt benchmark that tracks local currency bonds issued by emerging market governments.
Lipper Emerging Markets Local Currency Debt Funds Average
Funds in the Lipper Emerging Markets Local Currency Debt Funds Average seek either current income or total return by investing at least 65% of total assets in debt issues denominated in the currency of their market of issuance. “Emerging market” is defined by a country’s GNP per capita or other economic measures.
Investors cannot invest directly in an index or average. The returns for the Index would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes. Returns for the Lipper Average reflect the deduction of operating expenses, but not sales charges or taxes.
Distributions and Yields as of 10/31/13 |
| |||||||
Total Distributions Paid for 12 Months | 30-Day SEC Yield | |||||||
Class A | $ | 0.65 | 6.36 | % | ||||
Class C | 0.58 | 5.85 | ||||||
Class Q | | 0.67 | | 7.00 | ||||
Class Z | 0.67 | 6.86 |
4 | Visit our website at www.prudentialfunds.com |
Five Largest Issues expressed as a percentage of net assets as of 10/31/13 |
| |||
South Africa Government Bond, Sr. Unsec’d. Notes, Ser. R209, 6.250%, 03/31/36 | 5.2 | % | ||
Brazil Notas do Tesouro Nacionalie Notes, Ser. NTNF, 10.000%, 01/01/23 | 3.9 | |||
Turkey Government Bond, Bonds, Ser. 5YR, 9.000%, 03/08/17 | 3.6 | |||
Poland Government Bond, Bonds, Ser. 1023, 4.000%, 10/25/23 | 3.4 | |||
Brazil Notas do Tesouro Nacionalie, Sr. Notes, Ser. NTNF, 10.000%, 01/01/17 | 3.1 |
Issues reflect only long-term investments and are subject to change.
Credit Quality* expressed as a percentage of net assets as of 10/31/13 |
| |||
A | 9.0 | % | ||
Baa | 73.0 | |||
Ba | 8.3 | |||
B | 3.2 | |||
Caa | 0.4 | |||
Less than Caa | — | |||
Not Rated | 3.6 | |||
Total Investments | 97.5 | |||
Other assets in excess of liabilities | 2.5 | |||
Net Assets | 100.0 | % | ||
|
|
*Source: Moody’s rating, defaulting to S&P when not rated by Moody’s.
Credit Quality is subject to change.
Prudential Emerging Markets Debt Local Currency Fund | 5 |
Strategy and Performance Overview
How did the Fund Perform?
The Prudential Emerging Markets Debt Local Currency Fund’s Class A shares declined by 3.23% for the 12-month reporting period that ended October 31, 2013, trailing the 1.60% decline of the JP Morgan GBI-EM Global Diversified Index (the Index) and the 2.58% decline of the Lipper Emerging Markets Local Currency Debt Funds Average.
What was the market environment for emerging market bonds denominated in local currencies?
The reporting period that began November 1, 2012, was a challenging one for the fixed income markets overall, particularly in the second quarter of 2013. Market action during this time was dominated by a large upward spike in U.S. Treasury yields that triggered price declines in both developed and emerging market debt instruments.
• | The rapid rise in U.S. Treasury yields was caused mainly by the U.S. Federal Reserve’s statement that it might begin to taper the bond-buying in its quantitative easing program later in the year, if warranted by the economic data. The bellwether 10-year Treasury yield surged from 1.87% on March 31 to almost 3% by early September, an unusually large move in such a short time. |
• | The general sell-off in bonds coincided with political unrest and weaker-than-expected economic reports in a number of emerging market countries, which led to downwardly revised economic forecasts in several countries, including Brazil, China, Indonesia, Mexico, Russia, and Turkey. The weaker outlook hampered emerging market bonds denominated in local currencies in these countries, both because of falling bond prices and due to depreciating currencies. |
• | China experienced a brief credit crunch in June, as a key interbank loan rate surged to roughly 25% at one point, the result of the government’s attempt to rein in unbridled credit demand from banks. This credit crunch was accompanied by a decline in the nation’s bond prices. However, China’s central bank subsequently added liquidity to the banking system, normalizing interbank rates and enabling bond prices there to recover somewhat. |
• | The volatility in interest rates and uncertain economic outlook for many emerging markets led to outflows of investment capital from mid-May through mid-September, reversing the “risk-on” mentality that had prevailed before May, as investors had flocked to emerging markets in search of higher yields. |
• | Emerging market bonds denominated in local currencies rallied in the final month or so of the reporting period, following the Federal Reserve’s September 18 decision not to taper quantitative easing for the time being. |
• | Returns for emerging market government local currency bonds in U.S. dollars without hedging for currency risk varied widely, according to the Index. |
6 | Visit our website at www.prudentialfunds.com |
Which strategies made the most positive and negative contributions to the Fund’s performance?
Prudential Fixed Income manages the Fund, which was well-diversified across a variety of emerging market countries, securities, and currencies. Its portfolio management team closely analyzes each country’s currency, local currency bonds, and hard currency bonds from three viewpoints—fundamental, technical, and relative value. During the period, a number of factors bolstered the Fund’s performance, but they were unfortunately outweighed by two significant negatives.
• | The Fund’s results were dampened by an overweighting in Brazil, which is a core position, as it offers attractive real (inflation-adjusted) yields. However, during the period Brazil experienced current account deterioration and a weak currency, and raised interest rates considerably from April through period-end, all of which hurt its local currency bonds. |
• | The other significant negative was the Fund’s foreign currency positioning. Specifically, short positions in the Japanese yen and other out-of-benchmark, non-U.S. dollar, developed market currencies, which the Fund held in order to fund long positions in emerging market currencies, detracted from performance. |
• | Positive factors included an overweighting in the Philippines, which benefited from a strong political environment that’s open to reforms, a credible central bank, and a solid financing position. |
• | An underweighting and rewarding security selection in Turkey also lifted the Fund’s performance versus the Index. Turkey is a dynamic but unbalanced economy with limited savings and so is reliant on capital from abroad to fund itself. Low real yields and opaque central bank policy leave it vulnerable in Prudential Fixed Income’s view. |
• | Significantly underweighting Indonesian bonds paid off, as this was the Index’s worst-performing emerging debt market in local currency terms during the period. The nation’s currency, the rupiah, and its bonds were hurt by aggressive rate hikes, high inflation, and weak economic growth. |
• | The Fund also benefited from holding select positions in bonds denominated in hard currencies that are not included in the Index. Most notably, it owned short-term bonds of issuers in Venezuela that provided relatively high yields. |
• | Security selection in long-duration positions in countries with steep yield curves, such as Mexico and South Africa, also added value, although at times they lagged when Treasury rates were rising. |
• | Derivatives were used in the Fund and are instrumental in attaining specific exposures targeted to gain from anticipated market developments. The Fund’s emerging markets local duration positioning, which was negative for returns, was partly facilitated through the use of interest rate swaps in Mexico. Currency positioning in the fund was facilitated by the use of currency forward contracts and currency options. During the reporting period, the Fund’s currency exposure detracted from performance. |
Prudential Emerging Markets Debt Local Currency Fund | 7 |
Fees and Expenses (Unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemptions, as applicable, and (2) ongoing costs, including management fees, distribution, and/or service (12b-1) fees, and other Fund expenses, as applicable. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on May 1, 2013, at the beginning of the period, and held through the six-month period ended October 31, 2013. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
Actual Expenses
The first line for each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of
8 | Visit our website at www.prudentialfunds.com |
Prudential Investments funds, including the Fund, that you own. You should consider the additional fees that were charged to your Fund account over the six-month period when you estimate the total ongoing expenses paid over the period and the impact of these fees on your ending account value, as these additional expenses are not reflected in the information provided in the expense table. Additional fees have the effect of reducing investment returns.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Prudential Emerging Markets Debt Local Currency Fund | Beginning Account Value May 1, 2013 | Ending Account October 31, 2013 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 900.80 | 1.30 | % | $ | 6.23 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,018.65 | 1.30 | % | $ | 6.61 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 896.90 | 2.05 | % | $ | 9.80 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,014.87 | 2.05 | % | $ | 10.41 | ||||||||||
Class Q | Actual | $ | 1,000.00 | $ | 901.30 | 1.05 | % | $ | 5.03 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,019.91 | 1.05 | % | $ | 5.35 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 901.50 | 1.05 | % | $ | 5.03 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,019.91 | 1.05 | % | $ | 5.35 |
*Fund expenses (net of fee waivers or subsidies, if any) for each share class are equal to the annualized expense ratio for each share class (provided in the table), multiplied by the average account value over the period, multiplied by the 184 days in the six-month period ended October 31, 2013, and divided by the 365 days in the Fund’s fiscal year ended October 31, 2013 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
Prudential Emerging Markets Debt Local Currency Fund | 9 |
Fees and Expenses (continued)
The Fund’s annual expense ratios for the year ended October 31, 2013, are as follows:
Class | Gross Operating Expenses | Net Operating Expenses | ||
A | 1.78% | 1.30% | ||
C | 2.47 | 2.05 | ||
Q | 1.39 | 1.05 | ||
Z | 1.49 | 1.05 |
Net operating expenses shown above reflect any fee waivers and/or expense reimbursements. Additional information on Fund expenses and any fee waivers and/or expense reimbursements can be found in the “Financial Highlights” tables in this report and in the Notes to the Financial Statements in this report.
10 | Visit our website at www.prudentialfunds.com |
Portfolio of Investments
as of October 31, 2013
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
LONG-TERM INVESTMENTS 97.4% |
| |||||||||||||||
FOREIGN BONDS |
| |||||||||||||||
Barbados 0.4% | ||||||||||||||||
Columbus International, Inc., Sr. Sec’d. Notes, RegS | B2 | 11.500% | 11/20/14 | 170 | $ | 183,175 | ||||||||||
Brazil 16.6% | ||||||||||||||||
Banco BMG SA, Sr. Unsec’d. Notes, RegS | B1 | 9.150 | 01/15/16 | 120 | 126,000 | |||||||||||
Banco Santander Brasil SA, Sr. Unsec’d. Notes, MTN, 144A | Baa2 | 8.000 | 03/18/16 | BRL | 2,250 | 939,090 | ||||||||||
Banco Votorantim Ltd., Sr. Unsec’d. Notes, MTN, RegS | Baa2 | 10.625 | 04/10/14 | BRL | 415 | 184,948 | ||||||||||
Brazil Notas do Tesouro Nacionalie, | ||||||||||||||||
Notes, Ser. NTNF | Baa2 | 10.000 | 01/01/18 | BRL | 1,262 | 536,353 | ||||||||||
Notes, Ser. NTNF | Baa2 | 10.000 | 01/01/21 | BRL | 1,903 | 788,806 | ||||||||||
Notes, Ser. NTNF | Baa2 | 10.000 | 01/01/23 | BRL | 4,197 | 1,706,531 | ||||||||||
Sr. Notes, Ser. NTNF | Baa2 | 10.000 | 01/01/17 | BRL | 3,135 | 1,348,975 | ||||||||||
Brazilian Government International Bond, | ||||||||||||||||
Sr. Unsec’d. Notes | Baa2 | 8.500 | 01/05/24 | BRL | 2,510 | 1,022,398 | ||||||||||
Sr. Unsec’d. Notes | Baa2 | 12.500 | 01/05/16 | BRL | 665 | 314,659 | ||||||||||
Itau Unibanco Holding SA, Sr. Unsec’d. Notes, RegS | Baa2 | 10.500 | 11/23/15 | BRL | 300 | 132,577 | ||||||||||
JBS Finance II Ltd., Gtd. Notes, RegS | Ba3 | 8.250 | 01/29/18 | 150 | 157,125 | |||||||||||
|
| |||||||||||||||
7,257,462 | ||||||||||||||||
China 0.5% | ||||||||||||||||
Country Garden Holdings Co. Ltd., Gtd. Notes, RegS | Ba2 | 11.125 | 02/23/18 | 200 | 223,240 | |||||||||||
Colombia 3.1% | ||||||||||||||||
Colombia Government International Bond, Sr. Unsec’d. Notes | Baa3 | 9.850 | 06/28/27 | COP | 180,000 | 126,937 | ||||||||||
Colombian TES, Bonds, | ||||||||||||||||
Ser. B | Baa3 | 7.250 | 06/15/16 | COP | 300,000 | 166,547 | ||||||||||
Ser. B | Baa3 | 11.000 | 07/24/20 | COP | 1,102,800 | 711,967 |
See Notes to Financial Statements.
Prudential Emerging Markets Debt Local Currency Fund | 11 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
FOREIGN BONDS (Continued) |
| |||||||||||||||
Colombia (cont’d.) | ||||||||||||||||
Colombian TES, Bonds, (cont’d.) | ||||||||||||||||
Ser. B | Baa3 | 11.250% | 10/24/18 | COP | 305,000 | $ | 196,311 | |||||||||
Empresas Publicas de Medellin ESP, Sr. Unsec’d. Notes, RegS | Baa3 | 8.375 | 02/01/21 | COP | 300,000 | 165,112 | ||||||||||
|
| |||||||||||||||
1,366,874 | ||||||||||||||||
Dominican Republic 0.3% | ||||||||||||||||
Dominican Republic International Bond, Sr. Unsec’d. Notes, RegS | B1 | 9.040 | 01/23/18 | 138 | 151,280 | |||||||||||
Ghana 0.1% | ||||||||||||||||
Ghana Government Bond, Bonds, Ser. 3Y | B1 | 16.900 | 03/07/16 | GHS | 50 | 21,594 | ||||||||||
Hungary 2.8% | ||||||||||||||||
Hungary Government Bond, | ||||||||||||||||
Bonds, Ser. 16/C | Ba1 | 5.500 | 02/12/16 | HUF | 33,080 | 156,961 | ||||||||||
Bonds, Ser. 17/A | Ba1 | 6.750 | 11/24/17 | HUF | 54,370 | 270,773 | ||||||||||
Bonds, Ser. 17/B | Ba1 | 6.750 | 02/24/17 | HUF | 50,270 | 247,907 | ||||||||||
Sr. Unsec’d. Notes, RegS | Ba1 | 5.750 | 06/11/18 | EUR | 241 | 350,124 | ||||||||||
MFB Magyar Fejlesztesi Bank Zrt, Gov’t. Gtd. Notes, 144A | Ba1 | 6.250 | 10/21/20 | 200 | 205,250 | |||||||||||
|
| |||||||||||||||
1,231,015 | ||||||||||||||||
Indonesia 8.2% | ||||||||||||||||
Berau Capital Resources Pte Ltd., Sr. Sec’d. Notes, RegS | B1 | 12.500 | 07/08/15 | 145 | 152,975 | |||||||||||
Indonesia Treasury Bond, Sr. Unsec’d. Notes, | ||||||||||||||||
Ser. FR53 | Baa3 | 8.250 | 07/15/21 | IDR | 2,700,000 | 249,701 | ||||||||||
Ser. FR56 | Baa3 | 8.375 | 09/15/26 | IDR | 1,000,000 | 92,648 | ||||||||||
Ser. FR58 | Baa3 | 8.250 | 06/15/32 | IDR | 1,700,000 | 152,318 | ||||||||||
Ser. FR59 | Baa3 | 7.000 | 05/15/27 | IDR | 3,800,000 | 313,452 | ||||||||||
Ser. FR61 | Baa3 | 7.000 | 05/15/22 | IDR | 2,000,000 | 171,657 | ||||||||||
Ser. FR63 | Baa3 | 5.625 | 05/15/23 | IDR | 9,800,000 | 765,587 | ||||||||||
Ser. FR65 | Baa3 | 6.625 | 05/15/33 | IDR | 14,500,000 | 1,096,585 | ||||||||||
Ser. FR67 | Baa3 | 8.750 | 02/15/44 | IDR | 2,700,000 | 252,218 |
See Notes to Financial Statements.
12 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
FOREIGN BONDS (Continued) |
| |||||||||||||||
Indonesia (cont’d.) | ||||||||||||||||
Majapahit Holding BV, Gtd. Notes, RegS | Baa3 | 7.750% | 10/17/16 | 100 | $ | 112,000 | ||||||||||
Perusahaan Penerbit SBSN Indonesia, Unsec’d. Notes, 144A | Baa3 | 6.125 | 03/15/19 | 200 | 216,000 | |||||||||||
|
| |||||||||||||||
3,575,141 | ||||||||||||||||
Italy 0.2% | ||||||||||||||||
Wind Acquisition Finance SA, Sec’d. Notes, 144A | B3 | 11.750 | 07/15/17 | 100 | 106,250 | |||||||||||
Jamaica 0.4% | ||||||||||||||||
Digicel Group Ltd., Sr. Unsec’d. Notes, RegS | Caa1 | 10.500 | 04/15/18 | 150 | 162,000 | |||||||||||
Kazakhstan 0.6% | ||||||||||||||||
KazMunayGas National Co. JSC, Gtd. Notes, RegS, MTN | Baa3 | 9.125 | 07/02/18 | 200 | 244,750 | |||||||||||
Luxembourg�� 0.4% | ||||||||||||||||
Millicom International Cellular SA, Sr. Unsec’d. Notes, 144A | Ba2 | 4.750 | 05/22/20 | 200 | 187,500 | |||||||||||
Malaysia 3.1% | ||||||||||||||||
Malaysia Government Bond, Sr. Unsec’d. Notes, | ||||||||||||||||
Ser. 0112 | A3 | 3.418 | 08/15/22 | MYR | 280 | 87,165 | ||||||||||
Ser. 0311 | A3 | 4.392 | 04/15/26 | MYR | 340 | 112,158 | ||||||||||
Ser. 0313 | A3 | 3.480 | 03/15/23 | MYR | 1,000 | 313,459 | ||||||||||
Ser. 0412 | A3 | 4.127 | 04/15/32 | MYR | 2,200 | 698,584 | ||||||||||
Ser. 0413 | A3 | 3.844 | 04/15/33 | MYR | 500 | 153,777 | ||||||||||
|
| |||||||||||||||
1,365,143 | ||||||||||||||||
Mexico 7.9% | ||||||||||||||||
America Movil SAB de CV, Sr. Unsec’d. Notes, Ser. 12 | A2 | 6.450 | 12/05/22 | MXN | 7,500 | 542,752 | ||||||||||
Cemex SAB de CV, Sr. Sec’d. Notes, RegS | B+(c) | 9.500 | 06/15/18 | 200 | 227,500 | |||||||||||
Mexican Bonos, Bonds, | ||||||||||||||||
Ser. M | Baa1 | 6.500 | 06/10/21 | MXN | 2,000 | 160,557 |
See Notes to Financial Statements.
Prudential Emerging Markets Debt Local Currency Fund | 13 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
FOREIGN BONDS (Continued) |
| |||||||||||||||
Mexico (cont’d.) | ||||||||||||||||
Mexican Bonos, Bonds, (cont’d.) | ||||||||||||||||
Ser. M | Baa1 | 6.500% | 06/09/22 | MXN | 75 | $ | 5,966 | |||||||||
Ser. M | Baa1 | 7.750 | 05/29/31 | MXN | 13,903 | 1,139,970 | ||||||||||
Ser. M | Baa1 | 7.998 | 06/11/20 | MXN | 5,660 | 494,604 | ||||||||||
Ser. M | Baa1 | 8.000 | 12/07/23 | MXN | 6,090 | 533,157 | ||||||||||
Petroleos Mexicanos, Gtd. Notes, 144A | Baa1 | 7.650 | 11/24/21 | MXN | 4,120 | 333,793 | ||||||||||
|
| |||||||||||||||
3,438,299 | ||||||||||||||||
Nigeria 2.4% | ||||||||||||||||
Nigeria Government Bond, Bonds, | ||||||||||||||||
Ser. 3YR | Ba3 | 10.500 | 03/18/14 | NGN | 5,740 | 35,813 | ||||||||||
Ser. 5YR | Ba3 | 4.000 | 04/23/15 | NGN | 19,380 | 108,225 | ||||||||||
Ser. 5YR | Ba3 | 15.100 | 04/27/17 | NGN | 33,495 | 226,851 | ||||||||||
Ser. 10YR | Ba3 | 7.000 | 10/23/19 | NGN | 123,761 | 603,608 | ||||||||||
Ser. 20YR | Ba3 | 10.000 | 07/23/30 | NGN | 10,680 | 54,274 | ||||||||||
|
| |||||||||||||||
1,028,771 | ||||||||||||||||
Peru 3.1% | ||||||||||||||||
Peruvian Government Bond, Sr. Unsec’d. Notes | Baa2 | 6.950 | 08/12/31 | PEN | 190 | 73,842 | ||||||||||
Peruvian Government International Bond, | ||||||||||||||||
Sr. Unsec’d. Notes, RegS | Baa2 | 6.950 | 08/12/31 | PEN | 460 | 178,775 | ||||||||||
Sr. Unsec’d. Notes, RegS | Baa2 | 7.840 | 08/12/20 | PEN | 1,985 | 832,784 | ||||||||||
Sr. Unsec’d. Notes, 144A | Baa2 | 7.840 | 08/12/20 | PEN | 650 | 272,700 | ||||||||||
|
| |||||||||||||||
1,358,101 | ||||||||||||||||
Philippines 1.2% |
| |||||||||||||||
Philippine Government International Bond, | Baa3 | 6.250 | 01/14/36 | PHP | 20,000 | 529,970 | ||||||||||
Poland 4.7% |
| |||||||||||||||
Poland Government Bond, Bonds, | A2 | 5.250 | 10/25/20 | PLN | 1,630 | 572,536 | ||||||||||
Ser. 1023 | A2 | 4.000 | 10/25/23 | PLN | 4,570 | 1,461,863 | ||||||||||
|
| |||||||||||||||
2,034,399 |
See Notes to Financial Statements.
14 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
FOREIGN BONDS (Continued) |
| |||||||||||||||
Romania 0.5% |
| |||||||||||||||
Romania Government Bond, Bonds, Ser. 5YR | Baa3 | 5.600% | 11/28/18 | RON | 690 | $ | 221,703 | |||||||||
Russia 12.0% |
| |||||||||||||||
AHML Finance Ltd., Unsec’d. Notes, 144A | Baa1 | 7.750 | 02/13/18 | RUB | 12,250 | 374,489 | ||||||||||
EDC Finance Ltd., Gtd. Notes, 144A | BB+(c) | 4.875 | 04/17/20 | 200 | 198,500 | |||||||||||
Home Credit & Finance Bank Via Eurasia Capital SA, Sr. Sec’d. Notes | Ba3 | 7.000 | 03/18/14 | 250 | 253,438 | |||||||||||
Russian Agricultural Bank OJSC via RSHB Capital SA, | ||||||||||||||||
Sr. Unsec’d. Notes, RegS | Baa3 | 7.875 | 02/07/18 | RUB | 22,500 | 684,385 | ||||||||||
Sr. Unsec’d. Notes, RegS | Baa3 | 8.625 | 02/17/17 | RUB | 13,400 | 420,542 | ||||||||||
Sr. Unsec’d. Notes, RegS, MTN | Baa3 | 8.700 | 03/17/16 | RUB | 12,000 | 378,592 | ||||||||||
Sr. Unsec’d. Notes, 144A | Baa3 | 8.625 | 02/17/17 | RUB | 3,000 | 94,151 | ||||||||||
Russian Federal Bond - OFZ, Bonds, | ||||||||||||||||
Ser. 6207 | Baa1 | 8.150 | 02/03/27 | RUB | 15,000 | 496,013 | ||||||||||
Ser. 6211 | Baa1 | 7.000 | 01/25/23 | RUB | 13,350 | 414,186 | ||||||||||
Ser. 6212 | Baa1 | 7.050 | 01/19/28 | RUB | 19,865 | 594,326 | ||||||||||
Russian Railways via RZD Capital PLC, Sr. Unsec’d. Notes, RegS | Baa1 | 8.300 | 04/02/19 | RUB | 30,200 | 952,026 | ||||||||||
Vimpelcom Holdings BV, | ||||||||||||||||
Gtd. Notes, 144A | Ba3 | 4.248(d) | 06/29/14 | 200 | 201,004 | |||||||||||
Gtd. Notes, 144A | Ba3 | 9.000 | 02/13/18 | RUB | 5,000 | 157,464 | ||||||||||
|
| |||||||||||||||
5,219,116 | ||||||||||||||||
South Africa 10.1% |
| |||||||||||||||
Eskom Holdings Ltd., Notes, Ser. ES23, MTN | Baa2 | 10.000 | 01/25/23 | ZAR | 7,500 | 839,258 | ||||||||||
South Africa Government Bond, | ||||||||||||||||
Bonds, Ser. 2023 | Baa1 | 7.750 | 02/28/23 | ZAR | 875 | 87,990 | ||||||||||
Bonds, Ser. R186 | Baa1 | 10.500 | 12/21/26 | ZAR | 448 | 53,558 | ||||||||||
Bonds, Ser. R203 | Baa1 | 8.250 | 09/15/17 | ZAR | 2,020 | 212,678 | ||||||||||
Bonds, Ser. R204 | Baa1 | 8.000 | 12/21/18 | ZAR | 4,180 | 437,622 | ||||||||||
Bonds, Ser. R207 | Baa1 | 7.250 | 01/15/20 | ZAR | 1,400 | 139,998 | ||||||||||
Sr. Unsec’d. Notes, Ser. R208 | Baa1 | 6.750 | 03/31/21 | ZAR | 3,500 | 337,130 | ||||||||||
Sr. Unsec’d. Notes, Ser. R209 | Baa1 | 6.250 | 03/31/36 | ZAR | 30,614 | 2,285,693 | ||||||||||
|
| |||||||||||||||
4,393,927 |
See Notes to Financial Statements.
Prudential Emerging Markets Debt Local Currency Fund | 15 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
FOREIGN BONDS (Continued) |
| |||||||||||||||
Spain 1.2% |
| |||||||||||||||
Spain Government International Bond, Sr. Unsec’d. Notes, MTN, 144A | Baa3 | 4.000% | 03/06/18 | 500 | $ | 514,600 | ||||||||||
Sri Lanka 0.9% |
| |||||||||||||||
Bank of Ceylon, Sr. Unsec’d. Notes, RegS | B1 | 6.875 | 05/03/17 | 400 | 410,000 | |||||||||||
Thailand 2.9% |
| |||||||||||||||
Thailand Government Bond, | ||||||||||||||||
Sr. Unsec’d. Notes | Baa1 | 3.580 | 12/17/27 | THB | 10,000 | 302,262 | ||||||||||
Sr. Unsec’d. Notes | Baa1 | 3.625 | 06/16/23 | THB | 11,577 | 364,209 | ||||||||||
Sr. Unsec’d. Notes | Baa1 | 3.650 | 12/17/21 | THB | 2,000 | 63,763 | ||||||||||
Sr. Unsec’d. Notes | Baa1 | 3.775 | 06/25/32 | THB | 600 | 17,810 | ||||||||||
Sr. Unsec’d. Notes | Baa1 | 3.850 | 12/12/25 | THB | 2,000 | 63,054 | ||||||||||
Sr. Unsec’d. Notes | Baa1 | 5.670 | 03/13/28 | THB | 5,000 | 184,542 | ||||||||||
Sr. Unsec’d. Notes - Inflation Linked | Baa1 | 1.200 | 07/14/21 | THB | 9,268 | 277,774 | ||||||||||
|
| |||||||||||||||
1,273,414 | ||||||||||||||||
Turkey 9.1% | ||||||||||||||||
Turkey Government Bond, | ||||||||||||||||
Bonds | Baa3 | 8.500 | 09/14/22 | TRY | 1,705 | 847,269 | ||||||||||
Bonds | Baa3 | 9.000 | 01/27/16 | TRY | 1,360 | 697,969 | ||||||||||
Bonds | Baa3 | 10.000 | 06/17/15 | TRY | 815 | 422,351 | ||||||||||
Bonds | Baa3 | 10.500 | 01/15/20 | TRY | 775 | 426,468 | ||||||||||
Bonds, Ser. 5YR | Baa3 | 9.000 | 03/08/17 | TRY | 3,030 | 1,560,346 | ||||||||||
|
| |||||||||||||||
3,954,403 | ||||||||||||||||
Ukraine 0.5% | ||||||||||||||||
NAK Naftogaz of Ukraine, Gov’t. Gtd. Notes | NR | 9.500 | 09/30/14 | 250 | 235,625 | |||||||||||
Uruguay 1.3% | ||||||||||||||||
Uruguay Government International Bond, | ||||||||||||||||
Sr. Unsec’d. Notes | Baa3 | 4.375 | 12/15/28 | UYU | 3,515 | 177,201 | ||||||||||
Sr. Unsec’d. Notes | Baa3 | 5.000 | 09/14/18 | UYU | 7,365 | 377,037 | ||||||||||
|
| |||||||||||||||
554,238 |
See Notes to Financial Statements.
16 |
Description | Moody’s Ratings† (Unaudited) | Interest Rate | Maturity Date | Principal Amount (000)# | Value (Note 1) | |||||||||||
FOREIGN BONDS (Continued) |
| |||||||||||||||
Venezuela 2.9% |
| |||||||||||||||
Petroleos de Venezuela SA, | NR | 4.900% | 10/28/14 | 1,340 | $ | 1,259,600 | ||||||||||
|
| |||||||||||||||
TOTAL LONG-TERM INVESTMENTS | 42,501,590 | |||||||||||||||
|
| |||||||||||||||
Shares | ||||||||||||||||
SHORT-TERM INVESTMENTS 0.1% |
| |||||||||||||||
AFFILIATED MONEY MARKET MUTUAL FUND | ||||||||||||||||
Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund | 4,588 | 4,588 | ||||||||||||||
|
| |||||||||||||||
Counterparty | Notional | |||||||||||||||
OPTIONS PURCHASED* 0.1% |
| |||||||||||||||
Call Options |
| |||||||||||||||
Currency Option EUR vs HUF, expiring 11/20/13, @ FX Rate 291.00 | | Barclays Capital International | | EUR | 685 | 16,722 | ||||||||||
Currency Option USD vs ILS, expiring 12/10/13, @ FX Rate 3.631 | | Barclays Capital International | | 1,042 | 1,713 | |||||||||||
|
| |||||||||||||||
18,435 | ||||||||||||||||
Put Options 0.1% | ||||||||||||||||
Currency Option USD vs RUB, expiring 09/11/14, @ FX Rate 34.72 | Credit Suisse | 630 | 40,814 | |||||||||||||
|
| |||||||||||||||
TOTAL OPTIONS PURCHASED |
| 59,249 | ||||||||||||||
|
| |||||||||||||||
TOTAL SHORT-TERM INVESTMENTS |
| 63,837 | ||||||||||||||
|
|
See Notes to Financial Statements.
Prudential Emerging Markets Debt Local Currency Fund | 17 |
Portfolio of Investments
as of October 31, 2013 continued
Description | Value (Note 1) | |||||||||||
TOTAL INVESTMENTS 97.5% | $ | 42,565,427 | ||||||||||
Other assets in excess of liabilities(f) 2.5% | 1,096,496 | |||||||||||
|
| |||||||||||
NET ASSETS 100.0% | $ | 43,661,923 | ||||||||||
|
|
The following abbreviations are used in the Portfolio descriptions:
144A—Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. Unless otherwise noted, 144A securities are deemed to be liquid.
LIBOR—London Interbank Offered Rate
MTN—Medium Term Note
NR—Not Rated by Moody’s or Standard & Poor’s
RegS—Regulations S. Security was purchased pursuant to Regulation S and may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933.
ARS—Argentine Peso
AUD—Australian Dollar
BRL—Brazilian Real
CAD—Canadian Dollar
CHF—Swiss Franc
CLP—Chilean Peso
CNY—Chinese Yuan
COP—Colombian Peso
EUR—Euro
GBP—British Pound
GHS—Ghana Cedi
HUF—Hungarian Forint
IDR—Indonesian Rupiah
ILS—Israel Shekel
JPY—Japanese Yen
KRW—South Korean Won
MXN—Mexican Peso
MYR—Malaysian Ringgit
NGN—Nigerian Naira
NOK—Norwegian Krone
NZD—New Zealand Dollar
PEN—Peru Soles
PHP—Philippine Peso
PLN—Polish Zloty
RON—Romanian Leu
RUB—Russian Ruble
THB—Thai Baht
See Notes to Financial Statements.
18 |
TRY—Turkish Lira
USD—United States Dollar
UYU—Uruguayan Peso
ZAR—South African Rand
* | Non-income producing security. |
† | The ratings reflected are as of October 31, 2013. Ratings of certain bonds may have changed subsequent to that date. The Fund’s current Statement of Additional Information contains a description of Moody’s and Standard & Poor’s ratings. |
# | Principal amount or notional amount shown in U.S. dollars unless otherwise stated. |
(a) | Indicates a security or securities that have been deemed illiquid. |
(b) | Indicates a restricted security, the aggregate original cost of such securities is $188,913. The aggregate value of $183,175, is approximately 0.4% of net assets. |
(c) | Standard & Poor’s Rating. |
(d) | Variable rate instrument. The interest rate shown reflects the rate in effect at October 31, 2013. |
(e) | Prudential Investments LLC, the manager of the Series, also serves as manager of the Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund. |
(f) | Includes net unrealized appreciation (depreciation) on the following derivative contracts held at reporting period end: |
Forward foreign currency exchange contracts outstanding at October 31, 2013:
Purchase Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date Payable | Current Value | Unrealized Appreciation (Depreciation) | |||||||||||||
Argentina Pesos, | ||||||||||||||||||
Expiring 02/03/14 | Citigroup Global Markets | ARS | 747 | $ | 112,000 | $ | 109,124 | $ | (2,876 | ) | ||||||||
Expiring 11/15/13 | Citigroup Global Markets | ARS | 814 | 134,000 | 134,550 | 550 | ||||||||||||
Expiring 12/18/13 | Citigroup Global Markets | ARS | 739 | 112,000 | 115,775 | 3,775 | ||||||||||||
Australian Dollar, | ||||||||||||||||||
Expiring 01/23/14 | Credit Suisse | AUD | 119 | 112,255 | 111,837 | (418 | ) | |||||||||||
Expiring 01/23/14 | Toronto-Dominion Securities, Inc. | AUD | 232 | 221,615 | 218,035 | (3,580 | ) | |||||||||||
Expiring 01/23/14 | Toronto-Dominion Securities, Inc. | AUD | 234 | 223,423 | 219,914 | (3,509 | ) | |||||||||||
Brazilian Real, | ||||||||||||||||||
Expiring 01/22/14 | Barclays Capital Group | BRL | 71 | 31,600 | 31,044 | (556 | ) | |||||||||||
Expiring 01/22/14 | Toronto-Dominion Securities, Inc. | BRL | 330 | 149,592 | 144,437 | (5,155 | ) |
See Notes to Financial Statements.
Prudential Emerging Markets Debt Local Currency Fund | 19 |
Portfolio of Investments
as of October 31, 2013 continued
Purchase Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date Payable | Current Value | Unrealized Appreciation (Depreciation) | |||||||||||||
British Pound, | ||||||||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | GBP | 141 | $ | 226,871 | $ | 225,292 | $ | (1,579 | ) | ||||||||
Expiring 01/27/14 | Credit Suisse | GBP | 70 | 113,404 | 112,001 | (1,403 | ) | |||||||||||
Expiring 01/27/14 | Credit Suisse | GBP | 156 | 252,155 | 249,960 | (2,195 | ) | |||||||||||
Expiring 01/27/14 | Goldman Sachs & Company | GBP | 140 | 226,184 | 223,842 | (2,342 | ) | |||||||||||
Canadian Dollar, | ||||||||||||||||||
Expiring 01/22/14 | Barclays Capital Group | CAD | 235 | 225,000 | 225,085 | 85 | ||||||||||||
Expiring 01/22/14 | Toronto-Dominion Securities, Inc. | CAD | 118 | 113,000 | 112,927 | (73 | ) | |||||||||||
Chilean Peso, | ||||||||||||||||||
Expiring 12/11/13 | Citigroup Global Markets | CLP | 57,475 | 112,700 | 111,530 | (1,170 | ) | |||||||||||
Expiring 12/11/13 | Citigroup Global Markets | CLP | 115,334 | 226,700 | 223,805 | (2,895 | ) | |||||||||||
Expiring 12/11/13 | Citigroup Global Markets | CLP | 141,515 | 274,499 | 274,611 | 112 | ||||||||||||
Chinese Yuan, | ||||||||||||||||||
Expiring 05/08/14 | Citigroup Global Markets | CNY | 94 | 15,000 | 15,268 | 268 | ||||||||||||
Expiring 05/08/14 | Credit Suisse | CNY | 1,027 | 164,000 | 167,519 | 3,519 | ||||||||||||
Colombian Peso, | ||||||||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | COP | 59,455 | 31,358 | 31,201 | (157 | ) | |||||||||||
Expiring 01/22/14 | Citigroup Global Markets | COP | 1,272,768 | 667,769 | 667,928 | 159 | ||||||||||||
Expiring 01/22/14 | Toronto-Dominion Securities, Inc. | COP | 212,072 | 112,000 | 111,292 | (708 | ) | |||||||||||
Euro, | ||||||||||||||||||
Expiring 01/27/14 | Citigroup Global Markets | EUR | 655 | 900,749 | 889,447 | (11,302 | ) | |||||||||||
Expiring 01/27/14 | Citigroup Global Markets | EUR | 328 | 451,411 | 445,402 | (6,009 | ) | |||||||||||
Expiring 01/27/14 | HSBC | EUR | 990 | 1,354,147 | 1,344,355 | (9,792 | ) | |||||||||||
Hungarian Forint, | ||||||||||||||||||
Expiring 01/24/14 | Barclays Capital Group | HUF | 7,836 | 35,930 | 35,793 | (137 | ) |
See Notes to Financial Statements.
20 |
Purchase Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date Payable | Current Value | Unrealized Appreciation (Depreciation) | |||||||||||||
Expiring 01/24/14 | Barclays Capital Group | HUF | 134,059 | $ | 628,429 | $ | 612,375 | $ | (16,054 | ) | ||||||||
Expiring 01/24/14 | Citigroup Global Markets | HUF | 131,991 | 610,035 | 602,929 | (7,106 | ) | |||||||||||
Expiring 01/24/14 | Credit Suisse | HUF | 131,991 | 610,506 | 602,929 | (7,577 | ) | |||||||||||
Expiring 01/24/14 | Goldman Sachs & Company | HUF | 131,991 | 610,560 | 602,929 | (7,631 | ) | |||||||||||
Expiring 01/24/14 | UBS Warburg LLC | HUF | 131,991 | 610,457 | 602,929 | (7,528 | ) | |||||||||||
Indonesia Rupiah, | ||||||||||||||||||
Expiring 01/30/14 | UBS Warburg LLC | IDR | 6,187,266 | 556,259 | 540,161 | (16,098 | ) | |||||||||||
Israeli Shekel, | ||||||||||||||||||
Expiring 01/30/14 | Deutsche Bank | ILS | 500 | 141,673 | 141,547 | (126 | ) | |||||||||||
Expiring 01/30/14 | Deutsche Bank | ILS | 500 | 141,673 | 141,547 | (126 | ) | |||||||||||
Japanese Yen, | ||||||||||||||||||
Expiring 01/27/14 | Citigroup Global Markets | JPY | 11,125 | 113,000 | 113,205 | 205 | ||||||||||||
Expiring 01/27/14 | Citigroup Global Markets | JPY | 21,982 | 226,000 | 223,683 | (2,317 | ) | |||||||||||
Expiring 01/27/14 | Citigroup Global Markets | JPY | 27,382 | 280,000 | 278,633 | (1,367 | ) | |||||||||||
Expiring 01/27/14 | Citigroup Global Markets | JPY | 5,406 | 55,000 | 55,011 | 11 | ||||||||||||
Malaysian Ringgit, | ||||||||||||||||||
Expiring 01/16/14 | UBS Warburg LLC | MYR | 748 | 233,000 | 235,640 | 2,640 | ||||||||||||
Expiring 01/22/14 | Barclays Capital Group | MYR | 3,400 | 1,061,355 | 1,071,105 | 9,750 | ||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | MYR | 3,400 | 1,060,701 | 1,071,105 | 10,404 | ||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | MYR | 3,400 | 1,061,198 | 1,071,105 | 9,907 | ||||||||||||
Expiring 01/22/14 | HSBC | MYR | 3,400 | 1,061,198 | 1,071,105 | 9,907 | ||||||||||||
Expiring 11/18/13 | Barclays Capital Group | MYR | 293 | 90,350 | 92,650 | 2,300 | ||||||||||||
Expiring 11/18/13 | UBS Warburg LLC | MYR | 735 | 226,700 | 232,543 | 5,843 | ||||||||||||
Mexican Peso, | ||||||||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | MXN | 10,507 | 813,800 | 799,984 | (13,816 | ) | |||||||||||
Expiring 01/22/14 | Goldman Sachs & Company | MXN | 10,507 | 814,172 | 799,984 | (14,188 | ) | |||||||||||
Expiring 01/22/14 | JPMorgan Chase | MXN | 10,507 | 814,159 | 799,983 | (14,176 | ) |
See Notes to Financial Statements.
Prudential Emerging Markets Debt Local Currency Fund | 21 |
Portfolio of Investments
as of October 31, 2013 continued
Purchase Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date Payable | Current Value | Unrealized Appreciation (Depreciation) | |||||||||||||
Expiring 01/22/14 | Toronto-Dominion Securities, Inc. | MXN | 2,917 | $ | 225,000 | $ | 222,103 | $ | (2,897 | ) | ||||||||
Expiring 01/22/14 | Toronto-Dominion Securities, Inc. | MXN | 10,507 | 813,888 | 799,984 | (13,904 | ) | |||||||||||
New Zealand Dollar, | ||||||||||||||||||
Expiring 01/23/14 | Credit Suisse | NZD | 230 | 189,000 | 188,941 | (59 | ) | |||||||||||
Expiring 01/23/14 | Goldman Sachs & Company | NZD | 324 | 273,369 | 266,037 | (7,332 | ) | |||||||||||
Nigerian Naira, | ||||||||||||||||||
Expiring 01/30/14 | Barclays Capital Group | NGN | 124,612 | 763,085 | 761,931 | (1,154 | ) | |||||||||||
Norwegian Krone, | ||||||||||||||||||
Expiring 01/24/14 | Barclays Capital Group | NOK | 676 | 112,346 | 113,250 | 904 | ||||||||||||
Expiring 01/24/14 | Citigroup Global Markets | NOK | 677 | 112,485 | 113,390 | 905 | ||||||||||||
Expiring 01/24/14 | Citigroup Global Markets | NOK | 669 | 111,137 | 112,080 | 943 | ||||||||||||
Expiring 01/24/14 | Credit Suisse | NOK | 673 | 113,600 | 112,607 | (993 | ) | |||||||||||
Expiring 01/24/14 | Toronto-Dominion Securities, Inc. | NOK | 668 | 112,000 | 111,805 | (195 | ) | |||||||||||
Peruvian Nuevo Sol, | ||||||||||||||||||
Expiring 02/04/14 | Barclays Capital Group | PEN | 311 | 111,000 | 111,053 | 53 | ||||||||||||
Expiring 02/04/14 | Citigroup Global Markets | PEN | 314 | 112,284 | 112,178 | (106 | ) | |||||||||||
Expiring 02/04/14 | Deutsche Bank | PEN | 505 | 181,100 | 180,263 | (837 | ) | |||||||||||
Expiring 11/04/13 | Barclays Capital Group | PEN | 97 | 34,278 | 34,797 | 519 | ||||||||||||
Expiring 11/04/13 | Citigroup Global Markets | PEN | 1,219 | 445,453 | 439,278 | (6,175 | ) | |||||||||||
Expiring 11/04/13 | Citigroup Global Markets | PEN | 1,481 | 537,129 | 533,729 | (3,400 | ) | |||||||||||
Expiring 11/04/13 | Citigroup Global Markets | PEN | 497 | 178,025 | 179,003 | 978 | ||||||||||||
Expiring 11/04/13 | Citigroup Global Markets | PEN | 63 | 22,900 | 22,755 | (145 | ) | |||||||||||
Expiring 11/04/13 | Credit Suisse | PEN | 268 | 97,209 | 96,594 | (615 | ) |
See Notes to Financial Statements.
22 |
Purchase Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date Payable | Current Value | Unrealized Appreciation (Depreciation) | |||||||||||||
Philippine Peso, | ||||||||||||||||||
Expiring 01/17/14 | Barclays Capital Group | PHP | 11,190 | $ | 260,727 | $ | 259,241 | $ | (1,486 | ) | ||||||||
Expiring 01/17/14 | HSBC | PHP | 5,545 | 129,697 | 128,447 | (1,250 | ) | |||||||||||
Expiring 01/17/14 | UBS Warburg LLC | PHP | 6,449 | 149,778 | 149,393 | (385 | ) | |||||||||||
Polish Zloty, | ||||||||||||||||||
Expiring 01/24/14 | Barclays Capital Group | PLN | 555 | 181,898 | 179,177 | (2,721 | ) | |||||||||||
Expiring 01/24/14 | Barclays Capital Group | PLN | 555 | 181,909 | 179,177 | (2,732 | ) | |||||||||||
Expiring 01/24/14 | Citigroup Global Markets | PLN | 3,706 | 1,206,162 | 1,196,770 | (9,392 | ) | |||||||||||
Expiring 01/24/14 | Citigroup Global Markets | PLN | 728 | 237,001 | 234,957 | (2,044 | ) | |||||||||||
Expiring 01/24/14 | Citigroup Global Markets | PLN | 268 | 88,103 | 86,664 | (1,439 | ) | |||||||||||
Expiring 01/24/14 | JPMorgan Chase | PLN | 3,706 | 1,211,524 | 1,196,769 | (14,755 | ) | |||||||||||
Romanian Leu, | ||||||||||||||||||
Expiring 01/24/14 | Barclays Capital Group | RON | 184 | 55,633 | 56,136 | 503 | ||||||||||||
Expiring 01/24/14 | Barclays Capital Group | RON | 664 | 203,729 | 202,344 | (1,385 | ) | |||||||||||
Expiring 01/24/14 | Barclays Capital Group | RON | 88 | 26,947 | 26,891 | (56 | ) | |||||||||||
Expiring 01/24/14 | Barclays Capital Group | RON | 184 | 55,633 | 56,136 | 503 | ||||||||||||
Expiring 01/24/14 | Citigroup Global Markets | RON | 664 | 203,885 | 202,343 | (1,542 | ) | |||||||||||
Expiring 01/24/14 | UBS Warburg LLC | RON | 184 | 55,632 | 56,127 | 495 | ||||||||||||
Expiring 01/24/14 | UBS Warburg LLC | RON | 184 | 55,632 | 56,127 | 495 | ||||||||||||
Russian Ruble, | ||||||||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | RUB | 19,866 | 603,192 | 610,411 | 7,219 | ||||||||||||
Expiring 01/22/14 | Toronto-Dominion Securities, Inc. | RUB | 1,164 | 35,788 | 35,765 | (23 | ) | |||||||||||
Expiring 11/18/13 | Citigroup Global Markets | RUB | 7,390 | 226,700 | 229,710 | 3,010 | ||||||||||||
Expiring 11/18/13 | Goldman Sachs & Company | RUB | 1,760 | 54,000 | 54,702 | 702 |
See Notes to Financial Statements.
Prudential Emerging Markets Debt Local Currency Fund | 23 |
Portfolio of Investments
as of October 31, 2013 continued
Purchase Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date Payable | Current Value | Unrealized Appreciation (Depreciation) | |||||||||||||
South African Rand, | ||||||||||||||||||
Expiring 01/30/14 | Citigroup Global Markets | ZAR | 2,250 | $ | 224,410 | $ | 221,057 | $ | (3,353 | ) | ||||||||
Expiring 01/30/14 | Citigroup Global Markets | ZAR | 2,222 | 224,895 | 218,275 | (6,620 | ) | |||||||||||
Expiring 01/30/14 | Deutsche Bank | ZAR | 1,788 | 181,167 | 175,663 | (5,504 | ) | |||||||||||
Expiring 01/30/14 | UBS Warburg LLC | ZAR | 2,140 | 215,392 | 210,245 | (5,147 | ) | |||||||||||
South Korean Won, | ||||||||||||||||||
Expiring 01/17/14 | UBS Warburg LLC | KRW | 495,734 | 457,383 | 464,785 | 7,402 | ||||||||||||
Swiss Franc, | ||||||||||||||||||
Expiring 01/24/14 | Barclays Capital Group | CHF | 1,030 | 1,155,090 | 1,135,920 | (19,170 | ) | |||||||||||
Thai Baht, | ||||||||||||||||||
Expiring 11/18/13 | Barclays Capital Group | THB | 3,508 | 113,021 | 112,570 | (451 | ) | |||||||||||
Expiring 11/18/13 | Barclays Capital Group | THB | 41,579 | 1,329,849 | 1,334,363 | 4,514 | ||||||||||||
Expiring 11/18/13 | Barclays Capital Group | THB | 1,253 | 40,000 | 40,218 | 218 | ||||||||||||
Expiring 11/18/13 | Credit Suisse | THB | 6,997 | 226,000 | 224,548 | (1,452 | ) | |||||||||||
Expiring 11/18/13 | Credit Suisse | THB | 41,579 | 1,330,616 | 1,334,364 | 3,748 | ||||||||||||
Expiring 11/18/13 | HSBC | THB | 7,219 | 227,000 | 231,661 | 4,661 | ||||||||||||
Expiring 11/18/13 | Toronto-Dominion Securities, Inc. | THB | 7,063 | 226,000 | 226,651 | 651 | ||||||||||||
Turkish Lira, | ||||||||||||||||||
Expiring 01/30/14 | Citigroup Global Markets | TRY | 687 | 341,667 | 338,606 | (3,061 | ) | |||||||||||
|
|
|
|
|
| |||||||||||||
$ | 34,480,935 | $ | 34,293,047 | $ | (187,888 | ) | ||||||||||||
|
|
|
|
|
|
Sale Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date Receivable | Current Value | Unrealized Appreciation (Depreciation) | |||||||||||||
Brazilian Real, | ||||||||||||||||||
Expiring 01/22/14 | HSBC | BRL | 303 | $ | 135,000 | $ | 132,711 | $ | 2,289 | |||||||||
Expiring 01/22/14 | HSBC | BRL | 304 | 137,000 | 133,028 | 3,972 | ||||||||||||
Expiring 01/22/14 | JPMorgan Chase | BRL | 100 | 45,000 | 43,857 | 1,143 | ||||||||||||
Expiring 01/22/14 | Toronto-Dominion Securities, Inc. | BRL | 108 | 48,617 | 47,129 | 1,488 |
See Notes to Financial Statements.
24 |
Sale Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date Receivable | Current Value | Unrealized Appreciation (Depreciation) | |||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | BRL | 1,733 | $ | 773,602 | $ | 758,455 | $ | 15,147 | |||||||||
Expiring 01/22/14 | Goldman Sachs & Company | BRL | 1,733 | 775,784 | 758,455 | 17,329 | ||||||||||||
Expiring 01/22/14 | UBS Warburg LLC | BRL | 1,733 | 776,549 | 758,455 | 18,094 | ||||||||||||
Expiring 01/22/14 | Barclays Capital Group | BRL | 1,733 | 776,827 | 758,455 | 18,372 | ||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | BRL | 222 | 98,072 | 96,976 | 1,096 | ||||||||||||
British Pound, | ||||||||||||||||||
Expiring 01/27/14 | Barclays Capital Group | GBP | 227 | 363,966 | 363,723 | 243 | ||||||||||||
Canadian Dollar, | ||||||||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | CAD | 473 | 458,329 | 452,297 | 6,032 | ||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | CAD | 234 | 226,871 | 224,091 | 2,780 | ||||||||||||
Chilean Peso, | ||||||||||||||||||
Expiring 12/11/13 | Cantor Fitz & Co. | CLP | 55,867 | 111,300 | 108,410 | 2,890 | ||||||||||||
Chinese Yuan, | ||||||||||||||||||
Expiring 05/08/14 | Citigroup Global Markets | CNY | 94 | 14,995 | 15,279 | (284 | ) | |||||||||||
Expiring 05/08/14 | Barclays Capital Group | CNY | 1,027 | 164,485 | 167,638 | (3,153 | ) | |||||||||||
Colombian Peso, | ||||||||||||||||||
Expiring 01/22/14 | Toronto-Dominion Securities, Inc. | COP | 48,201 | 25,452 | 25,295 | 157 | ||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | COP | 92,319 | 48,532 | 48,448 | 84 | ||||||||||||
Expiring 01/22/14 | Toronto-Dominion Securities, Inc. | COP | 170,193 | 90,000 | 89,629 | 371 | ||||||||||||
Euro, | ||||||||||||||||||
Expiring 01/27/14 | Credit Suisse | EUR | 95 | 131,264 | 129,334 | 1,930 | ||||||||||||
Expiring 01/27/14 | Barclays Capital Group | EUR | 990 | 1,360,621 | 1,344,355 | 16,266 | ||||||||||||
Expiring 01/27/14 | UBS Warburg LLC | EUR | 325 | 448,712 | 441,328 | 7,384 | ||||||||||||
Expiring 01/27/14 | Barclays Capital Group | EUR | 327 | 450,992 | 444,044 | 6,948 | ||||||||||||
Expiring 01/27/14 | Citigroup Global Markets | EUR | 50 | 69,465 | 68,440 | 1,025 |
See Notes to Financial Statements.
Prudential Emerging Markets Debt Local Currency Fund | 25 |
Portfolio of Investments
as of October 31, 2013 continued
Sale Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date Receivable | Current Value | Unrealized Appreciation (Depreciation) | |||||||||||||
Expiring 01/27/14 | Citigroup Global Markets | EUR | 506 | $ | 696,616 | $ | 686,572 | $ | 10,044 | |||||||||
Expiring 01/24/14 | Citigroup Global Markets | EUR | 82 | 111,137 | 111,350 | (213 | ) | |||||||||||
Expiring 01/24/14 | Barclays Capital Group | EUR | 83 | 112,485 | 112,708 | (223 | ) | |||||||||||
Expiring 01/24/14 | Citigroup Global Markets | EUR | 83 | 112,347 | 112,708 | (361 | ) | |||||||||||
Hungarian Forint, | ||||||||||||||||||
Expiring 01/24/14 | Credit Suisse | HUF | 24,640 | 114,000 | 112,554 | 1,446 | ||||||||||||
Expiring 01/24/14 | Citigroup Global Markets | HUF | 55,709 | 261,500 | 254,474 | 7,026 | ||||||||||||
Expiring 01/24/14 | Toronto-Dominion Securities, Inc. | HUF | 7,925 | 37,092 | 36,199 | 893 | ||||||||||||
Expiring 01/24/14 | Citigroup Global Markets | HUF | 9,580 | 44,873 | 43,761 | 1,112 | ||||||||||||
Indonesia Rupiah, | ||||||||||||||||||
Expiring 01/30/14 | Citigroup Global Markets | IDR | 2,041,341 | 182,100 | 178,213 | 3,887 | ||||||||||||
Expiring 01/30/14 | Toronto-Dominion Securities, Inc. | IDR | 421,176 | 38,064 | 36,770 | 1,294 | ||||||||||||
Expiring 01/30/14 | Barclays Capital Group | IDR | 1,098,900 | 99,000 | 95,936 | 3,064 | ||||||||||||
Israeli Shekel, | ||||||||||||||||||
Expiring 01/30/14 | Citigroup Global Markets | ILS | 564 | 159,927 | 159,687 | 240 | ||||||||||||
Japanese Yen, | ||||||||||||||||||
Expiring 01/27/14 | Barclays Capital Group | JPY | 11,038 | 112,000 | 112,326 | (326 | ) | |||||||||||
Expiring 01/27/14 | Barclays Capital Group | JPY | 23,030 | 236,862 | 234,349 | 2,513 | ||||||||||||
Expiring 01/27/14 | Citigroup Global Markets | JPY | 27,490 | 281,000 | 279,738 | 1,262 | ||||||||||||
Expiring 01/27/14 | Credit Suisse | JPY | 52,229 | 534,764 | 531,480 | 3,284 | ||||||||||||
Expiring 01/27/14 | Citigroup Global Markets | JPY | 5,407 | 55,000 | 55,021 | (21 | ) | |||||||||||
Malaysian Ringgit, | ||||||||||||||||||
Expiring 01/22/14 | Barclays Capital Group | MYR | 115 | 35,930 | 36,084 | (154 | ) | |||||||||||
Expiring 01/22/14 | Barclays Capital Group | MYR | 284 | 90,000 | 89,607 | 393 |
See Notes to Financial Statements.
26 |
Sale Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date Receivable | Current Value | Unrealized Appreciation (Depreciation) | |||||||||||||
Expiring 01/22/14 | UBS Warburg LLC | MYR | 355 | $ | 112,395 | $ | 111,982 | $ | 413 | |||||||||
Expiring 01/16/14 | Citigroup Global Markets | MYR | 435 | 135,888 | 137,242 | (1,354 | ) | |||||||||||
Expiring 01/22/14 | UBS Warburg LLC | MYR | 66 | 20,681 | 20,786 | (105 | ) | |||||||||||
Expiring 01/22/14 | Toronto-Dominion Securities, Inc. | MYR | 89 | 27,867 | 27,982 | (115 | ) | |||||||||||
Expiring 01/22/14 | Citigroup Global Markets | MYR | 979 | 306,662 | 308,510 | (1,848 | ) | |||||||||||
Expiring 01/22/14 | Barclays Capital Group | MYR | 354 | 112,000 | 111,504 | 496 | ||||||||||||
Expiring 01/22/14 | Toronto-Dominion Securities, Inc. | MYR | 131 | 41,172 | 41,258 | (86 | ) | |||||||||||
Expiring 01/22/14 | Toronto-Dominion Securities, Inc. | MYR | 210 | 66,371 | 66,248 | 123 | ||||||||||||
Mexican Peso, | ||||||||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | MXN | 278 | 21,366 | 21,168 | 198 | ||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | MXN | 2,852 | 218,284 | 217,140 | 1,144 | ||||||||||||
Expiring 01/22/14 | HSBC | MXN | 372 | 28,426 | 28,345 | 81 | ||||||||||||
Expiring 01/22/14 | Credit Suisse | MXN | 5,856 | 452,000 | 445,861 | 6,139 | ||||||||||||
Expiring 01/22/14 | Citigroup Global Markets | MXN | 6,223 | 477,256 | 473,797 | 3,459 | ||||||||||||
Expiring 01/22/14 | Toronto-Dominion Securities, Inc. | MXN | 860 | 66,313 | 65,475 | 838 | ||||||||||||
New Zealand Dollar, | ||||||||||||||||||
Expiring 01/23/14 | Credit Suisse | NZD | 1,103 | 918,751 | 905,888 | 12,863 | ||||||||||||
Nigerian Naira, | ||||||||||||||||||
Expiring 08/20/14 | Citigroup Global Markets | NGN | 30,202 | 168,116 | 174,742 | (6,626 | ) | |||||||||||
Expiring 08/20/14 | Citigroup Global Markets | NGN | 47,315 | 261,700 | 273,756 | (12,056 | ) | |||||||||||
Expiring 01/30/14 | Citigroup Global Markets | NGN | 10,028 | 61,394 | 61,312 | 82 | ||||||||||||
Expiring 01/30/14 | Barclays Capital Group | NGN | 10,028 | 61,481 | 61,313 | 168 | ||||||||||||
Norwegian Krone, | ||||||||||||||||||
Expiring 01/24/14 | Citigroup Global Markets | NOK | 668 | 113,000 | 111,870 | 1,130 |
See Notes to Financial Statements.
Prudential Emerging Markets Debt Local Currency Fund | 27 |
Portfolio of Investments
as of October 31, 2013 continued
Sale Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date Receivable | Current Value | Unrealized Appreciation (Depreciation) | |||||||||||||
Peruvian Nuevo Sol, | ||||||||||||||||||
Expiring 11/04/13 | Citigroup Global Markets | PEN | 1,481 | $ | 526,286 | $ | 533,729 | $ | (7,443 | ) | ||||||||
Expiring 11/04/13 | Citigroup Global Markets | PEN | 497 | 180,143 | 179,003 | 1,140 | ||||||||||||
Expiring 11/04/13 | Barclays Capital Group | PEN | 63 | 22,588 | 22,755 | (167 | ) | |||||||||||
Expiring 11/04/13 | Barclays Capital Group | PEN | 97 | 35,019 | 34,797 | 222 | ||||||||||||
Expiring 02/04/14 | Citigroup Global Markets | PEN | 1,219 | 441,372 | 434,860 | 6,512 | ||||||||||||
Expiring 11/04/13 | Citigroup Global Markets | PEN | 1,219 | 442,076 | 439,278 | 2,798 | ||||||||||||
Expiring 02/04/14 | Toronto-Dominion Securities, Inc. | PEN | 188 | 67,400 | 67,096 | 304 | ||||||||||||
Expiring 11/04/13 | Credit Suisse | PEN | 268 | 95,000 | 96,594 | (1,594 | ) | |||||||||||
Philippine Peso, | ||||||||||||||||||
Expiring 03/17/14 | Bank of New York | PHP | 19,972 | 462,000 | 462,414 | (414 | ) | |||||||||||
Expiring 01/17/14 | Citigroup Global Markets | PHP | 33,419 | 774,175 | 774,193 | (18 | ) | |||||||||||
Polish Zloty, | ||||||||||||||||||
Expiring 01/24/14 | HSBC | PLN | 686 | 225,000 | 221,461 | 3,539 | ||||||||||||
Expiring 01/24/14 | Toronto-Dominion Securities, Inc. | PLN | 179 | 58,906 | 57,828 | 1,078 | ||||||||||||
Russian Ruble, | ||||||||||||||||||
Expiring 01/22/14 | Credit Suisse | RUB | 3,652 | 112,646 | 112,215 | 431 | ||||||||||||
Expiring 01/22/14 | UBS Warburg LLC | RUB | 3,637 | 112,700 | 111,753 | 947 | ||||||||||||
Expiring 11/18/13 | Citigroup Global Markets | RUB | 4,548 | 139,976 | 141,378 | (1,402 | ) | |||||||||||
Expiring 01/22/14 | Toronto-Dominion Securities, Inc. | RUB | 1,372 | 41,957 | 42,156 | (199 | ) | |||||||||||
Expiring 01/22/14 | Credit Suisse | RUB | 14,540 | 450,900 | 446,765 | 4,135 | ||||||||||||
Expiring 01/22/14 | Toronto-Dominion Securities, Inc. | RUB | 2,176 | 67,614 | 66,854 | 760 | ||||||||||||
South African Rand, | ||||||||||||||||||
Expiring 01/30/14 | Barclays Capital Group | ZAR | 364 | 35,930 | 35,776 | 154 | ||||||||||||
Expiring 01/30/14 | JPMorgan Chase | ZAR | 1,137 | 113,800 | 111,724 | 2,076 | ||||||||||||
Expiring 01/30/14 | JPMorgan Chase | ZAR | 11,469 | 1,149,636 | 1,126,067 | 23,569 |
See Notes to Financial Statements.
28 |
Sale Contracts | Counterparty | Notional Amount (000) | Value at Settlement Date Receivable | Current Value | Unrealized Appreciation (Depreciation) | |||||||||||||
Expiring 01/30/14 | Goldman Sachs & Company | ZAR | 216 | $ | 21,278 | $ | 21,256 | $ | 22 | |||||||||
Expiring 01/30/14 | Toronto-Dominion Securities, Inc. | ZAR | 452 | 45,706 | 44,403 | 1,303 | ||||||||||||
South Korean Won, | ||||||||||||||||||
Expiring 01/17/14 | Citigroup Global Markets | KRW | 119,035 | 111,393 | 111,603 | (210 | ) | |||||||||||
Swiss Franc, | ||||||||||||||||||
Expiring 01/24/14 | UBS Warburg LLC | CHF | 620 | 691,331 | 684,142 | 7,189 | ||||||||||||
Expiring 01/24/14 | Barclays Capital Group | CHF | 620 | 691,707 | 684,142 | 7,565 | ||||||||||||
Thai Baht, | ||||||||||||||||||
Expiring 11/18/13 | Citigroup Global Markets | THB | 3,304 | 104,952 | 106,026 | (1,074 | ) | |||||||||||
Expiring 11/18/13 | Citigroup Global Markets | THB | 682 | 21,852 | 21,888 | (36 | ) | |||||||||||
Expiring 11/18/13 | Toronto-Dominion Securities, Inc. | THB | 967 | 30,881 | 31,044 | (163 | ) | |||||||||||
Expiring 11/18/13 | Barclays Capital Group | THB | 1,402 | 44,912 | 44,981 | (69 | ) | |||||||||||
Expiring 11/18/13 | Barclays Capital Group | THB | 1,414 | 45,175 | 45,388 | (213 | ) | |||||||||||
Expiring 11/18/13 | Toronto-Dominion Securities, Inc. | THB | 1,568 | 50,449 | 50,308 | 141 | ||||||||||||
Turkish Lira, | ||||||||||||||||||
Expiring 01/30/14 | Barclays Capital Group | TRY | 64 | 31,438 | 31,363 | 75 | ||||||||||||
|
|
|
|
|
| |||||||||||||
$ | 22,224,213 | $ | 22,011,548 | $ | 212,665 | |||||||||||||
|
|
|
|
|
| |||||||||||||
$ | 24,777 | |||||||||||||||||
|
|
See Notes to Financial Statements.
Prudential Emerging Markets Debt Local Currency Fund | 29 |
Portfolio of Investments
as of October 31, 2013 continued
Interest rate swap agreements outstanding at October 31, 2013:
Notional | Termination Date | Fixed Rate | Floating | Fair Value | Upfront Premiums Paid (Received) | Unrealized Appreciation | Counterparty | |||||||||||||||||||
| Over-the-counter swap agreements: | |||||||||||||||||||||||||
MXN | 8,000 | 02/21/22 | 6.620% | 28 Day Mexican Interbank Rate(1) | $ | 13,772 | $ | — | $ | 13,772 | Barclays Bank PLC | |||||||||||||||
MXN | 3,000 | 02/28/22 | 6.440% | 28 Day Mexican Interbank Rate(1) | 1,855 | — | 1,855 | Barclays Bank PLC | ||||||||||||||||||
HUF | 140,000 | 06/28/23 | 6.150% | 3 month LIBOR(1) | 63,409 | — | 63,409 | Barclays Bank PLC | ||||||||||||||||||
MXN | 6,450 | 08/02/28 | 7.670% | 28 Day Mexican Interbank Rate(1) | 19,912 | — | 19,912 | Barclays Bank PLC | ||||||||||||||||||
MXN | 6,200 | 08/09/28 | 7.640% | 28 Day Mexican Interbank Rate(1) | 17,209 | — | 17,209 | HSBC Bank USA | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
$ | 116,157 | $ | — | $ | 116,157 | |||||||||||||||||||||
|
|
|
|
|
|
(1) | The Series pays the floating rate and receives the fixed rate. |
# | Notional Amount is shown in U.S. dollars unless otherwise stated. |
Various inputs are used in determining the value of the Series’ investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.
Level 2—other significant observable inputs including, but not limited to, quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates, and amortized cost.
Level 3—significant unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
See Notes to Financial Statements.
30 |
The following is a summary of the inputs used as of October 31, 2013 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Foreign Bonds: | ||||||||||||
Barbados | $ | — | $ | 183,175 | $ | — | ||||||
Brazil | — | 7,257,462 | — | |||||||||
China | — | 223,240 | — | |||||||||
Colombia | — | 1,366,874 | — | |||||||||
Dominican Republic | — | 151,280 | — | |||||||||
Ghana | — | 21,594 | — | |||||||||
Hungary | — | 1,231,015 | — | |||||||||
Indonesia | — | 3,575,141 | — | |||||||||
Italy | — | 106,250 | — | |||||||||
Jamaica | — | 162,000 | — | |||||||||
Kazakhstan | — | 244,750 | — | |||||||||
Luxembourg | — | 187,500 | — | |||||||||
Malaysia | — | 1,365,143 | — | |||||||||
Mexico | — | 3,438,299 | — | |||||||||
Nigeria | — | 1,028,771 | — | |||||||||
Peru | — | 1,358,101 | — | |||||||||
Philippines | — | 529,970 | — | |||||||||
Poland | — | 2,034,399 | — | |||||||||
Romania | — | 221,703 | — | |||||||||
Russia | — | 5,219,116 | — | |||||||||
South Africa | — | 4,393,927 | — | |||||||||
Spain | — | 514,600 | — | |||||||||
Sri Lanka | — | 410,000 | — | |||||||||
Thailand | — | 1,273,414 | — | |||||||||
Turkey | — | 3,954,403 | — | |||||||||
Ukraine | — | 235,625 | — | |||||||||
Uruguay | — | 554,238 | — | |||||||||
Venezuela | — | 1,259,600 | — | |||||||||
Affiliated Money Market Mutual Fund | 4,588 | — | — | |||||||||
Options Purchased | — | 59,249 | — | |||||||||
Other Financial Instruments* | ||||||||||||
Forward Foreign Currency Exchange Contracts | — | 24,777 | — | |||||||||
Interest Rate Swap Agreements | — | 116,157 | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 4,588 | $ | 42,701,773 | $ | — | ||||||
|
|
|
|
|
|
See Notes to Financial Statements.
Prudential Emerging Markets Debt Local Currency Fund | 31 |
Portfolio of Investments
as of October 31, 2013 continued
The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value:
Foreign Bonds | ||||
Balance as of 10/31/12 | $ | 458,225 | ||
Realized gain (loss) | (4,221 | ) | ||
Accrued discount/premium | — | |||
Change in unrealized appreciation (depreciation) | 7,128 | |||
Purchases | — | |||
Sales | (461,132 | ) | ||
Transfers into Level 3 | — | |||
Transfers out of Level 3 | — | |||
|
| |||
Balance as of 10/31/13 | $ | — | ||
|
|
* | Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, such as futures, forwards and swap contracts, which are recorded at the unrealized appreciation/depreciation on the instrument. |
The industry classification of investments and other assets in excess of liabilities shown as a percentage of net assets as October 31, 2013 was as follows:
Foreign Government Obligations | 72.1 | % | ||
Foreign Agencies | 15.1 | |||
Foreign Corporations | 10.2 | |||
Options Purchased | 0.1 | |||
|
| |||
97.5 | ||||
Other assets in excess of liabilities | 2.5 | |||
|
| |||
100.0 | % | |||
|
|
Prudential Emerging Markets Debt Local Currency Fund (the “Series”) invested in derivative instruments during the reporting period. The primary types of risk associated with these derivative instruments is foreign exchange risk and interest rate risk. The effect of such derivative instruments on the Series’ financial position and financial performance as reflected in the Statement of Assets and Liabilities and Statement of Operations is presented in the summary below.
See Notes to Financial Statements.
32 |
Fair values of derivative instruments as of October 31, 2013 as presented in the Statement of Assets and Liabilities:
Derivatives not accounted for | Asset Derivatives | Liability Derivatives | ||||||||||
Balance | Fair Value | Balance | Fair Value | |||||||||
Foreign exchange contracts | Unrealized appreciation on forward foreign currency contracts | $ | 350,450 | Unrealized depreciation on forward foreign currency contracts | $ | 325,673 | ||||||
Foreign exchange contracts | Unaffiliated investments | 59,249 | — | — | ||||||||
Interest rate contracts | Unrealized appreciation on swap agreements | 116,157 | — | — | ||||||||
|
|
|
| |||||||||
$ | 525,856 | $ | 325,673 | |||||||||
|
|
|
|
The effects of derivative instruments on the Statement of Operations for the year ended October 31, 2013 are as follows:
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income | ||||||||||||||||||||
Derivatives not accounted for as hedging | Options Purchased | Futures | Forward Currency Contracts | Swaps | Total | |||||||||||||||
Foreign exchange contracts | $ | 1,480 | $ | — | $ | 279,177 | $ | — | $ | 280,657 | ||||||||||
Interest rate contracts | — | 17,206 | — | 26,076 | 43,282 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 1,480 | $ | 17,206 | $ | 279,177 | $ | 26,076 | $ | 323,939 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income | ||||||||||||||||
Derivatives not accounted for as hedging | Options Purchased | Forward Currency Contracts | Swaps | Total | ||||||||||||
Foreign exchange contracts | $ | (24,094 | ) | $ | (65,223 | ) | $ | — | $ | (89,317 | ) | |||||
Interest rate contracts | — | — | 70,074 | 70,074 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | (24,094 | ) | $ | (65,223 | ) | $ | 70,074 | $ | (19,243 | ) | |||||
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
Prudential Emerging Markets Debt Local Currency Fund | 33 |
Portfolio of Investments
as of October 31, 2013 continued
For the year ended October 31, 2013, the Series’ average volume of derivative activities are as follows:
Options Purchased (Cost) | Forward Currency Contracts—Purchased (Value at Settlement Date Payable) | Forward Currency Contracts—Sold (Value at Settlement Date Receivable) | Interest Rate Swaps (Notional amount in USD (000)) | |||||||||||
$ | 33,358 | $ | 31,230,047 | $ | 20,494,533 | $ | 1,310 |
See Notes to Financial Statements.
34 |
PRUDENTIAL INVESTMENTS»MUTUAL FUNDS
FINANCIAL STATEMENTS
ANNUAL REPORT · OCTOBER 31, 2013
Prudential Emerging Markets Debt Local Currency Fund
Statement of Assets & Liabilities
as of October 31, 2013
Assets | ||||
Investments at value: | ||||
Unaffiliated Investments (cost $46,874,678) | $ | 42,560,839 | ||
Affiliated Investments (cost $4,588) | 4,588 | |||
Foreign currency, at value (cost $130,095) | 129,242 | |||
Dividends and interest receivable | 796,620 | |||
Unrealized appreciation on forward foreign currency exchange contracts | 350,450 | |||
Receivable for investments sold | 260,096 | |||
Unrealized appreciation on over-the-counter swap agreements | 116,157 | |||
Receivable for Series shares sold | 50,839 | |||
Tax reclaim receivable | 14,648 | |||
Prepaid expenses | 798 | |||
|
| |||
Total assets | 44,284,277 | |||
|
| |||
Liabilities | ||||
Unrealized depreciation on forward foreign currency exchange contracts | 325,673 | |||
Payable for Series shares reacquired | 154,012 | |||
Accrued expenses | 115,744 | |||
Dividends payable | 16,210 | |||
Management fee payable | 6,196 | |||
Distribution fee payable | 3,731 | |||
Affiliated transfer agent fee payable | 712 | |||
Loan interest payable | 76 | |||
|
| |||
Total liabilities | 622,354 | |||
|
| |||
Net Assets | $ | 43,661,923 | ||
|
| |||
Net assets were comprised of: | ||||
Common stock, at par | $ | 50,134 | ||
Paid-in capital in excess of par | 48,617,622 | |||
|
| |||
48,667,756 | ||||
Distributions in excess of net investment income | (303,732 | ) | ||
Accumulated net realized loss on investment and foreign currency transactions | (525,283 | ) | ||
Net unrealized depreciation on investments and foreign currencies | (4,176,818 | ) | ||
|
| |||
Net assets, October 31, 2013 | $ | 43,661,923 | ||
|
|
See Notes to Financial Statements.
36 |
Class A | ||||
Net asset value and redemption price per share | ||||
($10,862,044 ÷ 1,252,467 shares of common stock issued and outstanding) | $ | 8.67 | ||
Maximum sales charge (4.50% of offering price) | 0.41 | |||
|
| |||
Maximum offering price to public | $ | 9.08 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share | ||||
($1,469,132 ÷ 168,566 shares of common stock issued and outstanding) | $ | 8.72 | ||
|
| |||
Class Q | ||||
Net asset value, offering price and redemption price per share | ||||
($1,027 ÷ 117.8 shares of common stock issued and outstanding) | $ | 8.71 | ||
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share | ||||
($31,329,720 ÷ 3,592,280 shares of common stock issued and outstanding) | $ | 8.72 | ||
|
|
See Notes to Financial Statements.
Prudential Emerging Markets Debt Local Currency Fund | 37 |
Statement of Operations
Year Ended October 31, 2013
Net Investment Income | ||||
Income | ||||
Interest income (net of foreign withholding taxes of $66,171) | $ | 3,141,142 | ||
Affiliated dividend income | 1,948 | |||
|
| |||
Total income | 3,143,090 | |||
|
| |||
Expenses | ||||
Management fee | 397,771 | |||
Distribution fee—Class A | 31,993 | |||
Distribution fee—Class C | 15,846 | |||
Custodian’s fees and expenses | 132,000 | |||
Audit fee | 60,000 | |||
Registration fees | 55,000 | |||
Shareholders’ reports | 28,000 | |||
Legal fees and expenses | 20,000 | |||
Transfer agent’s fees and expenses (including affiliated expense of $3,700) (Note 3) | 19,000 | |||
Directors’ fees | 11,000 | |||
Loan interest expense (Note 7) | 1,688 | |||
Insurance | 1,000 | |||
Miscellaneous | 13,902 | |||
|
| |||
Total expenses | 787,200 | |||
Expense reimbursement (Note 2) | (215,238 | ) | ||
|
| |||
Net expenses | 571,962 | |||
|
| |||
Net investment income | 2,571,128 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investment And Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Investment transactions | (1,303,161 | ) | ||
Futures transactions | 17,206 | |||
Swap agreements transactions | 26,076 | |||
Foreign currency transactions | 276,368 | |||
|
| |||
(983,511 | ) | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments (net of capital gains tax) | (4,486,082 | ) | ||
Swap agreements | 70,074 | |||
Foreign currencies | (67,620 | ) | ||
|
| |||
(4,483,628 | ) | |||
|
| |||
Net loss on investment and foreign currency transactions | (5,467,139 | ) | ||
|
| |||
Net Decrease In Net Assets Resulting From Operations | $ | (2,896,011 | ) | |
|
|
See Notes to Financial Statements.
38 |
Statement of Changes in Net Assets
Year Ended October 31, | ||||||||
2013 | 2012 | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income | $ | 2,571,128 | $ | 1,670,398 | ||||
Net realized loss on investment and foreign currency transactions | (983,511 | ) | (229,215 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments and foreign currencies | (4,483,628 | ) | 1,619,136 | |||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | (2,896,011 | ) | 3,060,319 | |||||
|
|
|
| |||||
Dividends and Distributions (Note 1) | ||||||||
Dividends from net investment income | ||||||||
Class A | (408,643 | ) | (150,328 | ) | ||||
Class C | (44,305 | ) | (36,880 | ) | ||||
Class Q | (36 | ) | (58 | ) | ||||
Class Z | (1,194,303 | ) | (1,755,165 | ) | ||||
|
|
|
| |||||
(1,647,287 | ) | (1,942,431 | ) | |||||
|
|
|
| |||||
Tax return of capital | ||||||||
Class A | (392,499 | ) | — | |||||
Class C | (42,579 | ) | — | |||||
Class Q | (36 | ) | — | |||||
Class Z | (1,148,753 | ) | — | |||||
|
|
|
| |||||
(1,583,867 | ) | — | ||||||
|
|
|
| |||||
Distributions from net realized gains | ||||||||
Class A | (37,964 | ) | — | |||||
Class C | (5,081 | ) | — | |||||
Class Q | (4 | ) | — | |||||
Class Z | (171,012 | ) | — | |||||
|
|
|
| |||||
(214,061 | ) | — | ||||||
|
|
|
| |||||
Series share transactions (Net of share conversions) (Note 6) | ||||||||
Net proceeds from shares sold | 30,796,003 | 12,318,655 | ||||||
Net asset value of shares issued in reinvestment of dividends and tax return of capital | 3,330,196 | 1,894,634 | ||||||
Cost of shares reacquired | (24,693,903 | ) | (4,310,811 | ) | ||||
|
|
|
| |||||
Net increase in net assets from Series share transactions | 9,432,296 | 9,902,478 | ||||||
|
|
|
| |||||
Total increase | 3,091,070 | 11,020,366 | ||||||
Net Assets: | ||||||||
Beginning of year | 40,570,853 | 29,550,487 | ||||||
|
|
|
| |||||
End of year | $ | 43,661,923 | $ | 40,570,853 | ||||
|
|
|
|
See Notes to Financial Statements.
Prudential Emerging Markets Debt Local Currency Fund | 39 |
Notes to Financial Statements
Prudential World Fund, Inc. (the “Fund”) is an open-end management investment company, registered under the Investment Company Act of 1940, as amended, (“1940 Act”) and currently consists of six series: Prudential International Equity Fund, Prudential Jennison Global Infrastructure Fund, Prudential International Value Fund, Prudential Jennison Global Opportunities Fund, Prudential Jennison International Opportunities Fund, and Prudential Emerging Markets Debt Local Currency Fund (the “Series”). These financial statements relate to Prudential Emerging Markets Debt Local Currency Fund. The financial statements of the other series are not presented herein. The Series commenced investment operations on March 30, 2011. The Series is non-diversified. The investment objective of the Series is total return, through a combination of current income and capital appreciation.
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the Fund and the Series in the preparation of the financial statements.
Security Valuation: The Series holds securities and other assets that are fair valued at the close of each day the New York Stock Exchange (“NYSE”) is open for trading. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Board of Directors (the “Board”) has adopted Valuation Procedures for security valuation under which fair valuation responsibilities have been delegated to Prudential Investments LLC (“PI” or “Manager”). Under the current Valuation Procedures, the established Valuation Committee is responsible for supervising the valuation of portfolio securities and other assets. The Valuation Procedures permit the Series to utilize independent pricing vendor services, quotations from market makers, and alternative valuation methods when market quotations are either not readily available or not representative of fair value. A record of the Valuation Committee’s actions is subject to the Board’s review, approval, and ratification at its next regularly-scheduled quarterly meeting.
Various inputs determine how the Series’ investments are valued, all of which are categorized according to the three broad levels (Level 1, 2, or 3) detailed in the table following the Portfolio of Investments.
40 |
Common stocks, exchange-traded funds, and derivative instruments that are traded on a national securities exchange are valued at the last sale price as of the close of trading on the applicable exchange. Securities traded via NASDAQ are valued at the NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQ official closing price; they are classified as Level 1 in the fair value hierarchy.
In the event that no sale or official closing price on valuation date exists, these securities are generally valued at the mean between the last reported bid and asked prices, or at the last bid price in the absence of an asked price. These securities are classified as Level 2 in the fair value hierarchy, as the inputs are observable and considered to be significant to the valuation.
Common stocks traded on foreign securities exchanges are valued using pricing vendor services that provide model prices derived using adjustment factors based on information such as local closing price, relevant general and sector indices, currency fluctuations, depositary receipts, and futures, as applicable. Securities valued using such model prices are classified as Level 2 in the fair value hierarchy, as the adjustment factors are observable and considered to be significant to the valuation.
Investments in open-end, non-exchange-traded mutual funds are valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Fixed income securities traded in the over-the-counter market are generally valued at prices provided by approved independent pricing vendors. The pricing vendors provide these prices after evaluating observable inputs including, but not limited to yield curves, yield spreads, credit ratings, deal terms, tranche level attributes, default rates, cash flows, prepayment speeds, broker/dealer quotations, and reported trades. Securities valued using such vendor prices are classified as Level 2 in the fair value hierarchy.
Over-the-counter derivative instruments are generally valued using pricing vendor services, which derive the valuation based on inputs such as underlying asset prices, indices, spreads, interest rates, and exchange rates. These instruments are categorized as Level 2 in the fair value hierarchy.
Securities and other assets that cannot be priced according to the methods described above are valued based on pricing methodologies approved by the Board of
Prudential Emerging Markets Debt Local Currency Fund | 41 |
Notes to Financial Statements
continued
Directors. In the event that significant unobservable inputs are used when determining such valuations, the securities will be classified as Level 3 in the fair value hierarchy.
When determining the fair value of securities, some of the factors influencing the valuation include: the nature of any restrictions on disposition of the securities; assessment of the general liquidity of the securities; the issuer’s financial condition and the markets in which it does business; the cost of the investment; the size of the holding and the capitalization of the issuer; the prices of any recent transactions or bids/offers for such securities or any comparable securities; any available analyst media or other reports or information deemed reliable by the investment adviser regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other mutual funds to calculate their net asset values.
Restricted and Illiquid Securities: The Series may invest up to 15% of its net assets in illiquid securities. Illiquid securities are those that, because of the absence of a readily available market or due to legal or contractual restrictions on resale, cannot be sold within seven days in the ordinary course of business at approximately the amount at which the Series has valued the investment. Therefore, the Series may find it difficult to sell illiquid securities at the time considered most advantageous by its Subadviser and may incur expenses that would not be incurred in the sale of securities that were freely marketable. Certain securities that would otherwise be considered illiquid because of legal restrictions on resale to the general public may be traded among qualified institutional buyers under Rule 144A of the Securities Act of 1933. These Rule 144A securities, as well as commercial paper that is sold in private placements under Section 4(2) of the Securities Act, may be deemed liquid by the Series’ Subadviser under the guidelines adopted by the Series. However, the liquidity of the Series’ investments in Rule 144A securities could be impaired if trading does not develop or declines.
Foreign Currency Translation: The books and records of the Series 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 current rates of exchange;
42 |
(ii) purchases and sales of investment securities, income and expenses at the rates of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Series are presented at the foreign exchange rates and market values at the close of the period, the Series does 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 long-term portfolio securities held at the end of the period. Similarly, the Series does 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 period. Accordingly, these realized foreign currency gains or losses are included in the reported net realized gains or losses on investment transactions.
Net realized gains or losses on foreign currency transactions represent net foreign exchange gains or losses from holdings of foreign currencies, currency gains or losses realized between the trade and settlement dates on security transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Series’ books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains or losses from valuing foreign currency denominated assets and liabilities (other than investments) at period end exchange rates are reflected as a component of net unrealized appreciation (depreciation) on 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 possibility of political and economic instability, or the level of governmental supervision and regulation of foreign securities markets.
Forward Currency Contracts: A forward currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate between two parties. The Series enters into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings or 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 foreign currencies. Gain or loss is realized on the settlement date of the contract equal to the difference between the settlement value of the original and negotiated forward contracts. This gain or loss, if any, is included in net realized gain (loss) on foreign currency transactions. Risks may arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts. Forward currency contracts involve risks from currency exchange rate and credit risk in excess of the amounts reflected on the Statement of Assets and Liabilities. The Series’
Prudential Emerging Markets Debt Local Currency Fund | 43 |
Notes to Financial Statements
continued
maximum risk of loss from counterparty credit risk is the net value of the cash flows to be received from the counterparty at the end of the contract’s life. Such credit risk may be mitigated by entering into a master netting arrangement between the Series and the counterparty which may permit the Series to offset amounts payable by the Series to the same counterparty against amounts to be received; and by the receipt of collateral from the counterparty by the Series to cover the Series’ exposure to the counterparty. However, there are no assurances that such mitigating factors are easily enforceable.
Options: The Series purchased options and may 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 which the Series currently owns or intends to purchase. The Series’ principal reason for writing options would be to realize, through receipt of premiums, a greater current return than would be realized on the underlying security alone. When the Series purchases an option, it pays a premium and an amount equal to that premium is recorded as an asset. When the Series writes an option, it receives a premium and an amount equal to that premium is recorded as a liability.
The asset or liability is adjusted daily to reflect the current market value of the option. If an option expires unexercised, the Series 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 recorded as an adjustment to the proceeds from the sale or the cost of the purchase in determining whether the Series 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 or loss on investment transactions. Gain or loss on written options is presented separately as net realized gain or loss on options written. The Series, as writer of an option, may have no control over whether the underlying securities may be sold (called) or purchased (put). As a result, the Series bears the market risk of an unfavorable change in the price of the security underlying the written option. Over-the-counter options involve the risk of the potential inability of the counterparties to meet the terms of their contracts.
With exchange-traded futures and options contracts, there is minimal counterparty credit risk to the Series since the exchanges’ clearinghouse acts as counterparty to all exchange traded futures and options and guarantees the futures and options contracts against default.
44 |
Swap Agreements: The Series entered into interest rate swap agreements. A swap agreement is an agreement to exchange the return generated by one instrument for the return generated by another instrument. Swap agreements are negotiated in the over-the-counter market and may be executed either directly with counterparty (“OTC Traded”) or through a central clearing facility, such as a registered commodities exchange (“Exchange Traded”). The swap agreements are valued daily at current market value and any change in value is included in the net unrealized appreciation or depreciation on investments. Payments received or paid by the Series are recorded as realized gains or losses upon termination or maturity of the swap. Risk of loss may exceed amounts recognized on the statements of assets and liabilities. Swap agreements outstanding at period end, if any, are listed on the Portfolio of Investments.
Interest Rate Swaps: Interest rate swaps represent an agreement between counterparties to exchange cash flows based on the difference between two interest rates, applied to a notional principal amount for a specified period. The Series is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. The Series used interest rate swaps to maintain its ability to generate steady cash flow by receiving a stream of fixed rate payments and to increase exposure to prevailing market rates by receiving floating rate payments using interest rate swap contracts. The Series’ maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from the counterparty over the contract’s remaining life. Such credit risk may be mitigated by entering into a master netting arrangement between the Series and the counterparty which may permit the Series to offset amounts payable by the Series to the same counterparty against amounts to be received; and by the receipt of collateral from the counterparty by the Series to cover the Series’ exposure to the counterparty. However, there are no assurances that such mitigating factors are easily enforceable.
In addition to each instrument’s primary underlying risk exposure (e.g. interest rate), swap agreements involve, to varying degrees, elements of credit, market risk and documentation risk. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreement may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreement, that there will be unfavorable changes in net interest rates. In connection with these agreements, securities in the portfolio may be identified as collateral or received as collateral from the counterparty in accordance with the terms of the respective swap agreements to provide or receive assets of value and serve as recourse in the event of default or bankruptcy/insolvency of either party.
Prudential Emerging Markets Debt Local Currency Fund | 45 |
Notes to Financial Statements
continued
Such over-the-counter derivative agreements include conditions which when materialized, give the counterparty the right to cause an early termination of the transactions under those agreements. Any election by the counterparty for early termination of the contract(s) may impact the amounts reported on financial statements.
As of October 31, 2013, the Series has not met conditions under such agreements that give the counterparty the right to call for an early termination.
Concentration of Risk: The ability of issuers of debt securities (other than those issued or guaranteed by the U.S. Government), held by the Series, to meet their obligations may be affected by the economic or political developments in a specific industry, region or country. 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 possibility of political or economic instability, or the level of governmental supervision and regulation of foreign securities markets.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains or losses from investment and currency transactions are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, including amortization of premium and accretion of discount on debt securities, as required, is recorded on an accrual basis. Expenses are recorded on an accrual basis, which may require the use of certain estimates by management, which may differ from actual.
Net investment income or loss (other than distribution fees which are charged directly to the respective class) and unrealized and realized gains or losses are allocated daily to each class of shares based upon the relative proportion of adjusted net assets of each class at the beginning of the day.
Dividends and Distributions: The Series declares dividends of net investment income daily and payment is made monthly. Distributions from net realized capital and currency gains, if any, are made annually.
Dividends and distributions are recorded on the ex-dividend date. Dividends and distributions are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. Permanent book/tax differences relating to income and gains are reclassified amongst distribution in
46 |
excess of net investment income, accumulated net realized gain or loss and paid-in-capital in excess of par, as appropriate.
Taxes: For federal income tax purposes, each series in the Fund is treated as a separate taxpaying entity. It is each series’ policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net investment income and capital gains, if any, to its shareholders. Therefore, no federal income tax provision is required.
Withholding taxes on foreign interest are recorded, net of reclaimable amounts, at the time the related income is earned.
Estimates: The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those amounts.
Note 2. Agreements
The Series has a management agreement with PI. Pursuant to this agreement, PI has responsibility for all investment advisory services and supervises the subadvisor’s performance of such services. PI has entered into a subadvisory agreement with Prudential Investment Management, Inc. (“PIM”). The subadvisory agreement provides that PIM will furnish investment advisory services in connection with the management of the Series. In connection therewith, PIM is obligated to keep certain books and records of the Series. PI pays for the services of PIM, the cost of compensation of officers of the Series, occupancy and certain clerical and bookkeeping costs of the Series. The Series bears all other costs and expenses.
The management fee paid to PI is computed daily and payable monthly at an annual rate of .80% of the average daily net assets of the Series.
PI has contractually agreed through February 28, 2015 to limit net annual Series operating expenses (excluding distribution and service (12b-1) fees, extraordinary and certain other expenses such as taxes, interest and brokerage commissions) to each class of shares to 1.05% of the Series’ average daily net assets.
The Series has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”) who acts as the distributor of the Class A, Class C, Class Q and Class Z shares. The Series compensates PIMS for distributing and servicing the Series’ Class A and Class C, pursuant to plans of distribution (the “Class A and C Plans”),
Prudential Emerging Markets Debt Local Currency Fund | 47 |
Notes to Financial Statements
continued
regardless of expenses actually incurred by PIMS. The distribution fees are accrued daily and payable monthly. No distribution or service fees are paid to PIMS as distributor of the Class Q and Z shares of the Series.
Pursuant to the Class A and C Plans, the Series compensates PIMS for distribution related activities at an annual rate of up to .30% and 1% of the average daily net assets of the Class A and C shares, respectively. For the year ended October 31, 2013, PIMS contractually agreed to limit such expenses to .25% of the average daily net assets of the Class A shares.
PIMS has advised the Series that it received $52,073 in front-end sales charges resulting from sales of Class A shares during the year ended October 31, 2013. From these fees, PIMS paid such sales charges to affiliated broker-dealers, which in turn paid commissions to salespersons and incurred other distribution costs.
PIMS has advised the Series that for the year ended October 31, 2013, it received $5,000 and $1,967 in contingent deferred sales charges imposed upon certain redemptions by Class A and Class C shareholders, respectively.
PI, PIM and PIMS are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PI and an indirect, wholly-owned subsidiary of Prudential, serves as the Series’ transfer agent. Transfer agent fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
The Series invests in the Prudential Core Taxable Money Market Fund (the “Core Fund”), a Series of the Prudential Investment Portfolios 2 registered under the 1940 Act, and managed by PI. Earnings from the Core Fund are disclosed on the Statement of Operations as affiliated dividend income.
48 |
Note 4. Portfolio Securities
Purchases and sales of portfolio securities, other than short-term investments and U.S. Government securities, for the year ended October 31, 2013, were $59,017,011 and $47,314,950, respectively.
Note 5. Tax Information
Distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-dividend date. In order to present distributions in excess of net investment income, accumulated net realized loss on investment and foreign currency transactions and paid-in capital in excess of par on the Statement of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to distributions in excess of net investment income and accumulated net realized loss on investment and foreign currency transactions. For the year ended October 31, 2013, the adjustments were to increase distributions in excess of net investment income and decrease accumulated net realized loss on investment and foreign currency transactions by $735,417 due to the differences in the treatment for book and tax purposes of certain transactions involving foreign currencies, swaps, paydown gains/losses and differences in the treatment of premium amortization. Net investment income, net realized gain (loss) on investment and foreign currency transactions and net assets were not affected by this change.
For the year ended October 31, 2013, the tax character of dividends paid as reflected in the Statement of Changes in Net Assets were $1,769,548 of ordinary income, $91,800 of long-term capital gains and $1,583,867 of tax return of capital. For the year ended October 31, 2012, the tax character of dividends paid as reflected in the Statement of Changes in Net Assets was $1,942,431 of ordinary income.
As of October 31, 2013, the Fund had no accumulated undistributed earnings on a tax basis.
The United States federal income tax basis of the Series’ investments and the net unrealized depreciation as of October 31, 2013 were as follows:
Tax Basis | Appreciation | Depreciation | Net | Other Cost | Total Net | |||||
$47,549,498 | $338,212 | $(5,322,283) | $(4,984,071) | $128,754 | $(4,855,317) |
The difference between book basis and tax basis is primarily attributable to the difference in the treatment of amortization of premiums, wash sales and straddle loss deferrals. The
Prudential Emerging Markets Debt Local Currency Fund | 49 |
Notes to Financial Statements
continued
other cost basis adjustments are primarily attributable to appreciation (depreciation) of foreign currencies, swaps and mark-to-market of receivables and payables.
For federal income tax purposes, the Series had a capital loss carryforward as of October 31, 2013 of approximately $129,000 which can be carried forward for an unlimited period. No capital gains distributions are expected to be paid to shareholders until net gains have been realized in excess of such losses.
Management has analyzed the Series’ tax positions taken on federal income tax returns for all open tax years and has concluded that no provision for income tax is required in the Series’ financial statements for the current reporting period. The Series’ federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
Note 6. Capital
The Series offers Class A, Class C, Class Q and Class Z shares. Class A shares are sold with a front-end sales charge of up to 4.50%. All Investors who purchase Class A shares in an amount of $1 million or more and sell these shares within 12 months of purchase are subject to a contingent deferred sales charge (“CDSC”) of 1%. The Class A CDSC is waived for purchases by certain retirement and/or benefit plans. Class C shares are sold with a contingent deferred sales charge of 1% on shares redeemed within the first 12 months after purchase. A special exchange privilege is also available for shareholders who qualified to purchase Class A shares at net asset value. Class Q and Z shares are not subject to any sales or redemption charge and are offered exclusively for sale to a limited group of investors.
Under certain circumstances, an exchange may be made from specified share classes of the Series to one or more other share classes of the Series as presented in the table of transactions in shares of common stock. For the year ended October 31, 2013, no such exchanges were made.
As of October 31, 2013, Prudential Financial, Inc. through its affiliates owned 117 Class A shares, 115 Class C shares, 118 Class Q shares and 2,783,393 Class Z shares of the Series.
There are 250 million shares of common stock at $0.01 par value per share, designated Class A, Class C, Class Q and Class Z common stock, each of which consists of 75 million, 50 million, 50 million and 75 million authorized shares, respectively.
50 |
Transactions in shares of common stock were as follows:
Class A | Shares | Amount | ||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 1,778,574 | $ | 17,221,493 | |||||
Shares issued in reinvestment of dividends and tax return of capital | 81,238 | 743,125 | ||||||
Shares reacquired | (1,229,880 | ) | (11,043,144 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 629,932 | $ | 6,921,474 | |||||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 507,223 | $ | 4,807,892 | |||||
Shares issued in reinvestment of dividends | 13,747 | 128,087 | ||||||
Shares reacquired | (178,210 | ) | (1,655,069 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 342,760 | $ | 3,280,910 | |||||
|
|
|
| |||||
Class C | ||||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 160,719 | $ | 1,568,898 | |||||
Shares issued in reinvestment of dividends and tax return of capital | 8,863 | 81,701 | ||||||
Shares reacquired | (107,280 | ) | (977,299 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 62,302 | $ | 673,300 | |||||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 76,112 | $ | 714,307 | |||||
Shares issued in reinvestment of dividends | 3,789 | 35,467 | ||||||
Shares reacquired | (15,867 | ) | (147,837 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 64,034 | $ | 601,937 | |||||
|
|
|
| |||||
Class Q | ||||||||
Year ended October 31, 2013: | ||||||||
Shares issued in reinvestment of dividends and tax return of capital | 8.3 | $ | 76 | |||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 8.3 | $ | 76 | |||||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares issued in reinvestment of dividends | 6.1 | $ | 58 | |||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 6.1 | $ | 58 | |||||
|
|
|
| |||||
Class Z | ||||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 1,250,099 | $ | 12,005,612 | |||||
Shares issued in reinvestment of dividends and tax return of capital | 270,309 | 2,505,294 | ||||||
Shares reacquired | (1,401,122 | ) | (12,673,460 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 119,286 | $ | 1,837,446 | |||||
|
|
|
| |||||
Year ended October 31, 2012: | ||||||||
Shares sold | 721,461 | $ | 6,796,456 | |||||
Shares issued in reinvestment of dividends | 185,266 | 1,731,022 | ||||||
Shares reacquired | (264,332 | ) | (2,507,905 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 642,395 | $ | 6,019,573 | |||||
|
|
|
|
Prudential Emerging Markets Debt Local Currency Fund | 51 |
Notes to Financial Statements
continued
Note 7. Borrowings
The Series, along with other affiliated registered investment companies (the “Funds”), is a party to a Syndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide an alternative source of temporary funding for capital share redemptions. The SCA provides for a commitment of $900 million for the period November 15, 2012 through November 4, 2013. The Funds pay an annualized commitment fee of 0.08% on the unused portion of the SCA. Prior to November 15, 2012, the Funds had another Syndicated Credit Agreement with substantially similar terms. Interest on any borrowings under the Syndicated Credit Agreement is paid at contracted market rates. The commitment fee for the unused amount is accrued daily and paid quarterly.
Subsequent to the fiscal year end, the SCA has been renewed effective November 5, 2013 at substantially similar terms through November 4, 2014.
The Series utilized the SCA during the year ended October 31, 2013. The average daily balance for the 71 days the Series had loans outstanding during the period was $592,549 borrowed at a weighted average interest rate of 1.44%. At October 31, 2013, the Series did not have an outstanding loan amount.
Note 8. New Accounting Pronouncement
In January 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” which replaced ASU No. 2011-11 “Disclosures about Offsetting Assets and Liabilities”. The updates create new disclosure requirements requiring entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of Assets and Liabilities or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods. Management is currently evaluating the application of ASU No. 2013-01 and its impact, if any, on the Series’ financial statements.
52 |
Financial Highlights
Class A Shares | ||||||||||||||||
Year October 31, | Year Ended October 31, 2012(b) | March 30, 2011(a) through October 31, 2011 | ||||||||||||||
Per Share Operating Performance: | ||||||||||||||||
Net Asset Value, Beginning Of Period | $9.61 | $9.36 | $10.00 | |||||||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income | .47 | .42 | .32 | |||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.76 | ) | .35 | (.62 | ) | |||||||||||
Total from investment operations | (.29 | ) | .77 | (.30 | ) | |||||||||||
Less Dividends and Distributions: | ||||||||||||||||
Dividends from net investment income | (.30 | ) | (.52 | ) | (.13 | ) | ||||||||||
Distributions from net realized gains | (.05 | ) | - | - | ||||||||||||
Tax return of capital | (.30 | ) | - | (.21 | ) | |||||||||||
Total dividends and distributions | (.65 | ) | (.52 | ) | (.34 | ) | ||||||||||
Net asset value, end of period | $8.67 | $9.61 | $9.36 | |||||||||||||
Total Return(c): | (3.23)% | 8.53% | (3.14)% | |||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||
Net assets, end of period (000) | $10,862 | $5,985 | $2,620 | |||||||||||||
Average net assets (000) | $12,797 | $2,721 | $1,634 | |||||||||||||
Ratios to average net assets(d): | ||||||||||||||||
Expenses after advisory fee waivers and/or expense reimbursement(e) | 1.30% | 1.30% | 1.30% | (f) | ||||||||||||
Expenses before advisory fee waivers and/or expense reimbursement | 1.78% | 2.09% | 2.81% | (f) | ||||||||||||
Net investment income | 5.07% | 4.73% | 4.85% | (f) | ||||||||||||
Portfolio turnover rate | 102% | 70% | 60% | (g) |
(a) Commencement of operations.
(b) Calculated based on average shares outstanding during the period.
(c) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of the reporting period, and includes reinvestment of dividends and distributions. Total return may reflect adjustments to conform to generally accepted accounting principles. Total return for a period less than a full year is not annualized.
(d) Does not include expenses of the underlying fund in which the Series invests.
(e) The distributor of the Series has contractually agreed to limit its distribution and service (12b-1) fees to .25% of the average daily net assets of the Class A shares.
(f) Annualized.
(g) Not annualized.
See Notes to Financial Statements.
Prudential Emerging Markets Debt Local Currency Fund | 53 |
Financial Highlights
continued
Class C Shares | ||||||||||||||||
Year | Year Ended October 31, 2012(b) | March 30, 2011(a) through October 31, 2011 | ||||||||||||||
Per Share Operating Performance: | ||||||||||||||||
Net Asset Value, Beginning Of Period | $9.65 | $9.41 | $10.00 | |||||||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income | .40 | .37 | .31 | |||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.75 | ) | .32 | (.57 | ) | |||||||||||
Total from investment operations | (.35 | ) | .69 | (.26 | ) | |||||||||||
Less Dividends and Distributions: | ||||||||||||||||
Dividends from net investment income | (.23 | ) | (.45 | ) | (.12 | ) | ||||||||||
Distributions from net realized gains | (.05 | ) | - | - | ||||||||||||
Tax return of capital | (.30 | ) | - | (.21 | ) | |||||||||||
Total dividends and distributions | (.58 | ) | (.45 | ) | (.33 | ) | ||||||||||
Net asset value, end of period | $8.72 | $9.65 | $9.41 | |||||||||||||
Total Return(c): | (3.85)% | 7.55% | (2.72)% | |||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||
Net assets, end of period (000) | $1,469 | $1,025 | $398 | |||||||||||||
Average net assets (000) | $1,585 | $786 | $211 | |||||||||||||
Ratios to average net assets(d): | ||||||||||||||||
Expenses after advisory fee waivers and/or expense reimbursement | 2.05% | 2.05% | 2.05% | (e) | ||||||||||||
Expenses before advisory fee waivers and/or expense reimbursement | 2.47% | 2.78% | 3.52% | (e) | ||||||||||||
Net investment income | 4.26% | 3.89% | 4.09% | (e) | ||||||||||||
Portfolio turnover rate | 102% | 70% | 60% | (f) |
(a) Commencement of operations.
(b) Calculated based on average shares outstanding during the period.
(c) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of the reporting period, and includes reinvestment of dividends and distributions. Total return may reflect adjustments to conform to generally accepted accounting principles. Total return for a period less than a full year is not annualized.
(d) Does not include expenses of the underlying fund in which the Series invests.
(e) Annualized.
(f) Not annualized.
See Notes to Financial Statements.
54 |
Class Q Shares | ||||||||||||||||
Year Ended October 31, 2013(b) | Year Ended October 31, 2012(b) | March 30, 2011(a) through October 31, 2011 | ||||||||||||||
Per Share Operating Performance: | ||||||||||||||||
Net Asset Value, Beginning Of Period | $9.66 | $9.37 | $10.00 | |||||||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income | .58 | .47 | .29 | |||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.86 | ) | .37 | (.59 | ) | |||||||||||
Total from investment operations | (.28 | ) | .84 | (.30 | ) | |||||||||||
Less Dividends and Distributions: | ||||||||||||||||
Dividends from net investment income | (.32 | ) | (.55 | ) | (.12 | ) | ||||||||||
Distributions from net realized gains | (.05 | ) | - | - | ||||||||||||
Tax return of capital | (.30 | ) | - | (.21 | ) | |||||||||||
Total dividends and distributions | (.67 | ) | (.55 | ) | (.33 | ) | ||||||||||
Net asset value, end of period | $8.71 | $9.66 | $9.37 | |||||||||||||
Total Return(c): | (3.06)% | 9.31% | (3.14)% | |||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||
Net assets, end of period (000) | $1 | $1 | $1 | |||||||||||||
Average net assets (000) | $1 | $1 | $1 | |||||||||||||
Ratios to average net assets(d): | ||||||||||||||||
Expenses after advisory fee waivers and/or expense reimbursement | 1.05% | 1.05% | 1.05% | (e) | ||||||||||||
Expenses before advisory fee waivers and/or expense reimbursement | 1.39% | 1.71% | 2.67% | (e) | ||||||||||||
Net investment income | 6.22% | 5.06% | 4.98% | (e) | ||||||||||||
Portfolio turnover rate | 102% | 70% | 60% | (f) |
(a) Commencement of operations.
(b) Calculated based on average shares outstanding during the period.
(c) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of the reporting period, and includes reinvestment of dividends and distributions. Total return may reflect adjustments to conform to generally accepted accounting principles. Total return for a period less than a full year is not annualized.
(d) Does not include expenses of the underlying fund in which the Series invests.
(e) Annualized.
(f) Not annualized.
See Notes to Financial Statements.
Prudential Emerging Markets Debt Local Currency Fund | 55 |
Financial Highlights
continued
Class Z Shares | ||||||||||||||||
Year | Year Ended October 31, 2012(b) | March 30, 2011(a) through October 31, 2011 | ||||||||||||||
Per Share Operating Performance: | ||||||||||||||||
Net Asset Value, Beginning Of Period | $9.66 | $9.37 | $10.00 | |||||||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income | .49 | .47 | .29 | |||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.76 | ) | .36 | (.59 | ) | |||||||||||
Total from investment operations | (.27 | ) | .83 | (.30 | ) | |||||||||||
Less Dividends and Distributions: | ||||||||||||||||
Dividends from net investment income | (.32 | ) | (.54 | ) | (.12 | ) | ||||||||||
Distributions from net realized gains | (.05 | ) | - | - | ||||||||||||
Tax return of capital | (.30 | ) | - | (.21 | ) | |||||||||||
Total dividends and distributions | (.67 | ) | (.54 | ) | (.33 | ) | ||||||||||
Net asset value, end of period | $8.72 | $9.66 | $9.37 | |||||||||||||
Total Return(c): | (2.98)% | 9.21% | (3.14)% | |||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||
Net assets, end of period (000) | $31,330 | $33,559 | $26,532 | |||||||||||||
Average net assets (000) | $35,341 | $30,441 | $25,697 | |||||||||||||
Ratios to average net assets(d): | ||||||||||||||||
Expenses after advisory fee waivers and/or expense reimbursement | 1.05% | 1.05% | 1.05% | (e) | ||||||||||||
Expenses before advisory fee waivers and/or expense reimbursement | 1.49% | 1.81% | 2.72% | (e) | ||||||||||||
Net investment income | 5.25% | 4.96% | 4.99% | (e) | ||||||||||||
Portfolio turnover rate | 102% | 70% | 60% | (f) |
(a) Commencement of operations.
(b) Calculated based on average shares outstanding during the period.
(c) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of the reporting period, and includes reinvestment of dividends and distributions. Total return may reflect adjustments to conform to generally accepted accounting principles. Total return for a period less than a full year is not annualized.
(d) Does not include expenses of the underlying portfolios in which the Series invests.
(e) Annualized.
(f) Not annualized.
See Notes to Financial Statements.
56 |
Report of Independent Registered Public
Accounting Firm
The Board of Trustees and Shareholders
Prudential World Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Prudential Emerging Markets Debt Local Currency Fund, a series of Prudential World Fund, Inc. (hereafter referred to as the “Fund”), including the portfolio of investments, as of October 31, 2013, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the two-year period then ended and for the period March 30, 2011 (commencement of operations) to October 31, 2011. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2013, by correspondence with the custodian, transfer agent and brokers or by other appropriate auditing procedures when replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Fund as of October 31, 2013, and the results of its operations for the year then ended, the changes in its net assets in each of the years in the two-year period then ended and the financial highlights for each of the years in the two-year period then ended and for the period March 30, 2011 (commencement of operations) to October 31, 2011, in conformity with U.S. generally accepted accounting principles.
New York, New York
December 23, 2013
Prudential Emerging Markets Debt Local Currency Fund | 57 |
Tax Information
(Unaudited)
We are advising you that during the year ended October 31, 2013, the Series reports the maximum amount allowed per share but not less than $.02 for Class A, C, Q and Z shares as a capital gain distribution in accordance with Section 852(b)(3)(C) of the Internal Revenue Code.
For the year ended October 31, 2013, the Series reports the maximum amount allowable but not less than 11.10% as interest related dividends in accordance with Section 871(k)(1) and 881(e)(1) of the Internal Revenue Code.
In January 2014, you will be advised on IRS Form 1099-DIV or substitute 1099-DIV, as to the federal tax status of distributions received by you in calendar year 2013.
58 |
INFORMATION ABOUT BOARD MEMBERS AND OFFICERS
(Unaudited)
Information about Board Members and Officers of the Fund is set forth below. Board Members who are not deemed to be “interested persons” of the Fund, as defined in the 1940 Act, are referred to as “Independent Board Members.” Board Members who are deemed to be “interested persons” of the Fund are referred to as “Interested Board Members.” The Board Members are responsible for the overall supervision of the operations of the Fund and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Board in turn elects the Officers, who are responsible for administering the day-to-day operations of the Fund.
Independent Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Ellen S. Alberding (55) Board Member Portfolios Overseen: 64 | President and Board Member, The Joyce Foundation (charitable foundation) (since 2002); Vice Chair, City Colleges of Chicago (community college system) (since 2011); Trustee, Skills for America’s Future (national initiative to connect employers to community colleges) (since 2011); Trustee, National Park Foundation (charitable foundation for national park system) (since 2009); Trustee, Economic Club of Chicago (since 2009). | None. | ||
Kevin J. Bannon (61) Board Member Portfolios Overseen: 64 | Managing Director (since April 2008) and Chief Investment Officer (since October 2008) of Highmount Capital LLC (registered investment adviser); formerly Executive Vice President and Chief Investment Officer (April 1993-August 2007) of Bank of New York Company; President (May 2003-May 2007) of BNY Hamilton Family of Mutual Funds. | Director of Urstadt Biddle Properties (since September 2008). | ||
Linda W. Bynoe (61) Board Member Portfolios Overseen: 64 | President and Chief Executive Officer (since March 1995) and formerly Chief Operating Officer (December 1989-February 1995) of Telemat Ltd. (management consulting); formerly Vice President (January 1985-June 1989) at Morgan Stanley & Co (broker-dealer). | Director of Simon Property Group, Inc. (retail real estate) (May 2003-May 2012); Director of Anixter International, Inc. (communication products distributor) (since January 2006); Director of Northern Trust Corporation (financial services) (since April 2006); Trustee of Equity Residential (residential real estate) (since December 2009). |
Prudential Emerging Markets Debt Local Currency Fund
Independent Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Keith F. Hartstein (57) Board Member Portfolios Overseen: 64 | Formerly President and Chief Executive Officer (2005-2012), Senior Vice President (2004-2005), Senior Vice President of Sales and Marketing (1997-2004), and various executive management positions (1990-1997), John Hancock Funds, LLC (asset management); Chairman, Investment Company Institute’s Sales Force Marketing Committee (2003-2008). | None. | ||
Michael S. Hyland, CFA (68) Board Member Portfolios Overseen: 64 | Independent Consultant (since February 2005); formerly Senior Managing Director (July 2001-February 2005) of Bear Stearns & Co, Inc.; Global Partner, INVESCO (1999-2001); Managing Director and President of Salomon Brothers Asset Management (1989-1999). | None. | ||
Douglas H. McCorkindale (74) Board Member Portfolios Overseen: 64 | Formerly Chairman (February 2001-June 2006), Chief Executive Officer (June 2000-July 2005), President (September 1997-July 2005) and Vice Chairman (March 1984-May 2000) of Gannett Co. Inc. (publishing and media). | Director of Lockheed Martin Corp. (aerospace and defense) (since May 2001). | ||
Stephen P. Munn (71) Board Member Portfolios Overseen: 64 | Lead Director (since 2007) and formerly Chairman (1993-2007) of Carlisle Companies Incorporated (manufacturer of industrial products). | Lead Director (since 2007) of Carlisle Companies Incorporated (manufacturer of industrial products). | ||
James E. Quinn (61) Board Member Portfolios Overseen: 64 | Formerly President (2003-2012) and Director (2003-2008), and Vice Chairman and Director (1998-2003), Tiffany & Company (jewelry retailing); Director, Mutual of America Capital Management Corporation (asset management) (since 1996); Director, Hofstra University (since 2008); Vice Chairman, Museum of the City of New York (since 1984). | Director of Deckers Outdoor Corporation (footwear manufacturer) (since 2011). | ||
Richard A. Redeker (70) Board Member & Independent Chair Portfolios Overseen: 64 | Retired Mutual Fund Senior Executive (44 years); Management Consultant; Independent Directors Council (organization of 2,800 Independent Mutual Fund Directors)-Executive Committee, Chair of Policy Steering Committee, Governing Council. | None. |
Visit our website at www.prudentialfunds.com
Independent Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Robin B. Smith (74) Board Member Portfolios Overseen: 64 | Chairman of the Board (since January 2003) of Publishers Clearing House (direct marketing); Member of the Board of Directors of ADLPartner (marketing) (since December 2010); formerly Chairman and Chief Executive Officer (August 1996-January 2003) of Publishers Clearing House. | Formerly Director of BellSouth Corporation (telecommunications) (1992-2006). | ||
Stephen G. Stoneburn (70) Board Member Portfolios Overseen: 64 | Chairman, (since July 2011), President and Chief Executive Officer (since June 1996) of Quadrant Media Corp. (publishing company); formerly President (June 1995-June 1996) of Argus Integrated Media, Inc.; Senior Vice President and Managing Director (January 1993-1995) of Cowles Business Media; Senior Vice President of Fairchild Publications, Inc. (1975-1989). | None. | ||
Interested Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Stuart S. Parker (51) Board Member & President Portfolios Overseen: 59 | President of Prudential Investments LLC (since January 2012); Executive Vice President of Prudential Investment Management Services LLC (since December 2012); Executive Vice President of Jennison Associates LLC and Head of Retail Distribution of Prudential Investments LLC (June 2005 - December 2011). | None. | ||
Scott E. Benjamin (40) Board Member & Vice President Portfolios Overseen: 64 | Executive Vice President (since June 2009) of Prudential Investments LLC; Executive Vice President (June 2009-June 2012) and Vice President (since June 2012) of Prudential Investment Management Services LLC; Executive Vice President (since September 2009) of AST Investment Services, Inc.; Senior Vice President of Product Development and Marketing, Prudential Investments (since February 2006); Vice President of Product Development and Product Management, Prudential Investments (2003-2006). | None. |
Prudential Emerging Markets Debt Local Currency Fund
(1) | The year that each Board Member joined the Funds’ Board is as follows: |
Ellen S. Alberding; 2013; Kevin J. Bannon, 2008; Linda W. Bynoe, 2005; Keith F. Hartstein, 2013; Michael S. Hyland, 2008; Douglas H. McCorkindale, 2003; Stephen P. Munn, 2008; James E. Quinn, 2013; Richard A. Redeker, 2003; Robin B. Smith, 1996; Stephen G. Stoneburn, 1996; Stuart S. Parker, Board Member and President since 2012; Scott E. Benjamin, Board Member since 2010 and Vice President since 2009.
Fund Officers(a) | ||||
Name, Address and Age Position with Fund | Principal Occupation(s) During Past Five Years | Length of Service as Fund Officer | ||
Raymond A. O’Hara (58) Chief Legal Officer | Vice President and Corporate Counsel (since July 2010) of Prudential Insurance Company of America (Prudential); Vice President (March 2011-Present) of Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey; Vice President and Corporate Counsel (March 2011-Present) of Prudential Annuities Life Assurance Corporation; Chief Legal Officer of Prudential Investments LLC (since June 2012); Chief Legal Officer of Prudential Mutual Fund Services LLC (since June 2012) and Corporate Counsel of AST Investment Services, Inc. (since June 2012); formerly Assistant Vice President and Corporate Counsel (September 2008-July 2010) of The Hartford Financial Services Group, Inc.; formerly Associate (September 1980-December 1987) and Partner (January 1988–August 2008) of Blazzard & Hasenauer, P.C. (formerly, Blazzard, Grodd & Hasenauer, P.C.). | Since 2012 | ||
Deborah A. Docs (55) Secretary | Vice President and Corporate Counsel (since January 2001) of Prudential; Vice President (since December 1996) and Assistant Secretary (since March 1999) of Prudential Investments LLC; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc. | Since 2004 | ||
Jonathan D. Shain (55) Assistant Secretary | Vice President and Corporate Counsel (since August 1998) of Prudential; Vice President and Assistant Secretary (since May 2001) of Prudential Investments LLC; Vice President and Assistant Secretary (since February 2001) of Prudential Mutual Fund Services LLC; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc. | Since 2005 | ||
Claudia DiGiacomo (39) Assistant Secretary | Vice President and Corporate Counsel (since January 2005) of Prudential; Vice President and Assistant Secretary of Prudential Investments LLC (since December 2005); Associate at Sidley Austin Brown & Wood LLP (1999-2004). | Since 2005 | ||
Andrew R. French (51) Assistant Secretary | Vice President and Corporate Counsel (since February 2010) of Prudential; formerly Director and Corporate Counsel (2006-2010) of Prudential; Vice President and Assistant Secretary (since January 2007) of Prudential Investments LLC; Vice President and Assistant Secretary (since January 2007) of Prudential Mutual Fund Services LLC. | Since 2006 |
Visit our website at www.prudentialfunds.com
Fund Officers(a) | ||||
Name, Address and Age Position with Fund | Principal Occupation(s) During Past Five Years | Length of Service as Fund Officer | ||
Amanda S. Ryan (35) Assistant Secretary | Director and Corporate Counsel (since March 2012) of Prudential; Director and Assistant Secretary (since June 2012) of Prudential Investments LLC; Associate at Ropes & Gray LLP (2008-2012). | Since 2012 | ||
Bruce Karpati (43) Chief Compliance Officer | Chief Compliance Officer of the Prudential Investments Funds, Target Funds, Advanced Series Trust, the Prudential Series Fund and Prudential’s Gibraltar Fund, Inc. (May 2013 - Present); formerly National Chief (May 2012 - May 2013) and Co-Chief (January 2010 - May 2012) of the Asset Management Unit, Division of Enforcement, of the U.S. Securities and Exchange Commission; Assistant Regional Director (January 2005 - January 2010) of the U.S. Securities and Exchange Commission. | Since 2013 | ||
Theresa C. Thompson (51) Deputy Chief Compliance Officer | Vice President, Compliance, Prudential Investments LLC (since April 2004); and Director, Compliance, Prudential Investments LLC (2001-2004). | Since 2008 | ||
Richard W. Kinville (45) Anti-Money Laundering Compliance Officer | Vice President, Corporate Compliance, Anti-Money Laundering Unit (since January 2005) of Prudential; committee member of the American Council of Life Insurers Anti-Money Laundering and Critical Infrastructure Committee (since January 2007); formerly Investigator and Supervisor in the Special Investigations Unit for the New York Central Mutual Fire Insurance Company (August 1994-January 1999); Investigator in AXA Financial’s Internal Audit Department and Manager in AXA’s Anti-Money Laundering Office (January 1999-January 2005); first chair of the American Council of Life Insurers Anti-Money Laundering and Critical Infrastructure Committee (June 2007-December 2009). | Since 2011 | ||
Grace C. Torres (54) Treasurer and Principal Financial and Accounting Officer | Assistant Treasurer (since March 1999) and Senior Vice President (since September 1999) of Prudential Investments LLC; Assistant Treasurer (since May 2003) and Vice President (since June 2005) of AST Investment Services, Inc.; Senior Vice President and Assistant Treasurer (since May 2003) of Prudential Annuities Advisory Services, Inc.; formerly Senior Vice President (May 2003-June 2005) of AST Investment Services, Inc. | Since 1998 | ||
M. Sadiq Peshimam (49) Assistant Treasurer | Vice President (since 2005) of Prudential Investments LLC. | Since 2006 | ||
Peter Parrella (55) Assistant Treasurer | Vice President (since 2007) and Director (2004-2007) within Prudential Mutual Fund Administration; formerly Tax Manager at SSB Citi Fund Management LLC (1997-2004). | Since 2007 |
(a) | Excludes Mr. Parker and Mr. Benjamin, interested Board Members who also serve as President and Vice President, respectively. |
Prudential Emerging Markets Debt Local Currency Fund
Explanatory Notes to Tables:
• | Board Members are deemed to be “Interested,” as defined in the 1940 Act, by reason of their affiliation with Prudential Investments LLC and/or an affiliate of Prudential Investments LLC. |
• | Unless otherwise noted, the address of all Board Members and Officers is c/o Prudential Investments LLC, Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077. |
• | There is no set term of office for Board Members or Officers. The Board Members have adopted a retirement policy, which calls for the retirement of Board Members on December 31 of the year in which they reach the age of 75. |
• | “Other Directorships Held” includes only directorships of companies required to register or file reports with the SEC under the 1934 Act (that is, “public companies”) or other investment companies registered under the 1940 Act. |
• | “Portfolios Overseen” includes all investment companies managed by Prudential Investments LLC. The investment companies for which Prudential Investments LLC serves as manager include the Prudential Investments Mutual Funds, The Prudential Variable Contract Accounts, Target Mutual Funds, Prudential Short Duration High Yield Fund, Inc., Prudential Global Short Duration High Yield Fund, Inc., The Prudential Series Fund, Prudential’s Gibraltar Fund, Inc. and the Advanced Series Trust. |
Visit our website at www.prudentialfunds.com
Approval of Advisory Agreements
The Fund’s Board of Directors
The Board of Directors (the “Board”) of Prudential Emerging Markets Debt Local Currency Fund (the “Fund”)1 consists of ten individuals, eight of whom are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Directors”).2 The Board is responsible for the oversight of the Fund and its operations, and performs the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Directors have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Director. The Board has established three standing committees: the Audit Committee, the Nominating and Governance Committee, and the Investment Committee. Each committee is chaired by, and composed of, Independent Directors.
Annual Approval of the Fund’s Advisory Agreements
As required under the 1940 Act, the Board determines annually whether to renew the Fund’s management agreement with Prudential Investments LLC (“PI”) and the Fund’s subadvisory agreement with Prudential Investment Management, Inc. (“PIM”). In considering the renewal of the agreements, the Board, including all of the Independent Directors, met on June 4-6, 2013 and approved the renewal of the agreements through July 31, 2014, after concluding that the renewal of the agreements was in the best interests of the Fund and its shareholders.
In advance of the meetings, the Board requested and received materials relating to the agreements, and had the opportunity to ask questions and request further information in connection with its consideration. Among other things, the Board considered comparative fee information from PI and PIM. Also, the Board considered comparisons with other mutual funds in relevant Peer Universes and Peer Groups, as is further discussed below.
In approving the agreements, the Board, including the Independent Directors advised by independent legal counsel, considered the factors it deemed relevant, including the nature, quality and extent of services provided by PI and the subadviser, the performance of the Fund, the profitability of PI and its affiliates, expenses and fees, and the potential for economies of scale that may be shared with the Fund and its shareholders as the Fund’s assets grow. In their deliberations, the Directors did not identify any single factor which alone was responsible for the Board’s decision to approve the agreements with respect to the Fund. In connection with its deliberations, the Board considered information provided by PI throughout the year at regular Board meetings, presentations from portfolio managers and other information, as well as information furnished at or in advance of the meetings on June 4-6, 2013.
1 | Prudential Emerging Markets Debt Local Currency Fund is a series of Prudential World Fund, Inc. |
2 | Ms. Alberding and Messrs. Hartstein and Quinn were elected to the Board effective September 1, 2013. |
Prudential Emerging Markets Debt Local Currency Fund
Approval of Advisory Agreements (continued)
The Directors determined that the overall arrangements between the Fund and PI, which serves as the Fund’s investment manager pursuant to a management agreement, and between PI and PIM, which serves as the Fund’s subadviser pursuant to the terms of a subadvisory agreement with PI, are in the best interests of the Fund and its shareholders in light of the services performed, fees charged and such other matters as the Directors considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the Directors’ reaching their determinations to approve the continuance of the agreements are separately discussed below.
Nature, Quality, and Extent of Services
The Board received and considered information regarding the nature, quality and extent of services provided to the Fund by PI and PIM. The Board considered the services provided by PI, including but not limited to the oversight of the subadviser for the Fund, as well as the provision of fund recordkeeping, compliance, and other services to the Fund. With respect to PI’s oversight of the subadviser, the Board noted that PI’s Strategic Investment Research Group (“SIRG”), which is a business unit of PI, is responsible for monitoring and reporting to PI’s senior management on the performance and operations of the subadviser. The Board also considered that PI pays the salaries of all of the officers and non-independent Directors of the Fund. The Board also considered the investment subadvisory services provided by PIM, including investment research and security selection, as well as adherence to the Fund’s investment restrictions and compliance with applicable Fund policies and procedures. The Board considered PI’s evaluation of the subadviser, as well as PI’s recommendation, based on its review of the subadviser, to renew the subadvisory agreement.
The Board considered the qualifications, backgrounds and responsibilities of PI’s senior management responsible for the oversight of the Fund and PIM, and also considered the qualifications, backgrounds and responsibilities of PIM’s portfolio managers who are responsible for the day-to-day management of the Fund’s portfolio. The Board was provided with information pertaining to PI’s and PIM’s organizational structure, senior management, investment operations, and other relevant information pertaining to both PI and PIM. The Board also noted that it received favorable compliance reports from the Fund’s Chief Compliance Officer (“CCO”) as to both PI and PIM. The Board noted that PIM is affiliated with PI.
The Board concluded that it was satisfied with the nature, extent and quality of the investment management services provided by PI and the subadvisory services provided to the Fund by PIM, and that there was a reasonable basis on which to
Visit our website at www.prudentialfunds.com
conclude that the Fund benefits from the services provided by PI and PIM under the management and subadvisory agreements.
Costs of Services and Profits Realized by PI
The Board was provided with information on the profitability of PI and its affiliates in serving as the Fund’s investment manager. The Board discussed with PI the methodology utilized in assembling the information regarding profitability and considered its reasonableness. The Board recognized that it is difficult to make comparisons of profitability from fund management contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser’s capital structure and cost of capital. However, the Board considered that the cost of services provided by PI for the year ended December 31, 2012 exceeded the management fees received by PI, resulting in an operating loss to PI. The Board separately considered information regarding the profitability of the subadviser, an affiliate of PI. Taking these factors into account, the Board concluded that the profitability of PI and its affiliates in relation to the services rendered was not unreasonable.
Economies of Scale
The Board noted that the management fee schedule for the Fund does not contain breakpoints that would reduce the fee rate on assets above specified levels. The Board received and discussed information concerning whether PI realizes economies of scale as the Fund’s assets grow beyond current levels. The Board recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board’s understanding that most of PI’s costs are not specific to any individual funds, but rather are incurred across a variety of products and services.
In light of the Fund’s current size, performance and expense structure, the Board concluded that the absence of breakpoints in the Fund’s fee schedule is acceptable at this time.
Other Benefits to PI and PIM
The Board considered potential ancillary benefits that might be received by PI and PIM and their affiliates as a result of their relationship with the Fund. The Board concluded that potential benefits to be derived by PI included fees received by affiliates of PI for serving as the Fund’s securities lending agent, transfer agency fees received by the Fund’s transfer agent (which is affiliated with PI), as well as benefits to its reputation or other intangible benefits resulting from PI’s association with the Fund. The Board concluded that the potential benefits to be derived by PIM included the
Prudential Emerging Markets Debt Local Currency Fund
Approval of Advisory Agreements (continued)
ability to use soft dollar credits, as well as the potential benefits consistent with those generally resulting from an increase in assets under management, specifically, potential access to additional research resources and benefits to its reputation. The Board concluded that the benefits derived by PI and PIM were consistent with the types of benefits generally derived by investment managers and subadvisers to mutual funds.
Performance of the Fund / Fees and Expenses
The Board considered certain additional specific factors and made related conclusions relating to the historical performance of the Fund for the one-year period ended December 31, 2012. The Board considered that the Fund commenced operations on March 30, 2011 and that longer-term performance was not yet available.
The Board also considered the Fund’s actual management fee, as well as the Fund’s net total expense ratio, for the fiscal year ended October 31, 2012. The Board considered the management fee for the Fund as compared to the management fee charged by PI to other funds and the fee charged by other advisers to comparable mutual funds in a Peer Group. The actual management fee represents the fee rate actually paid by Fund shareholders and includes any fee waivers or reimbursements. The net total expense ratio for the Fund represents the actual expense ratio incurred by Fund shareholders.
The mutual funds included in the Peer Universe (the Lipper Emerging Markets Local Currency Debt Funds Performance Universe) and the Peer Group were objectively determined by Lipper Inc. (“Lipper”), an independent provider of mutual fund data. The comparisons placed the Fund in various quartiles, with the first quartile being the best 25% of the mutual funds (for performance, the best performing mutual funds and, for expenses, the lowest cost mutual funds).
The section below summarizes key factors considered by the Board and the Board’s conclusions regarding the Fund’s performance, fees and overall expenses. The table sets forth gross performance comparisons (which do not reflect the impact on performance of fund expenses, or any subsidies, expense caps or waivers that may be applicable) with the Peer Universe, actual management fees with the Peer Group (which reflect the impact of any subsidies or fee waivers), and net total expenses with the Peer Group, each of which were key factors considered by the Board.
Performance | 1 Year | 3 Years | 5 Years | 10 Years | ||||
1st Quartile | N/A | N/A | N/A | |||||
Actual Management Fees: 1st Quartile | ||||||||
Net Total Expenses: 4th Quartile |
Visit our website at www.prudentialfunds.com
• | The Board noted that the Fund outperformed its benchmark index for the one-year period. |
• | The Board accepted PI’s recommendation to continue the existing expense cap of 1.05% (exclusive of 12b-1 fees and certain other fees) through February 28, 2014. |
• | The Board concluded that, in light of the Fund’s strong performance against its benchmark index and its Peer Universe, it would be in the best interests of the Fund and its shareholders to renew the agreements. |
• | The Board concluded that the management fees (including subadvisory fees) and total expenses were reasonable in light of the services provided. |
* * *
After full consideration of these factors, the Board concluded that the approval of the agreements was in the best interests of the Fund and its shareholders.
Prudential Emerging Markets Debt Local Currency Fund
n MAIL | n TELEPHONE | n WEBSITE | ||
Gateway Center Three 100 Mulberry Street Newark, NJ 07102 | (800) 225-1852 | www.prudentialfunds.com |
PROXY VOTING |
The Board of Directors of the Fund has delegated to the Fund’s investment subadviser the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852 or by visiting the Securities and Exchange Commission’s website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the Securities and Exchange Commission’s website. |
DIRECTORS |
Ellen S. Alberding • Kevin J. Bannon • Scott E. Benjamin • Linda W. Bynoe • Keith F. Hartstein • Michael S. Hyland • Douglas H. McCorkindale • Stephen P. Munn • Stuart S. Parker • James E. Quinn • Richard A. Redeker • Robin B. Smith • Stephen G. Stoneburn |
OFFICERS |
Stuart S. Parker, President • Scott E. Benjamin, Vice President • Grace C. Torres, Treasurer and Principal Financial and Accounting Officer • Raymond A. O’Hara, Chief Legal Officer • Deborah A. Docs, Secretary • Bruce Karpati, Chief Compliance Officer • Theresa C. Thompson, Deputy Chief Compliance Officer • Richard W. Kinville, Anti-Money Laundering Compliance Officer • Jonathan D. Shain, Assistant Secretary • Claudia DiGiacomo, Assistant Secretary • Amanda S. Ryan, Assistant Secretary • Andrew R. French, Assistant Secretary • M. Sadiq Peshimam, Assistant Treasurer • Peter Parrella, Assistant Treasurer |
MANAGER | Prudential Investments LLC | Gateway Center Three 100 Mulberry Street Newark, NJ 07102 | ||
| ||||
INVESTMENT SUBADVISER | Prudential Investment Management, Inc. | Gateway Center Two 100 Mulberry Street Newark, NJ 07102 | ||
| ||||
DISTRIBUTOR | Prudential Investment Management Services LLC | Gateway Center Three 100 Mulberry Street | ||
| ||||
CUSTODIAN | The Bank of New York Mellon | One Wall Street New York, NY 10286 | ||
| ||||
TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
| ||||
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
| ||||
FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 |
An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain a prospectus and summary prospectus by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
E-DELIVERY |
To receive your mutual fund documents online, go to www.prudentialfunds.com/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above. |
SHAREHOLDER COMMUNICATIONS WITH DIRECTORS |
Shareholders can communicate directly with the Board of Directors by writing to the Chair of the Board, Prudential Emerging Markets Debt Local Currency Fund, Prudential Investments, Attn: Board of Directors, 100 Mulberry Street, Gateway Center Three, Newark, NJ 07102. Shareholders can communicate directly with an individual Director by writing to the same address. Communications are not screened before being delivered to the addressee. |
AVAILABILITY OF PORTFOLIO SCHEDULE |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation and location of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund’s schedule of portfolio holdings is also available on the Fund’s website as of the end of each month. |
The Fund’s Statement of Additional Information contains additional information about the Fund’s Directors and is available without charge, upon request, by calling (800) 225-1852. |
Mutual Funds:
ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY | MAY LOSE VALUE | ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE |
PRUDENTIAL EMERGING MARKETS DEBT LOCAL CURRENCY FUND
SHARE CLASS | A | C | Q | Z | ||||
NASDAQ | EMDAX | EMDCX | EMDQX | EMDZX | ||||
CUSIP | 743969750 | 743969743 | 743969735 | 743969727 |
MF212E 0255312-00001-00
PRUDENTIAL INVESTMENTS»MUTUAL FUNDS
PRUDENTIAL JENNISON GLOBAL OPPORTUNITIES FUND
ANNUAL REPORT · OCTOBER 31, 2013
Fund Type
Global Stock
Objective
To seek long-term growth of capital
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.
The views expressed in this report and information about the Fund’s portfolio holdings are for the period covered by this report and are subject to change thereafter.
Mutual funds are distributed by Prudential Investment Management Services LLC. Jennison Associates is a registered investment advisor. Both are Prudential Financial companies. © 2013 Prudential Financial, Inc., and its related entities. Prudential Investments, Prudential, Jennison Associates, Jennison, the Prudential logo, Bring Your Challenges, and the Rock symbol are service marks of Prudential Financial, Inc., and its related entities, registered in many jurisdictions worldwide.
December 16, 2013
Dear Shareholder:
We hope you find the annual report for the Prudential Jennison Global Opportunities Fund informative and useful. The report covers performance for the 12-month period that ended October 31, 2013.
We recognize that ongoing market volatility may make it a difficult time to be an investor. We continue to believe a prudent response to uncertainty is to maintain a diversified portfolio of funds consistent with your tolerance for risk, time horizon, and financial goals.
Your financial advisor can help you create a diversified investment plan that may include funds covering all the basic asset classes and that reflects your personal investor profile and risk tolerance. Keep in mind, however, that diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.
Prudential Investments® is dedicated to helping you solve your toughest investment challenges—whether it’s capital growth, reliable income, or protection from market volatility and other risks. We offer the expertise of Prudential Financial’s affiliated asset managers* that strive to be leaders in a broad range of funds to help you stay on course to the future you envision. They also manage money for major corporations and pension funds around the world, which means you benefit from the same expertise, innovation, and attention to risk demanded by today’s most sophisticated investors.
Thank you for choosing the Prudential Investments family of funds.
Sincerely,
Stuart S. Parker, President
Prudential Jennison Global Opportunities Fund
*Most of Prudential Investments’ equity funds are advised by Jennison Associates LLC, Quantitative Management Associates LLC (QMA), or Prudential Real Estate Investors. Prudential Investments’ fixed income and money market funds are advised by Prudential Investment Management, Inc. (PIM) through its Prudential Fixed Income unit. Jennison Associates LLC, QMA, and PIM are registered investment advisers and Prudential Financial companies. Prudential Real Estate Investors is a unit of PIM.
Prudential Jennison Global Opportunities Fund | 1 |
Your Fund’s Performance (Unaudited)
Performance data quoted represent past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the past performance data quoted. An investor may obtain performance data as of the most recent month-end by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852.
Cumulative Total Returns (Without Sales Charges) as of 10/31/13 | ||||||||||
One Year | Since Inception | |||||||||
Class A | 31.24 | % | 29.40% (3/14/12) | |||||||
Class C | 30.17 | 27.70 (3/14/12) | ||||||||
Class Z | 31.61 | 29.90 (3/14/12) | ||||||||
MSCI AC World ND Index | 23.29 | 24.38 | ||||||||
Lipper Global Multi-Cap Core Funds Average | 22.76 | 22.93 | ||||||||
Lipper Global Multi-Cap Growth Funds Average | 25.89 | — | ||||||||
Average Annual Total Returns (With Sales Charges) as of 9/30/13 | ||||||||||
One Year | Since Inception | |||||||||
Class A | 16.96 | % | 11.35% (3/14/12) | |||||||
Class C | 21.89 | 14.59 (3/14/12) | ||||||||
Class Z | 24.13 | 15.79 (3/14/12) | ||||||||
MSCI AC World ND Index | 17.73 | 11.95 | ||||||||
Lipper Global Multi-Cap Core Funds Average | 17.78 | 11.47 | ||||||||
Lipper Global Multi-Cap Growth Funds Average | 20.63 | — | ||||||||
Average Annual Total Returns (With Sales Charges) as of 10/31/13 | ||||||||||
One Year | Since Inception | |||||||||
Class A | 24.02 | % | 13.10% (3/14/12) | |||||||
Class C | 29.17 | 16.14 (3/14/12) | ||||||||
Class Z | 31.61 | 17.36 (3/14/12) | ||||||||
Average Annual Total Returns (Without Sales Charges) as of 10/31/13 | ||||||||||
One Year | Since Inception | |||||||||
Class A | 31.24 | % | 17.08% (3/14/12) | |||||||
Class C | 30.17 | 16.14 (3/14/12) | ||||||||
Class Z | 31.61 | 17.36 (3/14/12) |
2 | Visit our website at www.prudentialfunds.com |
Growth of a $10,000 Investment
The graph compares a $10,000 investment in the Prudential Jennison Global Opportunities Fund (Class A shares) with a similar investment in the MSCI AC World ND Index by portraying the initial account values at the commencement of operations for Class A shares (March 14, 2012) and the account values at the end of the current fiscal year (October 31, 2013), as measured on a quarterly basis. For purposes of the graph, and unless otherwise indicated, it has been assumed that (a) the maximum applicable front-end sales charge was deducted from the initial $10,000 investment in Class A shares; (b) all recurring fees (including management fees) were deducted; and (c) all dividends and distributions were reinvested. The line graph provides information for Class A shares only. As indicated in the tables provided earlier, performance for Class C and Class Z shares will vary due to the differing charges and expenses applicable to each share class (as indicated in the following paragraphs). Without waiver of fees and/or expense reimbursement, if any, the returns would have been lower.
Past performance does not predict future performance. Total returns and the ending account values in the graph include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown. The Fund’s total returns do not reflect the deduction of income taxes on an individual’s investment. Taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares.
Source: Prudential Investments LLC and Lipper Inc.
Inception Date: 3/14/12
Prudential Jennison Global Opportunities Fund | 3 |
Your Fund’s Performance (continued)
The average annual total returns take into account applicable sales charges, which are described for each share class in the table below.
Class A | Class C | Class Z | ||||
Maximum initial sales charge | 5.50% of the public offering price | None | None | |||
Contingent deferred sales charge (CDSC) (as a percentage of the lower of original purchase price or sale proceeds) | 1% on sales of $1 million or more made within 12 months of purchase | 1% on sales made within 12 months of purchase | None | |||
Annual distribution and service (12b-1) fees (shown as a percentage of average daily net assets) | .30% (.25% currently) | 1% | None |
Benchmark Definitions
Morgan Stanley Capital International (MSCI) All Country (AC) World Net Dividend (ND) Index
The MSCI AC World ND Index (MSCI AC World ND) is an unmanaged free-float-adjusted, market-capitalization-weighted index designed to measure the equity market performance of developed and emerging markets. The MSCI AC World ND Index comprises 24 developed market country indexes and 21 emerging market country indexes. The developed market country indexes include Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States. The emerging market country indexes include Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.
Lipper Global Multi-Cap Core Funds Average
Funds in the Lipper Global Multi-Cap Core Funds Average are funds that, by portfolio practice, invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time. Global multi-cap core funds typically have average characteristics compared to the MSCI World Index.
Lipper Global Multi-Cap Growth Funds Average
Funds in the Lipper Global Multi-Cap Growth Funds Average are funds that, by portfolio practice, invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time. Global multi-cap growth funds typically have above-average characteristics compared to the MSCI World Index.
Note: Although the Fund is classified by Lipper in its Global Multi-Cap Core Funds Performance Universe, the Global Multi-Cap Growth Funds Performance Universe was utilized for performance comparisons, because the Fund’s investment manager believes that the Global Multi-Cap Growth Funds Performance Universe provides a more appropriate basis for Fund performance comparisons.
4 | Visit our website at www.prudentialfunds.com |
Investors cannot invest directly in an index or average. The returns for the Index would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes. Returns for the Lipper Averages reflect the deduction of operating expenses, but not sales charges or taxes.
Five Largest Holdings expressed as a percentage of net assets as of 10/31/13 | ||||
priceline.com, Inc., Internet & Catalog Retail | 4.8 | % | ||
MasterCard, Inc., IT Services | 4.4 | |||
Gilead Sciences, Inc., Biotechnology | 3.9 | |||
ARM Holdings PLC, Semiconductors & Semiconductor Equipment | 3.5 | |||
Google, Inc., Internet Software & Services | 3.4 |
Holdings reflect only long-term investments and are subject to change.
Five Largest Industries expressed as a percentage of net assets as of 10/31/13 | ||||
Internet & Catalog Retail | 13.3 | % | ||
Biotechnology | 11.5 | |||
Textiles, Apparel & Luxury Goods | 11.2 | |||
Internet Software & Services | 8.8 | |||
Specialty Retail | 8.2 |
Industry weightings reflect long-term investments and are subject to change.
Prudential Jennison Global Opportunities Fund | 5 |
Strategy and Performance Overview
How did the Fund perform?
In the 12 months ended October 31, 2013, the Prudential Jennison Global Opportunities Fund’s Class A shares advanced 31.24%, outperforming the 23.29% return of the MSCI All Country World Index and the 22.76% return of the Lipper Global Multi-Cap Core Average.
What was the market environment?
Global equity markets advanced broadly if unevenly in the reporting period. Developed Europe, developed Asia/Pacific, and developed North America1 posted gains of 25.0% or more. Emerging markets, hurt by depreciation of the yen and concerns about eventual tapering of the U.S. Federal Reserve’s quantitative easing program, lagged, rising a comparatively modest 7.0%. The U.S. equity market’s advance reflected a more optimistic economic outlook. U.S. housing and employment indicators improved, consumer confidence rose, and strength in corporate profits continued. Conditions in Europe appeared to stabilize, relieving earlier worries of sustained deterioration. In China, economic growth slowed but to levels sufficiently expansionary to give investors conviction that global GDP, although moderating, remained solid. Concerns that the Federal Reserve would begin scaling back its quantitative easing program took a toll globally, especially in Emerging markets, in early summer. However, markets soon refocused on individual company fundamentals and showed renewed appreciation for companies with strong growth.
Which holdings made the largest positive contributions to the Fund’s return?
Consumer discretionary holdings, including Priceline.com, ASOS, and Amazon.com, contributed significantly to Fund performance:
• | priceline.com reported better-than-projected financial results, as both international and domestic gross bookings growth accelerated. Please see “Comments on largest holdings” on page 9 for more information on Priceline.com. |
• | London-based ASOS rose on accelerating sales growth. The fast-growing global online apparel retailer targets fashionable, Web-savvy 16- to 34-year-olds and has local-language sites in France, Germany, and the U.S., with plans to add more. Jennison likes the company’s strong revenue growth, margin improvement potential, and international expansion opportunities. |
1 | Jennison regional definitions: Developed North America includes countries classified by MSCI as developed markets in North America. Developed Europe includes countries classified by MSCI as developed markets in Europe and the Middle East. Developed Asia/Pacific includes countries classified by MSCI as developed markets in Asia and Australia. Emerging Markets includes all countries classified by MSCI as emerging and frontier markets. |
6 | Visit our website at www.prudentialfunds.com |
• | Amazon.com accelerated its business investment to drive robust longer-term growth not only in its core retail business but through the proliferation of digital commerce via the mobile market. Substantial revenue growth reflected the world’s largest online retailer’s efforts. |
In information technology, LinkedIn and Splunk posted triple-digit gains.
• | LinkedIn’s revenue and earnings exceeded consensus expectations significantly. The company is a leading global online professional network that provides what Jennison considers unique access to a scale database of active and passive job candidates. Adjacent growth opportunities in marketing services and professional publishing are added potential drivers in early phases of development. |
• | Splunk makes software that allows businesses to quickly mine and make sense of burgeoning amounts of digital data from a vast array of sources, including applications, servers, mobile devices, and websites. Jennison views the company as well positioned to benefit from the emergence of operational intelligence, which has the potential to disrupt traditional information technology spending. |
In health care, Gilead Sciences and Biogen Idec were top performers.
• | Gilead Sciences reported strong revenue and earnings in its core HIV franchise. Please see “Comments on largest holdings” on page 9 for more information on Gilead Sciences. |
• | The U.S. Food and Drug Administration approved Biogen Idec’s Tecfidera for multiple sclerosis. Jennison believes the drug’s ease of use could support broad adoption and potential market leadership. Tecfidera may also eventually treat other neurodegenerative diseases such as ALS and Parkinson’s. |
Which holdings detracted from the Fund’s return?
Financials positions, specifically those exposed to emerging markets, detracted from Fund return relative to the benchmark.
• | São Paulo-based BTG Pactual faced strong headwinds, including Brazil’s slower economic growth, rising interest rates, and growing public frustration with both the government and economy. One of the largest independent investment banks in emerging markets, BTG has a dominant franchise in Brazil, an expanding presence in the rest of Latin America, and operations on four continents. |
Prudential Jennison Global Opportunities Fund | 7 |
Strategy and Performance Overview (continued)
• | BR Properties, Brazil’s largest real estate investment company, was similarly hurt by an uncertain outlook for Brazilian interest rates, macroeconomic growth, investments, industrial activity, and employment as well as an increase in office space. BR buys, leases, manages, and sells commercial and industrial properties in Rio de Janeiro and São Paulo. |
Information technology holding Apple was hurt by slowing revenue growth and lowered earnings projections. Jennison finds Apple shares attractively valued and believes recent product launches can revive the company’s growth outlook.
In industrials:
• | Glasgow-based Aggreko, a world leader in the rental of power generation and temperature-control equipment, declined on concerns about global growth. |
In consumer discretionary:
• | Brazilian exposure hurt growth, as Arezzo Indústria e Comércio declined on decelerating sales growth and lower-than-expected same-store sales growth. The company designs, makes, and sells high-end women’s shoes, handbags, and clothing accessories, primarily in Brazil. |
• | Mr Price Group’s sales growth moderated as well. Based in Durban, the company operates and franchises almost 1,000 apparel and home products stores, primarily in South Africa. |
Jennison eliminated the Fund’s positions in BTG Pactual, BR Properties, Aggreko, and Mr Price Group.
Were there significant changes to the portfolio?
Selection of individual stocks based on business fundamentals drives construction of the Fund. Over the reporting period, the Fund’s weights increased in consumer discretionary, health care, and industrials, and decreased in consumer staples, financials, and information technology. Relative to the MSCI All Country World Index, the Fund remains overweight in consumer discretionary, information technology, and health care, and underweight in financials, energy, and consumer staples.
8 | Visit our website at www.prudentialfunds.com |
Comments on Largest Holdings
4.8% | priceline.com, Inc., Internet and Catalog Retail |
Online travel company Priceline.com allows customers to “name their own price” for airline tickets, hotel rooms, rental cars, cruises, and vacation packages for destinations in more than 90 countries. Jennison believes the company is poised to benefit from the secular shift to online travel spending, especially in Europe and Asia, where lower market penetration offers greater early-stage growth opportunities.
4.4% | MasterCard, Inc., IT Services |
MasterCard is the No. 2 payment system in the U.S. Jennison’s long-term thesis on MasterCard is based on projected growth in the total value of its cardholders’ transactions, as consumers continue their ongoing shift from paper money to electronic credit/debit transactions (retailers and banks pay MasterCard each time consumers use MasterCard-branded payment cards).
3.9% | Gilead Sciences, Inc., Biotechnology |
Gilead Sciences is the world’s largest maker of AIDS drugs and a front runner in the race to develop an all-oral hepatitis C (HCV) treatment that could greatly expand the HCV market because of shorter-term treatment periods, easier use, and fewer side effects (current treatments often include injected interferon, which is associated with severe fatigue and badly tolerated by many patients). The company’s oncology pipeline is also promising.
3.5% | ARM Holdings PLC., Semiconductors and Semiconductor Equipment |
ARM Holdings licenses its intellectual property designs to semiconductor companies and receives upfront license fees and ongoing royalties based on a percentage of microchip prices. Jennison believes the company stands to be a key beneficiary of the merger of the mobile and computing worlds. As mobile phones become increasingly complex, more ARM-based chips are used, adding to upfront license fees and the royalty stream. In the tablet market, ARM powers virtually every major applications processor.
3.4% | Google, Inc., Internet Software and Services |
Jennison believes Google’s technological lead and dominant position in Internet search is a unique strength that has enabled the company to monetize search traffic at a meaningfully higher rate than its competitors. Jennison likes Google’s continued strong competitive position, strong advertising revenue, and opportunities to generate income from YouTube.
Prudential Jennison Global Opportunities Fund | 9 |
Fees and Expenses (Unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemptions, as applicable, and (2) ongoing costs, including management fees, distribution, and/or service (12b-1) fees, and other Fund expenses, as applicable. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on May 1, 2013, at the beginning of the period, and held through the six-month period ended October 31, 2013. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
Actual Expenses
The first line for each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of Prudential Investments funds, including the Fund, that you own. You should consider the additional fees that were charged to your Fund account over the six-month period
10 | Visit our website at www.prudentialfunds.com |
when you estimate the total ongoing expenses paid over the period and the impact of these fees on your ending account value, as these additional expenses are not reflected in the information provided in the expense table. Additional fees have the effect of reducing investment returns.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Prudential Jennison Global Opportunities Fund | Beginning Account Value May 1, 2013 | Ending Account October 31, 2013 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,167.90 | 1.60 | % | $ | 8.74 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,017.14 | 1.60 | % | $ | 8.13 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,163.00 | 2.35 | % | $ | 12.81 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,013.36 | 2.35 | % | $ | 11.93 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,169.20 | 1.35 | % | $ | 7.38 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,018.40 | 1.35 | % | $ | 6.87 |
*Fund expenses (net of fee waivers or subsidies, if any) for each share class are equal to the annualized expense ratio for each share class (provided in the table), multiplied by the average account value over the period, multiplied by the 184 days in the six-month period ended October 31, 2013, and divided by the 365 days in the Fund’s fiscal year ended October 31, 2013 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
The Fund’s annual expense ratios for the year ended October 31, 2013, are as follows:
Class | Gross Operating Expenses | Net Operating Expenses | ||
A | 2.19% | 1.60% | ||
C | 2.89 | 2.35 | ||
Z | 1.89 | 1.35 |
Net operating expenses shown above reflect any fee waivers and/or expense reimbursements. Additional information on Fund expenses and any fee waivers and/or expense reimbursements can be found in the “Financial Highlights” tables in this report and in the Notes to the Financial Statements in this report.
Prudential Jennison Global Opportunities Fund | 11 |
Portfolio of Investments
as of October 31, 2013
Shares | Description | Value (Note 1) | ||||
LONG-TERM INVESTMENTS 96.6% | ||||||
COMMON STOCKS | ||||||
Brazil 1.0% | ||||||
25,222 | Arezzo Industria e Comercio SA | $ | 377,170 | |||
Canada 1.5% | ||||||
3,848 | Canadian Pacific Railway Ltd. | 550,533 | ||||
China 3.2% | ||||||
21,828 | Tencent Holdings Ltd. | 1,190,290 | ||||
Denmark 1.2% | ||||||
2,710 | Novo Nordisk A/S (Class B Stock) | 451,358 | ||||
Hong Kong 1.9% | ||||||
96,719 | Sands China Ltd. | 687,681 | ||||
Italy 8.2% | ||||||
35,757 | Azimut Holding SpA | 907,058 | ||||
13,473 | Luxottica Group SpA | 729,854 | ||||
90,083 | Prada SpA | 878,909 | ||||
13,926 | Yoox SpA* | 500,980 | ||||
|
| |||||
3,016,801 | ||||||
Japan 1.6% | ||||||
7,516 | Murata Manufacturing Co. Ltd. | 603,308 | ||||
Netherlands 1.7% | ||||||
3,303 | Core Laboratories NV | 618,388 | ||||
Spain 2.7% | ||||||
6,068 | Inditex SA | 996,606 | ||||
Switzerland 1.9% | ||||||
6,924 | Cie Financiere Richemont SA | 707,977 | ||||
Thailand 1.4% | ||||||
1,421,957 | Home Product Center PCL(a) | 529,684 | ||||
United Kingdom 14.0% | ||||||
82,946 | ARM Holdings PLC | 1,299,743 | ||||
61,400 | Ashtead Group PLC | 645,205 | ||||
13,402 | ASOS PLC* | 1,218,342 |
See Notes to Financial Statements.
Prudential Jennison Global Opportunities Fund | 13 |
Portfolio of Investments
as of October 31, 2013 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) | ||||||
United Kingdom (cont’d.) | ||||||
19,591 | Diageo PLC | $ | 624,516 | |||
38,438 | Rolls-Royce Holdings PLC* | 708,149 | ||||
12,606 | SABMiller PLC | 657,292 | ||||
|
| |||||
5,153,247 | ||||||
United States 56.3% | ||||||
2,930 | Alliance Data Systems Corp.* | 694,586 | ||||
2,517 | Amazon.com, Inc.* | 916,264 | ||||
1,458 | Apple, Inc. | 761,586 | ||||
4,682 | Biogen Idec, Inc.* | 1,143,298 | ||||
11,758 | BioMarin Pharmaceutical, Inc.* | 738,638 | ||||
6,483 | Celgene Corp.* | 962,661 | ||||
9,762 | Cree, Inc.* | 593,042 | ||||
8,025 | Discovery Communications, Inc. (Class A Stock)* | 713,583 | ||||
20,028 | Gilead Sciences, Inc.* | 1,421,788 | ||||
5,759 | Goldman Sachs Group, Inc. (The) | 926,393 | ||||
1,211 | Google, Inc. (Class A Stock)* | 1,248,032 | ||||
8,076 | Home Depot, Inc. (The) | 629,040 | ||||
3,647 | LinkedIn Corp. (Class A Stock)* | 815,724 | ||||
2,282 | MasterCard, Inc. (Class A Stock) | 1,636,422 | ||||
5,931 | Monsanto Co. | 622,043 | ||||
11,524 | Michael Kors Holdings Ltd.* | 886,772 | ||||
1,670 | Netflix, Inc.* | 538,542 | ||||
1,666 | priceline.com, Inc.* | 1,755,681 | ||||
13,301 | Splunk, Inc.* | 834,106 | ||||
3,398 | Tesla Motors, Inc.* | 543,476 | ||||
14,479 | TJX Cos., Inc. (The) | 880,178 | ||||
3,309 | TransDigm Group, Inc. | 481,162 | ||||
6,808 | Under Armour, Inc. (Class A Stock)* | 552,469 | ||||
6,471 | Workday, Inc. (Class A Stock)* | 484,482 | ||||
|
| |||||
20,779,968 | ||||||
|
| |||||
TOTAL COMMON STOCKS | 35,663,011 | |||||
|
| |||||
PREFERRED STOCK |
| |||||
United Kingdom |
| |||||
3,110,190 | Rolls-Royce Holdings PLC (Class C Stock)* | 4,987 | ||||
|
| |||||
TOTAL LONG-TERM INVESTMENTS | 35,667,998 | |||||
|
|
See Notes to Financial Statements.
14 |
Shares | Description | Value (Note 1) | ||||
SHORT-TERM INVESTMENT 1.9% |
| |||||
AFFILIATED MONEY MARKET MUTUAL FUND |
| |||||
689,768 | Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund | $ | 689,768 | |||
|
| |||||
TOTAL INVESTMENTS 98.5% | 36,357,766 | |||||
Other assets in excess of liabilities 1.5% | 553,965 | |||||
|
| |||||
NET ASSETS 100.0% | $ | 36,911,731 | ||||
|
|
* | Non-income producing security. |
(a) | Indicates a restricted security; the aggregate cost of the restricted securities is $501,212. The aggregate value of $529,684, is approximately 1.4% of net assets. |
(b) | Prudential Investments LLC, the manager of the Series also serves as manager of the Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund. |
Various inputs are used in determining the value of the Series’ investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.
Level 2—other significant observable inputs including, but not limited to, quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates, and amortized cost.
Level 3—significant unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
The following is a summary of the inputs used as of October 31, 2013 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Common Stocks | ||||||||||||
Brazil | $ | 377,170 | $ | — | $ | — | ||||||
Canada | 550,533 | — | — | |||||||||
China | — | 1,190,290 | — | |||||||||
Denmark | — | 451,358 | — | |||||||||
Hong Kong | — | 687,681 | — |
See Notes to Financial Statements.
Prudential Jennison Global Opportunities Fund | 15 |
Portfolio of Investments
as of October 31, 2013 continued
Level 1 | Level 2 | Level 3 | ||||||||||
Common Stocks (continued) | ||||||||||||
Italy | $ | — | $ | 3,016,801 | $ | — | ||||||
Japan | — | 603,308 | — | |||||||||
Netherlands | 618,388 | — | — | |||||||||
Spain | — | 996,606 | — | |||||||||
Switzerland | — | 707,977 | — | |||||||||
Thailand | — | 529,684 | — | |||||||||
United Kingdom | — | 5,153,247 | — | |||||||||
United States | 20,779,968 | — | — | |||||||||
Preferred Stock | ||||||||||||
United Kingdom | — | 4,987 | — | |||||||||
Affiliated Money Market Mutual Fund | 689,768 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 23,015,827 | $ | 13,341,939 | $ | — | ||||||
|
|
|
|
|
|
Fair Value of Level 2 investments at 10/31/12 was $369,831. An amount of $4,190,069 was transferred from Level 1 into Level 2 at 10/31/13 as a result of fair valuing such foreign securities using third-party vendor modeling tools. Such fair values are used to reflect the impact of significant market movements between the time at which the Series values its securities and the earlier closing of foreign markets.
It is the Series’ policy to recognize transfers in and transfers out at the fair value as of the beginning of period.
The industry classification of investments and other assets in excess of liabilities shown as a percentage of net assets as October 31, 2013 was as follows:
Internet & Catalog Retail | 13.3 | % | ||
Biotechnology | 11.5 | |||
Textiles, Apparel & Luxury Goods | 11.2 | |||
Internet Software & Services | 8.8 | |||
Specialty Retail | 8.2 | |||
IT Services | 6.3 | |||
Semiconductors & Semiconductor Equipment | 5.1 | |||
Capital Markets | 5.0 | |||
Software | 3.6 | |||
Beverages | 3.5 | |||
Aerospace & Defense | 3.2 | |||
Computers & Peripherals | 2.1 | |||
Media | 1.9 | |||
Affiliated Money Market Mutual Fund | 1.9 | % | ||
Hotels, Restaurants & Leisure | 1.9 | |||
Trading Companies & Distributors | 1.8 | |||
Chemicals | 1.7 | |||
Energy Equipment & Services | 1.7 | |||
Electronic Equipment & Instruments | 1.6 | |||
Road & Rail | 1.5 | |||
Automobiles | 1.5 | |||
Pharmaceuticals | 1.2 | |||
|
| |||
98.5 | ||||
Other assets in excess of liabilities | 1.5 | |||
|
| |||
100.0 | % | |||
|
|
See Notes to Financial Statements.
16 |
PRUDENTIAL INVESTMENTS»MUTUAL FUNDS
FINANCIAL STATEMENTS
ANNUAL REPORT · OCTOBER 31, 2013
Prudential Jennison Global Opportunities Fund
Statement of Assets & Liabilities
as of October 31, 2013
Assets | ||||
Investments at value: | ||||
Unaffiliated Investments (cost $27,777,243) | $ | 35,667,998 | ||
Affiliated Investments (cost $689,768) | 689,768 | |||
Receivable for investments sold | 489,972 | |||
Receivable for Series shares sold | 235,652 | |||
Dividends receivable | 8,505 | |||
Tax reclaim receivable | 3,446 | |||
Prepaid expenses | 607 | |||
|
| |||
Total assets | 37,095,948 | |||
|
| |||
Liabilities | ||||
Accrued expenses | 84,973 | |||
Payable for investments purchased | 43,310 | |||
Payable for Series shares reacquired | 29,267 | |||
Management fee payable | 23,442 | |||
Distribution fee payable | 2,936 | |||
Affiliated transfer agent fee payable | 289 | |||
|
| |||
Total liabilities | 184,217 | |||
|
| |||
Net Assets | $ | 36,911,731 | ||
|
| |||
Net assets were comprised of: | ||||
Common stock, at par | $ | 28,469 | ||
Paid-in capital in excess of par | 29,970,049 | |||
|
| |||
29,998,518 | ||||
Accumulated net investment loss | (71,701 | ) | ||
Accumulated net realized loss on investment and foreign currency transactions | (907,868 | ) | ||
Net unrealized appreciation on investments and foreign currencies | 7,892,782 | |||
|
| |||
Net assets, October 31, 2013 | $ | 36,911,731 | ||
|
|
See Notes to Financial Statements.
18 |
Class A | ||||
Net asset value and redemption price per share | $ | 12.94 | ||
Maximum sales charge (5.50% of offering price) | 0.75 | |||
|
| |||
Maximum offering price to public | $ | 13.69 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share | $ | 12.77 | ||
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share | $ | 12.99 | ||
|
|
See Notes to Financial Statements.
Prudential Jennison Global Opportunities Fund | 19 |
Statement of Operations
Year Ended October 31, 2013
Net Investment Loss | ||||
Income | ||||
Unaffiliated dividend income (net of foreign withholding taxes of $8,626) | $ | 264,507 | ||
Affiliated dividend income | 730 | |||
|
| |||
Total income | 265,237 | |||
|
| |||
Expenses | ||||
Management fee | 218,434 | |||
Distribution fee—Class A | 12,455 | |||
Distribution fee—Class C | 9,498 | |||
Custodian’s fees and expenses | 83,000 | |||
Registration fees | 43,000 | |||
Shareholders’ reports | 27,000 | |||
Audit fee | 26,000 | |||
Legal fees and expenses | 20,000 | |||
Transfer agent’s fees and expenses (including affiliated expense of $1,000) (Note 3) | 14,000 | |||
Directors’ fees | 10,000 | |||
Insurance | 1,000 | |||
Miscellaneous | 17,755 | |||
|
| |||
Total expenses | 482,142 | |||
Expense reimbursement (Note 2) | (132,142 | ) | ||
|
| |||
Net expenses | 350,000 | |||
|
| |||
Net investment loss | (84,763 | ) | ||
|
| |||
Realized And Unrealized Gain (Loss) On Investment And Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Investment transactions | 264,700 | |||
Foreign currency transactions | (10,597 | ) | ||
|
| |||
254,103 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 6,845,776 | |||
Foreign currencies | 2,149 | |||
|
| |||
6,847,925 | ||||
|
| |||
Net gain on investment and foreign currency transactions | 7,102,028 | |||
|
| |||
Net Increase In Net Assets Resulting From Operations | $ | 7,017,265 | ||
|
|
See Notes to Financial Statements.
20 |
Statement of Changes in Net Assets
Year Ended October 31, 2013 | March 14, 2012* through | |||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment loss | $ | (84,763 | ) | $ | (10,654 | ) | ||
Net realized gain (loss) on investment and foreign currency transactions | 254,103 | (1,195,648 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments and foreign currencies | 6,847,925 | 1,044,857 | ||||||
|
|
|
| |||||
Net increase (decrease) in net assets resulting from operations | 7,017,265 | (161,445 | ) | |||||
|
|
|
| |||||
Series share transactions (Note 6) | ||||||||
Net proceeds from shares sold | 11,184,673 | 19,692,646 | ||||||
Cost of shares reacquired | (783,244 | ) | (38,164 | ) | ||||
|
|
|
| |||||
Net increase in net assets from Series share transactions | 10,401,429 | 19,654,482 | ||||||
|
|
|
| |||||
Total increase | 17,418,694 | 19,493,037 | ||||||
Net Assets: | ||||||||
Beginning of period | 19,493,037 | — | ||||||
|
|
|
| |||||
End of period | $ | 36,911,731 | $ | 19,493,037 | ||||
|
|
|
|
* | Commencement of Series. |
See Notes to Financial Statements.
Prudential Jennison Global Opportunities Fund | 21 |
Notes to Financial Statements
Prudential World Fund, Inc. (the “Fund”) is an open-end management investment company, registered under the Investment Company Act of 1940, as amended, (“1940 Act”) and currently consists of six series: Prudential Jennison Global Opportunities Fund (the “Series”), Prudential Jennison Global Infrastructure Fund, Prudential International Equity Fund, Prudential International Value Fund, Prudential Jennison International Opportunities Fund and Prudential Emerging Markets Debt Local Currency Fund. These financial statements relate to Prudential Jennison Global Opportunities Fund. The financial statements of the other series are not presented herein. The Series commenced investment operations on March 14, 2012. The investment objective of the Series is to seek long-term growth of capital.
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the Fund and the Series in the preparation of the financial statements.
Security Valuation: The Series holds securities and other assets that are fair valued at the close of each day the New York Stock Exchange (“NYSE”) is open for trading. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Board of Directors (the “Board”) has adopted Valuation Procedures for security valuation under which fair valuation responsibilities have been delegated to Prudential Investments LLC (“PI” or “Manager”). Under the current Valuation Procedures, the established Valuation Committee is responsible for supervising the valuation of portfolio securities and other assets. The Valuation Procedures permit the Series to utilize independent pricing vendor services, quotations from market makers, and alternative valuation methods when market quotations are either not readily available or not representative of fair value. A record of the Valuation Committee’s actions is subject to the Board’s review, approval, and ratification at its next regularly-scheduled quarterly meeting.
Various inputs determine how the Series’ investments are valued, all of which are categorized according to the three broad levels (Level 1, 2, or 3) detailed in the table following the Portfolio of Investments.
Common stocks, exchange-traded funds, and derivative instruments that are traded on a national securities exchange are valued at the last sale price as of the close of
22 |
trading on the applicable exchange. Securities traded via NASDAQ are valued at the NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQ official closing price; they are classified as Level 1 in the fair value hierarchy.
In the event that no sale or official closing price on valuation date exists, these securities are generally valued at the mean between the last reported bid and asked prices, or at the last bid price in the absence of an asked price. These securities are classified as Level 2 in the fair value hierarchy, as the inputs are observable and considered to be significant to the valuation.
Common stocks traded on foreign securities exchanges are valued using pricing vendor services that provide model prices derived using adjustment factors based on information such as local closing price, relevant general and sector indices, currency fluctuations, depositary receipts, and futures, as applicable. Securities valued using such model prices are classified as Level 2 in the fair value hierarchy, as the adjustment factors are observable and considered to be significant to the valuation.
Investments in open-end, non-exchange-traded mutual funds are valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Fixed income securities traded in the over-the-counter market are generally valued at prices provided by approved independent pricing vendors. The pricing vendors provide these prices after evaluating observable inputs including, but not limited to yield curves, yield spreads, credit ratings, deal terms, tranche level attributes, default rates, cash flows, prepayment speeds, broker/dealer quotations, and reported trades. Securities valued using such vendor prices are classified as Level 2 in the fair value hierarchy.
Over-the-counter derivative instruments are generally valued using pricing vendor services, which derive the valuation based on inputs such as underlying asset prices, indices, spreads, interest rates, and exchange rates. These instruments are categorized as Level 2 in the fair value hierarchy.
Securities and other assets that cannot be priced according to the methods described above are valued based on pricing methodologies approved by the Board of Directors. In the event that significant unobservable inputs are used when determining such valuations, the securities will be classified as Level 3 in the fair value hierarchy.
Prudential Jennison Global Opportunities Fund | 23 |
Notes to Financial Statements
continued
When determining the fair value of securities, some of the factors influencing the valuation include: the nature of any restrictions on disposition of the securities; assessment of the general liquidity of the securities; the issuer’s financial condition and the markets in which it does business; the cost of the investment; the size of the holding and the capitalization of the issuer; the prices of any recent transactions or bids/offers for such securities or any comparable securities; any available analyst media or other reports or information deemed reliable by the investment adviser regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other mutual funds to calculate their net asset values.
Foreign Currency Translation: The books and records of the Series 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 current rates of exchange;
(ii) purchases and sales of investment securities, income and expenses-at the rates of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Series are presented at the foreign exchange rates and market values at the close of the fiscal period, the Series does 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 long-term portfolio securities held at the end of the period. Similarly, the Series does 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 period. Accordingly, realized foreign currency gains or losses are included in the reported net realized gains or losses on investment transactions.
Net realized gains or losses on foreign currency transactions represent net foreign exchange gains or losses from the holding of foreign currencies, currency gains or losses realized between the trade date and settlement dates on security transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Series’ books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains or losses from valuing foreign currency denominated assets and liabilities (other than investments) at
24 |
period end exchange rates are reflected as a component of net unrealized appreciation (depreciation) on 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 possibility of political and economic instability and the level of governmental supervision and regulation of foreign securities markets.
Forward Currency Contracts: A forward currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate between two parties. The Series enters into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings or 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 foreign currencies. Gain or loss is realized on the settlement date of the contract equal to the difference between the settlement value of the original and negotiated forward contracts. This gain or loss, if any, is included in net realized gain (loss) on foreign currency transactions. Risks may arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts. Forward currency contracts involve risks from currency exchange rate and credit risk in excess of the amounts reflected on the Statement of Assets and Liabilities. The Series’ maximum risk of loss from counterparty credit risk is the net value of the cash flows to be received from the counterparty at the end of the contract’s life. A master netting arrangement between the Series and the counterparty permits the Series to offset amounts payable by the Series to the same counterparty against amounts to be received; and by the receipt of collateral from the counterparty by the Series to cover the Series’ exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains or losses from investment and currency transactions are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, including amortization of premium and accretion of discount on debt securities, as required, is recorded on an accrual basis. Expenses are recorded on an accrual basis, which may require the use of certain estimates by management, which may differ from actual.
Net investment income or loss (other than distribution fees which are charged directly to the respective class) and unrealized and realized gains or losses are allocated daily to each class of shares based upon the relative proportion of adjusted net assets of each class at the beginning of the day.
Prudential Jennison Global Opportunities Fund | 25 |
Notes to Financial Statements
continued
Dividends and Distributions: The Series expects to pay dividends of net investment income and distributions from net realized capital and currency gains, if any, annually. Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-dividend date.
Taxes: For federal income tax purposes, each Series in the Fund is treated as a separate taxpaying entity. It is each Series’ policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net investment income and capital gains, if any, to its shareholders. Therefore, no federal income tax provision is required. Withholding taxes on foreign dividends are recorded net of reclaimable amounts, at the time the related income is earned.
Estimates: The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
Note 2. Agreements
The Fund has a management agreement for the Series with PI. Pursuant to this agreement, PI has responsibility for all investment advisory services and supervises the subadvisor’s performance of such services. PI has entered into a subadvisory agreement with Jennison Associates LLC (“Jennison”). The subadvisory agreement provides that Jennison furnishes investment advisory services in connection with the management of the Series. In connection therewith, Jennison is obligated to keep certain books and records of the Series. PI pays for the services of Jennison, the cost of compensation of officers of the Series, occupancy and certain clerical and bookkeeping costs of the Series. The Series bears all other costs and expenses.
The management fee paid to PI is computed daily and payable monthly at an annual rate of .90% of the Series’ average daily net assets. PI has contractually agreed through February 28, 2015 to limit net annual Series operating expenses (excluding distribution and service (12b-1) fees, extraordinary and certain other expenses such as taxes, interest and brokerage commissions) to each class of shares to 1.35% of the Series’ average daily net assets.
26 |
The Series has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”), which acts as the distributor of the Class A, Class C and Class Z shares of the Series. The Series compensates PIMS for distributing and servicing the Series’ Class A and Class C shares, pursuant to plans of distribution (the “Class A and C Plans”), regardless of expenses actually incurred by PIMS. The distribution fees are accrued daily and payable monthly. No distribution or service fees are paid to PIMS as distributor of the Class Z shares of the Series.
Pursuant to the Class A and C Plans, the Series compensates PIMS for distribution related activities at an annual rate of up to .30% and 1% of the average daily net assets of the Class A and C shares, respectively. PIMS has contractually agreed to limit such fees to .25% of the average daily net assets of the Class A shares through February 28, 2015.
PIMS has advised the Series that they received $10,481 in front-end sales charges resulting from sales of Class A shares during the year ended October 31, 2013. From these fees, PIMS paid such sales charges to affiliated broker-dealers, which in turn paid commissions to salespersons and incurred other distribution costs.
PIMS has advised the Series that for the year ended October 31, 2013, there were no contingent deferred sales charges imposed.
PI, PIMS and Jennison are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PI and an indirect, wholly-owned subsidiary of Prudential, serves as the Series’ transfer agent. Transfer agent’s fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
The Series invests in the Prudential Core Taxable Money Market Fund (the “Core Fund”), a portfolio of the Prudential Investment Portfolios 2, registered under the 1940 Act and managed by PI. Earnings from the Core Fund are disclosed on the Statement of Operations as affiliated dividend income.
Note 4. Portfolio Securities
Purchases and sales of portfolio securities, other than short-term investments, for the year ended October 31, 2013 were $26,195,368 and $16,950,647, respectively.
Prudential Jennison Global Opportunities Fund | 27 |
Notes to Financial Statements
continued
Note 5. Tax Information
Distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-dividend date. In order to present accumulated net investment loss, accumulated net realized loss on investment and foreign currency transactions and paid-in capital in excess of par on the Statement of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to accumulated net investment loss, accumulated net realized loss on investment and foreign currency transactions and paid-in capital in excess of par. For the year ended October 31, 2013, the adjustments were to decrease accumulated net investment loss by $25,249, decrease accumulated net realized loss on investment and foreign currency transactions by $10,597 and decrease paid-in capital in excess of par by $35,846 due to the reclassification of a net operating loss and certain transactions involving foreign currencies. Net investment loss, net realized gain on investment and foreign currency transactions and net assets were not affected by this change.
For the year ended October 31, 2013 and the period ended October 31, 2012 there were no distributions paid by the Fund.
As of October 31, 2013, the Fund did not have any distributable earnings on a tax basis.
The United States federal income tax basis of the Series’ investments and the net unrealized appreciation as of October 31, 2013 were as follows:
Tax Basis | Appreciation | Depreciation | Net | Other Cost | Total Net | |||||
$28,497,968 | $8,051,857 | $(192,059) | $7,859,798 | $1,655 | $7,861,453 |
The difference between book basis and tax basis is primarily attributable to deferred losses on wash sales. The other cost basis adjustments are primarily attributable to appreciation of foreign currencies and mark-to-market of receivables and payables.
For federal income tax purposes, the Series had a capital loss carryforward as of October 31, 2013 of approximately $877,000 which can be carried forward for an
28 |
unlimited period. The Series utilized approximately $256,000 of its capital loss carryforward to offset net taxable gains realized in the fiscal year ended October 31, 2013. No capital gains distributions are expected to be paid to shareholders until net gains have been realized in excess of such losses.
The Series elected to treat certain late-year ordinary income losses of approximately $63,000 as having been incurred in the following fiscal year (October 31, 2014).
Management has analyzed the Series’ tax positions taken on federal income tax returns for all open tax years and has concluded that no provision for income tax is required in the Series’ financial statements for the current reporting period. The Series’ federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
Note 6. Capital
The Series offers Class A, Class C and Class Z shares. Class A shares are subject to a maximum front-end sales charge of 5.50%. All investors who purchase Class A shares in an amount of $1 million or more and sell these shares within 12 months of purchase are subject to a contingent deferred sales charge (“CDSC”) of 1%. The Class A CDSC is waived for purchases by certain retirement or benefits plans. Class C shares are sold with a CDSC of 1% on shares redeemed within the first 12 months after purchase. Class Z shares are not subject to any sales or redemption charge and are offered exclusively for sale to a limited group of investors. A special exchange privilege is also available for shareholders who qualified to purchase Class A shares at net asset value.
Under certain circumstances, an exchange may be made from specified share classes of the Series to one or more other share classes of the Series as presented in the table of transactions in shares of capital stock.
At October 31, 2013, Prudential Financial, Inc. through its affiliates owned 1,000 Class A shares, 1,000 Class C shares and 1,726,022 Class Z shares of the Series.
There are 900 million shares of common stock, $.01 par value per share, divided into three classes, designated Class A, Class C and Class Z common stock, each of which consists of 300,000,000 authorized shares.
Prudential Jennison Global Opportunities Fund | 29 |
Notes to Financial Statements
continued
Transactions in shares of common stock were as follows:
Class A | Shares | Amount | ||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 429,183 | $ | 5,230,950 | |||||
Shares reacquired | (52,529 | ) | (574,895 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 376,654 | 4,656,055 | ||||||
Shares issued upon conversion from Class Z | 3,655 | 45,724 | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 380,309 | $ | 4,701,779 | |||||
|
|
|
| |||||
Period ended October 31, 2012*: | ||||||||
Shares sold | 399,078 | $ | 3,930,985 | |||||
Shares reacquired | (3,880 | ) | (38,164 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 395,198 | $ | 3,892,821 | |||||
|
|
|
| |||||
Class C | ||||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 75,679 | $ | 876,837 | |||||
Shares reacquired | (6,306 | ) | (69,558 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 69,373 | $ | 807,279 | |||||
|
|
|
| |||||
Period ended October 31, 2012*: | ||||||||
Shares sold | 60,499 | $ | 579,898 | |||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 60,499 | $ | 579,898 | |||||
|
|
|
| |||||
Class Z | ||||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 437,242 | $ | 5,076,886 | |||||
Shares reacquired | (11,330 | ) | (138,791 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding before conversion | 425,912 | 4,938,095 | ||||||
Shares reacquired upon conversion into Class A | (3,640 | ) | (45,724 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 422,272 | $ | 4,892,371 | |||||
|
|
|
| |||||
Period ended October 31, 2012*: | ||||||||
Shares sold | 1,519,236 | $ | 15,181,763 | |||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 1,519,236 | $ | 15,181,763 | |||||
|
|
|
|
* | Commenced operations on March 14, 2012. |
30 |
Note 7. Borrowings
The Series, along with other affiliated registered investment companies (the “Funds”), is a party to a Syndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide an alternative source of temporary funding for capital share redemptions. The SCA provides for a commitment of $900 million for the period November 15, 2012 through November 4, 2013. The Funds pay an annualized commitment fee of 0.08% on the unused portion of the SCA. Prior to November 15, 2012, the Funds had another SCA with substantially similar terms. Interest on any borrowings under the SCA is paid at contracted market rates. The commitment fee for the unused amount is accrued daily and paid quarterly.
Subsequent to the fiscal year end, the SCA has been renewed effective November 5, 2013 at substantially similar terms through November 4, 2014.
The Series did not utilize the SCA during the year ended October 31, 2013.
Note 8. New Accounting Pronouncement
In January 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” which replaced ASU No. 2011-11 “Disclosures about Offsetting Assets and Liabilities”. The updates create new disclosure requirements requiring entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of Assets and Liabilities or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods. Management is currently evaluating the application of ASU No. 2013-01 and its impact, if any, on the Series’ financial statements.
Prudential Jennison Global Opportunities Fund | 31 |
Financial Highlights
Class A Shares | ||||||||||
Year Ended | March 14, 2012(a) through October 31, 2012 | |||||||||
Per Share Operating Performance: | ||||||||||
Net Asset Value, Beginning Of Period | $9.86 | $10.00 | ||||||||
Income (loss) from investment operations: | ||||||||||
Net investment loss | (.06 | ) | (.02 | ) | ||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 3.14 | (.12 | ) | |||||||
Total from investment operations | 3.08 | (.14 | ) | |||||||
Net asset value, end of period | $12.94 | $9.86 | ||||||||
Total Return(c): | 31.24% | (1.40)% | ||||||||
Ratios/Supplemental Data: | ||||||||||
Net assets, end of period (000) | $10,035 | $3,898 | ||||||||
Average net assets (000) | $4,982 | $2,967 | ||||||||
Ratios to average net assets(d): | ||||||||||
Expenses after waivers and/or expense reimbursement(e) | 1.60% | 1.60% | (f) | |||||||
Expenses before waivers and/or expense reimbursement(e) | 2.19% | 3.10% | (f) | |||||||
Net investment loss | (.54)% | (.30)% | (f) | |||||||
Portfolio turnover rate | 70% | 48% | (g) |
(a) Commencement of Series.
(b) Calculated based on average shares outstanding during the year.
(c) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported, and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than a full year are not annualized.
(d) Does not include expenses of the underlying fund in which the Series invests.
(e) The distributor of the Series has contractually agreed to limit its distribution and service (12b-1) fees to .25% of the average daily net assets of the Class A shares.
(f) Annualized.
(g) Not annualized.
See Notes to Financial Statements.
32 |
Class C Shares | ||||||||||
Year Ended | March 14, 2012(a) through October 31, 2012 | |||||||||
Per Share Operating Performance: | ||||||||||
Net Asset Value, Beginning Of Period | $9.81 | $10.00 | ||||||||
Income (loss) from investment operations: | ||||||||||
Net investment loss | (.14 | ) | (.06 | ) | ||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 3.10 | (.13 | ) | |||||||
Total from investment operations | 2.96 | (.19 | ) | |||||||
Net asset value, end of period | $12.77 | $9.81 | ||||||||
Total Return(c): | 30.17% | (1.90)% | ||||||||
Ratios/Supplemental Data: | ||||||||||
Net assets, end of period (000) | $1,659 | $593 | ||||||||
Average net assets (000) | $950 | $300 | ||||||||
Ratios to average net assets(d): | ||||||||||
Expenses after waivers and/or expense reimbursement | 2.35% | 2.35% | (e) | |||||||
Expenses before waivers and/or expense reimbursement | 2.89% | 3.85% | (e) | |||||||
Net investment loss | (1.26)% | (.97)% | (e) | |||||||
Portfolio turnover rate | 70% | 48% | (f) |
(a) Commencement of Series.
(b) Calculated based on average shares outstanding during the year.
(c) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported, and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than a full year are not annualized.
(d) Does not include expenses of the underlying fund in which the Series invests.
(e) Annualized.
(f) Not annualized.
See Notes to Financial Statements.
Prudential Jennison Global Opportunities Fund | 33 |
Financial Highlights
continued
Class Z Shares | ||||||||||
Year Ended | March 14, 2012(a) through October 31, 2012 | |||||||||
Per Share Operating Performance: | ||||||||||
Net Asset Value, Beginning Of Period | $9.87 | $10.00 | ||||||||
Income (loss) from investment operations: | ||||||||||
Net investment loss | (.03 | ) | - | (e) | ||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 3.15 | (.13 | ) | |||||||
Total from investment operations | 3.12 | (.13 | ) | |||||||
Net asset value, end of period | $12.99 | $9.87 | ||||||||
Total Return(c): | 31.61% | (1.30)% | ||||||||
Ratios/Supplemental Data: | ||||||||||
Net assets, end of period (000) | $25,219 | $15,002 | ||||||||
Average net assets (000) | $18,340 | $14,655 | ||||||||
Ratios to average net assets(d): | ||||||||||
Expenses after waivers and/or expense reimbursement | 1.35% | 1.35% | (f) | |||||||
Expenses before waivers and/or expense reimbursement | 1.89% | 2.72% | (f) | |||||||
Net investment loss | (.25)% | (.03)% | (f) | |||||||
Portfolio turnover rate | 70% | 48% | (g) |
(a) Commencement of Series.
(b) Calculated based on average shares outstanding during the year.
(c) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported, and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than a full year are not annualized.
(d) Does not include expenses of the underlying fund in which the Series invests.
(e) Less than $.005 per share.
(f) Annualized.
(g) Not annualized.
See Notes to Financial Statements.
34 |
Report of Independent Registered Public
Accounting Firm
The Board of Directors and Shareholders
Prudential World Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Prudential Jennison Global Opportunities Fund, a series of Prudential World Fund, Inc. (hereafter referred to as the “Fund”), including the portfolio of investments, as of October 31, 2013, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for the year then ended and for the period March 14, 2012 (commencement of operations) to October 31, 2012. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2013, by correspondence with the custodian, transfer agent and brokers or by other appropriate auditing procedures when replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Fund as of October 31, 2013, and the results of its operations for year then ended, and the changes in its net assets and the financial highlights for the year then ended and for the period March 14, 2012 to October 31, 2012, in conformity with U.S. generally accepted accounting principles.
New York, New York
December 20, 2013
Prudential Jennison Global Opportunities Fund | 35 |
INFORMATION ABOUT BOARD MEMBERS AND OFFICERS
(Unaudited)
Information about Board Members and Officers of the Fund is set forth below. Board Members who are not deemed to be “interested persons” of the Fund, as defined in the 1940 Act, are referred to as “Independent Board Members.” Board Members who are deemed to be “interested persons” of the Fund are referred to as “Interested Board Members.” The Board Members are responsible for the overall supervision of the operations of the Fund and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Board in turn elects the Officers, who are responsible for administering the day-to-day operations of the Fund.
Independent Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Ellen S. Alberding (55) Board Member Portfolios Overseen: 64 | President and Board Member, The Joyce Foundation (charitable foundation) (since 2002); Vice Chair, City Colleges of Chicago (community college system) (since 2011); Trustee, Skills for America’s Future (national initiative to connect employers to community colleges) (since 2011); Trustee, National Park Foundation (charitable foundation for national park system) (since 2009); Trustee, Economic Club of Chicago (since 2009). | None. | ||
Kevin J. Bannon (61) Board Member Portfolios Overseen: 64 | Managing Director (since April 2008) and Chief Investment Officer (since October 2008) of Highmount Capital LLC (registered investment adviser); formerly Executive Vice President and Chief Investment Officer (April 1993-August 2007) of Bank of New York Company; President (May 2003-May 2007) of BNY Hamilton Family of Mutual Funds. | Director of Urstadt Biddle Properties (since September 2008). | ||
Linda W. Bynoe (61) Board Member Portfolios Overseen: 64 | President and Chief Executive Officer (since March 1995) and formerly Chief Operating Officer (December 1989-February 1995) of Telemat Ltd. (management consulting); formerly Vice President (January 1985-June 1989) at Morgan Stanley & Co (broker-dealer). | Director of Simon Property Group, Inc. (retail real estate) (May 2003-May 2012); Director of Anixter International, Inc. (communication products distributor) (since January 2006); Director of Northern Trust Corporation (financial services) (since April 2006); Trustee of Equity Residential (residential real estate) (since December 2009). |
Prudential Jennison Global Opportunities Fund
Independent Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Keith F. Hartstein (57) Board Member Portfolios Overseen: 64 | Formerly President and Chief Executive Officer (2005-2012), Senior Vice President (2004-2005), Senior Vice President of Sales and Marketing (1997-2004), and various executive management positions (1990-1997), John Hancock Funds, LLC (asset management); Chairman, Investment Company Institute’s Sales Force Marketing Committee (2003-2008). | None. | ||
Michael S. Hyland, CFA (68) Board Member Portfolios Overseen: 64 | Independent Consultant (since February 2005); formerly Senior Managing Director (July 2001-February 2005) of Bear Stearns & Co, Inc.; Global Partner, INVESCO (1999-2001); Managing Director and President of Salomon Brothers Asset Management (1989-1999). | None. | ||
Douglas H. McCorkindale (74) Board Member Portfolios Overseen: 64 | Formerly Chairman (February 2001-June 2006), Chief Executive Officer (June 2000-July 2005), President (September 1997-July 2005) and Vice Chairman (March 1984-May 2000) of Gannett Co. Inc. (publishing and media). | Director of Lockheed Martin Corp. (aerospace and defense) (since May 2001). | ||
Stephen P. Munn (71) Board Member Portfolios Overseen: 64 | Lead Director (since 2007) and formerly Chairman (1993-2007) of Carlisle Companies Incorporated (manufacturer of industrial products). | Lead Director (since 2007) of Carlisle Companies Incorporated (manufacturer of industrial products). | ||
James E. Quinn (61) Board Member Portfolios Overseen: 64 | Formerly President (2003-2012) and Director (2003-2008), and Vice Chairman and Director (1998-2003), Tiffany & Company (jewelry retailing); Director, Mutual of America Capital Management Corporation (asset management) (since 1996); Director, Hofstra University (since 2008); Vice Chairman, Museum of the City of New York (since 1984). | Director of Deckers Outdoor Corporation (footwear manufacturer) (since 2011). | ||
Richard A. Redeker (70) Board Member & Independent Chair Portfolios Overseen: 64 | Retired Mutual Fund Senior Executive (44 years); Management Consultant; Independent Directors Council (organization of 2,800 Independent Mutual Fund Directors)-Executive Committee, Chair of Policy Steering Committee, Governing Council. | None. |
Visit our website at www.prudentialfunds.com
Independent Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Robin B. Smith (74) Board Member Portfolios Overseen: 64 | Chairman of the Board (since January 2003) of Publishers Clearing House (direct marketing); Member of the Board of Directors of ADLPartner (marketing) (since December 2010); formerly Chairman and Chief Executive Officer (August 1996-January 2003) of Publishers Clearing House. | Formerly Director of BellSouth Corporation (telecommunications) (1992-2006). | ||
Stephen G. Stoneburn (70) Board Member Portfolios Overseen: 64 | Chairman, (since July 2011), President and Chief Executive Officer (since June 1996) of Quadrant Media Corp. (publishing company); formerly President (June 1995-June 1996) of Argus Integrated Media, Inc.; Senior Vice President and Managing Director (January 1993-1995) of Cowles Business Media; Senior Vice President of Fairchild Publications, Inc. (1975-1989). | None. | ||
Interested Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Stuart S. Parker (51) Board Member & President Portfolios Overseen: 59 | President of Prudential Investments LLC (since January 2012); Executive Vice President of Prudential Investment Management Services LLC (since December 2012); Executive Vice President of Jennison Associates LLC and Head of Retail Distribution of Prudential Investments LLC (June 2005 - December 2011). | None. | ||
Scott E. Benjamin (40) Board Member & Vice President Portfolios Overseen: 64 | Executive Vice President (since June 2009) of Prudential Investments LLC; Executive Vice President (June 2009-June 2012) and Vice President (since June 2012) of Prudential Investment Management Services LLC; Executive Vice President (since September 2009) of AST Investment Services, Inc.; Senior Vice President of Product Development and Marketing, Prudential Investments (since February 2006); Vice President of Product Development and Product Management, Prudential Investments (2003-2006). | None. |
Prudential Jennison Global Opportunities Fund
(1) | The year that each Board Member joined the Funds’ Board is as follows: |
Ellen S. Alberding; 2013; Kevin J. Bannon, 2008; Linda W. Bynoe, 2005; Keith F. Hartstein, 2013; Michael S. Hyland, 2008; Douglas H. McCorkindale, 2003; Stephen P. Munn, 2008; James E. Quinn, 2013; Richard A. Redeker, 2003; Robin B. Smith, 1996; Stephen G. Stoneburn, 1996; Stuart S. Parker, Board Member and President since 2012; Scott E. Benjamin, Board Member since 2010 and Vice President since 2009.
Fund Officers(a) | ||||
Name, Address and Age Position with Fund | Principal Occupation(s) During Past Five Years | Length of Service as Fund Officer | ||
Raymond A. O’Hara (58) Chief Legal Officer | Vice President and Corporate Counsel (since July 2010) of Prudential Insurance Company of America (Prudential); Vice President (March 2011-Present) of Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey; Vice President and Corporate Counsel (March 2011-Present) of Prudential Annuities Life Assurance Corporation; Chief Legal Officer of Prudential Investments LLC (since June 2012); Chief Legal Officer of Prudential Mutual Fund Services LLC (since June 2012) and Corporate Counsel of AST Investment Services, Inc. (since June 2012); formerly Assistant Vice President and Corporate Counsel (September 2008-July 2010) of The Hartford Financial Services Group, Inc.; formerly Associate (September 1980-December 1987) and Partner (January 1988–August 2008) of Blazzard & Hasenauer, P.C. (formerly, Blazzard, Grodd & Hasenauer, P.C.). | Since 2012 | ||
Deborah A. Docs (55) Secretary | Vice President and Corporate Counsel (since January 2001) of Prudential; Vice President (since December 1996) and Assistant Secretary (since March 1999) of Prudential Investments LLC; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc. | Since 2004 | ||
Jonathan D. Shain (55) Assistant Secretary | Vice President and Corporate Counsel (since August 1998) of Prudential; Vice President and Assistant Secretary (since May 2001) of Prudential Investments LLC; Vice President and Assistant Secretary (since February 2001) of Prudential Mutual Fund Services LLC; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc. | Since 2005 | ||
Claudia DiGiacomo (39) Assistant Secretary | Vice President and Corporate Counsel (since January 2005) of Prudential; Vice President and Assistant Secretary of Prudential Investments LLC (since December 2005); Associate at Sidley Austin Brown & Wood LLP (1999-2004). | Since 2005 | ||
Andrew R. French (51) Assistant Secretary | Vice President and Corporate Counsel (since February 2010) of Prudential; formerly Director and Corporate Counsel (2006-2010) of Prudential; Vice President and Assistant Secretary (since January 2007) of Prudential Investments LLC; Vice President and Assistant Secretary (since January 2007) of Prudential Mutual Fund Services LLC. | Since 2006 |
Visit our website at www.prudentialfunds.com
Fund Officers(a) | ||||
Name, Address and Age Position with Fund | Principal Occupation(s) During Past Five Years | Length of Service as Fund Officer | ||
Amanda S. Ryan (35) Assistant Secretary | Director and Corporate Counsel (since March 2012) of Prudential; Director and Assistant Secretary (since June 2012) of Prudential Investments LLC; Associate at Ropes & Gray LLP (2008-2012). | Since 2012 | ||
Bruce Karpati (43) Chief Compliance Officer | Chief Compliance Officer of the Prudential Investments Funds, Target Funds, Advanced Series Trust, the Prudential Series Fund and Prudential’s Gibraltar Fund, Inc. (May 2013 - Present); formerly National Chief (May 2012 - May 2013) and Co-Chief (January 2010 - May 2012) of the Asset Management Unit, Division of Enforcement, of the U.S. Securities and Exchange Commission; Assistant Regional Director (January 2005 - January 2010) of the U.S. Securities and Exchange Commission. | Since 2013 | ||
Theresa C. Thompson (51) Deputy Chief Compliance Officer | Vice President, Compliance, Prudential Investments LLC (since April 2004); and Director, Compliance, Prudential Investments LLC (2001-2004). | Since 2008 | ||
Richard W. Kinville (45) Anti-Money Laundering Compliance Officer | Vice President, Corporate Compliance, Anti-Money Laundering Unit (since January 2005) of Prudential; committee member of the American Council of Life Insurers Anti-Money Laundering and Critical Infrastructure Committee (since January 2007); formerly Investigator and Supervisor in the Special Investigations Unit for the New York Central Mutual Fire Insurance Company (August 1994-January 1999); Investigator in AXA Financial’s Internal Audit Department and Manager in AXA’s Anti-Money Laundering Office (January 1999-January 2005); first chair of the American Council of Life Insurers Anti-Money Laundering and Critical Infrastructure Committee (June 2007-December 2009). | Since 2011 | ||
Grace C. Torres (54) Treasurer and Principal Financial and Accounting Officer | Assistant Treasurer (since March 1999) and Senior Vice President (since September 1999) of Prudential Investments LLC; Assistant Treasurer (since May 2003) and Vice President (since June 2005) of AST Investment Services, Inc.; Senior Vice President and Assistant Treasurer (since May 2003) of Prudential Annuities Advisory Services, Inc.; formerly Senior Vice President (May 2003-June 2005) of AST Investment Services, Inc. | Since 1998 | ||
M. Sadiq Peshimam (49) Assistant Treasurer | Vice President (since 2005) of Prudential Investments LLC. | Since 2006 | ||
Peter Parrella (55) Assistant Treasurer | Vice President (since 2007) and Director (2004-2007) within Prudential Mutual Fund Administration; formerly Tax Manager at SSB Citi Fund Management LLC (1997-2004). | Since 2007 |
(a) | Excludes Mr. Parker and Mr. Benjamin, interested Board Members who also serve as President and Vice President, respectively. |
Prudential Jennison Global Opportunities Fund
Explanatory Notes to Tables:
• | Board Members are deemed to be “Interested,” as defined in the 1940 Act, by reason of their affiliation with Prudential Investments LLC and/or an affiliate of Prudential Investments LLC. |
• | Unless otherwise noted, the address of all Board Members and Officers is c/o Prudential Investments LLC, Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077. |
• | There is no set term of office for Board Members or Officers. The Board Members have adopted a retirement policy, which calls for the retirement of Board Members on December 31 of the year in which they reach the age of 75. |
• | “Other Directorships Held” includes only directorships of companies required to register or file reports with the SEC under the 1934 Act (that is, “public companies”) or other investment companies registered under the 1940 Act. |
• | “Portfolios Overseen” includes all investment companies managed by Prudential Investments LLC. The investment companies for which Prudential Investments LLC serves as manager include the Prudential Investments Mutual Funds, The Prudential Variable Contract Accounts, Target Mutual Funds, Prudential Short Duration High Yield Fund, Inc., Prudential Global Short Duration High Yield Fund, Inc., The Prudential Series Fund, Prudential’s Gibraltar Fund, Inc. and the Advanced Series Trust. |
Visit our website at www.prudentialfunds.com
Approval of Advisory Agreements
The Fund’s Board of Directors
The Board of Directors (the “Board”) of Prudential Jennison Global Opportunities Fund (the “Fund”)1 consists of ten individuals, eight of whom are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Directors”).2 The Board is responsible for the oversight of the Fund and its operations, and performs the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Directors have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Director. The Board has established three standing committees: the Audit Committee, the Nominating and Governance Committee, and the Investment Committee. Each committee is chaired by, and composed of, Independent Directors.
Annual Approval of the Fund’s Advisory Agreements
As required under the 1940 Act, the Board determines annually whether to renew the Fund’s management agreement with Prudential Investments LLC (“PI”) and the Fund’s subadvisory agreement with Jennison Associates LLC (“Jennison”). In considering the renewal of the agreements, the Board, including all of the Independent Directors, met on June 4-6, 2013 and approved the renewal of the agreements through July 31, 2014, after concluding that the renewal of the agreements was in the best interests of the Fund and its shareholders.
In advance of the meetings, the Board requested and received materials relating to the agreements, and had the opportunity to ask questions and request further information in connection with its consideration. Among other things, the Board considered comparative fee information from PI and Jennison. Also, the Board considered comparisons with other mutual funds in relevant Peer Universes and Peer Groups, as is further discussed below.
In approving the agreements, the Board, including the Independent Directors advised by independent legal counsel, considered the factors it deemed relevant, including the nature, quality and extent of services provided by PI and the subadviser, the performance of the Fund, the profitability of PI and its affiliates, expenses and fees, and the potential for economies of scale that may be shared with the Fund and its shareholders as the Fund’s assets grow. In their deliberations, the Directors did not identify any single factor which alone was responsible for the Board’s decision to approve the agreements with respect to the Fund. In connection with its deliberations, the Board considered information provided by PI throughout the year at regular Board meetings, presentations from portfolio managers and other information, as well as information furnished at or in advance of the meetings on June 4-6, 2013.
1 | Prudential Jennison Global Opportunities Fund is a series of Prudential World Fund, Inc. |
2 | Ms. Alberding and Mssrs. Hartstein and Quinn were elected to the Board effective September 1, 2013. |
Prudential Jennison Global Opportunities Fund
Approval of Advisory Agreements (continued)
The Directors determined that the overall arrangements between the Fund and PI, which serves as the Fund’s investment manager pursuant to a management agreement, and between PI and Jennison, which serves as the Fund’s subadviser pursuant to the terms of a subadvisory agreement with PI, are in the best interests of the Fund and its shareholders in light of the services performed, fees charged and such other matters as the Directors considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the Directors’ reaching their determinations to approve the continuance of the agreements are separately discussed below.
Nature, Quality and Extent of Services
The Board received and considered information regarding the nature, quality and extent of services provided to the Fund by PI and Jennison. The Board considered the services provided by PI, including but not limited to the oversight of the subadviser for the Fund, as well as the provision of fund recordkeeping, compliance, and other services to the Fund. With respect to PI’s oversight of the subadviser, the Board noted that PI’s Strategic Investment Research Group (“SIRG”), which is a business unit of PI, is responsible for monitoring and reporting to PI’s senior management on the performance and operations of the subadviser. The Board also considered that PI pays the salaries of all of the officers and non-independent Directors of the Fund. The Board also considered the investment subadvisory services provided by Jennison, as well as adherence to the Fund’s investment restrictions and compliance with applicable Fund policies and procedures. The Board considered PI’s evaluation of the subadviser, as well as PI’s recommendation, based on its review of the subadviser, to renew the subadvisory agreement.
The Board considered the qualifications, backgrounds and responsibilities of PI’s senior management responsible for the oversight of the Fund and Jennison, and also considered the qualifications, backgrounds and responsibilities of Jennison’s portfolio managers who are responsible for the day-to-day management of the Fund’s portfolio. The Board was provided with information pertaining to PI’s and Jennison’s organizational structure, senior management, investment operations, and other relevant information pertaining to both PI and Jennison. The Board also noted that it received favorable compliance reports from the Fund’s Chief Compliance Officer (“CCO”) as to both PI and Jennison. The Board noted that Jennison is affiliated with PI.
The Board concluded that it was satisfied with the nature, extent and quality of the investment management services provided by PI and the subadvisory services
Visit our website at www.prudentialfunds.com
provided to the Fund by Jennison, and that there was a reasonable basis on which to conclude that the Fund benefits from the services provided by PI and Jennison under the management and subadvisory agreements.
Costs of Services and Profits Realized by PI
The Board was provided with information on the profitability of PI and its affiliates in serving as the Fund’s investment manager. The Board discussed with PI the methodology utilized in assembling the information regarding profitability and considered its reasonableness. The Board recognized that it is difficult to make comparisons of profitability from fund management contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser’s capital structure and cost of capital. Taking these factors into account, the Board concluded that the profitability of PI and its affiliates in relation to the services rendered was not unreasonable. The Board separately considered information regarding the profitability of the subadviser, an affiliate of PI. Taking these factors into account, the Board concluded that the profitability of PI and its affiliates in relation to the services rendered was not unreasonable.
Economies of Scale
The Board noted that the management fee schedule for the Fund does not contain breakpoints that would reduce the fee rate on assets above specified levels. The Board received and discussed information concerning whether PI realizes economies of scale as the Fund’s assets grow beyond current levels. The Board also recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board’s understanding that most of PI’s costs are not specific to individual funds, but rather are incurred across a variety of products and services. In light of the Fund’s current size, performance and expense structure, the Board concluded that the absence of breakpoints in the Fund’s fee schedule is acceptable at this time.
Other Benefits to PI and Jennison
The Board considered potential ancillary benefits that might be received by PI and Jennison and their affiliates as a result of their relationship with the Fund. The Board concluded that potential benefits to be derived by PI included fees received by affiliates of PI for serving as the Fund’s securities lending agent, transfer agency fees received by the Fund’s transfer agent (which is affiliated with PI), as well as benefits to its reputation or other intangible benefits resulting from PI’s association with the Fund. The Board concluded that the potential benefits to be derived by Jennison included the ability to use soft dollar credits, as well as the potential benefits consistent with
Prudential Jennison Global Opportunities Fund
Approval of Advisory Agreements (continued)
those generally resulting from an increase in assets under management, specifically, potential access to additional research resources and benefits to its reputation. The Board concluded that the benefits derived by PI and Jennison were consistent with the types of benefits generally derived by investment managers and subadvisers to mutual funds.
Performance of the Fund / Fees and Expenses
The Board considered certain additional specific factors and made related conclusions relating to the historical performance of the Fund for the fourth quarter of 2012. The Board considered that the Fund commenced operations on March 14, 2012 and that longer-term performance was not yet available.
The Board also considered the Fund’s actual management fee, as well as the Fund’s net total expense ratio, for the fiscal year ended October 31, 2012. The Board considered the management fee for the Fund as compared to the management fee charged by PI to other funds and the fee charged by other advisers to comparable mutual funds in a Peer Group. The actual management fee represents the fee rate actually paid by Fund shareholders and includes any fee waivers or reimbursements. The net total expense ratio for the Fund represents the actual expense ratio incurred by Fund shareholders.
The mutual funds included in the Peer Universe (the Lipper Global Multi-Cap Growth Funds Performance Universe)3 and the Peer Group were objectively determined by Lipper Inc. (“Lipper”), an independent provider of mutual fund data. To the extent that PI deemed appropriate, and for reasons addressed in detail with the Board, PI may have provided supplemental data compiled by Lipper for the Board’s consideration. The comparisons placed the Fund in various quartiles, with the first quartile being the best 25% of the mutual funds (for performance, the best performing mutual funds and, for expenses, the lowest cost mutual funds).
The section below summarizes key factors considered by the Board and the Board’s conclusions regarding the Fund’s performance, fees and overall expenses. The table sets forth gross performance comparisons (which do not reflect the impact on performance of fund expenses, or any subsidies, expense caps or waivers that may be applicable) with the Peer Universe, actual management fees with the Peer Group
3 | The Fund was compared to the Lipper Global Multi-Cap Growth Funds Performance Universe, although Lipper classifies the Fund in its Global Multi-Cap Core Funds Performance Universe. The Fund was compared to the Lipper Global Multi-Cap Growth Funds Performance Universe because PI believes that the funds included in the Lipper Global Multi-Cap Growth Funds Performance Universe provide a more appropriate basis for Fund performance comparisons. |
Visit our website at www.prudentialfunds.com
(which reflect the impact of any subsidies or fee waivers), and net total expenses with the Peer Group, each of which were key factors considered by the Board.
Performance | 1 Year | 3 Years | 5 Years | 10 Years | ||||
N/A | N/A | N/A | N/A | |||||
Actual Management Fees: 1st Quartile | ||||||||
Net Total Expenses: 3rd Quartile |
• | The Board noted that because the Fund commenced operations during 2012, it did not yet have a full-year performance record for evaluation. |
• | The Board accepted PI’s recommendation to continue the existing expense cap of 1.35% (exclusive of 12b-1 fees and certain other fees) through June 30, 2014. |
• | The Board concluded that, in light of the Fund’s recent inception date, it would be in the best interests of the Fund and its shareholders to renew the agreements to allow the subadviser to develop a performance record to be compared against. |
• | The Board concluded that the management fees (including subadvisory fees) and total expenses were reasonable in light of the services provided. |
* * *
After full consideration of these factors, the Board concluded that the approval of the agreements was in the best interests of the Fund and its shareholders.
Prudential Jennison Global Opportunities Fund
n MAIL | n TELEPHONE | n WEBSITE | ||
Gateway Center Three 100 Mulberry Street Newark, NJ 07102 | (800) 225-1852 | www.prudentialfunds.com |
PROXY VOTING |
The Board of Directors of the Fund has delegated to the Fund’s investment subadviser the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852 or by visiting the Securities and Exchange Commission’s website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the Securities and Exchange Commission’s website. |
DIRECTORS |
Ellen S. Alberding • Kevin J. Bannon • Scott E. Benjamin • Linda W. Bynoe • Keith F. Hartstein • Michael S. Hyland • Douglas H. McCorkindale • Stephen P. Munn • Stuart S. Parker • James E. Quinn • Richard A. Redeker • Robin B. Smith • Stephen G. Stoneburn |
OFFICERS |
Stuart S. Parker, President • Scott E. Benjamin, Vice President • Grace C. Torres, Treasurer and Principal Financial and Accounting Officer • Raymond A. O’Hara, Chief Legal Officer • Deborah A. Docs, Secretary • Bruce Karpati, Chief Compliance Officer • Theresa C. Thompson, Deputy Chief Compliance Officer • Richard W. Kinville, Anti-Money Laundering Compliance Officer • Jonathan D. Shain, Assistant Secretary • Claudia DiGiacomo, Assistant Secretary • Amanda S. Ryan, Assistant Secretary • Andrew R. French, Assistant Secretary • M. Sadiq Peshimam, Assistant Treasurer • Peter Parrella, Assistant Treasurer |
MANAGER | Prudential Investments LLC | Gateway Center Three 100 Mulberry Street Newark, NJ 07102 | ||
| ||||
INVESTMENT SUBADVISER | Jennison Associates LLC | 466 Lexington Avenue New York, NY 10017 | ||
| ||||
DISTRIBUTOR | Prudential Investment Management Services LLC | Gateway Center Three 100 Mulberry Street | ||
| ||||
CUSTODIAN | The Bank of New York Mellon | One Wall Street New York, NY 10286 | ||
| ||||
TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
| ||||
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
| ||||
FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 |
An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain a prospectus and summary prospectus by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
E-DELIVERY |
To receive your mutual fund documents online, go to www.prudentialfunds.com/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above. |
SHAREHOLDER COMMUNICATIONS WITH DIRECTORS |
Shareholders can communicate directly with the Board of Directors by writing to the Chair of the Board, Prudential Jennison Global Opportunities Fund, Prudential Investments, Attn: Board of Directors, 100 Mulberry Street, Gateway Center Three, Newark, NJ 07102. Shareholders can communicate directly with an individual Director by writing to the same address. Communications are not screened before being delivered to the addressee. |
AVAILABILITY OF PORTFOLIO SCHEDULE |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation and location of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund’s schedule of portfolio holdings is also available on the Fund’s website as of the end of each month. |
The Fund’s Statement of Additional Information contains additional information about the Fund’s Directors and is available without charge, upon request, by calling (800) 225-1852. |
Mutual Funds:
ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY | MAY LOSE VALUE | ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE |
PRUDENTIAL JENNISON GLOBAL OPPORTUNITIES FUND
SHARE CLASS | A | C | Z | |||
NASDAQ | PRJAX | PRJCX | PRJZX | |||
CUSIP | 743969719 | 743969693 | 743969685 |
MF214E 0255298-00001-00
PRUDENTIAL INVESTMENTS»MUTUAL FUNDS
PRUDENTIAL JENNISON INTERNATIONAL OPPORTUNITIES FUND
ANNUAL REPORT · OCTOBER 31, 2013
Fund Type
International Stock
Objective
To seek long-term growth of capital
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.
The views expressed in this report and information about the Fund’s portfolio holdings are for the period covered by this report and are subject to change thereafter.
Mutual funds are distributed by Prudential Investment Management Services LLC. Jennison Associates is a registered investment advisor. Both are Prudential Financial companies. © 2013 Prudential Financial, Inc., and its related entities. Prudential Investments, Prudential, Jennison Associates, Jennison, the Prudential logo, Bring Your Challenges, and the Rock symbol are service marks of Prudential Financial, Inc., and its related entities, registered in many jurisdictions worldwide.
December 16, 2013
Dear Shareholder:
We hope you find the annual report for the Prudential Jennison International Opportunities Fund informative and useful. The report covers performance for the 12-month period that ended October 31, 2013.
We recognize that ongoing market volatility may make it a difficult time to be an investor. We continue to believe a prudent response to uncertainty is to maintain a diversified portfolio of funds consistent with your tolerance for risk, time horizon, and financial goals.
Your financial advisor can help you create a diversified investment plan that may include funds covering all the basic asset classes and that reflects your personal investor profile and risk tolerance. Keep in mind, however, that diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets.
Prudential Investments® is dedicated to helping you solve your toughest investment challenges—whether it’s capital growth, reliable income, or protection from market volatility and other risks. We offer the expertise of Prudential Financial’s affiliated asset managers* that strive to be leaders in a broad range of funds to help you stay on course to the future you envision. They also manage money for major corporations and pension funds around the world, which means you benefit from the same expertise, innovation, and attention to risk demanded by today’s most sophisticated investors.
Thank you for choosing the Prudential Investments family of funds.
Sincerely,
Stuart S. Parker, President
Prudential Jennison International Opportunities Fund
*Most of Prudential Investments’ equity funds are advised by Jennison Associates LLC, Quantitative Management Associates LLC (QMA), or Prudential Real Estate Investors. Prudential Investments’ fixed income and money market funds are advised by Prudential Investment Management, Inc. (PIM) through its Prudential Fixed Income unit. Jennison Associates LLC, QMA, and PIM are registered investment advisers and Prudential Financial companies. Prudential Real Estate Investors is a unit of PIM.
Prudential Jennison International Opportunities Fund | 1 |
Your Fund’s Performance (Unaudited)
Performance data quoted represent past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the past performance data quoted. An investor may obtain performance data as of the most recent month-end by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852.
Cumulative Total Returns (Without Sales Charges) as of 10/31/13 | ||||||
One Year | Since Inception | |||||
Class A | 19.93 | % | 35.65% (6/5/12) | |||
Class C | 19.01 | 34.24 (6/5/12) | ||||
Class Z | 20.24 | 36.11 (6/5/12) | ||||
MSCI All Country World Index ex-US | 20.29 | 37.34 | ||||
Lipper International Multi-Cap Core Funds Average | 23.52 | 40.53 | ||||
Lipper International Multi-Cap Growth Funds Average | 21.94 | 36.95 | ||||
Average Annual Total Returns (With Sales Charges) as of 9/30/13 | ||||||
One Year | Since Inception | |||||
Class A | 12.10 | % | 18.22% (6/5/12) | |||
Class C | 16.67 | 22.46 (6/5/12) | ||||
Class Z | 18.85 | 23.64 (6/5/12) | ||||
MSCI All Country World Index ex-US | 16.48 | 23.48 | ||||
Lipper International Multi-Cap Core Funds Average | 20.45 | 25.83 | ||||
Lipper International Multi-Cap Growth Funds Average | 19.03 | 23.89 |
Average Annual Total Returns (With Sales Charges) as of 10/31/13 | ||||||
One Year | Since Inception | |||||
Class A | 13.34 | % | 19.30% (6/5/12) | |||
Class C | 18.01 | 23.28 (6/5/12) | ||||
Class Z | 20.24 | 24.49 (6/5/12) | ||||
Average Annual Total Returns (Without Sales Charges) as of 10/31/13 | ||||||
One Year | Since Inception | |||||
Class A | 19.93 | % | 24.19% (6/5/12) | |||
Class C | 19.01 | 23.28 (6/5/12) | ||||
Class Z | 20.24 | 24.49 (6/5/12) |
2 | Visit our website at www.prudentialfunds.com |
Growth of a $10,000 Investment
The graph compares a $10,000 investment in the Prudential Jennison International Opportunities Fund (Class A shares) with a similar investment in the MSCI AC World Index ex-US by portraying the initial account values at the commencement of operations for Class A shares (June 5, 2012) and the account values at the end of the current fiscal year (October 31, 2013), as measured on a quarterly basis. For purposes of the graph, and unless otherwise indicated, it has been assumed that (a) the maximum applicable front-end sales charge was deducted from the initial $10,000 investment in Class A shares; (b) all recurring fees (including management fees) were deducted; and (c) all dividends and distributions were reinvested. The line graph provides information for Class A shares only. As indicated in the tables provided earlier, performance for Class C and Class Z shares will vary due to the differing charges and expenses applicable to each share class (as indicated in the following paragraphs). Without waiver of fees and/or expense reimbursement, if any, the returns would have been lower.
Past performance does not predict future performance. Total returns and the ending account values in the graph include changes in share price and reinvestment of dividends and capital gains distributions in a hypothetical investment for the periods shown. The Fund’s total returns do not reflect the deduction of income taxes on an individual’s investment. Taxes may reduce your actual investment returns on income or gains paid by the Fund or any gains you may realize if you sell your shares.
Source: Prudential Investments LLC and Lipper Inc.
Inception Date: 6/5/12
Prudential Jennison International Opportunities Fund | 3 |
Your Fund’s Performance (continued)
The average annual total returns take into account applicable sales charges, which are described for each share class in the table below.
Class A | Class C | Class Z | ||||
Maximum initial sales charge | 5.50% of the public offering price | None | None | |||
Contingent deferred sales charge (CDSC) (as a percentage of the lower of original purchase price or sale proceeds) | 1% on sales of $1 million or more made within 12 months of purchase | 1% on sales made within 12 months of purchase | None | |||
Annual distribution and service (12b-1) fees (shown as a percentage of average daily net assets) | .30% (.25% currently) | 1% | None |
Benchmark Definitions
Morgan Stanley Capital International (MSCI) All Country (AC) World Index ex-US
The MSCI AC World Index ex-US is an unmanaged free-float-adjusted, market-capitalization-weighted index designed to measure the equity market performance of developed and emerging markets, excluding the U.S. The MSCI AC World Index ex-US comprises 23 developed market country indexes and 21 emerging market country indexes. The developed market country indexes include Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom. The emerging market country indexes include Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.
Lipper International Multi-Cap Core Funds Average
Funds in the Lipper International Multi-Cap Core Funds Average are Funds that, by portfolio practice, invest in a variety of market-capitalization ranges without concentrating 75% of their equity assets in any one market-capitalization range over an extended period of time. International multi-cap core funds typically have average characteristics compared to the MSCI EAFE Index.
Lipper International Multi-Cap Growth Funds Average
Funds in the Lipper International Multi-Cap Growth Funds Average are Funds that, by portfolio practice, invest in a variety of market-capitalization ranges without concentrating 75% of their equity assets in any one market-capitalization range over an extended period of time. International multi-cap growth funds typically have above-average characteristics compared to the MSCI EAFE Index.
Note: Although Lipper classifies the Fund in its International Multi-Cap Core Funds category, the Fund utilizes the Lipper International Multi-Cap Growth Funds category because the Fund’s investment manager believes that the Lipper International Multi-Cap Growth Funds category provides a more appropriate basis for Fund performance comparisons.
4 | Visit our website at www.prudentialfunds.com |
Investors cannot invest directly in an index or average. The returns for the Index would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes. Returns for the Lipper Averages reflect the deduction of operating expenses, but not sales charges or taxes.
Five Largest Holdings expressed as a percentage of net assets as of 10/31/13 | ||||
Tencent Holdings Ltd., China | 4.1 | % | ||
Inditex SA, Spain | 3.8 | |||
ASOS PLC, United Kingdom | 3.3 | |||
ARM Holdings PLC, United Kingdom | 3.3 | |||
Azimut Holding SpA, Italy | 2.9 |
Holdings reflect only long-term investments and are subject to change.
Five Largest Industries expressed as a percentage of net assets as of 10/31/13 | ||||
Textiles, Apparel & Luxury Goods | 12.8 | % | ||
Internet Software & Services | 9.0 | |||
Pharmaceuticals | 8.4 | |||
Specialty Retail | 7.8 | |||
Internet & Catalog Retail | 6.7 |
Industry weightings reflect only long-term investments and are subject to change.
Prudential Jennison International Opportunities Fund | 5 |
Strategy and Performance Overview
How did the Fund perform?
In the 12 months ended October 31, 2013, the Prudential Jennison International Opportunities Fund’s Class A shares gained 19.93%, underperforming the 20.29% of the MSCI All Country World ex-United States Index and the 21.94% return of the Lipper International Multi-Cap Growth Average.
How is the Fund managed?
The Fund seeks long-term growth of capital by investing in a portfolio of companies outside the U.S. that are believed to be market leaders with sustainable competitive advantages and strong financial characteristics. The Fund seeks to capture market upside, protect against market downside, and dampen portfolio volatility by monitoring correlations of individual holdings.
What was the market environment?
Global equity markets advanced broadly if unevenly in the reporting period. Developed Europe and Developed Asia/Pacific1 posted gains of 25.0% or more. Emerging markets, hurt by depreciation of the yen and concerns about eventual tapering of the U.S. Federal Reserve’s quantitative easing program, lagged, rising a comparatively modest 7.0%. Conditions in Europe appeared to stabilize, relieving earlier worries of sustained deterioration. In China, economic growth slowed but to levels sufficiently expansionary to give investors conviction that global GDP, although moderating, remained solid. Concerns that the Federal Reserve would begin scaling back its quantitative easing program took a toll globally, especially in emerging markets, in early summer. However, markets soon refocused on individual company fundamentals and showed renewed appreciation for companies with strong growth.
Which holdings made the largest positive contributions to the Fund’s return?
Consumer discretionary holdings, including ASOS and Yoox, contributed significantly to Fund performance.
• | London-based ASOS rose on accelerating sales growth. Please see “Comments on Largest Holdings” on page 9 for more information on ASOS. |
• | Headquartered in Milan with offices in Asia, Europe, and North America, Yoox has emerged as a leading global luxury fashion e-commerce site with a unique business model that combines a multibrand offering, an online shop-in-shop outlet, and a website set-up and management service to help a growing number of |
6 | Visit our website at www.prudentialfunds.com |
1 | Jennison regional definitions: Developed North America includes countries classified by MSCI as developed markets in North America. Developed Europe includes countries classified by MSCI as developed markets in Europe and the Middle East. Developed Asia /Pacific includes countries classified by MSCI as developed markets in Asia and Australia. Emerging Markets includes all countries classified by MSCI as emerging and frontier markets. |
global brands develop an online retail presence. Jennison believes the company’s market position and niche focus position it well to benefit as the online luxury market evolves. Its scale also represents a key competitive advantage. |
In information technology:
• | Tencent Holdings, China’s largest and most visited Internet service portal, performed well thanks to its dominant position in China’s on-line gaming and instant messaging markets and its growing e-commerce efforts. Please see “Comments on Largest Holdings” on page 9 for more information on Tencent. |
• | ARM Holdings reported strong financial results. Please see “Comments on Largest Holdings” below for more information on ARM. |
In energy:
• | Amsterdam-based Core Laboratories benefited from solid margin expansion. The company analyzes petroleum reservoir rock and fluids, helping oil companies determine how much gas or oil is present in their reservoirs and how quickly it can be extracted. Jennison believes the company is well positioned to benefit from a cyclical upturn in global exploration and production spending. Jennison also likes its strong position in domestic shale and liquids-rich plays. |
Which holdings detracted most from the Fund’s return?
Financials positions, specifically those exposed to emerging markets, detracted from Fund return relative to the benchmark.
• | Shares of Istanbul-based Emlak Konut Gayrimenkul Yati were hurt by political unrest, as protests, initially contesting urban development plans in Istanbul, expanded to issues such as freedoms of the press, expression, and assembly. Emlak develops and sells residential, commercial, educational, and social properties, offering what Jennison considers attractive exposure to growth in the Turkish real estate market. |
• | São Paulo-based BTG Pactual faced strong headwinds, including Brazil’s slower economic growth, rising interest rates, and growing public frustration with both the government and economy. One of the largest independent investment banks in emerging markets, BTG has a dominant franchise in Brazil, an expanding presence in the rest of Latin America, and operations on four continents. |
• | BR Properties, Brazil’s largest real estate investment company, was similarly hurt by an uncertain outlook for Brazilian interest rates, macroeconomic |
Prudential Jennison International Opportunities Fund | 7 |
Strategy and Performance Overview (continued)
growth, investments, industrial activity, and employment as well as an increase in office space. BR buys, leases, manages, and sells commercial and industrial properties in Rio de Janeiro and São Paulo. |
In consumer discretionary, Mr Price Group’s sales growth decelerated. Based in Durban, the company operates and franchises almost 1,000 apparel and home products stores, primarily in South Africa.
In industrials, Glasgow-based Aggreko, a world leader in the rental of power generation and temperature-control equipment, declined on concerns about global growth.
Jennison eliminated the Fund’s positions in Emlak Konut Gayrimenkul Yati, BTG Pactual, BR Properties, Mr Price Group, and Aggreko.
Were there significant changes to the portfolio?
Over the reporting period, the Fund’s weights increased in consumer discretionary and industrials, and decreased in consumer staples, energy, financials, and materials. The Fund is focused on identifying businesses that can generate growth and that continue to offer long-term growth opportunities. It remains heavily invested in consumer discretionary and technology stocks offering these characteristics, while financials, energy, and materials exposures remain quite small.
8 | Visit our website at www.prudentialfunds.com |
Comments on Five Largest Holdings
4.1% | Tencent Holdings Ltd., China |
Tencent holdings is discussed in the largest contributors to performance section on pages 6 and 7.
3.8% | Inditex SA, Spain |
Industria de Diseño Textil, or Inditex, is best known for its brand, Zara, and vertically integrates textile and fashion design, manufacturing, and distribution. Jennison believes this integration is a competitive advantage as it allows the company to shorten turnaround times and achieve greater flexibility, reducing merchandise stock and fashion risk.
3.3% | ASOS PLC, United Kingdom |
London-based ASOS, a fast-growing global online apparel retailer, targets fashionable, Web-savvy 16- to 34-year-olds and has local-language sites in France, Germany, and the U.S., with plans to add more. Jennison likes the company’s strong revenue growth, margin improvement potential, and international expansion opportunities.
3.3% | ARM Holdings PLC, United Kingdom |
ARM Holdings licenses its intellectual property designs to semiconductor companies and receives upfront license fees and ongoing royalties based on a percentage of microchip prices. Jennison believes the company stands to be a key beneficiary of the merger of the mobile and computing worlds. As mobile phones become increasingly complex, more ARM-based chips are used, adding to upfront license fees and royalties streams. In the tablet market, ARM powers virtually every major applications processor.
2.9% | Azimut Holding SpA, Italy |
One of Italy’s largest independent asset managers, Azimut is gaining market share, and recent flows data have been strong. Azimut owns its distribution network and has been successful, Jennison believes, in creating funds with a good mix of risk control and innovation. In addition to organic development, Azimut remains focused on expanding selectively abroad (Brazil and Asia) and in Italy.
Prudential Jennison International Opportunities Fund | 9 |
Fees and Expenses (Unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemptions, as applicable, and (2) ongoing costs, including management fees, distribution, and/or service (12b-1) fees, and other Fund expenses, as applicable. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on May 1, 2013, at the beginning of the period, and held through the six-month period ended October 31, 2013. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
Actual Expenses
The first line for each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the six-month period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of
10 | Visit our website at www.prudentialfunds.com |
Prudential Investments funds, including the Fund, that you own. You should consider the additional fees that were charged to your Fund account over the six-month period when you estimate the total ongoing expenses paid over the period and the impact of these fees on your ending account value, as these additional expenses are not reflected in the information provided in the expense table. Additional fees have the effect of reducing investment returns.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Prudential Jennison International Opportunities Fund | Beginning Account Value May 1, 2013 | Ending Account October 31, 2013 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual | $ | 1,000.00 | $ | 1,093.00 | 1.60 | % | $ | 8.44 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,017.14 | 1.60 | % | $ | 8.13 | ||||||||||
Class C | Actual | $ | 1,000.00 | $ | 1,088.80 | 2.35 | % | $ | 12.37 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,013.36 | 2.35 | % | $ | 11.93 | ||||||||||
Class Z | Actual | $ | 1,000.00 | $ | 1,094.50 | 1.35 | % | $ | 7.13 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,018.40 | 1.35 | % | $ | 6.87 |
*Fund expenses (net of fee waivers or subsidies, if any) for each share class are equal to the annualized expense ratio for each share class (provided in the table), multiplied by the average account value over the period, multiplied by the 184 days in the six-month period ended October 31, 2013, and divided by the 365 days in the Fund’s fiscal year ended October 31, 2013 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
The Fund’s annual expense ratios for the year ended October 31, 2013, are as follows:
Class | Gross Operating Expenses | Net Operating Expenses | ||
A | 3.16% | 1.60% | ||
C | 4.09 | 2.35 | ||
Z | 2.73 | 1.35 |
Prudential Jennison International Opportunities Fund | 11 |
Fees and Expenses (continued)
Net operating expenses shown above reflect any fee waivers and/or expense reimbursements. Additional information on Fund expenses and any fee waivers and/or expense reimbursements can be found in the “Financial Highlights” tables in this report and in the Notes to the Financial Statements in this report.
12 | Visit our website at www.prudentialfunds.com |
Portfolio of Investments
as of October 31, 2013
Shares | Description | Value (Note 1) | ||||
LONG-TERM INVESTMENTS 97.2% |
| |||||
COMMON STOCKS 95.6% |
| |||||
Argentina 1.7% |
| |||||
2,275 | MercadoLibre, Inc. | $ | 306,295 | |||
Brazil 0.7% |
| |||||
8,425 | Arezzo Industria e Comercio SA | 125,988 | ||||
Canada 2.0% |
| |||||
2,514 | Canadian Pacific Railway Ltd. | 359,678 | ||||
China 6.3% |
| |||||
47,483 | Great Wall Motor Co. Ltd. (Class H Stock) | 279,092 | ||||
13,145 | Tencent Holdings Ltd. | 716,803 | ||||
35,268 | Tong Ren Tang Technologies Co. Ltd. (Class H Stock) | 106,928 | ||||
|
| |||||
1,102,823 | ||||||
Denmark 1.2% |
| |||||
1,300 | Novo Nordisk A/S (Class B Stock) | 216,518 | ||||
France 1.5% |
| |||||
3,597 | BNP Paribas SA | 265,363 | ||||
Germany 7.3% |
| |||||
3,541 | Bayer AG | 439,271 | ||||
1,416 | Brenntag AG | 239,601 | ||||
1,617 | Continental AG | 295,697 | ||||
8,195 | Wirecard AG | 298,163 | ||||
|
| |||||
1,272,732 | ||||||
Hong Kong 2.2% |
| |||||
53,069 | Sands China Ltd. | 377,325 | ||||
Indonesia 0.4% |
| |||||
77,869 | PT Tower Bersama Infrastructure Tbk | 39,350 | ||||
72,770 | PT Tower Bersama Infrastructure Tbk, 144A | 36,774 | ||||
|
| |||||
76,124 | ||||||
Ireland 2.2% | ||||||
18,559 | Experian PLC | 377,839 |
See Notes to Financial Statements.
Prudential Jennison International Opportunities Fund | 13 |
Portfolio of Investments
as of October 31, 2013 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Italy 13.3% | ||||||
20,382 | Azimut Holding SpA | $ | 517,036 | |||
8,650 | Brunello Cucinelli SpA | 269,601 | ||||
7,776 | Luxottica Group SpA | 421,238 | ||||
47,206 | Prada SpA | 460,573 | ||||
22,879 | World Duty Free SpA* | 253,482 | ||||
1,206 | World Duty Free SpA, 144A* | 13,362 | ||||
10,970 | Yoox SpA* | 394,640 | ||||
|
| |||||
2,329,932 | ||||||
Japan 10.0% |
| |||||
8,932 | Fuji Heavy Industries Ltd. | 244,215 | ||||
21,552 | Hino Motors Ltd. | 304,520 | ||||
7,986 | Mitsui Fudosan Co. Ltd. | 264,543 | ||||
4,046 | Murata Manufacturing Co. Ltd. | 324,772 | ||||
3,287 | Pigeon Corp. | 169,587 | ||||
13,508 | Rakuten, Inc. | 176,004 | ||||
4,249 | Unicharm Corp. | 272,909 | ||||
|
| |||||
1,756,550 | ||||||
Mexico 2.4% |
| |||||
99,990 | Alfa SAB de CV (Class A Stock) | 273,747 | ||||
12,239 | Corp. Inmobiliaria Vesta SAB de CV | 23,451 | ||||
60,800 | Corp. Inmobiliaria Vesta SAB de CV, 144A | 116,500 | ||||
|
| |||||
413,698 | ||||||
Netherlands 2.1% |
| |||||
1,931 | Core Laboratories NV | 361,522 | ||||
Panama 1.2% |
| |||||
1,415 | Copa Holdings SA (Class A Stock) | 211,599 | ||||
South Africa 1.6% |
| |||||
10,278 | Aspen Pharmacare Holdings Ltd. | 285,930 | ||||
South Korea 1.9% |
| |||||
587 | NAVER Corp. | 329,405 | ||||
Spain 3.8% |
| |||||
4,056 | Inditex SA | 666,156 |
See Notes to Financial Statements.
14 |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) |
| |||||
Sweden 1.5% |
| |||||
5,261 | Assa Abloy AB (Class B Stock) | $ | 261,036 | |||
Switzerland 4.6% | ||||||
1,613 | Roche Holding AG | 446,052 | ||||
571 | Swatch Group AG (The) (Bearer Shares) | 364,693 | ||||
|
| |||||
810,745 | ||||||
Thailand 1.1% |
| |||||
529,779 | Home Product Center PCL(a) | 197,344 | ||||
Turkey 1.1% |
| |||||
9,498 | BIM Birlesik Magazalar AS | 198,716 | ||||
United Kingdom 21.4% |
| |||||
36,552 | ARM Holdings PLC | 572,761 | ||||
30,863 | Ashtead Group PLC | 324,316 | ||||
6,357 | ASOS PLC* | 577,899 | ||||
215 | ASOS PLC, 144A* | 19,545 | ||||
6,853 | Burberry Group PLC | 168,404 | ||||
23,365 | Compass Group PLC | 336,020 | ||||
11,727 | Diageo PLC | 373,830 | ||||
3,286 | Intertek Group PLC | 175,307 | ||||
22,010 | Rolls-Royce Holdings PLC* | 405,493 | ||||
6,719 | SABMiller PLC | 350,337 | ||||
7,700 | Sports Direct International PLC* | 86,534 | ||||
13,272 | Sports Direct International PLC, 144A* | 149,153 | ||||
18,297 | Telecity Group PLC | 223,690 | ||||
|
| |||||
3,763,289 | ||||||
United States 4.1% |
| |||||
5,718 | Michael Kors Holdings Ltd.* | 440,000 | ||||
2,474 | Stratasys Ltd.* | 280,129 | ||||
|
| |||||
720,129 | ||||||
|
| |||||
TOTAL COMMON STOCKS | 16,786,736 | |||||
|
|
See Notes to Financial Statements.
Prudential Jennison International Opportunities Fund | 15 |
Portfolio of Investments
as of October 31, 2013 continued
Shares | Description | Value (Note 1) | ||||
PREFERRED STOCK 1.6% |
| |||||
Germany | ||||||
1,099 | Volkswagen AG (PRFC) | $ | 278,717 | |||
United Kingdom | ||||||
1,892,860 | Rolls-Royce Holdings PLC (Class C Stock)* | 3,035 | ||||
|
| |||||
TOTAL PREFERRED STOCKS | 281,752 | |||||
|
| |||||
TOTAL LONG-TERM INVESTMENTS | 17,068,488 | |||||
|
| |||||
SHORT-TERM INVESTMENT 1.2% | ||||||
AFFILIATED MONEY MARKET MUTUAL FUND | ||||||
211,071 | Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund | 211,071 | ||||
|
| |||||
TOTAL INVESTMENTS 98.4% | 17,279,559 | |||||
Other assets in excess of liabilities 1.6% | 276,979 | |||||
|
| |||||
NET ASSETS 100.0% | $ | 17,556,538 | ||||
|
|
The following abbreviations are used in the Portfolio descriptions:
144A—Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. Unless otherwise noted, 144A securities are deemed to be liquid.
PRFC—Preference Shares
* | Non-income producing security. |
(a) | Indicates a restricted security; the aggregate cost of the restricted securities is $191,285. The aggregate value, $197,344, is approximately 1.1% of net assets. |
(b) | Prudential Investments LLC, the manager of the Series, also serves as manager of the Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund. |
Various inputs are used in determining the value of the Series’ investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.
Level 2—other significant observable inputs including, but not limited to, quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates, and amortized cost.
Level 3—significant unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
See Notes to Financial Statements.
16 |
The following is a summary of the inputs used as of October 31, 2013 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Common Stocks | ||||||||||||
Argentina | $ | 306,295 | $ | — | $ | — | ||||||
Brazil | 125,988 | — | — | |||||||||
Canada | 359,678 | — | — | |||||||||
China | — | 1,102,823 | — | |||||||||
Denmark | — | 216,518 | — | |||||||||
France | — | 265,363 | — | |||||||||
Germany | — | 1,272,732 | — | |||||||||
Hong Kong | — | 377,325 | — | |||||||||
Indonesia | — | 76,124 | — | |||||||||
Ireland | — | 377,839 | — | |||||||||
Italy | 266,844 | 2,063,088 | — | |||||||||
Japan | — | 1,756,550 | — | |||||||||
Mexico | 413,698 | — | — | |||||||||
Netherlands | 361,522 | — | — | |||||||||
Panama | 211,599 | — | — | |||||||||
South Africa | — | 285,930 | — | |||||||||
South Korea | — | 329,405 | — | |||||||||
Spain | — | 666,156 | — | |||||||||
Sweden | — | 261,036 | — | |||||||||
Switzerland | — | 810,745 | — | |||||||||
Thailand | — | 197,344 | — | |||||||||
Turkey | — | 198,716 | — | |||||||||
United Kingdom | — | 3,763,289 | — | |||||||||
United States | 720,129 | — | — | |||||||||
Preferred Stock | ||||||||||||
Germany | — | 278,717 | — | |||||||||
United Kingdom | — | 3,035 | — | |||||||||
Affiliated Money Market Mutual Fund | 211,071 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 2,976,824 | $ | 14,302,735 | $ | — | ||||||
|
|
|
|
|
|
Fair Value of Level 2 investments at October 31, 2012 was $175,730. An amount of $4,241,388 was transferred from Level 1 into Level 2 at October 31, 2013 as a result of fair valuing such foreign securities using third-party vendor modeling tools. Such fair values are used to reflect the impact of significant market movements between the time at which the Portfolio values its securities and the earlier closing of foreign markets.
It is the Series’ policy to recognize transfers in and transfers out at the fair value as of the beginning period.
See Notes to Financial Statements.
Prudential Jennison International Opportunities Fund | 17 |
Portfolio of Investments
as of October 31, 2013 continued
The industry classification of investments and other assets in excess of liabilities shown as a percentage of net assets as October 31, 2013 was as follows:
Textiles, Apparel & Luxury Goods | 12.8 | % | ||
Internet Software & Services | 9.0 | |||
Pharmaceuticals | 8.4 | |||
Specialty Retail | 7.8 | |||
Internet & Catalog Retail | 6.7 | |||
Automobiles | 4.6 | |||
Beverages | 4.1 | |||
Hotels, Restaurants & Leisure | 4.0 | |||
Semiconductors & Semiconductor Equipment | 3.3 | |||
Trading Companies & Distributors | 3.2 | |||
Professional Services | 3.2 | |||
Capital Markets | 3.0 | |||
Household Products | 2.6 | |||
Aerospace & Defense | 2.3 | |||
Real Estate Management & Development | 2.3 | |||
Energy Equipment & Services | 2.1 | |||
Road & Rail | 2.0 | |||
Electronic Equipment & Instruments | 1.8 | % | ||
Machinery | 1.7 | |||
IT Services | 1.7 | |||
Auto Components | 1.7 | |||
Computers & Peripherals | 1.6 | |||
Industrial Conglomerates | 1.6 | |||
Commercial Banks | 1.5 | |||
Building Products | 1.5 | |||
Airlines | 1.2 | |||
Affiliated Money Market Mutual Fund | 1.2 | |||
Food & Staples Retailing | 1.1 | |||
Wireless Telecommunication Services | 0.4 | |||
|
| |||
98.4 | ||||
Other assets in excess of liabilities | 1.6 | |||
|
| |||
100.0 | % | |||
|
|
The Series invested in derivative instruments during the reporting period. The primary type of risk associated with these derivative instruments is equity risk. The effect of such derivative instruments on the Series’ financial performance as reflected in the Statement of Operations is presented in the summary below.
The effects of derivative instruments on the Statement of Operations for the year ended October 31, 2013 are as follows:
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income | ||||
Derivatives not designated as hedging | Right | |||
Equity contracts | $ | 3 | ||
|
|
See Notes to Financial Statements.
18 |
PRUDENTIAL INVESTMENTS»MUTUAL FUNDS
FINANCIAL STATEMENTS
ANNUAL REPORT · OCTOBER 31, 2013
Prudential Jennison International Opportunities Fund
Statement of Assets & Liabilities
as of October 31, 2013
Assets | ||||
Investments at value: | ||||
Unaffiliated investments (cost $13,700,101) | $ | 17,068,488 | ||
Affiliated investments (cost $211,071) | 211,071 | |||
Foreign currency, at value (cost $18) | 18 | |||
Receivable for investments sold | 412,509 | |||
Receivable for Series shares sold | 36,354 | |||
Due from Manager | 21,965 | |||
Dividends receivable | 11,158 | |||
Tax reclaim receivable | 5,243 | |||
Prepaid expenses | 607 | |||
|
| |||
Total assets | 17,767,413 | |||
|
| |||
Liabilities | ||||
Payable for investments purchased | 117,038 | |||
Accrued expenses | 93,137 | |||
Distribution fee payable | 285 | |||
Payable for Series shares reacquired | 265 | |||
Affiliated transfer agent fee payable | 150 | |||
|
| |||
Total liabilities | 210,875 | |||
|
| |||
Net Assets | $ | 17,556,538 | ||
|
| |||
Net assets were comprised of: | ||||
Common stock, at par | $ | 12,960 | ||
Paid-in capital in excess of par | 13,547,100 | |||
|
| |||
13,560,060 | ||||
Distributions in excess of net investment income | (1,989 | ) | ||
Accumulated net realized gain on investment and foreign currency transactions | 629,043 | |||
Net unrealized appreciation on investments and foreign currencies | 3,369,424 | |||
|
| |||
Net assets, October 31, 2013 | $ | 17,556,538 | ||
|
|
See Notes to Financial Statements.
20 |
Class A | ||||
Net asset value and redemption price per share | $ | 13.51 | ||
Maximum sales charge (5.50% of offering price) | 0.79 | |||
|
| |||
Maximum offering price to public | $ | 14.30 | ||
|
| |||
Class C | ||||
Net asset value, offering price and redemption price per share | $ | 13.37 | ||
|
| |||
Class Z | ||||
Net asset value, offering price and redemption price per share | $ | 13.55 | ||
|
|
See Notes to Financial Statements.
Prudential Jennison International Opportunities Fund | 21 |
Statement of Operations
Year Ended October 31, 2013
Net Investment Income | ||||
Income | ||||
Unaffiliated dividend income (net of foreign withholding taxes of $18,103) | $ | 210,936 | ||
Affiliated dividend income | 482 | |||
|
| |||
Total income | 211,418 | |||
|
| |||
Expenses | ||||
Management fee | 128,986 | |||
Distribution fee—Class A | 891 | |||
Distribution fee—Class C | 383 | |||
Custodian’s fees and expenses | 102,000 | |||
Registration fees | 35,000 | |||
Shareholders’ reports | 31,000 | |||
Audit fee | 30,000 | |||
Legal fees and expenses | 20,000 | |||
Transfer agent’s fees and expenses (including affiliated expense of $600) (Note 3) | 11,000 | |||
Directors’ fees | 10,000 | |||
Insurance | 1,000 | |||
Miscellaneous | 22,945 | |||
|
| |||
Total expenses | 393,205 | |||
Expense reimbursement (Note 2) | (198,648 | ) | ||
|
| |||
Net expenses | 194,557 | |||
|
| |||
Net investment income | 16,861 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investment And Foreign Currency Transactions | ||||
Net realized gain (loss) on: | ||||
Investment transactions | 746,613 | |||
Foreign currency transactions | (12,415 | ) | ||
|
| |||
734,198 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 1,932,859 | |||
Foreign currencies | 1,071 | |||
|
| |||
1,933,930 | ||||
|
| |||
Net gain on investment and foreign currency transactions | 2,668,128 | |||
|
| |||
Net Increase In Net Assets Resulting From Operations | $ | 2,684,989 | ||
|
|
See Notes to Financial Statements.
22 |
Statement of Changes in Net Assets
Year Ended October 31, 2013 | June 5, 2012* through October 31, 2012 | |||||||
Increase (Decrease) In Net Assets | ||||||||
Operations | ||||||||
Net investment income (loss) | $ | 16,861 | $ | (7,704 | ) | |||
Net realized gain (loss) on investment and foreign currency transactions | 734,198 | (71,729 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments and foreign currencies | 1,933,930 | 1,435,494 | ||||||
|
|
|
| |||||
Net increase in net assets resulting from operations | 2,684,989 | 1,356,061 | ||||||
|
|
|
| |||||
Dividends from net investment income (Note 1) | ||||||||
Class A | (532 | ) | — | |||||
Class C | (54 | ) | — | |||||
Class Z | (56,371 | ) | — | |||||
|
|
|
| |||||
(56,957 | ) | — | ||||||
|
|
|
| |||||
Series share transactions (Net of share conversions) (Note 6) | ||||||||
Net proceeds from shares sold | 3,196,495 | 10,711,411 | ||||||
Net asset value of shares issued in reinvestment of dividends | 56,957 | — | ||||||
Cost of shares reacquired | (392,418 | ) | — | |||||
|
|
|
| |||||
Net increase in net assets from Series share transactions | 2,861,034 | 10,711,411 | ||||||
|
|
|
| |||||
Total increase | 5,489,066 | 12,067,472 | ||||||
Net Assets: | ||||||||
Beginning of period | 12,067,472 | — | ||||||
|
|
|
| |||||
End of period(a) | $ | 17,556,538 | $ | 12,067,472 | ||||
|
|
|
| |||||
(a) Includes undistributed net investment income of: | $ | — | $ | 10,385 | ||||
|
|
|
|
* | Commencement of Series. |
See Notes to Financial Statements.
Prudential Jennison International Opportunities Fund | 23 |
Notes to Financial Statements
Prudential World Fund, Inc. (the “Fund”) is an open-end management investment company, registered under the Investment Company Act of 1940, as amended, (“1940 Act”) and currently consists of six series: Prudential Jennison International Opportunities Fund (the “Series”), Prudential Jennison Global Infrastructure Fund, Prudential International Equity Fund, Prudential International Value Fund, Prudential Jennison Global Opportunities Fund and Prudential Emerging Markets Debt Local Currency Fund. These financial statements relate to the Prudential Jennison International Opportunities Fund. The financial statements of the other series are not presented herein. The Series commenced investment operations on June 5, 2012.
The investment objective of the Series is to seek long-term growth of capital.
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the Fund and the Series in the preparation of the financial statements.
Security Valuation: The Series holds securities and other assets that are fair valued at the close of each day the New York Stock Exchange (“NYSE”) is open for trading. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Board of Directors (the “Board”) has adopted Valuation Procedures for security valuation under which fair valuation responsibilities have been delegated to Prudential Investments LLC (“PI” or “Manager”). Under the current Valuation Procedures, the established Valuation Committee is responsible for supervising the valuation of portfolio securities and other assets. The Valuation Procedures permit the Series to utilize independent pricing vendor services, quotations from market makers, and alternative valuation methods when market quotations are either not readily available or not representative of fair value. A record of the Valuation Committee’s actions is subject to the Board’s review, approval, and ratification at its next regularly-scheduled quarterly meeting.
Various inputs determine how the Series’ investments are valued, all of which are categorized according to the three broad levels (Level 1, 2, or 3) detailed in the table following the Portfolio of Investments.
24 |
Common stocks, exchange-traded funds, and derivative instruments that are traded on a national securities exchange are valued at the last sale price as of the close of trading on the applicable exchange. Securities traded via NASDAQ are valued at the NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQ official closing price; they are classified as Level 1 in the fair value hierarchy.
In the event that no sale or official closing price on valuation date exists, these securities are generally valued at the mean between the last reported bid and asked prices, or at the last bid price in the absence of an asked price. These securities are classified as Level 2 in the fair value hierarchy, as the inputs are observable and considered to be significant to the valuation.
Common stocks traded on foreign securities exchanges are valued using pricing vendor services that provide model prices derived using adjustment factors based on information such as local closing price, relevant general and sector indices, currency fluctuations, depositary receipts, and futures, as applicable. Securities valued using such model prices are classified as Level 2 in the fair value hierarchy, as the adjustment factors are observable and considered to be significant to the valuation.
Investments in open-end, non-exchange-traded mutual funds are valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Fixed income securities traded in the over-the-counter market are generally valued at prices provided by approved independent pricing vendors. The pricing vendors provide these prices after evaluating observable inputs including, but not limited to yield curves, yield spreads, credit ratings, deal terms, tranche level attributes, default rates, cash flows, prepayment speeds, broker/dealer quotations, and reported trades. Securities valued using such vendor prices are classified as Level 2 in the fair value hierarchy.
Over-the-counter derivative instruments are generally valued using pricing vendor services, which derive the valuation based on inputs such as underlying asset prices, indices, spreads, interest rates, and exchange rates. These instruments are categorized as Level 2 in the fair value hierarchy.
Securities and other assets that cannot be priced according to the methods described above are valued based on pricing methodologies approved by the Board of Directors. In the event that significant unobservable inputs are used when determining such valuations, the securities will be classified as Level 3 in the fair value hierarchy.
Prudential Jennison International Opportunities Fund | 25 |
Notes to Financial Statements
continued
When determining the fair value of securities, some of the factors influencing the valuation include: the nature of any restrictions on disposition of the securities; assessment of the general liquidity of the securities; the issuer’s financial condition and the markets in which it does business; the cost of the investment; the size of the holding and the capitalization of the issuer; the prices of any recent transactions or bids/offers for such securities or any comparable securities; any available analyst media or other reports or information deemed reliable by the investment adviser regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other mutual funds to calculate their net asset values.
Foreign Currency Translation: The books and records of the Series 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 current rates of exchange;
(ii) purchases and sales of investment securities, income and expenses-at the rates of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Series are presented at the foreign exchange rates and market values at the close of the fiscal period, the Series does 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 long-term portfolio securities held at the end of the period. Similarly, the Series does 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 period. Accordingly, these realized foreign currency gains or losses are included in the reported net realized gains or losses on investment transactions.
Net realized gains or losses on foreign currency transactions represent net foreign exchange gains or losses from the holding of foreign currencies, currency gains or losses realized between the trade date and settlement dates on security transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Series’ books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains or losses from
26 |
valuing foreign currency denominated assets and liabilities (other than investments) at period end exchange rates are reflected as a component of net unrealized appreciation (depreciation) on 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 possibility of political and economic instability and the level of governmental supervision and regulation of foreign securities markets.
Forward Currency Contracts: A forward currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate between two parties. The Series enters into forward currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings or 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 foreign currencies. Gain or loss is realized on the settlement date of the contract equal to the difference between the settlement value of the original and negotiated forward contracts. This gain or loss, if any, is included in net realized gain (loss) on foreign currency transactions. Risks may arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts. Forward currency contracts involve risks from currency exchange rate and credit risk in excess of the amounts reflected on the Statement of Assets and Liabilities. The Series’ maximum risk of loss from counterparty credit risk is the net value of the cash flows to be received from the counterparty at the end of the contract’s life. A master netting arrangement between the Series and the counterparty permits the Series to offset amounts payable by the Series to the same counterparty against amounts to be received; and by the receipt of collateral from the counterparty by the Series to cover the Series’ exposure to the counterparty. However, there is no assurance that such mitigating factors are easily enforceable.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains or losses from investment and currency transactions are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, including amortization of premium and accretion of discount on debt securities, as required, is recorded on the accrual basis. Expenses are recorded on the accrual basis, which may require the use of certain estimates by management, that may differ from actual.
Prudential Jennison International Opportunities Fund | 27 |
Notes to Financial Statements
continued
Net investment income or loss (other than distribution fees which are charged directly to the respective class) and unrealized and realized gains or losses are allocated daily to each class of shares based upon the relative proportion of adjusted net assets of each class at the beginning of the day.
Dividends and Distributions: The Series expects to pay dividends of net investment income and distributions from net realized capital and currency gains, if any, annually. Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-dividend date.
Taxes: For federal income tax purposes, each Series in the Fund is treated as a separate taxpaying entity. It is each Series’ policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net investment income and capital gains, if any, to shareholders. Therefore, no federal income tax provision is required. Withholding taxes on foreign dividends are recorded net of reclaimable amounts, at the time the related income is earned.
Estimates: The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those amounts.
Note 2. Agreements
The Fund has a management agreement for the Series with PI. Pursuant to this agreement, PI has responsibility for all investment advisory services and supervises the subadvisor’s performance of such services. PI has entered into a subadvisory agreement with Jennison Associates LLC (“Jennison”). The subadvisory agreement provides that Jennison furnishes investment advisory services in connection with the management of the Series. In connection therewith, Jennison is obligated to keep certain books and records of the Series. PI pays for the services of Jennison, the compensation of officers of the Series, occupancy and certain clerical and bookkeeping costs of the Series. The Series bears all other costs and expenses.
The management fee paid to PI is computed daily and payable monthly at an annual rate of .90% of the Series’ average daily net assets.
28 |
PI has contractually agreed through February 28, 2015 to limit net annual Series operating expenses (excluding distribution and service (12b-1) fees, extraordinary and certain other expenses such as taxes, interest and brokerage commissions) to each class of shares to 1.35% of the Series’ average daily net assets.
The Series has a distribution agreement with Prudential Investment Management Services LLC (“PIMS”), which acts as the distributor of the Class A, Class C and Class Z shares of the Series. The Series compensates PIMS for distributing and servicing the Series’ Class A and Class C shares, pursuant to plans of distribution (the “Class A and C Plans”), regardless of expenses actually incurred by PIMS. The distribution fees are accrued daily and payable monthly. No distribution or service fees are paid to PIMS as distributor of the Class Z shares of the Series.
Pursuant to the Class A and C Plans, the Series compensates PIMS for distribution related activities at an annual rate of up to .30% and 1% of the average daily net assets of the Class A and C shares, respectively. PIMS has contractually agreed to limit such fees to .25% of the average daily net assets of the Class A shares through February 28, 2015.
PIMS has advised the Series that they received $10,033 in front-end sales charges resulting from sales of Class A shares during the year ended October 31, 2013. From these fees, PIMS paid such sales charges to broker-dealers, which in turn paid commissions to salespersons and incurred other distribution costs.
PIMS has advised the Series that for the year ended October 31, 2013, it received $120 in contingent deferred sales charges imposed upon redemptions by certain Class C shareholders.
PI, PIMS and Jennison are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PI and an indirect, wholly-owned subsidiary of Prudential, serves as the Series’ transfer agent. Transfer agent’s fees and expenses on the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
The Series invests in the Prudential Core Taxable Money Market Fund, a portfolio of the Prudential Investment Portfolios 2, registered under the Investment Company Act of 1940 and managed by PI. Earnings from the Core Fund are disclosed on the Statement of Operations as affiliated dividend income.
Prudential Jennison International Opportunities Fund | 29 |
Notes to Financial Statements
continued
Note 4. Portfolio Securities
Purchases and sales of portfolio securities, other than short-term investments, for the year ended October 31, 2013 were $14,471,355 and $12,041,944, respectively.
Note 5. Distributions and Tax Information
Distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-dividend date. In order to present distributions in excess of net investment income, accumulated net realized gain on investment and foreign currency transactions and paid-in capital in excess of par on the Statement of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to distributions in excess of net investment income and accumulated net realized gain on investment and foreign currency transactions. For the year ended October 31, 2013, the adjustments were to decrease distributions in excess of net investment income and decrease accumulated net realized gain on investment and foreign currency transactions by $27,722 primarily due to the difference between certain transactions involving foreign currencies, reclassification of distributions and net operating losses. Net investment income, net realized gain on investment and foreign currency transactions and net assets were not affected by this change.
For the year ended October 31, 2013, the tax character of dividends paid as reflected in the Statement of Changes in Net Assets was $56,957 of ordinary income. For the period ended October 31, 2012, there were no distributions paid.
As of October 31, 2013, the accumulated undistributed earnings on a tax basis were $442,543 of ordinary income and $188,995 of long-term capital gains. This differs from the amounts shown on the Statement of Assets and Liabilities primarily due to cumulative timing differences.
The United States federal income tax basis of the Series’ investments and the net unrealized appreciation as of October 31, 2013 were as follows:
Tax Basis | Appreciation | Depreciation | Net | Other Cost | Total Net | |||||
$13,913,667 | $3,481,628 | $(115,736) | $3,365,892 | $(674) | $3,365,218 |
30 |
The difference between book basis and tax basis is primarily attributable to deferred losses on wash sales. The other cost basis adjustments are primarily attributable to appreciation (depreciation) of foreign currencies and mark-to-market of receivables and payables.
The Series utilized approximately $77,000 of its capital loss carryforward to offset net taxable gains realized in the fiscal year ended October 31, 2013.
Management has analyzed the Series’ tax positions taken on federal income tax returns for all open tax years and has concluded that no provision for income tax is required in the Series’ financial statements for the current reporting period. The Series’ federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
Note 6. Capital
The Series offers Class A, Class C and Class Z shares. Class A shares are subject to a maximum front-end sales charge of 5.50%. Investors who purchase Class A shares in an amount of $1 million or more and sell these shares within 12 months of purchase are not subject to an initial sales charge but are subject to a contingent deferred sales charge (CDSC) of 1%. The Class A CDSC is waived for purchases by certain retirement or benefits plans. The CDSC for Class C shares is 1% for shares redeemed within 12 months of purchase. Class Z shares are not subject to any sales or redemption charge and are offered exclusively for sale to a limited group of investors. A special exchange privilege is also available for shareholders who qualified to purchase Class A shares at net asset value.
Under certain circumstances, an exchange may be made from specified share classes of the Series to one or more other share classes of the Series as presented in the table of transactions in shares of capital stock.
At October 31, 2013, Prudential Financial, Inc. through its affiliates owned 1,004 Class A shares, 1,004 Class C shares and 1,005,515 Class Z shares of the Series.
There are 900 million shares of common stock, $.01 par value per share, divided into three classes, designated Class A, Class C and Class Z common stock, each of which consists of 300,000,000 authorized shares.
Prudential Jennison International Opportunities Fund | 31 |
Notes to Financial Statements
continued
Transactions in shares of common stock were as follows:
Class A | Shares | Amount | ||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 65,533 | $ | 824,730 | |||||
Shares issued in reinvestment of dividends | 45 | 532 | ||||||
Shares reacquired | (8,111 | ) | (101,961 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 57,467 | $ | 723,301 | |||||
|
|
|
| |||||
Period ended October 31, 2012*: | ||||||||
Shares sold | 8,321.2 | $ | 91,261 | |||||
|
|
|
| |||||
Net increase in shares outstanding | 8,321.2 | $ | 91,261 | |||||
|
|
|
| |||||
Class C | ||||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 13,478 | $ | 171,150 | |||||
Shares issued in reinvestment of dividends | 5 | 54 | ||||||
Shares reacquired | (985 | ) | (12,138 | ) | ||||
|
|
|
| |||||
Net increase in shares outstanding | 12,498 | $ | 159,066 | |||||
|
|
|
| |||||
Period ended October 31, 2012*: | ||||||||
Shares sold | 1,013.4 | $ | 10,150 | |||||
|
|
|
| |||||
Net increase in shares outstanding | 1,013.4 | $ | 10,150 | |||||
|
|
|
| |||||
Class Z | ||||||||
Year ended October 31, 2013: | ||||||||
Shares sold | 177,162 | $ | 2,200,615 | |||||
Shares issued in reinvestment of dividends | 4,798 | 56,371 | ||||||
Shares reacquired | (22,112 | ) | (278,319 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 159,848 | $ | 1,978,667 | |||||
|
|
|
| |||||
Period ended October 31, 2012*: | ||||||||
Shares sold | 1,056,892 | $ | 10,610,000 | |||||
|
|
|
| |||||
Net increase in shares outstanding | 1,056,892 | $ | 10,610,000 | |||||
|
|
|
|
* | Commenced operations on June 5, 2012. |
Note 7. Borrowings
The Series, along with other affiliated registered investment companies (the “Funds”), is a party to a Syndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide an alternative source of temporary funding for
32 |
capital share redemptions. The SCA provides for a commitment of $900 million for the period November 15, 2012 through November 4, 2013. The Funds pay an annualized commitment fee of 0.08% on the unused portion of the SCA. Prior to November 15, 2012, the Funds had another Syndicated Credit Agreement with substantially similar terms. Interest on any borrowings under the Syndicated Credit Agreement is paid at contracted market rates. The commitment fee for the unused amount is accrued daily and paid quarterly.
Subsequent to the fiscal year end, the SCA has been renewed effective November 5, 2013 at substantially similar terms through November 4, 2014.
The Series did not utilize the SCA during the year ended October 31, 2013.
Note 8. Notice of Distributions to Shareholders
Subsequent to the fiscal year end, the Series declared capital gain distributions on December 12, 2013 to shareholders of record on December 13, 2013. The ex-dividend date was December 16, 2013. The per share amounts declared were as follows:
Short-Term Capital Gains | Long-Term Capital Gains | |||
Class A | $0.3392 | $0.1451 | ||
Class C | $0.3392 | $0.1451 | ||
Class Z | $0.3392 | $0.1451 |
Note 9. New Accounting Pronouncement
In January 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” which replaced ASU No. 2011-11 “Disclosures about Offsetting Assets and Liabilities”. The updates create new disclosure requirements requiring entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of Assets and Liabilities or subject to an enforceable master netting arrangement or similar agreement. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods. Management is currently evaluating the application of ASU No. 2013-01 and its impact, if any, on the Series’ financial statements.
Prudential Jennison International Opportunities Fund | 33 |
Financial Highlights
Class A Shares | ||||||||||
Year Ended | June 5, 2012(a) through October 31, 2012 | |||||||||
Per Share Operating Performance: | ||||||||||
Net Asset Value, Beginning Of Period | $11.30 | $10.00 | ||||||||
Income (loss) from investment operations: | ||||||||||
Net investment loss | (.01 | ) | (.01 | ) | ||||||
Net realized and unrealized gain on investment transactions | 2.27 | 1.31 | ||||||||
Total from investment operations | 2.26 | 1.30 | ||||||||
Less Dividends: | ||||||||||
Dividends from net investment income | (.05 | ) | - | |||||||
Net asset value, end of period | $13.51 | $11.30 | ||||||||
Total Return(c): | 20.04% | 13.00% | ||||||||
Ratios/Supplemental Data: | ||||||||||
Net assets, end of period (000) | $889 | $94 | ||||||||
Average net assets (000) | $356 | $32 | ||||||||
Ratios to average net assets(d): | ||||||||||
Expenses after waivers and/or expense reimbursement(e) | 1.60% | 1.60% | (f) | |||||||
Expenses before waivers and/or expense reimbursement(e) | 3.16% | 4.42% | (f) | |||||||
Net investment loss | (.08)% | (.61)% | (f) | |||||||
Portfolio turnover rate | 86% | 28% | (g) |
(a) Commencement of Series.
(b) Calculated based on average shares outstanding during the period.
(c) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported, and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than a full year are not annualized.
(d) Does not include expenses of the underlying fund in which the Series invests.
(e) The distributor of the Series has contractually agreed to limit its distribution and service (12b-1) fees to .25% of the average daily net assets of the Class A shares.
(f) Annualized.
(g) Not annualized.
See Notes to Financial Statements.
34 |
Class C Shares | ||||||||||
Year Ended October 31, 2013(b) | June 5, 2012(a) through October 31, 2012 | |||||||||
Per Share Operating Performance: | ||||||||||
Net Asset Value, Beginning Of Period | $11.27 | $10.00 | ||||||||
Income (loss) from investment operations: | ||||||||||
Net investment loss | (.14 | ) | (.05 | ) | ||||||
Net realized and unrealized gain on investment transactions | 2.29 | 1.32 | ||||||||
Total from investment operations | 2.15 | 1.27 | ||||||||
Less Dividends: | ||||||||||
Dividends from net investment income | (.05 | ) | - | |||||||
Net asset value, end of period | $13.37 | $11.27 | ||||||||
Total Return(c): | 19.11% | 12.70% | ||||||||
Ratios/Supplemental Data: | ||||||||||
Net assets, end of period (000) | $181 | $11 | ||||||||
Average net assets (000) | $38 | $11 | ||||||||
Ratios to average net assets(d): | ||||||||||
Expenses after waivers and/or expense reimbursement | 2.35% | 2.35% | (e) | |||||||
Expenses before waivers and/or expense reimbursement | 4.09% | 5.29% | (e) | |||||||
Net investment loss | (1.12)% | (1.16)% | (e) | |||||||
Portfolio turnover rate | 86% | 28% | (f) |
(a) Commencement of Series.
(b) Calculated based on average shares outstanding during the period.
(c) Total return does not consider the effects of sales loads. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported, and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than a full year are not annualized.
(d) Does not include expenses of the underlying fund in which the Series invests.
(e) Annualized.
(f) Not annualized.
See Notes to Financial Statements.
Prudential Jennison International Opportunities Fund | 35 |
Financial Highlights
continued
Class Z Shares | ||||||||||
Year Ended | June 5, 2012(a) through October 31, 2012 | |||||||||
Per Share Operating Performance: | ||||||||||
Net Asset Value, Beginning Of Period | $11.32 | $10.00 | ||||||||
Income (loss) from investment operations: | ||||||||||
Net investment income (loss) | .02 | (.01 | ) | |||||||
Net realized and unrealized gain on investment transactions | 2.26 | 1.33 | ||||||||
Total from investment operations | 2.28 | 1.32 | ||||||||
Less Dividends: | ||||||||||
Dividends from net investment income | (.05 | ) | - | |||||||
Net asset value, end of period | $13.55 | $11.32 | ||||||||
Total Return(c): | 20.24% | 13.20% | ||||||||
Ratios/Supplemental Data: | ||||||||||
Net assets, end of period (000) | $16,487 | $11,962 | ||||||||
Average net assets (000) | $13,938 | $11,061 | ||||||||
Ratios to average net assets(d): | ||||||||||
Expenses after waivers and/or expense reimbursement | 1.35% | 1.35% | (e) | |||||||
Expenses before waivers and/or expense reimbursement | 2.73% | 4.28% | (e) | |||||||
Net investment income (loss) | .13% | (.17)% | (e) | |||||||
Portfolio turnover rate | 86% | 28% | (f) |
(a) Commencement of Series.
(b) Calculated based on average shares outstanding during the period.
(c) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported, and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to conform to generally accepted accounting principles. Total returns for periods less than a full year are not annualized.
(d) Does not include expenses of the underlying fund in which the Series invests.
(e) Annualized.
(f) Not annualized.
See Notes to Financial Statements.
36 |
Report of Independent Registered Public
Accounting Firm
The Board of Directors and Shareholders
Prudential World Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Prudential Jennison International Opportunities Fund, a series of Prudential World Fund, Inc. (hereafter referred to as the “Fund”), including the portfolio of investments, as of October 31, 2013, the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for the year then ended and for the period June 5, 2012 (commencement of operations) to October 31, 2012. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2013, by correspondence with the custodian, transfer agent and brokers or by other appropriate auditing procedures when replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Fund as of October 31, 2013, and the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for year then ended and for the period June 5, 2012 to October 31, 2012, in conformity with U.S. generally accepted accounting principles.
New York, New York
December 20, 2013
Prudential Jennison International Opportunities Fund | 37 |
Tax Information
(Unaudited)
For the year ended October 31, 2013, the Series reports 100% of the ordinary income dividends paid during the year as qualified dividend income in accordance with Section 854 of the Internal Revenue Code.
For the fiscal year ended October 31, 2013, the Series made an election to pass through the maximum amount of the portion of the ordinary income dividends paid derived from foreign source income as well as any foreign taxes paid by the Series in accordance with Section 853 of the Internal Revenue Code of the following amounts: $15,676 foreign tax credit from recognized foreign source income of $223,398.
In January 2014, you will be advised on IRS Form 1099-DIV or substitute 1099-DIV as to the federal tax status of distributions received by you in calendar year 2013.
38 |
INFORMATION ABOUT BOARD MEMBERS AND OFFICERS
(Unaudited)
Information about Board Members and Officers of the Fund is set forth below. Board Members who are not deemed to be “interested persons” of the Fund, as defined in the 1940 Act, are referred to as “Independent Board Members.” Board Members who are deemed to be “interested persons” of the Fund are referred to as “Interested Board Members.” The Board Members are responsible for the overall supervision of the operations of the Fund and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Board in turn elects the Officers, who are responsible for administering the day-to-day operations of the Fund.
Independent Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Ellen S. Alberding (55) Board Member Portfolios Overseen: 64 | President and Board Member, The Joyce Foundation (charitable foundation) (since 2002); Vice Chair, City Colleges of Chicago (community college system) (since 2011); Trustee, Skills for America’s Future (national initiative to connect employers to community colleges) (since 2011); Trustee, National Park Foundation (charitable foundation for national park system) (since 2009); Trustee, Economic Club of Chicago (since 2009). | None. | ||
Kevin J. Bannon (61) Board Member Portfolios Overseen: 64 | Managing Director (since April 2008) and Chief Investment Officer (since October 2008) of Highmount Capital LLC (registered investment adviser); formerly Executive Vice President and Chief Investment Officer (April 1993-August 2007) of Bank of New York Company; President (May 2003-May 2007) of BNY Hamilton Family of Mutual Funds. | Director of Urstadt Biddle Properties (since September 2008). | ||
Linda W. Bynoe (61) Board Member Portfolios Overseen: 64 | President and Chief Executive Officer (since March 1995) and formerly Chief Operating Officer (December 1989-February 1995) of Telemat Ltd. (management consulting); formerly Vice President (January 1985-June 1989) at Morgan Stanley & Co (broker-dealer). | Director of Simon Property Group, Inc. (retail real estate) (May 2003-May 2012); Director of Anixter International, Inc. (communication products distributor) (since January 2006); Director of Northern Trust Corporation (financial services) (since April 2006); Trustee of Equity Residential (residential real estate) (since December 2009). |
Prudential Jennison International Opportunities Fund
Independent Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Keith F. Hartstein (57) Board Member Portfolios Overseen: 64 | Formerly President and Chief Executive Officer (2005-2012), Senior Vice President (2004-2005), Senior Vice President of Sales and Marketing (1997-2004), and various executive management positions (1990-1997), John Hancock Funds, LLC (asset management); Chairman, Investment Company Institute’s Sales Force Marketing Committee (2003-2008). | None. | ||
Michael S. Hyland, CFA (68) Board Member Portfolios Overseen: 64 | Independent Consultant (since February 2005); formerly Senior Managing Director (July 2001-February 2005) of Bear Stearns & Co, Inc.; Global Partner, INVESCO (1999-2001); Managing Director and President of Salomon Brothers Asset Management (1989-1999). | None. | ||
Douglas H. McCorkindale (74) Board Member Portfolios Overseen: 64 | Formerly Chairman (February 2001-June 2006), Chief Executive Officer (June 2000-July 2005), President (September 1997-July 2005) and Vice Chairman (March 1984-May 2000) of Gannett Co. Inc. (publishing and media). | Director of Lockheed Martin Corp. (aerospace and defense) (since May 2001). | ||
Stephen P. Munn (71) Board Member Portfolios Overseen: 64 | Lead Director (since 2007) and formerly Chairman (1993-2007) of Carlisle Companies Incorporated (manufacturer of industrial products). | Lead Director (since 2007) of Carlisle Companies Incorporated (manufacturer of industrial products). | ||
James E. Quinn (61) Board Member Portfolios Overseen: 64 | Formerly President (2003-2012) and Director (2003-2008), and Vice Chairman and Director (1998-2003), Tiffany & Company (jewelry retailing); Director, Mutual of America Capital Management Corporation (asset management) (since 1996); Director, Hofstra University (since 2008); Vice Chairman, Museum of the City of New York (since 1984). | Director of Deckers Outdoor Corporation (footwear manufacturer) (since 2011). | ||
Richard A. Redeker (70) Board Member & Independent Chair Portfolios Overseen: 64 | Retired Mutual Fund Senior Executive (44 years); Management Consultant; Independent Directors Council (organization of 2,800 Independent Mutual Fund Directors)-Executive Committee, Chair of Policy Steering Committee, Governing Council. | None. |
Visit our website at www.prudentialfunds.com
Independent Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Robin B. Smith (74) Board Member Portfolios Overseen: 64 | Chairman of the Board (since January 2003) of Publishers Clearing House (direct marketing); Member of the Board of Directors of ADLPartner (marketing) (since December 2010); formerly Chairman and Chief Executive Officer (August 1996-January 2003) of Publishers Clearing House. | Formerly Director of BellSouth Corporation (telecommunications) (1992-2006). | ||
Stephen G. Stoneburn (70) Board Member Portfolios Overseen: 64 | Chairman, (since July 2011), President and Chief Executive Officer (since June 1996) of Quadrant Media Corp. (publishing company); formerly President (June 1995-June 1996) of Argus Integrated Media, Inc.; Senior Vice President and Managing Director (January 1993-1995) of Cowles Business Media; Senior Vice President of Fairchild Publications, Inc. (1975-1989). | None. | ||
Interested Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Stuart S. Parker (51) Board Member & President Portfolios Overseen: 59 | President of Prudential Investments LLC (since January 2012); Executive Vice President of Prudential Investment Management Services LLC (since December 2012); Executive Vice President of Jennison Associates LLC and Head of Retail Distribution of Prudential Investments LLC (June 2005 - December 2011). | None. | ||
Scott E. Benjamin (40) Board Member & Vice President Portfolios Overseen: 64 | Executive Vice President (since June 2009) of Prudential Investments LLC; Executive Vice President (June 2009-June 2012) and Vice President (since June 2012) of Prudential Investment Management Services LLC; Executive Vice President (since September 2009) of AST Investment Services, Inc.; Senior Vice President of Product Development and Marketing, Prudential Investments (since February 2006); Vice President of Product Development and Product Management, Prudential Investments (2003-2006). | None. |
Prudential Jennison International Opportunities Fund
(1) | The year that each Board Member joined the Funds’ Board is as follows: |
Ellen S. Alberding; 2013; Kevin J. Bannon, 2008; Linda W. Bynoe, 2005; Keith F. Hartstein, 2013; Michael S. Hyland, 2008; Douglas H. McCorkindale, 2003; Stephen P. Munn, 2008; James E. Quinn, 2013; Richard A. Redeker, 2003; Robin B. Smith, 1996; Stephen G. Stoneburn, 1996; Stuart S. Parker, Board Member and President since 2012; Scott E. Benjamin, Board Member since 2010 and Vice President since 2009.
Fund Officers(a) | ||||
Name, Address and Age Position with Fund | Principal Occupation(s) During Past Five Years | Length of Service as Fund Officer | ||
Raymond A. O’Hara (58) Chief Legal Officer | Vice President and Corporate Counsel (since July 2010) of Prudential Insurance Company of America (Prudential); Vice President (March 2011-Present) of Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey; Vice President and Corporate Counsel (March 2011-Present) of Prudential Annuities Life Assurance Corporation; Chief Legal Officer of Prudential Investments LLC (since June 2012); Chief Legal Officer of Prudential Mutual Fund Services LLC (since June 2012) and Corporate Counsel of AST Investment Services, Inc. (since June 2012); formerly Assistant Vice President and Corporate Counsel (September 2008-July 2010) of The Hartford Financial Services Group, Inc.; formerly Associate (September 1980-December 1987) and Partner (January 1988–August 2008) of Blazzard & Hasenauer, P.C. (formerly, Blazzard, Grodd & Hasenauer, P.C.). | Since 2012 | ||
Deborah A. Docs (55) Secretary | Vice President and Corporate Counsel (since January 2001) of Prudential; Vice President (since December 1996) and Assistant Secretary (since March 1999) of Prudential Investments LLC; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc. | Since 2004 | ||
Jonathan D. Shain (55) Assistant Secretary | Vice President and Corporate Counsel (since August 1998) of Prudential; Vice President and Assistant Secretary (since May 2001) of Prudential Investments LLC; Vice President and Assistant Secretary (since February 2001) of Prudential Mutual Fund Services LLC; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc. | Since 2005 | ||
Claudia DiGiacomo (39) Assistant Secretary | Vice President and Corporate Counsel (since January 2005) of Prudential; Vice President and Assistant Secretary of Prudential Investments LLC (since December 2005); Associate at Sidley Austin Brown & Wood LLP (1999-2004). | Since 2005 | ||
Andrew R. French (51) Assistant Secretary | Vice President and Corporate Counsel (since February 2010) of Prudential; formerly Director and Corporate Counsel (2006-2010) of Prudential; Vice President and Assistant Secretary (since January 2007) of Prudential Investments LLC; Vice President and Assistant Secretary (since January 2007) of Prudential Mutual Fund Services LLC. | Since 2006 |
Visit our website at www.prudentialfunds.com
Fund Officers(a) | ||||
Name, Address and Age Position with Fund | Principal Occupation(s) During Past Five Years | Length of Service as Fund Officer | ||
Amanda S. Ryan (35) Assistant Secretary | Director and Corporate Counsel (since March 2012) of Prudential; Director and Assistant Secretary (since June 2012) of Prudential Investments LLC; Associate at Ropes & Gray LLP (2008-2012). | Since 2012 | ||
Bruce Karpati (43) Chief Compliance Officer | Chief Compliance Officer of the Prudential Investments Funds, Target Funds, Advanced Series Trust, the Prudential Series Fund and Prudential’s Gibraltar Fund, Inc. (May 2013 - Present); formerly National Chief (May 2012 - May 2013) and Co-Chief (January 2010 - May 2012) of the Asset Management Unit, Division of Enforcement, of the U.S. Securities and Exchange Commission; Assistant Regional Director (January 2005 - January 2010) of the U.S. Securities and Exchange Commission. | Since 2013 | ||
Theresa C. Thompson (51) Deputy Chief Compliance Officer | Vice President, Compliance, Prudential Investments LLC (since April 2004); and Director, Compliance, Prudential Investments LLC (2001-2004). | Since 2008 | ||
Richard W. Kinville (45) Anti-Money Laundering Compliance Officer | Vice President, Corporate Compliance, Anti-Money Laundering Unit (since January 2005) of Prudential; committee member of the American Council of Life Insurers Anti-Money Laundering and Critical Infrastructure Committee (since January 2007); formerly Investigator and Supervisor in the Special Investigations Unit for the New York Central Mutual Fire Insurance Company (August 1994-January 1999); Investigator in AXA Financial’s Internal Audit Department and Manager in AXA’s Anti-Money Laundering Office (January 1999-January 2005); first chair of the American Council of Life Insurers Anti-Money Laundering and Critical Infrastructure Committee (June 2007-December 2009). | Since 2011 | ||
Grace C. Torres (54) Treasurer and Principal Financial and Accounting Officer | Assistant Treasurer (since March 1999) and Senior Vice President (since September 1999) of Prudential Investments LLC; Assistant Treasurer (since May 2003) and Vice President (since June 2005) of AST Investment Services, Inc.; Senior Vice President and Assistant Treasurer (since May 2003) of Prudential Annuities Advisory Services, Inc.; formerly Senior Vice President (May 2003-June 2005) of AST Investment Services, Inc. | Since 1998 | ||
M. Sadiq Peshimam (49) Assistant Treasurer | Vice President (since 2005) of Prudential Investments LLC. | Since 2006 | ||
Peter Parrella (55) Assistant Treasurer | Vice President (since 2007) and Director (2004-2007) within Prudential Mutual Fund Administration; formerly Tax Manager at SSB Citi Fund Management LLC (1997-2004). | Since 2007 |
(a) | Excludes Mr. Parker and Mr. Benjamin, interested Board Members who also serve as President and Vice President, respectively. |
Prudential Jennison International Opportunities Fund
Explanatory Notes to Tables:
• | Board Members are deemed to be “Interested,” as defined in the 1940 Act, by reason of their affiliation with Prudential Investments LLC and/or an affiliate of Prudential Investments LLC. |
• | Unless otherwise noted, the address of all Board Members and Officers is c/o Prudential Investments LLC, Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077. |
• | There is no set term of office for Board Members or Officers. The Board Members have adopted a retirement policy, which calls for the retirement of Board Members on December 31 of the year in which they reach the age of 75. |
• | “Other Directorships Held” includes only directorships of companies required to register or file reports with the SEC under the 1934 Act (that is, “public companies”) or other investment companies registered under the 1940 Act. |
• | “Portfolios Overseen” includes all investment companies managed by Prudential Investments LLC. The investment companies for which Prudential Investments LLC serves as manager include the Prudential Investments Mutual Funds, The Prudential Variable Contract Accounts, Target Mutual Funds, Prudential Short Duration High Yield Fund, Inc., Prudential Global Short Duration High Yield Fund, Inc., The Prudential Series Fund, Prudential’s Gibraltar Fund, Inc. and the Advanced Series Trust. |
Visit our website at www.prudentialfunds.com
Approval of Advisory Agreements
The Fund’s Board of Directors
The Board of Directors (the “Board”) of Prudential Jennison International Opportunities Fund (the “Fund”)1 consists of ten individuals, eight of whom are not “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Directors”).2 The Board is responsible for the oversight of the Fund and its operations, and performs the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Directors have retained independent legal counsel to assist them in connection with their duties. The Chair of the Board is an Independent Director. The Board has established three standing committees: the Audit Committee, the Nominating and Governance Committee, and the Investment Committee. Each committee is chaired by, and composed of, Independent Directors.
Annual Approval of the Fund’s Advisory Agreements
As required under the 1940 Act, the Board determines annually whether to renew the Fund’s management agreement with Prudential Investments LLC (“PI”) and the Fund’s subadvisory agreement with Jennison Associates LLC (“Jennison”). In considering the renewal of the agreements, the Board, including all of the Independent Directors, met on June 4-6, 2013 and approved the renewal of the agreements through July 31, 2014, after concluding that the renewal of the agreements was in the best interests of the Fund and its shareholders.
In advance of the meetings, the Board requested and received materials relating to the agreements, and had the opportunity to ask questions and request further information in connection with its consideration. Among other things, the Board considered comparative fee information from PI and Jennison. Also, the Board considered comparisons with other mutual funds in relevant Peer Universes and Peer Groups, as is further discussed below.
In approving the agreements, the Board, including the Independent Directors advised by independent legal counsel, considered the factors it deemed relevant, including the nature, quality and extent of services provided by PI and the subadviser, the performance of the Fund, the profitability of PI and its affiliates, expenses and fees, and the potential for economies of scale that may be shared with the Fund and its shareholders as the Fund’s assets grow. In their deliberations, the Directors did not identify any single factor which alone was responsible for the Board’s decision to approve the agreements with respect to the Fund. In connection with its deliberations, the Board considered information provided by PI throughout the year at regular Board
1 | Prudential Jennison International Opportunities Fund is a series of Prudential World Fund, Inc. |
2 | Ms. Alberding and Messrs. Hartstein and Quinn were elected to the Board effective September 1, 2013. |
Prudential Jennison International Opportunities Fund
Approval of Advisory Agreements (continued)
meetings, presentations from portfolio managers and other information, as well as information furnished at or in advance of the meetings on June 4-6, 2013.
The Directors determined that the overall arrangements between the Fund and PI, which serves as the Fund’s investment manager pursuant to a management agreement, and between PI and Jennison, which serves as the Fund’s subadviser pursuant to the terms of a subadvisory agreement with PI, are in the best interests of the Fund and its shareholders in light of the services performed, fees charged and such other matters as the Directors considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the Directors’ reaching their determinations to approve the continuance of the agreements are separately discussed below.
Nature, Quality and Extent of Services
The Board received and considered information regarding the nature, quality and extent of services provided to the Fund by PI and Jennison. The Board considered the services provided by PI, including but not limited to the oversight of the subadviser for the Fund, as well as the provision of fund recordkeeping, compliance, and other services to the Fund. With respect to PI’s oversight of the subadviser, the Board noted that PI’s Strategic Investment Research Group (“SIRG”), which is a business unit of PI, is responsible for monitoring and reporting to PI’s senior management on the performance and operations of the subadviser. The Board also considered that PI pays the salaries of all of the officers and non-independent Directors of the Fund. The Board also considered the investment subadvisory services provided by Jennison, as well as adherence to the Fund’s investment restrictions and compliance with applicable Fund policies and procedures. The Board considered PI’s evaluation of the subadviser, as well as PI’s recommendation, based on its review of the subadviser, to renew the subadvisory agreement.
The Board considered the qualifications, backgrounds and responsibilities of PI’s senior management responsible for the oversight of the Fund and Jennison, and also considered the qualifications, backgrounds and responsibilities of Jennison’s portfolio managers who are responsible for the day-to-day management of the Fund’s portfolio. The Board was provided with information pertaining to PI’s and Jennison’s organizational structure, senior management, investment operations, and other relevant information pertaining to both PI and Jennison. The Board also noted that it received favorable compliance reports from the Fund’s Chief Compliance Officer (“CCO”) as to both PI and Jennison. The Board noted that Jennison is affiliated with PI.
Visit our website at www.prudentialfunds.com
The Board concluded that it was satisfied with the nature, extent and quality of the investment management services provided by PI and the subadvisory services provided to the Fund by Jennison, and that there was a reasonable basis on which to conclude that the Fund benefits from the services provided by PI and Jennison under the management and subadvisory agreements.
Costs of Services and Profits Realized by PI
The Board was provided with information on the profitability of PI and its affiliates in serving as the Fund’s investment manager. The Board discussed with PI the methodology utilized in assembling the information regarding profitability and considered its reasonableness. The Board recognized that it is difficult to make comparisons of profitability from fund management contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser’s capital structure and cost of capital. Taking these factors into account, the Board concluded that the profitability of PI and its affiliates in relation to the services rendered was not unreasonable. The Board separately considered information regarding the profitability of the subadviser, an affiliate of PI. Taking these factors into account, the Board concluded that the profitability of PI and its affiliates in relation to the services rendered was not unreasonable.
Economies of Scale
The Board noted that the management fee schedule for the Fund does not contain breakpoints that would reduce the fee rate on assets above specified levels. The Board received and discussed information concerning whether PI realizes economies of scale as the Fund’s assets grow beyond current levels. The Board also recognized the inherent limitations of any analysis of economies of scale, stemming largely from the Board’s understanding that most of PI’s costs are not specific to individual funds, but rather are incurred across a variety of products and services. In light of the Fund’s current size, performance and expense structure, the Board concluded that the absence of breakpoints in the Fund’s fee schedule is acceptable at this time.
Other Benefits to PI and Jennison
The Board considered potential ancillary benefits that might be received by PI and Jennison and their affiliates as a result of their relationship with the Fund. The Board concluded that potential benefits to be derived by PI included fees received by affiliates of PI for serving as the Fund’s securities lending agent, transfer agency fees received by the Fund’s transfer agent (which is affiliated with PI), as well as benefits to its reputation or other intangible benefits resulting from PI’s association with the Fund.
Prudential Jennison International Opportunities Fund
Approval of Advisory Agreements (continued)
The Board concluded that the potential benefits to be derived by Jennison included the ability to use soft dollar credits, as well as the potential benefits consistent with those generally resulting from an increase in assets under management, specifically, potential access to additional research resources and benefits to its reputation. The Board concluded that the benefits derived by PI and Jennison were consistent with the types of benefits generally derived by investment managers and subadvisers to mutual funds.
Performance of the Fund / Fees and Expenses
The Board considered certain additional specific factors and made related conclusions relating to the historical performance of the Fund for the fourth quarter of 2012. The Board considered that the Fund commenced operations on June 5, 2012 and that longer-term performance was not yet available.
The Board also considered the Fund’s actual management fee, as well as the Fund’s net total expense ratio, for the fiscal year ended October 31, 2012. The Board considered the management fee for the Fund as compared to the management fee charged by PI to other funds and the fee charged by other advisers to comparable mutual funds in a Peer Group. The actual management fee represents the fee rate actually paid by Fund shareholders and includes any fee waivers or reimbursements. The net total expense ratio for the Fund represents the actual expense ratio incurred by Fund shareholders.
The mutual funds included in the Peer Universe (the Lipper International Multi-Cap Growth Funds Performance Universe)3 and the Peer Group were objectively determined by Lipper Inc. (“Lipper”), an independent provider of mutual fund data. To the extent that PI deemed appropriate, and for reasons addressed in detail with the Board, PI may have provided supplemental data compiled by Lipper for the Board’s consideration. The comparisons placed the Fund in various quartiles, with the first quartile being the best 25% of the mutual funds (for performance, the best performing mutual funds and, for expenses, the lowest cost mutual funds).
The section below summarizes key factors considered by the Board and the Board’s conclusions regarding the Fund’s performance, fees and overall expenses. The table sets forth gross performance comparisons (which do not reflect the impact on performance of fund expenses, or any subsidies, expense caps or waivers that may be
3 | The Fund was compared to the Lipper International Multi-Cap Growth Funds Performance Universe, although Lipper classifies the Fund in its International Multi-Cap Core Funds Performance Universe. The Fund was compared to the Lipper International Multi-Cap Growth Funds Performance Universe because PI believes that the funds included in the Lipper International Multi-Cap Growth Funds Performance Universe provide a more appropriate basis for Fund performance comparisons. |
Visit our website at www.prudentialfunds.com
applicable) with the Peer Universe, actual management fees with the Peer Group (which reflect the impact of any subsidies or fee waivers), and net total expenses with the Peer Group, each of which were key factors considered by the Board.
Performance | 1 Year | 3 Years | 5 Years | 10 Years | ||||
N/A | N/A | N/A | N/A | |||||
Actual Management Fees: 1st Quartile | ||||||||
Net Total Expenses: 4th Quartile |
• | The Board noted that because the Fund commenced operations during 2012, it did not yet have a full-year performance record for evaluation. |
• | The Board accepted PI’s recommendation to continue the existing expense cap of 1.35% (exclusive of 12b-1 fees and certain other fees) through February 28, 2015. |
• | The Board concluded that, in light of the Fund’s recent inception date, it would be in the best interests of the Fund and its shareholders to renew the agreements to allow the subadviser to develop a performance record to be compared against. |
• | The Board concluded that the management fees (including subadvisory fees) and total expenses were reasonable in light of the services provided. |
* * *
After full consideration of these factors, the Board concluded that the approval of the agreements was in the best interests of the Fund and its shareholders.
Prudential Jennison International Opportunities Fund
n MAIL | n TELEPHONE | n WEBSITE | ||
Gateway Center Three 100 Mulberry Street Newark, NJ 07102 | (800) 225-1852 | www.prudentialfunds.com |
PROXY VOTING |
The Board of Directors of the Fund has delegated to the Fund’s investment subadviser the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852 or by visiting the Securities and Exchange Commission’s website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the Securities and Exchange Commission’s website. |
DIRECTORS |
Ellen S. Alberding • Kevin J. Bannon • Scott E. Benjamin • Linda W. Bynoe • Keith F. Hartstein • Michael S. Hyland • Douglas H. McCorkindale • Stephen P. Munn • Stuart S. Parker • James E. Quinn • Richard A. Redeker • Robin B. Smith • Stephen G. Stoneburn |
OFFICERS |
Stuart S. Parker, President • Scott E. Benjamin, Vice President • Grace C. Torres, Treasurer and Principal Financial and Accounting Officer • Raymond A. O’Hara, Chief Legal Officer • Deborah A. Docs, Secretary • Bruce Karpati, Chief Compliance Officer • Theresa C. Thompson, Deputy Chief Compliance Officer • Richard W. Kinville, Anti-Money Laundering Compliance Officer • Jonathan D. Shain, Assistant Secretary • Claudia DiGiacomo, Assistant Secretary • Amanda S. Ryan, Assistant Secretary • Andrew R. French, Assistant Secretary • M. Sadiq Peshimam, Assistant Treasurer • Peter Parrella, Assistant Treasurer |
MANAGER | Prudential Investments LLC | Gateway Center Three 100 Mulberry Street Newark, NJ 07102 | ||
| ||||
INVESTMENT SUBADVISER | Jennison Associates LLC | 466 Lexington Avenue New York, NY 10017 | ||
| ||||
DISTRIBUTOR | Prudential Investment Management Services LLC | Gateway Center Three 100 Mulberry Street | ||
| ||||
CUSTODIAN | The Bank of New York Mellon | One Wall Street New York, NY 10286 | ||
| ||||
TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
| ||||
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
| ||||
FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 |
An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain a prospectus and summary prospectus by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
E-DELIVERY |
To receive your mutual fund documents online, go to www.prudentialfunds.com/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above. |
SHAREHOLDER COMMUNICATIONS WITH DIRECTORS |
Shareholders can communicate directly with the Board of Directors by writing to the Chair of the Board, Prudential Jennison International Opportunities Fund, Prudential Investments, Attn: Board of Directors, 100 Mulberry Street, Gateway Center Three, Newark, NJ 07102. Shareholders can communicate directly with an individual Director by writing to the same address. Communications are not screened before being delivered to the addressee. |
AVAILABILITY OF PORTFOLIO SCHEDULE |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation and location of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund’s schedule of portfolio holdings is also available on the Fund’s website as of the end of each month. |
The Fund’s Statement of Additional Information contains additional information about the Fund’s Directors and is available without charge, upon request, by calling (800) 225-1852. |
Mutual Funds:
ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY | MAY LOSE VALUE | ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE |
PRUDENTIAL JENNISON INTERNATIONAL OPPORTUNITIES FUND
SHARE CLASS | A | C | Z | |||
NASDAQ | PWJAX | PWJCX | PWJZX | |||
CUSIP | 743969677 | 743969669 | 743969651 |
MF215E 0255282-00001-00
PRUDENTIAL INVESTMENTS»MUTUAL FUNDS
PRUDENTIAL JENNISON GLOBAL INFRASTRUCTURE FUND
ANNUAL REPORT · OCTOBER 31, 2013
Fund Type
Sector Stock
Objective
Total return
This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus.
The views expressed in this report and information about the Fund’s portfolio holdings are for the period covered by this report and are subject to change thereafter.
Mutual funds are distributed by Prudential Investment Management Services LLC. Jennison Associates is a registered investment advisor. Both are Prudential Financial companies. © 2013 Prudential Financial, Inc., and its related entities. Prudential Investments, Prudential, Jennison Associates, Jennison, the Prudential logo, Bring Your Challenges, and the Rock symbol are service marks of Prudential Financial, Inc., and its related entities, registered in many jurisdictions worldwide.
December 16, 2013
Dear Shareholder:
We hope you find the annual report for the Prudential Jennison Global Infrastructure Fund informative and useful. The report covers performance for the period from September 25, 2013, the Fund’s inception, through October 31, 2013, its fiscal year-end.
We recognize that ongoing market volatility may make it a difficult time to be an investor. We continue to believe a prudent response to uncertainty is to maintain a diversified portfolio of funds consistent with your tolerance for risk, time horizon, and financial goals.
Your financial advisor can help you create a diversified investment plan that may include funds covering all the basic asset classes and that reflects your personal investor profile and risk tolerance. Keep in mind, however, that diversification and asset allocation strategies do not assure a profit or protect against loss in declining markets. Prudential Investments® is dedicated to helping you solve your toughest investment challenges—whether it’s capital growth, reliable income, or protection from market volatility and other risks.
We offer the expertise of Prudential Financial’s affiliated asset managers* that strive to be leaders in a broad range of funds to help you stay on course to the future you envision. They also manage money for major corporations and pension funds around the world, which means you benefit from the same expertise, innovation, and attention to risk demanded by today’s most sophisticated investors.
Thank you for choosing the Prudential Investments family of funds.
Sincerely,
Stuart S. Parker, President
Prudential Jennison Global Infrastructure Fund
*Most of Prudential Investments’ equity funds are advised by Jennison Associates LLC, Quantitative Management Associates LLC (QMA), or Prudential Real Estate Investors. Prudential Investments’ fixed income and money market funds are advised by Prudential Investment Management, Inc. (PIM) through its Prudential Fixed Income unit. Jennison Associates LLC, QMA, and PIM are registered investment advisers and Prudential Financial companies. Prudential Real Estate Investors is a unit of PIM.
Prudential Jennison Global Infrastructure Fund | 1 |
Your Fund’s Performance (Unaudited)
Performance data quoted represent past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the past performance data quoted. An investor may obtain performance data as of the most recent month-end by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852.
Cumulative Total Returns (Without Sales Charges) as of 10/31/13 | ||||
Since Inception | ||||
Class A | 4.20% (9/25/13) | |||
Class C | 4.10 (9/25/13) | |||
Class Z | 4.20 (9/25/13) | |||
S&P Global Infrastructure Index | 3.83 | |||
S&P 500 Index | 4.59 | |||
Lipper Specialty & Misc. Funds Average | 2.20 | |||
Average Annual Total Returns (With Sales Charges) as of 9/30/13 | ||||
Since Inception | ||||
Class A | N/A (9/25/13) | |||
Class C | N/A (9/25/13) | |||
Class Z | N/A (9/25/13) | |||
S&P Global Infrastructure Index | N/A | |||
S&P 500 Index | N/A | |||
Lipper Specialty & Misc. Funds Average | N/A | |||
Average Annual Total Returns (With Sales Charges) as of 10/31/13 | ||||
Since Inception | ||||
Class A | N/A (9/25/13) | |||
Class C | N/A (9/25/13) | |||
Class Z | N/A (9/25/13) | |||
Average Annual Total Returns (Without Sales Charges) as of 10/31/13 | ||||
Since Inception | ||||
Class A | N/A (9/25/13) | |||
Class C | N/A (9/25/13) | |||
Class Z | N/A (9/25/13) |
Source: Prudential Investments LLC and Lipper Inc.
Inception Date: 9/25/13
2 | Visit our website at www.prudentialfunds.com |
The average annual total returns take into account applicable sales charges, which are described for each share class in the table below.
Class A | Class C | Class Z | ||||
Maximum initial sales charge | 5.50% of the public offering price | None | None | |||
Contingent deferred sales charge (CDSC) (as a percentage of the lower of original purchase price or sale proceeds) | 1% on sales of $1 million or more made within 12 months of purchase | 1% on sales made within 12 months of purchase | None | |||
Annual distribution and service (12b-1) fees (shown as a percentage of average daily net assets) | .30% (.25% currently) | 1% | None |
Benchmark Definitions
S&P Global Infrastructure Index
The S&P Global Infrastructure Index is an unmanaged index that consists of 75 companies from around the world that represent the listed infrastructure universe. To create diversified exposure across the global listed infrastructure market, the index has balanced weights across three distinct infrastructure clusters: Utilities, Transportation, and Energy.
Lipper Specialty & Misc. Funds Average
Lipper Specialty & Miscellaneous Funds Average includes funds that limit investments to a specific industry (e.g., transportation, retailing, or paper, etc.) or ones that have not been classified into an existing investment objective.
S&P 500 Index
The S&P 500 Index is an unmanaged index of 500 stocks of large U.S. public companies. It gives a broad look at how stock prices have performed in the United States.
Investors cannot invest directly in an index or average. The returns for the Index would be lower if they included the effects of sales charges, operating expenses of a mutual fund, or taxes. Returns for the Lipper Average reflect the deduction of operating expenses, but not sales charges or taxes.
Prudential Jennison Global Infrastructure Fund | 3 |
Your Fund’s Performance (continued)
Five Largest Holdings expressed as a percentage of net assets as of 10/31/13 | ||||
Targa Resources Corp., Oil, Gas & Consumable Fuels | 3.5 | % | ||
Chenlere Energy, Inc., Oil, Gas & Consumable Fuels | 3.0 | |||
Enbridge, Inc., Oil, Gas & Consumable Fuels | 2.9 | |||
Atlantia SpA, Transportation Infrastructure | 2.8 | |||
Abertis Infraestructuras SA, Transportation Infrastructure | 2.5 |
Five Largest Industries expressed as a percentage of net assets as of 10/31/13 | ||||
Oil, Gas & Consumable Fuels | 22.9 | % | ||
Transportation Infrastructure | 14.6 | |||
Road & Rail | 9.9 | |||
Independent Power Producers & Energy Traders | 8.8 | |||
Electric Utilities | 7.7 |
4 | Visit our website at www.prudentialfunds.com |
Fees and Expenses (Unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemptions, as applicable, and (2) ongoing costs, including management fees, distribution, and/or service (12b-1) fees, and other Fund expenses, as applicable. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested on September 25, 2013, at the Fund’s commencement of operations, and held through the initial fiscal period ended October 31, 2013. The example is for illustrative purposes only; you should consult the Prospectus for information on initial and subsequent minimum investment requirements.
Actual Expenses
The first line for each share class in the table on the following page provides information about actual account values and actual expenses. You may use the information on this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value ÷ $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line for each share class in the table on the following page provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The Fund’s transfer agent may charge additional fees to holders of certain accounts that are not included in the expenses shown in the table on the following page. These fees apply to individual retirement accounts (IRAs) and Section 403(b) accounts. As of the close of the period covered by the table, IRA fees included an annual maintenance fee of $15 per account (subject to a maximum annual maintenance fee of $25 for all accounts held by the same shareholder). Section 403(b) accounts are charged an annual $25 fiduciary maintenance fee. Some of the fees may vary in amount, or may be waived, based on your total account balance or the number of
Prudential Jennison Global Infrastructure Fund | 5 |
Fees and Expenses (continued)
Prudential Investments funds, including the Fund, that you own. You should consider the additional fees that were charged to your Fund account over the six-month period when you estimate the total ongoing expenses paid over the period and the impact of these fees on your ending account value, as these additional expenses are not reflected in the information provided in the expense table. Additional fees have the effect of reducing investment returns.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads). Therefore, the second line for each share class in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Prudential Jennison Global Infrastructure Fund | Beginning Account Value September 25, 2013 | Ending Account October 31, 2013 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period* | ||||||||||||||
Class A | Actual** | $ | 1,000.00 | $ | 1,042.00 | 1.50 | % | $ | 1.55 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,017.64 | 1.50 | % | $ | 7.63 | ||||||||||
Class C | Actual** | $ | 1,000.00 | $ | 1,041.00 | 2.25 | % | $ | 2.33 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,013.86 | 2.25 | % | $ | 11.42 | ||||||||||
Class Z | Actual** | $ | 1,000.00 | $ | 1,042.00 | 1.25 | % | $ | 1.29 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,018.90 | 1.25 | % | $ | 6.36 |
*Fund expenses (net of fee waivers or subsidies, if any) for each share class are equal to the annualized expense ratio for each share class (provided in the table), multiplied by the average account value over the period, multiplied by the 184 days in the six-month period ended October 31, 2013, and divided by the 365 days in the Fund’s fiscal year ended October 31, 2013 (to reflect the six-month period). Expenses presented in the table include the expenses of any underlying portfolios in which the Fund may invest.
**”Actual” expenses are calculated using the 37 day period ended October 31, 2013 due to the Fund’s inception date of September 25, 2013.
6 | Visit our website at www.prudentialfunds.com |
The Fund’s annual expense ratios for the period ended October 31, 2013, are as follows:
Class | Gross Operating Expenses | Net Operating Expenses | ||
A | 25.87% | 1.50% | ||
C | 38.05 | 2.25 | ||
Z | 22.65 | 1.25 |
Net operating expenses shown above reflect any fee waivers and/or expense reimbursements. Additional information on Fund expenses and any fee waivers and/or expense reimbursements can be found in the “Financial Highlights” tables in this report and in the Notes to the Financial Statements in this report.
Prudential Jennison Global Infrastructure Fund | 7 |
Portfolio of Investments
as of October 31, 2013
Shares | Description | Value (Note 1) | ||||
LONG-TERM INVESTMENTS 96.6% |
| |||||
COMMON STOCKS | ||||||
Australia 5.2% | ||||||
13,513 | Asciano Ltd. | $ | 74,212 | |||
13,770 | Aurizon Holdings Ltd. | 62,333 | ||||
10,756 | Goodman Group, REIT | 51,403 | ||||
9,294 | Sydney Airport | 36,808 | ||||
7,761 | Transurban Group | 52,064 | ||||
|
| |||||
276,820 | ||||||
Brazil 2.3% | ||||||
6,224 | Alupar Investimento SA, UTS* | 46,954 | ||||
8,947 | CCR SA | 74,405 | ||||
|
| |||||
121,359 | ||||||
Canada 5.5% | ||||||
773 | AltaGas Ltd. | 28,618 | ||||
633 | Canadian Pacific Railway Ltd. | 90,483 | ||||
3,556 | Enbridge, Inc. | 154,295 | ||||
634 | Pembina Pipeline Corp. | 20,795 | ||||
|
| |||||
294,191 | ||||||
China 5.9% | ||||||
88,977 | Beijing Enterprises Water Group Ltd. | 39,590 | ||||
66,596 | China Longyuan Power Group Corp. (Class H Stock) | 76,620 | ||||
9,762 | China Merchants Holdings International Co. Ltd. | 34,606 | ||||
5,730 | ENN Energy Holdings Ltd. | 33,973 | ||||
145,302 | Huadian Fuxin Energy Corp. Ltd. (Class H Stock) | 44,776 | ||||
42,401 | Jiangsu Expressway Co. Ltd. (Class H Stock) | 53,377 | ||||
66,158 | Shenzhen Expressway Co. Ltd. (Class H Stock) | 27,821 | ||||
|
| |||||
310,763 | ||||||
France 4.4% | ||||||
5,964 | Groupe Eurotunnel SA | 57,737 | ||||
1,209 | Vinci SA | 77,360 | ||||
3,944 | Vivendi SA | 99,861 | ||||
|
| |||||
234,958 | ||||||
Germany 2.0% | ||||||
870 | Fraport AG Frankfurt Airport Services Worldwide | 67,306 | ||||
289 | Siemens AG, ADR | 36,995 | ||||
|
| |||||
104,301 |
See Notes to Financial Statements.
Prudential Jennison Global Infrastructure Fund | 9 |
Portfolio of Investments
as of October 31, 2013 continued
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) | ||||||
Italy 3.8% | ||||||
6,683 | Atlantia SpA | $ | 146,473 | |||
13,047 | Enel SpA | 57,562 | ||||
|
| |||||
204,035 | ||||||
Japan 2.8% | ||||||
1,162 | East Japan Railway Co. | 100,944 | ||||
5 | Nippon Prologis REIT, Inc., REIT | 49,931 | ||||
|
| |||||
150,875 | ||||||
Mexico 1.1% | ||||||
5,561 | Promotora y Operadora de Infraestructura SAB de CV* | 56,470 | ||||
Netherlands 0.4% | ||||||
2,095 | TNT Express NV | 19,315 | ||||
New Zealand 1.9% | ||||||
12,808 | Auckland International Airport Ltd. | 36,258 | ||||
71,425 | Meridian Energy Ltd. (Partial Paid Shares), 144A* | 64,307 | ||||
|
| |||||
100,565 | ||||||
Peru 1.2% | ||||||
2,890 | Grana Y Montero SA, ADR* | 62,597 | ||||
Korea 1.3% | ||||||
5,128 | Korea Electric Power Corp., ADR | 67,895 | ||||
Spain 4.6% | ||||||
6,232 | Abertis Infraestructuras SA | 133,521 | ||||
5,791 | Ferrovial SA | 110,387 | ||||
|
| |||||
243,908 | ||||||
Switzerland 1.0% | ||||||
95 | Flughafen Zuerich AG | 52,648 | ||||
United Kingdom 7.1% | ||||||
10,821 | Drax Group PLC | 110,476 | ||||
1,081 | Liberty Global PLC* (Class C Stock) | 80,924 | ||||
1,001 | National Grid PLC, ADR | 62,993 | ||||
5,786 | Telecity Group PLC | 70,737 | ||||
1,449 | Vodafone Group PLC, ADR | 53,352 | ||||
|
| |||||
378,482 |
See Notes to Financial Statements.
10 |
Shares | Description | Value (Note 1) | ||||
COMMON STOCKS (Continued) | ||||||
United States 46.1% | ||||||
1,236 | American Water Works Co., Inc. | $ | 52,987 | |||
3,375 | Calpine Corp.* | 68,074 | ||||
2,913 | CenterPoint Energy, Inc. | 71,660 | ||||
457 | Charter Communications, Inc. (Class A Stock)* | 61,348 | ||||
3,983 | Cheniere Energy, Inc.* | 158,523 | ||||
655 | Crosstex Energy, Inc. | 20,102 | ||||
892 | Crown Castle International Corp.* | 67,810 | ||||
1,041 | Dominion Resources, Inc. | 66,364 | ||||
548 | Energy Transfer Equity LP | 37,039 | ||||
1,837 | EQT Midstream Partners LP | 96,681 | ||||
530 | Genesee & Wyoming, Inc. (Class A Stock)* | 52,915 | ||||
2,725 | Intelsat SA* | 55,563 | ||||
628 | ITC Holdings Corp. | 63,170 | ||||
819 | J.B. Hunt Transport Services, Inc. | 61,450 | ||||
464 | Kirby Corp.* | 41,059 | ||||
2,357 | MPLX LP | 86,832 | ||||
742 | NextEra Energy, Inc. | 62,884 | ||||
1,805 | NiSource, Inc. | 56,894 | ||||
3,569 | NRG Energy, Inc. | 101,824 | ||||
3,074 | NRG Yield, Inc. (Class A Stock)* | 108,881 | ||||
1,506 | ONEOK, Inc. | 85,089 | ||||
2,769 | Phillips 66 Partners LP | 93,038 | ||||
2,915 | Plains GP Holdings LP (Class A Stock)* | 64,975 | ||||
1,356 | SBA Communications Corp. (Class A Stock)* | 118,609 | ||||
2,007 | SemGroup Corp. (Class A Stock) | 121,203 | ||||
912 | Sempra Energy | 83,120 | ||||
2,392 | Targa Resources Corp. | 185,523 | ||||
627 | Time Warner Cable, Inc. | 75,334 | ||||
534 | Union Pacific Corp. | 80,848 | ||||
1,377 | Western Gas Equity Partners LP | 51,927 | ||||
2,732 | Williams Cos., Inc. (The) | 97,560 | ||||
|
| |||||
2,449,286 | ||||||
|
| |||||
TOTAL LONG-TERM INVESTMENTS | 5,128,468 | |||||
|
|
See Notes to Financial Statements.
Prudential Jennison Global Infrastructure Fund | 11 |
Portfolio of Investments
as of October 31, 2013 continued
Shares | Description | Value (Note 1) | ||||
SHORT-TERM INVESTMENT 1.6% |
| |||||
AFFILIATED MONEY MARKET MUTUAL FUND |
| |||||
86,710 | Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund | $ | 86,710 | |||
|
| |||||
TOTAL INVESTMENTS 98.2% | 5,215,178 | |||||
Other assets in excess of liabilities 1.8% | 93,289 | |||||
|
| |||||
NET ASSETS 100% | $ | 5,308,467 | ||||
|
|
The following abbreviations are used in the Portfolio descriptions:
144A—Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. Unless otherwise noted, 144A securities are deemed to be liquid.
ADR—American Depositary Receipt
REIT—Real Estate Investment Trust
UTS—Unit Trust Security
* | Non-income producing security. |
(a) | Prudential Investments LLC, the manager of the Portfolio, also serves as manager of the Prudential Investment Portfolios 2 - Prudential Core Taxable Money Market Fund. |
Various inputs are used in determining the value of the Portfolio’s investments. These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices generally in active markets for identical securities.
Level 2—other significant observable inputs including, but not limited to, quoted prices for similar securities, interest rates and yield curves, prepayment speeds, foreign currency exchange rates, and amortized cost.
Level 3—significant unobservable inputs for securities valued in accordance with Board approved fair valuation procedures.
See Notes to Financial Statements.
12 |
The following is a summary of the inputs used as of October 31, 2013 in valuing such portfolio securities:
Level 1 | Level 2 | Level 3 | ||||||||||
Investments in Securities | ||||||||||||
Common Stocks: | ||||||||||||
Australia | $ | — | $ | 276,820 | $ | — | ||||||
Brazil | 121,359 | — | — | |||||||||
Canada | 294,191 | — | — | |||||||||
China | 53,377 | 257,386 | — | |||||||||
France | — | 234,958 | — | |||||||||
Germany | 36,995 | 67,306 | — | |||||||||
Italy | — | 204,035 | — | |||||||||
Japan | — | 150,875 | — | |||||||||
Mexico | 56,470 | — | — | |||||||||
Netherlands | — | 19,315 | — | |||||||||
New Zealand | 64,307 | 36,258 | — | |||||||||
Peru | 62,597 | — | — | |||||||||
Korea | 67,895 | — | — | |||||||||
Spain | — | 243,908 | — | |||||||||
Switzerland | — | 52,648 | — | |||||||||
United Kingdom | 197,269 | 181,213 | — | |||||||||
United States | 2,449,286 | — | — | |||||||||
Affiliated Money Market Mutual Fund | 86,710 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 3,490,456 | $ | 1,724,722 | $ | — | ||||||
|
|
|
|
|
|
The industry classification of investments and other assets in excess of liabilities shown as a percentage of net assets as of October 31, 2013 were as follows:
Oil, Gas & Consumable Fuels | 22.9 | % | ||
Transportation Infrastructure | 14.6 | |||
Road & Rail | 9.9 | |||
Independent Power Producers & Energy Traders | 8.8 | |||
Electric Utilities | 7.7 | |||
Multi-Utilities | 6.4 | |||
Construction & Engineering | 5.8 | |||
Wireless Telecommunication Services | 4.5 | |||
Media | 4.1 | |||
Diversified Telecommunication Services | 2.9 | |||
Gas Utilities | 2.2 | |||
Real Estate Investment Trusts | 1.9 | % | ||
Water Utilities | 1.7 | |||
Affiliated Money Market Mutual Fund | 1.6 | |||
Internet Software & Services | 1.3 | |||
Marine | 0.8 | |||
Industrial Conglomerates | 0.7 | |||
Air Freight & Logistics | 0.4 | |||
|
| |||
98.2 | ||||
Other assets in excess of liabilities | 1.8 | |||
|
| |||
100.0 | % | |||
|
|
See Notes to Financial Statements.
Prudential Jennison Global Infrastructure Fund | 13 |
Statement of Assets and Liabilities
as of October 31, 2013
Assets | ||||
Investments at value, | ||||
Unaffiliated investments (cost $4,922,542) | $ | 5,128,468 | ||
Affiliated investments (cost $86,710) | 86,710 | |||
Foreign currency, at value (cost $373) | 378 | |||
Due from manager | 100,051 | |||
Receivable for investments sold | 22,767 | |||
Dividends receivable | 8,305 | |||
Receivable for Fund shares sold | 7,281 | |||
Prepaid expenses | 663 | |||
|
| |||
Total assets | 5,354,623 | |||
|
| |||
Liabilities | ||||
Accrued expenses | 29,565 | |||
Payable for investments purchased | 16,541 | |||
Affiliated transfer agent fee payable | 29 | |||
Distribution fee payable | 21 | |||
|
| |||
Total Liabilities | 46,156 | |||
|
| |||
Net Assets | $ | 5,308,467 | ||
|
| |||
Net assets were comprised of: | ||||
Common stock, at $.001 par value | $ | 510 | ||
Paid-in capital in excess of par | 5,093,704 | |||
|
| |||
5,094,214 | ||||
Undistributed net investment income | 4,298 | |||
Accumulated net realized gain on investment and foreign currency transactions | 4,059 | |||
Net unrealized appreciation on investments and foreign currencies | 205,896 | |||
|
| |||
Net Assets, October 31, 2013 | $ | 5,308,467 | ||
|
|
See Notes to Financial Statements.
14 |
Class A: | ||||
Net asset value and redemption price per share | $ | 10.42 | ||
Maximum sales charge (5.5% of offering price) | .61 | |||
|
| |||
Maximum offering price to public | $ | 11.03 | ||
|
| |||
Class C: | ||||
Net asset value, offering price and redemption price per share | ||||
($39,652 ÷ 3,810 shares of beneficial interest issued and outstanding) | $ | 10.41 | ||
|
| |||
Class Z: | ||||
Net asset value, offering price and redemption price per share | ||||
($5,247,321 ÷ 503,669 shares of beneficial interest issued and outstanding) | $ | 10.42 | ||
|
|
See Notes to Financial Statements.
Prudential Jennison Global Infrastructure Fund | 15 |
Statement of Operations
September 25, 2013* through October 31, 2013
Net Income | ||||
Income | ||||
Unaffiliated dividend income (net of foreign withholding tax of $270) | $ | 9,354 | ||
Affiliated dividend income | 130 | |||
|
| |||
Total income | 9,484 | |||
|
| |||
Expenses | ||||
Management fee | 5,217 | |||
Distribution fee—Class A | 4 | |||
Distribution fee—Class C | 18 | |||
Registration fees | 49,000 | |||
Audit fees | 24,000 | |||
Legal fees and expenses | 23,000 | |||
Reports to shareholders | 9,000 | |||
Custodian’s fees and expenses | 4,000 | |||
Directors’ fees | 1,000 | |||
Transfer agent’s fee and expenses (including affiliated expense of $100) (Note 3) | 1,000 | |||
Miscellaneous | 2,266 | |||
|
| |||
Total expenses | 118,505 | |||
Expense reimbursement (Note 2) | (111,960 | ) | ||
|
| |||
Net expenses | 6,545 | |||
|
| |||
Net investment income | 2,939 | |||
|
| |||
Realized And Unrealized Gain (Loss) On Investment And Foreign Currencies | ||||
Net realized gain (loss) on: | ||||
Investment transactions | 4,059 | |||
Foreign currency transactions | (1,472 | ) | ||
|
| |||
2,587 | ||||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 205,926 | |||
Foreign currencies | (30 | ) | ||
|
| |||
205,896 | ||||
|
| |||
Net gain on investments and foreign currencies | 208,483 | |||
|
| |||
Net Increase In Net Assets Resulting From Operations | $ | 211,422 | ||
|
|
* | Commencement of operations |
See Notes to Financial Statements.
16 |
Statement of Changes in Net Assets
September 25, 2013* October 31, 2013 | ||||
Increase (Decrease) In Net Assets | ||||
Operations | ||||
Net investment income | $ | 2,939 | ||
Net realized gain on investment and foreign currency transactions | 2,587 | |||
Net change in unrealized appreciation on investments and foreign currencies | 205,896 | |||
|
| |||
Net increase in net assets resulting from operations | 211,422 | |||
|
| |||
Fund share transactions (Note 6) | ||||
Net proceeds from shares sold | 5,097,070 | |||
Cost of shares reacquired | (25 | ) | ||
|
| |||
Net increase in net assets resulting from Fund share transactions | 5,097,045 | |||
|
| |||
Total increase | 5,308,467 | |||
Net Assets | ||||
Beginning of period | — | |||
|
| |||
End of period(a) | $ | 5,308,467 | ||
|
| |||
(a) Includes undistributed net investment income of | $ | 4,298 | ||
|
|
* | Commencement of operations. |
See Notes to Financial Statements.
Prudential Jennison Global Infrastructure Fund | 17 |
Notes to Financial Statements
Prudential World Fund, Inc. (the “Fund”) is an open-end management investment company, registered under the Investment Company Act of 1940, as amended, (“1940 Act”) and currently consists of six series: Prudential International Equity Fund, Prudential Jennison Global Infrastructure Fund (the “Series”), Prudential International Value Fund, Prudential Jennison Global Opportunities Fund, Prudential Jennison International Opportunities Fund and Prudential Emerging Markets Debt Local Currency Fund. These financial statements relate to the Prudential Jennison Global Infrastructure Fund. The financial statements of the other series are not presented herein.
The investment objective of the Series is to achieve total return.
Note 1. Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of the financial statements.
Security Valuation: The Series holds securities and other assets that are fair valued at the close of each day the New York Stock Exchange (“NYSE”) is open for trading. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Board of Directors (the “Board”) has adopted Valuation Procedures for security valuation under which fair valuation responsibilities have been delegated to Prudential Investments LLC (“PI” or “Manager”). Under the current Valuation Procedures, the established Valuation Committee is responsible for supervising the valuation of portfolio securities and other assets. The Valuation Procedures permit the Series to utilize independent pricing vendor services, quotations from market makers, and alternative valuation methods when market quotations are either not readily available or not representative of fair value. A record of the Valuation Committee’s actions is subject to the Board’s review, approval, and ratification at its next regularly-scheduled quarterly meeting.
Various inputs determine how the Series’ investments are valued, all of which are categorized according to the three broad levels (Level 1, 2, or 3) detailed in the table following the Portfolio of Investments.
Common stocks, exchange-traded funds, and derivative instruments that are traded on a national securities exchange are valued at the last sale price as of the close of
18 |
trading on the applicable exchange. Securities traded via NASDAQ are valued at the NASDAQ official closing price. To the extent these securities are valued at the last sale price or NASDAQ official closing price; they are classified as Level 1 in the fair value hierarchy.
In the event that no sale or official closing price on valuation date exists, these securities are generally valued at the mean between the last reported bid and asked prices, or at the last bid price in the absence of an asked price. These securities are classified as Level 2 in the fair value hierarchy, as the inputs are observable and considered to be significant to the valuation.
Common stocks traded on foreign securities exchanges are valued using pricing vendor services that provide model prices derived using adjustment factors based on information such as local closing price, relevant general and sector indices, currency fluctuations, depositary receipts, and futures, as applicable. Securities valued using such model prices are classified as Level 2 in the fair value hierarchy, as the adjustment factors are observable and considered to be significant to the valuation.
Investments in open-end, non-exchange-traded mutual funds are valued at their net asset values as of the close of the NYSE on the date of valuation. These securities are classified as Level 1 in the fair value hierarchy since they may be purchased or sold at their net asset values on the date of valuation.
Fixed income securities traded in the over-the-counter market are generally valued at prices provided by approved independent pricing vendors. The pricing vendors provide these prices after evaluating observable inputs including, but not limited to yield curves, yield spreads, credit ratings, deal terms, tranche level attributes, default rates, cash flows, prepayment speeds, broker/dealer quotations, and reported trades. Securities valued using such vendor prices are classified as Level 2 in the fair value hierarchy.
Over-the-counter derivative instruments are generally valued using pricing vendor services, which derive the valuation based on inputs such as underlying asset prices, indices, spreads, interest rates, and exchange rates. These instruments are categorized as Level 2 in the fair value hierarchy.
Securities and other assets that cannot be priced according to the methods described above are valued based on pricing methodologies approved by the Board of Directors. In the event that significant unobservable inputs are used when determining such valuations, the securities will be classified as Level 3 in the fair value hierarchy.
Prudential Jennison Global Infrastructure Fund | 19 |
Notes to Financial Statements
continued
When determining the fair value of securities, some of the factors influencing the valuation include: the nature of any restrictions on disposition of the securities; assessment of the general liquidity of the securities; the issuer’s financial condition and the markets in which it does business; the cost of the investment; the size of the holding and the capitalization of the issuer; the prices of any recent transactions or bids/offers for such securities or any comparable securities; any available analyst media or other reports or information deemed reliable by the investment adviser regarding the issuer or the markets or industry in which it operates. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the price used by other mutual funds to calculate their net asset values.
Foreign Currency Translation: The books and records of the Series 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 current rates of exchange;
(ii) purchases and sales of investment securities, income and expenses at the rates of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Series are presented at the foreign exchange rates and market values at the close of the period, the Series does 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 long-term portfolio securities held at the end of the period. Similarly, the Series does 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 period. Accordingly, realized foreign currency gains or losses are included in the reported net realized gains or losses on investment transactions.
Net realized gains or losses on foreign currency transactions represent net foreign exchange gains or losses from holdings of foreign currencies, currency gains or losses realized between the trade and settlement dates on security transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Series’ books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains or losses from valuing foreign
20 |
currency denominated assets and liabilities (other than investments) at period end exchange rates are reflected as a component of net unrealized appreciation (depreciation) on 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 possibility of political and economic instability, or the level of governmental supervision and regulation of foreign securities markets.
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 Series 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 Series 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 or loss on financial futures transactions. The Series invested in financial futures contracts in order to hedge its existing portfolio securities, or securities the Series intends to purchase, against fluctuations in value caused by changes in prevailing interest rates, value of equities or foreign currency exchange rates. Should interest rates move unexpectedly, the Series 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.
Financial futures contracts involve elements of both risk in excess of the amounts reflected on the Statement of Assets and Liabilities.
With exchange-traded futures, there is a minimal counterparty credit risk to the Series since the exchanges’ clearinghouse acts as counterparty to all exchange-traded futures and guarantees the futures contracts against default.
Securities Lending: The Series may lend its portfolio securities to banks and broker-dealers. The loans are secured by collateral at least equal to the market value of the securities loaned. Collateral pledged by each borrower is invested in a highly liquid short-term money market fund and is marked to market daily, based on the previous day’s market value, such that the value of the collateral exceeds the value of the loaned securities. Loans are subject to termination at the option of the borrower or the Series. Upon termination of the loan, the borrower will return to the Series
Prudential Jennison Global Infrastructure Fund | 21 |
Notes to Financial Statements
continued
securities identical to the loaned securities. Should the borrower of the securities fail financially, the Series has the right to repurchase the securities using the collateral in the open market. The Series recognizes income, net of any rebate and securities lending agent fees, for lending its securities, and any interest on the investment of cash received as collateral. The Series also continues to receive interest and dividends or amounts equivalent thereto, on the securities loaned and recognizes any unrealized gain or loss in the market price of the securities loaned that may occur during the term of the loan.
Warrants and Rights: The Series may hold warrants and rights acquired either through a direct purchase, included as part of a private placement, or pursuant to corporate actions. Warrants and rights entitle the holder to buy a proportionate amount of common stock, or such other security that the issuer may specify, at a specific price and time through the expiration dates. Such warrants and rights are held as long positions by the Series until exercised, sold or expired. Warrants and rights are valued at fair value in accordance with the Board of Trustees’ approved fair valuation procedures.
Securities Transactions and Net Investment Income: Securities transactions are recorded on the trade date. Realized gains or losses from investment and currency transactions are calculated on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, including amortization of premium and accretion of discount on debt securities, as required, is recorded on the accrual basis. Expenses are recorded on the accrual basis, which may require the use of certain estimates by management, that may differ from actual.
Net investment income or loss (other than distribution fees which are charged directly to the respective class) and unrealized and realized gains or losses are allocated daily to each class of shares based upon the relative proportion of adjusted net assets of each class at the beginning of the day.
The Fund invests in real estate investment trusts (“REITs”), which report information on the source of their distributions annually. Based on current and historical information, a portion of distributions received from REITs during the year is estimated to be dividend income, capital gain or return of capital and is recorded accordingly. These estimates are adjusted when the actual source of distributions is disclosed by the REITs.
22 |
Dividends and Distributions: The Series expects to pay dividends from net investment income quarterly and distributions from net realized capital gains, if any, at least annually. Dividends and distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-dividend date. Permanent book/tax differences relating to income and gains are reclassified amongst undistributed net investment income, accumulated net realized gain or loss and paid-in capital in excess of par, as appropriate.
Taxes: It is the Series’ policy to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable net investment income and capital gains, if any, to its shareholders. Therefore, no federal income tax provision is required. Withholding taxes on foreign dividends are recorded, net of reclaimable amounts, at the time the related income is earned.
Estimates: The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
Note 2. Agreements
The Fund has a management agreement for the Series with PI. Pursuant to this agreement, PI has responsibility for all investment advisory services and supervises the subadvisor’s performance of such services. PI entered into a subadvisory agreement with Quantitative Management Associates LLC (“QMA”). The subadvisory agreement provides that QMA furnishes investment advisory services in connection with the management of the Series. In connection therewith, QMA is obligated to keep certain books and records of the Series. PI pays for the services of QMA, the cost of compensation of officers of the Series, occupancy and certain clerical and bookkeeping costs of the Series. The Series bears all other costs and expenses.
The management fee paid to PI is computed daily and payable monthly, at an annual rate of 1.00% of the average daily net assets of the Series. The management fee waived exceeds the management fee for the current period.
PI has contractually agreed, to limit net annual Fund operating expenses (exclusive of distribution and service (12b-1) fees, acquired fund fees and expenses, extraordinary and certain other expenses, including taxes, interest and brokerage commissions) of each class of shares to 1.25% of the Fund’s average daily net assets.
Prudential Jennison Global Infrastructure Fund | 23 |
Notes to Financial Statements
continued
The Series has distribution agreements with Prudential Investment Management Services LLC (“PIMS”) and Prudential Annuities Distributors, Inc. (“PAD”). PIMS and PAD are both affiliates of PI and indirect, wholly-owned subsidiaries of Prudential. PIMS serves as the distributor of the Series’ Class A, Class C, and Class Z shares.
The Series has adopted a separate Distribution and Service plan (each a “Plan” and collectively the “Plans”) for the Class A and Class C shares of the Series in accordance with Rule 12b-1 of the 1940 Act. No distribution or service fees are paid to PIMS as distributor for the Series’ Class Z shares. Under the Plans, the Series compensates PIMS and PAD a distribution and service fee at the annual rate of .30% and 1% of the average daily net assets of the Class A and C shares, respectively. PIMS has contractually agreed through February 28, 2015 to limit such fees to .25% of the average daily net assets of the Class A shares.
PIMS has advised the Series that they did not receive any front-end sales charges resulting from sales of Class A shares during the period ended October 31, 2013. From these fees, PIMS paid such sales charges to broker-dealers, which in turn paid commissions to salespersons and incurred other distribution costs.
PIMS has advised the Series that for the period ended October 31, 2013 it did not receive any contingent deferred sales charges imposed upon redemptions by certain Class A and Class C shareholders.
PI, QMA and PIMS are indirect, wholly-owned subsidiaries of Prudential Financial, Inc. (“Prudential”).
Note 3. Other Transactions with Affiliates
Prudential Mutual Fund Services LLC (“PMFS”), an affiliate of PI and an indirect, wholly-owned subsidiary of Prudential, serves as the Series’ transfer agent. Transfer agent’s fees and expenses in the Statement of Operations include certain out-of-pocket expenses paid to non-affiliates, where applicable.
Prudential Investment Management, Inc. (“PIM”), an indirect, wholly-owned subsidiary of Prudential, is the Series’ security lending agent. For the period ended October 31, 2013, PIM has been compensated approximately $0 for these services.
24 |
The Series invests in the Prudential Core Taxable Money Market Fund (the “Core Fund”), a series of the Prudential Investment Portfolios 2, registered under the 1940 Act, and managed by PI. Earnings from the Core Fund are disclosed on the Statement of Operations as affiliated dividend income.
Note 4. Portfolio Securities
Purchases and sales of portfolio securities, other than short-term investments, for the period ended October 31, 2013 aggregated $5,409,152 and $490,668, respectively.
Note 5. Tax Information
Distributions to shareholders, which are determined in accordance with federal income tax regulations and which may differ from generally accepted accounting principles, are recorded on the ex-dividend date. In order to present undistributed net investment income, accumulated net realized gain on investment and foreign currency transactions and paid-in capital in excess of par on the Statement of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to undistributed net investment income, accumulated net realized gain on investment and foreign currency transactions and paid-in capital in excess of par. For the period ended October 31, 2013, the adjustments were to increase undistributed net investment income by $1,359, increase accumulated net realized gain on investment and foreign currency transactions by $1,472 and decrease paid-in capital in excess of par by $2,831 due to differences in the treatment for book and tax purposes of certain transactions involving foreign securities and currencies and other book to tax differences. Net investment income, net realized gain (loss) on investment and foreign currency transactions and net assets were not affected by this change.
For the period ended October 31, 2013, there were no distributions paid by the Fund.
As of October 31, 2013, the accumulated undistributed earnings on a tax basis was $9,281 of ordinary income. This differs from the amount shown on the Statement of Assets and Liabilities primarily due to cumulative timing differences between financial and tax reporting.
The United States federal income tax basis of the Fund’s investments and the net unrealized appreciation as of October 31, 2013 were as follows:
Tax Basis | Appreciation | Depreciation | Net | |||
$5,010,176 | $248,809 | $(43,807) | $205,002 |
Prudential Jennison Global Infrastructure Fund | 25 |
Notes to Financial Statements
continued
The difference between book basis and tax basis is primarily attributable to deferred losses on wash sales, investment in passive foreign investment company and other cost basis differences between financial and tax reporting.
Management has analyzed the Fund’s tax positions and has concluded that as of October 31, 2013, no provision for income tax is required in the Fund’s financial statements for the current reporting period.
Note 6. Capital
The Series offers Class A, C, and Z shares. Class A shares are sold with a front-end sales charge of up to 5.50%. All investors who purchase Class A shares in an amount of $1 million or more and sell these shares within 12 months of purchase are subject to a contingent deferred sales charge (CDSC) of 1%. The Class A CDSC is waived for purchases by certain retirement and/or benefit plans. Class C shares are sold with a CDSC of 1% on shares redeemed within the first 12 months after purchase. A special exchange privilege is also available for shareholders who qualify to purchase Class A shares at net asset value. Class Z shares are not subject to any sales or redemption charge and are offered exclusively for sale to a limited group of investors.
Under certain circumstances, an exchange may be made from specified share classes of the Series to one or more other share classes of the Series as presented in the table of transactions in shares of common stock.
There are 900 million authorized shares of common stock at $.01 par value per share, designated Class A, Class C, and Class Z, each of which consists of 400 million, 100 million, and 400 million authorized shares, respectively. As of October 31, 2013, PI owned 1,000, 1,000 and 1,000 Class A, C and Z shares of the Series, respectively.
Transactions in shares of common stock were as follows:
Class A | Shares | Amount | ||||||
Period* ended October 31, 2013: | ||||||||
Shares sold | 2,064 | $ | 20,615 | |||||
Shares reacquired | — | — | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 2,064 | $ | 20,615 | |||||
|
|
|
|
26 |
Class C | Shares | Amount | ||||||
Period* ended October 31, 2013: | ||||||||
Shares sold | 3,810 | $ | 39,025 | |||||
Shares reacquired | — | — | ||||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 3,810 | $ | 39,025 | |||||
|
|
|
| |||||
Class Z | ||||||||
Period* ended October 31, 2013: | ||||||||
Shares sold | 503,671 | $ | 5,037,430 | |||||
Shares reacquired | (2 | ) | (25 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in shares outstanding | 503,669 | $ | 5,037,405 | |||||
|
|
|
|
* | Commencement of operations was September 25, 2013. |
Note 7. Borrowing
The Series, along with other affiliated registered investment companies (the “Funds”), is a party to a Syndicated Credit Agreement (“SCA”) with a group of banks. The purpose of the SCA is to provide an alternative source of temporary funding for capital share redemptions. The SCA provides for a commitment of $900 million for the period November 15, 2012 through November 4, 2013. The Funds pay an annualized commitment fee of 0.08% on the unused portion of the SCA. Prior to November 15, 2012, the Funds had another Syndicated Credit Agreement with substantially similar terms. Interest on any borrowings under the Syndicated Credit Agreement is paid at contracted market rates. The commitment fee for the unused amount is accrued daily and paid quarterly.
Subsequent to the fiscal year end, the SCA has been renewed effective November 5, 2013 at substantially similar terms through November 4, 2014.
The Series did not utilize the SCA during the period ended October 31, 2013.
Note 8. New Accounting Pronouncement
In January 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” which replaced ASU No. 2011-11 “Disclosures about Offsetting Assets and Liabilities”. The updates create new disclosure requirements requiring entities to disclose both gross and net information for derivatives and other financial instruments that are either offset in the Statement of Assets and Liabilities or subject to an enforceable master netting arrangement or
Prudential Jennison Global Infrastructure Fund | 27 |
Notes to Financial Statements
continued
similar agreement. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods. Management is currently evaluating the application of ASU No. 2013-01 and its impact, if any, on the Fund’s financial statements.
Note 9. Notice of Dividends and Distributions to Shareholders
The Series declared ordinary income and short-term capital gains distributions on December 9, 2013 to shareholders of record on December 10, 2013. The ex-dividend date was December 11, 2013. The per share amounts declared were as follows:
Ordinary Income | Short-Term Capital Gains | |||||||
Class A | $ | 0.03321 | $ | 0.01039 | ||||
Class C | $ | 0.01219 | $ | 0.01039 | ||||
Class Z | $ | 0.04020 | $ | 0.01039 |
28 |
Financial Highlights
Class A Shares | ||||
September 25, 2013(b) through October 31, 2013(c) | ||||
Per Share Operating Performance: | ||||
Net Asset Value, Beginning of Period | $10.00 | |||
Income (loss) from investment operations: | ||||
Net investment income | - | (g) | ||
Net realized and unrealized gain on investments | .42 | |||
Total from investment operations | .42 | |||
Net Asset Value, end of period | $10.42 | |||
Total Return(a): | 4.20% | |||
Ratios/Supplemental Data: | ||||
Net assets, end of period (000) | $21 | |||
Average net assets (000) | $17 | |||
Ratios to average net assets(d)(h): | ||||
Expenses After Waivers and/or Expense Reimbursement(c) | 1.50% | (e) | ||
Expenses Before Waivers and/or Expense Reimbursement | 25.87% | (e) | ||
Net investment income | .28% | (e) | ||
Portfolio turnover rate | 10% | (f) |
(a) Total return does not consider the effect of sales load. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to confrom to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(b) Commencement of operations.
(c) Calculated based on the average shares outstanding during the period.
(d) Does not include expenses of the underlying portfolio in which the Fund invests.
(e) Annualized.
(f) Not Annualized.
(g) Less than $.005.
(h) The Manager has contractually agreed to limit expenses to 1.25% of average daily net assets before distribution and service (12b-1) fees. Additionally, the Distributor as contractually agreed to limit the distribution and service (12b-1) fees to 0.25% of average daily net assets.
See Notes to Financial Statements.
Prudential Jennison Global Infrastructure Fund | 29 |
Financial Highlights
continued
Class C Shares | ||||
September 25, 2013(b) through October 31, 2013(c) | ||||
Per Share Operating Performance: | ||||
Net Asset Value, Beginning of Period | $10.00 | |||
Income (loss) from investment operations: | ||||
Net investment income | .01 | |||
Net realized and unrealized gain on investments | .40 | |||
Total from investment operations | .41 | |||
Net Asset Value, end of period | $10.41 | |||
Total Return(a): | 4.10% | |||
Ratios/Supplemental Data: | ||||
Net assets, end of period (000) | $40 | |||
Average net assets (000) | $17 | |||
Ratios to average net assets(d)(g): | ||||
Expenses After Waivers and/or Expense Reimbursement | 2.25% | (e) | ||
Expenses Before Waivers and/or Expense Reimbursement | 38.05% | (e) | ||
Net investment income | .52% | (e) | ||
Portfolio turnover rate | 10% | (f) |
(a) Total return does not consider the effect of sales load. Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to confrom to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(b) Commencement of operations.
(c) Calculated based on the average shares outstanding during the period.
(d) Does not include expenses of the underlying portfolio in which the Fund invests.
(e) Annualized.
(f) Not Annualized.
(g) The Manager has contractually agreed to limit expenses to 1.25% of average daily net assets before distribution and service (12b-1) fees.
See Notes to Financial Statements.
30 |
Class Z Shares | ||||
September 25, 2013(b) through October 31, 2013(c) | ||||
Per Share Operating Performance: | ||||
Net Asset Value, Beginning of Period | $10.00 | |||
Income (loss) from investment operations: | ||||
Net investment income | .01 | |||
Net realized and unrealized gain on investments | .41 | |||
Total from investment operations | .42 | |||
Net Asset Value, end of period | $10.42 | |||
Total Return(a): | 4.20% | |||
Ratios/Supplemental Data: | ||||
Net assets, end of period (000) | $5,247 | |||
Average net assets (000) | $5,113 | |||
Ratios to average net assets(d)(g): | ||||
Expenses After Waivers and/or Expense Reimbursement | 1.25% | (e) | ||
Expenses Before Waivers and/or Expense Reimbursement | 22.65% | (e) | ||
Net investment income | .56% | (e) | ||
Portfolio turnover rate | 10% | (f) |
(a) Total return is calculated assuming a purchase of a share on the first day and a sale on the last day of each period reported and includes reinvestment of dividends and distributions. Total returns may reflect adjustments to confrom to generally accepted accounting principles. Total returns for periods less than one full year are not annualized.
(b) Commencement of operations.
(c) Calculated based on the average shares outstanding during the period.
(d) Does not include expenses of the underlying portfolio in which the Fund invests.
(e) Annualized.
(f) Not Annualized.
(g) The Manager has contractually agreed to limit expenses to 1.25% of average daily net assets before distribution and service (12b-1) fees.
See Notes to Financial Statements.
Prudential Jennison Global Infrastructure Fund | 31 |
Report of Independent Registered Public
Accounting Firm
The Board of Directors and Shareholders
Prudential World Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Prudential Jennison Global Infrastructure Fund, a series of Prudential World Fund, Inc., (hereafter referred to as the “Fund”), including the portfolio of investments, as of October 31, 2013, the related statement of operations, changes in net assets and the financial highlights for the period September 25, 2013 (commencement of operations) to October 31, 2013. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2013, by correspondence with the custodian, transfer agent and brokers or by other appropriate auditing procedures when replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Fund as of October 31, 2013, and the results of its operations, the changes in its net assets and the financial highlights for the period September 25, 2013 to October 31, 2013, in conformity with U.S. generally accepted accounting principles.
New York, New York
December 20, 2013
32 |
INFORMATION ABOUT BOARD MEMBERS AND OFFICERS
(Unaudited)
Information about Board Members and Officers of the Fund is set forth below. Board Members who are not deemed to be “interested persons” of the Fund, as defined in the 1940 Act, are referred to as “Independent Board Members.” Board Members who are deemed to be “interested persons” of the Fund are referred to as “Interested Board Members.” The Board Members are responsible for the overall supervision of the operations of the Fund and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Board in turn elects the Officers, who are responsible for administering the day-to-day operations of the Fund.
Independent Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Ellen S. Alberding (55) Board Member Portfolios Overseen: 64 | President and Board Member, The Joyce Foundation (charitable foundation) (since 2002); Vice Chair, City Colleges of Chicago (community college system) (since 2011); Trustee, Skills for America’s Future (national initiative to connect employers to community colleges) (since 2011); Trustee, National Park Foundation (charitable foundation for national park system) (since 2009); Trustee, Economic Club of Chicago (since 2009). | None. | ||
Kevin J. Bannon (61) Board Member Portfolios Overseen: 64 | Managing Director (since April 2008) and Chief Investment Officer (since October 2008) of Highmount Capital LLC (registered investment adviser); formerly Executive Vice President and Chief Investment Officer (April 1993-August 2007) of Bank of New York Company; President (May 2003-May 2007) of BNY Hamilton Family of Mutual Funds. | Director of Urstadt Biddle Properties (since September 2008). | ||
Linda W. Bynoe (61) Board Member Portfolios Overseen: 64 | President and Chief Executive Officer (since March 1995) and formerly Chief Operating Officer (December 1989-February 1995) of Telemat Ltd. (management consulting); formerly Vice President (January 1985-June 1989) at Morgan Stanley & Co (broker-dealer). | Director of Simon Property Group, Inc. (retail real estate) (May 2003-May 2012); Director of Anixter International, Inc. (communication products distributor) (since January 2006); Director of Northern Trust Corporation (financial services) (since April 2006); Trustee of Equity Residential (residential real estate) (since December 2009). |
Prudential Jennison Global Infrastructure Fund
Independent Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Keith F. Hartstein (57) Board Member Portfolios Overseen: 64 | Formerly President and Chief Executive Officer (2005-2012), Senior Vice President (2004-2005), Senior Vice President of Sales and Marketing (1997-2004), and various executive management positions (1990-1997), John Hancock Funds, LLC (asset management); Chairman, Investment Company Institute’s Sales Force Marketing Committee (2003-2008). | None. | ||
Michael S. Hyland, CFA (68) Board Member Portfolios Overseen: 64 | Independent Consultant (since February 2005); formerly Senior Managing Director (July 2001-February 2005) of Bear Stearns & Co, Inc.; Global Partner, INVESCO (1999-2001); Managing Director and President of Salomon Brothers Asset Management (1989-1999). | None. | ||
Douglas H. McCorkindale (74) Board Member Portfolios Overseen: 64 | Formerly Chairman (February 2001-June 2006), Chief Executive Officer (June 2000-July 2005), President (September 1997-July 2005) and Vice Chairman (March 1984-May 2000) of Gannett Co. Inc. (publishing and media). | Director of Lockheed Martin Corp. (aerospace and defense) (since May 2001). | ||
Stephen P. Munn (71) Board Member Portfolios Overseen: 64 | Lead Director (since 2007) and formerly Chairman (1993-2007) of Carlisle Companies Incorporated (manufacturer of industrial products). | Lead Director (since 2007) of Carlisle Companies Incorporated (manufacturer of industrial products). | ||
James E. Quinn (61) Board Member Portfolios Overseen: 64 | Formerly President (2003-2012) and Director (2003-2008), and Vice Chairman and Director (1998-2003), Tiffany & Company (jewelry retailing); Director, Mutual of America Capital Management Corporation (asset management) (since 1996); Director, Hofstra University (since 2008); Vice Chairman, Museum of the City of New York (since 1984). | Director of Deckers Outdoor Corporation (footwear manufacturer) (since 2011). | ||
Richard A. Redeker (70) Board Member & Independent Chair Portfolios Overseen: 64 | Retired Mutual Fund Senior Executive (44 years); Management Consultant; Independent Directors Council (organization of 2,800 Independent Mutual Fund Directors)-Executive Committee, Chair of Policy Steering Committee, Governing Council. | None. |
Visit our website at www.prudentialfunds.com
Independent Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Robin B. Smith (74) Board Member Portfolios Overseen: 64 | Chairman of the Board (since January 2003) of Publishers Clearing House (direct marketing); Member of the Board of Directors of ADLPartner (marketing) (since December 2010); formerly Chairman and Chief Executive Officer (August 1996-January 2003) of Publishers Clearing House. | Formerly Director of BellSouth Corporation (telecommunications) (1992-2006). | ||
Stephen G. Stoneburn (70) Board Member Portfolios Overseen: 64 | Chairman, (since July 2011), President and Chief Executive Officer (since June 1996) of Quadrant Media Corp. (publishing company); formerly President (June 1995-June 1996) of Argus Integrated Media, Inc.; Senior Vice President and Managing Director (January 1993-1995) of Cowles Business Media; Senior Vice President of Fairchild Publications, Inc. (1975-1989). | None. | ||
Interested Board Members(1) | ||||
Name, Address, Age Position(s) Portfolios Overseen | Principal Occupation(s) During Past Five Years | Other Directorships Held | ||
Stuart S. Parker (51) Board Member & President Portfolios Overseen: 59 | President of Prudential Investments LLC (since January 2012); Executive Vice President of Prudential Investment Management Services LLC (since December 2012); Executive Vice President of Jennison Associates LLC and Head of Retail Distribution of Prudential Investments LLC (June 2005 - December 2011). | None. | ||
Scott E. Benjamin (40) Board Member & Vice President Portfolios Overseen: 64 | Executive Vice President (since June 2009) of Prudential Investments LLC; Executive Vice President (June 2009-June 2012) and Vice President (since June 2012) of Prudential Investment Management Services LLC; Executive Vice President (since September 2009) of AST Investment Services, Inc.; Senior Vice President of Product Development and Marketing, Prudential Investments (since February 2006); Vice President of Product Development and Product Management, Prudential Investments (2003-2006). | None. |
Prudential Jennison Global Infrastructure Fund
(1) | The year that each Board Member joined the Funds’ Board is as follows: |
Ellen S. Alberding; 2013; Kevin J. Bannon, 2008; Linda W. Bynoe, 2005; Keith F. Hartstein, 2013; Michael S. Hyland, 2008; Douglas H. McCorkindale, 2003; Stephen P. Munn, 2008; James E. Quinn, 2013; Richard A. Redeker, 2003; Robin B. Smith, 1996; Stephen G. Stoneburn, 1996; Stuart S. Parker, Board Member and President since 2012; Scott E. Benjamin, Board Member since 2010 and Vice President since 2009.
Fund Officers(a) | ||||
Name, Address and Age Position with Fund | Principal Occupation(s) During Past Five Years | Length of Service as Fund Officer | ||
Raymond A. O’Hara (58) Chief Legal Officer | Vice President and Corporate Counsel (since July 2010) of Prudential Insurance Company of America (Prudential); Vice President (March 2011-Present) of Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey; Vice President and Corporate Counsel (March 2011-Present) of Prudential Annuities Life Assurance Corporation; Chief Legal Officer of Prudential Investments LLC (since June 2012); Chief Legal Officer of Prudential Mutual Fund Services LLC (since June 2012) and Corporate Counsel of AST Investment Services, Inc. (since June 2012); formerly Assistant Vice President and Corporate Counsel (September 2008-July 2010) of The Hartford Financial Services Group, Inc.; formerly Associate (September 1980-December 1987) and Partner (January 1988–August 2008) of Blazzard & Hasenauer, P.C. (formerly, Blazzard, Grodd & Hasenauer, P.C.). | Since 2012 | ||
Deborah A. Docs (55) Secretary | Vice President and Corporate Counsel (since January 2001) of Prudential; Vice President (since December 1996) and Assistant Secretary (since March 1999) of Prudential Investments LLC; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc. | Since 2004 | ||
Jonathan D. Shain (55) Assistant Secretary | Vice President and Corporate Counsel (since August 1998) of Prudential; Vice President and Assistant Secretary (since May 2001) of Prudential Investments LLC; Vice President and Assistant Secretary (since February 2001) of Prudential Mutual Fund Services LLC; formerly Vice President and Assistant Secretary (May 2003-June 2005) of AST Investment Services, Inc. | Since 2005 | ||
Claudia DiGiacomo (39) Assistant Secretary | Vice President and Corporate Counsel (since January 2005) of Prudential; Vice President and Assistant Secretary of Prudential Investments LLC (since December 2005); Associate at Sidley Austin Brown & Wood LLP (1999-2004). | Since 2005 | ||
Andrew R. French (51) Assistant Secretary | Vice President and Corporate Counsel (since February 2010) of Prudential; formerly Director and Corporate Counsel (2006-2010) of Prudential; Vice President and Assistant Secretary (since January 2007) of Prudential Investments LLC; Vice President and Assistant Secretary (since January 2007) of Prudential Mutual Fund Services LLC. | Since 2006 |
Visit our website at www.prudentialfunds.com
Fund Officers(a) | ||||
Name, Address and Age Position with Fund | Principal Occupation(s) During Past Five Years | Length of Service as Fund Officer | ||
Amanda S. Ryan (35) Assistant Secretary | Director and Corporate Counsel (since March 2012) of Prudential; Director and Assistant Secretary (since June 2012) of Prudential Investments LLC; Associate at Ropes & Gray LLP (2008-2012). | Since 2012 | ||
Bruce Karpati (43) Chief Compliance Officer | Chief Compliance Officer of the Prudential Investments Funds, Target Funds, Advanced Series Trust, the Prudential Series Fund and Prudential’s Gibraltar Fund, Inc. (May 2013 - Present); formerly National Chief (May 2012 - May 2013) and Co-Chief (January 2010 - May 2012) of the Asset Management Unit, Division of Enforcement, of the U.S. Securities and Exchange Commission; Assistant Regional Director (January 2005 - January 2010) of the U.S. Securities and Exchange Commission. | Since 2013 | ||
Theresa C. Thompson (51) Deputy Chief Compliance Officer | Vice President, Compliance, Prudential Investments LLC (since April 2004); and Director, Compliance, Prudential Investments LLC (2001-2004). | Since 2008 | ||
Richard W. Kinville (45) Anti-Money Laundering Compliance Officer | Vice President, Corporate Compliance, Anti-Money Laundering Unit (since January 2005) of Prudential; committee member of the American Council of Life Insurers Anti-Money Laundering and Critical Infrastructure Committee (since January 2007); formerly Investigator and Supervisor in the Special Investigations Unit for the New York Central Mutual Fire Insurance Company (August 1994-January 1999); Investigator in AXA Financial’s Internal Audit Department and Manager in AXA’s Anti-Money Laundering Office (January 1999-January 2005); first chair of the American Council of Life Insurers Anti-Money Laundering and Critical Infrastructure Committee (June 2007-December 2009). | Since 2011 | ||
Grace C. Torres (54) Treasurer and Principal Financial and Accounting Officer | Assistant Treasurer (since March 1999) and Senior Vice President (since September 1999) of Prudential Investments LLC; Assistant Treasurer (since May 2003) and Vice President (since June 2005) of AST Investment Services, Inc.; Senior Vice President and Assistant Treasurer (since May 2003) of Prudential Annuities Advisory Services, Inc.; formerly Senior Vice President (May 2003-June 2005) of AST Investment Services, Inc. | Since 1998 | ||
M. Sadiq Peshimam (49) Assistant Treasurer | Vice President (since 2005) of Prudential Investments LLC. | Since 2006 | ||
Peter Parrella (55) Assistant Treasurer | Vice President (since 2007) and Director (2004-2007) within Prudential Mutual Fund Administration; formerly Tax Manager at SSB Citi Fund Management LLC (1997-2004). | Since 2007 |
(a) | Excludes Mr. Parker and Mr. Benjamin, interested Board Members who also serve as President and Vice President, respectively. |
Prudential Jennison Global Infrastructure Fund
Explanatory Notes to Tables:
• | Board Members are deemed to be “Interested,” as defined in the 1940 Act, by reason of their affiliation with Prudential Investments LLC and/or an affiliate of Prudential Investments LLC. |
• | Unless otherwise noted, the address of all Board Members and Officers is c/o Prudential Investments LLC, Gateway Center Three, 100 Mulberry Street, Newark, New Jersey 07102-4077. |
• | There is no set term of office for Board Members or Officers. The Board Members have adopted a retirement policy, which calls for the retirement of Board Members on December 31 of the year in which they reach the age of 75. |
• | “Other Directorships Held” includes only directorships of companies required to register or file reports with the SEC under the 1934 Act (that is, “public companies”) or other investment companies registered under the 1940 Act. |
• | “Portfolios Overseen” includes all investment companies managed by Prudential Investments LLC. The investment companies for which Prudential Investments LLC serves as manager include the Prudential Investments Mutual Funds, The Prudential Variable Contract Accounts, Target Mutual Funds, Prudential Short Duration High Yield Fund, Inc., Prudential Global Short Duration High Yield Fund, Inc., The Prudential Series Fund, Prudential’s Gibraltar Fund, Inc. and the Advanced Series Trust. |
Visit our website at www.prudentialfunds.com
Approval of Management and Subadvisory Agreements
Initial Approval of the Fund’s Advisory Agreements
As required by the Investment Company Act of 1940 (the “1940 Act”), the Board of Directors (the “Board”) of Prudential World Fund, Inc. considered the proposed management agreement with Prudential Investments LLC (the “Manager”) and the proposed subadvisory agreement with Jennison Associates LLC (the “Subadviser”), with respect to the Fund prior to the Fund’s commencement of operations. The Board, including all of the Independent Directors, met telephonically on June 21, 2013 and in person on September 17-19, 2013 and approved the agreements at the September meeting for an initial two-year period, after concluding that approval of the agreements was in the best interests of the Fund.
In advance of the meetings, the Board requested and received materials relating to the agreements, and had the opportunity to ask questions and request further information in connection with its consideration.
In approving the agreements, the Board, including the Independent Directors advised by independent legal counsel, considered the factors it deemed relevant, including the nature, quality and extent of services to be provided to the Fund by the Manager and the Subadviser; any relevant comparable performance and the Subadviser’s qualifications and track record in serving other affiliated mutual funds; the fees proposed to be paid by the Fund to the Manager and by the Manager to the Subadviser under the agreements; and the potential for economies of scale that may be shared with the Fund and its shareholders. In connection with its deliberations, the Board considered information provided by the Manager and the Subadviser at or in advance of the meetings on June 21, 2013 and September 17-19, 2013. The Board also considered information provided by the Manager with respect to other funds managed by the Manager and the Subadviser, which information had been provided throughout the year at regular Board meetings. In their deliberations, the Directors did not identify any single factor which alone was responsible for the Board’s decision to approve the agreements with respect to the Fund.
The Directors determined that the overall arrangements between the Fund and the Manager, which will serve as the Fund’s investment manager pursuant to a management agreement, and between the Manager and the Subadviser, which will serve as the Fund’s Subadviser pursuant to the terms of a subadvisory agreement, are appropriate in light of the services to be performed and the fees to be charged under the agreements and such other matters as the Directors considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the Directors’ reaching their determinations to approve the agreements are separately discussed below.
Prudential Jennison Global Infrastructure Fund
Approval of Management and Subadvisory
Agreements (continued)
Nature, Quality and Extent of Services
With respect to the Manager, the Board noted that it had received and considered information about the Manager at the June 4-6, 2013 meetings in connection with the renewal of the management agreements between the Manager and the other Prudential Retail Funds, as well as at other regular meetings throughout the year, regarding the nature, quality and extent of services provided by the Manager. The Board considered the services to be provided by the Manager, including but not limited to the oversight of the Subadviser, as well as the provision of fund recordkeeping, compliance and other services to the Fund. With respect to the Manager’s oversight of the Subadviser, the Board noted that the Manager’s Strategic Investment Research Group, which is a business unit of the Manager, is responsible for monitoring and reporting to the Manager’s senior management on the performance and operations of the Subadviser. The Board also noted that the Manager pays the salaries of all the officers and non-independent Directors of the Fund. The Board reviewed the qualifications, backgrounds and responsibilities of the Manager’s senior management responsible for the oversight of the Fund and the Subadviser, and was also provided with information pertaining to the Manager’s organizational structure, senior management, investment operations and other relevant information. The Board further noted that it received favorable compliance reports from the Fund’s Chief Compliance Officer as to the Manager. The Board noted that it had concluded that it was satisfied with the nature, quality and extent of the services provided by the Manager to the other Prudential Retail Funds and determined that it was reasonable to conclude that the nature, quality and extent of services to be provided by the Manager under the management agreement for the Fund would be similar in nature to those provided under the other management agreements.
With respect to the Subadviser, the Board noted that it had received and considered information about the Subadviser at the June 4-6, 2013 meetings in connection with the renewal of the subadvisory agreements between the Manager and the Subadviser with respect to other Prudential Retail Funds, as well as at other regular meetings throughout the year, regarding the nature, quality and extent of services provided by the Subadviser. The Board considered, among other things, the qualifications, background and experience of the Subadviser’s portfolio managers who will be responsible for the day-to-day management of the Fund’s portfolio, as well as information on the Subadviser’s organizational structure, senior management, investment operations and other relevant information. The Board further noted that it received favorable compliance reports from the Fund’s Chief Compliance Officer as to the Subadviser. The Board noted that it was satisfied with the nature, quality and extent of services provided by the Subadviser with respect to the other Prudential Retail Funds served by the Subadviser and determined that it was reasonable to
Visit our website at www.prudentialfunds.com
conclude that the nature, quality and extent of services to be provided by the Subadviser under the subadvisory agreement for the Fund would be similar in nature to those provided under the other subadvisory agreements. The Board noted that the Subadviser is affiliated with the Manager.
Performance
Because the Fund had not yet commenced operations and the actual asset base of the Fund has not yet been determined, no investment performance for the Fund existed for Board review. Nevertheless, as noted above, the Board did consider the background and professional experience of the proposed portfolio management team for the Fund. The Manager will provide information relating to performance to the Board periodically and in connection with future annual reviews of the management agreement and subadvisory agreement.
Fee Rates
The Board considered the proposed management fees of 1.00% of the Fund’s average daily net assets to be paid by the Fund to the Manager and the proposed subadvisory fees of 0.60% of the average daily value of the Fund’s investable assets up to $100 million and 0.55% of the average daily value of the Fund’s investable assets over $100 million to be paid by the Manager to the subadviser.
The Board considered information provided by the Manager comparing the Fund’s proposed management fee rate and total expenses for Class A shares to the Lipper 15(c) Peer Group. The Board noted that the Fund’s gross management fee was in the third quartile of the Lipper Peer Group (first quartile being the lowest fee). The Board further noted that the anticipated net total expenses for Class A shares, after waivers and reimbursements, were in the third quartile of the Lipper Peer Group (first quartile being the lowest expenses).
The Board noted that the Fund’s contractual management fee of 1.00% was 5 basis points higher than the Peer Group median and that the Fund’s actual management fee would be 18 basis points, due to waivers and reimbursements to support the net total expense limitation, given that the Fund’s initial assets will be low. The Board concluded that the proposed management fee and total expenses were reasonable in light of the services to be provided.
Profitability
Because the Fund had not yet commenced operations and the actual asset base of the Funds has not yet been determined, the Board noted that there was no historical profitability information with respect to the Fund to be reviewed. The Board noted
Prudential Jennison Global Infrastructure Fund
Approval of Management and Subadvisory
Agreements (continued)
that it would review profitability information in connection with the annual renewal of the advisory and subadvisory agreements.
Economies of Scale
Because the Fund had not yet commenced operations and the actual asset base of the Fund has not yet been determined, the Board noted that there was no historical information regarding economies of scale with respect to the Fund to be reviewed. The Board noted that it would review such information in connection with the annual renewal of the advisory and subadvisory agreements.
Other Benefits to the Manager and the Subadviser
The Board considered potential “fall out” or ancillary benefits anticipated to be received by the Manager and the Subadviser. The Board concluded that any potential benefits to be derived by the Manager were similar to benefits derived by the Manager in connection with its management of the other Prudential Retail Funds, which are reviewed on an annual basis. The Board also concluded that any potential benefits to be derived by the Subadviser were consistent with those generally derived by subadvisers to the Prudential Retail Funds, and that those benefits are reviewed on an annual basis. The Board concluded that any potential benefits derived by the Manager and the Subadviser were consistent with the types of benefits generally derived by investment managers and subadvisers to mutual funds.
* * *
After full consideration of these factors, the Board concluded that the approval of the agreements was in the interests of the Fund.
Visit our website at www.prudentialfunds.com
n MAIL | n TELEPHONE | n WEBSITE | ||
Gateway Center Three 100 Mulberry Street Newark, NJ 07102 | (800) 225-1852 | www.prudentialfunds.com |
PROXY VOTING |
The Board of Directors of the Fund has delegated to the Fund’s investment subadviser the responsibility for voting any proxies and maintaining proxy recordkeeping with respect to the Fund. A description of these proxy voting policies and procedures is available without charge, upon request, by calling (800) 225-1852 or by visiting the Securities and Exchange Commission’s website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund’s website and on the Securities and Exchange Commission’s website. |
DIRECTORS |
Ellen S. Alberding • Kevin J. Bannon • Scott E. Benjamin • Linda W. Bynoe • Keith F. Hartstein • Michael S. Hyland • Douglas H. McCorkindale • Stephen P. Munn • Stuart S. Parker • James E. Quinn • Richard A. Redeker • Robin B. Smith • Stephen G. Stoneburn |
OFFICERS |
Stuart S. Parker, President • Scott E. Benjamin, Vice President • Grace C. Torres, Treasurer and Principal Financial and Accounting Officer • Raymond A. O’Hara, Chief Legal Officer • Deborah A. Docs, Secretary • Bruce Karpati, Chief Compliance Officer • Theresa C. Thompson, Deputy Chief Compliance Officer • Richard W. Kinville, Anti-Money Laundering Compliance Officer • Jonathan D. Shain, Assistant Secretary • Claudia DiGiacomo, Assistant Secretary • Amanda S. Ryan, Assistant Secretary • Andrew R. French, Assistant Secretary • M. Sadiq Peshimam, Assistant Treasurer • Peter Parrella, Assistant Treasurer |
MANAGER | Prudential Investments LLC | Gateway Center Three 100 Mulberry Street Newark, NJ 07102 | ||
| ||||
INVESTMENT SUBADVISER | Jennison Associates LLC | 466 Lexington Avenue New York, NY 10017 | ||
| ||||
DISTRIBUTOR | Prudential Investment Management Services LLC | Gateway Center Three 100 Mulberry Street | ||
| ||||
CUSTODIAN | The Bank of New York Mellon | One Wall Street New York, NY 10286 | ||
| ||||
TRANSFER AGENT | Prudential Mutual Fund Services LLC | PO Box 9658 Providence, RI 02940 | ||
| ||||
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | KPMG LLP | 345 Park Avenue New York, NY 10154 | ||
| ||||
FUND COUNSEL | Willkie Farr & Gallagher LLP | 787 Seventh Avenue New York, NY 10019 |
An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. An investor may obtain a prospectus and summary prospectus by visiting our website at www.prudentialfunds.com or by calling (800) 225-1852. The prospectus and summary prospectus should be read carefully before investing. |
E-DELIVERY |
To receive your mutual fund documents online, go to www.prudentialfunds.com/edelivery and enroll. Instead of receiving printed documents by mail, you will receive notification via email when new materials are available. You can cancel your enrollment or change your email address at any time by visiting the website address above. |
SHAREHOLDER COMMUNICATIONS WITH DIRECTORS |
Shareholders can communicate directly with the Board of Directors by writing to the Chair of the Board, Prudential Jennison Global Infrastructure Fund, Prudential Investments, Attn: Board of Directors, 100 Mulberry Street, Gateway Center Three, Newark, NJ 07102. Shareholders can communicate directly with an individual Director by writing to the same address. Communications are not screened before being delivered to the addressee. |
AVAILABILITY OF PORTFOLIO SCHEDULE |
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation and location of the Public Reference Room may be obtained by calling (202) 551-8090. The Fund’s schedule of portfolio holdings is also available on the Fund’s website as of the end of each month. |
The Fund’s Statement of Additional Information contains additional information about the Fund’s Directors and is available without charge, upon request, by calling (800) 225-1852. |
Mutual Funds:
ARE NOT INSURED BY THE FDIC OR ANY FEDERAL GOVERNMENT AGENCY | MAY LOSE VALUE | ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE |
PRUDENTIAL JENNISON GLOBAL INFRASTRUCTURE FUND
SHARE CLASS | A | C | Z | |||
NASDAQ | PGJAX | PGJCX | PGJZX | |||
CUSIP | 743969792 | 743969784 | 743969776 |
MF217E 0255316-00001-00
Item 2 – Code of Ethics — See Exhibit (a)
As of the end of the period covered by this report, the registrant has adopted a code of ethics (the “Section 406 Standards for Investment Companies – Ethical Standards for Principal Executive and Financial Officers”) that applies to the registrant’s Principal Executive Officer and Principal Financial Officer; the registrant’s Principal Financial Officer also serves as the Principal Accounting Officer.
The registrant hereby undertakes to provide any person, without charge, upon request, a copy of the code of ethics. To request a copy of the code of ethics, contact the registrant 800-225-1852, and ask for a copy of the Section 406 Standards for Investment
Companies - Ethical Standards for Principal Executive and Financial Officers.
Item 3 – Audit Committee Financial Expert –
The registrant’s Board has determined that Mr. Stephen P. Munn, member of the Board’s Audit Committee is an “audit committee financial expert,” and that he is “independent,” for purposes of this Item.
Item 4 – Principal Accountant Fees and Services –
(a) Audit Fees
For the fiscal years ended October 31, 2013 and October 31, 2012, KPMG LLP (“KPMG”), the Registrant’s principal accountant, billed the Registrant $193,000 and $183,500, respectively, for professional services rendered for the audit of the Registrant’s annual financial statements or services that are normally provided in connection with statutory and regulatory filings.
(b) Audit-Related Fees
None.
(c) Tax Fees
Not applicable for the fiscal year ended October 31, 2013. During the fiscal year ended October 31, 2012, KPMG billed the Registrant $13,024 for professional services rendered in connection with agreed upon procedures performed related to the receipt of payments pursuant to certain fair fund settlement orders, an in-kind distribution of equity securities and an analysis in connection with federal and state tax issues related to the fiscal year end of the portfolio.
(d) All Other Fees
None.
(e) (1) Audit Committee Pre-Approval Policies and Procedures
THE PRUDENTIAL MUTUAL FUNDS
AUDIT COMMITTEE POLICY
on
Pre-Approval of Services Provided by the Independent Accountants
The Audit Committee of each Prudential Mutual Fund is charged with the responsibility to monitor the independence of the Fund’s independent accountants. As part of this responsibility, the Audit Committee must pre-approve any independent accounting firm’s engagement to render audit and/or permissible non-audit services, as required by law. In evaluating a proposed engagement of the independent accountants, the Audit Committee will assess the effect that the engagement might reasonably be expected to have on the accountant’s independence. The Committee’s evaluation will be based on:
• | a review of the nature of the professional services expected to be provided, |
• | a review of the safeguards put into place by the accounting firm to safeguard independence, and |
• | periodic meetings with the accounting firm. |
Policy for Audit and Non-Audit Services Provided to the Funds
On an annual basis, the scope of audits for each Fund, audit fees and expenses, and audit-related and non-audit services (and fees proposed in respect thereof) proposed to be performed by the Fund’s independent accountants will be presented by the Treasurer and the independent accountants to the Audit Committee for review and, as appropriate, approval prior to the initiation of such services. Such presentation shall be accompanied by confirmation by both the Treasurer and the independent accountants that the proposed services will not adversely affect the independence of the independent accountants. Proposed services shall be described in sufficient detail to enable the Audit Committee to assess the appropriateness of such services and fees, and the compatibility of the provision of such services with the auditor’s independence. The Committee shall receive periodic reports on the progress of the audit and other services which are approved by the Committee or by the Committee Chair pursuant to authority delegated in this Policy.
The categories of services enumerated under “Audit Services”, “Audit-related Services”, and “Tax Services” are intended to provide guidance to the Treasurer and the independent accountants as to those categories of services which the Committee believes are generally consistent with the independence of the independent accountants and which the Committee (or the Committee Chair) would expect upon the presentation of specific proposals to pre-approve. The enumerated categories are not intended as an exclusive list of audit, audit-related or tax services, which the Committee (or the Committee Chair) would consider for pre-approval.
Audit Services
The following categories of audit services are considered to be consistent with the role of the Fund’s independent accountants:
• | Annual Fund financial statement audits |
• | Seed audits (related to new product filings, as required) |
• | SEC and regulatory filings and consents |
Audit-related Services
The following categories of audit-related services are considered to be consistent with the role of the Fund’s independent accountants:
• | Accounting consultations |
• | Fund merger support services |
• | Agreed Upon Procedure Reports |
• | Attestation Reports |
• | Other Internal Control Reports |
Individual audit-related services that fall within one of these categories and are not presented to the Audit Committee as part of the annual pre-approval process will be subject to pre-approval by the Committee Chair (or any other Committee member on whom this responsibility has been delegated) so long as the estimated fee for those services does not exceed $50,000.
Tax Services
The following categories of tax services are considered to be consistent with the role of the Fund’s independent accountants:
• | Tax compliance services related to the filing or amendment of the following: |
• | Federal, state and local income tax compliance; and, |
• | Sales and use tax compliance |
• | Timely RIC qualification reviews |
• | Tax distribution analysis and planning |
• | Tax authority examination services |
• | Tax appeals support services |
• | Accounting methods studies |
• | Fund merger support services |
• | Tax consulting services and related projects |
Individual tax services that fall within one of these categories and are not presented to the Audit Committee as part of the annual pre-approval process will be subject to pre-approval by the Committee Chair (or any other Committee member on whom this responsibility has been delegated) so long as the estimated fee for those services does not exceed $50,000.
Other Non-audit Services
Certain non-audit services that the independent accountants are legally permitted to render will be subject to pre-approval by the Committee or by one or more Committee members to whom the Committee has delegated this authority and who will report to the full Committee any pre-approval decisions made pursuant to this Policy. Non-audit services presented for pre-approval pursuant to this paragraph will be accompanied by a confirmation from both the Treasurer and the independent accountants that the proposed services will not adversely affect the independence of the independent accountants.
Proscribed Services
The Fund’s independent accountants will not render services in the following categories of non-audit services:
• | Bookkeeping or other services related to the accounting records or financial statements of the Fund |
• | Financial information systems design and implementation |
• | Appraisal or valuation services, fairness opinions, or contribution-in-kind reports |
• | Actuarial services |
• | Internal audit outsourcing services |
• | Management functions or human resources |
• | Broker or dealer, investment adviser, or investment banking services |
• | Legal services and expert services unrelated to the audit |
• | Any other service that the Public Company Accounting Oversight Board determines, by regulation, is impermissible. |
Pre-approval of Non-Audit Services Provided to Other Entities Within the Prudential Fund Complex
Certain non-audit services provided to Prudential Investments LLC or any of its affiliates that also provide ongoing services to the Prudential Mutual Funds will be subject to pre-approval by the Audit Committee. The only non-audit services provided to these entities that will require pre-approval are those related directly to the operations and financial reporting of the Funds. Individual projects that are not presented to the Audit Committee as part of the annual pre-approval process will be subject to pre-approval by the Committee Chair (or any other Committee member on whom this responsibility has been delegated) so long as the estimated fee for those services does not exceed $50,000. Services presented for pre-approval pursuant to this paragraph will be accompanied by a confirmation from both the Treasurer and the independent accountants that the proposed services will not adversely affect the independence of the independent accountants.
Although the Audit Committee will not pre-approve all services provided to Prudential Investments LLC and its affiliates, the Committee will receive an annual report from the Fund’s independent accounting firm showing the aggregate fees for all services provided to Prudential Investments and its affiliates.
(e) (2) Percentage of services referred to in 4(b) – 4(d) that were approved by the audit committee –
One hundred percent of the services described in Item 4(c) was approved by the audit committee.
(f) Percentage of hours expended attributable to work performed by other than full time employees of principal accountant if greater than 50%.
The percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was 0%.
(g) Non-Audit Fees
Not applicable to Registrant for the fiscal years 2013 and 2012. The aggregate non-audit fees billed by KPMG for services rendered to the registrant’s investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant for the fiscal years 2013 and 2012 was $0 and $0, respectively.
(h) Principal Accountant’s Independence
Not applicable as KPMG has not provided non-audit services to the registrant’s investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X.
Item 5 – | Audit Committee of Listed Registrants – Not applicable. | |
Item 6 – | Schedule of Investments – The schedule is included as part of the report to shareholders filed under Item 1 of this Form. | |
Item 7 – | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – Not applicable. | |
Item 8 – | Portfolio Managers of Closed-End Management Investment Companies – Not applicable. | |
Item 9 – | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not applicable. | |
Item 10 – | Submission of Matters to a Vote of Security Holders – Not applicable. | |
Item 11 – | Controls and Procedures |
(a) | It is the conclusion of the registrant’s principal executive officer and principal financial officer that the effectiveness of the registrant’s current disclosure controls and procedures (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing) provide reasonable assurance that the information required to be disclosed by the registrant has been recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms and that the information required to be disclosed by the registrant has been accumulated and communicated to the registrant’s principal executive officer and principal financial officer in order to allow timely decisions regarding required disclosure. |
(b) | There has been no significant change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter of the period covered by this report that has materially affected, or is likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12 – Exhibits
(a) | (1) Code of Ethics – Attached hereto as Exhibit EX-99.CODE-ETH |
(2) | Certifications pursuant to Section 302 of the Sarbanes-Oxley Act – Attached hereto as Exhibit EX-99.CERT. |
(3) | Any written solicitation to purchase securities under Rule 23c-1. – Not applicable. |
(b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act – Attached hereto as Exhibit EX-99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: | Prudential World Fund, Inc. | |
By: | /s/ Deborah A. Docs | |
Deborah A. Docs | ||
Secretary | ||
Date: | December 19, 2013 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Stuart S. Parker | |
Stuart S. Parker | ||
President and Principal Executive Officer | ||
Date: | December 19, 2013 | |
By: | /s/ Grace C. Torres | |
Grace C. Torres | ||
Treasurer and Principal Financial Officer | ||
Date: | December 19, 2013 |